Our Strength is
Rooted in
Our Values
A N N U A L R E P O R T
2023
FARMER MAC’S SECONDARY MARKET ECOSYSTEM
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Loans
FINANCIAL
INSTITUTIONS
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$
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Debt & Equity
Financing
Debt Service
& Dividends
CAPITAL
MARKETS
RURAL
INFRASTRUCTURE
AGRIBUSINESS
FARMERS &
RANCHERS
Letter From Our CEO and Chair
LOWELL L. JUNKINS
Board Chair
BRADFORD T. NORDHOLM
President and
Chief Executive Officer
It is our privilege to address Farmer Mac’s
valued stakeholders and to once again report
on the robust growth of our company, the
impact of our mission, and the strategic vision
that propels us forward.
At Farmer Mac, our vital mission to increase
the accessibility of financing for American
agriculture and rural infrastructure is more
than a guiding principle. It is the heart of our
corporate culture, informs our core values, and
motivates all of us to drive positive results for
our stakeholders—our investors, customers,
employees, and the millions of Americans
who benefit from our secondary market
activities. Everyone at Farmer Mac can be
proud to work for a company that has been
a champion for and an integral part of this
nation’s rural economy for nearly four decades.
As we review our 2023 financial results—
some of the strongest in our history—we think
it’s important to underline the connection
between our recent successes, our plan for
where we’re headed, and our strong corporate
culture. Our core values of Passion for Our
Mission, Innovation, Excellence,
Relationships, and Integrity inform and
permeate everything we do. That’s why we
believe, wholeheartedly: our strength is
rooted in our values.
2023 ANNUAL REPORT
1
L E T T E R F R O M O U R C E O A N D C H A I R
he year in review:
WINDS OF CHANGE
AND OPPORTUNITY
2 FARMER MAC
Guided by our intentional strategy rooted in
our values and an unwavering mission, we
stand prepared to weather storms and cycles
by diversifying our lines of business.
Through headwinds and tailwinds alike,
Farmer Mac remains steadfastly
committed to being a dependable and
resilient partner for America’s farmers
and ranchers, agribusinesses, rural
infrastructure businesses, our customers
that lend to them, and the communities
that rely upon them.
In 2023, many of our stakeholders faced
headwinds as average farm incomes
declined 21%, the most substantial drop
in 17 years. It is noteworthy that even
after this decline, U.S. farm incomes
were still 27% higher in inflation-adjusted
terms than pre-pandemic levels. The
agricultural sector was generally resilient
in other measures as well. Most farm
balance sheets remained in reasonably
good health, while overall default rates
remained at low levels. And farmland
values remained high by historical
standards, generally supporting loan-to-
value ratios on loans secured by
agricultural real estate.
Through these winds of change,
Farmer Mac remained a pillar of
stability, contributing to the resiliency
of America’s rural communities. We
maintained disciplined asset liability
management, uninterrupted access
to the capital markets, and a strong
capital base. Guided by our intentional
strategy rooted in our values and an
unwavering mission, we stand prepared
to weather storms and cycles by
diversifying our lines of business.
Through fourth quarter 2023, Farmer
Mac has achieved seven consecutive
quarters of record-high earnings, a
testament to our commitment to being
a reliable partner. Farmer Mac provided
$8.3 billion in new liquidity and lending
capacity to lenders in 2023 and
achieved a record business volume
of $28.5 billion at year-end.
Growth in some of our newer focus areas
helped us achieve our positive results.
We drove volume by increasing our loan
servicing platform, expanding our outreach
in our wholesale finance product, and
executing innovative new initiatives in
a handful of sectors benefiting from
significant tailwinds. We achieved
a $257.4 million net increase in our
Renewable Energy operating segment
as that market continued to expand
in 2023. As the nation focused on
bolstering our food supply chain in
response to lessons learned from
instability during the pandemic and
the war in Ukraine, we saw a $90.5
million net increase in our Corporate
AgFinance operating segment. And the
$1.1 billion net increase in our Rural
Utilities operating segment reflected that
sector’s continued growth helping to
bridge the digital divide and drive exciting
new opportunities in rural America.
Our success continues to be driven by
our team’s execution of our multi-year
strategic vision, systematic investments
to bolster our expertise in new markets
and modernize our infrastructure, and
expansion in our business development
strategy, all while maintaining disciplined
asset liability management decisions
and funding execution.
2023 ANNUAL REPORT
3
LETTER FROM OUR CEO AND CHAIR Our debt funding strategies and
opportunistic capital raises in
previous low-rate environments
drove a remarkable 28% increase
in our net effective spread (NES, a
non-GAAP measure) to an all-time
high of $327.0 million in 2023.
Record NES, in turn, supported a
38% year-over-year increase in core
earnings (also a non-GAAP measure)
to a record $171.2 million.
Our gains in outstanding business
volume and record financial results
in 2023 speak to the foresight we
have demonstrated over the last few
years to diversify our business
model, proactively manage our
balance sheet and funding sources,
bolster our liquidity profile, and create
profitable growth opportunities in all
interest rate environments. The
discipline of our asset liability and
equity capital management enables
our growth and profitability.
We ended 2023 with $1.5 billion of
core capital. Our Tier 1 capital ratio
improved to 15.4%, largely due to
our robust earnings, supporting a
substantial increase in our retained
earnings. In consideration of our
strong capital position and earnings
growth, the Board of Directors
raised our quarterly dividend to
$1.40 per share of common stock
for first quarter 2024, reflecting a
27% year-over-year increase, our
thirteenth consecutive annual
increase. Over the past five years,
our total shareholder return has been
four times the average of the S&P
500 Financials index with less than
a quarter of the earnings volatility.
OUTSTANDING BUSINESS VOLUME
CORE EARNINGS & NET EFFECTIVE SPREAD**
$30.0
$25.0
8% CAGR* (2019-2023)
$28.5
$25.9
$23.6
$20.0
$21.1
$21.9
s
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$
$15.0
$10.0
$5.0
$0.0
2019
2020
2021
2022
2023
Outstanding Business Volume
*CAGR is Compound Annual Growth Rate.
4 FARMER MAC
s
n
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l
l
i
M
n
i
$
$350.0
$300.0
$250.0
$200.0
18% CAGR* (2019-2023)
16% CAGR* (2019-2023)
$327.0
$255.5
$220.7
$197.0
$168.6
$150.0
$171.2
$100.0
$93.7
$100.6
$124.3
$113.6
$50.0
$0.0
2019
2020
2021
2022
2023
Net Effective Spread
Core Earnings
*CAGR is Compound Annual Growth Rate.
**Core earnings and net effective spread are non-GAAP measures.
For a reconciliation of core earnings to GAAP net income and of net
effective spread to GAAP net interest income, please refer to
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in Farmer Mac's 2023 Annual Report on
Form 10-K filed with the SEC.
LETTER FROM OUR CEO AND CHAIR
Through fourth quarter 2023, Farmer Mac has achieved seven
consecutive quarters of record-high earnings, a testament to
our commitment to being a reliable partner.
ENHANCED CAPITAL POSITION***
COMMON STOCK QUARTERLY DIVIDENDS
16% Total Capital CAGR*
(2019-2023)
$1,209.8
$496.8
$1,452.0
$589.4
$1,322.8
$516.9
$1,011.9
$331.4
$815.4
$196.7
$713.1
$680.5
14.8%
14.2%
12.9%
$600.0
$618.7
$862.6
$805.9
15.4%
14.9%
$1,500.0
$1,350.0
$1,200.0
$1,050.0
$900.0
$750.0
s
n
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i
l
l
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M
n
i
$
$450.0
$300.0
$150.0
$0.0
22.0%
$1.50
15% CAGR* (2019-2024)
$1.40
$1.10
$0.95
$0.88
$0.80
20.0%
18.0%
16.0%
14.0%
12.0%
r
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T
$1.20
$0.90
$0.70
$0.60
$0.30
2019
2020
2021
2022
2023
10.0%
$0.00
2019
2020
2021
2022
2023
2024****
Core Capital Amount Above Statutory Minimum
Total Capital
Quarterly Dividends
Minimum Statutory Core Capital
Tier 1 Capital Ratio
First Quarter 2024 Dividends
*CAGR is Compound Annual Growth Rate.
***Chart may not sum to total due to rounding.
*CAGR is Compound Annual Growth Rate.
****Chart shows dividend paid for first quarter 2024.
The level of future quarterly dividends is subject to change.
2023 ANNUAL REPORT
5
LETTER FROM OUR CEO AND CHAIR
Why and how
we achieve our
strategic goals
Many great companies today strive to be mission-
driven, and many are. But it is fair to say that our
mission at Farmer Mac is especially integral to who
we are, what we do, and why.
As much as we’re dedicated to producing robust
results for Farmer Mac, what motivates and inspires
us is the positive impact we can create for our
customers, their borrowers, and all of America
because of our strong results. We believe that this
approach ultimately leads to better, more consistent
investor returns over time. It also means that our
culture and values are especially central to every
area of our business.
Our strength is rooted in our values. So, what are
those values, and how are they informing our
strategy, our recent successes, and our path
along this critical next chapter of our journey?
Passion for
our mission
One of the main reasons that people choose to work
for Farmer Mac and that keeps them excited about
their jobs is the tremendous impact they can have
on executing our mission. As much as business
volume, profitability, and share price are indicators
of our success, we are even more energized by the
$88 billion in financing we’ve provided to farmers,
ranchers, agribusinesses, and rural electric
cooperatives over the years, the 100,000 plus end
borrowers we’ve served, and the 40 million rural
Americans that have benefited from cheaper power
and connectivity for their homes and businesses.
As an organization, we also know that we couldn’t
achieve any of this without our passionate and
driven employees, and we will always strive to foster
a strong culture that supports and rewards them for
their tireless work.
Farming and ranching are inherently risky professions that are extremely
expensive to undertake, but in the past few years America’s producers have
faced unprecedented challenges. Access to adequate and affordable credit is
integral to ensuring the survival of the agriculture industry domestically
and continued American leadership. The strong relationship between lender
and producer is even more important during uncertain economic times like
we’re seeing right now. Farmer Mac plays a key role in ensuring lenders can
provide flexible and innovative financial solutions that meet the needs of
farmers and ranchers during these challenging times. This makes Farmer
Mac critical to maintaining America’s ability to produce the world’s safest,
most affordable, and most abundant supply of food, fuel, and fiber.
- SENATOR JOHN BOOZMAN (R-AR)
6 FARMER MAC
LETTER FROM OUR CEO AND CHAIR Innovation
Excellence
For a company to succeed, it must grow and mature.
And for a company to grow, it must innovate. Much
of our strategic vision calls for continuing to harness
a spirit of innovation to meet the future capital
needs of American agriculture and rural
infrastructure markets—and training that lens
ever more on our own processes and systems.
We are investing heavily in digital transformations
that we expect to simultaneously improve the
customer experience, reduce closing times, and
de-risk business processes. Data streams are
being merged and transformed into a strategic
asset to further increase efficiencies, help identify
opportunities, and aid in real-time decision-making.
All the while, we are continuing to take a calculated
approach to risk management as we innovate and
expand to achieve our business objectives and work
to fulfill our mission.
We strive for excellence in every interaction we
have with our customers. We recognize that speed,
enhanced customer satisfaction, and sound business
practices are critical elements to winning new
customers, building customer loyalty, and maintaining
a lasting business platform. With a heightened focus
on customer segmentation across our customer
channels, we aspire to become even more customer-
driven and responsive to the needs of an increasingly
diverse and fast-evolving customer base.
As we continue to expand our customer base in
both traditional and newer operating segments, we
recognize the value of a cohesive brand that projects
the excellence we can provide in our work with all
our stakeholders. We embarked on a journey in
2022 to assess and refine our brand positioning.
Emphasizing the importance of this letter as an
opportunity to speak directly with our stakeholders,
it is one of the first times we are debuting our newly
refined and simplified logo, accompanied by our new
tagline: Accelerating Rural Opportunities. This broader
tagline not only represents our impact across all
operating segments but also signifies our commitment
to driving meaningful, positive change for rural America.
We take pride in this opportunity to share our
rebranding journey directly with all our stakeholders,
emphasizing our dedication to collaboration and
excellence in serving as a reliable partner.
2023 ANNUAL REPORT
7
LETTER FROM OUR CEO AND CHAIR Relationships
Integrity
Forging and strengthening relationships have always
been central to our ability to facilitate growth. We
have always understood the value of establishing
bonds across our various constituents, from Wall
Street to rural America. We cannot highlight enough
how important it is to nurture and support these
bonds to drive our mission, our growth, and the
essential contribution our secondary market makes
to the agriculture and rural ecosystem.
Recently, we have focused on expanding our
relationships to bring even greater efficiencies to the
rural credit markets. A good example is our FARM
securitization program. Given the strong demand for
and positive reception of our FARM issuances, we
remain committed to being a regular issuer in the
market with a set of securitization products that
align with customer and investor interest. As we
assess the strategic objectives for the program, we
plan to transform the FARM securitization program
from a financing strategy to offering this as a
product designed to help support our customers’
capital and financing needs.
At Farmer Mac, we believe that how we get the job
done—ethically, honestly, with careful consideration
for others and our trusted role in a larger ecosystem—
is as important as our achievements.
Ensuring that our work is done with integrity starts
with nurturing a strong corporate culture and
workforce that respects and rewards our employees.
We recognize our work would be impossible without
our dedicated and talented employees, whom we
deeply value.
In 2023, we took a step to directly align incentives
with our mission-focused work by extending equity
award compensation to all employees. We are
continually strengthening our focus on career
development and diversity, equity, and inclusion
efforts, with an emphasis on ensuring each employee
feels included and valued. And our “Presence with
Purpose” hybrid work model provides our teams the
flexibility to work in the ways they are most productive.
Our culture-building efforts were recognized once
again in the form of several Top Workplace awards
in 2023, including national recognition by USA Today
and culture-focused awards for compensation and
benefits, purpose and values, and work-life flexibility.
And we’re proud of our low 6.3% percent employee
turnover rate in 2023—a sign that our focus on
retaining and rewarding talent is making a difference.
At Farmer Mac, valuing our employees isn’t just a
box to check—it’s fundamental to our approach to
achieving our mission with integrity.
8 FARMER MAC
LETTER FROM OUR CEO AND CHAIR Farmer Mac remains a critical partner for American agriculture and rural
infrastructure. Whether it’s supporting our farmers and ranchers across more
than 144 different commodities or providing financial solutions to close the
digital divide, Farmer Mac plays a crucial role as the nation’s secondary
market for agricultural credit.
- CONGRESSMAN DAVID SCOTT (D-GA)
We recognize our
work would be
impossible without
our dedicated
and talented
employees, whom
we deeply value.
A FUTURE FORTIFIED BY VALUES
In many ways, rural America is very
different than it was when Farmer
Mac was created 36 years ago.
Farmers increasingly leverage huge
sets of data to make planting
decisions—and can easily perform
that analysis on their cell phones
and tablets while out in their fields.
Once-experimental practices for
water preservation and soil
regeneration have become routine.
In more and more places, solar
panels flank the property lines.
Wind turbines twirl overhead.
Much of this change has brought
new opportunities and connections
to rural communities, enriching the
lives of millions. Through the
innovative financial products and
solutions we provide and the
research initiatives we support,
Farmer Mac is helping to
strengthen, power, and connect
rural America.
And yet, through all these winds of
change, rural America has
maintained a culture rooted in
community values. Even today,
small family farms operating on less
than $350,000 in gross farm
income a year constitute almost
90% of all U.S. farms. The goals and
aspirations farmers and ranchers
across the country have for
themselves and future generations,
the inherent uncertainties they face,
the values that tie them to the sector
and the land—these haven’t changed
all that much through the decades
Farmer Mac has been doing
business, nor has our essential
commitment to supporting our
stakeholders’ struggles and triumphs.
We sincerely thank all our
stakeholders for being an integral
part of the Farmer Mac story, which
continues to evolve. We will
continue innovating and improving
because it is crucial for fulfilling our
mission in a dynamic marketplace.
As our work continues to support a
brighter future for rural America, our
collective success will be driven not
only by the constancy of our mission
but by the values that guide us and
serve as the strong foundation of
everything we do.
BRADFORD T. NORDHOLM
President and
Chief Executive Officer
LOWELL L. JUNKINS
Board Chair
2023 ANNUAL REPORT
9
LETTER FROM OUR CEO AND CHAIR LINE OF
BUSINESS
gricultural Finance
Farmer Mac’s Agricultural Finance line of business is composed of the Farm & Ranch
and Corporate AgFinance operating segments. Across both segments, Farmer Mac
provides a secondary market to a diverse customer set, offering a wide range of
products and innovative solutions that assist with their capital, liquidity, and portfolio
diversification needs. The Agricultural Finance business line helps agricultural lenders
and financial institutions support their customers by providing better and more
efficient access to financing solutions across American agriculture.
FARM & RANCH BUSINESS VOLUME
& NET EFFECTIVE SPREAD*
CORPORATE AGFINANCE BUSINESS VOLUME
& NET EFFECTIVE SPREAD*
e
m
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$
$20.0
$18.0
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
$18.8B
$17.7B
$14.6B
$14.9B
$16.1B
$132.9M
$129.1M
$113.5M
$90.2M
$76.1M
2019
2020
2021
2022
2023
$150.0
$140.0
$130.0
$120.0
$110.0
$100.0
$90.0
$80.0
$70.0
$2.0
$1.8
$1.6
$1.4
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$1.2
$1.0
$0.8
$0.6
$0.4
$ 0.0
$1.7B
$1.7B
$1.6B
$1.5B
$1.3B
$31.2M
$29.2M
$27.1M
$21.4M
$13.8M
2019
2020
2021
2022
2023
$45.0
$40.0
$35.0
$30.0
$25.0
$20.0
$15.0
$10.0
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Loans and USDA Securities
AgVantage Securities
(Wholesale Finance)
Net Effective Spread
Long-Term Standby
Purchase Commitments
Guaranteed Securities,
Loans Held in Trusts, & Other**
Total Business Volume
AgVantage Securities (Wholesale Finance)
Loans & Unfunded Commitments
Net Effective Spread
Total Business Volume
*Net effective spread is a non-GAAP measure. For a reconciliation of net effective spread to GAAP net interest income, please refer to “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Farmer Mac's 2023 Annual Report on Form 10-K filed with the SEC.
**“Other” includes IO-FMGS and loans serviced for others.
10 FARMER MAC
Segments
FARM & RANCH
Through its Farm & Ranch operating segment,
Farmer Mac works with customers varying
from small community banks to large
financial institutions and nonbank lenders.
Farmer Mac’s innovative products and
solutions help these customers reduce
interest rate risk and credit risk, manage
their capital efficiency, and offer more
competitive and efficient products and terms
to better support lending initiatives to
farmers and ranchers across the country.
Overall Farm & Ranch business volume
increased 6.1% in 2023, primarily driven
by newly purchased servicing rights on $0.6
billion of loans serviced for other financial
institutions. Farmer Mac’s Farm & Ranch
wholesale finance product (i.e., AgVantage
Securities) also contributed to growth in the
Agricultural Finance line of business in
2023, as the relative value and competitive
pricing of this product increased customer
utilization. Conversely, loan purchase
volume growth slowed compared to historical
performance, as farmers and ranchers
adjusted to higher mortgage interest rates
as well as record 2022 farm incomes.
Looking forward, we expect Farm & Ranch
loan purchase volume to begin to recover
as farm incomes recede from multi-year
highs along with the potential for a decrease
in market interest rates.
CORPORATE AGFINANCE
Farmer Mac’s Corporate AgFinance operating
segment provides financing solutions
through a secondary market that reaches
across a broad portion of the agricultural
supply chain and the institutional investor
community. This segment serves a diverse
set of customers ranging from community
banks and large financial institutions to
institutional investors and funds. They turn
to Farmer Mac for a reliable source of
financial solutions to help finance large,
complex agribusinesses, vertically integrated
farming operations, and institutional
investment vehicles. For these capital-
intensive needs, Farmer Mac provides
flexible and competitive debt financing
solutions tailored to meet borrowers’ varied
needs, including direct loan purchase,
broad participation in group syndicated
transactions, and wholesale financing.
Incremental loan and unfunded commitment
purchase volume in Corporate AgFinance
contributed to the overall growth of business
volume in our Agricultural Finance business
line in 2023. This growth continued to reflect
an increase in activity reflecting Farmer Mac’s
commitment to build a strong brand and
reputation in this marketplace. We achieved
approximately $161.2 million in net growth of
loans and unfunded commitments in Corporate
AgFinance, representing a 13% increase in
volume in 2023, at accretive spreads, which
supported a strong increase in revenues.
Farmer Mac is prepared to continue to serve
the needs of financial institutions and their
borrowers across the food supply chain.
2023 ANNUAL REPORT
11
LINE OF
BUSINESS
ural Infrastructure Finance
Capital-intensive investments are required to deliver reliable electric power and
communications services to communities across rural America. Farmer Mac’s
Rural Utilities and Renewable Energy operating segments help lenders organized
as cooperatives finance these important expansion and improvement projects
through a secondary market. Farmer Mac saw tremendous growth across Rural
Infrastructure Finance in 2023, steadily increasing the extent to which we support
the vital access to these services that millions of rural residents and businesses
rely on and helping to connect rural communities.
RURAL UTILITIES BUSINESS VOLUME
& NET EFFECTIVE SPREAD*
RENEWABLE ENERGY BUSINESS VOLUME
& NET EFFECTIVE SPREAD*
e
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$8.0
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
$30.0
$0.6
$7.5B
$6.4B
$25.0M
$25.0
$5.9B
$5.3B
$5.2B
$16.1M
$8.1M
$5.1M
$6.9M
2019
2020
2021
2022
2023
d
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$20.0
$15.0
$10.0
$0.0
$0.5
$0.4
$0.3
$0.2
$0.1
$0.0
$7.0
$0.49B
$6.0
$4.65M
$0.23B
$2.48M
$0.09B
$0.07B
$0.30M $1.22M
$0.01B
$0.02M
2019
2020
2021
2022
2023
d
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$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
AgVantage Securities
(Wholesale Finance)
Long-Term Standby Purchase Commit-
ments and Guaranteed Securities
Net Effective Spread
Rural Utilities Loans
Telecommunications Loans
and Unfunded Commitments
Total Business Volume
Renewable Energy Loans
and Unfunded Commitments
Net Effective Spread
Total Business Volume
*Net effective spread is a non-GAAP measure. For a reconciliation of net effective spread to GAAP net interest income, please refer to “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Farmer Mac's 2023 Annual Report on Form 10-K filed with the SEC.
12 FARMER MAC
Segments
RENEWABLE ENERGY
One pillar in supporting critical energy
infrastructure across rural America is the
growing and diverse renewable energy
sector. Renewable power costs have fallen
significantly in recent years with a
simultaneous rise in government and
corporate interest in renewable
infrastructure, heating up this growing
market. With its Renewable Energy
operating segment, Farmer Mac provides
the competitive benefits of a secondary
market for financial institutions organized
as cooperatives to help finance renewable
energy projects generating and distributing
energy across rural America.
In 2023, Farmer Mac more than doubled
the size of its Renewable Energy portfolio
for the second year in a row, to $487.5
million. The industry’s projected pipeline of
projects remains robust, bolstered by ongoing
federal support and many state-level plans
to accelerate the transition from fossil-fuel-
fired generation. As Farmer Mac continues
investing to support the potential for significant
portfolio growth in the future, the expanded
Renewable Energy team will strive to continue
to serve as a reliable partner to cooperative
lenders to help deliver affordable power
to rural communities and further the
development of infrastructure critical to
the future of all Americans.
RURAL UTILITIES
Reliable power and communications
infrastructure is crucial in the modern age,
but America’s rural communities have been
historically underserved. In its Rural Utilities
operating segment, Farmer Mac offers a
wide range of competitively priced, flexible
solutions that support the ability of
financial institutions organized as
cooperatives to provide financing to a
variety of rural infrastructure borrowers.
This funding is used for electric generation,
transmission, and distribution systems as
well as broadband projects to deliver safe,
affordable, and reliable power and high-
speed telecommunications services to
homes, farms, businesses, and schools
across the country.
During 2023, the Rural Utilities operating
segment saw meaningful growth as borrowers
had significant financing needs for both
recurring maintenance and growth initiatives
aimed at delivering reliable and affordable
energy and communications services to
rural communities. The continued strong
capital investment in America’s electric
generation, transmission, and distribution
infrastructure supported significant growth
in wholesale finance (i.e., AgVantage
Securities), which saw increased financing
of $854.3 million in 2023 as cooperative
lenders continued to support their
members’ investment needs. Farmer Mac’s
telecommunications portfolio alone achieved
more than $190 million of growth in loans
and unfunded commitments in 2023, much
of it related to major public and private
initiatives to extend and upgrade the country’s
rural broadband coverage. Looking ahead,
Farmer Mac anticipates continued strong
demand across its Rural Utilities operating
segment and remains focused on providing
solutions to cooperative lenders to help
finance their borrowers’ investments in
rural utility infrastructure.
2023 ANNUAL REPORT
13
ore than metrics
It all starts with people. As Farmer Mac increases its commitment to rural America, its main engine
will continue to be a workforce passionate about driving positive change. Farmer Mac strives to support
our employees in all aspects of their lives. This includes finding ways to serve rural America together—
going above and beyond the work we do in pursuit of our mission.
MAKING MEANINGFUL CHANGE THAT’S ROOTED IN GIVING
We proudly engage in philanthropy, welcoming the
opportunity to give back to our communities and our country.
We focus our efforts on volunteerism that begins in the
communities in which we live and work, on providing aid
and relief for natural disasters impacting agricultural and
rural areas, and on supporting programs aimed at helping
small operations, new farmers and ranchers, and
underrepresented groups grow and prosper.
This year, specific focus areas included supporting two
fellowship programs—one aimed at helping advance the
education of those interested in preserving the legacy
of agriculture in America’s Tribal communities, and the
other at supporting aspiring women ag professionals.
We also provided financial sponsorship for the fight
against rural childhood hunger, which grew out of a
hands-on volunteer event with employees.
“The Tribal
Agricultural
Fellowship (TAF)
has given me the
opportunity to learn
more about indigenous
agriculture, meet other
young professionals
across the United
States, and continue
my higher education.
“The Summit was
a great experience!
I was able to talk with
women in the industry
and learn about
their careers and
experiences. I loved
being able to learn
and connect with
many women in the
agricultural industry,
I’m so thankful to be a part of a group that helps
me grow as a leader and share my native identity.”
Keona Mason, senior in Agricultural Communications at
Oklahoma State University, and a member of the second
cohort of TAF fellows. Farmer Mac is a founding funder
of the program.
To learn more about TAF,
please visit taffellows.org
learning new facts and exciting insights on
Gen Z in the workplace, regenerative initiatives,
and changing policies. Thank you, Farmer Mac,
for sponsoring my trip!”
Maggie Long, Masters of Agribusiness candidate at
Texas A&M University, one of three students sponsored by
Farmer Mac to attend the 2023 Women in Agriculture
Summit in Nashville, Tennessee.
In November 2023, 18 employees from our Iowa office participated
in a meal-packing event with Meals from the Heartland in Des
Moines. The team packaged 9,720 meals, ensuring that 37
underprivileged children from the surrounding communities would
be fed for the next year. So enthusiastic was the team’s feedback
about the experience that our Philanthropic Committee
subsequently approved a $25,000 contribution to the group.
14 FARMER MAC
WE ARE ONE FARMER MAC, ON A JOURNEY TOGETHER
The positive results Farmer Mac achieves for rural America begin with and are fueled by our employees. As we broaden
and deepen our mission, we recognize the importance of keeping our employees at the forefront of owning and driving
our evolution. That was part of the thinking behind our new brand repositioning and its emphasis on Farmer Mac’s
special role in helping rural America navigate a period of tremendous change. We realize that to successfully achieve
our ambitious business goals, it will not only require new and established stakeholders to grasp the opportunity
represented by our expanded value proposition. Our employees will also need opportunities to fully absorb and
imprint the vision—to ensure, as always, they are all in.
We are committed to fostering a strong
workplace and are proud to be recognized
for our efforts on the national stage.
Jenny Knapik, Program Manager,
Information Technology, is one
of the 2023 recipients of Farmer
Mac’s Living Our Values awards.
Her winning nomination cited her
leadership on a major technological
modernization project that involved
coordinating the efforts of 80+
people, including a multitude
of outside vendors.
When describing a few of Jenny’s noteworthy attributes, one
senior stakeholder especially appreciated her willingness to
self-reflect and self-correct as road bumps to the
transformational technology project she led emerged so
that success could be achieved. According to Jenny, it’s a
trait shared by many of her colleagues. “Part of what I love
most about working at Farmer Mac is everyone has the
same can-do attitude,” she says. “People here don’t take
themselves too seriously. It’s always ‘What more can I do
to help?’ ‘What can we be doing better?’ When you start with
a mindset like that, even the most complex projects can feel
a whole lot more manageable.”
2023 ANNUAL REPORT
15
BOARD OF DIRECTORS
As of April 3, 2024
LOWELL L. JUNKINS, CHAIR1
Political Affairs Consultant
Lowell Junkins & Associates
Montrose, Iowa
LAJUANA S. WILCHER, VICE CHAIR1
Owner – Scuffle Hill Farm
Partner – English, Lucas, Priest & Owsley, LLP
Bowling Green, Kentucky
DENNIS L. BRACK2
Director
Bath State Bank and Bath State Bancorp
Bath, Indiana
CHESTER J. CULVER1
Founder
Chet Culver Group
West Des Moines, Iowa
RICHARD H. DAVIDSON3
President
Davidson Farms, Inc.
Washington Court House, Ohio
EXECUTIVE ROUNDTABLE
As of April 3, 2024
EVERETT M. DOBRINSKI3
Former Owner/Operator
Dobrinski Farm
Makoti, North Dakota
JAMES R. ENGEBRETSEN2
Retired Professor, Finance
Marriott School of Management
Brigham Young University
Provo, Utah
SARA L. FAIVRE1
Co-Owner and Advisory Partner
Wild Type Ranch
Cameron, Texas
AMY H. GALES3
Retired Executive Vice President
CoBank
Bonita Springs, Florida
MITCHELL A. JOHNSON2
Financial Consultant
Miami, Florida
From Left: Robert Sexton, James Engebretsen,
Eric McKissack, Amy Gales, Mitchell Johnson,
LaJuana Wilcher, Chester Culver, Lowell Junkins,
Dennis Brack, Sara Faivre, Everett Dobrinski,
Richard Davidson, Todd Ware, Roy Tiarks,
Charles Stones
1 Presidential Appointee
2 Director elected by holders of Class A Common Stock
3 Director elected by holders of Class B Common Stock
ERIC T. MCKISSACK2
Former CEO
Channing Capital Management, LLC
Chicago, Illinois
ROBERT G. SEXTON3
President
Oslo Citrus Growers Association
Vero Beach, Florida
CHARLES A. STONES1
Former President
Kansas Bankers Association
Topeka, Kansas
ROY H. TIARKS3
Owner
Tiarks Family Farm
Council Bluffs, Iowa
TODD P. WARE2
President and Chief Executive Officer
Licking Rural Electrification –
The Energy Cooperative
Newark, Ohio
BRADFORD T. NORDHOLM
President and
Chief Executive Officer
ZACHARY N. CARPENTER
Executive Vice President –
Chief Business Officer
STEPHEN P. MULLERY
Executive Vice President –
General Counsel and Secretary
BRIAN M. BRINCH
Senior Vice President –
Enterprise Risk Officer
MARC J. CRADY
Senior Vice President –
Chief Credit Officer
SEAN T. DATCHER
Senior Vice President –
Chief Information Officer
ROBERT J. MAINES
Senior Vice President –
Operations
APARNA RAMESH
Executive Vice President –
Chief Financial Officer
and Treasurer
KERRY T. WILLIE
Senior Vice President –
Chief Human
Resources Officer
TODD A. BATTA
Vice President –
Government Affairs
LISA MEYER
Vice President –
Marketing and Corporate
Communications
CATHERINE D. BIRR
Chief of Staff
16 FARMER MAC
16 FARMER MAC
As filed with the Securities and Exchange Commission on February 23, 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission File Number 001-14951
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Exact name of registrant as specified in its charter)
Federally chartered instrumentality
of the United States
(State or other jurisdiction of
incorporation or organization)
1999 K Street, N.W., 4th Floor,
Washington, DC
(Address of principal executive offices)
52-1578738
(I.R.S. employer identification number)
20006
(Zip code)
(Registrant's telephone number, including area code)
(202) 872-7700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A voting common stock
Class C non-voting common stock
6.000% Fixed-to-Floating Rate Non-Cumulative
Preferred Stock, Series C
5.700% Non-Cumulative Preferred Stock, Series D
5.750% Non-Cumulative Preferred Stock, Series E
5.250% Non-Cumulative Preferred Stock, Series F
4.875% Non-Cumulative Preferred Stock, Series G
Trading symbol
AGM.A
AGM
AGM.PRC
Exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
AGM.PRD
AGM.PRE
AGM.PRF
AGM.PRG
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Class B voting common stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes
o
No
x
1
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes o No x
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted 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 such files).
Yes ☒ No ☐
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.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
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
13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment
of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act
(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial
statements of the registrant included in the filing reflect the correction of an error to previously issued financial
statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery
period pursuant to §240.10D-1(b) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The aggregate market value of the Class A voting common stock and Class C non-voting common stock held by
non-affiliates of the registrant was $1,402,769,072 as of June 30, 2023, the last business day of the registrant's most
recently completed second fiscal quarter, based upon the closing prices for the respective classes on June 30, 2023
reported by the New York Stock Exchange. For purposes of this information, the outstanding shares of Class A
voting common stock and Class C non-voting common stock held by directors, executive officers, and significant
stockholders of the registrant, as applicable, as of June 30, 2023 were deemed to be held by affiliates. The aggregate
market value of the Class B voting common stock is not ascertainable due to the absence of publicly available
quotations or prices for the Class B voting common stock as a result of the limited market for, and infrequency of
trades in, Class B voting common stock and the fact that any such trades are privately negotiated transactions.
As of February 9, 2024, the registrant had outstanding 1,030,780 shares of Class A voting common stock,
500,301 shares of Class B voting common stock, and 9,315,397 shares of Class C non-voting common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the registrant's Proxy Statement for the 2024 Annual Meeting of Stockholders is
incorporated herein by reference in Part III of this Annual Report on Form 10-K. The Proxy Statement will be filed
2
with the Securities and Exchange Commission within 120 days after the end of the registrant's fiscal year to which
this report relates.
Auditor Firm ID: 238 Auditor Name: PricewaterhouseCoopers LLP
Auditor Location: Washington DC, USA
3
Table of Contents
Forward-Looking Statements
PART I
Item 1.
Business
General
Farmer Mac's Line of Business
Competition
Capital and Corporate Governance
Human Capital
Available Information
Funding of Guarantee and LTSPC Obligations
Financing
Debt Issuance
Equity Issuance
Farmer Mac's Authority to Borrow from the U.S. Treasury
Government Regulation of Farmer Mac
General
Office of Secondary Market Oversight
Capital Standards
Liquidity Requirements
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Critical Accounting Estimates
Use of Non-GAAP Measures
Results of Operations
Outlook
Balance Sheet Review
Risk Management
Liquidity and Capital Resources
Other Matters
Supplemental Information
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements
Consolidated Balance Sheets
4
6
8
8
8
10
19
20
22
25
25
26
26
26
30
31
31
31
32
34
36
50
51
53
54
54
51
55
53
58
58
63
64
66
85
91
91
107
111
111
115
116
120
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Directors, Executive Officers, and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Item 13.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits
Item 16.
Form 10-K Summary
Signatures
121
122
123
124
125
194
195
195
195
196
196
196
196
196
196
196
196
199
199
5
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, such as in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section, are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995 about management's current expectations for Farmer Mac's
future financial results, business prospects, and business developments. Forward-looking statements
include, without limitation, any statement that may predict, forecast, indicate, or imply future results,
performance, or achievements. These statements typically 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 "would." This report includes forward-looking statements addressing Farmer Mac's:
•
•
•
•
•
•
•
•
•
•
•
prospects for earnings;
prospects for growth in business volume;
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.
Management's expectations for Farmer Mac's future necessarily involve assumptions, 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 I, Item 1A of this
report, as well as uncertainties about:
•
•
•
•
•
•
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
agricultural or rural infrastructure industries;
fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries;
the level of 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 infrastructure indebtedness;
the effect of economic conditions stemming from disruptive global events or otherwise on
agricultural mortgage or rural infrastructure lending, borrower repayment capacity, or collateral
values, including inflation, fluctuations in interest rates, changes in U.S. trade policies,
fluctuations in export demand for U.S. agricultural products and foreign currency exchange
6
•
•
•
•
rates, 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;
the effects of the Federal Reserve’s efforts to achieve monetary policy normalization to
respond to inflation and employment levels; and
other factors that could hinder agricultural mortgage lending or borrower repayment capacity,
including the effects of severe weather, flooding and drought, climate change, or fluctuations in
agricultural real estate values.
Considering these potential risks and uncertainties, no undue reliance should be placed on any forward-
looking statements expressed in this report. Farmer Mac undertakes no obligation to release publicly the
results of revisions to any forward-looking statements to reflect new information or any future events or
circumstances, except as otherwise required by applicable law. The information in this report is not
necessarily indicative of future results.
7
Item 1.
Business
PART I
GENERAL
Farmer Mac is a stockholder-owned, federally chartered corporation that combines private capital and
public sponsorship to serve a public purpose. Congress has charged Farmer Mac with the mission of
providing a secondary market for a variety of loans made to borrowers in rural America. A secondary
market is an economic arrangement in which the owners of financial assets, such as the originators of
loans, may sell all or part of those assets or pay a fee to offset some or all of the inherent risks of holding
the assets. Farmer Mac's secondary market activities include:
•
•
•
•
•
purchasing eligible loans directly from lenders (including participation interests, syndicated notes,
revolving and non-revolving credit facilities, and unfunded commitments to make advances on
loans);
guaranteeing and purchasing securities issued by lenders and other financial institutions that are
secured by pools of eligible loans (Farmer Mac refers to these securities as "AgVantage," a
registered trademark of Farmer Mac);
issuing and guaranteeing securities that represent interests in, or obligations secured by, pools of
eligible loans (together with AgVantage, Farmer Mac refers to these securities as "Farmer Mac
Guaranteed Securities");
servicing (including as master servicer) eligible loans, including loans that have been purchased or
securitized by Farmer Mac or that would be eligible for purchase by Farmer Mac but are owned by
a third party; and
providing long-term standby purchase commitments ("LTSPCs") for eligible loans.
Farmer Mac Guaranteed Securities may be retained by the seller of the underlying loans, retained by
Farmer Mac, or sold to third-party investors.
Farmer Mac was established under federal legislation first enacted in 1988 and amended most recently in
2018 – Title VIII of the Farm Credit Act of 1971 (12 U.S.C. §§ 2279aa et seq.), which is referred to as
Farmer Mac's charter. Farmer Mac is a government-sponsored enterprise ("GSE") by virtue of the status
conferred by its charter. The charter provides that Farmer Mac has the power to establish, acquire, and
maintain affiliates under applicable state law to carry out any activities that Farmer Mac otherwise would
perform directly. Farmer Mac established its two existing subsidiaries – Farmer Mac II LLC and Farmer
Mac Mortgage Securities Corporation – under that power.
Farmer Mac is an institution of the Farm Credit System ("FCS"), which is composed of the banks,
associations, and related entities, including Farmer Mac and its subsidiaries, regulated by the Farm Credit
Administration ("FCA"), an independent agency in the executive branch of the United States
government. Although Farmer Mac is an institution of the FCS, it is not liable for any debt or obligation of
any other institution of the FCS. None of FCA, the FCS, or any other individual institution of the FCS is
liable for any debt or obligation of Farmer Mac or its subsidiaries. The debts and obligations of Farmer
Mac and its subsidiaries are not guaranteed by the full faith and credit of the United States of America.
8
Farmer Mac's two primary sources of revenue are:
•
•
interest income earned on assets held on balance sheet, net of related funding costs and interest
payments and receipts on financial derivatives; and
guarantee and commitment fees received for outstanding guaranteed securities and LTSPCs.
Farmer Mac funds its purchases of eligible loans and securities primarily by issuing debt obligations of
various maturities in the public capital markets. Farmer Mac also uses the proceeds of debt issuance to
fund liquidity investments that must comply with policies adopted by Farmer Mac's board of directors and
with FCA regulations, which establish limitations on asset class, dollar amount, issuer concentration, and
credit quality. Those regulations can be found at 12 C.F.R. §§ 652.1-652.45 ("Liquidity and Investment
Regulations"). Farmer Mac's regular debt issuance supports its access to the capital markets, and Farmer
Mac's liquidity investments provide an alternative source of funds should market conditions become
unfavorable. As of December 31, 2023, Farmer Mac had $1.7 billion of discount notes and $24.9 billion
of medium-term notes outstanding. For more information about Farmer Mac's eligible loans, securities,
and liquidity investments, as well as its financial performance and sources of capital and liquidity, see
"Management's Discussion and Analysis of Financial Condition and Results of Operations." For more
information about Farmer Mac's debt issuance, see "Business—Financing—Debt Issuance."
Secondary Market
Farmer Mac's activities are intended to provide lenders with an efficient and competitive secondary market
that enhances these lenders' ability to offer competitively-priced financing solutions to borrowers. This
secondary market is designed to increase the availability of credit at competitive interest rates to America's
rural communities and agricultural sectors, as well as to provide borrowers with the benefits of capital
markets pricing and product innovation. The secondary market provided by Farmer Mac functions as a
bridge between the public capital markets and the U.S. agricultural and rural credit markets by attracting
additional capital sources for financing rural America and agricultural borrowers.
Farmer Mac's purchases of loans and securities and its sale of guaranteed securities to investors increase
lenders' liquidity and lending capacity and provide a stable source of funding for lenders that extend credit
to the agricultural and rural credit markets. Farmer Mac's issuance of LTSPCs for loans held by lenders
and its issuance of guaranteed securities to lenders in exchange for the related securitized loans could
result in lower regulatory capital requirements and reduced borrower or commodity concentration
exposure for many lenders, thereby expanding their lending capacity. By providing efficient and
competitive financing solutions, Farmer Mac has the potential to increase lending flexibility for rural
credit markets, which may result in lower interest rates paid on loans made by lenders to rural and
agricultural borrowers.
Farmer Mac markets a mix of products to lenders who may be in need of capital, liquidity, portfolio
diversification, and/or access to a wide variety of loan products, including those with long-term fixed
rates. As part of its outreach strategy, Farmer Mac engages with current and prospective lenders to identify
how their use of Farmer Mac's secondary market could further support their origination efforts and drive
efficient capital deployment to agricultural communities and rural America. Farmer Mac also provides
wholesale funding for institutional investors in agricultural assets that qualify as eligible collateral under
Farmer Mac's charter. For these potential issuers, Farmer Mac directs its outreach efforts through its
business relationships within the agricultural community and through outreach to institutions whose
profile may benefit from wholesale funding. Farmer Mac seeks to maximize the use of technology to
support these business development efforts.
9
FARMER MAC'S LINES OF BUSINESS
Farmer Mac engages in a variety of secondary market activities across its two lines of business,
Agricultural Finance and Rural Infrastructure Finance. Within those two lines of business are four
segments: Corporate AgFinance, Farm & Ranch, Rural Utilities, and Renewable Energy, as shown in the
table below:
Agricultural Finance
Rural Infrastructure
Finance
Farm &
Ranch
Corporate
AgFinance
Rural
Utilities
Renewable
Energy
Interest-earning assets
Loans
Loans held in securitization trusts (single-class)1
AgVantage Securities1
Interest-only portions of agricultural mortgage-
backed securities ("IO")1
USDA Securities
Products and services that earn fee income
LTSPCs
Unfunded loan commitments
Structured securitization transactions1
Loan servicing
Other Farmer Mac Guaranteed Securities1
1 These categories comprise "Farmer Mac Guaranteed Securities."
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
The loans (and interests in those loans) eligible for Farmer Mac's secondary market activities in each of
Farmer Mac's lines of business include:
•
•
For Farmer Mac's Agricultural Finance line of business, mortgage loans secured by first liens on
real estate used in agricultural production or processing, including part-time farms and rural
housing loans, as well as agricultural and rural development loans guaranteed by the United States
Department of Agriculture ("USDA"); and
For Farmer Mac's Rural Infrastructure Finance line of business, loans by lenders organized as
cooperatives to finance electrification and telecommunications systems and renewable energy
providers or projects in rural areas.
As of December 31, 2023, the total outstanding business volume in Farmer Mac's two lines of business
(Agricultural Finance and Rural Infrastructure Finance) was $28.5 billion. The following table presents
the outstanding balances under Farmer Mac's two lines of business as of December 31, 2023 and 2022:
10
Lines of Business - Outstanding Business Volume
On or Off
Balance Sheet
As of December 31,
2023
As of December 31,
2022
(in thousands)
Agricultural Finance:
Farm & Ranch:
Loans
Loans held in consolidated trusts:
Beneficial interests owned by third-party investors (single-
class)(1)
Beneficial interests owned by third-party investors (structured)(1)
IO-FMGS(2)
USDA Securities
AgVantage Securities(1)
LTSPCs and unfunded loan commitments
Other Farmer Mac Guaranteed Securities(3)
Loans serviced for others
Total Farm & Ranch
Corporate AgFinance:
Loans
AgVantage Securities(1)
Unfunded loan commitments
Total Corporate AgFinance
Total Agricultural Finance
Rural Infrastructure Finance:
Rural Utilities:
Loans
AgVantage Securities(1)
LTSPCs and unfunded loan commitments
Other Farmer Mac Guaranteed Securities(3)
Total Rural Utilities
Renewable Energy:
Loans
Unfunded loan commitments
Total Renewable Energy
Total Rural Infrastructure Finance
Total
On-balance sheet
$
5,133,450 $
5,150,750
On-balance sheet
On-balance sheet
On-balance sheet
On-balance sheet
On-balance sheet
Off-balance sheet
Off-balance sheet
Off-balance sheet
870,912
561,349
9,409
2,368,872
5,835,000
2,999,943
452,602
577,264
914,918
296,658
10,622
2,407,302
5,605,000
2,822,309
500,953
20,280
$
18,808,801 $
17,728,792
On-balance sheet
$
1,259,723 $
1,166,253
On-balance sheet
Off-balance sheet
288,879
145,377
$
$
1,693,979 $
20,502,780 $
On-balance sheet
$
3,094,477 $
On-balance sheet
Off-balance sheet
Off-balance sheet
3,898,468
487,778
—
359,600
77,654
1,603,507
19,332,299
2,801,696
3,044,156
512,592
1,169
$
7,480,723 $
6,359,613
On-balance sheet
$
440,286 $
Off-balance sheet
47,235
$
$
$
487,521 $
7,968,244 $
28,471,024 $
219,570
10,600
230,170
6,589,783
25,922,082
(1)
(2)
(3)
A type of Farmer Mac Guaranteed Security.
An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.
Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.
Agricultural Finance
Farmer Mac provides a secondary market for eligible loans in Farmer Mac's Agricultural Finance line of
business by (1) purchasing and retaining eligible loans and securities, (2) guaranteeing the payment of
principal and interest on securities that represent interests in, or obligations secured by, pools of eligible
loans, (3) servicing (including as master servicer) eligible loans, and (4) issuing LTSPCs for designated
eligible loans. Farmer Mac is compensated for these activities through net interest income on loans and
securities held on balance sheet, guarantee fees earned on securities issued to third parties, servicing fees
11
on securitized loans and loans serviced for others, and commitment fees earned on loans in LTSPCs and
on unfunded loan commitments.
Loan Eligibility
To be eligible for the Agricultural Finance line of business, a loan must either:
•
◦
be an agricultural mortgage loan (referred to as "Agricultural Finance mortgage loans") that is
secured by a fee simple mortgage or a leasehold mortgage with status as a first lien on
agricultural real estate (including part-time farms and rural housing) located within the
United States; and
an obligation of a citizen or national of the United States, an alien lawfully admitted for
permanent residence in the United States, or a private corporation or partnership that is
majority-owned by U.S. citizens, nationals, or legal resident aliens that, in each case, has
training or farming experience that is sufficient to ensure a reasonable likelihood that the
loan will be repaid according to its terms; or
◦
•
be the guaranteed portion of a loan guaranteed by the USDA under the Consolidated Farm and
Rural Development Act (7 U.S.C. § 1921 et seq.) (referred to as "USDA Securities").
Farmer Mac's charter authorizes a maximum loan size (adjusted annually for inflation) for an eligible
Agricultural Finance mortgage loan secured by more than 2,000 acres of agricultural real estate. That
maximum loan size was $17.0 million as of December 31, 2023. The charter does not prescribe a
maximum loan size or a total borrower exposure for an eligible Agricultural Finance mortgage loan
secured by 2,000 acres or less of agricultural real estate. However, an internal policy approved by Farmer
Mac's board of directors limits the cumulative direct credit exposure to any one borrower or group of
related borrowers on loans secured by 2,000 acres or less of agricultural real estate to 10% of Farmer
Mac's Tier 1 capital ($145.2 million as of December 31, 2023). For Agricultural Finance mortgage loans,
eligible agricultural real estate consists of one or more parcels of land, which may be improved by
permanently affixed buildings or other structures, that (i) is used for the production of one or more
agricultural commodities or products and (ii) either consists of a minimum of five acres or generates
minimum annual receipts of $5,000.
As required by Farmer Mac's charter, Farmer Mac has established underwriting, security appraisal, and
repayment standards for eligible loans that consider the nature, risk profile, and other differences between
different categories of eligible loans. The charter prescribes that the following minimum standards must be
applied to all Agricultural Finance mortgage loans:
•
•
•
•
•
provide that no loan with a loan-to-value ratio ("LTV") more than 80% may be eligible;
require each borrower to demonstrate sufficient cash flow to adequately service the loan;
require sufficient documentation standards;
protect the integrity of the appraisal process for any loan; and
confirm that the borrower is or will be actively engaged in agricultural production.
Underwriting and Collateral Standards - Farm & Ranch
Farmer Mac accepts direct credit exposure to borrowers on Agricultural Finance mortgage loans in its
Farm & Ranch reportable operating segment (referred to as "Farm & Ranch loans") through its loan
12
purchases, unfunded loan commitments, LTSPCs, and Farmer Mac Guaranteed Securities that represent
interests in, or obligations secured by, pools of eligible Farm & Ranch loans but that are not AgVantage
securities ("Farm & Ranch Guaranteed Securities"). Farmer Mac applies credit underwriting standards and
methodologies to help assess exposures to Farm & Ranch loans, which may include collateral valuation,
financial metrics, and other appropriate borrower financial and credit information.
Farm & Ranch loans typically are required to meet specific underwriting criteria established by Farmer
Mac or demonstrate compensating strengths in one or more other underwriting criteria. Farmer Mac relies
on the combined expertise of experienced internal agricultural credit underwriters and loan servicers,
along with external agricultural loan servicing and collateral valuation contractors, to perform the
necessary underwriting, servicing, and collateral valuation functions on Farm & Ranch loans.
USDA Securities are exempted from the credit underwriting, collateral valuation, documentation, and
other standards that other loans must meet to be eligible for the secondary market provided by Farmer
Mac and are exempted from any diversification and internal credit enhancement that may be required of
pools of other eligible loans. Farmer Mac purchases nearly all of its USDA Securities through Farmer
Mac II LLC, a subsidiary of Farmer Mac that operates substantially all of the business related to Farmer
Mac's USDA Securities.
Underwriting and Collateral Standards - Corporate AgFinance
Farmer Mac accepts direct credit exposure to borrowers on Agricultural Finance mortgage loans in Farmer
Mac’s Corporate AgFinance reportable operating segment (referred to as “Corporate AgFinance loans”)
through its loan purchases and unfunded commitments. Farmer Mac applies credit underwriting standards
and methodologies to help assess exposures to Corporate AgFinance loans, which may include cash flow,
leverage, and liquidity assessment, financial metrics analysis, collateral valuation, and other appropriate
borrower financial and credit information.
Corporate AgFinance loans tend to be larger and more complex operations than Farm & Ranch loans
(generally more than $10 million) and typically are loans made to agribusinesses focused on agriculture
production, food and fiber processing, and other supply chain production. The underwriting for loans to
agribusinesses typically relies upon enterprise value, meaning the debt is generally secured by all business
assets and common stock (in addition to first lien mortgages) of the borrower and the value of the
borrowing entity depends on its ability to generate recurring positive cash flow. Enterprise value is the
estimated value of the borrower as a going concern, which is estimated using one or more valuation
techniques such as: discounted cash flow, cash flow multiples, asset liquidation, or other valuation
techniques. Thus, Corporate AgFinance loans often have a different credit risk profile than Farm & Ranch
loans. Farmer Mac has implemented methodologies and parameters to help assess credit risk and has
established specific underwriting criteria for Corporate AgFinance loans based on the sector, borrower
construct, and transaction complexity. Due to the larger loan sizes and different credit risk profiles, Farmer
Mac thoroughly analyzes each prospective Corporate AgFinance loan, including assessing the borrower's
leverage, cash flows, liquidity, revenue and margin trends, as well as evaluating the borrower's suppliers,
customers, market share, and competition. Any underlying weaknesses are assessed and analyzed in
conjunction with any compensating strengths. Corporate AgFinance loans also typically require ongoing
monitoring of reporting requirements and financial and non-financial covenants. Farmer Mac relies on the
experience of internal underwriters with the expertise to analyze large, complex farming operations and
agribusiness loans, along with collateral valuation contractors, and legal counsel to perform the necessary
diligence to assess the overall credit risk and loan structures of these transactions.
13
Lenders
Farmer Mac approves lenders into its network of Farm & Ranch loan sellers based on an assessment of the
lender's credit profile, which may include factors such as the institution's credit rating, origination history,
or financial profile. Most lenders that participate in Farmer Mac's secondary market for Farm & Ranch
loans meet prescribed criteria that Farmer Mac establishes for loan-selling counterparties, which typically
include the requirement to:
•
•
own a requisite amount of Farmer Mac common stock according to a schedule prescribed for the
size and type of institution;
have, in the judgment of Farmer Mac, the ability and experience to make or purchase and sell
Farm & Ranch loans and service those loans in accordance with Farmer Mac's requirements either
through the lender's own staff or through contractors and originators, as well as have appropriate
internal controls, policies, and procedures;
• maintain a minimum amount of net liquidity or appropriate credit enhancements; and
•
enter into a Seller/Servicer Agreement, which requires compliance with the terms of Farmer
Mac's Seller/Servicer Guide, including providing representations and warranties about the
eligibility of the loans and accuracy of loan data provided to Farmer Mac.
Any lender authorized by the USDA to obtain a USDA guarantee on a loan may participate in Farmer
Mac's secondary market for USDA Securities.
Farmer Mac purchases Corporate AgFinance loans and unfunded commitments from a diverse set of
lenders that support financing of the agriculture sector. Lenders may be existing Farm & Ranch lenders
that have larger, more complex borrowers in their territories, as well as larger financial and non-bank
institutions, such as national and regional banks, insurance companies, Farm Credit System institutions,
and other non-traditional lending organizations, that structure and originate transactions for larger, more
complex farming operations and agribusinesses.
Farmer Mac evaluates each lender that originates Corporate AgFinance loans to assess the experience and
capabilities of the lender’s ability to originate, structure, distribute, and monitor Corporate AgFinance
transactions. In many instances, Farmer Mac will purchase loans and unfunded commitments from lenders
that structure and arrange large, syndicated transactions involving numerous lenders that are necessary to
support the larger transaction loan size. In these cases, Farmer Mac typically assesses each arranger’s
capabilities and experience in arranging syndicated loans. Because Corporate AgFinance loans are
typically offered to Farmer Mac without or with few representations and warranties, Farmer Mac places a
greater emphasis on underwriting and legal documentation due diligence in connection with its purchase
of these loans to mitigate risks associated with the transaction, including loan documentation, borrower
eligibility, and loan data.
Loan Servicing
Farmer Mac services a sizeable portion of its Agricultural Finance mortgage loan and USDA Securities
portfolios, as well as a smaller portfolio of eligible agricultural mortgage loans that are held by an
unrelated third party. Farmer Mac also continues to contract with other institutions to undertake most of
the servicing responsibilities for the remaining portion of its Agricultural Finance mortgage loans in
accordance with Farmer Mac's specified servicing requirements or in accordance with the servicing
14
standards established by the servicing institution if the institution's standards are acceptable to Farmer
Mac. For these loans, the servicer may or may not be the same entity as the lender that sold the loans to
Farmer Mac. For Farm & Ranch loans for which the servicer is not the originating lender, the originating
lender often retains some servicing responsibility, particularly with direct borrower contact, which is
referred to as "field servicing." Field servicers may enter into contracts with Farmer Mac's servicers that
specify their field servicing responsibilities.
For Farmer Mac's USDA Securities, the lender on each USDA-guaranteed loan is required by regulation
to retain the unguaranteed portion of the guaranteed loan, to service the entire underlying guaranteed loan
(including the USDA-guaranteed portion of that loan), and to remain mortgagee and/or secured party of
record, if applicable. The USDA-guaranteed portion and the unguaranteed portion of the loan are to be
secured by the same collateral with equal lien priority. The USDA-guaranteed portion of a loan cannot be
paid later than, or in any way be subordinated to, the related unguaranteed portion.
Other Products - Agricultural Finance
AgVantage Securities
Under the AgVantage securities product line, Farmer Mac guarantees and purchases securities issued by
lenders and other financial institutions (including financial funds and real estate investment funds) that are
secured by pools of eligible loans. Typically, Farmer Mac retains AgVantage securities in its portfolio.
Most of the AgVantage securities in Farmer Mac's Agricultural Finance line of business are securities
issued by agricultural lenders that are secured by pools of Farm & Ranch loans. The AgVantage securities
in the Agricultural Finance line of business also include securities issued by other financial institutions
(including financial funds and institutional real estate investors) secured by mortgage loans that generally
have different credit profiles, structural characteristics, and loan terms than typical Farm & Ranch loans.
The loans serving as collateral for these AgVantage securities require a more comprehensive underwriting
that more closely approximates Farmer Mac's underwriting for Corporate AgFinance loans.
Farmer Mac has direct credit exposure to the general credit of the issuers of AgVantage securities and
assumes the ultimate credit risk of an issuer default on the AgVantage securities. Before approving an
institution as an issuer in an AgVantage transaction, Farmer Mac assesses the issuer's creditworthiness as
well as the credit quality and performance of the issuer's loan portfolio and loan underwriting
standards. Farmer Mac continues to monitor the counterparty risk assessment on an ongoing basis after the
AgVantage security is issued. In addition to being a general obligation of the issuer, all AgVantage
securities must be secured by eligible loans or eligible securities guaranteed by Farmer Mac in an amount
at least equal to the outstanding principal amount of the issuer's AgVantage securities. As a result, Farmer
Mac has indirect credit exposure to the loans or guaranteed securities that are pledged to secure the
AgVantage securities, which comprise collateral for Farmer Mac in the event of a default by the issuer.
Loans pledged under AgVantage securities are serviced by the issuers of the securities (or their affiliated
servicing institutions) in accordance with these institutions' servicing procedures. Farmer Mac reviews
these servicing procedures before purchasing AgVantage securities from the issuer. In AgVantage
transactions, the issuer is generally required to remove from the pool of pledged collateral any loan that
becomes and remains delinquent in the payment of principal or interest and to replace the delinquent loan
with another eligible loan that is current in payment or to pay down the AgVantage securities to maintain
the minimum required collateralization level.
15
For AgVantage securities secured by loans eligible for Farmer Mac's Agricultural Finance line of
business, Farmer Mac currently requires the general obligation to be over-collateralized, either by more
eligible loans or any of the following types of assets:
•
•
•
•
cash;
securities issued by the U.S. Treasury or guaranteed by an agency or instrumentality
of the United States;
other highly-rated securities; or
other instruments approved by Farmer Mac.
The required collateralization level for the AgVantage securities secured by Agricultural Finance
mortgage loans currently ranges from 103% to 125%. The required collateralization level is determined
based on credit factors related to the issuer and the credit profile of the loans serving as collateral, is
established when the AgVantage facility is entered into with the counterparty, and does not change during
the life of the AgVantage securities issued under the facility unless mutually agreed by Farmer Mac and
the counterparty.
For AgVantage securities that are secured by eligible Agricultural Finance mortgage loans, Farmer Mac
requires that the loans meet the minimum standards set forth in the charter for those types of loans with a
maximum limit of $75.0 million in cumulative exposure to any one borrower or related borrowers from a
single AgVantage issuer.
Guarantees
Farmer Mac offers two credit enhancement alternatives to direct loan purchases for Farm & Ranch loans
that allow approved lenders the ability to retain the cash flow benefits of their loans and increase their
liquidity and lending capacity: (1) LTSPCs and (2) Farm & Ranch Guaranteed Securities. In LTSPCs and
Farm & Ranch Guaranteed Securities, the lender effectively transfers the credit risk on their eligible loans
because, through Farmer Mac's commitment to purchase the loan (in the case of LTSPCs) or Farmer Mac's
guarantee (in the case of Farm & Ranch Guaranteed Securities), Farmer Mac assumes the ultimate credit
risk of borrower defaults on the related loans.
An LTSPC permits the lender to retain loans in its portfolio until such time, if ever, as the lender elects to
deliver some or all of the loans covered by the LTSPC to Farmer Mac for purchase. Loans subject to an
LTSPC must meet Farmer Mac's standards for eligible loans at the commencement of the LTSPC when
Farmer Mac assumes the credit risk on the loans and are serviced by the holders of those loans in
accordance with those lenders' servicing procedures, which Farmer Mac reviews before entering into those
transactions. As consideration for its assumption of the credit risk on loans covered by an LTSPC, Farmer
Mac receives commitment fees payable monthly in arrears. Some LTSPCs contain risk sharing
arrangements for pools of loans that provide for the counterparty to absorb up to a specified amount
(typically between one percent and three percent of the original principal balance of the loan pool) of any
losses incurred on the loans in the pool. At a lender's request, Farmer Mac purchases loans subject to an
LTSPC at:
•
par if the loans become delinquent for either 90 days or 120 days (depending on the agreement) or
are in material non-monetary default, with accrued and unpaid interest on the defaulted loans
payable out of any future loan payments or liquidation proceeds; or
16
•
fair value or in exchange for cash or Farm & Ranch Guaranteed Securities (if the loans are not
delinquent), in accordance with the applicable agreement.
In Farm & Ranch Guaranteed Securities transactions, Farmer Mac guarantees securities representing
interests in eligible Farm & Ranch loans held by a trust or other entity. Farmer Mac guarantees principal
and interest payments on the securities in the event of a payment shortfall due to default and either retains
these securities or arranges for their sale to third parties. As consideration for its assumption of credit risk
on the assets underlying the Farm & Ranch Guaranteed Securities, Farmer Mac receives guarantee fees
based on the outstanding principal balance of the securities it guarantees. Some Farm & Ranch Guaranteed
Securities transactions include a smaller, subordinate tranche of securities issued to third parties that are
not guaranteed by Farmer Mac, which helps to offset Farmer Mac's credit risk on these transactions.
Farmer Mac is obligated under its guarantee on the securities to make payments to investors of interest
and principal (including balloon payments), regardless of whether Farmer Mac or the related trust has
actually received those scheduled payments. Farmer Mac's guarantee fees typically are collected out of
installment payments made on the underlying loans until those loans have been repaid, purchased out of
the trust, or otherwise liquidated (generally as a result of default). The aggregate amount of guarantee fees
received on Farm & Ranch Guaranteed Securities depends on the amount of those securities outstanding
and on the applicable guarantee fee rate, which Farmer Mac's charter caps at 50 basis points (0.50%) per
year.
From time to time, Farmer Mac issues and guarantees securities backed by USDA Securities that it has
purchased and also guarantees securities issued by Farmer Mac II LLC backed by USDA Securities that it
has purchased. Farmer Mac II LLC does not guarantee any USDA Securities it holds or any Farmer Mac
Guaranteed USDA Securities issued by Farmer Mac or Farmer Mac II LLC.
Rural Infrastructure Finance
Farmer Mac's charter authorizes the purchase of, and guarantee of securities backed by, loans for electric
(including renewable electric energy) or telecommunications facilities by lenders organized as
cooperatives to borrowers that have received or are eligible to receive loans under the Rural Electrification
Act of 1936 ("REA"). The REA is administered by the Rural Utilities Service ("RUS"), an agency of the
USDA. Farmer Mac refers to eligible loans made to an electric distribution facility, an electric generation
and transmission facility, or a telecommunications facility as "Rural Utilities loans" and refers to eligible
loans made to renewable electric energy facilities as "Renewable Energy loans."
Farmer Mac's Rural Infrastructure Finance line of business encompasses purchases of Rural Utilities loans
and Renewable Energy loans and guarantees of securities backed by those loans, as well as LTSPCs for
pools of eligible Rural Utilities loans. The vast majority of Farmer Mac's business to date under the Rural
Infrastructure Finance line of business has involved Rural Utilities loans made to electric facilities
(primarily electric distribution cooperatives and electric generation and transmission cooperatives). During
2023, Farmer Mac purchased $232.5 million of loans to telecommunications companies that provide
wireless, cable, fiber transport, and broadband services to rural America as part of its strategic initiative to
provide further support for the telecommunications industry. Also during 2023, Farmer Mac purchased
17
$273.5 million of Renewable Energy loans as part of its strategic initiative to support rural renewable
energy projects.
Underwriting and Collateral Standards
Farmer Mac's charter does not specify minimum underwriting criteria for eligible Rural Utilities or
Renewable Energy loans. To manage Farmer Mac's credit risk, to mitigate the risk of loss from borrower
defaults, and to provide guidance for the management, administration, and conduct of underwriting to
participants in the Rural Infrastructure Finance line of business, Farmer Mac has adopted credit
underwriting standards that vary by loan product and by loan type. These standards are based on industry
practices for similar Rural Utilities and Renewable Energy loans and are designed to assess the
creditworthiness of the borrower, as well as the risk to Farmer Mac.
For Rural Utilities loans, Farmer Mac reviews lenders' credit submissions and analyzes borrowers' audited
financial statements and financial and operating reports to confirm that loans meet Farmer Mac's
underwriting standards for Rural Utilities loans. It is customary with these loans for the lender or lender
group to take a security interest in substantially all of the borrower's assets. When Farmer Mac purchases a
Rural Utilities loan with a pledge of all assets and a lender also has a lien on all assets, Farmer Mac
verifies that a lien accommodation will result in either a shared first lien or a first lien in favor of Farmer
Mac. When debt indentures are used, Farmer Mac determines if available collateral is adequate to support
the loan program and Farmer Mac's investment. Farmer Mac also purchases unsecured Rural Utilities
loans (primarily electric generation and transmission loans) that meet Farmer Mac's underwriting
standards for unsecured Rural Utilities loans.
For a Renewable Energy loan, Farmer Mac has direct credit exposure to the related standalone renewable
energy project. These projects are typically financed on a non-recourse or limited recourse basis and
underwritten on a projection basis with significant reliance placed on assumptions used in each project’s
analysis. Farmer Mac has implemented methodologies and parameters to assess credit risk and has
established specific underwriting criteria based on the project and transaction construct and complexity.
Farmer Mac thoroughly analyzes each prospective Renewable Energy loan. Farmer Mac performs
quantitative assessments typically focused on projected debt service requirements, term and amortization
review, interest rate sensitivity, and collateral analysis. Farmer Mac also performs qualitative assessments
typically focused on the project sponsor's credentials and experience, off-take (cash flow) considerations,
and concentration and other market considerations. Farmer Mac also typically reviews the project
contracts and agreements for each Renewable Energy loan. Renewable Energy loans are typically secured
by a first lien on the borrower's project assets, an assignment of the project contracts and agreements, a
land or leasehold interest, and in certain cases, a pledge of the equity interests in the borrower entity.
Farmer Mac's enforcement rights in any collateral securing a Renewable Energy loan may be subject to
tax equity interests in the borrower's renewable energy project.
Lenders and Loan Servicing
Farmer Mac's charter requires loans in Farmer Mac's Rural Infrastructure Finance line of business to
involve a lender organized as a cooperative. Farmer Mac does not directly service the Rural Utilities or
Renewable Energy loans held in its portfolio. Typically, these loans are serviced by the lender or other
organization designated by Farmer Mac that has experience in servicing loans to utilities and renewable
energy providers and in the context of project finance, as applicable.
18
Other Products - Rural Infrastructure Finance
AgVantage Securities
Farmer Mac's portfolio of AgVantage securities in its Rural Infrastructure Finance line of business
includes securities issued by cooperative lenders that are secured by pools of Rural Utilities loans. For
these AgVantage securities, Farmer Mac requires:
•
•
the counterparty issuing the general obligation to have a credit rating from a nationally-recognized
statistical rating organization ("NRSRO") that is at least investment grade, or be of comparable
creditworthiness as determined through Farmer Mac's analysis; and
the collateralization (consisting of current, performing loans) to be maintained at the contractually
prescribed level, in an amount at least equal to the outstanding principal amount of the security.
Although Farmer Mac has only indirect credit exposure on the Rural Utilities loans pledged to secure
AgVantage securities, the same underwriting standards that apply to loans made to Rural Utilities
borrowers on which Farmer Mac assumes direct credit exposure also apply to loans made to Rural Utilities
borrowers that secure the AgVantage securities. Farmer Mac's charter does not prescribe a maximum loan
size or a total borrower exposure for an eligible Rural Utilities loan, but Farmer Mac's current limit for
AgVantage transactions is $75.0 million for cumulative loan exposure to any one borrower or related
borrowers (with the amount of any direct exposure to a borrower not counting towards the $75.0 million
limit).
COMPETITION
Farmer Mac is the only federally-chartered corporation established to provide a secondary market for
agricultural mortgage loans, rural infrastructure loans, and USDA Securities, but faces competition from
other entities that purchase, retain, securitize, or provide financing for the types of assets eligible for
Farmer Mac's secondary market activities. These entities include commercial and investment banks,
insurance companies, other FCS institutions, financial funds, and certain government programs. Farmer
Mac also competes indirectly with originators of eligible loans that would prefer to retain the loans they
originate rather than sell them into the secondary market. Farmer Mac is able to compete to acquire
eligible loans due to the variety of products it offers and its ability to offer competitive funding structures
and pricing to its customers. This enables Farmer Mac to provide flexible financing options and products
designed to meet the varied needs of lending institutions related to capital requirements, liquidity, credit
risk, and management of sector and geographic concentrations and borrower exposure limits. The relative
competitiveness of Farmer Mac's loan rates and Farmer Mac's ability to develop business with lending
institutions are affected by many factors, including:
•
•
•
•
•
•
the overall supply of capital available to agricultural and rural infrastructure borrowers;
the types and variety of products offered by Farmer Mac's competitors to meet the needs of Farmer
Mac's customer base;
changes in the levels of available capital and liquidity of lending institutions;
the existence of alternative sources of funding and credit enhancement for lending institutions;
the rate of growth in the market for eligible loans; and
demand for Farmer Mac's products.
19
Because Farmer Mac's charter limits Farmer Mac's business to secondary-market activities, Farmer Mac's
competitive position is affected by the willingness of originators to offer eligible loans for sale in the
secondary market or to utilize Farmer Mac for funding syndicated or participated loans. The charter's
limits on loan size for some Agricultural Finance mortgage loans, as well as the types of loans that are
eligible for Farmer Mac's lines of business, also affect Farmer Mac's competitive position. For more
information on government regulation of Farmer Mac, see "Business—Government Regulation of Farmer
Mac."
Farmer Mac's ability to obtain competitive funding in the debt markets is essential to its ability to maintain
its relative position with its customers. As a result, competition for debt investors with other debt-issuing
institutions, such as the FCS, Federal Home Loan Banks, Fannie Mae, Freddie Mac, and highly-rated
financial institutions, can affect the price and volume at which Farmer Mac issues debt and therefore its
ability to offer savings to customers in the form of competitive products.
CAPITAL AND CORPORATE GOVERNANCE
Farmer Mac's charter prescribes the company's basic capital and corporate governance structure, as
described below. The charter authorizes Farmer Mac to issue two classes of voting common stock, each of
which elects one-third of Farmer Mac's 15-person board of directors. The charter also authorizes Farmer
Mac to issue non-voting common stock.
•
Presidential appointments. Five members of Farmer Mac's 15-member board of directors are
individuals who meet the qualifications specified in the charter and are appointed by the President
of the United States with the advice and consent of the United States Senate (one of whom is
designated as the chair of the board of directors). These appointed directors serve at the pleasure of
the President of the United States with no set term.
• Class A voting common stock. The charter restricts ownership of Farmer Mac's Class A voting
common stock to banks, insurance companies, and other financial institutions or similar entities
that are not institutions of the FCS. The charter also provides that five members of Farmer Mac's
15-member board of directors are elected by a plurality of the votes of the Class A stockholders
each year. The charter limits the amount of Class A voting common stock that any one holder may
own to no more than 33% of the outstanding shares of Class A voting common stock. Farmer Mac
is not aware of any regulation applicable to non-FCS financial institutions that requires a minimum
investment in Farmer Mac's Class A voting common stock or that prescribes a maximum
investment amount lower than the 33% limit set forth in the charter. Farmer Mac's Class A voting
common stock is listed on the New York Stock Exchange under the symbol AGM.A.
• Class B voting common stock. The charter restricts ownership of Farmer Mac's Class B voting
common stock to FCS institutions and also provides that five members of Farmer Mac's 15-
member board of directors are elected by a plurality of the votes of the Class B stockholders each
year. The charter contains no restrictions on the maximum number or percentage of outstanding
shares of Class B voting common stock that any one holder may own, and Farmer Mac is not
aware of any regulation applicable to FCS institutions that requires a minimum investment in its
Class B voting common stock or that prescribes a maximum amount. Farmer Mac's Class B voting
common stock, which has a limited market and trades infrequently, is not listed or quoted on any
exchange or other quotation system, and Farmer Mac is not aware of any publicly available
quotations or prices for this class of common stock.
20
• Class C non-voting common stock. The charter does not impose any ownership restrictions on
Farmer Mac's Class C non-voting common stock, so shares of this class are freely
transferable. Farmer Mac uses Class C non-voting common stock for awards of equity-based
compensation to officers, directors, and employees as part of the company's compensation
programs. Holders of the Class C non-voting common stock do not vote on the election of
directors or any other matter. Farmer Mac's Class C non-voting common stock is listed on the New
York Stock Exchange under the symbol AGM.
The dividend and liquidation rights of all three classes of Farmer Mac's common stock are the same.
Dividends may be paid on Farmer Mac's common stock only when, as, and if declared by Farmer Mac's
board of directors in its sole discretion, subject to compliance with applicable capital requirements and the
payment of dividends on any outstanding preferred stock issued by Farmer Mac. Upon liquidation,
dissolution, or winding up of the business of Farmer Mac, after payment and provision for payment of
outstanding debt of Farmer Mac, the holders of shares of Farmer Mac's currently outstanding 6.000%
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C ("Series C Preferred Stock"), 5.700%
Non-Cumulative Preferred Stock, Series D ("Series D Preferred Stock"), 5.750% Non-Cumulative
Preferred Stock, Series E ("Series E Preferred Stock"), 5.250% Non-Cumulative Preferred Stock, Series F
("Series F Preferred Stock"), 4.875% Non-Cumulative Preferred Stock, Series G ("Series G Preferred
Stock"), and any other preferred stock then outstanding, would be paid at par value out of assets available
for distribution, plus all declared and unpaid dividends, before the holders of shares of common stock
received any payment. See also "Market for Registrant's Common Equity, Related Stockholder Matters,
and Issuer Purchases of Equity Securities" for more information about Farmer Mac's common stock, and
"Business—Financing—Equity Issuance" for more information about Farmer Mac's common stock and
preferred stock.
Unlike some other GSEs such as other FCS institutions and the Federal Home Loan Banks, Farmer Mac is
not structured as a cooperative owned exclusively by member institutions and established to provide
services exclusively to its members. Rather, Farmer Mac, as a publicly-traded corporation, has a broader
base of stockholders, including those who do not directly participate in the secondary market provided by
Farmer Mac. Farmer Mac therefore seeks to fulfill its mission of serving the financing needs of rural
America in a way that is consistent with providing a return on the investment of its stockholders.
Farmer Mac generally requires financial institutions to own a requisite amount of Farmer Mac common
stock, based on the size and type of institution, to sell Agricultural Finance mortgage loans to Farmer
Mac. As a result of this requirement, coupled with the ability of holders of Class A and Class B voting
common stock to elect two-thirds of Farmer Mac's board of directors, Farmer Mac regularly conducts
business with "related parties," including institutions affiliated with members of Farmer Mac's board of
directors and institutions that own large amounts of Farmer Mac's voting common stock. Farmer Mac has
adopted a Code of Business Conduct and Ethics and related corporate policies that govern any conflicts of
interest that may arise in these transactions. Farmer Mac also requires that any transactions with related
parties be conducted in the ordinary course of business, with terms and conditions comparable to those
available to any other counterparty not related to Farmer Mac. For more information about related party
transactions, see "Management's Discussion and Analysis of Financial Condition and Results of
Operations—Results of Operations—Related Party Transactions" and Note 3 to the consolidated financial
statements.
21
Capital
Farmer Mac's charter establishes three capital standards for Farmer Mac – minimum capital, critical
capital, and risk-based capital. Farmer Mac must comply with the higher of the minimum capital
requirement and the risk-based capital requirement. Also, in accordance with the applicable FCA
regulation on capital planning, Farmer Mac's board of directors oversees a policy that requires Farmer
Mac to maintain a sufficient level of Tier 1 capital and restricts dividends and bonus payments if Farmer
Mac's Tier 1 capital falls below specified thresholds. For a discussion of Farmer Mac's capital
requirements and its actual capital levels, as well as FCA's role in the establishment and monitoring of
those requirements and levels, see "Business—Government Regulation of Farmer Mac—Capital
Standards," "Management's Discussion and Analysis of Financial Condition and Results of Operations—
Balance Sheet Review—Equity," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources—Capital Requirements."
Regulatory Oversight
Farmer Mac's charter assigns to FCA, acting through the separate Office of Secondary Market Oversight
("OSMO") within FCA, the responsibility for the examination of Farmer Mac and the general supervision
of the safe and sound performance of the powers, functions, and duties vested in Farmer Mac by the
charter. The charter also authorizes FCA, acting through OSMO, to apply its general enforcement powers
to Farmer Mac. Farmer Mac's charter requires an annual examination of the financial transactions of
Farmer Mac and authorizes FCA to assess Farmer Mac for the cost of FCA's regulatory activities,
including the cost of any examination. Farmer Mac is also required to file quarterly reports of condition
with OSMO. As a publicly-traded corporation, Farmer Mac also must comply with the periodic reporting
requirements of the SEC. For a more detailed discussion of Farmer Mac's regulatory and governmental
relationships, see "Business—Government Regulation of Farmer Mac."
HUMAN CAPITAL
As of December 31, 2023, Farmer Mac employed 185 people, with 36 new employees hired during the
year resulting in a net increase of 27 employees (17%) compared to year-end 2022. Farmer Mac primarily
employs full-time employees to meet its business needs as it grows and evolves while supplementing
human capital needs with part-time employees (including interns) and independent contractors and
consultants as needed.
Farmer Mac has experienced a geographic evolution in its workforce since 2020 and now employs
personnel in 27 states across the United States. This represents a 73% increase in geographic diversity (by
state) since the start of the COVID-19 pandemic in early 2020. As of December 31, 2023, 95 full-time
employees were located in the Washington, D.C. area, 28 full-time employees were located in the
Johnston, Iowa area, and 62 full-time employees worked on a fully remote basis in other parts of the
United States.
Workplace Culture
Farmer Mac continues to focus on how and where people work and to reassess physical workspace needs
and operates under a "Presence with Purpose" model. This hybrid work approach, which is grounded in
the three core principles of community, collaboration, and communication, relies on managers and leaders
to consider their unique team circumstances and determine an appropriate cadence for purposeful in-
22
person presence. This has allowed leadership to leverage the collaborative benefits that cannot be fully
replicated remotely while still being flexible with the unique needs of each team and employee. To ensure
continuity in regular communication, Farmer Mac has continued to reinforce employees' access to secure
digital meeting platforms, and its senior executive team has continued to lead regular meetings of all
employees to share pertinent information on Farmer Mac's business and operations and to provide a forum
for discussing issues. In 2023, Farmer Mac was awarded a Top Workplaces USA national award and an
industry award in financial services. Farmer Mac also received six Top Workplaces USA cultural
excellence awards in 2023 in the categories of innovation, employee appreciation, leadership,
compensation & benefits, employee well being, and professional development.
Compensation & Benefits
As a financial services organization, Farmer Mac must attract and retain a highly skilled workforce in an
often competitive employment environment. Farmer Mac uses traditional methods to attract and retain
talent, such as competitive salaries and benefits that include:
•
•
•
•
•
•
•
•
•
•
a robust paid time off program (up to 5 weeks of vacation, 2 weeks of sick leave, 11 paid
holidays, 6 weeks of pregnancy leave, 6 weeks of parental leave, and 8 hours of leave to
volunteer for community or charitable service activities);
an "equity for all" program in which all employees are eligible to receive annual grants of
equity-based compensation;
a group health plan with all premiums paid by Farmer Mac;
a 401(k) plan that provides for both voluntary employee contributions and employer
contributions at the levels described in Note 11 to the consolidated financial statements;
a self-funded short-term disability benefit that provides varying percentages of base salary
payments through the time of eligibility for long-term disability insurance coverage;
group term life insurance and long-term disability insurance with all premiums paid by
Farmer Mac;
pre-tax dependent care reimbursement;
partially-funded health savings accounts;
access to group rates for legal services insurance, additional life and disability insurance,
and pet insurance; and
professional and career development opportunities and programs.
Talent Acquisition and Development
Farmer Mac is committed to the professional and career development of all employees. "Farmer Mac
LEARN" is a program that Farmer Mac launched in 2022 to provide a comprehensive suite of learning
and development services to maximize the learning effectiveness in the business. Farmer Mac LEARN is
deployed in a blended learning fashion and is structured around six strategic LEARN Academies to enable
effective learning and career development. The LEARN Academies were introduced in 2023 and include:
• New Hire Academy
•
Skills Academy
• Leadership Academy
• Business Academy
• Ethics & Compliance Academy
•
IT and Cybersecurity Academy
23
Each Academy is structured around learning paths aligned to each employee’s professional level, role, and
career trajectory. Farmer Mac continues to invest in digital learning platforms to support the learning
needs of the employees and business, while also leveraging internal subject matter expertise to elevate
learning offerings. Farmer Mac also continues to offer an education assistance plan for employees with at
least one year of full-time employment.
As part of its workforce strategy, Farmer Mac is building intern, early career, and talent pipelines through
partnership with academic institutions, community organizations, and business partners. Farmer Mac also
places strategic focus on succession planning. Detailed succession plans are crafted in partnership with
key leaders in the business to identify and develop high potential leaders to promote career readiness for
expanded responsibilities and roles in Farmer Mac.
Farmer Mac experienced a 6.4% turnover rate in 2023, which was down from 12.3% in 2022, despite a
highly competitive employment market.
Philanthropy
Farmer Mac's mission to serve agricultural and rural communities, as well as philanthropic activities
undertaken in support of its mission, provide Farmer Mac an advantage in its effort to attract and retain
talent. Farmer Mac's philanthropic philosophy centers on supporting agriculture and rural communities
and supporting the next generation of farmers and ranchers and financial professionals, including in the
communities where Farmer Mac's employees live.
Code of Business Conduct and Ethics
Farmer Mac's onboarding program includes a mandatory compliance session for every new hire and
contract consultant within their first week. All employees also take annual training on and recertification
of Farmer Mac's Code of Business Conduct and Ethics, which encompasses the following core principles:
(1) promoting a safe workplace and a respectful and inclusive culture, (2) conducting business lawfully,
fairly, and objectively, (3) communicating responsibly and protecting information, (4) conducting business
diligently and being a good corporate citizen, and (5) how to report actual or suspected misconduct.
Farmer Mac's Code of Business Conduct and Ethics was refreshed in May 2023 while maintaining this
principles-based approach. Farmer Mac's Code of Business Conduct and Ethics is available at
www.farmermac.com and is not incorporated by reference into this report.
Diversity, Equity, and Inclusion
Farmer Mac's diversity, equity, and inclusion ("DEI") council was formed in late 2020 at the direction of
Farmer Mac's board of directors and senior executives. In 2023, Farmer Mac's DEI council, with support
from external consultants, continued to assess the council’s objectives and focused its DEI efforts on
refining its three-year plan. This included leveraging regular internal Farmer Mac communications to
inform and educate personnel on diversity, equity, and inclusion matters and engage in company-wide
philanthropic efforts with a focus on inclusion.
24
AVAILABLE INFORMATION
Farmer Mac makes available free of charge, through the "Investors" section of its internet website at
www.farmermac.com, copies of materials it files with, or furnishes to, the SEC, including its Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements,
and any amendments to those filings, as soon as reasonably practicable after electronically filing those
materials with, or furnishing those materials to, the SEC. All references to www.farmermac.com in this
report are inactive textual references only. The information contained on Farmer Mac's website is not
incorporated by reference into this report.
FUNDING OF GUARANTEE AND LTSPC OBLIGATIONS
The main sources of funding for the payment of Farmer Mac's obligations under its guarantees and
LTSPCs are the fees Farmer Mac receives for its guarantees and commitments, net effective spread,
proceeds of debt issuances, loan repayments, and maturities of AgVantage securities. Farmer Mac has
traditionally satisfied its obligations under LTSPCs and its guarantees by purchasing defaulted loans out of
the LTSPCs or from related securitization trusts under the terms of the respective agreements governing
the LTSPC or guaranteed securities. Farmer Mac typically recovers a significant portion of the value of
defaulted loans purchased either through borrower payments, loan payoffs, payments by third parties, or
foreclosure and sale of the property securing the loans. Net credit losses/(gains) arising from Farmer Mac's
guarantees and commitments include charge-offs/(recoveries) against its allowance for losses, gains and
losses on the sale of real estate acquired through foreclosure (known as "real estate owned" or "REO"),
and fair value adjustments of REOs held.
Farmer Mac's charter requires Farmer Mac to maintain in its accounts a portion of the guarantee fees it
receives from its guarantee activities as a reserve against losses. As of December 31, 2023, this reserve
against losses arising from Farmer Mac's guarantee activities was $129.6 million. Farmer Mac calculates
the amount of this statutorily required reserve against losses arising from its guarantee activities based on
the credit risk component of guarantee fees received on all securities it guarantees, including AgVantage
securities. This amount does not represent expected credit losses and does not directly relate to either the
allowance for loan losses or the reserve for losses in Farmer Mac's consolidated balance sheets. Rather,
this is the amount of capital that must be exhausted before Farmer Mac may issue obligations to the
U.S. Treasury against the $1.5 billion that Farmer Mac is statutorily authorized to borrow from the U.S.
Treasury to fulfill its guarantee obligations. That borrowing authority is not intended to be a routine
funding source and has never been used. For a more detailed discussion of Farmer Mac's borrowing
authority from the U.S. Treasury, see "Business—Farmer Mac's Authority to Borrow from the U.S.
Treasury."
Farmer Mac's total outstanding guarantees and LTSPCs exceed the total of: (1) the amount held as an
allowance for losses, (2) the amount maintained as a reserve against losses arising from guarantee
activities, and (3) the amount Farmer Mac may borrow from the U.S. Treasury. However, Farmer Mac
does not expect its future payment obligations under its guarantees and LTSPCs to exceed amounts
available to satisfy those obligations, which includes access to the underlying collateral in the event of
default. For information about Farmer Mac's allowance for losses, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and
Guarantees" and Note 2(h), Note 8, and Note 12 to the consolidated financial statements.
25
Debt Issuance
FINANCING
Farmer Mac's charter authorizes Farmer Mac to issue debt obligations to purchase eligible loans and
securities, USDA Securities, and to maintain reasonable amounts of liquid investments to maintain an
adequate supply of liquidity. Farmer Mac funds its purchases of eligible program assets and liquidity
investment assets primarily by issuing debt obligations of various maturities in the public capital
markets. Farmer Mac also issues debt obligations to obtain funds to finance its obligations under
guarantees and LTSPCs. Farmer Mac's debt obligations include discount notes and medium-term notes,
including callable medium-term notes, all of which are unsecured general obligations of Farmer Mac.
Discount notes have original maturities of 1 year or less. Medium-term notes generally have maturities of
0.5 years to 25.0 years.
The interest and principal on Farmer Mac's debt obligations are not guaranteed by, and do not constitute
debts or obligations of, FCA, the United States, or any agency or instrumentality of the United States other
than Farmer Mac. Farmer Mac is an institution of the FCS but is not liable for any debt or obligation of
any other institution of the FCS. Likewise, neither the FCS nor any other individual institution of the FCS
is liable for any debt or obligation of Farmer Mac. Income to the purchaser of a Farmer Mac discount note
or medium-term note is not exempt under federal law from federal, state, or local taxation. Farmer Mac's
discount notes and medium-term notes are not currently rated by an NRSRO.
Farmer Mac invests the proceeds of its debt issuances in eligible program asset purchases, Farmer Mac
Guaranteed Securities, and liquidity investment assets in accordance with policies established by its board
of directors that comply with Farmer Mac's Liquidity and Investment Regulations, which establish
limitations on asset class, dollar amount, issuer concentration, and credit quality. Farmer Mac's regular
debt issuance supports its access to the capital markets, and Farmer Mac's liquidity investment assets
provide an alternative source of funds should market conditions be unfavorable.
For more information about the Liquidity and Investment Regulations, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." For more
information about Farmer Mac's outstanding investments and indebtedness, see Note 4 and Note 7 to the
consolidated financial statements.
Equity Issuance
Farmer Mac's charter authorizes Farmer Mac to issue voting common stock, non-voting common stock,
and non-voting preferred stock. Farmer Mac may obtain additional capital from future issuances of
common stock and preferred stock.
Common Stock
Only banks, other financial entities, insurance companies, and institutions of the FCS may hold voting
common stock. No holder of Class A voting common stock may directly or indirectly be a beneficial
owner of more than 33% of the outstanding shares of Class A voting common stock. There are no
restrictions on the maximum number or percentage of outstanding shares of Class B voting common stock
that may be held by an eligible stockholder. No ownership restrictions apply to Class C non-voting
common stock, and those securities are freely transferable.
26
The dividend rights of all three classes of Farmer Mac's common stock are the same, and dividends may
be paid on common stock only when, as, and if declared by Farmer Mac's board of directors in its sole
discretion, subject to compliance with applicable capital requirements and the payment of dividends on
outstanding preferred stock. Upon liquidation, dissolution, or winding up of the business of Farmer Mac,
after payment and provision for payment of outstanding debt of Farmer Mac, the holders of shares of
preferred stock would be paid at par value out of assets available for distribution, plus all declared and
unpaid dividends, before the holders of shares of common stock received any payment.
As of December 31, 2023, the following shares of Farmer Mac common stock were outstanding:
•
•
•
1,030,780 shares of Class A voting common stock;
500,301 shares of Class B voting common stock; and
9,310,872 shares of Class C non-voting common stock.
Except for the period from March 16, 2020 to March 10, 2021, Farmer Mac has had a common stock
repurchase program in place since third quarter 2015. In March 2023, Farmer Mac's board of directors
extended the expiration date of the repurchase program to March 2025 on the same terms and with a
remaining authorization of up to $9.8 million in stock repurchases. As of December 31, 2023, Farmer Mac
had repurchased approximately 673,000 shares of Class C non-voting common stock at a cost of
approximately $19.8 million under the share repurchase program since 2015.
The following table presents the dividends declared on Farmer Mac's common stock during and after
2023:
Date
Dividend
Declared
February 22, 2023
May 3, 2023
August 9, 2023
November 8, 2023
February 21, 2024
Per
Share
Amount
$1.10
$1.10
$1.10
$1.10
$1.40
For
Holders Of
Record As Of
March 16, 2023
June 16, 2023
Date
Paid
March 31, 2023
June 30, 2023
September 15, 2023
September 29, 2023
December 15, 2023
December 29, 2023
March 15, 2024
*
* The dividend declared on February 21, 2024 is scheduled to be paid on March 28, 2024.
Farmer Mac's ability to declare and pay common stock dividends could be restricted if it were to fail to
comply with applicable capital requirements. See Note 9 to the consolidated financial statements and
"Business—Government Regulation of Farmer Mac—Capital Standards."
Preferred Stock
No ownership restrictions apply to any preferred stock issued by Farmer Mac, and those securities are
freely transferable. As of December 31, 2023, the following shares of Farmer Mac preferred stock were
outstanding:
•
•
•
•
3,000,000 shares of Series C Preferred Stock, all of which were issued in June 2014;
4,000,000 shares of Series D Preferred Stock, all of which were issued in May 2019;
3,180,000 shares of Series E Preferred Stock, all of which were issued in May 2020;
4,800,000 shares of Series F Preferred Stock, all of which were issued in August 2020; and
27
•
5,000,000 shares of Series G Preferred Stock, all of which were issued in May 2021.
The Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, and Series G Preferred Stock, (collectively, "Outstanding Preferred Stock") each has a par value of
$25.00 per share and an initial liquidation preference of $25.00 per share. Since each of their respective
issuances, Farmer Mac has not issued any more shares of any series of Outstanding Preferred Stock. Each
series of Outstanding Preferred Stock ranks senior to Farmer Mac's outstanding Class A voting common
stock, Class B voting common stock, Class C non-voting common stock, and any other common stock of
Farmer Mac issues in the future.
The Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, and Series G Preferred
Stock pay an annual dividend rate fixed at 5.700%, 5.750%, 5.250%, and 4.875%, respectively, for the life
of the securities. The Series C Preferred Stock pays an annual dividend rate of 6.000% from the date of
issuance to and including the quarterly payment date on July 17, 2024 and thereafter at a floating rate
equal to three-month LIBOR plus 3.260%, which Farmer Mac expects will be converted to the Term
Secured Overnight Financing Rate published by CME Group Benchmark Administration, Ltd., plus a
spread adjustment based on the tenor of the securities, if not redeemed prior to that payment date.
Dividends on all series of Outstanding Preferred Stock are non-cumulative, so if the board of directors has
not declared a dividend before the applicable dividend payment date for any dividend period, the dividend
will not be paid or accumulate, and Farmer Mac will not be obligated to pay dividends for that dividend
period, whether or not dividends on any series of Outstanding Preferred Stock are declared for any future
dividend period. Farmer Mac may pay dividends on the Outstanding Preferred Stock without paying
dividends on any class or series of stock Farmer Mac may issue in the future that ranks junior to the
Outstanding Preferred Stock.
The Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, and Series G Preferred Stock rank equally with each other and will rank equally with any other
class or series of stock Farmer Mac may issue in the future of equal priority as to dividends and upon
liquidation. Farmer Mac has the right, but not the obligation, to redeem some or all of the issued and
outstanding shares of Series C Preferred Stock on and any time after July 18, 2024, the Series D Preferred
Stock on and after July 17, 2024, the Series E Preferred Stock on and after July 17, 2025, the Series F
Preferred Stock on and after October 17, 2025, and the Series G Preferred Stock on and any time after
July 17, 2026, all at a price equal to the then-applicable liquidation preference. Any redemption date for
the Series D, Series E, Series F, or Series G Preferred Stock must be a scheduled quarterly dividend
payment date. The Outstanding Preferred Stock is considered Tier 1 capital for Farmer Mac. For more
information on Farmer Mac's capital requirements, see "Business—Government Regulation of Farmer
Mac—Capital Standards."
28
The following table presents the dividends declared and paid on Series C Preferred Stock during and after
2023:
Date
Dividend
Declared
February 22, 2023
May 3, 2023
August 9, 2023
November 8, 2023
February 21, 2024
Per
Share
Amount
$0.3750
$0.3750
$0.3750
$0.3750
$0.3750
For
Period
Beginning
January 18, 2023
April 18, 2023
July 18, 2023
For
Period
Ending
April 17, 2023
July 17, 2023
Date
Paid
April 17, 2023
July 17, 2023
October 17, 2023
October 17, 2023
October 18, 2023
January 17, 2024
January 17, 2024
January 18, 2024
April 17, 2024
*
* The dividend declared on February 21, 2024 is scheduled to be paid on April 17, 2024.
The following table presents the dividends declared and paid on Series D Preferred Stock during and after
2023:
Date
Dividend
Declared
February 22, 2023
May 3, 2023
August 9, 2023
November 8, 2023
February 21, 2024
Per
Share
Amount
$0.35625
$0.35625
$0.35625
$0.35625
$0.35625
For
Period
Beginning
January 18, 2023
April 18, 2023
July 18, 2023
For
Period
Ending
April 17, 2023
July 17, 2023
Date
Paid
April 17, 2023
July 17, 2023
October 17, 2023
October 17, 2023
October 18, 2023
January 17, 2024
January 17, 2024
January 18, 2024
April 17, 2024
*
* The dividend declared on February 21, 2024 is scheduled to be paid on April 17, 2024.
The following table presents the dividends declared and paid on Series E Preferred Stock during and after
2023:
Date
Dividend
Declared
February 22, 2023
May 3, 2023
August 9, 2023
November 8, 2023
February 21, 2024
Per
Share
Amount
$0.359375
$0.359375
$0.359375
$0.359375
$0.359375
For
Period
Beginning
January 18, 2023
April 18, 2023
July 18, 2023
For
Period
Ending
April 17, 2023
July 17, 2023
Date
Paid
April 17, 2023
July 17, 2023
October 17, 2023
October 17, 2023
October 18, 2023
January 17, 2024
January 17, 2024
January 18, 2024
April 17, 2024
*
* The dividend declared on February 21, 2024 is scheduled to be paid on April 17, 2024.
The following table presents the dividends declared and paid on Series F Preferred Stock during and after
2023:
Date
Dividend
Declared
Per
Share
Amount
For
Period
Beginning
February 22, 2023
$0.3281250
January 18, 2023
$0.3281250
April 18, 2023
For
Period
Ending
April 17, 2023
July 17, 2023
Date
Paid
April 17, 2023
July 17, 2023
May 3, 2023
August 9, 2023
November 8, 2023
February 21, 2024
$0.3281250
July 18, 2023
October 17, 2023
October 17, 2023
$0.3281250
October 18, 2023
January 17, 2024
January 17, 2024
$0.3281250
January 18, 2024
April 17, 2024
*
* The dividend declared on February 21, 2024 is scheduled to be paid on April 17, 2024.
29
The following table presents the dividends declared and paid on Series G Preferred Stock during and after
2023:
Date
Dividend
Declared
Per
Share
Amount
For
Period
Beginning
February 22, 2023
$0.3046875
January 18, 2023
$0.3046875
April 18, 2023
For
Period
Ending
April 17, 2023
July 17, 2023
Date
Paid
April 17, 2023
July 17, 2023
May 3, 2023
August 9, 2023
November 8, 2023
February 21, 2024
$0.3046875
July 18, 2023
October 17, 2023
October 17, 2023
$0.3046875
October 18, 2023
January 17, 2024
January 17, 2024
$0.3046875
January 18, 2024
April 17, 2024
*
* The dividend declared on February 21, 2024 is scheduled to be paid on April 17, 2024.
FARMER MAC'S AUTHORITY TO BORROW FROM THE U.S. TREASURY
Farmer Mac is authorized 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. Farmer Mac's charter provides that the U.S. Treasury is required to
purchase Farmer Mac's debt obligations up to the authorized limit if Farmer Mac certifies that:
•
•
a portion of the guarantee fees assessed by Farmer Mac has been set aside as a reserve against
losses arising out of Farmer Mac's guarantee activities in an amount determined by Farmer Mac's
board of directors to be necessary and such reserve has been exhausted (that amount was
$129.6 million as of December 31, 2023); and
the proceeds of such obligations are needed 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 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. Farmer Mac would be required to repurchase any of its debt obligations
held by the U.S. Treasury within a "reasonable time." As of December 31, 2023, Farmer Mac had not used
this borrowing authority and does not expect to use this borrowing authority in the future.
The United States government does not guarantee payments due on securities guaranteed by Farmer Mac,
funds invested in the equity or debt securities of Farmer Mac, any dividend payments on shares of Farmer
Mac stock, or the profitability of Farmer Mac.
30
GOVERNMENT REGULATION OF FARMER MAC
General
Farmer Mac was created by federal statute in 1988 in the aftermath of the collapse of the agricultural
credit delivery system. Farmer Mac's primary committees of jurisdiction in Congress – the Committee on
Agriculture of the U.S. House of Representatives and the U.S. Senate Committee on Agriculture, Nutrition
and Forestry – added requirements for Farmer Mac that had not been included in any of the other statutes
establishing other GSEs. Unlike the other existing GSEs at the time, Farmer Mac was required to be
regulated by an independent regulator, FCA, which has the authority to regulate Farmer Mac's safety and
soundness. The statute creating Farmer Mac expressly requires that eligible Farm & Ranch loans meet
minimum credit and appraisal standards that represent sound loans to profitable businesses. The enabling
legislation also did not contain a specific federal securities law exemption, which had the effect of
requiring Farmer Mac to comply with the periodic reporting requirements of the SEC, including filing
annual and quarterly reports on the financial status of Farmer Mac and current reports when there are
significant developments. Farmer Mac's charter also requires offerings of securities backed by eligible
loans and guaranteed by Farmer Mac to be registered under the Securities Act of 1933 and related
regulations (collectively, "Securities Act"), unless an exemption for an offering is available that is not
based on Farmer Mac's status as an instrumentality of the United States.
Since Farmer Mac's creation, Congress has amended Farmer Mac's charter five times:
•
•
•
•
•
in 1990 to authorize Farmer Mac to purchase, and guarantee securities backed by, USDA
Securities;
in 1991 to clarify Farmer Mac's authority to purchase its guaranteed securities, establish OSMO as
Farmer Mac's financial regulator, and set minimum regulatory capital requirements for Farmer
Mac;
in 1996 to remove certain barriers to and restrictions on Farmer Mac's operations to be more
competitive (e.g., allowing Farmer Mac to buy loans directly from lenders and issue guaranteed
securities representing 100% of the principal of the purchased loans and modifying capital
requirements);
in 2008 to authorize Farmer Mac to purchase, and guarantee securities backed by, loans or interests
in loans by lenders organized as cooperatives to borrowers to finance electrification and
telecommunications systems in rural areas; and
in 2018 to expand the acreage exception to agricultural mortgage loan amount limitation from
1,000 acres to 2,000 acres, subject to FCA's feasibility assessment (which was completed in June
2019), and to repeal obsolete provisions and make technical corrections.
Farmer Mac's authorities and regulatory structure were not revised by legislation adopted in 2008 to
regulate other GSEs.
Office of Secondary Market Oversight (OSMO)
As an institution of the FCS, Farmer Mac (including its subsidiaries) is subject to the regulatory authority
of FCA. Farmer Mac's charter assigns to FCA, acting through OSMO within FCA, the responsibility for
the examination of Farmer Mac and the general supervision of the safe and sound performance of the
powers, functions, and duties vested in Farmer Mac by its charter. The charter also authorizes FCA, acting
through OSMO, to apply its general enforcement powers to Farmer Mac. Farmer Mac (including its
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subsidiaries) is the only entity regulated by OSMO, which was created as a separate office in recognition
of the different role that Farmer Mac plays in providing a secondary market, as compared to the roles of
other FCS institutions as primary lenders. The Director of OSMO is selected by and reports to the FCA
board.
Farmer Mac's charter requires an annual examination of the financial transactions of Farmer Mac and
authorizes FCA to assess Farmer Mac for the cost of its regulatory activities, including the cost of any
examination. Each year, OSMO conducts an examination of Farmer Mac to evaluate its safety and
soundness, compliance with applicable laws and regulations, and mission achievement. The examination
includes a review of Farmer Mac's capital adequacy, asset quality, management performance, earnings,
liquidity, and sensitivity to interest rate risk. OSMO may also conduct additional oversight and
examination activities unrelated to its annual examination of Farmer Mac at any other time it determines
necessary. Farmer Mac is also required to file quarterly reports of condition with FCA.
Capital Standards
General Requirements. Farmer Mac's charter establishes three capital standards for Farmer Mac:
•
Statutory minimum capital requirement. Farmer Mac's minimum capital level is an amount of core
capital (stockholders' equity less accumulated other comprehensive income) equal to the sum of
2.75% of Farmer Mac's aggregate on-balance sheet assets, as calculated for regulatory purposes,
plus 0.75% of Farmer Mac's aggregate off-balance sheet obligations, specifically including:
◦
◦
◦
the unpaid principal balance of outstanding loan-backed securities guaranteed by Farmer Mac;
instruments issued or guaranteed by Farmer Mac that are substantially equivalent to securities
guaranteed by Farmer Mac, 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% of the total minimum capital requirement at that time.
• Risk-based capital. The charter directs FCA to establish a risk-based capital stress test for Farmer
Mac, using specified stress-test parameters.
Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital
requirement.
The risk-based capital stress test promulgated by FCA is intended to determine the amount of regulatory
capital (core capital plus the allowance for losses) that Farmer Mac would need to maintain positive
capital during a ten-year period in which:
•
•
annual losses occur at a rate of default and severity "reasonably related" to the rates of the highest
sequential two years in a limited U.S. geographic area; and
interest rates are shocked by the lesser of 600 basis points or 50% of the ten-year U.S. Treasury
rate, and interest rates remain at such level for the remainder of the period.
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The risk-based capital stress test then adds an additional 30% to the resulting capital requirement for
management and operational risk. Farmer Mac's risk-based capital requirement as of December 31, 2023
was $186.4 million, and Farmer Mac's regulatory capital of $1.5 billion exceeded that amount by
approximately $1.3 billion. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources—Capital Requirements" for a presentation of
Farmer Mac's current regulatory capital position.
Enforcement Levels. Farmer Mac's charter directs FCA to classify Farmer Mac within one of four
enforcement levels to determine compliance with the capital standards established by Farmer Mac's
charter. As of December 31, 2023, Farmer Mac was classified as within level I – the highest compliance
level.
Failure to comply with the applicable required capital level in the charter would result in Farmer Mac
being classified as within level II (below the applicable risk-based capital level, but above the minimum
capital level), level III (below the minimum capital level, but above the critical capital level) or level IV
(below the critical capital level). If Farmer Mac were classified as within level II, III or IV, the charter
requires the Director of OSMO to take specified mandatory supervisory measures and provides the
Director with discretionary authority to take various optional supervisory measures depending on the level
in which Farmer Mac is classified. The mandatory measures applicable to level II and level III include:
•
•
•
requiring Farmer Mac to submit and comply with a capital restoration plan;
prohibiting the payment of dividends if the payment would result in Farmer Mac being reclassified
as within a lower level and requiring the pre-approval of any dividend payment even if the
payment would not result in reclassification as within level IV; and
reclassifying Farmer Mac as within one level lower if it does not submit a capital restoration plan
that is approved by the Director, or the Director determines that Farmer Mac has failed to make, in
good faith, reasonable efforts to comply with such a plan and fulfill the schedule for the plan
approved by the Director.
If Farmer Mac were classified as within level III, then, in addition to the mandatory supervisory measures
described above, the Director of OSMO could take any of the following discretionary supervisory
measures:
•
•
•
•
•
imposing limits on any increase in, or ordering the reduction of, any obligations of Farmer Mac,
including off-balance sheet obligations;
limiting or prohibiting asset growth or requiring the reduction of assets;
requiring the acquisition of new capital in an amount sufficient to provide for reclassification as
within a higher level;
terminating, reducing, or modifying any activity the Director determines creates excessive risk to
Farmer Mac; or
appointing a conservator or a receiver for Farmer Mac.
Farmer Mac's charter does not specify any supervisory measures, either mandatory or discretionary, to be
taken by the Director if Farmer Mac were classified as within level IV.
The Director of OSMO has the discretionary authority to reclassify Farmer Mac to a level that is one level
below its then current level (for example, from level I to level II) if the Director determines that Farmer
Mac is engaging in any action not approved by the Director that could result in a rapid depletion of core
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capital or if the value of property subject to mortgages backing securities guaranteed by Farmer Mac has
decreased significantly.
Capital Adequacy Requirements. Under FCA's rule on capital planning, Farmer Mac must develop and
submit to OSMO for approval annually a plan for capital that considers the sources and uses of Farmer
Mac's capital, addresses capital projections under stress scenarios, assesses Farmer Mac's overall capital
adequacy, and incorporates a Farmer Mac board-approved policy on capital adequacy. In accordance with
this regulation, Farmer Mac's board of directors oversees a policy that requires Farmer Mac to maintain an
adequate level of "Tier 1" capital, consisting of retained earnings, paid-in-capital, common stock,
qualifying preferred stock, and accumulated other comprehensive income allocable to "non-program"
investments that are not included in the Agricultural Finance and Rural Infrastructure Finance lines of
business. Under this policy, Farmer Mac must maintain at all times a Tier 1 capital ratio of at least 7.0% of
risk-weighted assets, calculated using an advanced internal ratings based asset risk weighting regime that
is consistent with current Basel-based principles.
The policy also requires Farmer Mac to maintain a "capital conservation buffer" of additional Tier 1
capital of more than 2.5% of risk-weighted assets. If the capital conservation buffer drops to various levels
at or below 2.5%, as shown in the table below, the policy requires Farmer Mac to restrict distributions of
current quarter Tier 1-eligible dividends and any discretionary bonus payments to an amount not to exceed
the corresponding payout percentage specified in the table below, which represents the percentage of the
cumulative core earnings for the four quarters immediately preceding the distribution date:
Capital Conservation Buffer
Payout Percentage
(percentage of risk-weighted assets)
(percentage of four quarters' accumulated core earnings)
greater than 2.5%
No limitation
greater than 1.875% to and including 2.5%
greater than 1.25% to and including 1.875%
greater than 0.625% to and including 1.25%
60%
40%
20%
equal to or less than 0.625%
0% (no payout permitted)
These distribution restrictions would remain for so long as the Tier 1 capital conservation buffer remains
at or below the minimum level of 2.5%, and Farmer Mac's board of directors may consider other factors,
such as earnings presented in accordance with generally accepted accounting principles in the United
States ("GAAP") and other regulatory requirements, in determining whether to restrict capital
distributions, including dividends and bonus payments. As of December 31, 2023, Farmer Mac's Tier 1
capital ratio was 15.4%. The calculation of Farmer Mac's Tier 1 capital ratio does not include certain
interest rate risk components of the risk weighting of assets, which reflects the fact that Farmer Mac
pursues an approach to funding its assets with liabilities of similar duration and convexity characteristics
and therefore does not bear material interest rate risk in its portfolio. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital
Requirements" for more information on Farmer Mac's Tier 1 capital ratio.
Liquidity Requirements
Liquidity Reserve Requirement and Supplemental Liquidity. Farmer Mac's Liquidity and Investment
Regulations require that Farmer Mac maintain at all times a liquidity reserve sufficient to fund at least
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90 days of the principal portion of maturing obligations and other borrowings. Farmer Mac may also
maintain supplemental liquidity to fund obligations and borrowings maturing after 90 days. The
investments that Farmer Mac holds as its liquidity reserve and as supplemental liquidity must consist of
unencumbered and readily marketable assets that are diversified in accordance with categories prescribed
by FCA, including limitations on asset class, dollar amount, issuer concentration, and credit quality.
Farmer Mac must report, in writing, to OSMO no later than the next business day following the discovery
of any breach of Farmer Mac's minimum liquidity reserve requirement.
Liquidity Management. Under the Liquidity and Investment Regulations, Farmer Mac must develop and
approve annually a liquidity policy that outlines Farmer Mac's purpose and objectives for liquidity
reserves, diversification requirements for liquidity reserves, target liquidity levels, maximum investment
amounts as a percentage of Farmer Mac's program assets, exception parameters (and approval
requirements), delegations of investment authority, and reporting requirements to Farmer Mac's board of
directors and to OSMO. The regulations also require Farmer Mac to develop a liability maturity
management plan and a contingency funding plan, each of which must be reviewed and approved annually
by Farmer Mac's board of directors.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity
and Capital Resources" for more information about Farmer Mac's liquidity and "Management's Discussion
and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Other
Investments" for more information about Farmer Mac's eligible investments.
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Item 1A.
Risk Factors
Farmer Mac's business activities, financial performance, and results of operations are, by their nature,
subject to risks and uncertainties, including those related to the agricultural industry, rural infrastructure
industries, access to the capital markets, the regulatory environment, the level of prevailing interest rates
and overall market conditions. The following risk factors should be considered along with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this report,
including the risks and uncertainties described in the "Forward-Looking Statements" section. Because new
risk factors likely will emerge from time to time, management can neither predict all potential risk factors
nor assess the effects of those factors on Farmer Mac's business, operating results, and financial condition
or how much any factor, or combination of factors, may affect Farmer Mac's actual results and financial
condition. If any of the following risks materialize, Farmer Mac's business, financial condition, or results
of operations could be materially and adversely affected. Farmer Mac undertakes no obligation to update
or revise this risk factor discussion, unless required by applicable law.
Credit and Counterparty Risk
Economic stress caused by disruptive global events, such as geopolitical instability, and natural or
human-caused disasters, may materially and adversely affect Farmer Mac's business, operations,
operating results, financial condition, liquidity, or capital levels and may heighten other risk factors in
this report.
In a tightly-linked global economy, recent or continuing disruptive global events have contributed and
may continue to contribute to economic stress on America’s agricultural producers and rural infrastructure
by disrupting or transforming markets, systems, or resources that America’s farmers, ranchers, and rural
service providers rely on to remain profitable. This includes supply chain disruptions that prevent
producers from accessing critical resources or that inhibit exports, inflationary effects that put downward
pressure on demand for agricultural products or that may increase production expenses, and rising interest
rates that may increase the risk that Farmer Mac’s borrowers may default on their loans. For example, the
conflict between Russia and Ukraine, conflict in the Middle East, and severe weather conditions and
natural disasters have all contributed to recent or current economic stress on producers and service
providers in rural America. Depending on the severity and frequency of these types of disruptive events,
as well as the capability of governments and global markets to effectively mitigate the resulting negative
effects, a prolonged period of economic stress, including a broader economic downturn or recession, could
ensue from these events, which could increase stress on Farmer Mac’s borrowers and their ability to
remain profitable and make payments on their loans.
Farmer Mac assumes the ultimate credit risk of borrower defaults on its agricultural mortgage and rural
infrastructure loan assets, and Farmer Mac's earnings, which come from net interest income, guarantee
fees, and commitment fees on those assets, depend significantly on their performance. Widespread and
sustained repayment shortfalls on loans in Farmer Mac's portfolio could result in losses, particularly if the
value of the available collateral does not cover Farmer Mac's exposure, and could materially and adversely
affect Farmer Mac’s business, operations, operating results, financial condition, liquidity, or capital levels.
The occurrence of these disruptive events and resulting negative economic effects may also heighten other
risk factors described in this report.
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Climate change and the occurrence of weather-related events, or other natural or environmental
disasters could have a material adverse effect on Farmer Mac’s business, operating results, or financial
condition.
In addition to the general risks posed by adverse weather conditions, Farmer Mac’s exposure to credit risk
and the market value of loan collateral is potentially subject to risks associated with the long-term effects
of climate change, as farmers and ranchers face increasing, as well as increasingly-severe, weather
incidents. The U.S. experienced 28 separate billion-dollar weather disasters in 2023, surpassing 2020
(which had 22 billion-dollar weather disasters) as the highest level in the 40 years tracked by the National
Oceanic and Atmospheric Administration. Many climatologists predict increases in average temperatures,
more extreme temperatures, and increases in volatile weather over time. These physical changes may
prompt changes in regulations or consumer preferences, which in turn could have negative consequences
for the business models of borrowers, such as increasing costs, reducing the value of assets, and increasing
operating expenses. For example, long and persistent heat and drought conditions affected agricultural
production regions in the western and midwestern parts of the United States in 2021 and 2022. There was
a sizable improvement in conditions in 2023 for large portions of the West Coast, especially California,
but drought conditions have intensified in other areas of the country. Approximately 14% of the
continental U.S. was classified as being in severe to exceptional drought as of January 2, 2024, according
to data from the National Center for Environmental Information. The effects of climate change could
make some agricultural properties less suitable for farming or for other alternative uses. 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. These and other
effects of climate change could have an adverse impact on farming operations and the value of loan
collateral, which could have a material adverse effect on Farmer Mac’s business, operating results, or
financial condition.
Other external factors outside of Farmer Mac's or borrowers' control may impair borrowers'
profitability and ability to repay their loans in Farmer Mac's portfolio, which could have a material
adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.
Other external factors beyond Farmer Mac's or borrowers' control could impair borrowers' profitability,
such as volatility in demand for agricultural products or electricity in rural areas; variability in borrowers'
input costs; protracted regional, domestic, or global economic stress (whether due to disruptive global
events or otherwise); legislative or regulatory actions affecting rural borrowers; U.S. trade policy affecting
the demand for agricultural exports or the price of imports required for borrowers' operations; increased
competition among producers due to oversupply or available alternatives; and adverse changes in interest
rates and land values. Any of these factors could put downward pressure on the value and profitability of a
farming, agribusiness or rural utilities operation, which could then inhibit the related borrower's repayment
capacity on one or more loans that Farmer Mac may have from that borrower in its portfolio. A
significant number of defaults, or a single default from a large borrower exposure, stemming from one or
more of these factors could have a material adverse effect on Farmer Mac's financial condition, results of
operations, liquidity, or capital levels.
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A decline in the value of collateral securing loans in Farmer Mac's portfolio or a decline in the value of
Farmer Mac's borrowers could increase the probability of loss in the event of default, which could have
a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or
capital levels.
Farmer Mac's credit risk may increase due to decline in the collateral values securing the loans in Farmer
Mac's portfolio. Specialized or highly improved collateral, such as storage and processing facilities,
permanent plantings, or rural utilities and renewable energy facilities, increase the risk of
undercollateralization in a default scenario because producers requiring specialized or highly improved
collateral are generally less able to adapt their operations or switch functional production when faced with
adverse conditions. Highly improved properties also face higher risk of loss in a default scenario, as the
pool of potential purchasers in a sale or foreclosure action may be smaller for a highly improved property
than for a property that is adaptable to multiple uses. If a borrower defaults and Farmer Mac forecloses on
a loan secured by property that is specialized or highly improved, Farmer Mac has experienced, and may
in the future experience, losses if the value of the property has dropped significantly since origination or
if there is a limited pool of potential purchasers willing to purchase the property at the price necessary for
Farmer Mac to recoup its investment. Farmer Mac's credit risk may also increase due to a decline in the
enterprise value of borrowers whose loans have been underwritten based on the estimated value of the
borrower as a going concern. External market factors outside of the borrower's control may cause stress in
the related industry, such as decrease in market demand, disruptions in supply chain, geopolitical or
regulatory action, or increased market competition. A borrower's management decisions, such as poorly
executed acquisitions or growth strategies or inability to adapt to changing market conditions, may also
adversely affect that borrower's ability to repay its loan. In these scenarios, the borrower may experience
downward pressure on cash flows and liquidity, which not only may contribute to an increased risk of
default, but also could decrease the borrower's enterprise value. Farmer Mac may incur losses if the value
of the collateral securing a loan or the enterprise value of a borrower is less than the outstanding principal
balance of Farmer Mac's loan at the time of foreclosure or sale, liquidation, or other disposition of the
business. If losses caused by declines in collateral value or borrower enterprise value occur across a large
number of loans, or across loans with large principal balances in the aggregate, this could have a material
adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.
Concentrations in Farmer Mac's loan or investments portfolios, or to one or more borrowers or
counterparties, may increase Farmer Mac's exposure to credit risk, which could materially and
adversely affect its business, operating results, and financial condition.
Farmer Mac's exposure to credit risk may increase due to concentrations in its loan portfolio, which can
include concentrated exposure to particular commodities, geographic regions, or collateral types, as well
as concentrations in processing and manufacturing segments of agricultural supply chains or in rural
utilities or renewable energy industries. Widespread weakening in the financial condition of borrowers
within a particular geographic region that produce particular commodities or rely on particular collateral,
that engage in processes or production that depend on a fluid supply chain, or that produce or provide a
specialized infrastructure service or product could negatively affect Farmer Mac’s financial condition if
sufficient diversity in these areas does not successfully mitigate concentration risk.
Farmer Mac's exposure to credit risk may also increase due to concentrated exposure to a particular
borrower or counterparty. Farmer Mac’s portfolio consists of loans varying in size and by borrower,
including large exposures ($25 million or more) to individual borrowers. The default of any one of these
borrowers could negatively affect Farmer Mac's financial condition. Farmer Mac also has concentrated
38
exposures to individual business counterparties on AgVantage securities, which are general obligations of
institutional counterparties secured by eligible loans held by the issuing institution. Although AgVantage
securities are collateralized by eligible loans in a principal amount equal to or greater than the principal
amount of the securities outstanding, Farmer Mac could suffer losses if the market value of the loan
collateral declines and the counterparty defaults. Taking possession of the loan collateral upon a default by
the AgVantage counterparty could also result in higher current expected credit losses for Farmer Mac's
loans held on balance sheet, as well as increased capital requirements. As of December 31, 2023, $9.0
billion of the $10.0 billion of AgVantage securities outstanding had been issued by only three
counterparties. A default by any of these counterparties could have a significant adverse effect on Farmer
Mac's business, operating results, and financial condition.
Farmer Mac's exposure to credit risk may also increase due to concentrated exposure to one or more
investment types or counterparties in the investment portfolio Farmer Mac maintains for liquidity. This
investment portfolio consists primarily of cash and cash equivalents, U.S. Treasury securities, investment
securities guaranteed by U.S. Government agencies and GSEs, and asset-backed securities backed
primarily by U.S. Government-guaranteed loans. Farmer Mac regularly reviews concentration limits to
ensure that its investments are appropriately diversified and comply with policies approved by Farmer
Mac's board of directors and with applicable FCA regulations, but Farmer Mac is still exposed to credit
risk from issuers of the investment securities it holds, particularly to issuers to whom Farmer Mac may
have a higher concentration of exposure relative to the rest of Farmer Mac's investment portfolio. For
example, as of December 31, 2023, Farmer Mac held at fair value $3.7 billion of investment securities
guaranteed by GSEs. A default by multiple issuers of investment securities held by Farmer Mac or by a
single issuer of investment securities in which Farmer Mac is more heavily concentrated could have an
adverse effect on Farmer Mac's business, operating results, and financial condition.
Farmer Mac Guaranteed Securities and LTSPCs expose Farmer Mac to significant contingent
liabilities, and Farmer Mac's ability to fulfill its obligations under its guarantees and LTSPCs may be
limited.
Farmer Mac's guarantee and purchase commitment obligations to third parties, including LTSPCs and
securities guaranteed by Farmer Mac, are obligations of Farmer Mac only and are not backed by the full
faith and credit of the United States, FCA, or any other agency or instrumentality of the United States
other than Farmer Mac. As of December 31, 2023, Farmer Mac had $4.1 billion of contingent liabilities
related to LTSPCs and securities issued to third parties and guaranteed by Farmer Mac, which represents
Farmer Mac's exposure if all loans underlying these LTSPCs and guarantees defaulted and Farmer Mac
recovered no value from the related collateral. If this were to occur, the funds available for payment on
these guarantees and LTSPCs could be substantially less than the aggregate amount of the corresponding
liabilities. As of December 31, 2023, Farmer Mac held cash, cash equivalents, and other investment
securities with a fair value of $5.9 billion that could be used as a source of funds for payment on its
obligations, including its guarantee and LTSPC obligations. Although Farmer Mac believes that it remains
well-collateralized on the assets underlying its guarantee and LTSPC obligations to third parties and that
the estimated probable losses for these obligations remain low relative to the amount available for
payment of claims on these obligations, Farmer Mac's total contingent liabilities for these obligations
could exceed the amount it may have available for payment of Farmer Mac's obligations, including claims
on Farmer Mac's contingent obligations. See "Management's Discussion and Analysis—Risk Management
—Credit Risk – Loans and Guarantees" for more information on Farmer Mac's management of credit risk.
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Farmer Mac is exposed to counterparty risk on both its cleared and non-cleared swaps transactions that
could materially and adversely affect its business, operating results, and financial condition.
Farmer Mac uses interest rate swap contracts and hedging arrangements to manage its interest rate risk.
Farmer Mac clears a significant portion of its interest rate swaps through a swap clearinghouse and uses
the services of a futures commission merchant to post and receive mark-to-market margin amounts.
Farmer Mac also transacts non-cleared (bilateral) derivative contracts directly with swap counterparties
and posts and receives collateral to secure the market value of those contracts. A failure of any of these
counterparties could cause intra-day disruption for Farmer Mac's swap operations if the failure were to
prompt a termination of all or part of Farmer Mac's swap positions or if Farmer Mac were unable to
quickly access margin or collateral amounts. These conditions could be exacerbated in volatile market
conditions, in which the market could move against Farmer Mac's position before Farmer Mac had time to
reposition its swaps. These events could have a negative effect on Farmer Mac's operations and liquidity
and could expose Farmer Mac to more interest rate risk, which could materially and adversely affect its
business, operating results, and financial condition. As of December 31, 2023, the aggregate notional
balance of Farmer Mac's cleared swaps was $20.5 billion, and the aggregate notional balance of Farmer
Mac's non-cleared swaps was $5.2 billion.
Strategic/Business Risk
Farmer Mac's business, operating results, financial condition, and capital levels may be materially and
adversely affected by external factors that may affect the demand for Farmer Mac's secondary market,
the price or marketability of Farmer Mac's products, or Farmer Mac's ability to offer its products and
services.
Farmer Mac's business, operating results, financial condition, and capital levels may be materially and
adversely affected by external factors that may affect the price or marketability of Farmer Mac's products
and services or Farmer Mac's ability to offer its products and services, including, but not limited to:
disruptions in the debt or equity capital markets;
competitive pressures in Farmer Mac's loan purchase and guarantee activities or in the issuance of
its debt securities;
changes in interest rates that may increase Farmer Mac's funding costs;
•
• market or customer perception of Farmer Mac's reputation;
•
legislative or regulatory developments adversely affecting Farmer Mac's ability to offer new
products, the ability or motivation of lenders to participate in Farmer Mac's lines of business, or
the cost of related corporate activities;
reduced demand for agricultural real estate loans or rural infrastructure loans due to regional,
domestic, or global economic conditions; and
expanded funding alternatives available to agricultural and rural infrastructure borrowers.
•
•
•
•
An inability to access the equity and debt capital markets could have a material adverse effect on
Farmer Mac's business, operating results, financial condition, liquidity, and capital levels.
Farmer Mac's ability to operate its business, meet its obligations, generate asset volume growth, and fulfill
its statutory mission depends on Farmer Mac's continued access to the U.S. financial markets at favorable
rates and terms to remain adequately capitalized through the issuance of equity and with adequate access
to liquidity through the issuance of debt securities. The issuance of debt securities is Farmer Mac's
40
primary source for repaying or refinancing existing debt and to fund contingent liabilities, as needed.
Farmer Mac's ability to access the debt and equity markets to raise capital, fund its assets, repay debt, and
earn net interest income depends on market perception of Farmer Mac. If Farmer Mac were unable to
access the U.S. financial markets to issue equity or debt securities at favorable rates and terms, Farmer
Mac's business, operating results, liquidity, or financial condition could be adversely affected.
The loss of business from key business counterparties or customers, including AgVantage
counterparties, could weaken Farmer Mac's business and decrease its revenues and profits.
Farmer Mac's business and ability to generate revenues and profits largely depends on its ability to
purchase eligible loans or place eligible loans under guarantees or LTSPCs and to purchase or guarantee
AgVantage securities. Farmer Mac conducts a significant portion of its business with a few business
counterparties. This concentration of business could potentially result in increased variability in Farmer
Mac's business as existing assets pay down or mature and the status and needs of Farmer Mac's customers
evolve. In 2023, ten institutions generated approximately 81% of loan purchase volume in the Agricultural
Finance line of business. As of December 31, 2023, approximately 90.1% of the $10.0 billion outstanding
principal amount of AgVantage securities (of which $2.4 billion and $1.2 billion will be maturing in 2024
and 2025, respectively) were issued by three institutions. As of December 31, 2023, transactions with two
institutions represented nearly all of the business volume under Farmer Mac's Rural Infrastructure Finance
line of business. Farmer Mac's ability to maintain the current relationships with its business counterparties
or customers and the business generated by those business counterparties or customers is significant to
Farmer Mac's business. As a result, the loss of business from any one of Farmer Mac's key business
counterparties could decrease Farmer Mac's revenues and profitability. Farmer Mac may be unable to
replace the loss of business of a key business counterparty or customer with alternate sources of business
due to limitations on the types of assets eligible for Farmer Mac's secondary market, which could
adversely affect Farmer Mac's business and decrease its revenues and profits.
Farmer Mac's efforts to balance fulfilling its mission with providing a return to its stockholders may
result in business transactions that involve lower returns or higher risk, which could adversely affect its
business, operating results, or financial condition.
Congress created Farmer Mac to provide for a secondary market for agricultural mortgage loans, rural
infrastructure loans, and the guaranteed portions of USDA-guaranteed loans. In pursuing this mission,
Farmer Mac's secondary market activities are designed to:
•
•
•
increase the accessibility of financing to rural borrowers at stable interest rates;
provide greater liquidity and lending capacity in extending credit to rural borrowers; and
provide an arrangement for new lending by facilitating capital market investments in funding for
rural borrowers, including funds at fixed rates of interest.
Farmer Mac's charter provides that its standards for Farm & Ranch loans shall not discriminate against
small originators or small agricultural mortgage loans of at least $50,000. The charter also requires Farmer
Mac's board of directors to promote and encourage the inclusion of qualified loans for small farms and
family farmers in the agricultural mortgage secondary market.
Although Farmer Mac strives to undertake its mission-related activities in a manner consistent with
providing an accretive return to Farmer Mac's stockholders, these activities could contribute to a lower
return to stockholders than if Farmer Mac's sole purpose were to maximize stockholder value. If Farmer
41
Mac were to undertake activities involving greater risk or lower returns to satisfy its mission, Farmer
Mac's business, operating results, or financial condition could be adversely affected.
A few stockholders who own large amounts of Farmer Mac voting common stock may seek to influence
Farmer Mac's business, strategy, or board composition, and the interests of these stockholders may
differ from the interests of Farmer Mac or other holders of Farmer Mac's common stock.
The ownership of Farmer Mac's two classes of voting common stock is concentrated in a few
institutions. Four financial institutions hold approximately 51% of Farmer Mac's Class A voting common
stock, with 31% held by one institution. Five FCS institutions hold approximately 97% of Farmer Mac's
Class B voting common stock (two of which are related to each other through a parent-subsidiary
relationship). The holders of Farmer Mac's Class A voting common stock and the holders of Farmer Mac's
Class B voting common stock each have the right to elect one-third of the membership of Farmer Mac's
board of directors. Many of these holders are rural lenders that may compete directly with each other. As
long as Farmer Mac's Class A and Class B voting common stock is highly concentrated in a few
institutions, these institutions may seek to influence Farmer Mac's business, strategy, or board
composition in a way that may not be in the best interests of either Farmer Mac or other stockholders.
Operational Risk
The inadequacy or failure of Farmer Mac's operational systems, cybersecurity program, internal
controls or processes, or infrastructure, or those of third parties, could have a material adverse effect
on Farmer Mac's business, operating results, or financial condition.
Farmer Mac is exposed to operational risk due to the complex nature of its business operations and the
processes and systems used to undertake its business activities and comply with regulatory requirements.
Operational risk includes the risk of loss to Farmer Mac resulting from:
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inadequate or failed internal processes, systems, cybersecurity program, or infrastructure;
Farmer Mac's inability to successfully implement enhancements to any of these or migrate to new
systems or infrastructure;
any cybersecurity incident or compromise of Farmer Mac's information systems or security
measures (including of its third parties), or the unauthorized access and/or acquisition of data;
failed execution of system implementations and upgrades;
human error, malfeasance, or other misconduct;
undetected or unknown errors, defects, or vulnerabilities in third party software or cybersecurity
incidents related to third party software;
inadequate or failed internal controls or processes to detect or prevent fraud or other violations of
law or regulations; or
external events, including a disruption involving physical site access, catastrophic events, natural
disasters, terrorist activities, or disease pandemics.
Farmer Mac relies on business processes that largely depend on people, technology, and the use of
complex systems and models to manage its business, process a high volume of daily transactions, and
generate the records on which Farmer Mac's financial statements are based. Inadequacies or failures in
Farmer Mac's internal processes, personnel, systems, cybersecurity program, or infrastructure could lead
to a significant disruption to business operations; unauthorized access to, or acquisition, destruction,
alteration, release, theft, or loss of, confidential, proprietary, or personal data; fraud on Farmer Mac's
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business and customers; extortion; financial and economic loss or costs; errors in its financial statements;
impairment of its liquidity; harm to its employees, customers, or vendors; liability or service interruptions
to its customers; loss of customers or vendors; violation of data protection laws and other litigation and
legal risk; increased regulatory or legislative scrutiny; or reputational damage.
The potential for operational risk exposure also exists as a result of Farmer Mac's interactions with, and
reliance on, third parties. Farmer Mac's business relies on its ability to process, evaluate, and interpret
significant amounts of information, much of which third parties provide or process. Yet Farmer Mac's
ability to implement safeguards preventing disruption or unauthorized access to third-party systems or
infrastructure is more limited than for its own systems or infrastructure. If the financial, accounting, data
processing, backup, information technology, or other operating systems and infrastructure of third parties
with whom Farmer Mac interacts or upon whom it relies fail to operate properly, are subject to
unauthorized access, or are disrupted, then Farmer Mac may be impacted in the same manner as it would
be due to inadequacies or failures in Farmer Mac's own internal processes, personnel, systems,
cybersecurity program, or infrastructure.
Farmer Mac’s internal loan servicing function and reliance on third-party servicers could expose
Farmer Mac to operational risks that could adversely affect its business, operating results, or financial
condition.
Effective and reliable loan servicing is essential for Farmer Mac to successfully operate its business.
Starting in 2021, Farmer Mac has expanded its internal loan servicing function through two strategic
acquisitions that included the loan servicing rights for a sizeable portion of Farmer Mac’s Agricultural
Finance mortgage loan and USDA Securities portfolios, as well as servicing rights for eligible agricultural
mortgage loans that are held by an unrelated third party. Farmer Mac has also acquired experienced
servicing personnel and an operational servicing platform during that time. This expansion of servicing
responsibilities and personnel has required Farmer Mac to implement processes and controls for a business
function that Farmer Mac has previously not operated and still has limited experience executing and
managing. Farmer Mac also continues to rely on experienced third-party servicers to service the portion of
Farmer Mac’s Agricultural Finance mortgage loan portfolio not serviced directly by Farmer Mac.
Although Farmer Mac has established servicing standards and requirements to which these third-party
servicers are required by contract to adhere and on which they must report to Farmer Mac, Farmer Mac
does not manage the processes and controls of these third-party servicers. The ineffective implementation,
operation, or oversight of one or more of the servicing processes or controls employed by Farmer Mac or
any of its third-party servicers could expose Farmer Mac to operational risk that could adversely affect
Farmer Mac’s business, operating results, or financial condition.
A deficiency, failure, interruption, or breach in Farmer Mac's or its service providers' technology and
information systems, infrastructure, or cybersecurity program, including the occurrence of a
cybersecurity incident, could result in a loss of business, damage to Farmer Mac's reputation, the
disclosure or misuse of confidential or proprietary information, or increased costs or liability to Farmer
Mac, which could adversely affect Farmer Mac's business, operating results, or financial condition.
Farmer Mac relies heavily on technology and information systems, including from third parties, for the
secure collection, processing, transmission, and storage of confidential, proprietary, and personal
information in its information systems (and those of third parties) to conduct and manage its business
operations. These technology and information systems encompass an integrated set of hardware, software,
infrastructure, and personnel organized to facilitate the planning, control, coordination, operations, and
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decision-making processes within Farmer Mac. As the importance and complexity of Farmer Mac’s
technology and information systems has increased, and as new technologies are developed that are used by
its customers, Farmer Mac, or its service providers to support its business and operations, the risks posed
to Farmer Mac’s information systems and data from cybersecurity attacks that threaten the confidentiality,
integrity, or availability of Farmer Mac’s information technology assets and resources and its data have
increased. Like many other financial institutions, Farmer Mac and its third party service providers face
regular attacks by threat actors attempting to gain unauthorized access to, or disrupt, its information
systems and access or acquire its data, including from organized criminal groups, hackers, nation states,
activists, insiders, and other unauthorized third parties. These threats come from a variety of different
sources, including cyber-attacks, computer viruses, malware, exploits of system and network
vulnerabilities, human error, phishing, ransomware, and distributed denial of service attacks. The threats
Farmer Mac faces and the methods used to gain unauthorized access to or disrupt its information systems
and data, or those of its service providers, are evolving. Farmer Mac is not always able to prevent or
recognize attacks, and Farmer Mac's existing cybersecurity defenses may not be sufficient to detect attacks
in a timely manner. Also, Farmer Mac may be unable to implement effective preventive measures or
proactively address these threats until after a cybersecurity incident has been discovered. Moreover, any
employees or agents of Farmer Mac’s (or its third-party customers or vendors) who have authorized
access to confidential, proprietary, or personal information could also intentionally, inadvertently, or
erroneously disseminate the information to unauthorized third parties.
Farmer Mac’s current information security program with cybersecurity procedures, policies, practices, and
controls, may not be sufficient to prevent unauthorized access to its information technology assets or data,
which could lead to a significant disruption to business operations; unauthorized access to or acquisition,
destruction, alteration, release, theft, or loss of confidential, proprietary, or personal data; fraud (on Farmer
Mac and/or its customers); extortion; financial and economic loss or costs; errors in its financial
statements; impairment of its liquidity; harm to employees, customers, or vendors; liability or service
interruptions to its customers; loss of customers or vendors; violation of data protection laws and other
litigation and legal risk; increased regulatory or legislative scrutiny; or reputational damage. Farmer Mac
also could be subject to litigation and government enforcement actions as a result of any such failure. Any
such claim or proceeding could cause us to incur significant unplanned expenses in excess of Farmer
Mac's insurance coverage, which could adversely affect Farmer Mac's financial condition and results of
operations. The amount and scope of insurance Farmer Mac maintains may not cover all expenses related
to such claims. Also, Farmer Mac's service providers may also experience interruptions to their
technology, facilities, and information systems that could adversely impact Farmer Mac and over which
Farmer Mac may have limited or no control. Finally, the risk of unauthorized access to confidential,
proprietary, or personal information through information system breaches or inadvertent dissemination
may be heightened in a remote-working environment, which is currently more prevalent at Farmer Mac.
Failure by Farmer Mac's third-party loan servicers, third-party applications, information systems
providers, and other service providers to protect confidential information from unauthorized access and
dissemination could result in liability for Farmer Mac or damage Farmer Mac's reputation, which
could have a negative effect on Farmer Mac's business, operating results, or financial condition.
Farmer Mac relies on third parties, including loan servicers, information systems providers, software-as-a-
service (SaaS) providers, cloud computing service providers, law firms, and other service providers, to
perform various functions that support Farmer Mac’s business and operations. Farmer Mac depends on
these third parties to collect, process, transmit, and store a variety of confidential, proprietary, or personal
information, including sensitive financial information and customer information. Just as Farmer Mac is
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subject to numerous cyber-attacks from a variety of actors, so too are these third parties. Farmer Mac
requires third parties who collect, process, or store confidential, proprietary, or personal data to adhere to
security policies, processes, and controls. However, the control systems, cybersecurity program,
infrastructure, and personnel associated with third parties with which Farmer Mac does business or obtains
services are beyond its control. Farmer Mac is aware of cybersecurity incidents involving its third party
service providers in the past, and although Farmer Mac has not experienced a material loss of data or
disruption of its operations due to a breach of third party systems, unauthorized access to a third party
service provider's information technology assets or data may significantly impact Farmer Mac's operations
in the same manner as incidents on its own systems.
Farmer Mac relies upon a variety of third parties to run and operate its business, including servicers who
perform certain duties for loans Farmer Mac has purchased. Farmer Mac also relies upon a variety of
third-party applications, services, and tools that are not developed by Farmer Mac, including cloud-based
platforms and related data centers, to host data and support and operate certain aspects of its services and
business operations. These third parties – particularly servicers – maintain, transmit, and receive
confidential, proprietary, and personal information, including customer information. The unauthorized
access to, acquisition, misuse, mishandling, unavailability, or destruction of Farmer Mac's data or
confidential information stored by these third parties or on their applications and systems, or unauthorized
access to or disruption of these third party applications, services, or tools could result in: unauthorized
access to Farmer Mac's own systems; significant disruption to its business operations; fraud (on Farmer
Mac and/or its customers); extortion; financial and economic losses or costs; errors in financial statements;
impairment of its liquidity; harm to its employees, customers, or vendors; liability or service interruptions
to its customers; loss of customers or vendors; violation of data protection laws and other litigation and
legal risk; increased regulatory or legislative scrutiny; reputational damage; or litigation and government
enforcement actions.
If Farmer Mac's management of risk associated with its loan assets and investment securities based on
model assumptions and output is not effective, its business, operating results, financial condition, or
capital levels could be materially adversely affected.
Farmer Mac continually develops and adapts profitability and risk management models to adequately
address a wide range of possible market developments. Some of Farmer Mac's qualitative tools and
metrics for managing risk are based on its use of observed historical market behavior. Farmer Mac applies
statistical and other tools to these observations to quantify its risks. These tools and metrics may fail to
predict future or unanticipated risks or may not be effective in mitigating its risk exposure in all economic
market environments or against all types of risk, which could expose Farmer Mac to material
unanticipated losses. The inability of Farmer Mac to effectively identify and manage the risks inherent in
its business could have a material adverse effect on its business, operating results, financial condition, or
capital levels.
Farmer Mac's efforts to expand product offerings and services to its customers exposes Farmer Mac to
operational risk that could materially and adversely affect its business, operating results, or financial
condition.
As the needs of Farmer Mac's customer base and rural America evolve, Farmer Mac seeks to respond by
offering new products and services to meet these needs. As Farmer Mac expands its product offerings and
services, it is exposed to operational risk in implementing these new products and services. New products
and services may require new operational processes, which often require new internal controls to manage
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new risks that these new processes present. If these controls are insufficient or ineffective to manage the
risks inherent in these new processes, or if there is human error in executing these new controls either due
to their novelty or otherwise, Farmer Mac could face financial loss, reputational damage, or regulatory
enforcement, which could materially and adversely affect Farmer Mac's business, operating results, or
financial condition.
Market Risk
Farmer Mac is exposed to interest rate risk that could materially and adversely affect its operating
results or financial condition.
Farmer Mac is subject to interest rate risk due to the timing differences in the cash flows of the assets it
holds and the liabilities issued to fund those assets. Farmer Mac's primary strategy for managing interest
rate risk is to fund asset purchases with debt together with financial derivatives that have similar duration
and convexity characteristics to help mitigate impacts from interest rate changes across the yield curve.
However, the ability of borrowers to prepay their loans before the scheduled maturities increases the
likelihood of asset and liability cash flow mismatches. In a changing interest rate environment, these cash
flow mismatches affect Farmer Mac's earnings if assets repay sooner than expected and the resulting cash
flows must be reinvested in lower-yielding investments, particularly if Farmer Mac's related funding costs
cannot be correspondingly repaid. Conversely, if assets repay more slowly than anticipated and the
associated debt issued to fund the assets must be reissued at a higher interest rate, Farmer Mac's earnings
could be adversely affected. In addition, rapid changes in interest rates could have a negative effect on
Farmer Mac's net interest income across quarters. For example, since 2022, the Federal Reserve has
rapidly increased the target range for the federal funds rate by 5.25% in an effort to combat rising
inflation. Although Farmer Mac benefited from higher nominal interest rates in its investment portfolio, if
those nominal interest rates decline, Farmer Mac may earn less interest income on its investments in future
periods. Furthermore, a future period of rapid increase or decline in interest rates may create or exacerbate
periods of market volatility that could adversely affect Farmer Mac's ability to manage interest rate risk,
which could have a material adverse effect on Farmer Mac's operating results or financial condition. See
"Management's Discussion and Analysis—Risk Management—Interest Rate Risk" for more information
on Farmer Mac's management of interest rate risk.
Farmer Mac is also subject to repricing risk, which is the risk that Farmer Mac's funding cost relative to a
benchmark index (for example, the Secured Overnight Financing Rate known as "SOFR") will increase
from the time the initial funding was issued and the time the liabilities are re-funded. This repricing risk
arises from a funding strategy whereby Farmer Mac issues floating rate debt across a variety of maturities
to fund floating or synthetically floating rate assets that on average may have longer maturities. A
significant increase in the difference between Farmer Mac's funding cost relative to the benchmark index,
including SOFR, may compress spread income on the assets Farmer Mac holds and seeks to re-fund with
the higher cost funding. Widespread compression within a short timeframe could adversely affect Farmer
Mac's operating results or financial condition.
Changes in interest rates relative to Farmer Mac's management of interest rate risk through derivatives
may cause volatility in financial results and capital levels and may adversely affect Farmer Mac's net
income, liquidity position, or operating results.
Farmer Mac enters into financial derivatives transactions to hedge interest rate risks inherent in its
business and carries its financial derivatives at fair value in its consolidated financial statements. Although
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Farmer Mac's financial derivatives provide economic hedges of interest rate risk, changes in the fair values
of financial derivatives can cause volatility in net income and in capital, particularly if those financial
derivatives are not designated in hedge accounting relationships or if there is any ineffectiveness in a
hedge accounting relationship. As interest rates increase or decrease, the fair values of Farmer Mac's
derivatives change based on the position Farmer Mac holds relative to the specific characteristics of the
derivative. Farmer Mac's core capital available to meet its statutory minimum capital requirement can be
affected by changes in the fair values of financial derivatives, as noted above. Adverse changes in the fair
values of Farmer Mac's financial derivatives that are not designated in hedge accounting relationships and
any hedge ineffectiveness that results in a loss would reduce the amount of core capital available to meet
this requirement. In 2023 and 2022, Farmer Mac recorded a gain of $5.1 million and a gain of $13.5
million, respectively, from changes in the fair values of its financial derivatives as a result of movements
in interest rates during those years. Farmer Mac recorded losses of $5.4 million and gains of $5.8 million
in 2023 and 2022, respectively, related to ineffectiveness in hedge accounting relationships.
Changes in interest rates have required, and in the future may require, Farmer Mac to post cash or
investment securities to collateralize its derivative exposures due to corresponding changes in the fair
market values of these derivatives. If changes in interest rates were to result in a significant decrease in the
fair value of Farmer Mac's derivatives, Farmer Mac would be required to post cash, cash equivalents, or
investment securities, possibly within a short period of time, to satisfy its obligations under its derivatives
contracts. As of December 31, 2023, Farmer Mac posted $84.6 million of cash and $207.2 million of
investment securities as collateral for its derivatives in net liability positions. If Farmer Mac is required to
fully collateralize a significant portion of its derivatives in an adverse interest rate environment, it could
have a material adverse effect on Farmer Mac's liquidity position or operating results.
Financial Risk
Incorrect estimates and assumptions by management in preparing financial statements could adversely
affect Farmer Mac's business, operating results, reported assets and liabilities, financial condition,
reputation, or capital levels.
Farmer Mac's accounting policies and methods are fundamental to how it records and reports its financial
condition and results of operations. Some of these policies and methods require management to make
estimates and assumptions in preparing Farmer Mac's consolidated financial statements. Incorrect
estimates and assumptions by management in connection with preparing Farmer Mac's consolidated
financial statements could adversely affect the reported amounts of assets and liabilities and the reported
amounts of income and expenses. For example, as of December 31, 2023, Farmer Mac's assets and
liabilities recorded at fair value included financial instruments valued at $5.6 billion whose fair values
management estimated in the absence of readily observable fair values (in other words, level 3). These
financial instruments measured with significant unobservable inputs represented 18.8% of total assets and
52.4% of financial instruments measured at fair value as of December 31, 2023. See "Management's
Discussion and Analysis—Critical Accounting Estimates" for more information about fair value
measurement. If management makes incorrect assumptions or estimates that result in understating or
overstating reported financial results, it could materially and adversely affect Farmer Mac's business,
operating results, reported assets and liabilities, financial condition, reputation, or capital levels.
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Changes in the value or composition of Farmer Mac's investment securities could adversely affect
Farmer Mac's business, operating results, financial condition, liquidity or capital levels.
Deterioration in financial or credit market conditions could reduce the fair value of Farmer Mac's
investment securities, particularly those securities that are less liquid and more subject to market
variability. Some securities owned by Farmer Mac, including auction-rate certificates, do not have well-
established secondary trading markets, making it more difficult to estimate current fair values for those
securities. This requires Farmer Mac to rely on market observations and internal models to estimate the
fair values of its investment securities and to determine whether credit losses exist. However, available
market data may not reflect the actual sale conditions Farmer Mac may face when selling its investment
securities, particularly in adverse financial market conditions. Internal models require Farmer Mac to
exercise judgment about estimates and assumptions used in the models. If Farmer Mac uses unreliable
market data or incorrect estimates or assumptions in its internal models to estimate the fair value of its
investment securities, those estimates could adversely affect results of operations during the reporting
period. And if Farmer Mac decides to sell securities in its investment portfolio, the price ultimately
realized will depend on the demand and liquidity in the market at the time of sale, which could be
significantly less than Farmer Mac's estimates for fair value. Failure to accurately estimate the fair value
of Farmer Mac's investment securities could adversely affect Farmer Mac's business, operating results,
financial condition, liquidity or capital levels.
The trading price for Farmer Mac's Class C non-voting common stock may be volatile due to market
influences, trading volume, the effects of equity awards for Farmer Mac's officers, directors, and
employees, or sales of significant amounts of the stock by large holders.
The trading price of Farmer Mac's Class C non-voting common stock ("Class C stock") has at times
experienced substantial price volatility and may remain volatile. For example, the trading price of the
Class C stock ranged from $113.53 per share to $194.92 per share during 2023. The trading price may
fluctuate in response to various factors, including short sales, hedging, the presence or absence of a share
repurchase program, stock market influences in general that are unrelated to Farmer Mac's operating
performance, or sales of significant amounts of the stock by large holders. Farmer Mac typically grants
equity awards each year that are based on the Class C stock, including grants that vest over time or upon
the achievement of specified performance goals. Sales of stock acquired upon vesting or the exercise of
equity awards by Farmer Mac's officers, directors, or employees, whether under an established trading
plan or otherwise, could adversely affect the trading price of the Class C stock. All of these factors may be
exacerbated during periods of low trading volume for Farmer Mac's Class C stock, which averaged 57,662
shares daily during 2023 and may have a prolonged negative effect on its trading price or increase price
volatility.
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Regulatory and Compliance Risk
Farmer Mac and many of its business counterparties are subject to comprehensive government
regulation, and unanticipated changes to those laws and regulations could adversely affect Farmer
Mac's business, operating results, reputation, or financial condition.
Farmer Mac was established under a statutory charter that the U.S. Congress may amend at any time and
is regulated by various government agencies, including the FCA and the SEC. Future legislative or
regulatory actions affecting Farmer Mac's statutory charter or its business activities, including increased
regulatory supervision, and any required changes to Farmer Mac's business or operations resulting from
such actions, could result in a financial loss for Farmer Mac or otherwise reduce its profitability, impose
more compliance and other costs on Farmer Mac, limit the products offered by Farmer Mac or its ability
to pursue business opportunities in which it might otherwise consider engaging, curtail business activities
in which it is currently engaged, affect the value of assets that Farmer Mac holds, or otherwise adversely
affect Farmer Mac's business, results of operations, reputation, or financial condition.
The financial services industry, in which most of Farmer Mac's business counterparties and customers
operate, is subject to significant legislation and regulations. To the extent that current or future legislation,
regulations, or supervisory activities affect the activities of banks, insurance companies, other rural
lenders, derivatives counterparties, clearinghouses, securities dealers, or other regulated entities that
constitute a large portion of Farmer Mac's business counterparties or customers, Farmer Mac could
experience loss of business or business opportunities, increased compliance costs, disadvantageous
business terms in its dealings with counterparties, and unfavorable changes to its business practices or
activities. As a result, Farmer Mac's business, operating results, reputation, or financial condition could be
adversely affected.
Farmer Mac's capital requirements may change, and failure to meet those requirements could result in
supervisory measures or the inability of Farmer Mac to declare dividends, or otherwise materially and
adversely affect Farmer Mac's business, operating results, or financial condition.
Farmer Mac is required by statute and regulation to maintain certain capital levels. Any inability by
Farmer Mac to meet these capital requirements could result in supervisory measures by FCA, adversely
affect Farmer Mac's ability to declare dividends on its common and preferred stock, or otherwise
materially and adversely affect Farmer Mac's business, operating results, or financial condition. As
required by an FCA regulation on capital planning, Farmer Mac has adopted a policy to maintain a
sufficient level of Tier 1 capital and to restrict paying Tier 1-eligible dividends if Tier 1 capital falls below
specified thresholds. For more information about Farmer Mac's capital requirements, including the Tier 1
capital requirement, see "Business—Government Regulation of Farmer Mac—Regulation—Capital
Standards." Factors that could adversely affect the adequacy of Farmer Mac's capital levels in the future,
and which may be beyond Farmer Mac's control, include:
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credit losses;
adverse changes in interest rates or credit spreads;
the need to increase the level of the allowance for losses on loans;
legislative or regulatory actions that increase Farmer Mac's capital requirements; and
changes in GAAP.
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Political Risk
Farmer Mac is a GSE that may be materially and adversely affected by legislative or political
developments.
Farmer Mac is a GSE with a statutory charter that may be amended by Congress at any time, and is also
regulated by government agencies, including the FCA and the SEC. Although Farmer Mac is not aware of
any pending legislative or regulatory proposals that would materially impact its business or operations,
Farmer Mac's ability to effectively conduct its business is subject to risks and uncertainties related to
political developments that could affect Farmer Mac or GSEs generally. These political risks and
uncertainties may be heightened under a new Congress or Presidential administration. Farmer Mac cannot
predict whether or when legislative or regulatory initiatives may commence that, if successful, could
negatively affect the status of Farmer Mac as a GSE or how Farmer Mac operates, and which could have a
material and adverse effect on Farmer Mac's business, operating results, financial condition, or capital
levels. See "Business—Government Regulation of Farmer Mac" for more information about the rules and
regulations governing Farmer Mac's activities.
Human Capital Risk
Farmer Mac's ability to attract and retain motivated and qualified employees is critical to the success of
its business, and significant or sustained disruption in the continuity of Farmer Mac's employees or
executive leaders may materially adversely affect Farmer Mac's business performance, operations,
financial condition, or reputation.
Farmer Mac relies on its employees' breadth and depth of knowledge of Farmer Mac and related industries
to run its business operations successfully. If Farmer Mac cannot continue to retain and attract motivated
and qualified employees or does not have adequate human capital to achieve its business objectives,
Farmer Mac's business performance, operations, financial condition, or reputation could be materially
adversely affected. A significant disruption in the continuity of Farmer Mac's employees or any significant
executive leadership change could also result in a loss of productivity and affect Farmer Mac's ability to
successfully execute business strategies by creating uncertainty or instability or requiring Farmer Mac to
divert or expend more resources to replace personnel. Loss of key leadership personnel could also damage
the public or market perception of Farmer Mac or result in the departure of other executives or key
employees. Any of these factors could materially adversely affect Farmer Mac's business performance,
operations, financial condition, or reputation.
Any of the risks described in this section could materially and adversely affect Farmer Mac's business,
operating results, financial condition, reputation, capital levels, and future earnings. For more information
about Farmer Mac's risk management, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations—Risk Management" in Item 7 of this Annual Report on Form 10-K.
Item 1B.
Unresolved Staff Comments
None.
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Item 1C.
Cybersecurity
Risk Management and Strategy
Farmer Mac recognizes the importance of assessing, identifying, and managing risks associated with
cybersecurity threats. These risks include the potential for:
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unauthorized access to or acquisition, destruction, alteration, release, theft, or loss of confidential,
proprietary, or personal data;
fraud or extortion;
financial and economic loss or costs;
errors in Farmer Mac’s financial statements;
impairment of Farmer Mac’s liquidity;
harm to employees, customers, or vendors;
liability or service interruptions to customers;
loss of customers or vendors;
violation of data protection laws and other litigation and legal risk;
increased regulatory or legislative scrutiny; and
reputational damage.
Farmer Mac’s process to identify and assess material risks from cybersecurity threats operates alongside
Farmer Mac’s broader overall risk assessment process that contemplates all company risks. As part of this
process, appropriate personnel collaborate with subject matter specialists, as necessary, to gather
information to identify and assess material cybersecurity threat risks, their severity, and potential
mitigations.
Farmer Mac has implemented a variety of processes, technologies, and controls to aid in its efforts to
identify, assess, and manage cybersecurity risks. Farmer Mac’s approach includes:
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an enterprise risk management program that includes cybersecurity risk assessment and
management and is periodically refreshed;
security reviews designed to identify risks from many new features, software, and vendors,
including a security operations center to monitor our systems;
a team of trained and experienced security professionals to investigate and remediate cybersecurity
incidents;
regular cybersecurity training for all employees and network users to raise and maintain awareness
of cybersecurity risks and best practices;
a vulnerability management program designed to identify vulnerabilities in the systems and
software Farmer Mac uses;
regular cybersecurity testing, including penetration testing on a periodic basis to allow security
researchers to help identify vulnerabilities in Farmer Mac’s systems before they mature into real-
world cybersecurity threats;
a third-party service provider risk management program designed to identify and mitigate risks
associated with third-party vendors and business partners, which includes pre-engagement
diligence, contractual security and notification provisions, and ongoing monitoring, as appropriate;
a threat intelligence program designed to model and research potential cybersecurity threat actors
to identify vulnerabilities and anticipate attack vectors before they are exploited;
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cybersecurity controls designed to segment access to systems and to limit access to sensitive data;
and
patch management controls aimed at reducing system vulnerabilities.
These processes vary in maturity across the business, and Farmer Mac works continually to improve them.
Farmer Mac also maintains a privacy and security incident response program to prepare for, detect,
respond to, and recover from cybersecurity incidents. That program includes processes to triage, assess
severity for, escalate, contain, investigate, and remediate any cybersecurity incident, as well as to comply
with any applicable legal obligations and to mitigate brand and reputational damage. Farmer Mac also
conducts regular tabletop exercises to test and fortify the controls of its cybersecurity incident response
program. Farmer Mac’s security operations center and incident response team assesses the severity and
priority of incidents on a rolling basis, with escalations of cybersecurity incidents provided to Farmer
Mac’s management team. If a cybersecurity incident is determined to be a material cybersecurity incident,
Farmer Mac’s incident response plan defines the process for any required regulatory disclosures.
Farmer Mac’s risk management approach is supplemented by external and internal enterprise risk
management audits, which are designed to test the effectiveness of Farmer Mac’s security controls. Prior
cybersecurity incidents have not materially affected Farmer Mac's business strategy, results of operations,
or financial condition. Farmer Mac does not believe that there are currently any known risks from
cybersecurity threats that are reasonably likely to materially affect its business strategy, results of
operations, or financial condition, although the occurrence of both intentional and unintentional incidents
could cause a variety of adverse business impacts in the future. For more information on Farmer's Mac's
cybersecurity risks see "Operational Risks" in "Risk Factors" in Part I, Item 1A of this report. Those
disclosures are incorporated by reference in this section.
Governance
Farmer Mac’s board of directors is actively involved in overseeing the company's cybersecurity risk
management. At least once a year, the full board of directors meets with Farmer Mac’s Chief Information
Security Officer (“CISO”) to discuss Farmer Mac’s programs and policies related to cybersecurity and risk
initiatives and considers them closely both from a risk management perspective and as part of Farmer
Mac’s business strategy.
The board has created a dedicated cybersecurity subcommittee of the enterprise risk committee to oversee
Farmer Mac’s cybersecurity programs and practices, including the identification and mitigation of security
and privacy risks. The cybersecurity subcommittee consists of three members of the enterprise risk
committee. Two members of that subcommittee have successfully completed the National Association of
Corporate Directors (“NACD”) certificate in cyber-risk oversight program. The other member of the
subcommittee is the CEO of an energy company and has direct experience managing cyber risk and
cybersecurity incidents in that capacity. The chair of the board audit committee has also successfully
completed the NACD certificate in cyber-risk oversight program (but is not a member of the cybersecurity
subcommittee). The cybersecurity subcommittee typically meets on a monthly basis with the CISO and
other members of Farmer Mac's management team to discuss the performance and effectiveness of Farmer
Mac's cyber program and to receive updates on cybersecurity risks, any cybersecurity incidents, and major
cybersecurity initiatives.
52
The materials provided to Farmer Mac’s cybersecurity subcommittee and discussed in the meetings
include:
•
•
•
•
•
updates on Farmer Mac’s data security posture;
results from third-party assessments and testing;
progress towards predetermined risk-mitigation-related goals;
Farmer Mac’s incident response plan; and
information about cybersecurity threat risks or incidents and developments, as well as the steps
management has taken to respond to those risks or incidents.
At each regular quarterly meeting of the board enterprise risk committee, the cybersecurity subcommittee
reviews a summary of the information discussed in the most recent cybersecurity subcommittee meetings.
The board of directors has determined that cybersecurity is a priority area of focus and regularly engages
with the CISO and other members of senior management in substantial discussions in board and
committee meetings to address cybersecurity topics relating to risk management, compliance, strategy,
innovation, and governance. Material cybersecurity threat risks are also considered during separate board
and committee meeting discussions of important matters like enterprise risk management, operational
budgeting, business continuity planning, business transactions and acquisitions, and brand management.
Farmer Mac’s CISO manages Farmer Mac’s cybersecurity program, including the identification,
evaluation, and prioritization of security risks, as well as the company’s response to security incidents.
The CISO has more than 19 years of experience in cybersecurity and information technology and holds a
Master’s degree in Business Administration with a focus on Information Technology. The CISO also
holds a Certified Information Security Manager (CISM) certification, which is an advanced certification
indicating that an individual possesses the knowledge and experience required to develop and manage an
enterprise information security program. The CISO reports to Farmer Mac's Senior Vice President –
Enterprise Risk Officer, who in turn reports to the Chief Executive Officer.
Members of senior management have regular meetings with the CISO and other members of Farmer Mac's
information technology team to discuss and monitor the prevention, mitigation, detection, and remediation
of cybersecurity incidents. The participants in these meetings also discuss their management of, and
participation in, the cybersecurity risk management and strategy processes described in this report,
including the operation of Farmer Mac’s incident response plan. Farmer Mac provides quarterly
cybersecurity training to all employees, board members, and users of Farmer Mac's technology assets.
Employees with elevated privileges within the computing environment also receive specialized training
tailored to their job responsibilities. Farmer Mac tracks the metrics from the cybersecurity training
program and includes the results in dashboard reports shared and discussed with senior management, the
board enterprise risk committee, and the board cybersecurity subcommittee.
Item 2.
Properties
Farmer Mac maintains its principal office at 1999 K Street, N.W., 4th Floor, Washington, D.C. 20006,
under a lease that ends on August 30, 2024. During 2023, Farmer Mac signed a new lease for office space
at 2100 Pennsylvania Avenue, N.W., Washington, D.C., which begins on September 1, 2024 and ends on
April 30, 2036. Under the terms of that lease, Farmer Mac has had access to the property since May 2023
and may take possession of its new office space upon completion of the agreed-upon buildout of tenant
improvements, which is expected before September 1, 2024. Farmer Mac also maintains another office
location at 9169 Northpark Drive, Johnston, Iowa 50131, under an amended lease that began on
53
October 1, 2017 and ends on August 31, 2027. Farmer Mac believes that its offices (including the
anticipated office space under Farmer Mac's new lease) are suitable and adequate for its current and
anticipated needs for the near future.
Item 3.
Legal Proceedings
None.
Item 4.
Mine Safety Disclosures
Not applicable.
54
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
(a)
Farmer Mac has three classes of common stock outstanding – Class A voting common stock,
Class B voting common stock, and Class C non-voting common stock. Ownership of Class A voting
common stock is restricted to banks, insurance companies, and other financial institutions or similar
entities that are not institutions of the FCS. Ownership of Class B voting common stock is restricted to
institutions of the FCS. There are no ownership restrictions on the Class C non-voting common stock. In
the original public offering of the Class A and Class B voting common stock, Farmer Mac reserved the
right to redeem at book value any shares of either class held by an ineligible holder.
Farmer Mac's Class A voting common stock and Class C non-voting common stock are listed on the New
York Stock Exchange under the symbols AGM.A and AGM, respectively. The Class B voting common
stock, which has a limited market and trades infrequently, is not listed or quoted on any exchange or other
quotation system, and Farmer Mac is not aware of any publicly available quotations or prices for that class
of common stock.
As of February 5, 2024, Farmer Mac had 833 registered owners of the Class A voting common stock,
75 registered owners of the Class B voting common stock, and 789 registered owners of the Class C non-
voting common stock.
The dividend rights of all three classes of Farmer Mac's common stock are the same, and dividends may
be paid on common stock only when, as, and if declared by Farmer Mac's board of directors in its sole
discretion, subject to compliance with applicable capital requirements and payment of dividends on any
outstanding preferred stock. On February 24, 2022, Farmer Mac's board of directors declared a dividend
of $0.95 per share on Farmer Mac's common stock payable for first quarter 2022. That dividend was paid
quarterly through fourth quarter 2022. On February 22, 2023, Farmer Mac's board of directors declared a
dividend of $1.10 per share on Farmer Mac's common stock payable for first quarter 2023. That dividend
was paid quarterly through fourth quarter 2023. On February 21, 2024, Farmer Mac's board of directors
declared a dividend of $1.40 per share on Farmer Mac's common stock payable for first quarter 2024. See
"Business—Financing—Equity Issuance" for more information on Farmer Mac's common stock.
The quarterly dividend of $1.40 per share on all three classes of common stock for first quarter 2024
represents an increase of $0.30 per common share, or 27%, over the quarterly dividend payout in 2023. In
deciding to increase Farmer Mac's common stock dividend payout, the board of directors considered
Farmer Mac's strong capital position and the consistency of and outlook for earnings, balanced against the
need for capital to fund the significant growth objectives identified in the company's strategic plan and to
meet regulatory requirements and metrics established by the board of directors. These actions are also
consistent with Farmer Mac's goal of providing a competitive return on its common stockholders'
investments through the payment of cash dividends.
The declaration and payment of future dividends to holders of Farmer Mac's common stock are, however,
at the discretion of Farmer Mac's board of directors and depend on many factors, including Farmer Mac's
financial condition, actual results of operations and earnings, the capital needs of Farmer Mac's business,
regulatory requirements, and other factors that Farmer Mac's board deems relevant. Farmer Mac's ability
to pay dividends on its common stock is also subject to the payment of dividends on its outstanding
preferred stock. Applicable FCA regulations also require Farmer Mac to provide FCA with 15 days'
55
advance notice of certain capital distributions. Farmer Mac's ability to declare and pay dividends could be
restricted if it were to fail to comply with applicable capital requirements. See Note 9 to the consolidated
financial statements for more information about Farmer Mac's capital position and see "Business—
Government Regulation of Farmer Mac—Regulation—Capital Standards" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—
Capital Requirements" for more information on the capital requirements applicable to Farmer Mac.
Information about securities authorized for issuance under Farmer Mac's equity compensation plans
appears under "Equity Compensation Plans" in Farmer Mac's definitive proxy statement to be filed on or
about April 17, 2024. That portion of the definitive proxy statement is incorporated by reference into this
Annual Report on Form 10-K.
Farmer Mac is a federally chartered instrumentality of the United States, and its common stock is exempt
from registration under Section 3(a)(2) of the Securities Act. One type of transaction related to Farmer
Mac's common stock occurred during fourth quarter 2023 that was not registered under the Securities Act
and not otherwise reported on a Current Report on Form 8-K:
•
In October 2023, consistent with Farmer Mac's policy that permits directors of Farmer Mac to elect
to receive shares of Class C non-voting common stock in lieu of their cash retainers, Farmer Mac
issued an aggregate of 420 shares of Class C non-voting common stock to the seven directors who
elected to receive such stock in lieu of a portion of their cash retainers. The number of shares
issued to the directors was calculated based on a price of $154.30 per share, which was the closing
price of the Class C non-voting common stock on September 30, 2023, the last business day of the
third quarter, as reported by the New York Stock Exchange.
Performance Graph. The following graph compares the performance of Farmer Mac's Class A voting
common stock and Class C non-voting common stock with the performance of the New York Stock
Exchange Composite Index ("NYSE Comp") and the Standard & Poor's 500 Financial Services Index
("S&P 500 Financial Services Index") over the period from December 31, 2018 to December 31,
2023. The S&P 500 Financial Services Index was renamed in 2023 and was formerly known as the
Standard & Poor's 500 Diversified Financials Index. The graph assumes that $100 was invested on
December 31, 2018 in each of: Farmer Mac's Class A voting common stock; Farmer Mac's Class C non-
voting common stock; the NYSE Composite Index; and the S&P 500 Financial Services Index. The graph
also assumes that all dividends were reinvested into the same securities throughout the past five
years. Farmer Mac obtained the information in the performance graph from S&P Global Market
Intelligence.
56
This performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC, and
this performance graph shall not be incorporated by reference into any of Farmer Mac's filings under the
Securities Act or the Securities Exchange Act of 1934 and related regulations, or any other document,
whether made before or after the date of this report and despite any general incorporation language
contained in a filing or document (except to the extent Farmer Mac specifically incorporates this section
by reference into a filing or document).
(b)
(c)
Not applicable.
None.
Item 6.
[Reserved].
57
Index ValueTotal Return PerformanceFarmer Mac Class C (AGM)Farmer Mac Class A (AGM.A)S&P 500 Financial ServicesNYSE Comp12/31/1812/31/1912/31/2012/31/2112/31/2212/31/2350100150200250300350400
Item 7.
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 year ended December 31, 2023. Financial information included in this report is
consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage
Securities Corporation and Farmer Mac II LLC. This discussion and analysis of financial condition and
results of operations should be read together with Farmer Mac's consolidated financial statements and the
related notes to the consolidated financial statements for the fiscal years ended December 31, 2023, 2022,
and 2021.
Overview
Farmer Mac is a mission-focused, purpose-driven company determined to drive economic opportunity and
prosperity by increasing the accessibility of financing for American agriculture and rural infrastructure. As
the nation’s secondary market for agricultural and rural infrastructure loans, we help strengthen and
connect rural America by providing a broad array of financial solutions to lenders that support flexible
low-cost financing to farmers, ranchers, agribusinesses, renewable energy projects, rural utilities
(including telecommunications, fiber, and broadband projects), and other related rural businesses and
enterprises. Farmer Mac also serves as a critical investment tool for entities such as states, counties,
municipalities, pension funds, banks, public trust funds, and credit unions. Farmer Mac offers those
entities a variety of investment opportunities that may diversify their investment portfolios and provide the
opportunity to earn a competitive return on their investment dollars.
During 2023:
• we continued to increase net income and core earnings;
• we maintained strong liquidity in our investment portfolio well above regulatory requirements;
• we maintained our strong capital position, well above regulatory requirements, and uninterrupted
access to the debt capital markets, which historically have not been subject to the same short-term
disruptions and liquidity concerns experienced by institutions that rely primarily on deposits to
fund their assets; and
• we provided $8.3 billion in liquidity and lending capacity to lenders serving rural America.
Farmer Mac’s performance during 2023, described in more detail below, reflects the success of our
continued focus on pursuing new channels and innovative ways to further our mission to increase the
accessibility of financing for American agriculture and rural infrastructure. Despite recent macroeconomic
concerns such as inflation, failures and liquidity concerns in the banking industry, rising interest rates, and
geopolitical conflicts, Farmer Mac continued to deliver solid financial results. These financial results for
2023 reflected a variety of factors, including:
•
our disciplined approach to interest rate risk management that helps to protect earnings from the
effects of interest rate volatility and has been accretive to Farmer Mac during periods of rising
interest rates;
58
•
•
•
effective capital strategies that resulted in advantageous funding in an elevated interest rate
environment in the current period;
an increase in outstanding business volume at higher spreads while credit quality improved; and
the resilience of the farm economy, as producers had benefited from healthy farm incomes and
liquidity from relatively high commodity prices in 2021 and 2022.
The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are
measures of financial performance 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
The following table shows our net income attributable to common stockholders and core earnings for the
periods presented. Core earnings and core earnings per share are non-GAAP measures that differ from net
income attributable to common stockholders and earnings per common share, respectively, by excluding
the effects of fair value fluctuations and specified infrequent or unusual transactions.
Table 1
For the Years Ended December 31,
2023
2022
2021
(in thousands)
Net income attributable to common stockholders
$
172,838 $
150,979 $
Core earnings
171,156
124,314
111,412
113,570
The $21.9 million year-over-year increase in net income attributable to common stockholders was due to a
$44.7 million after-tax increase in net interest income and a $2.9 million after-tax increase in guarantee
fees. These factors were partially offset by a $15.6 million after-tax decrease in the fair value of
undesignated financial derivatives and a $12.1 million after-tax increase in operating expenses.
The $39.6 million year-over-year increase in net income attributable to common stockholders for 2022
compared to 2021 was due to a $38.7 million after-tax increase in net interest income and a $17.6 million
after-tax increase in the fair value of undesignated financial derivatives. These factors were partially offset
by a $5.2 million after-tax decrease related to the non-recurrence of the gain on the sale of mortgage loans
that occurred in the prior period, a $6.6 million increase in operating expenses, a $2.5 million increase in
preferred stock dividends, and a $2.4 million increase in our provision for credit losses.
The $46.8 million year-over-year increase in core earnings was due to a $56.4 million after-tax increase in
net effective spread, partially offset by a $12.1 million after-tax increase in operating expenses.
The $10.7 million year-over-year increase in core earnings for 2022 compared to 2021 was due to a $27.5
million after-tax increase in net effective spread. This factor was partially offset by a $5.2 million after-tax
decrease related to the non-recurrence of the gain on the sale of mortgage loans that occurred in the prior
period, a $6.6 million increase in operating expenses, a $2.5 million increase in preferred stock dividends,
and a $2.4 million increase in our provision for credit losses.
59
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
The following table shows our net interest income and net effective spread in both dollars and percentage
yield or spread for the periods presented. Farmer Mac uses net effective spread, a non-GAAP measure, as
an alternative 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
Net interest income
Net interest yield %
Net effective spread
Net effective spread %
For the Years Ended December 31,
2023
2022
2021
(in thousands)
$
$
327,547
$
270,940
$
221,951
1.15 %
1.04 %
0.94 %
326,980
$
255,529
$
220,668
1.18 %
1.02 %
0.98 %
The $56.6 million year-over-year increase in net interest income was primarily due to a $48.9 million
decrease in funding costs and a $19.9 million increase related to net new business volume. The decrease in
funding costs was primarily due to our disciplined funding strategies and higher nominal interest rates that
have led to an upward repricing of our excess long-term capital that we raised when interest rates were at
historical lows and is held in our investment portfolio. The factors that contributed to the increase in net
interest income were partially offset by an $11.2 million decrease in the fair value of derivatives
designated in fair value hedge accounting relationships (designated financial derivatives). In percentage
terms, the 0.11% increase was primarily attributable to a decrease of 0.16% in funding costs and a
decrease of 0.04% in net fair value changes from designated financial derivatives.
The $49.0 million year-over-year increase in net interest income for 2022 compared to 2021 was primarily
attributable to a $21.9 million increase from net new business volume and a $21.4 million decrease in
funding costs, due to increasing yields on interest-earning assets on our short-term investments that are
funded by non-interest bearing excess equity, and a $6.1 million increase in the fair value of designated
financial derivatives. In percentage terms, the year-over-year 0.10% increase was primarily attributable to
a decrease of 0.08% in funding costs and an increase of 0.02% in net fair value changes from financial
derivatives designated in hedge accounting relationships (designated financial derivatives).
The $71.5 million year-over-year increase in net effective spread was primarily due to a $54.6 million
decrease in non-GAAP funding costs, due to the same factors mentioned above that decreased our funding
costs, and a $20.6 million increase related to net new business volume. In percentage terms, the year-over-
year increase of 0.16% was primarily attributable to a decrease in non-GAAP funding costs.
60
The $34.9 million year-over-year increase in net effective spread in dollars for 2022 compared to 2021
was primarily due to a $23.6 million increase from net new business volume, a $7.7 million decrease in
non-GAAP funding costs, due to increasing yields on interest-earning assets on our short-term investments
that are funded by non-interest bearing excess equity, a $2.4 million increase in net servicing revenue, and
a $0.9 million increase in cash-basis interest income. In percentage terms, the year-over-year increase of
0.04% was primarily attributable to a decrease of 0.03% in non-GAAP funding costs and an increase of
0.01% in cash-basis interest income.
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 10 in
"Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of
Operations—Net Interest Income."
Business Volume
Our outstanding business volume was $28.5 billion as of December 31, 2023, a net increase of $2.5 billion
from December 31, 2022 after taking into account all new business, maturities, and paydowns on existing
assets. The net increase was primarily attributable to a net increase of $1.4 billion in the Rural
Infrastructure Finance line of business and a net increase of $1.2 billion in the Agricultural Finance line of
business.
For more information about Farmer Mac's business volume, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations—Results of Operations—Business Volume."
Capital
Table 3
Core capital
Capital in excess of minimum capital level required
As of
December 31, 2023 December 31, 2022
(in thousands)
$
1,452,008 $
1,322,801
589,399
516,882
The increase in capital in excess of the minimum capital level required was primarily due to an increase in
retained earnings.
61
Credit Quality
The following table presents Agricultural Finance on- and off-balance sheet substandard assets, in dollars
and as a percentage of the respective portfolio as of December 31, 2023 and 2022:
Table 4
On-Balance Sheet
Off-Balance Sheet
Substandard Assets
% of Portfolio
Substandard Assets
% of Portfolio
December 31, 2023
December 31, 2022
Increase/(decrease) from prior year-ending
$
$
152,865
169,667
(16,802)
(dollars in thousands)
2.0 % $
2.3 %
33,086
39,733
(0.3) % $
(6,647)
1.0 %
1.2 %
(0.2) %
The decrease of $16.8 million in on-balance sheet substandard assets during 2023 was primarily driven by
the full payoff of a substandard agricultural storage and processing loan. The $6.6 million decrease in
substandard assets in our off-balance sheet portfolios during 2023 was primarily due to credit upgrades in
livestock and crops, and was partially offset by credit downgrades in permanent plantings and part-time
farms.
There was one substandard asset with an outstanding balance of $29.4 million in the Rural Infrastructure
Finance portfolio as of December 31, 2023, and there were no substandard assets as of December 31,
2022.
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."
62
The following table presents 90-day delinquencies for the on- and off-balance sheet Agricultural Finance
portfolios in dollars and as a percentage of the respective balance sheet category as of December 31, 2023
and 2022:
Table 5
December 31, 2023
December 31, 2022
Increase/(decrease) from prior year-ending
On-Balance Sheet
Off-Balance Sheet
90-Day
Delinquencies
% of Portfolio
90-Day
Delinquencies
% of Portfolio
$
$
32,893
39,681
(6,788)
(dollars in thousands)
0.42 % $
0.53 %
1,784
3,817
0.05 %
0.12 %
(0.11) % $
(2,033)
(0.07) %
On-balance sheet Agricultural Finance assets 90 or more days delinquent decreased in agricultural storage
and processing and was partially offset by increases in permanent plantings, crops, livestock, and part-
time farms. Off-balance sheet Agricultural Finance assets 90 days or more delinquent decreased in
permanent plantings and livestock and was partially offset by increases in crops and part-time farms. The
top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural
Finance portfolio represented over half of the aggregate 90-day delinquencies as of December 31, 2023.
As of both December 31, 2023 and 2022, there were no 90-day delinquencies in Farmer Mac's portfolio of
Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.
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—Loans and Guarantees."
Critical Accounting Estimates
The preparation of Farmer Mac's consolidated financial statements in conformity with GAAP requires the
use of estimates and assumptions that affect the amounts reported in the consolidated financial statements
and related notes for the periods presented. Farmer Mac considers an accounting estimate made in
accordance with GAAP to be critical when it involves a significant level of estimation uncertainty and it
has had or is likely to have a material impact on our financial condition or results of operations.
The accounting estimate that Farmer Mac considers to be critical in the preparation of its consolidated
financial statements is the estimation of the fair value of AgVantage Securities (AgVantage). Farmer Mac
considers the fair value of AgVantage Securities that are classified as held-to-maturity (AgVantage HTM)
because of their impact on the company's fair value disclosures in Note 5 to the consolidated financial
statements – Farmer Mac Guaranteed Securities and USDA Securities and Note 13 to the consolidated
financial statements – Fair Value Disclosures. Farmer Mac considers the fair value of AgVantage
Securities that are classified as available-for-sale (AgVantage AFS) to be a critical estimate due to the
significance of the periodic measurement of mark-to-market adjustments relative to the company's total
assets, comprehensive income, and equity. Farmer Mac also considers the fair value of AgVantage to be a
critical accounting estimate because Farmer Mac applies a discount rate in calculating the net present
value of future expected cash flows that is both significant to the estimate of their fair value and
63
unobservable in the market. Farmer Mac relies upon this significant unobservable input to estimate the fair
value of AgVantage because there are no observable transactions in these securities in the market.
Farmer Mac's AgVantage HTM amortized cost was $4.2 billion and $1.0 billion as of December 31, 2023
and 2022, respectively. The fair value of AgVantage HTM had net unrealized losses in the amount of
$34.8 million and $53.7 million as of December 31, 2023 and 2022, respectively. See Note 5 to the
consolidated financial statements – Farmer Mac Guaranteed Securities and USDA Securities for more
information.
Farmer Mac's AgVantage AFS fair value was $5.5 billion and $7.6 billion as of December 31, 2023 and
2022, respectively. The fair value of AgVantage AFS had accumulated net unrealized losses in the amount
of $293.0 million and $408.9 million as of December 31, 2023 and 2022, respectively. See Note 5 to the
consolidated financial statements – Farmer Mac Guaranteed Securities and USDA Securities for more
information.
Farmer Mac applies discount rates that are commensurate with the risks involved to estimate the fair value
measurement of AgVantage AFS. As of December 31, 2023, Farmer Mac applied discount rates that
ranged from 4.7% to 5.4% (with a weighted average of 5.0%). As of December 31, 2022, Farmer Mac
applied discount rates that ranged from 4.7% to 6.1% (with a weighted average of 5.1%).
Use of different discount rates than those selected by Farmer Mac may result in materially different
estimates of fair value for AgVantage AFS. Farmer Mac selects the discount rate for each AgVantage AFS
security by analyzing credit default swap levels and the long-term credit outlook of Farmer Mac's major
counterparties and estimating an appropriate credit spread relative to U.S. Treasury yields. The periodic
measurement of fair value and underlying discount rate methodology is subject to Farmer Mac’s internal
controls and review by management. As of December 31, 2023, a 0.50% increase in the discount rates
used to determine the fair value of AgVantage AFS would decrease the overall GAAP carrying value by
approximately 2.01%. See Note 13 to the consolidated financial statements – Fair Value Disclosures for
more information.
For a description of Farmer Mac’s accounting policy for fair value measurements, see Note 2(n) to the
consolidated financial statements – Significant Accounting Policies, Fair Value Measurements.
Use of Non-GAAP Measures
In the accompanying analysis of its financial information, Farmer Mac 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.
64
Core Earnings and Core Earnings Per Share
The main difference between core earnings and core earnings per share (non-GAAP measures) and net
income attributable to common stockholders and earnings per common share (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.
Another difference is that these two non-GAAP measures exclude specified infrequent or unusual
transactions that we 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, in prior periods,
we excluded any losses on retirement of preferred stock from core earnings and core earnings per share.
Similar transactions may reoccur in future periods. 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. As further explained below, net effective
spread differs from net interest income and net interest yield by excluding certain items from net interest
income and net interest 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 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 in
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 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 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 on financial 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.
65
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 our 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 10 in
"Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of
Operations—Net Interest Income."
Results of Operations
Reconciliations 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 information about the composition
of core earnings:
66
Table 6
Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
Net income attributable to common stockholders
$
172,838 $
150,979 $
111,412
For the Years Ended December 31,
2023
2022
2021
(in thousands, except per share amounts)
Less reconciling items:
Gains/(losses) on undesignated financial derivatives due to fair value
changes (see Table 13)
(Losses)/gains on hedging activities due to fair value changes
Unrealized gains/(losses) on trading securities
Net effects of amortization of premiums/discounts and deferred gains on
assets consolidated at fair value
Net effects of terminations or net settlements on financial derivatives
Income tax effect related to reconciling items
Sub-total
Core earnings
Composition of Core Earnings:
Revenues:
Net effective spread(1)
Guarantee and commitment fees(2)
Gains on sale of mortgage loans
Other(3)
Total revenues
Credit related expense (GAAP):
Provision for/(release of) losses
REO operating expenses
Total credit related expense
Operating expenses (GAAP):
Compensation and employee benefits
General and administrative
Regulatory fees
Total operating expenses
Net earnings
Income tax expense(4)
Preferred stock dividends (GAAP)
Core earnings
Core earnings per share:
Basic
Diluted
Weighted-average shares:
Basic
5,142
(5,394)
1,979
175
227
(447)
1,682
13,495
5,343
(917)
39
15,794
(7,089)
26,665
171,156 $
124,314 $
326,980 $
255,529 $
18,928
—
3,299
349,207
1,136
—
1,136
58,914
34,963
3,222
97,099
250,972
52,651
27,165
18,144
—
1,684
275,357
806
819
1,625
48,766
29,772
3,269
81,807
191,925
40,446
27,165
171,156 $
124,314 $
15.80 $
15.65 $
11.52 $
11.42 $
10,829
10,937
10,791
10,883
(1,431)
(1,810)
(115)
130
494
574
(2,158)
113,570
220,668
17,533
6,539
1,680
246,420
(2,187)
—
(2,187)
42,847
27,507
3,062
73,416
175,191
36,944
24,677
113,570
10.56
10.47
10,758
10,846
$
$
$
$
$
Diluted
(1)
(2)
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 10 for a reconciliation of net interest income to net
effective spread.
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.
67
(3)
(4)
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.
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
GAAP - Basic EPS
Less reconciling items:
Gains/(losses) on undesignated financial derivatives due to fair value changes
(see Table 13)
(Losses)/gains on hedging activities due to fair value changes
Unrealized gains/(losses) on trading securities
Net effects of amortization of premiums/discounts and deferred gains on assets
consolidated at fair value
Net effects of terminations or net settlements on financial derivatives
Income tax effect related to reconciling items
Sub-total
Core Earnings - Basic EPS
For the Years Ended December 31,
2023
2022
2021
(in thousands, except per share amounts)
$
15.97 $
14.00 $
10.36
0.49
(0.50)
0.18
0.02
0.02
(0.04)
0.17
1.25
0.50
(0.08)
—
1.47
(0.66)
2.48
$
15.80 $
11.52 $
(0.13)
(0.17)
(0.01)
0.01
0.04
0.06
(0.20)
10.56
Shares used in per share calculation (GAAP and Core Earnings)
10,829
10,791
10,758
Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share
GAAP - Diluted EPS
Less reconciling items:
Gains/(losses) on undesignated financial derivatives due to fair value changes
(see Table 13)
(Losses)/gains on hedging activities due to fair value changes
Unrealized gains/(losses) on trading securities
Net effects of amortization of premiums/discounts and deferred gains on assets
consolidated at fair value
Net effects of terminations or net settlements on financial derivatives
Income tax effect related to reconciling items
Sub-total
Core Earnings - Diluted EPS
For the Years Ended December 31,
2023
2022
2021
(in thousands, except per share amounts)
$
15.81 $
13.87 $
10.27
0.47
(0.49)
0.18
0.02
0.02
(0.04)
0.16
1.24
0.49
(0.08)
—
1.45
(0.65)
2.45
$
15.65 $
11.42 $
(0.13)
(0.17)
(0.01)
0.01
0.05
0.05
(0.20)
10.47
Shares used in per share calculation (GAAP and Core Earnings)
10,937
10,883
10,846
The non-GAAP reconciling items between net income attributable to common stockholders and core
earnings are:
1. Gains/(losses) on financial derivatives due to fair value changes are presented by two reconciling items
in Table 6 above: (a) Gains/(losses) on undesignated financial derivatives due to fair value changes; and
(b) (Losses)/gains on hedging activities due to fair value changes.
68
2. Unrealized gains/(losses) on trading securities. The unrealized gains/(losses) 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. The 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 effects of terminations or net settlements on financial derivatives. These terminations 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 these contracts are reported in the consolidated
statements of operations in the period in which they occur. For core earnings purposes, these
realized gains or losses are deferred and amortized as net yield adjustments over the term of the
related debt, which generally ranges from 3 to 15 years.
The following sections provide more detail about specific components of Farmer Mac's results of
operations.
Net Interest Income. The following table provides information about interest-earning assets and funding
for the years ended December 31, 2023, 2022, and 2021. 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 (single-class) and for which Farmer Mac guarantees all classes of securities issued 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.
69
Table 8
Interest-earning assets:
December 31, 2023
For the Year Ended
December 31, 2022
December 31, 2021
Average
Balance
Income/
Expense
Average
Rate
Average
Balance
Income/
Expense
Average
Rate
Average
Balance
Income/
Expense
Average
Rate
(dollars in thousands)
Cash and investments
$ 5,894,515 $ 287,144
4.87 % $ 5,236,118 $ 82,659
1.58 % $ 4,726,552 $ 18,660
0.39 %
Loans, Farmer Mac Guaranteed
Securities and USDA
Securities(1)
21,739,403
1,070,932
4.93 % 19,882,489
602,537
3.03 % 17,838,238
368,330
Total interest-earning assets
27,633,918
1,358,076
4.91 % 25,118,607
685,196
2.73 % 22,564,790
386,990
2.06 %
1.72 %
Funding:
Notes payable due within one
year
Notes payable due after one
year(2)
Total interest-bearing
liabilities(3)
Net non-interest-bearing
funding
3,274,799
150,666
4.60 % 2,876,452
48,481
1.69 % 3,779,689
3,820
0.10 %
22,631,904
884,034
3.91 % 20,987,990
370,014
1.76 % 18,004,757
166,083
0.92 %
25,906,703
1,034,700
3.99 % 23,864,442
418,495
1.75 % 21,784,446
169,903
0.78 %
1,727,215
—
1,254,165
—
780,344
—
Total funding
27,633,918
1,034,700
3.74 % 25,118,607
418,495
1.67 % 22,564,790
169,903
0.75 %
27,633,918
323,376
1.17 % 25,118,607
266,701
1.06 % 22,564,790
217,087
0.96 %
Net interest income/yield prior to
consolidation of certain trusts
Net effect of consolidated
trusts(4)
0.46 %
0.94 %
873,181
4,171
0.48 %
850,916
4,239
0.50 % 1,049,521
4,864
Net interest income/yield
$ 28,507,099 $ 327,547
1.15 % $ 25,969,523 $ 270,940
1.04 % $ 23,614,311 $ 221,951
(1)
(2)
(3)
(4)
Excludes interest income of $34.2 million, $31.7 million, and $39.0 million in 2023, 2022, and 2021, respectively, related to consolidated trusts with
beneficial interests owned by third parties (single-class).
Includes current portion of long-term notes.
Excludes interest expense of $30.0 million, $27.4 million, and $34.1 million in 2023, 2022, and 2021, respectively, related to consolidated trusts with
beneficial interests owned by third parties (single-class).
Includes the effect of consolidated trusts with beneficial interests owned by third parties (single-class).
The $56.6 million year-over-year increase in net interest income was primarily due to a $48.9 million
decrease in funding costs and a $19.9 million increase related to net new business volume. The decrease in
funding costs was due to our disciplined funding strategies and higher nominal interest rates that have led
to an upward repricing of our excess long-term capital that we raised when interest rates were at historical
lows and is held in our investment portfolio. The factors that contributed to an increase in net interest
income were partially offset by an $11.2 million decrease in the fair value of derivatives designated in fair
value hedge accounting relationships (designated financial derivatives). In percentage terms, the 0.11%
increase was primarily attributable to a decrease of 0.16% in funding costs and a decrease of 0.04% in net
fair value changes from designated financial derivatives.
For 2022 compared to 2021, the $49.0 million year-over-year increase in net interest income was
primarily attributable to a $21.9 million increase from net new business volume, a $21.4 million decrease
in funding costs due to increasing yields on interest-earning assets on our short-term investments that are
funded by non-interest bearing excess equity, and a $6.1 million increase in the fair value of designated
financial derivatives. In percentage terms, the year-over-year 0.10% increase was primarily attributable to
a decrease of 0.08% in funding costs and an increase of 0.02% in net fair value changes from financial
derivatives designated in hedge accounting relationships (designated financial derivatives).
The following table sets forth information about 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 prior rate), and
70
changes in rate (change in rate multiplied by old volume), and then allocated based on the relative size of
rate and volume changes from the prior period.
Table 9
2023 vs. 2022
2022 vs. 2021
Increase/(Decrease) Due to
Increase/(Decrease) Due to
Rate
Volume
Total
Rate
Volume
Total
(in thousands)
Income from interest-earning assets:
Cash and investments
$
192,859 $
11,626 $
204,485 $
61,778 $
2,221 $
63,999
Loans, Farmer Mac Guaranteed Securities
and USDA Securities
Total
Expense from other interest-bearing
liabilities
Change in net interest income prior to
consolidation of certain trusts(1)
407,548
600,407
60,847
72,473
468,395
672,880
188,111
249,889
46,096
48,317
234,207
298,206
577,519
38,686
616,205
230,931
17,661
248,592
$
22,888 $
33,787 $
56,675 $
18,958 $
30,656 $
49,614
(1)
Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties (single-class).
The following table presents a reconciliation of net interest income and net interest yield to net effective
spread. Net effective spread is measured by: 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 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 (1) the
amortization of premiums and discounts on assets consolidated at fair value, (2) the net effects of
consolidated trusts with beneficial interests owned by third parties (single-class), and (3) 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 10
For the Years Ended December 31,
2023
2022
2021
Dollars
Yield
Dollars
Yield
Dollars
Yield
(dollars in thousands)
Net interest income/yield
Net effects of consolidated trusts
$ 327,547
1.15 % $ 270,940
1.04 % $ 221,951
0.94 %
(4,171)
0.02 %
(4,239)
0.02 %
(4,864)
0.02 %
Expense related to undesignated financial derivatives
(4,845)
(0.02) %
(7,756)
(0.03) %
2,841
0.01 %
Amortization of premiums/discounts on assets consolidated at fair
value
Amortization of losses due to terminations or net settlements on
financial derivatives
Fair value changes on fair value hedge relationships
(175)
— %
(24)
— %
(45)
— %
3,230
5,394
0.01 %
2,413
0.01 %
0.02 %
(5,805)
(0.02) %
446
339
— %
0.01 %
Net effective spread
$ 326,980
1.18 % $ 255,529
1.02 % $ 220,668
0.98 %
The $71.5 million year-over-year increase in net effective spread was primarily due to a $54.6 million
decrease in non-GAAP funding costs, due to our disciplined funding strategies and higher nominal interest
rates that have led to an upward repricing of our excess capital that is held in our short-term investment
71
portfolio, and a $20.6 million increase related to net new business volume. In percentage terms, the year-
over-year increase of 0.16% was primarily attributable to a decrease in non-GAAP funding costs.
For 2022 compared to 2021, the $34.9 million year-over-year increase in net effective spread in dollars
was primarily due to a $23.6 million increase from net new business volume, a $7.7 million decrease in
non-GAAP funding costs due to increasing yields on interest-earning assets on our short-term investments
that are funded by non-interest bearing excess equity, a $2.4 million increase in net servicing revenue, and
a $0.9 million increase in cash-basis interest income. In percentage terms, the year-over-year increase of
0.04% was primarily attributable to an decrease of 0.03% in non-GAAP funding costs and an increase of
0.01% in cash-basis interest income.
See Note 14 to the consolidated financial statements for more information about 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.
Provision for and Release of Allowance for Losses and Reserve for Losses. The following table
summarizes the components of Farmer Mac's total allowance for losses for the three-year period ended
December 31, 2023:
Table 11
Balance as of December 31, 2020
Release of losses
Recovery
Balance as of December 31, 2021
Provision for/(release of) losses
Charge-offs
Balance as of December 31, 2022
Provision for losses
Balance as of December 31, 2023
Allowance
for
Losses
Reserve
for Losses
(in thousands)
Total
Allowance
for Losses
$
$
$
$
14,298 $
3,277 $
(860)
1,054
(1,327)
—
14,492 $
1,950 $
1,323
(84)
(517)
—
15,731 $
1,433 $
858
278
16,589 $
1,711 $
17,575
(2,187)
1,054
16,442
806
(84)
17,164
1,136
18,300
See Notes 8 and 12 to the consolidated financial statements and "Management's Discussion and Analysis
of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and
Guarantees."
During 2023, we recorded a $1.1 million net provision to the total allowance for losses primarily as a
result of one rural infrastructure loan that was downgraded to substandard during the year, partially offset
by an allowance for losses release related to a single collateral dependent agricultural storage and
processing loan that fully paid off during the year.
Guarantee and Commitment Fees. The 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 years ended December 31, 2023, 2022, and 2021:
72
Table 12
Contractual guarantee and commitment fees
Guarantee obligation amortization
Guarantee asset fair value changes
Guarantee and commitment fee income
For the Years Ended December 31,
2023
2022
2021
(dollars in thousands)
15,084 $
14,235 $
4,331
(2,703)
16,712 $
5,913
(7,108)
13,040 $
$
$
12,669
7,257
(7,257)
12,669
Guarantee and commitment fees increased for the year ended December 31, 2023 compared to 2022,
which was due to increases in the average outstanding balance of LTSPCs during the period. As adjusted
for the core earnings presentation, guarantee and commitment fees were $18.9 million for the year ended
December 31, 2023, compared to $18.1 million and $17.5 million for the years ended December 31, 2022,
and 2021, 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 interest income Farmer Mac earns is effectively a guarantee fee on those consolidated Farmer Mac
Guaranteed Securities. Farmer Mac has also excluded guarantee asset fair value changes from the
presentation of core earnings because these fluctuations are not expected to have a cumulative net impact
on Farmer Mac's financial condition or results of operations if Farmer Mac fulfills its guarantee obligation
throughout the term of the guaranteed securities, as is expected.
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
Table 6 in "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."
Gains on financial derivatives. The components of gains and losses on financial derivatives for the years
ended December 31, 2023, 2022, and 2021 are summarized in the following table:
Table 13
Gains/(losses) due to fair value changes
Accrual of contractual payments
Gains/(losses) due to terminations or net settlements
Gains on financial derivatives
For the Years Ended December 31,
2023
2022
2021
(dollars in thousands)
5,142 $
(4,845)
2,585
13,495 $
(7,756)
16,892
2,882 $
22,631 $
$
$
(1,431)
2,841
(1,086)
324
These changes in fair value are primarily the result of fluctuations in long-term interest rates. The accrual
of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are
undesignated financial derivatives is shown as income or 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 and initial cash
payments received upon the inception of certain undesignated swaps are included in "Gains/(losses) due to
73
terminations or net settlements" in the table above. See Note 6 to the consolidated financial statements for
more information about Farmer Mac's financial derivatives.
Gains on Sale of Mortgage Loans
Table 14
For the Years Ended December 31,
2023
2022
2021
(in thousands)
Gains on sale of mortgage loans
$
— $
— $
6,539
In 2021, Farmer Mac executed a structured securitization of Farm & Ranch loans that resulted in a gain of
$6.5 million from the sale of the pool of mortgage loans into the securitization vehicle.
Operating Expenses. The components of operating expenses for the years ended December 31, 2023,
2022, and 2021 are summarized in the following table:
Table 15
Compensation and employee benefits
General and administrative
Regulatory fees
Total Operating Expenses
For the Years Ended December 31,
2023
2022
2021
(dollars in thousands)
58,914 $
48,766 $
34,963
3,222
29,772
3,269
97,099 $
81,807 $
$
$
42,847
27,507
3,062
73,416
Compensation and Employee Benefits. The increase in compensation and employee benefits
expenses for the year ended December 31, 2023 compared to 2022 was largely due to increased
headcount. The increase in compensation and employee benefits expenses for 2022 compared to
2021 was due to increased headcount (full year impact of 32 net new hires in 2021 and 5 net new
hires in 2022) and increased executive stock compensation.
General and Administrative Expenses (G&A). The increase in G&A expenses for the year ended
December 31, 2023 compared to 2022 was primarily due to increased spending on software
licenses and information technology and other consultants to support growth and strategic
initiatives. One of those initiatives is a multi-year effort to replace Farmer Mac's platform for
securities trades and to implement a treasury management system. That initiative is expected to be
completed during the first half of 2024.
74
Income Tax Expense. The following table presents income tax expense and the effective income tax rate
for the years ended December 31, 2023, 2022, and 2021:
Table 16
Income tax expense
Effective tax rate
For the Years Ended December 31,
2023
2022
2021
(dollars in thousands)
$
53,098
$
47,535
$
36,372
21.0 %
21.1 %
21.1 %
75
Business Volume.
The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the years
ended December 31, 2023 and 2022:
Table 17
Net New Business Volume
Agricultural Finance:
Farm & Ranch:
Loans
Loans held in consolidated trusts:
Beneficial interests owned by third-party investors (single-class)(1)
Beneficial interests owned by third-party investors (structured)(1)
IO-FMGS(2)
USDA Securities
AgVantage Securities(1)
LTSPCs and unfunded loan commitments
Other Farmer Mac Guaranteed Securities(3)
Loans serviced for others
Total Farm & Ranch
Corporate AgFinance:
Loans
AgVantage Securities(1)
Unfunded loan commitments
Total Corporate AgFinance
Total Agricultural Finance
Rural Infrastructure Finance:
Rural Utilities:
Loans
AgVantage Securities(1)
LTSPCs and unfunded loan commitments
Other Farmer Mac Guaranteed Securities(3)
Total Rural Utilities
Renewable Energy:
Loans
Unfunded loan commitments
Total Renewable Energy
Total Rural Infrastructure Finance
Total
For the Years Ended
December 31, 2023 December 31, 2022
On or Off
Balance Sheet
Net Growth/
(Decrease)
Net Growth/
(Decrease)
(in thousands)
On-balance sheet $
(17,300) $
375,680
On-balance sheet
On-balance sheet
On-balance sheet
On-balance sheet
On-balance sheet
Off-balance sheet
Off-balance sheet
Off-balance sheet
(44,006)
264,691
(1,213)
(38,430)
230,000
177,634
(48,351)
556,984
(33,705)
296,658
(1,675)
(38,504)
880,000
235,155
(77,405)
(2,051)
$
1,080,009 $
1,634,153
On-balance sheet $
On-balance sheet
Off-balance sheet
$
$
93,470 $
(70,721)
67,723
90,472 $
42,953
(7,864)
30,584
65,673
1,170,481 $
1,699,826
On-balance sheet $
292,781 $
On-balance sheet
Off-balance sheet
Off-balance sheet
854,312
(24,814)
(1,169)
$
1,121,110 $
On-balance sheet $
220,716 $
Off-balance sheet
36,635
257,351 $
1,378,461 $
2,548,942 $
$
$
$
499,323
10,894
(44,245)
(1,586)
464,386
132,807
10,600
143,407
607,793
2,307,619
(1)
(2)
(3)
Categories of Farmer Mac Guaranteed Securities.
An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.
Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.
76
Farmer Mac's outstanding business volume was $28.5 billion as of December 31, 2023, a net increase of
$2.5 billion from December 31, 2022 after taking into account all new business, maturities, and paydowns
on existing assets.
The $1.1 billion net increase in Farm & Ranch during 2023 resulted from $5.0 billion of new purchases,
commitments, and guarantees, partially offset by $3.9 billion of scheduled maturities and repayments.
Included in the $5.0 billion of new volume is newly purchased servicing rights on $0.6 billion of loans
(i.e., loans serviced for others). Loans serviced for others earn servicing fee income rather than interest
income and are a component of outstanding business volume because they are assets under our
management.
Farmer Mac also purchased a total of $2.7 billion in Farm & Ranch AgVantage Securities during 2023,
which primarily reflected the refinancing of maturing securities. The $2.7 billion in gross purchases was
partially offset by $2.5 billion in scheduled maturities.
The $90.5 million net increase in Corporate AgFinance during 2023 resulted from $0.9 billion of new
purchases and unfunded loan commitments, which was partially offset by $0.8 billion of scheduled
maturities, repayments, and paydowns on revolving commitments. Farmer Mac purchased a total of
$578.1 million in loans, including draws on revolving commitments, which was partially offset by $484.6
million in scheduled maturities, repayments, and paydowns on revolving commitments. The increase in
loan purchases was primarily due to Farmer Mac's continued focus to support loans to larger and more
complex agribusinesses focused on food and fiber processing and other food supply chain production.
The $1.1 billion net increase in Rural Utilities during 2023 resulted from $2.0 billion of new purchases,
unfunded loan commitments, and guarantees, which was partially offset by $0.9 billion of scheduled
maturities and repayments. Farmer Mac purchased a total of $1.5 billion in AgVantage Securities, $232.5
million in telecommunications loans, and $297.6 million in electric distribution and generation and
transmission loans. The $530.1 million in loan purchases was partially offset by $237.3 million in
scheduled maturities and repayments. The net increase in loan purchases primarily reflected borrowers'
normal-course capital expenditures related to maintaining and upgrading utility infrastructure as well as
investments in broadband infrastructure, and Farmer Mac's continued focus to support
telecommunications investment in rural America.
The $257.4 million net increase in Renewable Energy during 2023 primarily reflects $273.5 million in
loan purchases and unfunded commitments, partially offset by $52.7 million in repayments.
Farmer Mac's outstanding business volume was $25.9 billion as of December 31, 2022, a net increase of
$2.3 billion from December 31, 2021 after taking into account all new business, scheduled maturities, and
paydowns on existing assets.
The $1.6 billion net increase in Farm & Ranch during 2022 resulted from $6.9 billion of new purchases,
commitments, and guarantees, mostly offset by $5.3 billion of scheduled maturities and repayments.
Farmer Mac purchased a total of $1.4 billion in loans, which was primarily driven by improved borrower
economics albeit navigating a substantially higher interest rate environment. The $1.4 billion in gross
Farm & Ranch loan purchases was partially offset by $1.1 billion in scheduled maturities and repayments.
77
Farmer Mac also purchased a total of $4.2 billion in Farm & Ranch AgVantage Securities during 2022,
which primarily reflected the refinancing of maturing securities as well as financial counterparties seeking
to add longer-term AgVantage securities to manage their asset-liability maturity profile given increases in
credit spreads and interest rates. The $4.2 billion in gross purchases was partially offset by $3.3 billion in
scheduled maturities. Of the AgVantage Securities that were acquired during 2022 and were still
outstanding as of December 31, 2022, $470.0 million are scheduled to mature by June 30, 2023 and an
additional $600.0 million are scheduled to mature by December 31, 2023.
The $65.7 million net increase in Corporate AgFinance during 2022 resulted from $546.6 million of new
purchases and unfunded loan commitments, which was partially offset by $480.9 million of scheduled
maturities, repayments, and sales. Farmer Mac purchased a total of $328.9 million in loans, which was
partially offset by $276.9 million in scheduled maturities and repayments. The increase in loan purchases
was primarily due to Farmer Mac's continued focus to support loans to larger and more complex
agribusinesses focused on food and fiber processing and other food supply chain production.
The $464.4 million net increase in Rural Utilities during 2022 resulted from $1.4 billion of new purchases,
unfunded loan commitments, and guarantees, which was partially offset by $927.8 million of scheduled
maturities and repayments. Farmer Mac purchased a total of $670.0 million in AgVantage Securities,
$231.0 million in telecommunications loans, and $449.5 million in electric distribution and generation and
transmission loans. The $680.5 million in loan purchases was partially offset by $181.2 million in
scheduled maturities and repayments. The net increase in loan purchases primarily reflected borrowers'
normal-course capital expenditures related to maintaining and upgrading utility infrastructure as well as
investments in broadband infrastructure, and Farmer Mac's continued focus to support
telecommunications investment in rural America.
The $143.4 million net increase in Renewable Energy during 2022 primarily reflects $182.3 million in
loan purchases and unfunded loan commitments, partially offset by $38.9 million in repayments.
The level and composition of Farmer Mac’s outstanding business volume is based on the relationship
between new business, loan sales, scheduled maturities, and repayments on existing assets from year to
year. This relationship in turn depends on a variety of factors both internal and external to Farmer Mac.
The external factors include general market forces, competition, and our counterparties’ liquidity needs,
access to alternative funding, desired products, and assessment of strategic factors. The internal factors
include our assessment of 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.
78
The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the
periods indicated:
Table 18
For the Years Ended December 31,
2023
2022
2021
(dollars in thousands)
AgVantage securities
$
4,284,405 $
4,990,483 $
3,919,907
Structured securitization transactions (not consolidated)
—
—
289,519
Loans securitized and held in consolidated trusts with beneficial interests owned
by third parties (structured and single-class)
317,524
460,588
113,175
Total Farmer Mac Guaranteed Securities Issuances
$
4,601,929 $
5,451,071 $
4,322,601
Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac
Guaranteed Securities backed by those securitized loans. During 2023, Farmer Mac sold and securitized
agricultural mortgage loans in a structured securitization resulting in $281.0 million of Farmer Mac
Guaranteed Securities. Farmer Mac consolidates the assets and liabilities of the trust for this structured
securitization. Farmer Mac does not consider the assets held by the related securitization trust to be
available to satisfy the claims of the creditors of Farmer Mac and/or the depositor.
During 2023 and 2022, Farmer Mac realized no gains or losses from the securitization of loans that it
holds in consolidated trusts. Farmer Mac consolidates these loans and presents them as "Loans held for
investment in consolidated trusts, at amortized cost" on the consolidated balance sheets.
During 2021, Farmer Mac realized a $5.2 million gain after tax from the sale of Farmer Mac Guaranteed
Securities in its structured securitization transaction.
79
The following table sets forth information about outstanding volume in each of Farmer Mac's lines of
business as of the dates indicated:
Outstanding Business Volume
On or Off
Balance Sheet
As of December 31,
2023
2022
2021
(in thousands)
Table 19
Agricultural Finance:
Farm & Ranch:
Loans
Loans held in consolidated trusts:
Beneficial interests owned by third-party investors
(single-class)(1)
Beneficial interests owned by third-party investors
(structured)(1)
IO-FMGS(2)
USDA Securities
AgVantage Securities(1)
LTSPCs and unfunded loan commitments
Other Farmer Mac Guaranteed Securities(3)
Loans serviced for others
Total Farm & Ranch
Corporate AgFinance:
Loans
AgVantage Securities(1)
Unfunded loan commitments
Total Corporate AgFinance
Total Agricultural Finance
Rural Infrastructure Finance:
Rural Utilities:
Loans
AgVantage Securities(1)
LTSPCs and unfunded loan commitments
Other Farmer Mac Guaranteed Securities(3)
Total Rural Utilities
Renewable Energy:
Loans
Unfunded loan commitments
Total Renewable Energy
Total Rural Infrastructure Finance
Total
On-balance sheet
$
5,133,450 $
5,150,750 $
4,775,070
On-balance sheet
870,912
914,918
948,623
On-balance sheet
On-balance sheet
On-balance sheet
On-balance sheet
Off-balance sheet
Off-balance sheet
Off-balance sheet
561,349
9,409
2,368,872
5,835,000
2,999,943
452,602
577,264
296,658
10,622
2,407,302
5,605,000
2,822,309
500,953
20,280
—
12,297
2,445,806
4,725,000
2,587,154
578,358
22,331
$
18,808,801 $
17,728,792 $
16,094,639
On-balance sheet
$
1,259,723 $
1,166,253 $
1,123,300
On-balance sheet
Off-balance sheet
288,879
145,377
359,600
77,654
367,464
47,070
$
$
1,693,979 $
1,603,507 $
1,537,834
20,502,780 $
19,332,299 $
17,632,473
On-balance sheet
$
3,094,477 $
2,801,696 $
2,302,373
On-balance sheet
3,898,468
3,044,156
3,033,262
Off-balance sheet
487,778
Off-balance sheet
—
512,592
1,169
556,837
2,755
$
7,480,723 $
6,359,613 $
5,895,227
On-balance sheet
$
440,286 $
219,570 $
86,763
Off-balance sheet
47,235
10,600
—
$
$
$
487,521 $
230,170 $
86,763
7,968,244 $
6,589,783 $
5,981,990
28,471,024 $
25,922,082 $
23,614,463
(1)
(2)
(3)
A type of Farmer Mac Guaranteed Security.
An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.
Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.
80
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 December 31, 2023:
Table 20
2024
2025
2026
2027
2028
Thereafter
Total
Schedule of Principal Amortization as of December 31, 2023
Loans
Underlying
Off-Balance
Sheet Farmer
Mac
Guaranteed
Securities and
LTSPCs
Loans
USDA Securities
and Farmer Mac
Guaranteed
USDA Securities
Total
(in thousands)
$
613,695 $
344,092 $
111,958 $ 1,069,745
610,817
585,917
696,170
814,868
246,828
310,052
248,520
299,813
114,089
119,223
119,790
120,020
971,734
1,015,192
1,064,480
1,234,701
8,038,730
2,483,552
1,983,870
12,506,152
$ 11,360,197 $
3,932,857 $
2,568,950 $ 17,862,004
Of Farmer Mac's $28.5 billion outstanding principal balance of business volume as of December 31, 2023,
$10.0 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure
Finance lines 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
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 December 31, 2023:
Table 21
2024
2025
2026
2027
2028
Thereafter(1)
Total
AgVantage Balances by Year of Maturity
As of
December 31, 2023
(in thousands)
$
2,576,297
1,676,625
1,195,815
1,048,898
245,451
3,279,261
$
10,022,347
(1)
Includes various maturities ranging from 2029 to 2044.
The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table
above was 4.2 years as of December 31, 2023.
81
Related Party Transactions. As provided by Farmer Mac's statutory charter, only banks, insurance
companies, and other financial institutions or similar entities may hold Farmer Mac's Class A voting
common stock, and only institutions of the FCS may hold Farmer Mac's Class B voting common
stock. Farmer Mac's charter also provides that holders of Class A voting common stock elect five
members of Farmer Mac's 15-member board of directors and that holders of Class B voting common stock
elect five members of the board of directors. The ownership of Farmer Mac's two classes of voting
common stock is currently concentrated in a small number of institutions. Approximately 51% of the
Class A voting common stock is held by four financial institutions, with 31% held by one institution.
Approximately 97% of the Class B voting common stock is held by five FCS institutions (two of which
are related to each other through a parent-subsidiary relationship).
Unlike some other GSEs, specifically other FCS institutions and the Federal Home Loan Banks, Farmer
Mac is not structured as a cooperative owned exclusively by member institutions and established to
provide services exclusively to its members. Farmer Mac, as a stockholder-owned, publicly-traded
corporation, seeks to fulfill its mission of serving the financing needs of rural America in a way that is
consistent with providing a return on the investment of its stockholders, including those who do not
directly participate in the secondary market provided by Farmer Mac. Farmer Mac generally requires most
financial institutions that participate in Farmer Mac's Agricultural Finance line of business to own a
requisite amount of common stock, based on the size and type of institution. As a result of this
requirement, coupled with the ability of holders of Class A and Class B voting common stock to elect two-
thirds of Farmer Mac's board of directors, Farmer Mac regularly conducts business with "related parties,"
including institutions affiliated with members of Farmer Mac's board of directors and institutions that own
large amounts of Farmer Mac's voting common stock. Farmer Mac has adopted a Code of Business
Conduct and Ethics and other related corporate policies that govern any conflicts of interest that may arise
in these transactions, and Farmer Mac's policy is to require that any transactions with related parties be
conducted in the ordinary course of business, with terms and conditions comparable to those available to
any other counterparty not related to Farmer Mac.
The following table summarizes the material relationships between Farmer Mac and certain related
parties. The related parties listed in the table below consist of (1) all holders of at least five percent of a
class of Farmer Mac voting common stock as of December 31, 2023 and (2) other institutions that are
considered "related parties" through an affiliation with a Farmer Mac director and that have conducted
business with Farmer Mac during the two years ended December 31, 2023. The table below does not
specify any relationships based on the ownership of Farmer Mac's non-voting common stock or any series
of preferred stock.
Table 22
Ownership of
Farmer Mac
Voting Common Stock
Affiliation with Any
Farmer Mac Directors
Primary Aspects of Institution's
Business Relationship with Farmer Mac
Name of Institution
AgFirst Farm Credit
Bank
84,024 shares of Class B
voting common stock
(16.79% of outstanding
Class B stock and 5.49%
of total voting common
stock outstanding)
None
In 2023 and 2022, Farmer Mac earned
approximately $1.4 million and $1.2 million,
respectively, in fees attributable to
transactions with AgFirst, primarily
commitment fees for LTSPCs.
82
Name of Institution
AgriBank, FCB
Ownership of
Farmer Mac
Voting Common Stock
Affiliation with Any
Farmer Mac Directors
Primary Aspects of Institution's
Business Relationship with Farmer Mac
None
Farmer Mac did not conduct any business
with AgriBank during 2023 or 2022.
201,621 shares of Class
B voting common stock
(40.30% of outstanding
Class B stock and
13.17% of total voting
common stock
outstanding)
Bath State Bank
Less than 5% ownership
Farmer Mac director
Dennis L. Brack serves as a
director of Bath State Bank
and Bath State Bancorp, the
holding company of Bath
State Bank.
Farmer Mac purchased $1.3 million and no
USDA Securities from Bath State Bank in
2023 and 2022, respectively. Farmer Mac
also purchased $0.3 million and $2.1 million
in Agricultural Finance mortgage loans from
Bath State Bank in 2023 and 2022,
respectively.
CoBank, ACB
163,253 shares of Class
B voting common stock
(32.63% of outstanding
Class B stock and
10.66% of total voting
common stock
outstanding)
Farmer Mac director
Everett M. Dobrinski served
as a director of CoBank
through December 2019.
Although no longer a
director of CoBank, Mr.
Dobrinski served on
CoBank's independent
nominating committee until
December 2023.
Farmer Mac purchased $438.8 million and
$376.0 million in loans from CoBank in
2023 and 2022, respectively.
In 2023 and 2022, CoBank retained $3.6
million and $3.5 million of servicing fees
related to the loan participations sold to
Farmer Mac, respectively.
Farm Credit Bank of
Texas (FCBT)
None
38,503 shares of Class B
voting common stock
(7.70% of outstanding
Class B stock and 2.51%
of total voting common
stock outstanding)
Matthew 25
Management Corp.
National Rural
Utilities Cooperative
Finance Corporation
(CFC)
None
None
71,500 shares of Class A
voting common stock
(6.94% of outstanding
Class A stock and 4.67%
of total voting common
stock outstanding)
81,500 shares of Class A
voting common stock
(7.91% of outstanding
Class A stock and 5.32%
of total voting common
stock outstanding)
In 2023 and 2022, Farmer Mac earned
approximately $3.4 million and $2.9 million,
respectively, in fees attributable to
transactions with FCBT, primarily
commitment fees for LTSPCs.
In both 2023 and 2022, FCBT retained
approximately $0.1 million in servicing fees
for its work as a Farmer Mac servicer.
Farmer Mac did not conduct any business
with Matthew 25 Management Corp. during
2023 or 2022.
Transactions with CFC represented 37.1%
and 46.7% of loans under the Rural
Infrastructure Finance line of business
during 2023 and 2022, respectively.
In 2023 and 2022, Farmer Mac earned
commitment fees of approximately $1.0
million and $1.1 million, respectively,
attributable to transactions with CFC.
In 2023 and 2022, Farmer Mac earned
interest income of $143.5 million and $79.4
million, respectively, attributable to
AgVantage transactions with CFC.
In 2023 and 2022, CFC retained
approximately $3.7 million and $3.4 million
in servicing fees for its work as a Farmer
Mac servicer, respectively.
83
Name of Institution
The Vanguard
Group, Inc.
53,805 shares of Class A
voting common stock
(5.22% of outstanding
Class A stock and 3.51%
of total voting common
stock outstanding)
Zions
Bancorporation,
National Association
(Zions)
322,100 shares of Class
A voting common stock
(31.25% of outstanding
Class A stock and
21.04% of total voting
common stock
outstanding)
Ownership of
Farmer Mac
Voting Common Stock
Affiliation with Any
Farmer Mac Directors
Primary Aspects of Institution's
Business Relationship with Farmer Mac
None
None
Farmer Mac did not conduct any business
with The Vanguard Group during 2023 or
2022.
In 2023 and 2022, Farmer Mac's purchases
of on-balance sheet Agricultural Finance
mortgage loans from Zions represented
approximately 9.5% and 12.9%,
respectively, of Agricultural Finance
mortgage loan purchase volume for those
years. Those purchases represented 6.9%
and 9.6%, respectively, of total Agricultural
Finance mortgage loan business volume
(excluding AgVantage and USDA
Securities) for those years. The purchases of
USDA Securities from Zions represented
approximately 0.1% and 1.5%, respectively,
of the USDA Guarantees purchases for the
years ended December 31, 2023 and 2022.
Transactions with Zions represented 3.1%
and 3.5%, respectively, of Farmer Mac's
total outstanding business volume
(excluding loans serviced for others) as of
December 31, 2023 and 2022.
In 2023 and 2022, Zions retained
approximately $11.2 million and $10.4
million, respectively, in servicing fees for its
work as a Farmer Mac servicer.
As discussed in more detail in Note 2(o) to the consolidated financial statements, Farmer Mac’s
consolidated financial statements include the accounts of variable interest entities ("VIEs") in which
Farmer Mac determines itself to be the primary beneficiary, including securitization trusts where Farmer
Mac shares the power to make decisions about default mitigation with a related party. If that related party
status changes, consolidation or deconsolidation of securitization trusts may occur. For more information
about related party transactions, see Note 3 to the consolidated financial statements.
84
Outlook
Business Outlook
Products and Portfolio. Farmer Mac serves a vital role in serving rural America by offering liquidity,
capital, and risk management tools as a secondary market that help increase the accessibility of financing
for American agriculture and rural infrastructure. The growth trajectory of Farmer Mac is closely tied to
the capital and liquidity needs of the lending institutions serving agriculture and rural infrastructure
businesses and the overall financial health of borrowers in these sectors. Despite significant increases in
market interest rates over the past two years and global and economic volatility, Farmer Mac was able to
increase outstanding business volume and net effective spread by 9.8% and 28.0%, respectively, in 2023.
The increase in outstanding business volume and net effective spread primarily reflects Farmer Mac's
effective and active asset-liability and capital management strategies, the diversification of Farmer Mac’s
business model, and the resiliency of the agriculture and rural infrastructure sectors.
Several factors continue to influence business volume growth dynamics. The rise in market interest rates
that have persisted over the past few years has had a direct impact on Farmer Mac’s Farm & Ranch
product interest rates, and there generally exists an inverse correlation between Farm & Ranch new loan
purchase volumes and changes in Farm & Ranch product interest rates, with higher product interest rates
slowing portfolio loan prepayments. The net effect of these forces contributed to positive Farm & Ranch
loan purchase portfolio growth in 2023 as new Farm & Ranch loan purchases outpaced loan prepayments,
although the overall net Farm & Ranch loan purchase portfolio growth was below prior years, primarily
because of the continued higher product interest rate environment. Future changes in monetary policy and
sustained elevated product interest rates are anticipated to influence the demand for Agricultural Finance
mortgage loans and the pace of repayments. Farmer Mac experienced significant momentum in its
wholesale finance product during 2023, driven by volatile market credit spreads resulting in greater
liquidity and diversification needs from our counterparties. This momentum could continue into 2024 and
will be determined by market interest rates and credit spreads, overall economic conditions, and the
relative value of Farmer Mac’s products versus the broader market. Corporate AgFinance loan purchases
and unfunded commitments increased 12.9% in 2023 to $1.4 billion despite volatile transaction velocity
throughout 2023 due to market and economic uncertainty. The Rural Infrastructure Finance segments
showed substantial business volume growth in 2023, driven by counterparty demand for wholesale
funding, increased investment activity in telecommunications and rural broadband borrowers, and
additional financing for renewable energy projects. Finally, Farmer Mac increased assets under
management through the expansion of its servicing platform through loan pool purchases and purchases of
loan servicing rights for loans owned by other entities.
Opportunities for profitable future growth include Farmer Mac's crucial role in alleviating liquidity, equity
capital, and return-on-equity capital challenges faced by agricultural and rural infrastructure lenders. The
suite of offerings encompasses loan and portfolio purchases, participations, guarantees, LTSPCs,
wholesale funding, and securitizations. Ongoing business and product development efforts continue to
attract institutional investors and nontraditional lenders, resulting in the diversification of Farmer Mac's
customer base and product set, potentially generating increased product demand from new sources.
Farmer Mac’s improved loan servicing capabilities enhance our loan portfolio purchase value proposition,
adding new product offerings to an increasingly diverse customer base.
Growing relationships with larger agriculture lenders, financial industry consolidation, and interest rate
and market volatility continue to provide increased opportunities for Farmer Mac, influencing the demand
85
for loan purchases, risk management solutions, and wholesale funding. This growth may lead to an
increase in the average transaction size within Farmer Mac’s lines of business. The financing needs arising
from mergers, acquisitions, consolidation, and vertical integration in the agricultural and rural
infrastructure industries present further opportunities for Farmer Mac’s loan purchase products and other
financing solutions. Furthermore, investments supporting consumer and food supply demand may increase
financing needs in the food and agriculture supply chain, potentially requiring incremental capital support
through the secondary market. Deepening relationships with eligible rural infrastructure counterparties are
expected to continue to create opportunities to support fiber and broadband-related projects, rural
telecommunications investments, and renewable energy projects.
Operations. Throughout 2023, Farmer Mac was not affected by the liquidity concerns that affected many
regional and national banks due to fluctuations caused by elevated interest rates and deposit withdrawals.
Unlike depository institutions, Farmer Mac's funding strategies do not rely on deposits, allowing us to
navigate beyond short-term liquidity disruptions and to take advantage of increased opportunities in a
competitive lending environment. Our funding advantage over regional and national banks is also aided by
the fact that our debt has a contractual term to maturity and that only we have the ability to call our
callable debt before its original maturity date when market conditions are beneficial to Farmer Mac. In
contrast, depository institutions largely rely on demand deposit accounts in which the depositors hold the
right to withdraw at any time. Because of these differences in funding strategies, certain economic
disruptions may have a positive impact on Farmer Mac’s funding costs relative to the overall market.
The increase in short-term rates during the last two years has provided an asymmetric benefit to Farmer
Mac's earnings as a result of effective capital allocation and interest rate risk strategies. Our proactive
equity capital allocation strategies help to limit any downside effect to earnings when rates decline.
Farmer Mac's fundamental asset-liability management approach, which matches the duration and
convexity of assets and liabilities in all rate environments, also helps to minimize earnings volatility
during periods of short-term interest rate fluctuations.
In addition to active asset-liability management, Farmer Mac's business may benefit from natural business
hedges that help mitigate vulnerability to effects from interest rate volatility. When interest rates rise,
prepayments tend to decline, but interest earned on excess cash and capital increases, maintaining Farmer
Mac's strong market access without relying on deposits. Conversely, when interest rates decline, loan
purchase volume often increases, but prepayments tend to rise as well. Farmer Mac manages its interest
rate risk by issuing callable debt and maintaining market-based credit spreads. Although these natural
business dynamics may not be perfect offsets, they often effectively counterbalance to mitigate volatility
from changes in short-term interest rates.
Farmer Mac expects continued increases in its operating expenses over the next several years as we
continue to expand our investments in human capital, technology, and business infrastructure to increase
capacity and efficiency as we seek to accommodate growth opportunities and achieve our long-term
strategic objectives. Investments in infrastructure and funding platforms to support strategic objectives are
expected to allow Farmer Mac to scale more efficiently with future portfolio and earnings growth. These
investments will likely help improve product delivery and funding efficiency, potentially creating
additional benefits for future growth.
Another focus of our infrastructure investments will be a continued effort to expand our servicing
capabilities and to enhance the efficiency and effectiveness of processes associated with loan onboarding
and servicing. Farmer Mac will continue to leverage technology enhancements and servicing
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standardization efforts to drive scalability and consistency. In 2023, Farmer Mac’s servicing portfolios
grew by more than 50% in both number of loans serviced and outstanding balances. Servicing capabilities
also increased to incorporate new features as we started servicing eligible loans on behalf of others.
Technology enhancements are planned for 2024 to continue to incorporate all Farmer Mac loan portfolios
onto our servicing platform and to provide flexibility in accessing loan portfolio information, as well as
streamlining operational workflows.
Agricultural Finance Industry Outlook
Farm Incomes. Overall farm incomes fell in 2023 and are forecast to fall again in 2024 after reaching new
highs in 2022. The USDA estimates that net cash farm income climbed 34% to $202.2 billion in 2022, a
new all-time high. The primary driver of increased profitability in 2022 was higher cash revenues, in
contrast to 2019 and 2020, when elevated government support payments supported farm incomes.
Although the USDA estimates that net cash farm income decreased 21% in 2023 and will decrease another
24% in 2024 due to lower commodity prices and elevated farm expenses, the average of 2023 and 2024
farm income projections are 10% higher than the 10-year average, demonstrating the continued strength in
farm profitability. Grain commodity prices may see increased volatility in 2024 due to changing global
supply levels, but some livestock and animal protein sectors may see offsetting benefits from lower feed
costs, particularly the cattle sector. Demand for corn and soybean by-products could see a boost in 2024 as
renewable diesel and sustainable aviation fuel markets mature. Farm expenses could also abate somewhat
in 2024, with lower expected feed, fertilizer, and fuel costs partially offset by higher expected interest,
labor, and rental rates.
Land Values. Record-setting farm incomes in 2021 and 2022, combined with historically low interest rates
in 2020 and 2021, drove a rapid rise in land values and a decrease in farm delinquencies and bankruptcies.
Momentum for farmland values persisted throughout 2023 due to high levels of farm liquidity and a
constrained supply of farmland for sale. Land value survey data from the USDA show a 7.4% increase in
average farm real estate values from June 2022 to June 2023. Annual farm real estate value gains were
highest in the Northern Plains (13.7%) and the Southern Plains (9.4%) but also strong in the Lake states
(8.2%), the Corn Belt (7.1%), and the Southeast (5.7%). Farmland value growth rates moderated in the
second half of 2023 in the face of continued higher market interest rates. The Federal Reserve Bank of
Chicago AgLetter reported a 5% gain in farmland values in the Seventh District (primarily Iowa, Indiana,
Illinois, and Wisconsin) between October 2022 and October 2023. 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) during that same period. Growth rates in land values could moderate slightly
into 2024 due to compressing farm profitability and a continued elevated interest rate environment,
although a low supply of available farmland and strong demand for the asset class across a wide variety of
investors could help maintain balance in the farmland transaction markets.
While regional averages for farmland values generally provide a good barometer for the overall changes in
U.S. farmland values, economic forces affecting land markets are highly localized, and some markets may
experience greater volatility in farmland values than state or national averages indicate. Based on our
robust collateral underwriting standards, we believe that our loan collateral is well-positioned to endure
reasonably foreseeable volatility in farmland values due to external factors.
Markets and Weather. Exogenous factors facing farm and food producers can create uncertainty and
market instability within the sector. Some of the external market conditions that could adversely affect the
farm and food sectors in 2024 include foreign trade and trade policy, supply chain disruptions, and
87
environmental conditions. The U.S. agricultural sector has become increasingly dependent on foreign
markets as a source of demand, making trade policy an important consideration for farms and food. The
USDA projects that U.S. agriculture exports will drop to $169.5 billion in 2024, a 14% decrease relative to
peak levels in 2022. Through November 2023, agricultural export values were down approximately 11%
in 2023 compared to 2022. The value of the U.S. dollar relative to other major currencies fell 3% in 2023,
but economic and geopolitical uncertainties such as conflicts in Eastern Europe and the Middle East
increased U.S. dollar volatility during the year. A strong U.S. dollar could potentially be a headwind for
farm, food, fiber, and fuel exports heading into 2024. Slower global growth could also be a headwind for
consumer-oriented products like animal proteins, dairy, fruits, and nuts, and Ukrainian corn and wheat
production may eventually stabilize.
Severe weather conditions and long-term environmental change continue to shape agricultural sectors. The
U.S. experienced 28 separate billion-dollar weather disasters in 2023, the highest number of billion-dollar
weather disasters on record, as tracked by the National Oceanic and Atmospheric Administration. Many of
those events affected agriculture, including midwestern storms, flooding, western wildfires, excessive
heat, and drought. Federal crop insurance provides a strong mitigator against this risk, but farmers and
ranchers face increasingly severe weather incidents. Long and persistent heat and drought conditions
affected agricultural production regions in the western and midwestern parts of the United States in 2021
and 2022. There was a sizable improvement in conditions in 2023 for large portions of the West Coast,
especially California, but drought conditions have intensified in other areas of the country. Approximately
14% of the continental U.S. was classified as being in severe to exceptional drought as of January 2, 2024,
according to data from the National Center for Environmental Information. For loans in other areas that
commonly experience exceptional drought (primarily in California), Farmer Mac's underwriting standards
include an assessment of anticipated long-term water availability for the related property and how water
availability impacts the collateral value and the borrower's liquidity position to mitigate that risk.
Ag Processing and Food Supply Chain. The production of food, feed, fiber, and biofuels has been
economically viable in the past few years, but some factors may change in 2024. Rising consumer
inflation boosted the profitability of the food processing and supply chains in 2021 and 2022. Lower
consumer prices increased the volume of consumer spending but also limited the profit expansion of food
and fiber businesses. Biofuels have gained more demand due to low-carbon regulations in several states
and incremental tax benefits for the production of renewable diesel and sustainable aviation fuel. A large
amount of planned biofuel projects and new facilities for 2024 and 2025 could raise the prices of raw
materials such as corn and soybeans. A strong U.S. dollar, trade issues, and a high risk of global economic
turmoil could pose challenges for these sectors in 2024. Nonetheless, consumer spending remains strong at
the beginning of 2024, creating favorable conditions for value-added food, feed, fiber, and biofuel
consumption. Credit demand in these sectors could grow in the next few quarters if interest rate policy
moderates, inflation rises again, or economic uncertainty clears up.
Rural Infrastructure Finance Industry Outlook
Power and Energy. Economic conditions affecting rural power and electricity markets typically 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 have slowed, with an annual decrease in sales of
1.1% and an increase in revenue of 2.9%, respectively, in the last 12 months through November 2023
compared to November 2022. This decrease in sales was driven by a drop in the residential electricity
sector. The average price of electricity to industrial customers increased 2.0% in November 2023 relative
to 2022. Higher energy input prices, such as natural gas and coal, became a headwind in 2022. Natural gas
88
prices rose consistently in 2021 and 2022 because of reduced supply and additional demand for U.S.
liquified natural gas from European countries. Coal prices also rapidly increased in 2022, driven by higher
natural gas prices and additional overseas demand to offset limited Russian coal exports. Oil and natural
gas price volatility moderated throughout 2023, but geopolitical uncertainty in the Middle East and
Eastern Europe could increase volatility in 2024. Despite higher input costs, power producers are
generally able to pass cost increases through higher retail electricity prices, as evidenced by the increase in
retail electricity price increases throughout 2022 and parts of 2023. Through December 31, 2023, Farmer
Mac had not observed material degradation in the financial performance of its rural utilities portfolio, and
that portfolio has never had a serious delinquency or default since its inception. Credit demand for electric
cooperatives will likely be tied to ongoing normal-course capital expenditures related to maintaining and
upgrading utility infrastructure. These growth opportunities may be affected by the demand for electric
power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological
changes, the changing interest rate environment, increased policy initiatives to support rural connectivity,
and competitive dynamics within the rural utilities cooperative finance industry. Generally, these
investments are expected to continue at historical levels based on the replacement and modernization of
existing infrastructure.
Telecommunications. Rural telecommunication connectivity has proven to be of vital economic
importance in the last decade, as more households and agricultural enterprises require more data and
connectivity to thrive. The rapid growth in digital technologies, including the ongoing interest and
investment in artificial intelligence, advancements in cloud computing, and wireless network
densification, will require significantly more computing and storage capabilities as well as investment in
additional fiber network capacity. These industry tailwinds are creating additional investments in rural
telecommunications infrastructure by cooperative and non-cooperative providers, which is aided by access
to many federally funded programs, such as USDA's Broadband Equity Access and Deployment Program
(BEAD), the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF), the
USDA’s ReConnect program, and the USDA’s Telecommunications Infrastructure Loan and Loan
Guarantee program. In addition to capital projects spurred by these programs, Farmer Mac could see an
increase in financing opportunities for other telecommunications providers in rural areas, with fiber line
expansion and wireless broadband increasingly important to rural economic opportunity and precision
agriculture.
Renewable Energy. Growth in renewable energy generation and deployment of energy storage
technologies has the potential to continue to deepen Farmer Mac's relationships with existing customers
through new business opportunities. According to data from the U.S. Energy Information Administration,
renewable electricity capacity is expected to grow by 48% in the next five years, compared to total electric
capacity growth of 10%. The rising cost of fossil fuel-based inputs combined with the falling costs of
renewable power generation may hasten this increase in capacity along with recently enacted legislation,
such as the Inflation Reduction Act of 2022 that incentivizes domestic production in clean energy
technologies such as solar and wind. Because of these policy tailwinds, analytics from Bloomberg New
Energy Finance (BNEF) estimate that investors will install nearly 400 gigawatts of renewable energy
capacity between 2023 and 2030. BNEF analysis also anticipates that nearly $2.5 trillion will be invested
in renewable projects between 2021 and 2050. If realized, growth in renewable energy capacity has the
potential to broaden Farmer Mac's customer base focused on financing renewable energy projects and
companies. In response to this expected growth, Farmer Mac has hired industry-specialized staff and
deployed new financing products tailored to the renewable energy sector, which represents a new and
growing market opportunity for Farmer Mac.
89
Legislative and Regulatory Outlook. Farmer Mac continues to monitor potential legislative and regulatory
changes that could affect Farmer Mac or its stakeholders, including:
• On November 16, 2023, President Biden signed into law a one-year extension of the 2018 farm
bill. The extension (through September 30, 2024) will give Congress more time to reauthorize and
update a variety of programs impacting farm profitability, agricultural credit, and rural
infrastructure. A farm bill is a critical piece of legislation for a variety of Farmer Mac's customers.
Congress has started an extensive process to review programs that are included in the farm bill in
preparation for reauthorization. Farmer Mac is seeking changes to its charter in this farm bill
reauthorization to enhance its partnerships and services in support of lenders serving farmers,
ranchers, agribusinesses, and rural infrastructure. Because the source of Farmer Mac's charter is
federal statute, any proposed changes to the text of our charter are subject to approval by Congress
and being signed into law by the President of the United States.
• On October 5, 2023, FCA approved a final rule on cyber risk management. The rule requires an
assessment of internal and external risk factors, identification of potential systems and software
vulnerabilities, the establishment of a risk management program for the risks identified,
development of a cyber risk training program, policies for managing third-party relationships, and
the establishment of board reporting requirements. The effective date of the final rule is January 1,
2025.
• The FCA's proposed 2023 regulatory agenda includes a proposed rulemaking to review Farmer
Mac's regulatory capital framework. The FCA's regulatory agenda estimates that proposed
rulemaking in May 2024, although this timeline may change. Farmer Mac's management team will
continue to monitor the FCA's process for this potential rulemaking.
• Two of the three members of the FCA board are currently serving in holdover status because their
terms have expired. These board members will continue to serve in their roles until replacements
are nominated by the President and confirmed by the U.S. Senate.
90
Balance Sheet Review
The following table summarizes Farmer Mac's balance sheet as of the periods indicated:
Table 23
Assets
Cash and cash equivalents
Investment securities
Farmer Mac Guaranteed Securities
USDA Securities
Loans, net of allowance
Loans held in trusts
Other
Total assets
Liabilities
Notes Payable
Debt securities of consolidated trusts held by third parties
Other
Total liabilities
Total equity
Total liabilities and equity
As of
Change
December 31, 2023
December 31, 2022
$
%
(in thousands)
$
888,707 $
861,002
$
27,705
4,979,504
9,745,548
2,355,412
9,607,531
1,431,818
515,862
4,628,268
351,236
8,628,380
1,117,168
2,411,601
8,994,350
1,211,116
(56,189)
613,181
220,702
598,393
(82,531)
$
$
$
$
29,524,382 $
27,333,110
$ 2,191,272
26,336,542 $
24,469,113
$ 1,867,429
1,351,069
1,181,948
169,121
424,908
28,112,519 $
1,411,863
410,091
26,061,152
14,817
$ 2,051,367
1,271,958
139,905
29,524,382 $
27,333,110
$ 2,191,272
3 %
8 %
13 %
(2) %
7 %
18 %
(14) %
8 %
8 %
14 %
4 %
8 %
11 %
8 %
Assets. The increase in total assets was primarily attributable to new Farmer Mac Guaranteed Securities
volume, new loan volume, including those held in consolidated trusts, and a larger investment portfolio.
Liabilities. The increase in total liabilities was primarily due to an increase in total notes payable to fund
the acquisition of Farmer Mac Guaranteed Securities, loan volume, and investment portfolio assets,
including those held in consolidated trusts.
Equity. The increase in total equity was primarily due to an increase in retained earnings and an increase
in accumulated other comprehensive income.
Risk Management
Credit Risk – Loans and Guarantees.
Agricultural Finance - Direct Credit Exposure
Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of December 31, 2023 was
$11.2 billion across 48 states. Farmer Mac applies credit underwriting standards and methodologies to
help assess exposures to loan purchases, which may include collateral valuation, financial metrics, and
other appropriate borrower financial and credit information. For Corporate AgFinance loans, which are
often larger loan exposures to agriculture production and agribusinesses that support agriculture
production, food and fiber processing, and other supply chain production, and which may have risk
profiles that differ from smaller agricultural mortgage loans, Farmer Mac has implemented methodologies
and parameters that help assess credit risk based on the appropriate sector, borrower construct, and
91
transaction complexity. For more information about Farmer Mac's underwriting and collateral valuation
standards for Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—
Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer
Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate
AgFinance."
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. For Agricultural Finance
mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of
December 31, 2023, were $34.7 million (0.31% of the Agricultural Finance mortgage loan portfolio to
which Farmer Mac has direct credit exposure), compared to $43.5 million (0.41% of the Agricultural
Finance mortgage loan portfolio) as of December 31, 2022. Those 90-day delinquencies consisted of 23
delinquent loans as of December 31, 2023, compared to 37 delinquent loans as of December 31, 2022. The
decrease in the number of 90-day delinquencies was primarily driven by decreased delinquencies in
agricultural storage and processing, and was partially offset by increased delinquencies in crops,
permanent plantings, part-time farms, and livestock. The top ten borrower exposures over 90 days
delinquent represented over half of the 90-day delinquencies as of December 31, 2023. Farmer Mac
believes that it remains adequately collateralized on its delinquent loans.
Farmer Mac's 90-day delinquency rate as of December 31, 2023 was below Farmer Mac's historical
average. In the near-term, our delinquency rate may exceed our historical average due to changes in the
agricultural or general economy or unforeseen and idiosyncratic events like adverse weather events.
Farmer Mac's average 90-day delinquency rate as a percentage of its Agricultural Finance mortgage loan
portfolio over the last 15 years is approximately 1%. The highest 90-day delinquency rate observed during
that period occurred in 2009 at approximately 2%, which coincided with increased delinquencies in loans
within Farmer Mac's ethanol loan portfolio.
The following table presents historical information about Farmer Mac's 90-day delinquencies in the
Agricultural Finance mortgage loan portfolio compared to the unpaid principal balance of all Agricultural
Finance mortgage loans to which Farmer Mac has direct credit exposure:
Table 24
As of:
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Agricultural Finance
Mortgage Loans
90-Day
Delinquencies
Percentage
(dollars in thousands)
$
11,223,276 $
11,014,678
10,826,201
10,680,419
10,719,571
10,508,549
10,128,083
9,879,978
9,811,749
34,677
42,443
45,368
70,646
43,498
44,232
20,623
55,847
47,307
0.31 %
0.39 %
0.42 %
0.66 %
0.41 %
0.42 %
0.20 %
0.57 %
0.48 %
Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.12% of total outstanding
business volume as of December 31, 2023, compared to 0.17% as of December 31, 2022 and 0.20% as of
December 31, 2021.
92
The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies
as of December 31, 2023 by year of origination, geographic region, commodity/collateral type, original
loan-to-value ratio, and range in the size of borrower exposure:
Table 25
Agricultural Finance Mortgage Loans 90-Day Delinquencies as of December 31, 2023
Distribution of
Agricultural
Loans
Agricultural
Loans
(dollars in thousands)
90-Day
Delinquencies(1)
Percentage
By year of origination:
2013 and prior
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
By geographic region(2):
Northwest
Southwest
Mid-North
Mid-South
Northeast
Southeast
Total
By commodity/collateral type:
Crops
Permanent plantings
Livestock
Part-time farm
Ag. Storage and Processing
Other
Total
By original loan-to-value ratio:
0.00% to 40.00%
40.01% to 50.00%
50.01% to 60.00%
60.01% to 70.00%
70.01% to 80.00%(3)
80.01% to 90.00%(3)
Enterprise Value(4)
Total
By size of borrower exposure(5):
Less than $1,000,000
$1,000,000 to $4,999,999
$5,000,000 to $9,999,999
$10,000,000 to $24,999,999
$25,000,000 and greater
Total
6 % $
2 %
3 %
5 %
5 %
5 %
7 %
18 %
23 %
15 %
11 %
718,725 $
198,726
318,518
512,420
513,356
595,089
820,410
1,964,250
2,616,354
1,735,928
1,229,500
2,982
1,102
9,585
2,871
1,262
2,409
551
5,232
931
7,752
—
100 % $
11,223,276 $
34,677
13 % $
31 %
26 %
17 %
4 %
9 %
100 % $
49 % $
22 %
19 %
4 %
6 %
— %
100 % $
16 % $
22 %
35 %
20 %
2 %
— %
5 %
1,397,173 $
3,438,077
2,966,948
1,942,663
439,449
1,038,966
11,223,276 $
5,475,379 $
2,460,486
2,124,438
490,975
655,279
16,719
11,223,276 $
1,761,182 $
2,480,809
3,877,916
2,291,423
247,698
24,752
539,496
1,837
17,422
2,626
10,355
1,296
1,141
34,677
20,994
6,252
4,116
3,315
—
—
34,677
551
9,227
18,980
5,118
801
—
—
0.41 %
0.55 %
3.01 %
0.56 %
0.25 %
0.40 %
0.07 %
0.27 %
0.04 %
0.45 %
0.45 %
0.31 %
0.13 %
0.51 %
0.09 %
0.53 %
0.29 %
0.11 %
0.31 %
0.38 %
0.25 %
0.19 %
0.68 %
— %
— %
0.31 %
0.03 %
0.37 %
0.49 %
0.22 %
0.32 %
— %
— %
100 % $
11,223,276 $
34,677
0.31 %
25 % $
37 %
15 %
13 %
10 %
100 % $
2,845,173 $
4,185,109
1,664,029
1,444,359
1,084,606
11,223,276 $
5,033
20,059
—
9,585
—
34,677
0.18 %
0.48 %
— %
0.66 %
— %
0.31 %
93
(1)
(2)
(3)
(4)
(5)
Includes loans held and loans underlying off-balance sheet Farmer Mac 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.
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).
Primarily part-time farm loans. Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance.
"Enterprise Value" loans are generally secured by all business assets and common stock (in addition to first lien mortgages) of the borrower and the value
of the borrowing entity depends on its ability to generate recurring positive cash flow. Enterprise Value is the estimated value of the borrower as a going
concern, which is estimated using one or more valuation techniques such as discounted cash flow, cash flow multiples, asset liquidation, or other
valuation techniques.
Includes aggregated loans to single borrowers or borrower-related entities.
Another indicator that Farmer Mac considers in analyzing the credit quality of its Agricultural Finance
mortgage loans is the level of internally-rated "substandard" assets, both in dollars and as a percentage of
the outstanding 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 December 31, 2023, Farmer Mac's Agricultural Finance mortgage loans (to which it has
direct credit exposure) comprising substandard assets were $186.0 million (1.7% of the portfolio),
compared to $209.4 million (2.0% of the portfolio) as of December 31, 2022. Those substandard assets
comprised 206 loans as of December 31, 2023 and 243 loans as of December 31, 2022.
The decrease of $23.4 million in Agricultural Finance substandard assets during 2023 was primarily
driven by the payoff of a substandard loan that had been in our on-balance sheet portfolio. Agricultural
Finance substandard assets decreased as a percentage of both our on-balance sheet and our off-balance
sheet Agricultural Finance portfolios during 2023.
The percentage of Agricultural Finance substandard assets within the portfolio as of December 31, 2023
was below the historical average. Farmer Mac's average Agricultural Finance substandard assets as a
percentage of its Agricultural Finance mortgage loans over the last 15 years is approximately 4%. The
highest substandard asset rate observed during the last 15 years occurred in 2010 at approximately 8%,
which coincided with an increase in substandard loans within Farmer Mac's ethanol portfolio. If Farmer
Mac's substandard asset rate increases 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
losses associated with the current agricultural credit cycle will be moderated by the strength and diversity
of its Agricultural Finance portfolio, which Farmer Mac believes is adequately collateralized.
Within Agricultural Finance, Farmer Mac considers a Farm & Ranch loan's original loan-to-value ratio as
one of many factors in evaluating loss severity. Loan-to-value ratios depend on the market value of a
property, as determined in accordance with Farmer Mac's collateral valuation standards. As of
December 31, 2023 and 2022, the average unpaid principal balances for Farm & Ranch loans outstanding
and to which Farmer Mac has direct credit exposure was $804,000 and $806,000, respectively. Farmer
Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan principal balance
by the original appraised property value. This calculation does not reflect any amortization of the original
loan balance or any adjustment to the original appraised value to provide a current market value. The
original loan-to-value ratio of any cross-collateralized loans is calculated on a combined basis rather than
on a loan-by-loan basis. The weighted-average original loan-to-value ratio for Farm & Ranch mortgage
loans purchased during 2023 was 51%, compared to 50% for loans purchased during 2022. The weighted-
average original loan-to-value ratio for Farm & Ranch mortgage loans and loans underlying off-balance
sheet Farmer Mac Guaranteed Securities and LTSPCs was 52% and 51% as of December 31, 2023 and
94
2022, respectively. The weighted-average original loan-to-value ratio for all 90-day delinquencies was
56% and 46% as of December 31, 2023 and 2022, respectively.
The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value
and current outstanding loan amount adjusted to reflect amortization) for Agricultural Finance mortgage
loans and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs was 47%
and 46% as of December 31, 2023 and 2022, respectively.
The following table presents the current loan-to-value ratios for the Agricultural Finance mortgage loans
to which Farmer Mac has direct credit exposure, as disaggregated by internally assigned risk ratings:
Table 26
Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of December 31, 2023
Acceptable
Special Mention
Substandard
Total
(in thousands)
Current loan-to-value ratio(1):
0.00% to 40.00%
40.01% to 50.00%
50.01% to 60.00%
60.01% to 70.00%
70.01% to 80.00%
80.01% and greater
Enterprise Value(2)
Total
$
2,941,132 $
58,143 $
48,923 $
2,808,638
2,888,136
1,335,688
188,582
15,963
507,885
95,906
78,501
58,715
28,425
—
31,611
41,127
44,403
30,072
17,555
3,871
—
3,048,198
2,945,671
3,011,040
1,424,475
234,562
19,834
539,496
$
10,686,024 $
351,301 $
185,951 $
11,223,276
(1)
(2)
The current loan-to-value ratio is based on original appraised value (or most recently obtained valuation, if available) and current outstanding loan amount
adjusted to reflect loan amortization.
"Enterprise Value" loans are generally secured by all business assets and common stock (in addition to first lien mortgages) of the borrower and the value
of the borrowing entity depends on its ability to generate recurring positive cash flow. Enterprise Value is the estimated value of the borrower as a going
concern, which is estimated using one ore more valuation techniques such as discounted cash flow, cash flow multiples, asset liquidation, or other
valuation techniques.
95
The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original
balance for all Agricultural Finance mortgage loans as of December 31, 2023 by year of origination,
geographic region, and commodity/collateral type. The purpose of this table is to present information
about realized losses relative to original Farm & Ranch purchases, guarantees, and commitments.
Table 27
Agricultural Finance Mortgage Loans Credit Losses Relative to Cumulative
Original Loans, Guarantees, and LTSPCs as of December 31, 2023
Cumulative Original Loans,
Guarantees and LTSPCs
Cumulative Net
Credit Losses/
(Recoveries)
Cumulative Loss
Rate
(dollars in thousands)
By year of origination:
2013 and prior
$
18,730,988 $
33,785
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
By geographic region(1):
Northwest
Southwest
Mid-North
Mid-South
Northeast
Southeast
Total
By commodity/collateral type:
Crops
Permanent plantings
Livestock
Part-time farm
Ag. Storage and Processing
Other
Total
37,126,085 $
38,483
0.10 %
1,097,131
1,251,414
1,599,533
1,709,852
1,403,244
1,630,441
2,934,102
3,346,715
2,003,044
1,419,621
—
(516)
903
4,311
—
—
—
—
4,705,793 $
12,434,219
9,213,586
5,361,636
1,921,518
3,489,333
12,094
8,542
17,165
(613)
323
972
37,126,085 $
38,483
17,023,194 $
8,028,667
8,158,577
1,936,477
1,810,339
168,831
3,790
9,783
3,836
1,090
19,984
—
38,483
0.18 %
— %
(0.04) %
0.06 %
0.25 %
— %
— %
— %
— %
— %
— %
0.26 %
0.07 %
0.19 %
(0.01) %
0.02 %
0.03 %
0.10 %
0.02 %
0.12 %
0.05 %
0.06 %
1.10 %
— %
0.10 %
$
$
$
$
$
37,126,085 $
(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).
96
Analysis of portfolio performance indicates that commodity type is the primary determinant of Farmer
Mac's exposure to loss on a given loan. The following tables present concentrations of Agricultural
Finance mortgage loans by commodity type within geographic region and cumulative credit losses by
origination year and commodity type:
Table 28
As of December 31, 2023
Agricultural Finance Mortgage Loans 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
$ 711,850
$ 232,794
$ 300,766
$ 116,082
$
35,658
$
23
$ 1,397,173
6.4 %
2.1 %
2.7 %
1.0 %
0.3 %
— %
12.5 %
Southwest
730,660
1,848,059
605,245
115,172
123,674
15,267
3,438,077
6.5 %
16.5 %
5.4 %
1.0 %
1.2 %
0.1 %
30.7 %
Mid-North
2,392,197
10,635
264,769
82,100
216,004
1,243
2,966,948
Mid-South
1,104,414
83,432
625,700
67,730
61,387
—
1,942,663
21.3 %
0.1 %
2.4 %
0.7 %
1.9 %
— %
26.4 %
Northeast
Southeast
Total
9.8 %
0.7 %
5.6 %
0.6 %
0.5 %
— %
17.2 %
187,279
42,835
69,641
48,936
90,758
—
439,449
1.7 %
0.4 %
0.6 %
0.4 %
0.8 %
— %
3.9 %
348,979
242,731
258,317
60,955
127,798
186
1,038,966
3.1 %
2.2 %
2.4 %
0.5 %
1.1 %
— %
9.3 %
$ 5,475,379
$ 2,460,486
$ 2,124,438
$ 490,975
$
655,279
$ 16,719
$ 11,223,276
48.8 %
22.0 %
19.1 %
4.2 %
5.8 %
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).
97
Table 29
As of December 31, 2023
Agricultural Loans 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:
2013 and prior
$
3,427 $
9,783 $
3,836 $
1,066 $
15,673 $
33,785
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
—
(540)
903
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
24
—
—
—
—
—
—
—
—
—
—
—
4,311
—
—
—
—
—
—
—
(516)
903
4,311
—
—
—
—
—
—
$
3,790 $
9,783 $
3,836 $
1,090 $
19,984 $
38,483
For more information about the credit quality of Farmer Mac's Agricultural Finance mortgage loans and
the associated allowance for losses please refer to Note 8 and Note 12 to the consolidated financial
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."
Rural Infrastructure Finance - Direct Credit Exposure
Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying
LTSPCs as of December 31, 2023 was $4.1 billion across 45 states. For more information about Farmer
Mac's underwriting and collateral valuation standards for Rural Infrastructure Finance loans, see "Business
—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral
Standards." As of December 31, 2023, there were no delinquencies in Farmer Mac's portfolio of Rural
Infrastructure Finance loans. As of December 31, 2023, there was one telecommunications loan classified
as substandard, with an unpaid principal balance of $29.4 million.
Farmer Mac evaluates credit risk of Rural Infrastructure 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 disaggregates Farmer Mac’s portfolio of Rural Infrastructure loans by portfolio
segment and by internally assigned risk ratings.
98
Table 30
As of December 31, 2023
Rural Infrastructure Finance portfolio by internally assigned risk rating
Acceptable
Special Mention
Substandard
Total
Distribution Cooperative
$
2,396,940 $
Generation and Transmission Cooperative
Renewable Energy
Telecommunications
678,354
487,521
467,711
Rural Infrastructure Total
$
4,030,526 $
(in thousands)
— $
—
—
9,850
9,850 $
— $
2,396,940
—
—
29,400
678,354
487,521
506,961
29,400 $
4,069,776
For more information about the credit quality of Farmer Mac's Rural Infrastructure Finance portfolio and
the associated allowance for losses please refer to Notes 8 and 12 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 to the USDA Securities in the Agricultural Finance line of
business because of the USDA guarantee. As of December 31, 2023, Farmer Mac had not experienced any
credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities 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 of USDA Securities.
Farmer Mac requires many lenders to make representations and warranties about the conformity of
Agricultural Finance mortgage 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. 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 the previous three years ended December 31, 2023, there
have been no breaches of representations and warranties 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
sellers, Farmer Mac also underwrites the Agricultural Finance mortgage loans (other than rural housing
and part-time farm mortgage loans) and Rural Infrastructure Finance loans on which it 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. For
more information about Farmer Mac's loan eligibility requirements and underwriting standards, see
"Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Eligibility," "Business—
Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm &
Ranch," "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and
Collateral Standards—Corporate AgFinance," and "Business—Farmer Mac's Lines of Business—Rural
Infrastructure Finance—Underwriting and Collateral Standards."
Under contracts with Farmer Mac and in consideration for servicing fees, Farmer Mac-approved servicers
service loans in accordance with Farmer Mac's requirements. Servicers are responsible to Farmer Mac for
material errors in the servicing of those loans. If a servicer materially breaches the terms of its servicing
99
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
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 servicer. Farmer Mac also
can proceed against the servicer in arbitration or exercise any remedies available to it under law. During
the previous three years ended December 31, 2023, Farmer Mac had not exercised any remedies or taken
any formal action against any servicers. For more information about Farmer Mac's servicing requirements,
see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Servicing" and "Business
—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing."
Credit Risk – Counterparty Risk. Farmer Mac is exposed to credit risk arising from its business
relationships with other institutions, which include:
•
•
•
issuers of AgVantage securities;
approved lenders and servicers; and
interest rate swap counterparties.
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 when the
AgVantage facility is entered into with the counterparty and does not change during the life of the
AgVantage securities issued under the facility without Farmer Mac's consent. In AgVantage transactions,
the corporate obligor is typically required to remove from the pool of pledged collateral loans that become
and remain (within specified parameters) delinquent in the payment of principal or interest and to
substitute eligible loans that are current in payment or pay down the AgVantage securities to maintain the
minimum required collateralization level.
In the event of a default on an AgVantage security, Farmer Mac would have recourse to the pledged
collateral and have rights to the ongoing borrower payments of principal and interest. As a result, Farmer
Mac has indirect credit exposure to the Agricultural Finance mortgage loans and Rural Infrastructure loans
that secure AgVantage securities. For AgVantage counterparties that are institutional real estate investors
or financial funds and other similar entities, Farmer Mac also typically requires that the counterparty
(1) maintain a higher collateralization level, through either a higher overcollateralization percentage or
lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the
related AgVantage security to avoid default. As of December 31, 2023, Farmer Mac had not experienced
any credit losses on any AgVantage securities over the life of the program. For a more detailed description
of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Other
Products – Agricultural Finance—AgVantage Securities" and "Business—Farmer Mac's Lines of Business
—Rural Infrastructure Finance—Other Products – Rural Infrastructure Finance—AgVantage Securities."
The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans
eligible for the Agricultural Finance line of business totaled $6.1 billion as of December 31, 2023 and $6.0
billion as of December 31, 2022. The unpaid principal balance of on-balance sheet AgVantage securities
secured by loans eligible for the Rural Infrastructure Finance line of business totaled $3.9 billion as of
December 31, 2023 and $3.0 billion as of December 31, 2022. The unpaid principal balance of
outstanding off-balance sheet AgVantage securities totaled $0.0 million as of December 31, 2023 and $1.2
million as of December 31, 2022.
100
The following table provides information about the issuers of AgVantage securities and the required
collateralization levels for those transactions as of December 31, 2023 and 2022:
Counterparty
Table 31
AgVantage:
CFC
MetLife
Rabo AgriFinance
Other(1)
Total outstanding
As of December 31, 2023
As of December 31, 2022
Balance
Required
Collateralization
Balance
Required
Collateralization
(dollars in thousands)
$
3,898,468
2,050,000
3,085,000
100%
103%
105%
$
3,045,325
2,050,000
2,855,000
100%
103%
105%
988,879
100% to 125%
1,059,600
100% to 125%
$ 10,022,347
$
9,009,925
(1)
Consists of AgVantage securities issued by 8 and 12 different issuers as of December 31, 2023 and 2022, respectively.
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 credit rating agency reports. For
more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac's Lines
of Business—Agricultural Finance—Lenders" and "Business—Farmer Mac's Lines of Business—Rural
Infrastructure Finance—Lenders and Loan Servicing."
Farmer Mac manages institutional credit risk related to its interest rate swap counterparties through
collateralization provisions contained in each of its swap agreements that vary based on the market value
of its swap portfolio with each counterparty. Farmer Mac and its interest rate swap counterparties are
required to fully collateralize their derivatives positions without any minimum threshold for cleared swap
transactions, as well as for non-cleared swap transactions entered into after March 1, 2017. Farmer Mac
transacts interest rate swaps with multiple counterparties to reduce counterparty credit exposure
concentration. Farmer Mac's usage of cleared derivatives has increased over time as has its exposure to
clearinghouses. The usage of cleared swap transactions 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 6 to the consolidated financial statements.
Credit Risk – Other Investments. As of December 31, 2023, Farmer Mac had $0.9 billion of cash and cash
equivalents and $5.0 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 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.
The Liquidity and Investment Regulations and Farmer Mac's internal policies require that investments
held in Farmer Mac's investment portfolio meet the following creditworthiness standards: (1) at a
minimum, at least one obligor of the investment must have a very strong capacity to meet financial
commitments for the life of the investment, even under severely adverse or stressful conditions, and
generally present a very low risk of default; (2) if the obligor whose capacity to meet financial
commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of
101
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
purposes for 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 single 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 to 10% of Farmer Mac's regulatory capital ($147.0 million as of December 31, 2023). However,
Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($73.5 million
as of December 31, 2023). These exposure limits do not apply to obligations of U.S. government agencies
or GSEs, although Farmer Mac'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 Investments Regulations do not establish limits on the maximum amount,
expressed as a percentage of Farmer Mac's investment portfolio, that can be invested in each eligible asset
class, Farmer Mac's internal policies set forth asset class limits as part of Farmer Mac's overall risk
management framework.
Interest Rate Risk. Farmer Mac is subject to interest rate risk on all interest-earning assets on its balance
sheet because of timing differences in the cash flows due to maturity, paydown, or repricing of the assets
and debt together with financial derivatives. Cash flow mismatches due to changing interest rates can
reduce the earnings of Farmer Mac if assets prepay 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. Alternatively, Farmer Mac could realize a decline in income if assets repay more slowly than
originally forecasted and the associated maturing debt must be replaced by debt issuances at higher
interest rates.
Interest Rate Risk Management
The goal of interest rate risk management at Farmer Mac is to manage the balance sheet in a manner that
generates stable earnings and value across a variety of interest rate environments. Recognizing that
interest rate sensitivities may change with the passage of time and as interest rates change, Farmer Mac
regularly assesses this exposure and, if necessary, adjusts its portfolio of interest-earning assets, debt, and
financial derivatives.
Farmer 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 board-established limits.
Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt that
together with financial derivatives have similar duration and convexity characteristics and help mitigate
impacts from interest rate changes across the yield curve. As part of this strategy, Farmer 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 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 to execute its debt issuance strategy. Portions of Farmer Mac's callable debt is
102
issued to mitigate prepayment risk associated with certain interest-earning assets held on balance sheet. In
general, as interest rates decline, prepayments typically increase, and Farmer Mac is able to economically
extinguish certain callable debt issuances. In addition, Farmer Mac enters into financial derivatives,
primarily interest rate swaps, to better match the durations of Farmer Mac's assets and liabilities, thereby
reducing overall sensitivity to changing interest rates.
Taking into consideration the prepayment provisions and the default probabilities associated with its
portfolio of interest-earning assets, Farmer Mac incorporates behavioral models when projecting and
valuing cash flows associated with these assets. In 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 future prepayment forecasts.
Changes in interest rates may affect the timing of asset prepayments which may, in turn, impact durations
and values of the assets. Declining interest rates generally result in increased prepayments, which shortens
the duration of these assets, while rising interest rates generally result in lower prepayments, thereby
extending the duration of the assets.
Farmer Mac is subject to interest rate risk on loans and securities it has committed to acquire but not yet
purchased (other than delinquent loans purchased through LTSPCs or loans designated for securitization
under a forward purchase agreement). When Farmer Mac commits to purchase these assets, it is exposed
to interest rate risk between the time it commits to purchase the loans and the time it issues debt to fund
the purchase of these loans. Farmer Mac manages the interest rate risk exposure related to these loans by
entering into exchange-traded futures contracts involving U.S. Treasury securities and other financial
derivatives. Similarly, when Farmer Mac commits to sell certain assets, the associated interest rate
exposure is primarily managed with exchange-traded futures contracts involving U.S. Treasury securities
and other financial derivatives.
Farmer Mac's $0.9 billion of cash and cash equivalents held as of December 31, 2023 mature within three
months. As of December 31, 2023, $3.1 billion of the $5.0 billion of investment securities (61%) were
floating rate securities with rates that adjust within one year or fixed rate securities with original maturities
between three months and one year. Farmer Mac's floating rate investment securities are funded with
floating rate debt. The fixed rate investment securities are generally funded in a manner consistent with
Farmer Mac's overall funding strategy that approximates a duration and convexity match.
103
Interest Rate Risk Metrics
Farmer Mac regularly evaluates and conducts interest rate shock simulations on its portfolio of financial
assets, debt, and financial 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 on the market
value of equity ("MVE") and forecasted net effective spread ("NES") as well as a 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 measures the degree to which the market values of Farmer Mac's assets,
liabilities, and financial derivatives are estimated to change for a given change in interest rates.
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 produced by the related
funding, including associated financial derivatives. Farmer Mac's NES simulation may be impacted by
changes in market interest rates resulting from timing differences between maturities and re-pricing
characteristics of funded assets and 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 simulation
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 shocks.
Duration is a measure of a financial instrument's fair value sensitivity to small changes in interest rates.
Duration gap is calculated using the net estimated durations of Farmer Mac's interest-earning assets, debt,
and financial derivatives. Duration gap quantifies the extent to which estimated fair value sensitivities are
matched for interest-earning assets, debt and financial derivatives. Duration gap provides a relatively
concise measure of the interest rate risk inherent in Farmer Mac's outstanding portfolio.
A positive duration gap denotes that the duration of Farmer Mac's interest-earning assets is greater than
the duration of its debt and financial derivatives. A positive duration gap indicates that with small changes
in interest rate movements the fair value change of Farmer Mac's interest-earning assets is more sensitive
than the fair value change of its 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
interest-earning assets are less sensitive than the fair value change of its debt and financial derivatives. A
duration gap of zero indicates that with small changes in interest rate movements the fair value change of
Farmer Mac's interest-earning assets is effectively offset by the fair value change of its debt and financial
derivatives.
Each of the interest rate risk metrics is quantified using asset/liability models and derived based on
management's best estimates of factors such as implied forward interest rates across the yield curve,
interest rate volatility, and timing of asset prepayments and callable debt redemptions. Accordingly, these
metrics are estimates rather than precise measurements. Actual 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.
104
The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of
December 31, 2023 and 2022 to an immediate and instantaneous uniform or "parallel" shift in the yield
curve:
Table 32
Interest Rate Scenario
+100 basis points
-100 basis points
Interest Rate Scenario
+100 basis points
-100 basis points
Percentage Change in MVE from Base Case
As of December 31, 2023
As of December 31, 2022
(3.6) %
2.9 %
(3.7) %
2.7 %
Percentage Change in NES from Base Case
As of December 31, 2023
As of December 31, 2022
— %
0.8 %
0.4 %
(0.6) %
As of December 31, 2023, Farmer Mac's duration gap was positive 3.4 months, compared to positive 3.6
months as of December 31, 2022. The U.S. Treasury interest rate yield curve remained inverted during
2023, although the 2-year U.S. Treasury Note yield-to-maturity decreased by approximately 18 basis
points and the 10-year U.S. Treasury Note yield-to-maturity was relatively flat compared to year-end
2022. This rate movement contributed to shortening the duration of Farmer Mac's funded assets compared
to its debt and financial derivatives, thereby narrowing Farmer Mac's duration gap.
Financial Derivatives Transactions
The economic effects of financial derivatives are included in Farmer Mac's MVE, NES, and duration gap
analyses. Farmer Mac typically 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 interest-earning assets, future cash flows, 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;
"basis swaps," in which Farmer Mac pays floating rates of interest based on one index to, and
receives floating rates of interest based on a different index from, counterparties; and
exchange-traded futures contracts involving U.S. Treasury securities.
As of December 31, 2023, Farmer Mac had $25.8 billion combined notional amount of interest rate swaps,
with terms ranging from less than one year to just over thirty years, of which $9.9 billion were pay-fixed
interest rate swaps, $15.0 billion were receive-fixed interest rate swaps, and $0.9 billion were basis swaps.
Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration
characteristics of its interest-earning assets with those of its debt. For example, Farmer Mac transacts pay-
fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that
approximately matches the duration of the corresponding fixed rate assets being funded. Farmer Mac
evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding
alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across
the balance sheet.
105
Certain financial derivatives are designated as fair value hedges of fixed rate assets classified as available-
for-sale or liabilities to protect against fair value changes in the assets or liabilities related to a benchmark
interest rate (e.g. SOFR). Also, certain financial derivatives are designated as cash flow hedges to mitigate
the volatility of future interest rate payments on floating rate debt.
As discussed in Note 6 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 on financial 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 reported in "Net interest
income" in the consolidated statements of operations. Interest accruals on derivatives designated in fair
value hedge accounting relationships are also recorded in "Net interest income" in the consolidated
statements of operations. For financial derivatives designated in cash flow hedge accounting relationships,
the unrealized gain or loss on the derivative is recorded in other comprehensive income. Because the
hedging instrument is an interest rate swap and the hedged forecasted transactions are future interest
payments on floating 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.
All of Farmer Mac's interest rate swap transactions are conducted under standard collateralized
agreements that limit Farmer Mac's potential credit exposure to any counterparty. As of both
December 31, 2023 and 2022, Farmer Mac had no uncollateralized net exposures based on the mark-to-
market value of the portfolio of interest rate swaps.
Re-funding and repricing risk
Farmer Mac is 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 resulting
from a funding strategy whereby Farmer Mac issues floating rate debt across a variety of maturities to
fund floating rate or synthetically floating rate assets that on average may have longer 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 interest income when debt matures and is reissued at then current interest rates to
continue funding those assets.
Farmer Mac is subject to re-funding and repricing risk on a portion of its fixed rate assets as a result of its
use of pay-fixed receive-floating interest rate swaps that effectively convert the required funding needed
from fixed rate to floating rate. These fixed rate assets are then effectively floating rate assets that require
floating rate funding.
Farmer Mac can meet floating rate funding 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 assets
being funded;
issuing non-maturity matched, floating rate medium-term notes with reset frequencies that match
the assets being funded; or
issuing non-maturity matched, fixed rate discount notes or medium-term notes swapped to floating
rate to match the interest rate reset dates of the assets.
106
To meet certain floating rate funding needs, Farmer Mac frequently issues shorter-term floating-rate
medium-term notes or fixed rate medium-term notes paired with a received-fixed interest rate swap
because these funding alternatives generally provide a lower cost of 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 match in the
context of Farmer Mac's overall debt issuance and liquidity management strategies. However, if the
funding cost of Farmer Mac’s discount notes or medium-term notes increased relative to the benchmark
market index of the associated assets during the time between when these floating rate assets were first
funded and when Farmer Mac refinanced the associated debt, Farmer Mac would be exposed to a
commensurate reduction of net effective spread. Conversely, if the funding cost on Farmer Mac’s discount
notes or medium-term notes decreased relative to the benchmark market index during that time, Farmer
Mac would benefit from a commensurate increase to net effective spread.
Farmer 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 maintain an effective mixture of funding structures in the context of its overall
liability and liquidity management strategies.
As of December 31, 2023, Farmer Mac held $8.0 billion of floating rate assets in its lines of business and
its investment portfolio that reset based on floating rate market indices, such as SOFR. As of the same
date, Farmer Mac also had $9.9 billion of interest rate swaps outstanding where Farmer Mac pays a fixed
rate of interest and receives a floating rate of interest, primarily SOFR.
Discontinuation of LIBOR
Farmer Mac has not had, and does not foresee, a material impact on our business due to the replacement of
LIBOR with SOFR. We have had no further LIBOR exposure since the quarter-ended September 30,
2023.
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 repayments of
AgVantage and investment securities. Farmer Mac regularly accesses the debt capital markets for funding,
and Farmer Mac has maintained steady access to the debt capital markets throughout 2023. 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 debt capital markets. As of December 31, 2023, Farmer Mac had outstanding discount notes of $1.7
billion, medium-term notes that mature within one year of $6.4 billion, and medium-term notes that
mature after one year of $18.5 billion.
Assuming continued access to the debt 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 has a contingency funding plan to manage unanticipated disruptions in its access to the debt capital
markets. Farmer Mac must maintain a minimum of 90 days of liquidity under the Liquidity and
Investment Regulations. In accordance with the methodology for calculating available days of liquidity
107
under those regulations, Farmer Mac maintained a monthly average of 307 days of liquidity throughout
2023 and had 319 days of liquidity as of December 31, 2023.
Farmer Mac maintains cash, cash equivalents (including U.S. Treasury securities, operational deposits,
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;
international and multilateral development bank obligations;
•
•
• municipal securities;
•
• money market instruments;
•
•
•
• mortgage-backed securities.
diversified investment funds;
asset-backed securities;
corporate debt securities; and
The following table presents these assets as of December 31, 2023 and 2022:
Table 33
Cash and cash equivalents
Investment securities:
Guaranteed by U.S. Government and its agencies
Guaranteed by GSEs
Asset-backed securities
Total
As of December 31, 2023
As of December 31, 2022
$
$
(in thousands)
888,707 $
1,249,568
3,704,037
19,082
5,861,394 $
861,002
1,444,650
3,160,919
19,027
5,485,598
The objectives of the investment portfolio as of December 31, 2023 and 2022 are 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.
Capital Requirements. Farmer Mac is subject to the following statutory capital requirements – minimum,
critical, and risk-based. Farmer Mac must comply with the higher of the minimum capital requirement and
the risk-based capital requirement. As of December 31, 2023, Farmer Mac was in compliance with its
statutory capital requirements and was classified as within "level 1" (the highest compliance level).
In accordance with the 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 restricts Tier 1-eligible dividends and any
discretionary bonus payments if Tier 1 capital falls below specified thresholds. As of December 31, 2023
and 2022, Farmer Mac's Tier 1 capital ratio was 15.4% and 14.9%, respectively. As of December 31,
2023, Farmer Mac was in compliance with its capital adequacy policy. Farmer Mac does not expect its
compliance on an ongoing basis with the 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.
108
For more information about the capital requirements applicable to Farmer Mac, its capital adequacy
policy, and the FCA's rule on capital planning, see "Business—Government Regulation of Farmer Mac—
Capital Standards." See Note 9 to the consolidated financial statements for more information about Farmer
Mac's capital position.
Discount and Medium-term Notes. The following table presents the amount and timing of Farmer Mac's
known, fixed, and determinable discount and medium-term note obligations by payment date as of
December 31, 2023. The payment amounts represent those amounts due to the investor (including return
of discount and interest on debt) and do not include unamortized premiums or discounts or other similar
carrying value adjustments.
Table 34
One Year
or Less
One to
Three Years
Three to
Five Years
Over Five
Years
Total
(in thousands)
Discount notes(1)
Medium-term notes(1)
Interest payments on fixed rate medium-term notes(2)
Interest payments on floating rate medium-term notes(3)
$ 1,768,539 $
— $
— $
— $ 1,768,539
6,353,538
9,354,027
5,666,797
3,495,980
24,870,342
553,339
137,144
710,935
149,402
369,933
70,673
310,559
1,944,766
32,457
389,676
(1)
(2)
(3)
Future events, including additional issuance of discount notes and medium-term notes and refinancing of those notes, could cause actual payments to
differ significantly from these amounts. For more information about discount notes and medium-term notes, see Note 7 to the consolidated financial
statements.
Interest payments on callable medium-term notes are calculated based on maturity. Future calls of these notes could cause actual interest payments to
differ significantly from the amounts presented.
Calculated using the effective interest rates as of December 31, 2023. As a result, these amounts do not reflect the effects of changes in the interest rates
effective on future interest rate reset dates.
Farmer Mac enters into financial derivatives contracts under which it either receives cash from
counterparties, or is required to pay cash to them, depending on changes in interest rates. Financial
derivatives are carried on the consolidated balance sheets at fair value, representing the net present value
of expected future cash payments or receipts based on market interest rates as of the balance sheet date
adjusted for the consideration of credit risk of Farmer Mac and its counterparties. The fair values of the
contracts change daily as market interest rates change. Because the financial derivative liabilities recorded
on the consolidated balance sheet as of December 31, 2023 do not represent the amounts that may
ultimately be paid under the financial derivative contracts, those liabilities are not included in the table
presented above. More information about financial derivatives is included in Note 2(f) and Note 6 to the
consolidated financial statements.
Contingent Liabilities. In conducting its loan purchase activities, Farmer Mac enters into mandatory
delivery commitments to purchase agricultural mortgage loans and USDA Securities. In conducting its
LTSPC activities, Farmer Mac commits, subject to the applicable LTSPC agreement, to a future purchase
of one or more loans from identified pools of eligible loans that met Farmer Mac's standards when the
applicable transaction was entered into and Farmer Mac assumed the credit risk on the loans. The
following table presents these significant commitments:
Table 35
LTSPCs
Mandatory commitments to purchase loans and USDA Securities
109
As of December 31,
2023
2022
(in thousands)
$
3,680,333 $
3,423,155
31,049
9,907
For more information about Farmer Mac's commitments to purchase loans, see Note 12 to the
consolidated financial statements.
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) certain categories of Farmer Mac
Guaranteed Securities; and (2) LTSPCs. Both products are available through each of the Agricultural
Finance and Rural Infrastructure Finance lines of business. For securitization trusts where Farmer Mac is
the primary beneficiary, the trust assets and liabilities are included on Farmer Mac's consolidated balance
sheet. For securitization trusts where Farmer Mac is not the primary beneficiary and in the event of
deconsolidation, both of these alternatives create off-balance sheet obligations for Farmer Mac. See Note
12 to the consolidated financial statements for more information about consolidation and Farmer Mac's
off-balance sheet business activities.
As of December 31, 2023 and 2022, outstanding off-balance sheet LTSPCs and Farmer Mac Guaranteed
Securities totaled $4.1 billion and $3.9 billion, respectively. The following table presents the balance of
outstanding LTSPCs, off-balance sheet Farmer Mac Guaranteed Securities, and unfunded loan
commitments as of December 31, 2023 and 2022:
Table 36
Outstanding Balance of LTSPCs and
Off-Balance Sheet Farmer Mac Guaranteed Securities
Agricultural Finance:
Corporate AgFinance:
Unfunded loan commitments
Farm & Ranch:
LTSPCs and unfunded loan commitments
Farmer Mac Guaranteed Securities
Total Agricultural Finance obligations
Rural Infrastructure:
Rural Utilities:
LTSPCs and unfunded loan commitments
Farmer Mac Guaranteed Securities
Renewable Energy:
Unfunded loan commitments
Total Rural Infrastructure obligations
Total off-balance sheet
As of December 31,
2023
2022
(in thousands)
$
145,377 $
77,654
2,999,943
452,602
3,597,922
2,822,309
500,953
3,400,916
487,778
—
47,235
535,013
512,592
1,169
10,600
524,361
$
4,132,935 $
3,925,277
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk
Management—Credit Risk – Loans and Guarantees" and Notes 2(c), 2(e), 5 and 12 to the consolidated
financial statements for more information about Farmer Mac Guaranteed Securities and Notes 2(m) and 12
to the consolidated financial statements for more information about LTSPCs.
110
Other Matters
None.
Supplemental Information
The following tables present quarterly and annual information about new business volume, repayments,
and outstanding business volume:
Table 37
For the quarter ended:
New Business Volume
Agricultural Finance
Rural Infrastructure Finance
Farm & Ranch
Corporate AgFinance
Rural Utilities
Renewable Energy
Total
(in thousands)
December 31, 2023
$
1,282,045 $
188,272 $
434,511 $
225,986 $
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
For the year ended:
1,384,273
1,574,169
750,040
1,114,255
1,927,209
1,418,397
2,452,539
2,075,540
275,932
218,136
203,211
165,395
169,932
107,916
103,353
411,838
607,979
294,292
683,232
140,222
547,117
326,899
377,965
631,338
17,390
71,611
89,747
43,737
61,653
35,307
41,636
12,594
December 31, 2023
$
4,990,527 $
885,551 $
2,020,014 $
404,734 $
December 31, 2022
6,912,400
546,596
1,392,203
182,333
2,130,814
2,285,574
2,158,208
1,726,230
1,463,609
2,705,911
1,888,519
2,975,493
3,131,310
8,300,826
9,033,532
111
Table 38
For the quarter ended:
Scheduled
Unscheduled
December 31, 2023
Scheduled
Unscheduled
September 30, 2023
Scheduled
Unscheduled
June 30, 2023
Scheduled
Unscheduled
March 31, 2023
Scheduled
Unscheduled
December 31, 2022
Scheduled
Unscheduled
September 30, 2022
Scheduled
Unscheduled
June 30, 2022
Scheduled
Unscheduled
March 31, 2022
Scheduled
Unscheduled
December 31, 2021
For the year ended:
Scheduled
Unscheduled
December 31, 2023
Scheduled
Unscheduled
December 31, 2022
Repayments of Assets
Agricultural Finance
Rural Infrastructure Finance
Farm & Ranch
Corporate AgFinance
Rural Utilities
Renewable Energy
Total
(in thousands)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
827,122 $
106,041
933,163 $
922,223 $
108,960
133,468 $
53,614 $
69,040 $
1,083,244
102,131
18,469
—
226,641
235,599 $
72,083 $
69,040 $
1,309,885
110,383 $
80,998 $
14,716 $
1,128,320
104,999
20,578
—
234,537
1,031,183 $
215,382 $
101,576 $
14,716 $
1,362,857
1,050,480 $
81,386 $
558,944 $
52,203 $
1,743,013
96,507
55,976
13,138
—
165,621
1,146,987 $
137,362 $
572,082 $
52,203 $
1,908,634
279,676 $
231,288
510,964 $
447,976 $
136,245
584,221 $
724,580 $
296,763
78,482 $
95,809 $
11,424 $
128,254
57,354
—
206,736 $
153,163 $
11,424 $
64,308 $
75,671 $
9,809 $
132,366
1,201
—
196,674 $
76,872 $
9,809 $
465,391
416,896
882,287
597,764
269,812
867,576
38,018 $
422,917 $
13,429 $
1,198,944
64,439
—
—
361,202
1,021,343 $
102,457 $
422,917 $
13,429 $
1,560,146
1,114,779 $
42,162 $
159,491 $
7,898 $
1,324,330
286,303
30,203
1,791
—
318,297
1,401,082 $
72,365 $
161,282 $
7,898 $
1,642,627
1,535,369 $
39,480 $
266,349 $
7,790 $
1,848,988
434,794
60,947
397
—
496,138
1,970,163 $
100,427 $
266,746 $
7,790 $
2,345,126
928,663 $
318,024
205,778 $
816,802 $
18,526 $
1,969,769
48,042
—
—
366,066
1,246,687 $
253,820 $
816,802 $
18,526 $
2,335,835
3,079,501 $
403,719 $
789,365 $
147,383 $
4,419,968
542,796
391,360
109,539
—
1,043,695
3,622,297 $
795,079 $
898,904 $
147,383 $
5,463,663
3,822,704 $
183,968 $
924,428 $
38,926 $
4,970,026
1,154,105
287,955
3,389
—
1,445,449
4,976,809 $
471,923 $
927,817 $
38,926 $
6,415,475
112
Table 39
As of:
Outstanding Business Volume
Agricultural Finance
Rural Infrastructure Finance
Farm & Ranch
Corporate AgFinance
Rural Utilities
Renewable Energy
Total
(in thousands)
December 31, 2023
$
18,808,801 $
1,693,979 $
7,480,723 $
487,521 $ 28,471,024
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
Table 40
As of:
December 31, 2023
September 30, 2023
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
18,461,835
18,116,503
17,685,961
17,728,792
17,199,347
16,591,999
16,575,595
16,094,639
1,741,306
1,680,756
1,599,982
1,603,507
1,634,786
1,567,311
1,540,760
1,537,834
7,118,295
6,611,892
6,889,682
6,359,613
6,296,263
6,172,063
6,006,446
5,895,227
330,575
27,652,011
327,901
26,737,052
308,493
26,484,118
230,170
25,922,082
196,242
25,326,638
148,018
24,479,391
120,609
24,243,410
86,763
23,614,463
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)
$
14,133,794 $
3,171,672 $
6,455,359 $
23,760,825
13,727,280
13,721,129
13,607,740
13,693,810
13,810,162
13,798,771
14,174,611
13,228,675
3,019,317
3,003,560
3,020,229
3,031,288
2,960,596
2,939,467
2,858,521
2,896,014
6,255,690
5,493,104
5,924,032
5,251,427
4,644,958
3,993,956
3,443,816
3,695,269
23,002,287
22,217,793
22,552,001
21,976,525
21,415,716
20,732,194
20,476,948
19,819,958
113
The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:
Table 41
Agricultural Finance
Rural Infrastructure Finance
Treasury
Net Effective Spread(1)
Farm & Ranch
Corporate
AgFinance
Rural Utilities
Renewable
Energy
Funding
Investments
Net Effective
Spread
Dollars
Yield
Dollars
Yield
Dollars
Yield
Dollars
Yield
Dollars
Yield
Dollars
Yield
Dollars
Yield
(dollars in thousands)
For the quarter ended:
December 31, 2023(2)
$ 33,329
0.98 % $ 8,382
2.06 % $ 7,342
0.43 % $ 1,540
1.69 % $ 33,361
0.47 % $ 597
0.04 % $ 84,551
1.19 %
September 30, 2023
32,718
0.97 % 8,250
2.05 % 6,362
0.39 % 1,150
1.46 % 34,412
0.49 %
June 30, 2023
34,388
1.03 % 7,444
1.92 % 5,808
0.38 % 1,100
1.47 % 32,498
0.48 %
532
594
0.04 % 83,424
1.20 %
0.04 % 81,832
1.20 %
March 31, 2023
December 31, 2022(2)
32,465
0.97 % 7,148
1.94 % 5,507
0.36 %
858
1.53 % 31,738
0.47 %
(543)
(0.04) % 77,173
1.15 %
32,770
0.98 % 7,471
1.94 % 4,960
0.34 %
935
1.76 % 27,656
0.42 % (2,689)
(0.19) % 71,103
1.07 %
September 30, 2022
33,343
1.04 % 7,600
1.99 % 4,220
0.30 %
705
1.97 % 22,564
0.36 % (2,791)
(0.21) % 65,641
1.03 %
June 30, 2022
32,590
1.05 % 6,929
1.87 % 3,733
0.27 %
468
1.78 % 18,508
0.30 % (1,282)
(0.10) % 60,946
0.99 %
March 31, 2022
30,354
1.02 % 7,209
1.96 % 3,159
0.23 %
375
1.69 % 16,738
0.28 %
4
— % 57,839
0.97 %
December 31, 2021
28,998
0.99 % 6,321
1.84 % 2,521
0.19 %
356
1.53 % 15,979
0.28 %
158
0.01 % 54,333
0.94 %
(1)
(2)
Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets.
See Note 14 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for
the years ended December 31, 2023 and 2022.
114
The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income
attributable to common stockholders:
Table 42
Revenues:
Core Earnings by Quarter End
December
2023
September
2023
June
2023
March
2023
December
2022
September
2022
June
2022
March
2022
December
2021
(in thousands)
Net effective spread
$ 84,551 $ 83,424 $ 81,832 $ 77,173 $ 71,103 $ 65,641 $ 60,946 $ 57,839 $ 54,333
Guarantee and commitment fees
4,865
4,828
4,581
4,654
4,677
4,201
4,709
4,557
—
767
—
1,056
—
409
—
1,067
—
390
—
473
—
307
—
514
90,183
89,308
86,822
82,894
76,170
70,315
65,962
62,910
65,750
(575)
—
(181)
1,142
—
—
(575)
(181)
1,142
750
—
750
1,945
819
450
—
(1,535)
—
(54)
—
(1,428)
—
2,764
450
(1,535)
(54)
(1,428)
4,637
6,539
241
Gains on sale of mortgage loans
Other
Total revenues
Credit related expense/(income):
(Release of)/provision for losses
REO operating expenses
Total credit related expense/
(income)
Operating expenses:
Compensation and employee benefits
15,523
14,103
13,937
15,351
12,105
11,648
11,715
13,298
11,246
General and administrative
Regulatory fees
8,916
725
9,100
831
9,420
831
7,527
835
8,055
832
6,919
812
7,520
813
7,278
812
8,492
812
Total operating expenses
25,164
24,034
24,188
23,713
20,992
19,379
20,048
21,388
20,550
Net earnings
Income tax expense
Preferred stock dividends
65,594
13,881
6,791
65,455
13,475
61,492
12,539
6,792
6,791
58,431
12,756
6,791
52,414
11,210
6,791
50,486
10,303
6,791
47,449
9,909
6,792
41,576
9,024
6,791
46,628
9,809
6,792
Core earnings
$ 44,922 $ 45,188 $ 42,162 $ 38,884 $ 34,413 $ 33,392 $ 30,748 $ 25,761 $ 30,027
Reconciling items:
(Losses)/gains on undesignated
financial derivatives due to fair
value changes
(Losses)/gains on hedging activities
due to fair value changes
Unrealized (losses)/gains on trading
assets
Net effects of amortization of
premiums/discounts and deferred
gains on assets consolidated at fair
value
Net effects of terminations or net
settlements on financial derivatives
Income tax effect related to
reconciling items
Net income attributable to
common stockholders
$
(836) $
2,921 $ 2,141 $
916 $
1,596 $
6,441 $
2,846 $
2,612 $
(1,242)
(3,598)
3,210
(4,901)
(105)
(148)
(624)
428
5,687
(2,079)
(37)
1,714
(57)
359
31
(757)
(285)
94
(76)
88
29
(800)
(79)
1,089
(1,638)
29
583
464
29
57
24
(62)
20
71
523
1,268
(3,522)
2,536
15,512
(429)
(362)
(590)
(327)
(1,148)
(5,024)
789
$ 40,828 $ 51,345 $ 40,421 $ 40,244 $ 36,627 $ 34,627 $ 35,063 $ 44,662 $ 27,061
Item 7A. 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
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
115
information about Farmer Mac's use of financial derivatives and related accounting policies, see Note 6 to
the consolidated financial statements.
Item 8.
Management's Report on Internal Control over Financial Reporting
Financial Statements
The management of Farmer Mac is responsible for establishing and maintaining adequate internal control
over financial reporting, as defined in Exchange Act Rule 13a-15(f). Internal control over financial
reporting is a process designed under the supervision of Farmer Mac's Chief Executive Officer and Chief
Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of Farmer Mac's financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America.
Farmer Mac's internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of Farmer Mac; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of Farmer Mac are being
made only in accordance with authorizations of management and directors of Farmer Mac; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of Farmer Mac's assets that could have a material effect on the consolidated financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Under the supervision and with the participation of Farmer Mac's Chief Executive Officer and Chief
Financial Officer, Farmer Mac's management assessed the effectiveness of Farmer Mac's internal control
over financial reporting as of December 31, 2023. In making this assessment, Farmer Mac's management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control - Integrated Framework (2013). Based on its evaluation under the COSO
criteria, management concluded that Farmer Mac's internal control over financial reporting as of
December 31, 2023 was effective.
Farmer Mac's independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited
the effectiveness of Farmer Mac's internal control over financial reporting as of December 31, 2023, as
stated in their report appearing below.
116
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
of the Federal Agricultural Mortgage Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of the Federal Agricultural Mortgage
Corporation and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related
consolidated statements of operations, comprehensive income, equity and cash flows for each of the three
years in the period ended December 31, 2023, including the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company's internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2023 in
conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated
financial statements and on the Company's internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting,
117
assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing
a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of AgVantage Farmer Mac Guaranteed Securities
As disclosed by management, the Company guarantees and purchases general obligations of lenders and
other financial institutions that are secured by pools of the types of loans eligible for purchase under
Farmer Mac's Agricultural Finance or Rural Infrastructure Finance lines of business, which are referred to
as AgVantage securities. As described in Notes 5 and 13 to the consolidated financial statements, the total
unpaid principal balance of AgVantage securities as of December 31, 2023 was $10.0 billion, and the fair
value of the AgVantage securities of December 31, 2023 was $9.6 billion. The fair value of AgVantage
securities is estimated using a discounted cash flow model. The significant unobservable input used is the
discount rate commensurate with the risks involved.
The principal considerations for our determination that performing procedures relating to the valuation of
AgVantage securities is a critical audit matter are (i) the high degree of audit effort in performing
procedures and evaluating audit evidence related to the discount rate assumption used by management in
118
the valuation of the AgVantage securities, and (ii) the audit effort involved the use of professionals with
specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to the valuation of AgVantage securities, including controls over the
model, data and assumption. These procedures also included, among others, (i) the involvement of
professionals with specialized skill and knowledge to assist in developing an independent range of prices
for a sample of AgVantage securities, and (ii) comparing management’s estimate to the independently
developed range to evaluate the reasonableness of management’s estimate. Developing the independent
range of prices involved testing the completeness and accuracy of data provided by management and
independently developing the discount rate assumption.
/s/ PricewaterhouseCoopers LLP
Washington, District of Columbia
February 23, 2024
We have served as the Company’s auditor since 2010.
119
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of
December 31, 2023
December 31, 2022
(in thousands)
$
888,707
$
861,002
Assets:
Cash and cash equivalents
Investment securities:
Available-for-sale, at fair value (amortized cost of $5,060,135 and $4,769,426, respectively)
Held-to-maturity, at amortized cost
Other investments
Total Investment Securities
Farmer Mac Guaranteed Securities:
Available-for-sale, at fair value (amortized cost of $5,825,433 and $8,019,495, respectively)
Held-to-maturity, at amortized cost
Total Farmer Mac Guaranteed Securities
USDA Securities:
Trading, at fair value
Held-to-maturity, at amortized cost
Total USDA Securities
Loans:
Loans held for investment, at amortized cost
Loans held for investment in consolidated trusts, at amortized cost
Allowance for losses
Total loans, net of allowance
Financial derivatives, at fair value
Accrued interest receivable (includes $16,764 and $12,514, respectively, related to consolidated
trusts)
Guarantee and commitment fees receivable
Deferred tax asset, net
Prepaid expenses and other assets
Total Assets
Liabilities and Equity:
Liabilities:
Notes payable
Debt securities of consolidated trusts held by third parties
Financial derivatives, at fair value
Accrued interest payable (includes $9,407 and $8,081, respectively, related to consolidated trusts)
Guarantee and commitment obligation
Accounts payable and accrued expenses
Reserve for losses
Total Liabilities
Commitments and Contingencies (Note 12)
Equity:
Preferred stock:
Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding
Series D, par value $25 per share, 4,000,000 shares authorized, issued and outstanding
Series E, par value $25 per share, 3,180,000 shares authorized, issued and outstanding
Series F, par value $25 per share, 4,800,000 shares authorized, issued and outstanding
Series G, par value $25 per share, 5,000,000 shares authorized, issued and outstanding
Common stock:
Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding
Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding
Class C Non-Voting, $1 par value, no maximum authorization, 9,310,872 shares and 9,270,265
shares outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive loss, net of tax
Retained earnings
Total Equity
Total Liabilities and Equity
$
$
$
4,918,931
53,756
6,817
4,979,504
5,532,479
4,213,069
9,745,548
1,241
2,354,171
2,355,412
9,623,119
1,432,261
(16,031)
11,039,349
37,478
287,128
49,832
8,470
132,954
29,524,382
26,336,542
1,351,069
117,131
181,841
47,563
76,662
1,711
28,112,519
73,382
96,659
77,003
116,160
121,327
1,031
500
9,311
$
$
132,919
(40,145)
823,716
1,411,863
29,524,382
$
4,579,564
45,032
3,672
4,628,268
7,607,226
1,021,154
8,628,380
1,767
2,409,834
2,411,601
9,008,979
1,211,576
(15,089)
10,205,466
37,409
229,061
47,151
18,004
266,768
27,333,110
24,469,113
1,181,948
175,326
117,887
46,582
68,863
1,433
26,061,152
73,382
96,659
77,003
116,160
121,327
1,031
500
9,270
128,939
(50,843)
698,530
1,271,958
27,333,110
The accompanying notes are an integral part of these consolidated financial statements.
120
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Interest income:
Investments and cash equivalents
Farmer Mac Guaranteed Securities and USDA Securities
Loans
Total interest income
Total interest expense
Net interest income
(Provision for)/release of losses
Net interest income after (provision for)/release of losses
Non-interest income/(expense):
Guarantee and commitment fees
Gains on financial derivatives
Gains on sale of mortgage loans
Gains/(losses) on trading securities
Gains on sale of available-for-sale investment securities
(Provision for)/release of reserve for losses
Other income
Non-interest income
Operating expenses:
Compensation and employee benefits
General and administrative
Regulatory fees
Real estate owned operating costs, net
Operating expenses
Income before income taxes
Income tax expense
Net income
Preferred stock dividends
For the Years Ended December 31,
2023
2022
2021
(in thousands, except per share amounts)
$
287,144 $
82,659 $
590,250
514,894
1,392,288
1,064,741
327,547
283,769
350,420
716,848
445,908
270,940
(858)
(1,323)
326,689
269,617
16,712
2,882
—
24
—
(278)
4,171
23,511
58,914
34,963
3,222
—
97,099
253,101
53,098
200,003
13,040
22,631
—
(51)
—
517
2,551
38,688
48,766
29,772
3,269
819
82,626
225,679
47,535
178,144
18,660
164,723
242,582
425,965
204,014
221,951
860
222,811
12,669
324
6,539
(115)
253
1,327
2,069
23,066
42,847
27,507
3,062
—
73,416
172,461
36,372
136,089
(27,165)
(27,165)
(24,677)
Net income attributable to common stockholders
$
172,838 $
150,979 $
111,412
Earnings per common share:
Basic earnings per common share
Diluted earnings per common share
$
$
15.97 $
15.81 $
14.00 $
13.87 $
10.36
10.27
The accompanying notes are an integral part of these consolidated financial statements.
121
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income/(loss):
Net unrealized gains/(losses) on available-for-sale securities
Net changes in held-to-maturity securities
Net unrealized (losses)/gains on cash flow hedges
Other comprehensive income/(loss) before tax
Income tax (expense)/benefit related to other comprehensive income/(loss)
Other comprehensive income/(loss) net of tax
Comprehensive income
For the Years Ended December 31,
2023
2022
2021
(in thousands)
$
200,003 $
178,144 $
136,089
59,640
(31,750)
(14,348)
13,542
(2,844)
10,698
(137,506)
259
68,012
(69,235)
14,539
(54,696)
8,867
(8,451)
22,084
22,500
(4,724)
17,776
$
210,701 $
123,448 $
153,865
The accompanying notes are an integral part of these consolidated financial statements.
122
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Accumulated
Additional
Other
Preferred Stock
Common Stock
Paid-In
Comprehensive Retained
Total
Shares
Amount
Shares
Amount
Capital
Income/(Loss)
Earnings
Equity
(in thousands)
Balance as of December 31, 2020
14,980 $ 363,204
10,737 $ 10,737 $ 122,899 $
(13,923) $ 515,018 $ 997,935
Net Income
Other comprehensive income, net of tax
Cash dividends:
Preferred stock
Common stock (cash dividend of $0.88 per share)
Issuance of Series G Preferred Stock
Issuance of Class C Common Stock
Stock-based compensation cost
Other stock-based award activity
Balance as of December 31, 2021
Net Income
Other comprehensive loss, net of tax
Cash dividends:
Preferred stock
Common stock (cash dividend of $0.95 per share)
Issuance of Class C Common Stock
Stock-based compensation cost
Other stock-based award activity
Balance as of December 31, 2022
Net Income
Other comprehensive income, net of tax
Cash dividends:
Preferred stock
Common stock (cash dividend of $1.10 per share)
Issuance of Class C Common Stock
Stock-based compensation cost
Other stock-based award activity
Balance as of December 31, 2023
—
—
—
—
—
—
—
—
5,000
121,327
—
—
—
—
—
—
—
—
—
—
—
29
—
—
—
—
—
—
—
29
—
—
—
—
—
—
—
116
4,310
(1,332)
—
136,089
136,089
17,776
—
17,776
—
—
—
—
—
—
(24,677)
(24,677)
(37,873)
(37,873)
—
—
—
—
121,327
145
4,310
(1,332)
19,980 $ 484,531
10,766 $ 10,766 $ 125,993 $
3,853 $ 588,557 $ 1,213,700
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
35
—
—
—
—
—
—
35
—
—
—
—
—
—
190
4,625
(1,869)
—
178,144
178,144
(54,696)
—
(54,696)
—
—
—
—
—
(27,165)
(27,165)
(41,006)
(41,006)
—
—
—
225
4,625
(1,869)
19,980 $ 484,531
10,801 $ 10,801 $ 128,939 $
(50,843) $ 698,530 $ 1,271,958
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
41
—
—
—
—
—
—
41
—
—
—
—
—
—
233
6,801
(3,054)
—
200,003
200,003
10,698
—
10,698
—
—
—
—
—
(27,165)
(27,165)
(47,652)
(47,652)
—
—
—
274
6,801
(3,054)
19,980 $ 484,531
10,842 $ 10,842 $ 132,919 $
(40,145) $ 823,716 $ 1,411,863
The accompanying notes are an integral part of these consolidated financial statements.
123
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income
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 Securities
Amortization of debt premiums, discounts, and issuance costs
Net change in fair value of trading securities, hedged items, and financial derivatives
Gain on the sale of available-for-sale investment securities
Gain on the sale of mortgage loans
Total provision for/(release of) allowance for losses
Excess tax benefits related to stock-based awards
Deferred income taxes
Stock-based compensation expense
Proceeds from repayment of loans purchased as held for sale
Net change in:
Interest receivable
Guarantee and commitment fees receivable
Other assets
Accrued interest payable
Custodial deposit liability
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of available-for-sale and held-to-maturity investment securities
Purchases of other investment securities
Purchases of Farmer Mac Guaranteed Securities and USDA Securities
Purchases of loans held for investment
Purchases of defaulted loans
Proceeds from repayment of available-for-sale and held-to-maturity investment securities
Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities
Proceeds from repayment of loans purchased as held for investment
Proceeds from sale of loans previously classified as held for investment
Proceeds from sale of available-for-sale investment securities
Proceeds from sale of Farmer Mac Guaranteed Securities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of discount notes
Proceeds from issuance of medium-term notes
Proceeds from third parties from issuance of debt securities of consolidated trusts
Payments to redeem discount notes
Payments to redeem medium-term notes
Payments to third parties on debt securities of consolidated trusts
Proceeds from common stock issuance
Proceeds from preferred stock issuance, net of stock issuance costs
Tax payments related to share-based awards
Dividends paid on common and preferred stock
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Cash paid during the period for:
Interest
Income taxes
Non-cash activity:
Loans securitized as Farmer Mac Guaranteed Securities
Loans held for investment transferred to consolidated trusts
Reclassification of loans held for investment to loans held for sale
For the Years Ended
2023
2022
2021
(in thousands)
$
200,003 $
178,144 $
136,089
(17,025)
31,421
78,249
—
—
1,136
523
6,690
6,801
24,378
(63,944)
(1,700)
54,369
63,954
(10,778)
1,721
375,798
(1,573,707)
(3,145)
(4,453,284)
(2,164,053)
—
1,397,096
3,478,124
1,363,588
—
—
—
(1,955,381)
720
19,656
689,998
—
—
806
101
12,406
4,624
33,311
(63,777)
1,043
(126,054)
58,884
(7,666)
7,075
809,271
(2,472,056)
(2,443)
(5,275,733)
(2,592,924)
—
1,440,201
4,429,364
1,321,989
9,000
—
99,643
(3,042,959)
17,314
6,780
205,701
(253)
(6,539)
(2,187)
292
(1,630)
4,311
46,968
4,446
(34)
(9,830)
(9,526)
44,955
(445)
436,412
(2,004,911)
(1,229)
(4,380,901)
(2,916,493)
(8,713)
1,740,000
4,027,726
1,889,408
301,393
257,524
—
(1,096,196)
49,291,165
8,274,618
222,188
(48,138,591)
(7,862,450)
(102,045)
233
—
(3,013)
(74,817)
1,607,288
27,705
861,002
888,707 $
52,470,273
9,031,116
258,198
(54,085,418)
(5,192,159)
(226,291)
192
—
(1,835)
(68,171)
2,185,905
(47,783)
908,785
861,002 $
61,112,365
11,173,147
—
(60,743,066)
(10,586,370)
(480,272)
117
121,327
(1,305)
(61,315)
534,628
(125,156)
1,033,941
908,785
$
582,960
48,000
36,497
281,027
—
269,327
33,800
162,875
297,713
—
198,593
36,300
113,175
—
301,551
The accompanying notes are an integral part of these consolidated financial statements.
124
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION
The Federal Agricultural Mortgage Corporation ("Farmer Mac") is a stockholder-owned, federally
chartered instrumentality of the United States established under Title VIII of the Farm Credit Act of 1971,
as amended (12 U.S.C. §§ 2279aa et seq.), which is sometimes referred to as Farmer Mac's
charter. Farmer Mac was originally created by the United States Congress to provide a secondary market
for a variety of loans made to borrowers in rural America. This secondary market is designed to increase
the availability of long-term credit at stable interest rates to America's rural communities and to provide
rural borrowers with the benefits of capital markets pricing and product innovation.
Farmer Mac's secondary market activities include:
•
•
•
•
•
purchasing eligible loans directly from lenders (including participation interests, syndicated
notes, revolving and non-revolving credit facilities, and unfunded commitments to make
advances on loans);
guaranteeing and purchasing securities issued by lenders and other financial institutions that
are secured by pools of eligible loans (Farmer Mac refers to these securities as "AgVantage," a
registered trademark of Farmer Mac);
issuing and guaranteeing securities that represent interests in, or obligations secured by, pools
of eligible loans (together with AgVantage, Farmer Mac refers to these securities as "Farmer
Mac Guaranteed Securities");
servicing (including as master servicer) eligible loans purchased or securitized by Farmer Mac;
and
providing long-term standby purchase commitments ("LTSPCs") for eligible loans.
Farmer Mac conducts its secondary market activities through two lines of business — Agricultural
Finance and Rural Infrastructure Finance. For more information about those lines of business and the
segments within them, see Note 14 - Business Segments.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Farmer Mac conform with accounting principles generally
accepted in the United States of America ("generally accepted accounting principles" or "GAAP"). The
preparation of consolidated financial statements in conformity with generally accepted accounting
principles requires management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the
consolidated financial statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following are the significant accounting
policies that Farmer Mac follows in preparing and presenting its consolidated financial statements:
(a) 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 Securities included in the
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Agricultural Finance line of business. The consolidated financial statements also include the accounts of
Variable Interest Entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary.
(b) Cash and Cash Equivalents
Farmer Mac considers cash on hand and highly liquid investment securities with maturities at the time of
purchase of three months or less to be cash equivalents.
(c) Investment Securities, Farmer Mac Guaranteed Securities, and USDA Securities
Securities for which Farmer Mac has the intent and ability to hold to maturity are classified as held-to-
maturity and are carried at amortized cost. Securities for which Farmer Mac does not have the positive
intent and ability to hold to maturity are classified as available-for-sale or trading and are carried at
estimated fair value. Unrealized gains and losses on available-for-sale securities are reported as a
component of accumulated other comprehensive income in stockholders' equity. For securities classified
as trading, unrealized gains and losses are included in earnings. Gains and losses on the sale of available-
for-sale and trading securities are determined using the specific identification cost method.
Farmer Mac determines the fair value of investment securities using quoted market prices, when
available. Farmer Mac determines the fair values of certain investment securities for which quoted market
prices are not available, Farmer Mac Guaranteed Securities, and USDA Securities based on the present
value of the associated expected future cash flows. In estimating the present value of the expected future
cash flows, management is required to make estimates and assumptions. The key estimates and
assumptions include discount rates and collateral repayment rates. Premiums, discounts, and other
deferred costs are amortized to interest income using the effective interest method.
Farmer Mac generally receives compensation when loans with yield maintenance provisions underlying
Farmer Mac Guaranteed Securities prepay. These yield maintenance payments mitigate Farmer Mac's
exposure to reinvestment risk and are calculated such that, when reinvested with the prepaid principal,
they should generate substantially the same cash flows that would have been generated had the loans not
prepaid. Yield maintenance payments are recognized as interest income in the consolidated statements of
operations upon receipt.
Interest Income Recognition on Interest-Only Farmer Mac Guaranteed Securities ("IO-FMGS")
Farmer Mac recognizes interest income for its IO-FMGS by applying the effective yield methodology
required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or
can be contractually prepaid or otherwise settled in such a way that Farmer Mac would not recover
substantially all of its recorded investment. The amount of periodic interest income recognized is
determined by applying the IO-FMGS effective interest rate to its amortized cost basis (or “reference
amount”). At the time of acquisition, the effective interest rate is calculated by solving for the single
discount rate that equates the present value of Farmer Mac's best estimate of the amount and timing of the
cash flows expected to be collected from the IO-FMGS to its purchase cost. To prepare its best estimate of
cash flows expected to be collected, Farmer Mac develops a number of assumptions about the future
performance of the pool of mortgage loans that serve as collateral, including assumptions about the timing
and amount of prepayments and credit losses. In each subsequent quarterly reporting period, the amount
and timing of cash flows expected to be collected from the IO-FMGS are re-estimated based upon current
information and events.
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(d) Loans
Loans for which Farmer Mac has the positive intent and ability to hold for the foreseeable future are
classified as held for investment and reported at their unpaid principal balance, net of unamortized
purchase discounts or premiums. Loans for which Farmer Mac does not have the positive intent and
ability to hold for the foreseeable future are classified as held for sale and reported at the lower of cost or
fair value determined on a pooled basis. Farmer Mac de-recognizes sold loans, and recognizes any
associated gain or loss, when they have been legally isolated from Farmer Mac, the buyer has the right to
pledge or exchange them, and Farmer Mac does not maintain effective control over them. When Farmer
Mac consolidates a trust, it recognizes the loans underlying the trust in the consolidated balance sheets as
"Loans held for investment in consolidated trusts, at amortized cost." See Note 2(o) for more information
on the accounting policy related to consolidation.
Non-accrual Loans
Non-accrual loans are loans for which it is probable that Farmer Mac will be unable to collect all amounts
due according to the contractual terms of the loan agreement and include all loans 90 days or more past
due. When a loan becomes 90 days past due, interest accrual on the loan is discontinued and interest
previously accrued is reversed against interest income in the current period. The interest on such loans is
accounted for on the cash basis until a loan qualifies for return to accrual status. Loans are returned to
accrual status when all the principal and interest payments contractually due are collected and certain
performance criteria are met.
(e) Securitization
Securitization involves the transfer of financial assets to another entity in exchange for cash and/or
beneficial interests in the assets transferred. Farmer Mac or third parties transfer agricultural mortgage
loans, Rural Infrastructure loans, or USDA securities into trusts that are used as vehicles for the
securitization of the transferred financial assets. The trusts issue Farmer Mac Guaranteed Securities that
are beneficial interests in the assets of the trusts, to either Farmer Mac or third-party investors. Farmer
Mac guarantees principal and interest payments on the securities issued by the trusts and receives
guarantee fees as compensation for its guarantee. Farmer Mac recognizes guarantee fees on the accrual
basis over the terms of the Farmer Mac Guaranteed Securities, which generally coincide with the terms of
the underlying loans. As such, no guarantee fees are unearned at the end of any reporting period.
Farmer Mac is required to perform under its guarantee obligation when the underlying loans for the off-
balance sheet Farmer Mac Guaranteed Securities do not make their scheduled installment payments. When
a loan underlying a Farmer Mac Guaranteed Security (other than Farmer Mac Guaranteed Securities
structured as real estate mortgage investment conduits under 26 U.S.C. §§ 860A-860G) becomes 90 days
or more past due, Farmer Mac may, in its sole discretion, repurchase the loan from the trust and generally
does repurchase such loans, thereby reducing the principal balance of the outstanding Farm & Ranch
Guaranteed Security. When Farmer Mac purchases a delinquent loan underlying a Farmer Mac
Guaranteed Security, Farmer Mac stops accruing the guarantee fee upon loan purchase.
If Farmer Mac repurchases a loan that is collateral for a Farmer Mac Guaranteed Security, Farmer Mac
would have the right to enforce the terms of the loan, and in the event of a default, would have access to
the underlying collateral. Farmer Mac typically recovers its investment in the defaulted loans purchased
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either through borrower payments, loan payoffs, payments by third parties, or foreclosure and sale of the
collateral securing the loans.
Farmer Mac has recourse to the USDA for any amounts advanced for the timely payment of principal and
interest on Farmer Mac Guaranteed USDA Securities. That recourse is the USDA guarantee, a full-faith-
and-credit obligation of the United States that becomes enforceable if a lender fails to repurchase the
USDA-guaranteed portion from its owner within 30 days after written demand from the owner when
(a) the borrower under the guaranteed loan is in default not less than 60 days in the payment of any
principal or interest due on the USDA-guaranteed portion, or (b) the lender has failed to remit to the
owner the payment made by the borrower on the USDA-guaranteed portion or any related loan subsidy
within 30 days after the lender's receipt of the payment.
Transfers of Financial Assets
Farmer Mac accounts for transfers of financial assets as sales when it has surrendered control over the
related assets. Whether control has been relinquished requires, among other things, an evaluation of
relevant legal considerations and an assessment of the nature and extent of Farmer Mac's continuing
involvement with the assets transferred. Gains and losses stemming from transfers reported as sales are
included in “Gain on sale of mortgage loans” in the accompanying consolidated statements of operations.
Assets obtained and liabilities incurred in connection with transfers reported as sales are initially
recognized in the consolidated balance sheets at fair value.
In fourth quarter 2021, Farmer Mac executed a structured securitization of a $299.4 million pool of Farm
& Ranch loans. The securitization consisted of two classes of securities, Class A and Class B. The Class A
securities are backed by 92.5% of the pool and is guaranteed by Farmer Mac. The Class B Tranche is
backed by the remaining 7.5% of the pool. Credit losses on the entire pool are first allocated to the Class B
securities. As a result of the transaction, Farmer Mac recognized the following:
1. A guarantee asset and liability related to the guarantee fees and the obligation to stand ready to
perform on the guarantee to the Class A security holders.
2. A servicing asset related to Farmer Mac’s role as Master and Central Servicer. Farmer Mac will
earn a related servicing fee.
3. A retained interest-only strip of a Farmer Mac Guaranteed Security (IO-FMGS) security.
The above assets and liabilities were initially recorded on the consolidated balance sheets at fair value.
For more information on fair value measurement see Footnote 13.
The securitization trust used to effect this transaction was a variable interest entity that Farmer Mac does
not consolidate. See Table 2.4 below for more information about these trusts.
Gains or losses arising from securitization are recorded as the difference between the transferred loans’
carrying values and the sum of (a) the initial fair value of the assets or liabilities received and (b) net cash
proceeds. For the year ended December 31, 2021, Farmer Mac recorded $6.5 million in gains attributable
to securitization activity. These gains were reported in “Gains on sale of mortgage loans” in the
consolidated statements of operations. Farmer Mac recorded no gains attributable to securitization activity
for both the years ended December 31, 2023 and 2022.
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(f) 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, not for trading or speculative purposes. Farmer Mac enters into interest rate swap contracts to
adjust the characteristics of its short-term debt to match more closely the cash flow and duration
characteristics of its longer-term loans and other assets, and also to adjust the characteristics of its long-
term debt to match more closely the cash flow and duration characteristics of its short-term assets, thereby
reducing interest rate risk and, often times, deriving an overall lower effective cost of borrowing than
would otherwise be available to Farmer Mac in the conventional debt market.
Accounting for financial derivatives differs depending on whether a derivative is designated in a hedge
accounting relationship. Derivative instruments designated in fair value hedge accounting relationships
mitigate exposure to changes in the fair value of assets or liabilities. Derivative instruments designated in
cash flow hedge accounting relationships mitigate exposure to the variability in expected future cash flows
or other forecasted transactions. In order to qualify for fair value or cash flow hedge accounting treatment,
documentation must indicate the intention to designate the derivative as a hedge of a specific asset, or
liability, or a future cash flow. Effectiveness of the hedge is assessed before the end of the quarter of
inception and monitored over the life of the hedging relationship.
Changes in the fair values of financial derivatives not designated as cash flow or fair value hedges were
reported in "Gains on financial derivatives" in the consolidated statements of operations. For financial
derivatives designated in fair value hedge accounting relationships, changes in the fair values of hedged
items related to the risk being hedged are reported in the same interest income or expense line item as
income or expense from the hedged financial asset or liability in the consolidated statements of operations.
Interest accruals on derivatives designated in fair value hedge relationships are also recorded in "Net
interest income" in the consolidated statements of operations. For financial derivatives designated in cash
flow hedge relationships, the unrealized gain or loss on the derivative is recorded in other comprehensive
income. 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.
Collateralized Agreements and Offsetting Arrangements
Over-the-Counter Derivatives
Farmer Mac uses master netting and collateral agreements to reduce our credit risk exposure to our over-
the-counter derivative ("OTC") counterparties for interest-rate swap derivatives. Master netting
agreements provide for the netting of amounts receivable and payable from an individual counterparty, as
well as posting of collateral in the form of cash depending on which party is in a liability position.
129
Farmer Mac has master netting agreements in place with most of our OTC derivative counterparties. The
market value of each counterparty's derivatives outstanding is calculated to determine the amount of our
net credit exposure, which is equal to the market value of derivatives in net gain position by counterparty
after giving consideration to collateral posted. In the event a counterparty defaults on its obligation under
the derivatives agreement and the default is not remedied in the manner prescribed by the agreement,
Farmer Mac has a right under the agreement to sell the collateral. As a result, Farmer Mac's use of master
netting and collateral agreements reduce our exposure to our counterparties in the event of default.
Cleared Derivatives
The majority of Farmer Mac's interest-rate swaps are subject to the central clearing requirement. Changes
in the value of cleared derivatives are settled daily via payments made through the clearinghouse. Farmer
Mac nets the exposure by clearinghouse and clearing member.
See Notes 6 and 13 for more information on financial derivatives.
(g) Notes Payable
Debt issuance costs and premiums and discounts are deferred and amortized to interest expense using the
effective interest method over the contractual life of the related debt.
(h) Allowance for Losses and Reserve for Losses
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. Farmer Mac's reserve for credit 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 credit 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"). Farmer Mac also maintains a
reserve for credit 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 Infrastructure Finance line of business. Farmer
Mac measures its expected credit losses for the expected life of all financial instruments, including its
Rural Infrastructure Finance 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 and renewable industries.
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
130
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 from the allowance for losses when either a) a loan, or a portion of a
loan, is deemed uncollectible; or b) a loss has been confirmed through the receipt of assets, generally the
underlying collateral, in full satisfaction of the loan. The charge-off 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 includes the following key components:
• An economic model for each portfolio, including Agricultural Finance loans (Corporate AgFinance
and Farm & Ranch), Rural Infrastructure Finance loans (Rural Utilities and Renewable Energy),
and AgVantage Securities;
• 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.
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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.
(i) 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 unit awards. The following schedule reconciles
basic and diluted EPS for the years ended December 31, 2023, 2022 and 2021:
Table 2.1
Basic EPS
Net income attributable to
common stockholders
Effect of dilutive securities(1)
For the Years Ended December 31,
2023
Weighted
-Average
Shares
Net
Income
$ per
Share
Net
Income
2022
Weighted
-Average
Shares
$ per
Share
Net
Income
2021
Weighted
-Average
Shares
$ per
Share
(in thousands, except per share amounts)
$ 172,838
10,829 $ 15.97 $ 150,979
10,791 $ 14.00 $ 111,412
10,758 $ 10.36
SARs and restricted stock units
—
108
(0.16)
—
92
(0.13)
—
88
(0.09)
Diluted EPS
(1)
$ 172,838
10,937 $ 15.81 $ 150,979
10,883 $ 13.87 $ 111,412
10,846 $ 10.27
For years ended December 31, 2023, 2022 and 2021, SARs and restricted stock units of 32,683, 32,448, and 39,326 respectively, were outstanding but not
included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the years ended December 31, 2023, 2022
and 2021, contingent shares of unvested restricted stock units of 30,648, 18,535, and 18,183 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.
132
(j) Income Taxes
Deferred federal income tax assets and liabilities are established for temporary differences between
financial and taxable income and are measured using the current enacted statutory tax rate. Income tax
expense is equal to the income taxes payable in the current year plus the net change in the deferred tax
asset or liability balance.
Deferred tax assets are measured at rates enacted for the periods in which they are expected to be realized.
To the extent rates change, the deferred tax asset will be adjusted to reflect the new rate. A increase in
corporate tax rates would result in an increase in the value of the deferred tax asset.
Farmer Mac evaluates its tax positions quarterly to identify and recognize any liabilities related to
uncertain tax positions in its federal income tax returns. Farmer Mac uses a two-step approach in which
income tax benefits are recognized if, based on the technical merits of a tax position, it is more likely than
not (a probability of greater than 50%) that the tax position would be sustained upon examination by the
taxing authority, which includes all related appeals and litigation process. The amount of tax benefit
recognized is then measured at the largest amount of tax benefit that is greater than 50% likely to be
realized upon settlement with the taxing authority, considering all information available at the reporting
date. Farmer Mac's policy for recording interest and penalties associated with uncertain tax positions is to
record them as a component of income tax expense. Farmer Mac establishes a valuation allowance for
deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be
realized. In determining its deferred tax asset valuation allowance, Farmer Mac considered its taxable
income of the appropriate character (for example, ordinary income or capital gain) within the carryback
and carryforward periods available under the tax law and the impact of possible tax planning strategies.
(k) Stock-Based Compensation
Farmer Mac accounts for its stock-based employee compensation plans using the grant date fair value
method of accounting. Farmer Mac measures the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award determined using the Black-
Scholes option pricing model. The cost is recognized over the period during which an employee is
required to provide service in exchange for the award. For performance-based grants, Farmer Mac
recognizes the grant-date fair value over the vesting period as long as it remains probable that the
performance conditions will be met. If the service or performance conditions are not met, Farmer Mac
reverses previously recognized compensation expense upon forfeiture.
Farmer Mac recognized $6.8 million, $4.6 million, and $4.3 million of compensation expense related to
SARs and non-vested restricted stock unit awards for 2023, 2022, and 2021, respectively.
(l) 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.
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The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of
tax, by component for the years ended December 31, 2023, 2022, and 2021.
Table 2.2
Available-for-
Sale Securities
Held-to-Maturity
Securities
Cash Flow
Hedges
Total
(in thousands)
Balance as of January 1, 2021
$
(13,937) $
22,829 $
(22,815)
Other comprehensive income before reclassifications
Amounts reclassified from AOCI
Net comprehensive income/(loss)
9,114
(2,109)
7,005
—
(6,676)
(6,676)
11,602
5,845
17,447
Balance as of December 31, 2021
$
(6,932) $
16,153 $
(5,368) $
Other comprehensive (loss)/income before reclassifications
(108,624)
Amounts reclassified from AOCI
Net comprehensive (loss)/income
(5)
(108,629)
—
204
204
54,688
(959)
53,729
Balance as of December 31, 2022
$
(115,561) $
16,357 $
48,361 $
Other comprehensive income/(loss) before reclassifications
Amounts reclassified from AOCI
Net comprehensive income/(loss)
47,114
—
47,114
(25,199)
118
(25,081)
4,973
(16,308)
(11,335)
Balance as of December 31, 2023
$
(68,447) $
(8,724) $
37,026 $
(13,923)
20,716
(2,940)
17,776
3,853
(53,936)
(760)
(54,696)
(50,843)
26,888
(16,190)
10,698
(40,145)
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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 years ended December 31,
2023, 2022, and 2021:
Table 2.3
Other comprehensive income:
Available-for-sale-
securities:
Unrealized holding gains/
(losses) on available-for-
sale securities
Less reclassification
adjustments included in:
Net interest income(1)
Gains on sale of
available-for-sale
investment securities(2)
Other income(2)
For the Years Ended December 31,
2023
2022
2021
Before
Tax
Provision
(Benefit)
After
Tax
Before
Tax
Provision
(Benefit)
After
Tax
Before
Tax
Provision
(Benefit)
After
Tax
(in thousands)
$ 59,640 $ 12,526 $ 47,114 $ (137,500) $ (28,876) $ (108,624) $ 11,537 $ 2,423 $ 9,114
—
—
—
—
—
—
—
—
—
—
—
—
(2,333)
(490)
(1,843)
—
(6)
—
(1)
—
(253)
(5)
(84)
(53)
(18)
(200)
(66)
Total
$ 59,640 $ 12,526 $ 47,114 $ (137,506) $ (28,877) $ (108,629) $ 8,867 $ 1,862 $ 7,005
Held-to-maturity securities:
Change in fair value(3)
Less reclassification
adjustments included in:
Net interest income(4)
$ (31,898) $ (6,699) $ (25,199) $
— $
— $
— $
— $
— $ —
148
30
118
259
55
204
(8,451)
(1,775)
(6,676)
Total
$ (31,750) $ (6,669) $ (25,081) $
259 $
55 $
204 $ (8,451) $ (1,775) $ (6,676)
Cash flow hedges
Unrealized gains on cash
flow hedges
Less reclassification
adjustments included in:
Net interest income(5)
$ 6,295 $ 1,322 $ 4,973 $ 69,225 $ 14,537 $ 54,688 $ 14,685 $ 3,083 $ 11,602
(20,643)
(4,335) (16,308)
(1,213)
(254)
(959)
7,399
1,554
5,845
Total
$ (14,348) $ (3,013) $ (11,335) $ 68,012 $ 14,283 $ 53,729 $ 22,084 $ 4,637 $ 17,447
Other comprehensive
income/(loss)
$ 13,542 $ 2,844 $ 10,698 $ (69,235) $ (14,539) $ (54,696) $ 22,500 $ 4,724 $ 17,776
(1)
(2)
(3)
(4)
(5)
Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.
Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.
Represents the accumulated unrealized loss on the AgVantage Securities transferred from available-for-sale to held-to-maturity.
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.
Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.
(m) Guarantees
Farmer Mac accounts for its LTSPCs as guarantees. LTSPCs and securitization trusts where Farmer Mac
is not the primary beneficiary result in the creation of guarantee obligations for Farmer Mac. Farmer Mac
records, at the inception of a guarantee or LTSPC, a liability for the fair value of its obligation to stand
ready to perform under the terms of each guarantee or LTSPC and an asset that is equal to the fair value of
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the fees that will be received over the life of each guarantee or LTSPC. The fair values of the guarantee
obligation and asset at inception 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. Because the cash flows of these
instruments may be interest rate path dependent, these values and projected discount rates are derived
using a Monte Carlo simulation model. The guarantee obligation and corresponding asset are later
amortized into guarantee and commitment fee income in relation to the decrease in the unpaid principal
balance on the underlying Agricultural Finance real estate mortgage loans and Rural Infrastructure
Finance loans.
See Note 2(h) for Farmer Mac's policy for estimating probable losses for LTSPCs.
(n) Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In determining fair value, Farmer Mac
uses various valuation approaches, including market and income based approaches. When available, the
fair value of Farmer Mac's financial instruments is based on quoted market prices, valuation techniques
that use observable market-based inputs, or unobservable inputs that are corroborated by market
data. Pricing information obtained from third parties is internally validated for reasonableness before use
in the consolidated financial statements.
Fair value measurements related to financial instruments that are reported at fair value in the consolidated
financial statements each period are referred to as recurring fair value measurements. Fair value
measurements related to financial instruments that are not reported at fair value each period but are subject
to fair value adjustments in certain circumstances are referred to as nonrecurring fair value measurements.
Fair Value Classification and Transfers
The fair value hierarchy ranks the quality and reliability of the information used to determine fair
values. The hierarchy gives highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs. The following three levels are used to
classify fair value measurements:
Level 1
Level 2
Level 3
Unadjusted quoted prices in active markets that are accessible at the measurement date
for identical, unrestricted assets or liabilities.
Quoted prices in markets that are not active or financial instruments for which all
significant inputs are observable, either directly or indirectly.
Prices or valuations that require unobservable inputs that are significant to the fair value
measurement.
Farmer Mac performs a detailed analysis of the assets and liabilities carried at fair value to determine the
appropriate level based on the transparency of the inputs used in the valuation techniques. In certain cases,
the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such
cases, an instrument's level within the fair value hierarchy is based on the lowest level of input that is
significant to the fair value measurement. Farmer Mac's assessment of the significance of a particular
input to the fair value measurement of an instrument requires judgment and consideration of factors
136
specific to the instrument. While Farmer Mac believes its valuation methods are appropriate and
consistent with those of other market participants, using different methodologies or assumptions to
determine fair value could result in a materially different estimate of fair value for some financial
instruments.
The following is a description of the fair value techniques used for instruments measured at fair value as
well as the general classification of those instruments under the valuation hierarchy described above.
Recurring Fair Value Measurements and Classification
Available-for-Sale and Trading Investment Securities
The fair value of investments in U.S. Treasuries is based on unadjusted quoted prices for identical
securities in active markets. Farmer Mac classifies these fair value measurements as "Level 1."
For a significant portion of Farmer Mac's investment portfolio, including most asset-backed securities,
senior agency debt securities, and Government/GSE guaranteed mortgage-backed securities, fair value is
primarily determined using a reputable and nationally recognized third-party pricing service. The prices
obtained are non-binding and generally representative of recent market trades on similar securities. The
fair value of certain asset-backed and Government guaranteed mortgage-backed securities are estimated
based on quotations from brokers or dealers. Farmer Mac corroborates its primary valuation source by
obtaining a secondary price from another independent third-party pricing service. Farmer Mac classifies
these fair value measurements as "Level 2."
For certain investment securities that are thinly traded or not quoted, Farmer Mac estimates fair value
using internally-developed models that employ a discounted cash flow approach. Farmer Mac maximizes
the use of observable market data, including prices of financial instruments with similar maturities and
characteristics, interest rate yield curves, measures of volatility, and prepayment rates. Farmer Mac
generally considers a market to be thinly traded or not quoted if the following conditions exist: (1) there
are few transactions for the financial instruments; (2) the prices in the market are not current; (3) the price
quotes vary significantly either over time or among independent pricing services or dealers; or (4) there is
limited availability of public market information. Farmer Mac classifies these fair value measurements as
"Level 3."
Available-for-Sale and Trading Farmer Mac Guaranteed Securities and USDA Securities
Farmer Mac estimates the fair value of its Farmer Mac Guaranteed Securities and USDA Securities by
discounting the projected cash flows of these instruments at discount rates commensurate with the risks
involved. 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. Farmer Mac classifies these fair value measurements as Level
3 because there is limited market activity and therefore require the use of significant unobservable inputs
in estimating the fair value.
Financial Derivatives
The fair value of exchange-traded U.S. Treasury futures is based on unadjusted quoted prices for identical
financial instruments. Farmer Mac classifies these fair value measurements as Level 1.
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Farmer Mac's derivative portfolio consists primarily of interest rate swaps and forward sales contracts on
the debt of other GSEs. Farmer Mac estimates the fair value of these financial instruments primarily based
upon a third-party accounting and valuation system. The third-party accounting and valuation system
determines the fair value of the interest rate swaps using the market standard methodology of netting the
discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or
payments). Farmer Mac also incorporates credit valuation adjustments to appropriately reflect both its own
nonperformance risk and the respective counterparty’s nonperformance risk in the fair value
measurements of its derivatives. The credit valuation adjustments associated with Farmer Mac’s
derivatives utilize model-derived credit spreads, which are Level 3 inputs. As of December 31, 2023,
Farmer Mac has assessed the significance of the impact of the credit valuation adjustments on the overall
valuation of these interest rate contracts and has determined that the credit valuation adjustments were not
significant to the overall valuation of its derivative portfolio. As a result, Farmer Mac classifies these
derivative instruments as Level 2 due to the observable nature of the significant inputs utilized.
Farmer Mac also internally values its derivative portfolio using a discounted cash flow valuation technique
and obtains counterparty valuations to corroborate management's estimate of fair value, which is based
upon a third-party accounting and valuation system.
See Note 13 for more information about fair value measurement.
(o) Consolidation of Variable Interest Entities
Farmer Mac has interests in various entities that are considered to be VIEs. These interests include
investments in securities issued by VIEs, such as Farmer Mac agricultural mortgage-backed securities
created pursuant to Farmer Mac's securitization transactions and mortgage- and asset-backed trusts that
Farmer Mac did not create. The consolidation model uses a qualitative evaluation that requires
consolidation of an entity when the reporting enterprise both: (1) has the power to direct matters which
significantly impact the activities and success of the entity, and (2) has exposure to benefits and/or losses
that could potentially be significant to the entity. The reporting enterprise that meets both these conditions
is deemed the primary beneficiary of the VIE. Upon consolidation of a VIE, Farmer Mac accounts for the
incremental assets and liabilities initially at their carrying amounts.
The VIEs in which Farmer Mac has a variable interest are limited to securitization trusts. Given the
interests Farmer Mac holds, the major factor in determining if Farmer Mac is the primary beneficiary is
whether Farmer Mac has the power to direct the activities of the trust that potentially have the most
significant impact on the economic performance of the trust. Generally, the ability to make decisions
regarding default mitigation is evidence of that power. Farmer Mac determined that it is the primary
beneficiary for the securitization trusts related to most Agricultural Finance securitization transactions
because of its rights as guarantor under both programs to control the default mitigation activities of the
trusts. For certain securitization trusts created when loans subject to LTSPCs were converted to Farmer
Mac Guaranteed Securities, Farmer Mac determined that it was not the primary beneficiary since the
power to make decisions regarding default mitigation was shared among unrelated parties. For these trusts,
the shared power provisions are substantive with respect to decision-making power and relate to the same
activity (i.e., default mitigation). For similar securitization transactions where the power to make decisions
regarding default mitigation was shared with a related party, Farmer Mac determined that it was the
primary beneficiary because the applicable accounting guidance does not permit parties within a related
138
party group to conclude that the power is shared. In the event that a related party status changes,
consolidation or deconsolidation of these securitization trusts could occur.
For those trusts that Farmer Mac is the primary beneficiary, the assets and liabilities are presented on the
consolidated balance sheets as "Loans held for investment in consolidated trusts, at amortized cost" and
"Debt securities of consolidated trusts held by third parties," respectively. These assets can only be used to
satisfy the obligations of the related trust.
For those trusts in which Farmer Mac has a variable interest but is not the primary beneficiary, Farmer
Mac's interests are presented as either "Farmer Mac Guaranteed Securities," "USDA Securities," or
"Investment securities" on the consolidated balance sheets. Farmer Mac's involvement in VIEs classified
as Farmer Mac Guaranteed Securities or USDA Securities include securitization trusts under the
Agricultural Finance line of business. In the case of USDA guaranteed trusts, Farmer Mac is not
determined to be the primary beneficiary because it does not have the decision-making power over default
mitigation activities. Based on the USDA's program authority over the servicing and default mitigation
activities of the USDA guaranteed portions of loans, Farmer Mac believes that the USDA has the power to
direct the activities that most significantly impact the trust's economic performance. Farmer Mac does not
have exposure to losses that could be significant to the trust and there are no triggers that would result in
Farmer Mac superseding the USDA's authority with regard to directing the activities of the trust. For VIEs
classified as investment securities, which include auction-rate certificates, asset-backed securities, and
government-sponsored enterprise ("GSE") guaranteed mortgage-backed securities, Farmer Mac is
determined not to be the primary beneficiary because of the lack of voting rights or other powers to direct
the activities of the trust.
In 2021, Farmer Mac executed a structured securitization of a $299.4 million pool of Farm & Ranch loans.
For more information about this securitization, see Note 2(e) - Securitization. The securitization trust used
to effect this transaction was a variable interest entity that Farmer Mac has not consolidated. Farmer Mac
determined that it was not the primary beneficiary of the securitization trust because the subordinate class
majority holder has the unilateral right to remove Farmer Mac as Master Servicer with or without cause.
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The following tables present, by segment, details about the consolidation of VIEs:
Table 2.4
On-Balance Sheet:
Consolidated VIEs:
Consolidation of Variable Interest Entities
As of December 31, 2023
Agricultural
Finance
Treasury
(in thousands)
Total
Loans held for investment in consolidated trusts, at amortized cost
Debt securities of consolidated trusts held by third parties (1)(2)
$
1,432,261 $
— $
1,432,261
1,351,069
—
1,351,069
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value
Maximum exposure to loss (3)
Investment securities:
Carrying value (4)
Maximum exposure to loss (3) (4)
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (3) (5)
46,343
45,952
—
—
46,343
45,952
—
—
3,676,555
3,862,006
3,676,555
3,862,006
452,602
—
452,602
(1)
(2)
(3)
(4)
(5)
Includes borrower remittances of $6.0 million. The borrower remittances had not been passed through to third-party investors as of December 31, 2023.
Includes $87.1 million in unamortized discount related to structured securitization transactions.
Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.
Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related
investments.
The amount under the Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the
primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as
Master Servicer without cause.
140
Consolidation of Variable Interest Entities
As of December 31, 2022
Agricultural
Finance
Treasury
(in thousands)
Total
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost
Debt securities of consolidated trusts held by third parties (1)(2)
Unconsolidated VIEs:
$
1,211,576 $
— $
1,211,576
1,181,948
—
1,181,948
Farmer Mac Guaranteed Securities:
Carrying value
Maximum exposure to loss (3)
Investment securities:
Carrying value (4)
Maximum exposure to loss (3) (4)
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (3) (5)
28,466
31,208
—
—
28,466
31,208
—
—
3,138,619
3,341,427
3,138,619
3,341,427
500,953
—
500,953
(1)
(2)
(3)
(4)
(5)
Includes borrower remittances of $8.1 million. The borrower remittances had not been passed through to third-party investors as of December 31, 2022.
Includes $37.7 million in unamortized discount related to a structured securitization transaction.
Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.
Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related
investments.
The amount under the Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the
primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as
Master Servicer without cause.
(p) Custodial Deposit Liability
Farmer Mac, as a servicer, 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 payment is
contractually 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."
(q) Business Segments
Farmer Mac's Chief Operating Decision Maker ("CODM") – its President and Chief Executive Officer –
reviews financial information of seven operating segments, which are reportable segments. The CODM
reviews the financial information of the seven segments to make decisions about allocating resources and
to assess the financial performance of those segments. The seven reportable segments are: Farm & Ranch,
Corporate AgFinance, Rural Utilities, Renewable Energy, Funding, Investments, and Corporate. The
purpose of the alignment of the company's segments is for the CODM to review and analyze financial
performance according to the type of customer and market rather than according to the type of product
offerings. The financial information for the Funding and Investments segments allow the CODM to
review the results of the company's Treasury activities. All operating expenses are managed at the
141
enterprise level and are reported within the Corporate segment rather than allocated to any of the other
segments.
The operations and financial results of the Farm & Ranch and Corporate AgFinance segments are within
our Agricultural Finance line of business. The Farm & Ranch segment includes the financial results of the
USDA Securities portfolio and Farm & Ranch loans. The Corporate AgFinance segment includes loans
and AgVantage securities to larger and more complex farming operations, agribusinesses focused on food
and fiber processing, and other supply chain production.
The Rural Utilities and Renewable Energy segments are within our Rural Infrastructure Finance line of
business. The Rural Utilities segment includes loans to rural electric generation and transmission
cooperatives, distribution cooperatives, and telecommunications providers, as well as AgVantage
securities secured by those types of loans. The Renewable Energy segment includes loans to rural electric
solar and wind energy projects.
The Funding segment includes the financial results of the company's debt issuance, hedging, asset/liability
management, and capital allocation strategies. The company allocates interest expense to each of the other
segments (except Corporate) using a funds transfer pricing process. That process also allocates the
benefits and costs from the company's funding and hedging strategies to the Funding segment.
The Investments segment includes the financial results of the company's investment portfolio, which is
held for liquidity purposes. Interest expense is allocated to the Investments segment using the same funds
transfer pricing process that is used to allocate interest expense to the other segments.
The Corporate segment includes all of the company's operating expenses, including compensation, general
and administrative expenses, and regulatory fees. The Corporate segment also includes items of other
income and preferred stock dividend expense.
Farmer Mac uses the non-GAAP financial measure "core earnings" to measure corporate economic
performance and develop financial plans because, in management's view, core earnings is a useful
alternative measure in understanding Farmer Mac's economic performance, transaction economics, and
business trends. The main difference between core earnings and net income attributable to common
stockholders is that core earnings excludes the effects of fair value fluctuations, which are not expected to
have a cumulative net impact on financial condition or results of operations reported in accordance with
generally accepted accounting principles if the related financial instruments are held to maturity, as is
generally expected. Core earnings also differs from net income attributable to common stockholders by
excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of
future operating results and that may not reflect the trends and economic financial performance of Farmer
Mac's core business. This corporate economic performance measure may not be comparable to similarly
labeled measures disclosed by other companies.
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. 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; (2) interest income and interest expense
related to consolidated trusts with beneficial interests owned by third parties (single-class), which are
presented on Farmer Mac's consolidated balance sheets as "Loans held for investment in consolidated
142
trusts, at amortized cost"; and (3) the fair value changes of financial derivatives and the corresponding
assets or liabilities designated in a fair value hedge accounting relationship.
(r) New Accounting Standards
Recently Adopted Accounting Guidance
Standard
Description
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.
Date of Adoption
January 1, 2020
Effect on Consolidated Financial
Statements
During the second quarter 2023, Farmer
Mac adopted optional expedients including
those relating to qualifying hedging
relationships and contract modification relief
and, since September 30, 2023, has no
further exposure to LIBOR. To date, these
elections did not have a material effect on
Farmer Mac's financial position, results of
operations, or cash flows. Farmer Mac does
not expect to elect further expedients
through the ending date of December 31,
2024.
ASU 2022-06, Reference
Rate Reform (Topic
848): Deferral of the
Sunset Date of Topic
848
ASU 2022-02, Financial
Instruments-Credit
Losses (Topic 326):
Troubled Debt
Restructurings and
Vintage Disclosures
ASU 2022-01, Fair
Value Hedging -
Portfolio Layer Method
The amendments in this Update deferred the
sunset date in Topic 848 from December 31,
2022 to December 31, 2024.
December 21, 2022 Farmer Mac does not expect to elect further
expedients through the ending date of
December 31, 2024.
January 1, 2023
The adoption of this Update did not have a
material effect on Farmer Mac's financial
position, results of operations, or cash flows.
January 1, 2023
Farmer Mac adopted this guidance as of
January 1, 2023. Farmer Mac does not
currently hedge interest rate risk for single
closed portfolios of financial assets, so
adoption of this guidance had no effect on
Farmer Mac's financial condition, results of
operations, cash flows, or disclosures given
current strategies.
The Update addresses and amends areas
identified by the Financial Accounting
Standards Board as part of its post-
implementation review of the accounting
standard that introduced the current expected
credit losses (“CECL”) model. The
amendments eliminate the accounting
guidance for troubled debt restructurings by
creditors that have adopted the CECL model
and enhance the disclosure requirements for
loan refinancings and restructurings made
with borrowers experiencing financial
difficulty. In addition, the amendments
require disclosure of current-period gross
write offs for financing receivables and net
investment in leases by year of origination in
the vintage disclosures.
The Update introduces the portfolio layer
method, which expands the current single-
layer method to allow multiple hedged layers
of a single closed portfolio under the method
(previously named, last-of-layer method). It
also expands the scope of the portfolio layer
method to include non-prepayable assets,
specifies eligible hedging instruments in a
single-layer hedge, provides additional
guidance on the accounting for and
disclosure of hedge basis adjustments under
the portfolio layer method, specifies how
hedge basis adjustments should be
considered when determining credit losses
for the assets included in the closed portfolio,
and provides that an entity may reclassify
HTM debt securities identified within 30
days of the date of adoption to AFS if the
entity applies portfolio layer method hedging
to those debt securities.
143
Recently Issued Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements
Description
The amendments in this Update require disclosures, on an
annual and interim basis, of significant segment expenses
that are regularly provided to the chief operating decision
maker ("CODM"), as well as the aggregate amount of other
segment items included in the reported measure of segment
profit or loss. This Update also requires that a public entity
disclose the title and position of the CODM and an
explanation of how the CODM uses the reported measure(s)
of segment profit or loss. Public entities will be required to
provide all annual disclosures currently required by Topic
280 in interim periods, and entities with a single reportable
segment are required to provide all the disclosures required
by the amendments in this Update and existing disclosures
in Topic 280. ASU 2023-07 is effective for fiscal years
beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024. The
amendments should be applied retrospectively. Early
adoption is permitted.
The Update provides guidance on improvements to annual
income tax disclosures by requiring (1) consistent categories
and greater disaggregation of information in the rate
reconciliation and (2) income taxes paid disaggregated by
jurisdiction. Additionally, public entities must provide a
separate disclosure for any reconciling item that meets a
quantitative threshold. ASU 2023-09 is effective for annual
periods beginning after December 15, 2024. The
amendments should be applied on a prospective basis. Early
adoption is permitted.
Standard
ASU 2023-07, Segment
Reporting (Topic 280):
Improvements to
Reportable Segment
Disclosures
ASU 2023-09, Income
Taxes (Topic 740):
Improvements to Income
Tax Disclosures
(s) Reclassifications
Effect on Consolidated Financial
Statements
Farmer Mac is still assessing the effect on our
annual consolidated financial statement
disclosures, however, adoption will not have a
material impact on Farmer Mac's financial
position, results of operations, or cash flows.
Farmer Mac is still assessing the impact of the
new accounting standard but does not expect that
adoption of the new guidance will have a material
impact on Farmer Mac's financial position, results
of operations, or cash flows.
Certain reclassifications of prior period information were made to conform to the current period
presentation. The reclassifications of prior period information were not material to the consolidated
financial statements.
3.
RELATED PARTY TRANSACTIONS
Farmer Mac considers an entity to be a related party if (1) the entity holds at least 5% of a class of Farmer
Mac voting common stock or (2) the institution has an affiliation with a Farmer Mac director and conducts
material business with Farmer Mac. As provided by Farmer Mac's statutory charter, only banks, insurance
companies, and other financial institutions or similar entities may hold Farmer Mac's Class A voting
common stock and only institutions of the Farm Credit System may hold Farmer Mac's Class B voting
common stock. Farmer Mac's statutory charter also provides that Class A stockholders elect 5 members of
Farmer Mac's 15-member board of directors and that Class B stockholders elect 5 members of the board of
directors. Farmer Mac generally requires financial institutions to own a requisite amount of common
stock, based on the size and type of institution, to participate in the Agricultural Finance line of
business. As a result of these requirements, Farmer Mac conducts business with related parties in the
normal course of Farmer Mac's business. All related party transactions were conducted with terms and
conditions comparable to those available to any other participant in Farmer Mac's lines of business not
related to Farmer Mac.
144
Zions Bancorporation, National Association:
Farmer Mac considers Zions Bancorporation, National Association and its affiliates ("Zions") a related
party because Zions owns approximately 31.2% of Farmer Mac's Class A voting common stock. The
following transactions occurred between Farmer Mac and Zions during 2023, 2022, and 2021:
Table 3.1
Unpaid Principal Balance:
Purchases:
Loans
USDA Securities
Sales of Farmer Mac Guaranteed Securities
For the Years Ended December 31,
2023
2022
2021
(in thousands)
$ 160,079 $ 274,517 $ 214,319
231
—
4,171
99,643
9,565
—
The purchases of loans from Zions under the Agricultural Finance line of business represented
approximately 9.5%, 12.9%, and 8.0% of Agricultural Finance mortgage loan purchases for the years
ended December 31, 2023, 2022, and 2021, respectively, and 6.9%, 9.6% and 5.6%, respectively, of total
Agricultural Finance mortgage loan business volume (excluding AgVantage and USDA Securities). The
purchases of USDA Securities from Zions represented approximately 0.1%, 1.5%, and 2.1% of total
purchases of USDA Securities for the years ended December 31, 2023, 2022, and 2021, respectively.
Outstanding Agricultural Finance mortgage loans purchased and USDA Securities purchased from Zions
represented 3.1% and 3.5%, respectively, of Farmer Mac's outstanding business volume (excluding loans
serviced for others) as of December 31, 2023 and 2022.
Zions retained servicing fees of $11.2 million, $10.4 million, and $11.0 million in 2023, 2022, and 2021,
respectively, for its work as a Farmer Mac servicer.
National Rural Utilities Cooperative Financial Corporation:
Farmer Mac considers the National Rural Utilities Cooperative Financial Corporation ("CFC") a related
party because CFC owns approximately 7.91% of Farmer Mac's Class A voting common stock and
because a member of Farmer Mac's board of directors had an affiliation with CFC through June 2021. The
following transactions occurred between Farmer Mac and CFC during 2023, 2022, and 2021:
Table 3.2
Farmer Mac Loan Purchases and Guarantees
Unpaid Principal Balance:
Loans
LTSPCs
AgVantage Securities
Total purchases and guarantees
145
For the Years Ended December 31,
2023
2022
2021
(in thousands)
$
298,254 $ 386,998 $
127,117
—
30,421
—
1,450,000
670,000
1,450,000
$ 1,748,254 $ 1,087,419 $ 1,577,117
The transactions with CFC represented 37.1% of Farmer Mac's loan purchase volume under the Rural
Infrastructure Finance line of business for 2023, compared to 46.7% of Rural Infrastructure Finance loan
purchase volume for 2022 and 36.9% for 2021. These transactions represented 33.8%, 13.4%, and 37.0%
of AgVantage securities volume for 2023, 2022, and 2021, respectively, and represented 22.6%, 12.0%,
and 18.4% of new business volume for 2023, 2022, and 2021, respectively. Of Farmer Mac's total
outstanding business volume (excluding loans serviced for others) as of December 31, 2023 and 2022,
Rural Utilities loans, loans under LTSPCs, and AgVantage securities issued by CFC represented 20.4%
and 18.7%, respectively.
Farmer Mac had interest receivable of $27.0 million and $18.2 million as of December 31, 2023 and 2022,
respectively, and earned interest income of $143.5 million, $79.4 million, and $50.0 million during 2023,
2022, and 2021, respectively, related to its AgVantage transactions with CFC.
As of both December 31, 2023 and 2022, Farmer Mac had $0.1 million of commitment fees receivable
from CFC and earned commitment fees of $1.0 million, $1.1 million, and $1.2 million, respectively for
2023, 2022, and 2021.
CFC retained servicing fees of $3.7 million, $3.4 million, and $3.3 million in 2023, 2022, and 2021,
respectively, for its work as a Farmer Mac central servicer.
CoBank:
Farmer Mac considers CoBank a related party because CoBank owns approximately 32.6% of Farmer
Mac's Class B voting common stock.
Farmer Mac purchased $438.8 million, $376.0 million, and $207.5 million of loans and participations
from CoBank, under the Rural Infrastructure Finance and Agricultural Finance lines of business in 2023,
2022, and 2021, respectively. Of Farmer Mac's total outstanding business volume as of December 31,
2023 and 2022, CoBank's loans, participations, and unfunded commitments represented 6.7% and 6.3%,
respectively, of total outstanding volume (excluding loans serviced for others).
CoBank retained servicing fees of $3.6 million, $3.5 million, and $3.2 million in 2023, 2022, and 2021,
respectively, for its work as a Farmer Mac central servicer.
AgFirst Farm Credit Bank:
Farmer Mac considers AgFirst Farm Credit Bank ("AgFirst") a related party because AgFirst owns
approximately 16.8% of Farmer Mac's Class B voting common stock.
AgFirst entered into no Agricultural Finance LTSPC transactions in either 2023 or 2022, and entered into
$11.0 million of Agricultural Finance LTSPC transactions in 2021. The aggregate balance of Agricultural
Finance LTSPCs outstanding as of December 31, 2023 and 2022 was $447.3 million and $387.1 million,
respectively. In 2023, 2022, and 2021, Farmer Mac received $1.4 million, $1.2 million, and $1.2 million,
respectively, in commitment fees from AgFirst, and had $0.1 million of commitment fees receivable as of
both December 31, 2023 and 2022.
AgFirst owns certain securities backed by rural housing loans. Farmer Mac guarantees the last ten percent
of losses (based on the original principal balance at the time of pooling) from each loan in the pool
146
backing those securities. As of December 31, 2023 and 2022, the outstanding balance of those securities
owned by AgFirst was $1.8 million and $2.2 million, respectively. Farmer Mac received guarantee fees of
$12,000, $15,000, and $19,000 in 2023, 2022, and 2021, respectively, on those securities.
Farm Credit Bank of Texas:
Farmer Mac considers Farm Credit Bank of Texas a related party because the bank owns approximately
7.7% of Farmer Mac's Class B voting common stock. Farmer Mac received from Farm Credit Bank of
Texas commitment fees of $3.4 million, $2.9 million, and $1.9 million in 2023, 2022, and 2021,
respectively. The aggregate amount of Agricultural Finance LTSPCs outstanding with Farm Credit Bank
of Texas as of December 31, 2023 and 2022 was $923.9 million and $881.6 million, respectively. In each
of 2023, 2022, and 2021, Farm Credit Bank of Texas retained $0.1 million in servicing fees for its work as
a Farmer Mac central servicer.
4.
INVESTMENT SECURITIES
The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity
investment securities as of December 31, 2023 and 2022:
Table 4.1
Available-for-sale:
Floating rate auction-rate certificates
backed by Government guaranteed student
loans
Floating rate Government/GSE guaranteed
mortgage-backed securities
Fixed rate GSE guaranteed mortgage-
backed securities
Floating rate U.S. Treasuries
Fixed rate U.S. Treasuries
Amount
Outstanding
Unamortized
Premium/
(Discount)
Amortized
Cost(1)
Allowance
for losses(2)
Unrealized
Gains
Unrealized
Losses
Fair Value
As of December 31, 2023
(in thousands)
$
19,700 $
— $
19,700 $
(27) $
— $
(591) $
19,082
2,454,009
(1,138)
2,452,871
1,727,669
(46,788)
1,680,881
50,000
869,585
(17)
(12,885)
49,983
856,700
—
—
—
—
1,212
(29,649)
2,424,434
6,558
(117,824)
1,569,615
—
2,074
9,844
(15)
(2,942)
49,968
855,832
(151,021)
4,918,931
Total available-for-sale
5,120,963
(60,828)
5,060,135
(27)
Held-to-maturity:
Floating rate Government/GSE
guaranteed mortgage-backed securities(3)
53,756
—
53,756
—
1,745
Total held-to-maturity
$
53,756 $
— $
53,756 $
— $
1,745 $
—
— $
55,501
55,501
(1)
(2)
(3)
Amounts presented exclude $15.9 million of accrued interest receivable on investment securities as of December 31, 2023.
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.
The held-to-maturity investment securities had a weighted average yield of 6.7% as of December 31, 2023.
147
Amount
Outstanding
Unamortized
Premium/
(Discount)
Amortized
Cost(1)
Allowance
for losses(2)
Unrealized
Gains
Unrealized
Losses
Fair Value
As of December 31, 2022
(in thousands)
$
19,700 $
— $
19,700 $
(33) $
— $
(640) $
19,027
2,433,696
(200)
2,433,496
1,207,416
1,145,915
4,806,727
(30,321)
1,177,095
(6,780)
1,139,135
(37,301)
4,769,426
—
—
—
(33)
1,954
(42,910)
2,392,540
2,128
621
4,703
(130,837)
1,048,386
(20,145)
1,119,611
(194,532)
4,579,564
Available-for-sale:
Floating rate auction-rate certificates
backed by Government guaranteed student
loans
Floating rate Government/GSE guaranteed
mortgage-backed securities
Fixed rate GSE guaranteed mortgage-
backed securities
Fixed rate U.S. Treasuries
Total available-for-sale
Held-to-maturity:
Floating rate Government/GSE
guaranteed mortgage-backed securities(3)
45,032
—
45,032
—
2,433
Total held-to-maturity
$
45,032 $
— $
45,032 $
— $
2,433 $
—
— $
47,465
47,465
(1)
(2)
(3)
Amounts presented exclude $10.6 million of accrued interest receivable on investment securities as of December 31, 2022.
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.
The held-to-maturity investment securities had a weighted average yield of 4.5% as of December 31, 2022.
Farmer Mac did not sell any securities from its available-for-sale investment portfolio during the years
ended December 31, 2023 and 2022. During the year ended December 31, 2021, Farmer Mac received
proceeds of $257.5 million, from the sale of securities from its available-for-sale investment portfolio,
resulting in gains of $0.3 million.
As of December 31, 2023 and 2022, unrealized losses on available-for-sale investment securities were as
follows:
Table 4.2
As of December 31, 2023
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
(dollars in thousands)
$
— $
— $
19,082 $
(591)
568,759
384,305
49,969
140,435
(4,395)
(4,262)
(15)
(606)
1,449,122
905,759
—
237,192
(25,254)
(113,562)
—
(2,336)
$
1,143,468 $
(9,278) $
2,611,155 $
(141,743)
Floating rate auction-rate certificates backed by Government
guaranteed student loans
Floating rate Government/GSE guaranteed mortgage-backed securities
Fixed rate Government/GSE guaranteed mortgage-backed securities
Floating rate U.S. Treasuries
Fixed rate U.S. Treasuries
Total
Number of securities in loss position
91
162
148
As of December 31, 2022
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
(dollars in thousands)
621,215
314,524
(36,976)
(56,434)
(2,842)
193,964
336,782
704,780
(640)
(5,934)
(74,403)
(17,303)
$
2,819,885 $
(96,252) $
1,254,553 $
(98,280)
Floating rate auction-rate certificates backed by Government
guaranteed student loans
$
— $
— $
19,027 $
Floating rate Government/GSE guaranteed mortgage-backed securities
1,884,146
Fixed rate Government/GSE guaranteed mortgage-backed securities
Fixed rate U.S. Treasuries
Total
Number of securities in loss position
174
51
The unrealized losses presented above are principally due to a general widening of market spreads and
changes in the levels of interest rates from the dates of acquisition to December 31, 2023 and
December 31, 2022, 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 December 31, 2023 and
2022, all of the investment securities in an unrealized loss position either were backed by the full faith and
credit of the U.S. government, a U.S. government sponsored enterprise, or had credit ratings of at least
"AA+."
Securities in unrealized loss positions for 12 months or longer have a fair value as of December 31, 2023
that is, on average, approximately 94.9% 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, changes in
credit spread, and changes in levels of interest rates.
The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by
remaining contractual maturity as of December 31, 2023 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 4.3
Due within one year
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
As of December 31, 2023
Available-for-Sale Securities
Amortized
Cost
Fair Value
(dollars in thousands)
$
567,615 $
565,976
1,191,428
2,489,410
811,682
1,173,923
2,386,411
792,621
$
5,060,135 $
4,918,931
Weighted-
Average
Yield
1.75%
4.25%
4.39%
5.72%
4.27%
149
5.
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 December 31, 2023 and 2022:
Table 5.1
Unpaid
Principal
Balance
Unamortized
Premium/
(Discount)
Amortized
Cost(1)
Allowance
for losses(2)
Unrealized
Gains
Unrealized
Losses
Fair Value
As of December 31, 2023
(in thousands)
Held-to-maturity:
AgVantage
Farmer Mac Guaranteed USDA
Securities
Total Farmer Mac Guaranteed
Securities
USDA Securities
$ 4,206,324 $
(29,622) $ 4,176,702 $
(209) $
4,676 $
(39,451) $ 4,141,718
36,543
33
36,576
—
107
(806)
35,877
4,242,867
2,331,093
(29,589)
4,213,278
(209)
4,783
(40,257)
4,177,595
23,078
2,354,171
—
417
(319,783)
2,034,805
Total held-to-maturity
$ 6,573,960 $
(6,511) $ 6,567,449 $
(209) $
5,200 $ (360,040) $ 6,212,400
Available-for-sale:
AgVantage
Farmer Mac Guaranteed
Securities(3)
$ 5,816,024 $
— $ 5,816,024 $
(317) $
16,416 $ (309,411) $ 5,522,712
—
9,409
9,409
—
358
—
9,767
Total available-for-sale
$ 5,816,024 $
9,409 $ 5,825,433 $
(317) $
16,774 $ (309,411) $ 5,532,479
Trading:
USDA Securities(4)
$
1,236 $
64 $
1,300 $
— $
— $
(59) $
1,241
(1)
(2)
(3)
(4)
Amounts presented exclude $47.2 million, $67.4 million, and $42,000 of accrued interest receivable on available-for-sale, held-to-maturity, and trading
securities, respectively, as of December 31, 2023.
Represents the amount of impairment 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.
Fair value includes $9.8 million of an interest-only security with a notional amount of $238.4 million.
The trading USDA securities had a weighted average yield of 5.46% as of December 31, 2023.
As of December 31, 2022
Unpaid
Principal
Balance
Unamortized
Premium/
(Discount)
Amortized
Cost(1)
Allowance
for losses(2)
Unrealized
Gains
Unrealized
Losses
Fair Value
(in thousands)
Held-to-maturity:
AgVantage
Farmer Mac Guaranteed USDA
Securities
Total Farmer Mac Guaranteed
Securities
USDA Securities
$ 1,000,689 $
(95) $ 1,000,594 $
(59) $
353 $
(54,098) $ 946,790
20,586
33
20,619
1,021,275
2,384,946
(62)
1,021,213
24,888
2,409,834
—
(59)
—
2
355
668
(856)
19,765
(54,954)
966,555
(312,824)
2,097,678
Total held-to-maturity
$ 3,406,221 $
24,826 $ 3,431,047 $
(59) $
1,023 $ (367,778) $ 3,064,233
Available-for-sale:
AgVantage
Farmer Mac Guaranteed
Securities(3)
Total available-for-sale
Trading:
USDA Securities(4)
$ 8,008,067 $
806 $ 8,008,873 $
(546) $
2,061 $ (411,009) $ 7,599,379
—
10,622
10,622
—
—
(2,775)
7,847
$ 8,008,067 $
11,428 $ 8,019,495 $
(546) $
2,061 $ (413,784) $ 7,607,226
$
1,770 $
80 $
1,850 $
— $
— $
(83) $
1,767
(1)
Amounts presented exclude $51.5 million, $44.4 million, and $47,000 of accrued interest receivable on available-for-sale, held-to-maturity, and trading
securities, respectively, as of December 31, 2022.
150
(2)
(3)
(4)
Represents the amount of impairment 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.
Fair value includes $7.8 million of an interest-only security with a notional amount of $250.1 million.
The trading USDA securities had a weighted average yield of 4.84% as of December 31, 2022.
On July 1, 2023, Farmer Mac transferred $2.7 billion of AgVantage Securities from available-for-sale to
held-to-maturity to reflect Farmer Mac's positive intent and ability to hold these securities until maturity or
payoff. Farmer Mac transferred these securities at fair value as of the date of the transfer, which included
a cost basis adjustment of unrealized losses of $31.9 million. The accumulated unrealized losses were
retained in accumulated other comprehensive income in the amount of $31.9 million. Both the cost basis
adjustment and accumulated unrealized depreciation will be amortized as an adjustment to the yield on the
held-to-maturity AgVantage Securities over the remaining term of the transferred securities.
As of December 31, 2023 and 2022, unrealized losses on held-to-maturity and available-for-sale on-
balance sheet Farmer Mac Guaranteed Securities and USDA Securities were as follows:
Table 5.2
As of December 31, 2023
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 Value
Unrealized
Loss
Fair Value
Unrealized
Loss
(in thousands)
2,070,770 $
(6,705) $
725,347 $
(32,746)
—
—
—
—
8,393
(806)
2,023,801
(319,783)
2,070,770 $
(6,705) $
2,757,541 $
(353,335)
508,182 $
(5,716) $
4,043,431 $
(303,695)
—
—
—
—
508,182 $
(5,716) $
4,043,431 $
(303,695)
Held-to-maturity:
AgVantage
Farmer Mac Guaranteed USDA Securities
USDA Securities
Total held-to-maturity
Available-for-sale:
AgVantage
Farmer Mac Guaranteed Securities
Total available-for-sale
$
$
$
$
151
As of December 31, 2022
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 Value
Unrealized
Loss
Fair Value
Unrealized
Loss
(in thousands)
$
548,634 $
(11,455) $
382,358 $
(42,643)
19,790
2,086,108
(856)
(312,824)
—
—
—
—
$
2,654,532 $
(325,135) $
382,358 $
(42,643)
$
$
4,642,096 $
(267,886) $
1,548,551 $
(143,123)
7,847
(2,775)
—
—
4,649,943 $
(270,661) $
1,548,551 $
(143,123)
Held-to-maturity:
AgVantage
Farmer Mac Guaranteed USDA Securities
USDA Securities
Total held-to-maturity
Available-for-sale:
AgVantage
Farmer Mac Guaranteed Securities
Total available-for-sale
The unrealized losses presented above are principally due to changes in interest rates from the date of
acquisition to December 31, 2023 and 2022, as applicable.
The credit exposure related to Farmer Mac's USDA Securities in the Agricultural Finance line of business
is covered by the full faith and credit guarantee of the United States of America.
The unrealized losses from AgVantage securities were on 68 and 95 available-for-sale securities as of
December 31, 2023 and 2022, respectively. There were 53 and 37 held-to-maturity AgVantage securities
with an unrealized loss as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and
2022, 62 and 13 available-for-sale AgVantage securities, respectively, had been in a loss position for more
than 12 months. As of December 31, 2023 and 2022, there were 22 and 4 held-to-maturity AgVantage
securities, respectively, in a loss position for more than 12 months.
During the three years ended December 31, 2023, 2022, and 2021 Farmer Mac had no sales of AgVantage
Farmer Mac Guaranteed Securities, USDA Farmer Mac Guaranteed Securities or USDA Trading
Securities and, therefore, Farmer Mac realized no gains or losses.
152
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
December 31, 2023 are set forth below. The balances presented are based on their contractual maturities,
although the actual maturities may differ due to prepayments of the underlying assets.
Table 5.3
As of December 31, 2023
Available-for-Sale Securities
Amortized
Cost(1)
Fair Value
(dollars in thousands)
$
643,100 $
2,801,674
1,425,000
955,659
$
5,825,433 $
636,408
2,706,830
1,343,146
846,095
5,532,479
As of December 31, 2023
Held-to-Maturity Securities
Amortized
Cost(1)
Fair Value
(dollars in thousands)
$
1,862,524 $
1,755,763
279,166
2,669,996
$
6,567,449 $
1,860,072
1,716,466
244,568
2,391,294
6,212,400
Weighted-
Average
Yield
3.31 %
3.54 %
3.75 %
3.55 %
3.56 %
Weighted-
Average
Yield
5.69 %
4.62 %
3.57 %
4.27 %
4.76 %
Due within one year
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
(1)
Amounts presented exclude $47.2 million of accrued interest receivable.
Due within one year
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
(1)
6.
Amounts presented exclude $67.4 million of accrued interest receivable.
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.
153
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 $16.4 million and $6.1 million of accrued interest receivable and $6.5 million
and $3.6 million of accrued interest payable on uncleared swaps as of December 31, 2023 and 2022,
respectively. The aforementioned accrued interest on uncleared swaps is included within Accrued Interest
Receivable and Accrued Interest Payable on the consolidated balance sheets.
Table 6.1
Fair value hedges:
Interest rate swaps:
As of December 31, 2023
Fair Value
Notional
Amount
Asset
(Liability)
Weighted-
Average
Pay Rate
Weighted-
Average
Receive
Rate
Weighted-
Average
Forward
Price
Weighted-
Average
Remaining
Term
(in years)
(dollars in thousands)
Receive fixed non-callable
$ 9,776,685 $
2,350 $ (20,390)
5.57%
Pay fixed non-callable
Receive fixed callable
Cash flow hedges:
Interest rate swaps:
9,174,253
3,879,827
7,767
7,374
(1,081)
(95,984)
2.50%
5.40%
2.94%
5.47%
3.40%
Pay fixed non-callable
558,000
20,234
(43)
1.94%
5.82%
No hedge designation:
Interest rate swaps:
Pay fixed non-callable
Receive fixed non-callable
Basis swaps
Treasury futures
Netting adjustments(1)
160,623
1,358,396
850,384
21,300
676
263
39
11
(29)
(3)
(746)
(91)
(1,236)
1,236
2.92%
5.44%
5.52%
5.64%
4.87%
5.48%
112.51
1.78
9.57
2.48
4.30
4.34
0.64
3.83
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.
154
As of December 31, 2022
Fair Value
Notional
Amount
Asset
(Liability)
Weighted-
Average
Pay Rate
Weighted-
Average
Receive
Rate
Weighted-
Average
Forward
Price
Weighted-
Average
Remaining
Term
(in years)
(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Receive fixed non-callable
$ 10,033,750 $
19 $
(4,686)
Pay fixed non-callable
Receive fixed callable
Cash flow hedges:
Interest rate swaps:
8,149,871
2,764,577
13,689
(366)
461
(174,757)
4.31%
2.23%
4.21%
2.03%
4.33%
1.98%
Pay fixed non-callable
588,000
27,275
—
1.93%
4.72%
No hedge designation:
Interest rate swaps:
Pay fixed non-callable
Receive fixed non-callable
Basis swaps
Treasury futures
Netting adjustments(1)
187,479
287,750
1,860,384
6,800
1,065
—
112
—
(1)
(130)
(456)
(142)
(5,212)
5,212
3.05%
4.31%
4.40%
4.09%
1.16%
4.42%
114.38
1.64
10.76
3.18
5.05
4.52
1.76
2.46
Total financial derivatives
$ 23,878,611 $ 37,409 $ (175,326)
(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, Farmer Mac expects to reclassify $13.6 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 December 31, 2023. During the years ended
December 31, 2023, 2022, and 2021, 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.
155
The following tables summarize the net income/(expense) recognized in the consolidated statements of
operations related to derivatives for the years ended December 31, 2023, 2022, and 2021:
Table 6.2
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
For the Year Ended December 31, 2023
Net Interest Income
Non-Interest
Income
Interest Income
Farmer Mac
Guaranteed
Securities and
USDA
Securities
Interest Income
Investments and
Cash Equivalents
Interest
Income
Loans
Total
Interest
Expense
Gains on
financial
derivatives
Total
(in thousands)
$
287,144 $
590,250 $ 514,894 $ (1,064,741) $
2,882 $ 330,429
35,377
33,488
1,860
146,027
183,396
64,648
63,133
(345,852)
(341,523)
—
—
(2,865)
—
—
—
(99,800)
(61,506)
(1,005)
70,725 $
329,423 $ 127,781 $ (690,240) $
— $ (162,311)
(19,445) $
(91,151) $
(23,528) $ 279,803 $
— $ 145,679
18,472
89,437
21,686
(280,668)
—
(151,073)
(973) $
(1,714) $
(1,842) $
(865) $
— $
(5,394)
$
$
$
Total amounts presented in the
consolidated statement of operations
Income/(expense) related to interest
settlements on fair value hedging
relationships:
Recognized on derivatives
Recognized on hedged items
Premium/discount amortization
recognized on hedged items
Income/(expense) related to interest
settlements on fair value hedging
relationships
(Losses)/gains on fair value hedging
relationships:
Recognized on derivatives
Recognized on hedged items
(Losses)/gains on fair value hedging
relationships
Expense related to interest settlements
on cash flow hedging relationships:
Interest settlements reclassified from
AOCI into net income on derivatives
$
Recognized on hedged items
Discount amortization recognized on
hedged items
Expense recognized on cash flow
hedges
Gains on financial derivatives not
designated in hedging relationships:
Gains on interest rate swaps
Interest expense on interest rate swaps
Treasury futures
Gains on financial derivatives not
designated in hedge relationships
$
$
$
— $
— $
— $
20,643 $
— $
20,643
—
—
—
—
—
—
(31,610)
(55)
—
—
(31,610)
(55)
— $
— $
— $
(11,022) $
— $
(11,022)
— $
— $
— $
— $
4,395 $
4,395
—
—
—
—
—
—
—
—
(4,845)
(4,845)
3,332
3,332
— $
— $
— $
— $
2,882 $
2,882
156
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
For the Year Ended December 31, 2022
Net Interest Income
Non-Interest
Income
Interest Income
Farmer Mac
Guaranteed
Securities and
USDA
Securities
Interest Income
Investments and
Cash Equivalents
Interest
Income
Loans
Total
Interest
Expense
Gains on
financial
derivatives
Total
(in thousands)
$
82,659 $
283,769 $ 350,420 $ (445,908) $
22,631 $ 293,571
2,727
16,199
(19,486)
142,809
(501)
(61,941)
56,141
(132,406)
(754)
—
—
(2,116)
—
—
—
(79,201)
82,743
(2,870)
18,172 $
123,323 $
55,640 $ (196,463) $
— $
672
104,722 $
553,530 $ 351,116 $ (489,445) $
— $ 519,923
(105,889)
(553,393)
(341,162)
486,323
—
(514,121)
(1,167) $
137 $
9,954 $
(3,122) $
— $
5,802
$
$
$
Total amounts presented in the
consolidated statement of operations:
Income/(expense) related to interest
settlements on fair value hedging
relationships:
Recognized on derivatives
Recognized on hedged items
Discount amortization recognized on
hedged items
Income/(expense) related to interest
settlements on fair value hedging
relationships
(Losses)/gains on fair value hedging
relationships:
Recognized on derivatives
Recognized on hedged items
(Losses)/gains on fair value hedging
relationships
Expense related to interest settlements
on cash flow hedging relationships:
Interest settlements reclassified from
AOCI into net income on derivatives
$
Recognized on hedged items
Discount amortization recognized on
hedged items
Expense recognized on cash flow
hedges
Gains on financial derivatives not
designated in hedge relationships:
Gains on interest rate swaps
Interest expense on interest rate swaps
Treasury futures
Gains on financial derivatives not
designated in hedge relationships
$
$
$
— $
— $
— $
1,213 $
— $
1,213
—
—
—
—
—
—
(12,847)
(57)
—
—
(12,847)
(57)
— $
— $
— $
(11,691) $
— $
(11,691)
— $
— $
— $
— $
13,012 $
13,012
—
—
—
—
—
—
—
—
(7,619)
17,238
(7,619)
17,238
— $
— $
— $
— $
22,631 $
22,631
157
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
For the Year Ended December 31, 2021
Net Interest Income
Non-Interest
Income
Interest Income
Farmer Mac
Guaranteed
Securities and
USDA
Securities
Interest Income
Investments and
Cash Equivalents
Interest
Income
Loans
Total
Interest
Expense
Gains on
financial
derivatives
Total
(in thousands)
$
18,660 $
164,723 $ 242,582 $ (204,014) $
324 $ 222,275
(1,002)
(85,302)
(27,167)
42,591
1,792
119,896
46,842
(51,484)
—
—
—
(1,118)
—
—
—
(70,880)
117,046
(1,118)
790 $
34,594 $
19,675 $
(10,011) $
— $
45,048
1,688 $
178,252 $
97,459 $
(98,332) $
— $ 179,067
(1,218)
(176,304)
(97,502)
95,617
—
(179,407)
470 $
1,948 $
(43) $
(2,715) $
— $
(340)
$
$
$
Total amounts presented in the
consolidated statement of operations:
Income/(expense) related to interest
settlements on fair value hedging
relationships:
Recognized on derivatives
Recognized on hedged items
Discount amortization recognized on
hedged items
Income/(expense) related to interest
settlements on fair value hedging
relationships
Gains/(losses) on fair value hedging
relationships:
Recognized on derivatives
Recognized on hedged items
Gains/(losses) on fair value hedging
relationships
Expense related to interest settlements
on cash flow hedging relationships:
Interest settlements reclassified from
AOCI into net income on derivatives
$
Recognized on hedged items
Discount amortization recognized on
hedged items
Expense recognized on cash flow
hedges
Gains on financial derivatives not
designated in hedge relationships:
Losses on interest rate swaps
Interest expense on interest rate swaps
Treasury futures
Gains on financial derivatives not
designated in hedge relationships
$
$
$
— $
— $
— $
(7,399) $
— $
(7,399)
—
—
—
—
—
—
(2,657)
(37)
—
—
(2,657)
(37)
— $
— $
— $
(10,093) $
— $
(10,093)
— $
— $
— $
— $
(2,144) $
(2,144)
—
—
—
—
—
—
—
—
3,259
(791)
3,259
(791)
— $
— $
— $
— $
324 $
324
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 December 31, 2023 and 2022:
158
Table 6.3
Investment securities, Available-for-Sale, at
fair value
Farmer Mac Guaranteed Securities, Available-
for-Sale, at fair value
Loans held for investment, at amortized cost
Notes Payable(1)
(1)
Carrying amount represents amortized cost.
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)
December 31, 2023 December 31, 2022
December 31, 2023
December 31, 2022
(in thousands)
$
1,251,386 $
876,063 $
(88,635) $
(107,107)
5,497,948
1,699,361
4,814,784
1,623,301
(13,350,111)
(12,151,382)
(257,436)
(305,592)
250,418
(346,873)
(327,278)
531,086
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 December 31, 2023 and 2022:
Table 6.4
Assets:
Uncleared
derivatives
Cleared
derivatives
December 31, 2023
Gross Amounts Not Offset in the Consolidated Balance
Sheet
Gross
Amount
Recognized
Gross Amounts
offset in the
Consolidated
Balance Sheet
Net Amount
Presented in the
Consolidated Balance
Sheet(1)
Netting
Adjustments
Financial
instruments
pledged
Cash
Collateral
(2)
Net
Amount(3)
(in thousands)
$
25,751 $
— $
25,751 $
(25,727) $
— $
— $
24
Total
$
36,139 $
10,388
(1,236)
(1,236) $
9,152
—
—
—
34,903 $
(25,727) $
— $
— $
9,152
9,176
Liabilities:
Uncleared
derivatives
Cleared
derivatives
Total
$
(100,114) $
— $
(100,114) $
25,727 $
— $ 69,360 $
(5,027)
(1,236)
$
(101,350) $
1,236
1,236 $
—
—
—
—
—
(100,114) $
25,727 $
— $ 69,360 $
(5,027)
(1)
(2)
(3)
Amounts presented may not agree to the consolidated balance sheet related to counterparties not subject to master netting agreements.
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.
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.
159
Assets:
Uncleared
derivatives
Cleared
derivatives
December 31, 2022
Gross Amounts Not Offset in the Consolidated Balance
Sheet
Gross
Amount
Recognized
Gross Amounts
offset in the
Consolidated
Balance Sheet
Net Amount
Presented in the
Consolidated Balance
Sheet(1)
Netting
Adjustments
Financial
instruments
pledged
Cash
Collateral
(2)
Net
Amount(3)
(in thousands)
$
27,132 $
— $
27,132 $
(27,132) $
— $
— $
—
Total
$
41,582 $
14,450
(5,212)
(5,212) $
9,238
—
—
—
36,370 $
(27,132) $
— $
— $
9,238
9,238
Liabilities:
Uncleared
derivatives
Cleared
derivatives
Total
$
(149,864) $
— $
(149,864) $
27,132 $
— $ 121,065 $
(1,667)
(5,212)
$
(155,076) $
5,212
5,212 $
—
—
—
—
—
(149,864) $
27,132 $
— $ 121,065 $
(1,667)
(1)
(2)
(3)
Amounts presented may not agree to the consolidated balance sheet related to counterparties not subject to master netting agreements.
Cash collateral excludes $23.7 million of collateral posted related to counterparties not subject to master netting agreements.
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, 2022, Farmer Mac had additional net exposure of $204.0 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 December 31, 2023 or 2022, it could
have been required to settle its obligations under the agreements, but would not have been required to post
additional collateral. As of December 31, 2023 and 2022, 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 $25.8 billion notional amount of interest rate swaps outstanding as of December 31,
2023, $20.5 billion were cleared through the swap clearinghouse, the Chicago Mercantile Exchange
("CME"). Of Farmer Mac's $23.9 billion notional amount of interest rate swaps outstanding as of
December 31, 2022, $19.5 billion were cleared through the CME. During 2023 and throughout 2022,
Farmer Mac continued the use of non-cleared basis swaps to prepare for the transition away from the use
of LIBOR as a reference rate, which was completed as of the end of the second quarter of 2023.
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 year or less,
whereas medium-term notes generally have maturities of 0.5 years to 25.0 years.
The following tables set forth information related to Farmer Mac's borrowings as of December 31, 2023
and 2022:
160
Table 7.1
Due within one year:
Discount notes
Medium-term notes
Current portion of medium-term notes
Total due within one year
Due after one year:
Medium-term notes due in:
Two years
Three years
Four years
Five years
Thereafter
Total due after one year
Total principal net of discounts
Hedging adjustments
Total
Due within one year:
Discount notes
Medium-term notes
Current portion of medium-term notes
Total due within one year
Due after one year:
Medium-term notes due in:
Two years
Three years
Four years
Five years
Thereafter
Total due after one year
Total principal net of discounts
Hedging adjustments
Total
December 31, 2023
Outstanding as of December 31
Average Outstanding During the Year
Amount
Weighted-
Average Rate
Amount
Weighted-
Average Rate
(dollars in thousands)
5.08 %
4.09 %
$
1,734,387
5.32 % $
1,097,300
384,970
5,967,811
$
8,087,168
$
5,523,671
3,825,702
3,038,229
2,623,202
3,488,987
18,499,791
26,586,959
(250,417)
26,336,542
$
$
$
5.07 %
1,731,308
2.90 %
3.52 %
3.27 %
2.27 %
3.44 %
4.37 %
2.80 %
3.16 %
3.27 %
December 31, 2022
Outstanding as of December 31
Average Outstanding During the Year
Amount
Weighted-
Average Rate
Amount
Weighted-
Average Rate
(dollars in thousands)
0.96 %
2.11 %
$
565,578
3.91 % $
1,325,026
2,547,733
4,920,864
$
8,034,175
$
4,072,740
3,506,480
2,967,625
2,361,197
4,057,982
16,966,024
25,000,199
(531,086)
24,469,113
$
$
$
3.54 %
1,442,932
1.49 %
2.31 %
1.71 %
2.10 %
1.44 %
3.12 %
2.60 %
2.15 %
2.20 %
The maximum amount of Farmer Mac's discount notes outstanding at any month end during the years
ended December 31, 2023 and 2022 was $1.8 billion and $2.2 billion, respectively.
161
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 2024 as of December 31, 2023:
Table 7.2
Maturity:
2025
2026
2027
2028
Thereafter
Total
Debt Callable in 2024 as of December 31, 2023, by Maturity
Amount
Weighted-Average Rate
(dollars in thousands)
$
$
970,468
1,398,727
883,962
582,892
1,805,423
5,641,472
2.88 %
2.05 %
2.80 %
4.27 %
2.54 %
2.70 %
The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total
borrowings outstanding as of December 31, 2023, including callable and non-callable medium-term notes,
assuming callable notes are redeemed at the initial call date:
Table 7.3
Debt with interest rate resets, or debt maturities in:
2024
2025
2026
2027
2028
Thereafter
Total principal net of discounts
Earliest Interest Rate Reset Date, or Debt Maturities,
of Borrowings Outstanding
Amount
Weighted-Average Rate
(dollars in thousands)
$
$
10,125,494
4,568,438
3,622,798
2,747,407
2,380,412
3,142,410
26,586,959
3.95 %
2.79 %
2.07 %
3.20 %
4.24 %
2.47 %
3.27 %
During the years ended December 31, 2023 and 2022, Farmer Mac called $233.0 million and $26.0
million 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
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 December 31, 2023, Farmer Mac had not used
this borrowing authority.
162
Gains on Repurchases of Outstanding Debt
No outstanding debt repurchases were made in the year ended December 31, 2023. During the years ended
December 31, 2022 and 2021, Farmer Mac repurchased $27.0 million and $23.0 million of outstanding
debt at a gain of $0.2 million and $0.0 million, respectively.
8.
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. As of both December 31, 2023 and 2022, Farmer Mac had no loans held for sale.
Under the Agricultural Finance line of business, Farmer Mac has two segments – Farm & Ranch and
Corporate AgFinance. The segments are characterized by similarities in risk attributes and the manner in
which Farmer Mac monitors and assesses credit risk.
The following table includes loans held for investment and displays the composition of the loan balances
as of December 31, 2023 and 2022:
Table 8.1
Agricultural Finance loans
Farm & Ranch
Corporate AgFinance
As of December 31, 2023
As of December 31, 2022
Unsecuritized
In
Consolidated
Trusts
Total
Unsecuritized
(in thousands)
In
Consolidated
Trusts
Total
$ 5,133,450 $ 1,432,261 $ 6,565,711 $ 5,150,750 $ 1,211,576 $ 6,362,326
1,259,723
—
1,259,723
1,166,253
—
1,166,253
Total Agricultural Finance loans
6,393,173
1,432,261
7,825,434
6,317,003
1,211,576
7,528,579
Rural Infrastructure Finance loans
Total unpaid principal balance(1)
Unamortized premiums, discounts, fair
value hedge basis adjustment, and other
cost basis adjustments
Total loans
Allowance for losses
3,534,763
—
3,534,763
3,021,266
—
3,021,266
9,927,936
1,432,261
11,360,197
9,338,269
1,211,576
10,549,845
(304,817)
—
(304,817)
(329,290)
—
(329,290)
9,623,119
1,432,261
11,055,380
9,008,979
1,211,576
10,220,555
(15,588)
(443)
(16,031)
(14,629)
(460)
(15,089)
Total loans, net of allowance
$ 9,607,531 $ 1,431,818 $ 11,039,349 $ 8,994,350 $ 1,211,116 $ 10,205,466
(1)
Unpaid principal balance is the basis of presentation in disclosures of outstanding balances for Farmer Mac's lines of business.
163
Allowance for Losses
The following table is a summary, by asset type, of the allowance for losses as of December 31, 2023 and
2022:
Table 8.2
Loans:
Agricultural Finance loans
Farm & Ranch
Corporate AgFinance
Total Agricultural Finance Loans
Rural Infrastructure Finance loans
Total
December 31, 2023
December 31, 2022
Allowance for Losses Allowance for Losses
(in thousands)
$
$
3,936 $
2,948
6,884
9,147
16,031 $
4,044
2,731
6,775
8,314
15,089
The following is a summary of the changes in the allowance for losses for each year in the three-year
period ended December 31, 2023:
Table 8.3
Balance as of December 31, 2020
(Release of)/provision for losses
Recovery
Balance as of December 31, 2021
Provision for/(release of) losses
Charge-offs
Balance as of December 31, 2022
(Release of)/provision for losses
Charge-offs
Balance as of December 31, 2023
(1)
Agricultural Finance loans
Farm & Ranch(1)
Corporate
AgFinance(2)
Total
Rural Infrastructure
Finance loans(3)
$
$
$
$
3,404 $
(1,576)
1,054
2,882 $
1,246
(84)
4,044 $
(108)
—
(in thousands)
341 $
219
—
560 $
2,171
—
2,731 $
217
—
3,745 $
(1,357)
1,054
3,442 $
3,417
(84)
6,775 $
109
—
3,936 $
2,948 $
6,884 $
10,087
512
—
10,599
(2,285)
—
8,314
833
—
9,147
As of December 31, 2023 and 2022, the allowance for losses for Agricultural Finance Farm & Ranch loans includes $1.0 million and $1.9 million
allowance for collateral dependent assets secured by agricultural real estate, respectively.
As of December 31, 2023 and 2022, the allowance for losses for Agricultural Finance Corporate AgFinance loans includes $0.0 million and $2.4 million
allowance for collateral dependent assets secured by agricultural real estate, respectively.
As of December 31, 2023 and 2022, the allowance for losses for Rural Infrastructure Finance loans includes no allowance for collateral dependent assets.
(2)
(3)
The $0.8 million net provision to the allowance for the Rural Infrastructure Finance portfolio during the
year ended December 31, 2023 was primarily attributable to a single telecommunications loan that was
downgraded to substandard during the year. The $0.1 million net provision to the allowance for the
Agricultural Finance mortgage loan portfolio during the year ended December 31, 2023 was primarily
attributable to increased loan volume.
The $2.3 million net release from the allowance for the Rural Infrastructure Finance portfolio during the
year ended December 31, 2022 was primarily attributable to a risk rating upgrade on a single loan and
improvements in forecasts of future economic conditions. The risk rating upgrade on that loan reflected
164
that borrower's successful securitization of its large payable that arose during the arctic freeze that struck
Texas in February 2021. The $3.4 million net provision to the allowance for the Agricultural Finance
mortgage loan portfolio during the year ended December 31, 2022 was primarily attributable to a risk
rating downgrade on a single agricultural storage and processing loan, due to its ongoing bankruptcy
proceedings.
The provision to the allowance for Rural Infrastructure Finance loan losses of $0.5 million recorded
during the year ended 2021 was primarily attributable to the impact of the Texas Arctic Freeze, partially
offset by the impact of improving economic factor forecasts. The $1.4 million release from the allowance
for the Agricultural Finance mortgage loan portfolio during the year ended 2021 was primarily attributable
to a recovery on the payoff of the agricultural storage and processing loan secured by a specialized poultry
facility that had been partially charged off in 2020 and improving economic factor forecasts.
The following table presents the unpaid principal balances by delinquency status of Farmer Mac's loans
and non-performing assets as of December 31, 2023 and 2022:
Table 8.4
Loans(1):
Agricultural Finance loans
As of December 31, 2023
Accruing
Current
30-59 Days
60-89 Days
90 Days and
Greater(2)
(in thousands)
Total Past
Due
Nonaccrual
loans(3)(4)
Total Loans
Farm & Ranch
$ 6,470,205 $
15,326 $
3,953 $
10,991 $
30,270 $
65,236 $ 6,565,711
Corporate AgFinance
1,259,723
—
—
—
—
—
1,259,723
Total Agricultural Finance
loans
Rural Infrastructure Finance
loans
7,729,928
15,326
3,953
10,991
30,270
65,236
7,825,434
3,534,763
—
—
—
—
—
3,534,763
$ 11,264,691 $
15,326 $
3,953 $
10,991 $
30,270 $
65,236 $ 11,360,197
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.
Includes loans in consolidated trusts with beneficial interests owned by third parties (single-class) that are 90 days or more past due.
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.
Includes $25.7 million of nonaccrual loans for which there was no associated allowance. During the year ended December 31, 2023, Farmer Mac received
$2.6 million in interest on nonaccrual loans.
Total
(1)
(2)
(3)
(4)
165
As of December 31, 2022
Accruing
Current
30-59 Days
60-89 Days
90 Days and
Greater(2)
(in thousands)
Total Past
Due
Nonaccrual
loans(3)(4)
Total Loans
Loans(1):
Agricultural Finance loans
Farm & Ranch
$ 6,287,326 $
10,066 $
392 $
1,140 $
11,598 $
63,402 $ 6,362,326
Corporate AgFinance
1,150,690
—
Total Agricultural Finance
loans
Rural Infrastructure Finance
loans
7,438,016
10,066
3,021,266
—
—
392
—
—
—
15,563
1,166,253
1,140
11,598
78,965
7,528,579
—
—
—
3,021,266
Total
(1)
(2)
(3)
(4)
$ 10,459,282 $
10,066 $
392 $
1,140 $
11,598 $
78,965 $ 10,549,845
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.
Includes loans in consolidated trusts with beneficial interests owned (single-class) by third parties that are 90 days or more past due.
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.
Includes $22.0 million of nonaccrual loans for which there was no associated allowance. During the year ended December 31, 2022, Farmer Mac received
$5.6 million in interest on nonaccrual loans.
Credit Quality Indicators
The following tables present credit quality indicators related to Agricultural Finance mortgage loans and
Rural Infrastructure Finance loans held as of December 31, 2023 and 2022, by year of origination:
Table 8.5
Agricultural Finance - Farm &
Ranch loans(1):
Internally Assigned Risk
Rating:
Acceptable
Special mention(2)
Substandard(3)
As of December 31, 2023
Year of Origination:
2023
2022
2021
2020
2019
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
$ 530,956 $ 1,137,226 $ 1,653,780 $ 1,120,917 $ 323,922 $ 1,068,862 $ 385,766 $ 6,221,429
70,524
3,357
46,529
23,987
27,957
10,164
11,591
17,395
4,782
28,942
21,257
58,606
8,777
10,414
191,417
152,865
Total
$ 604,837 $ 1,207,742 $ 1,691,901 $ 1,149,903 $ 357,646 $ 1,148,725 $ 404,957 $ 6,565,711
For the Year Ended
December 31, 2023:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
(3)
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.
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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.
166
As of December 31, 2023
Year of Origination:
2023
2022
2021
2020
2019
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
Agricultural Finance - Corporate
AgFinance(1):
Internally Assigned Risk
Rating:
Acceptable
Special mention(2)
Substandard(3)
$ 207,279 $ 97,922 $ 261,992 $ 123,158 $ 99,352 $ 112,947 $ 254,325 $ 1,156,975
—
—
14,522
15,408
50,822
20,333
—
—
—
—
—
—
1,663
102,748
—
—
Total
$ 207,279 $ 112,444 $ 277,400 $ 173,980 $ 119,685 $ 112,947 $ 255,988 $ 1,259,723
For the Year Ended
December 31, 2023:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
(3)
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.
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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, 2023
Year of Origination:
2023
2022
2021
2020
2019
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
Rural Infrastructure Finance
loans(1):
Internally Assigned Risk
Rating:
Acceptable
Special mention(2)
Substandard(3)
Total
For the Year Ended
December 31, 2023:
$ 618,946 $ 681,272 $ 187,746 $ 593,841 $ 701,937 $ 611,548 $ 100,223 $ 3,495,513
—
—
9,850
29,400
—
—
—
—
—
—
—
—
—
—
9,850
29,400
$ 618,946 $ 720,522 $ 187,746 $ 593,841 $ 701,937 $ 611,548 $ 100,223 $ 3,534,763
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
(3)
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.
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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.
167
As of December 31, 2022
Year of Origination:
2022
2021
2020
2019
2018
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
Agricultural Finance - Farm &
Ranch loans(1):
Internally Assigned Risk
Rating:
Acceptable
Special mention(2)
Substandard(3)
$ 1,157,829 $ 1,704,547 $ 1,187,474 $ 360,704 $ 242,491 $ 947,535 $ 385,503 $ 5,986,083
91,099
3,094
68,260
8,814
25,629
22,976
11,254
23,937
5,325
17,845
17,797
67,654
2,452
10,107
221,816
154,427
Total
$ 1,252,022 $ 1,781,621 $ 1,236,079 $ 395,895 $ 265,661 $ 1,032,986 $ 398,062 $ 6,362,326
For the Year Ended
December 31, 2022:
Current period charge-offs
$
— $
— $
— $
— $
— $
(84) $
— $
(84)
(1)
(2)
(3)
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.
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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, 2022
Year of Origination:
2022
2021
2020
2019
2018
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
Agricultural Finance - Corporate
AgFinance loans(1):
Internally Assigned Risk
Rating:
Acceptable
Special mention(2)
Substandard(3)
$ 145,263 $ 299,729 $ 221,560 $ 108,230 $ 76,454 $ 44,827 $ 232,107 $ 1,128,170
—
—
—
—
—
20,698
4,598
—
—
—
—
—
2,145
10,642
22,843
15,240
Total
$ 145,263 $ 299,729 $ 226,158 $ 128,928 $ 76,454 $ 44,827 $ 244,894 $ 1,166,253
For the Year Ended
December 31, 2022:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
(3)
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.
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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.
168
As of December 31, 2022
Year of Origination:
2022
2021
2020
2019
2018
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
$ 741,021 $ 220,420 $ 629,223 $ 739,270 $
7,932 $ 649,830 $
33,570 $ 3,021,266
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 741,021 $ 220,420 $ 629,223 $ 739,270 $
7,932 $ 649,830 $
33,570 $ 3,021,266
Rural Infrastructure Finance
loans(1):
Internally Assigned Risk
Rating:
Acceptable
Special mention(2)
Substandard(3)
Total
For the Year Ended
December 31, 2022:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
(3)
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.
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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.
9.
EQUITY
Common Stock
Farmer Mac has three classes of common stock outstanding:
• Class A voting common stock, which may be held only by banks, insurance companies, and
other financial institutions or similar entities that are not institutions of the Farm Credit
System. By federal statute, no holder of Class A voting common stock may directly or
indirectly be a beneficial owner of more than 33% of the outstanding shares of Class A voting
common stock.
• Class B voting common stock, which may be held only by institutions of the Farm Credit
System. There are no restrictions on the maximum holdings of Class B voting common stock.
• Class C non-voting common stock, which has no ownership restrictions.
During 2023, 2022, and 2021, Farmer Mac paid a quarterly dividend of $1.10, $0.95, and $0.88 per share
on all classes of its common stock. Farmer Mac's ability to declare and pay dividends on its common stock
could be restricted if it fails to comply with applicable capital requirements.
Except for the period from March 16, 2020 to March 10, 2021, Farmer Mac has had a common stock
repurchase program in place since third quarter 2015. On March 10, 2021, Farmer Mac's board of
directors reinstated the share repurchase program on its previous terms (with a remaining authorization of
up to $9.8 million in stock repurchases) and extended the expiration date of the program to March 2023.
Farmer Mac did not repurchase any shares of its Class C non-voting common stock during that two-year
period. In March 2023, Farmer Mac's board of directors renewed the share repurchase program on its
169
previous terms (with a remaining authorization of up to $9.8 million in stock repurchases) and extended
the expiration date of the program to March 2025. Farmer Mac did not repurchase any shares of its Class
C non-voting common stock during 2023. As of December 31, 2023, Farmer Mac had repurchased
approximately 673,000 shares of Class C non-voting common stock at a cost of approximately $19.8
million under the share repurchase program since 2015.
Preferred Stock
The following table presents the Series C Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock, and the Series G Preferred Stock (collectively referred to as
the "Outstanding Preferred Stock") as of December 31, 2023:
Table 9.1
Name
Issuance Date
Issuance Cost
Shares Issued
Annual Dividend
Rate(2)
Liquidation Value
Per Share
First Possible
Redemption
Date(3)
Series C(1)
Series D
Series E
Series F
Series G
(1)
June 20, 2014
May 13, 2019
May 20, 2020
August 20, 2020
May 27, 2021
$
$
$
$
$
1,618,583
3,000,000
3,340,456
4,000,000
2,496,750
3,180,000
3,839,902
4,800,000
3,661,677
5,000,000
6.000 % $
5.700 % $
5.750 % $
5.250 % $
4.875 % $
25.00
July 18, 2024
25.00
July 17, 2024
25.00
July 17, 2025
25.00 October 17, 2025
25.00
July 17, 2026
The Series C Preferred Stock pays an annual dividend rate of 6.00% from the date of issuance to and including the quarterly payment date occurring on
July 17, 2024, and thereafter, at a floating rate equal to three-month LIBOR plus 3.26%, which Farmer Mac expects will be converted to the Term Loan
Secured Overnight Financing Rate published by CME Group Benchmark Administration, Ltd., plus a spread adjustment based on the tenor of the
securities, if not redeemed prior to that payment date.
Dividends on all series of Outstanding Preferred Stock are non-cumulative, which means that if Farmer Mac's board of directors has not declared a
dividend before the applicable dividend payment date for any dividend period, such dividend will not be paid or cumulate, and Farmer Mac will have no
obligation to pay dividends for such dividend period, whether or not dividends on any series of Outstanding Preferred Stock are declared for any future
dividend period.
Farmer Mac has the right but not the obligation to redeem.
(2)
(3)
The following tables present the quarterly dividends paid by Farmer Mac on its outstanding preferred
during 2023, 2022, and 2021:
Table 9.2
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2023
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock,
Series C
$
0.3750 $
0.3750 $
0.3750 $
0.3750
5.700% Non-Cumulative Preferred Stock, Series D
5.750% Non-Cumulative Preferred Stock, Series E
5.250% Non-Cumulative Preferred Stock, Series F
4.875% Non-Cumulative Preferred Stock, Series G
0.3563
0.3594
0.3281
0.3047
0.3563
0.3594
0.3281
0.3047
0.3563
0.3594
0.3281
0.3047
0.3563
0.3594
0.3281
0.3047
170
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock,
Series C
$
0.3750 $
0.3750 $
0.3750 $
0.3750
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2022
5.700% Non-Cumulative Preferred Stock, Series D
5.750% Non-Cumulative Preferred Stock, Series E
5.250% Non-Cumulative Preferred Stock, Series F
4.875% Non-Cumulative Preferred Stock, Series G
0.3563
0.3594
0.3281
0.3047
0.3563
0.3594
0.3281
0.3047
2021
0.3563
0.3594
0.3281
0.3047
0.3563
0.3594
0.3281
0.3047
1st Quarter
2nd Quarter(1)
3rd Quarter
4th Quarter
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock,
Series C
$
0.3750 $
0.3750 $
0.3750 $
0.3750
5.700% Non-Cumulative Preferred Stock, Series D
5.750% Non-Cumulative Preferred Stock, Series E
5.250% Non-Cumulative Preferred Stock, Series F
4.875% Non-Cumulative Preferred Stock, Series G
(1)
0.3563
0.3594
0.3281
—
0.3563
0.3594
0.3281
0.1693
0.3563
0.3594
0.3281
0.3047
0.3563
0.3594
0.3281
0.3047
For second quarter 2021, dividend payment includes $0.1693 per share on the Series G Preferred Stock for the period from but not including May 27,
2021 (issuance date) to and including July 17, 2021.
Equity-Based Incentive Compensation Plans
Farmer Mac's Amended and Restated 2008 Omnibus Incentive Compensation Plan authorizes the grant of
restricted stock units and SARs, among other alternative forms of equity-based compensation, to Farmer
Mac's directors, officers, and employees. SARs awarded to officers and employees vest annually in
thirds. Farmer Mac has not granted SARs to directors since 2008. If not exercised or cancelled earlier due
to the termination of employment, SARs granted to officers or employees expire after 10 years from the
grant date. For all SARs granted, the exercise price is equal to the closing price of Farmer Mac's Class C
non-voting common stock on the date of grant. SARs granted during 2023, 2022, and 2021 have a
weighted average exercise price per share of $135.12, $120.38 and $88.68, respectively. During 2023,
2022, and 2021, restricted stock unit awards were granted to employees, officers, and directors with
vesting periods of one to three years.
171
The following tables summarize SARs and non-vested restricted stock unit activity for the years ended
December 31, 2023, 2022, and 2021:
Table 9.3
For the Years Ended December 31,
2023
2022
2021
Weighted-
Average
Exercise
Price
SARs
Outstanding, beginning of year
132,163 $
Granted
Exercised
Canceled
Outstanding, end of year
Exercisable at end of year
16,761
(22,972)
—
125,952
87,378
75.82
135.12
56.82
—
87.18
73.15
Weighted-
Average
Exercise
Price
66.10
120.38
49.04
—
75.82
63.12
SARs
130,409 $
18,432
(16,678)
—
132,163
83,054
Weighted-
Average
Exercise
Price
57.16
88.68
38.99
—
66.10
52.85
SARs
116,417 $
28,575
(14,583)
—
130,409
72,106
For the Years Ended December 31,
2023
2022
2021
Non-vested
Restricted
Stock Units
Weighted-
Average
Grant Date
Fair Value
Non-vested
Restricted
Stock Units
Weighted-
Average
Grant Date
Fair Value
Non-vested
Restricted
Stock Units
Weighted-
Average
Grant Date
Fair Value
Outstanding, beginning of year
100,025 $
Granted
Canceled
Vested and issued
Outstanding, end of year
59,745
(62)
(45,355)
114,353
91.84
135.56
88.68
78.12
120.13
103,891 $
38,668
(2,711)
(39,823)
100,025
78.55
120.14
97.44
84.25
91.84
83,956 $
53,358
(1,184)
(32,239)
103,891
71.76
88.92
79.82
77.98
78.55
The cancellations of SARs and non-vested restricted stock units during 2023, 2022, and 2021 were due to
unvested awards terminating in accordance with the provisions of the applicable equity compensation
plans or award agreements upon directors' or employees' departures from Farmer Mac.
Cash is not received from exercises of SARs or the vesting and issuance of restricted stock units. During
2023, 2022, and 2021, the reduction of income taxes payable as a result of the deduction for the exercise
of SARs and the vesting of restricted stock units was $1.7 million, $1.2 million, and $0.9 million,
respectively.
During 2023, 2022, and 2021, Farmer Mac recorded a net decrease to additional paid-in capital of $3.1
million, $1.9 million, and $1.3 million, respectively, related to stock-based compensation awards.
172
As of December 31, 2023, Farmer Mac had no stock options outstanding. The following tables summarize
information about SARs and non-vested restricted stock units outstanding as of December 31, 2023:
Table 9.4
SARs:
Range of
Exercise Prices
$25.00 - $39.99
40.00 - 54.99
55.00 - 69.99
70.00 - 84.99
85.00 - 99.99
100.00 - 114.99
115.00 - 129.99
130.00 - 144.99
Outstanding
Exercisable
Vested or Expected to Vest
Weighted-
Average
Remaining
Contractual Life
SARs
Weighted-
Average
Remaining
Contractual Life
1.6 years
0.0 years
3.3 years
5.8 years
6.6 years
0.0 years
8.2 years
9.3 years
18,735
—
3,381
39,642
19,476
—
6,144
—
87,378
1.6 years
0.0 years
3.3 years
5.8 years
6.3 years
0.0 years
8.2 years
0.0 years
SARs
18,735
—
3,381
39,642
29,001
—
18,432
16,761
125,952
Weighted-
Average
Remaining
Contractual Life
1.6 years
0.0 years
3.3 years
5.8 years
6.6 years
0.0 years
8.2 years
9.3 years
SARs
18,735
—
3,381
39,642
29,001
—
18,432
16,761
125,952
Non-vested Restricted Stock Units:
Weighted-
Average
Grant-Date
Fair Value
$80.00 - $94.99
95.00 - 109.99
110.00 - 124.99
125.00 - 139.99
140.00 - 154.99
Outstanding
Expected to Vest
Non-vested
Restricted
Stock Units
Weighted-Average
Remaining
Contractual
Life
Non-vested
Restricted
Stock Units
Weighted-Average
Remaining
Contractual
Life
30,182
219
24,779
56,194
2,979
114,353
0.3 years
0.3 years
1.3 years
2.3 years
2.3 years
30,450
219
24,779
56,194
2,979
114,621
0.1 years
0.3 years
1.3 years
2.3 years
2.3 years
As of December 31, 2023 and 2022, the intrinsic value of SARs, and non-vested restricted stock units
outstanding, exercisable, and vested or expected to vest was $35.0 million and $16.3 million,
respectively. During 2023, 2022, and 2021, the total intrinsic value of SARs exercised was $2.4 million,
$1.1 million, and $0.9 million, respectively. As of December 31, 2023, there was $7.7 million of total
unrecognized compensation cost related to non-vested SARs and restricted stock unit awards. This cost is
expected to be recognized over a weighted-average period of 1.9 years.
The weighted-average grant date fair values of SARs and restricted stock unit awards granted in 2023,
2022, and 2021 were $114.68, $91.94, and $65.48 per share, respectively. Under the fair value-based
method of accounting for stock-based compensation cost, Farmer Mac recognized compensation expense
of $6.8 million, $4.6 million, and $4.3 million during 2023, 2022, and 2021, respectively.
173
The fair value of SARs was estimated using the Black-Scholes option pricing model based on the
following assumptions:
Table 9.5
Risk-free interest rate
Expected years until exercise
Expected stock volatility
Dividend yield
For the Year Ended December 31,
2023
4.1%
6 years
36.6%
3.3%
2022
1.9%
6 years
37.4%
3.2%
2021
0.9%
6 years
39.1%
4.0%
The risk-free interest rates used in the model were based on the U.S. Treasury yield curve in effect at the
grant date. Farmer Mac used historical data to estimate the timing of option exercises and stock option
cancellation rates used in the model. Expected volatilities were based on historical volatility of Farmer
Mac's Class C non-voting common stock. The dividend yields were based on the expected dividends as a
percentage of the value of Farmer Mac's Class C non-voting common stock on the grant date.
Because stock will be issued upon the vesting of restricted stock units regardless of the stock price,
expected stock volatility is not considered in determining grant date fair value. Restricted stock unit
awards also accrue dividends which are paid at vesting. The weighted-average grant date fair value of the
restricted stock units awarded in 2023, 2022, and 2021 was $135.56, $120.14, and $88.92 per unit,
respectively, which is based on the closing price of Farmer Mac's Class C non-voting stock on the date
granted.
Capital Requirements
Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based
capital requirement. As of both December 31, 2023 and 2022, the minimum capital 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 December 31, 2023, Farmer Mac's minimum capital requirement was $862.6 million and its core
capital level was $1.5 billion, which was $589.4 million above the minimum capital requirement as of that
date. As of December 31, 2022, Farmer Mac's minimum capital requirement was $805.9 million and its
core capital level was $1.3 billion, which was $516.9 million above the minimum capital requirement as
of that date.
In accordance with a rule of the Farm Credit Administration ("FCA") 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.
174
10.
INCOME TAXES
Farmer Mac is subject to federal corporate income taxes but is exempt from state and local corporate
income taxes. The components of the federal corporate income tax expense for the years ended
December 31, 2023, 2022, and 2021 were as follows:
Table 10.1
Current income tax expense
Deferred income tax expense
Income tax expense
For the Year Ended December 31,
2023
2022
2021
(in thousands)
$
$
46,712 $
35,609 $
6,386
11,926
53,098 $
47,535 $
38,645
(2,273)
36,372
A reconciliation of income tax at the statutory federal corporate income tax rate to the income tax expense
for the years ended December 31, 2023, 2022, and 2021 is as follows:
Table 10.2
Tax expense at statutory rate
Excess tax benefits related to stock-based awards
Other
Income tax expense
Statutory tax rate
For the Year Ended December 31,
2023
2022
2021
(dollars in thousands)
$
53,151
$
47,393
$
36,217
(924)
871
(401)
543
(300)
455
$
53,098
$
47,535
$
36,372
21.0 %
21.0 %
21.0 %
175
The components of the deferred tax assets and liabilities as of December 31, 2023 and 2022 were as
follows:
Table 10.3
Deferred tax assets:
Basis difference related to hedge items
Unrealized losses on available-for-sale securities
Allowance for losses
Compensation and Benefits
Stock-based compensation
Capital loss carryforwards
Valuation allowance
Other
Total deferred tax assets
Deferred tax liability:
Basis differences related to financial derivatives
Unrealized gains on cash flow hedges
Basis difference related to structured securitizations
Other
Total deferred tax liability
Net deferred tax asset
As of December 31,
2023
2022
(in thousands)
$
84,922 $
20,514
3,842
2,127
2,481
35
(35)
2,051
115,937 $
80,887 $
9,843
16,647
90
107,467 $
8,470 $
$
$
$
$
53,360
26,371
3,603
1,639
1,755
32
(32)
1,444
88,172
49,526
12,855
7,782
5
70,168
18,004
After the evaluation of both positive and negative objective evidence regarding the likelihood that its
deferred tax assets will be realized, Farmer Mac established a valuation allowance of $35,000 and
$32,000, as of December 31, 2023 and 2022, respectively, which was attributable to capital loss
carryforwards on investment securities. Farmer Mac did not establish a valuation allowance for the
remainder of its deferred tax assets because it believes it is more likely than not that those deferred tax
assets will be realized. As of December 31, 2023, no capital loss carryforwards expired. As of
December 31, 2023, the amount of capital loss carryforwards was $0.2 million. These capital loss
carryforwards will expire beginning in 2024.
As of December 31, 2023 and 2022, Farmer Mac did not identify any uncertain tax positions.
Farmer Mac did not have any unrecognized tax benefits for the years ended December 31, 2023, 2022, and
2021.
Tax years 2020 through 2023 remain subject to examination.
176
11.
EMPLOYEE BENEFITS
Farmer Mac makes contributions to a defined contribution retirement plan for all of its employees.
Farmer Mac contributed 13.2% of the lesser of an employee's gross salary and the maximum
compensation permitted under the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA") ($330,000 for 2023, $305,000 for 2022, and $290,000 for 2021), plus 5.7% of the difference
between: (1) the lesser of the gross salary and the amount established under EGTRRA and (2) the Social
Security Taxable Wage Base. Employees are fully vested after having been employed for approximately 3
years. Expenses for this plan for the years ended December 31, 2023, 2022, and 2021 were $3.6 million,
$3.1 million, and $2.7 million, respectively.
Farmer Mac established a Nonqualified Deferred Compensation Plan ("NQDC Plan") for its executive
officers effective May 1, 2017. Under the NQDC Plan, Farmer Mac credits the account of each participant
each calendar year with an amount equal to 18.9% of the difference between: (1) the amount established
under EGTRRA and (2) a participant’s gross annual base salary, which for purposes of calculating
employer credits under the NQDC Plan is capped at $750,000 for all other participants. This fixed
contribution percentage is the same formula used for determining employer contributions to Farmer Mac’s
defined contribution retirement plan based on an employee’s gross annual base salary that is above the
amount established under EGTRRA for that year. Expenses for the NQDC Plan were $0.1 million, $0.2
million, and $0.2 million, respectively, for the years ended December 31, 2023, 2022, and 2021.
12.
GUARANTEES AND COMMITMENTS
Farmer Mac offers two credit enhancement alternatives to direct loan purchases 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 and (2) LTSPCs, both of which are available through
each of the Agricultural Finance and Rural Infrastructure Finance lines of business.
The contractual terms of Farmer Mac's off-balance sheet guarantees and LTSPCs range from less than 1
year to 30 years. However, the actual term of each guarantee or LTSPC may be significantly less than the
contractual term based on the prepayment characteristics of the related loans. Farmer Mac's maximum
potential exposure under these off-balance sheet guarantees and LTSPCs is the unpaid principal balance of
the underlying loans. Farmer Mac's maximum potential exposure was $4.1 billion and $3.9 billion as of
December 31, 2023 and 2022, respectively. The maximum exposure from these guarantees and LTSPCs is
not representative of the actual loss Farmer Mac is likely to incur, based on historical loss experience. In
the event Farmer Mac was required to make payments under its guarantees or LTSPCs, Farmer Mac
would have the right to enforce the terms of the loans, and in the event of default, would have access to
the underlying collateral. For information on Farmer Mac's methodology for determining the reserve for
losses for its financial guarantees, see Note 2(h). The following table presents changes in Farmer Mac's
guarantee and commitment obligations in the consolidated balance sheets for the years ended
December 31, 2023, 2022, and 2021:
177
Table 12.1
Beginning balance, January 1
Additions to the guarantee and commitment obligation(1)
Amortization of the guarantee and commitment obligation
Ending balance, December 31
(1)
Represents the fair value of the guarantee and commitment obligation at inception.
Off-Balance Sheet Farmer Mac Guaranteed Securities
For the Years Ended December 31,
2023
2022
2021
(in thousands)
46,582 $
43,926 $
5,312
(4,331)
8,569
(5,913)
47,563 $
46,582 $
$
$
35,535
15,648
(7,257)
43,926
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 December 31, 2023 and 2022, not including offsets provided by any recourse provisions, recoveries
from third parties, or collateral for the underlying loans:
Table 12.2
Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities
Agricultural Finance
Farmer Mac Guaranteed Securities
Rural Infrastructure Finance
Farmer Mac Guaranteed Securities
Total off-balance sheet Farmer Mac Guaranteed Securities
As of December 31, 2023
As of December 31, 2022
(in thousands)
$
$
452,602 $
500,953
—
452,602 $
1,169
502,122
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 12.3
Proceeds from new securitizations
Guarantee fees received
For the Year Ended December 31,
2023
2022
2021
(in thousands)
$
222,188 $
357,841 $
291,393
1,620
1,852
1,029
Farmer Mac presents a liability for its obligation to stand ready under its guarantee in "Guarantee and
commitment obligation" on the consolidated balance sheets. The following table presents the liability and
the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac
Guaranteed Securities:
178
Table 12.4
Guarantee and commitment obligation
Weighted average remaining maturity:
Farmer Mac Guaranteed Securities
AgVantage Securities
Long-Term Standby Purchase Commitments
As of December 31, 2023 As of December 31, 2022
(dollars in thousands)
$
5,969 $
6,461
21.9 years
0.0 years
21.4 years
2.0 years
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. The following table presents the
liability, 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, as well as the weighted-average
remaining maturity of all loans underlying LTSPCs:
Table 12.5
Guarantee and commitment obligation(1)
Maximum principal amount
Weighted-average remaining maturity
(1) Relates to LTSPCs issued or modified on or after January 1, 2003.
Commitments
As of December 31, 2023 As of December 31, 2022
(dollars in thousands)
$
41,594 $
3,680,333
14.5 years
40,121
3,423,155
15.3 years
Farmer Mac enters into mandatory and optional delivery commitments to purchase loans. Most loan
purchase commitments entered into by Farmer Mac are mandatory commitments, in which Farmer Mac
charges a fee to extend or cancel the commitment. As of December 31, 2023 and 2022, commitments to
purchase Agricultural Finance loans and USDA Guarantees totaled $31.0 million and $9.9 million,
respectively, all of which were mandatory commitments. Farmer Mac also has unfunded commitments
and letters of credit under which Farmer Mac earns a nominal fee for the obligation to provide funding at a
future date. As of December 31, 2023 and 2022, Farmer Mac had $261.2 million and $130.2 million of
these unfunded commitments and letters of credit under the Agricultural Finance and Rural Infrastructure
lines of business. Any optional loan purchase commitments are sold forward under optional commitments
to deliver Farmer Mac Guaranteed Securities that may be canceled by Farmer Mac without penalty.
179
Reserve for Losses - LTSPCs and Farmer Mac Guaranteed Securities
The following table is a summary, by asset type, of the reserve for losses as of December 31, 2023 and
2022:
Table 12.6
Agricultural Finance
Rural Infrastructure Finance
Total
December 31, 2023
December 31, 2022
Reserve for Losses
Reserve for Losses
$
$
(in thousands)
1,471 $
240
1,711 $
819
614
1,433
The following is a summary of the changes in the reserve for losses for the three-year period ended
December 31, 2023:
Table 12.7
Balance as of December 31, 2020(1)
Release of losses
Balance as of December 31, 2021
Release of losses
Balance as of December 31, 2022
Release of losses
Agricultural Finance
loans
Rural Infrastructure
Finance loans
Reserve for Losses
Reserve for Losses
$
$
$
(in thousands)
2,097 $
(1,029)
1,068 $
(249)
819 $
652
1,180
(298)
882
(268)
614
(374)
240
Balance as of December 31, 2023
(1) Reserve for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.
$
1,471 $
The provision for the reserve for losses in the Agricultural Finance LTSPC portfolio recorded during the
year ended December 31, 2023 was primarily due to an updated estimate of expected losses based on
additional available industry data. The release from the reserve for losses in the Rural Infrastructure
Finance LTSPC portfolio recorded during the year ended December 31, 2023 was primarily due to an
updated estimate of expected losses based on additional available loss-given-default industry data.
The release from the reserve for losses in the Rural Infrastructure Finance LTSPC portfolio recorded
during the year ended December 31, 2022 was primarily due to decreased volume and ratings upgrades.
The release from the reserve for losses in the Agricultural Finance LTSPC portfolio was primarily due to
ratings upgrades.
The release from the reserve for losses in both the Agricultural Finance and Rural Infrastructure Finance
LTSPC and Farmer Mac Guaranteed portfolios recorded during the year ended December 31, 2021 was
primarily due to improving economic factor forecasts and ratings upgrades.
The following table presents the unpaid principal balances by delinquency status of Agricultural Finance
and Rural Infrastructure loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of
December 31, 2023 and 2022:
180
Table 12.8
As of December 31, 2023
Current
30-59 Days
60-89 Days
90 Days and
Greater(1)
Total Past
Due
Total Loans
(in thousands)
Agricultural Finance:
$ 3,390,918 $
2,776 $
2,366 $
1,784 $
6,926 $ 3,397,844
Rural Infrastructure Finance:
535,013
—
—
—
—
535,013
Total
$ 3,925,931 $
2,776 $
2,366 $
1,784 $
6,926 $ 3,932,857
(1)
Includes loans underlying off-balance sheet Farmer Mac 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.
As of December 31, 2022
Current
30-59 Days
60-89 Days
90 Days and
Greater(1)
Total Past
Due
Total Loans
(in thousands)
Agricultural Finance:
$ 3,174,939 $
11,614 $
622 $
3,817 $
16,053 $ 3,190,992
Rural Infrastructure Finance:
523,192
—
—
—
—
523,192
Total
$ 3,698,131 $
11,614 $
622 $
3,817 $
16,053 $ 3,714,184
(1)
Includes loans underlying off-balance sheet Farmer Mac 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 Agricultural Finance and Rural
Infrastructure loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of December 31, 2023
and 2022, by year of origination:
181
Table 12.9
Agricultural Finance:
Internally Assigned Risk
Rating:
Acceptable
Special mention(1)
Substandard(2)
As of December 31, 2023
Year of Origination:
2023
2022
2021
2020
2019
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
$ 169,429 $ 246,441 $ 515,396 $ 534,395 $ 264,815 $ 1,185,811 $ 391,335 $ 3,307,622
—
—
71
—
2,466
—
872
131
531
1,536
44,631
26,328
8,565
5,091
57,136
33,086
Total
$ 169,429 $ 246,512 $ 517,862 $ 535,398 $ 266,882 $ 1,256,770 $ 404,991 $ 3,397,844
For the Year Ended
December 31, 2023:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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, 2023
Year of Origination:
2023
2022
2021
2020
2019
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
$
— $
— $
— $
— $
— $ 419,190 $ 115,823 $ 535,013
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
— $
— $
— $
— $
— $ 419,190 $ 115,823 $ 535,013
Rural Infrastructure Finance:
Internally Assigned Risk
Rating:
Acceptable
Special mention(1)
Substandard(2)
Total
For the Year Ended
December 31, 2023:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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.
182
As of December 31, 2022
Year of Origination:
2022
2021
2020
2019
2018
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
Agricultural Finance:
Internally Assigned Risk
Rating:
Acceptable
Special mention(1)
Substandard(2)
$ 202,998 $ 496,269 $ 535,798 $ 254,293 $ 207,379 $ 1,107,834 $ 296,508 $ 3,101,079
—
—
1,319
—
1,778
176
—
—
1,198
3,588
42,680
32,597
3,205
3,372
50,180
39,733
Total
$ 202,998 $ 497,588 $ 537,752 $ 254,293 $ 212,165 $ 1,183,111 $ 303,085 $ 3,190,992
For the Year Ended
December 31, 2022:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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, 2022
Year of Origination:
2022
2021
2020
2019
2018
Prior
(in thousands)
Revolving
Loans -
Amortized
Cost Basis
Total
$
— $
— $
— $
— $
— $ 470,659 $ 52,533 $ 523,192
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
— $
— $
— $
— $
— $ 470,659 $ 52,533 $ 523,192
Rural Infrastructure Finance:
Internally Assigned Risk
Rating:
Acceptable
Special mention(1)
Substandard(2)
Total
For the Year Ended
December 31, 2022:
Current period charge-offs
$
— $
— $
— $
— $
— $
— $
— $
—
(1)
(2)
Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately
secured.
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.
183
13.
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, 2023 and 2022, respectively, and indicate the fair value hierarchy
of the valuation techniques used by Farmer Mac to determine such fair value:
Table 13.1
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Assets and Liabilities Measured at Fair Value as of December 31, 2023
Level 1
Level 2
Level 3(1)
Total
(in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student
loans
$
— $
— $
19,082 $
19,082
Floating rate Government/GSE guaranteed mortgage-backed securities
Fixed rate GSE guaranteed mortgage-backed securities
—
—
2,424,434
1,569,615
Floating rate U.S. Treasuries
Fixed rate U.S. Treasuries
Total Available-for-sale Investment Securities
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage
Farmer Mac Guaranteed Securities
Total Farmer Mac Guaranteed Securities
USDA Securities:
Trading
Total USDA Securities
Financial derivatives
Guarantee Asset
Total Assets at fair value
Liabilities:
Financial derivatives
Total Liabilities at fair value
—
—
—
—
2,424,434
1,569,615
49,968
855,832
—
—
3,994,049
19,082
4,918,931
—
—
—
—
—
37,467
—
5,522,712
5,522,712
9,767
9,767
5,532,479
5,532,479
1,241
1,241
—
5,831
1,241
1,241
37,478
5,831
49,968
855,832
905,800
—
—
—
—
—
11
—
$
905,811 $ 4,031,516 $ 5,558,633 $ 10,495,960
$
$
91 $
117,040 $
91 $
117,040 $
— $
— $
117,131
117,131
(1) Level 3 assets represent 19% of total assets and 52% of financial instruments measured at fair value.
184
Assets and Liabilities Measured at Fair Value as of December 31, 2022
Level 1
Level 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
Floating rate Government/GSE guaranteed mortgage-backed securities
Fixed rate GSE guaranteed mortgage-backed securities
Fixed rate U.S. Treasuries
$
— $
— $
19,027 $
19,027
—
—
2,392,540
1,048,386
1,119,611
—
—
—
—
2,392,540
1,048,386
1,119,611
4,579,564
Total Available-for-sale Investment Securities
1,119,611
3,440,926
19,027
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage
Farmer Mac Guaranteed Securities
Total Farmer Mac Guaranteed Securities
USDA Securities:
Trading
Total USDA Securities
Financial derivatives
Guarantee Asset
Total Assets at fair value
Liabilities:
Financial derivatives
Total Liabilities at fair value
—
—
—
—
—
—
—
—
—
—
—
—
37,409
—
7,599,379
7,599,379
7,847
7,847
7,607,226
7,607,226
1,767
1,767
—
4,467
1,767
1,767
37,409
4,467
$ 1,119,611 $ 3,478,335 $ 7,632,487 $
12,230,433
$
$
142 $
175,184 $
142 $
175,184 $
— $
— $
175,326
175,326
(1) Level 3 assets represent 28% of total assets and 62% of financial instruments measured at fair value.
There were no material assets or liabilities measured at fair value on a non-recurring basis as of
December 31, 2023 or 2022.
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 years ended December 31,
2023 and 2022, there were no transfers within the fair value hierarchy.
185
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, 2023, 2022, and 2021.
Table 13.2
Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2023
Beginning
Balance
Purchases
Settlements
Allowance
for Losses
Realized and
unrealized
(losses)/
gains
included
in Income
Unrealized
gains
included in
Other
Comprehensive
Income
Transfers
Out(1)
Ending
Balance
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate
certificates backed by
Government guaranteed
student loans
$ 19,027 $
— $
— $
Total available-for-sale
19,027
—
—
Farmer Mac Guaranteed
Securities:
Available-for-sale:
AgVantage
Farmer Mac Guaranteed
Securities
7,599,379
2,084,650
(1,561,507)
7,847
—
(1,213)
Total available-for-sale
7,607,226
2,084,650
(1,562,720)
USDA Securities:
Trading
Total USDA Securities
Guarantee and commitment
obligations:
Guarantee Asset
Total Guarantee and
commitment obligations
1,767
1,767
4,467
4,467
—
—
—
—
(550)
(550)
(590)
(590)
6 $
6
— $
—
49 $
— $
19,082
49
—
19,082
230
—
230
—
—
—
—
89,629
(5,573)
(2,684,096)
5,522,712
—
89,629
24
24
1,954
1,954
3,133
—
9,767
(2,440)
(2,684,096)
5,532,479
—
—
—
—
—
—
—
—
1,241
1,241
5,831
5,831
Total Assets at fair value $ 7,632,487 $ 2,084,650 $ (1,563,860) $
236 $
91,607 $
(2,391) $ (2,684,096) $ 5,558,633
(1) Includes $2.7 billion of AgVantage Securities transferred from available-for-sale to held-to-maturity on July 1, 2023.
186
Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2022
Beginning
Balance
Purchases
Settlements
Allowance
for Losses
Realized and
unrealized
losses
included
in Income
Unrealized
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
$
19,254 $
— $
— $
19 $
Total available-for-sale
19,254
—
—
19
— $
—
(246) $
19,027
(246)
19,027
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage
Farmer Mac Guaranteed
Securities
Total available-for-sale
USDA Securities:
Trading
Total USDA Securities
Guarantee and commitment obligations:
Guarantee Asset
Total Guarantee and commitment
obligations
6,316,145
3,411,665
(1,526,303)
(283)
(552,907)
(48,938)
7,599,379
12,414
—
(1,675)
—
—
(2,892)
7,847
6,328,559
3,411,665
(1,527,978)
(283)
(552,907)
(51,830)
7,607,226
4,401
4,401
6,237
6,237
—
—
—
—
(2,583)
(2,583)
(903)
(903)
—
—
—
—
(51)
(51)
(867)
(867)
—
—
—
—
1,767
1,767
4,467
4,467
Total Assets at fair value
$ 6,358,451 $ 3,411,665 $ (1,531,464) $
(264) $
(553,825) $
(52,076) $ 7,632,487
187
Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2021
Beginning
Balance
Purchases
Settlements
Allowance
for Losses
Realized 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) $
Total available-for-sale
19,171
—
—
(16)
— $
—
99 $
19,254
99
19,254
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage
Farmer Mac Guaranteed
Securities
Total available-for-sale
USDA Securities:
Trading
Total USDA Securities
Guarantee and commitment obligations:
Guarantee Asset
Total Guarantee and commitment
obligations
6,947,701
1,143,115
(1,614,598)
—
12,560
(263)
6,947,701
1,155,675
(1,614,861)
6,695
6,695
—
—
—
—
(2,178)
(2,178)
6,237
6,237
—
—
47
—
47
—
—
—
—
(176,064)
15,944
6,316,145
—
117
12,414
(176,064)
16,061
6,328,559
(116)
(116)
—
—
—
—
—
—
4,401
4,401
6,237
6,237
Total Assets at fair value
$ 6,973,567 $ 1,161,912 $ (1,617,039) $
31 $
(176,180) $
16,160 $ 6,358,451
188
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, 2023 and 2022:
Table 13.3
Financial Instruments
Fair Value
Valuation Technique
Unobservable Input
Range
(Weighted-Average)
(in thousands)
As of December 31, 2023
Assets:
Investment securities:
Floating rate auction-rate certificates backed
by Government guaranteed student loans
Farmer Mac Guaranteed Securities:
$
19,082
Indicative bids
Range of broker quotes 97.0% - 97.0% (97.0%)
AgVantage
$ 5,522,712 Discounted cash flow Discount rate
4.7% - 5.4% (5.0%)
Farmer Mac Guaranteed Securities
$
9,767 Discounted cash flow Discount rate
CPR
8.3%
3%
USDA Securities
$
1,241 Discounted cash flow Discount rate
5.4% - 5.4% (5.4%)
CPR
12% - 12% (12%)
Guarantee Asset
$
5,831 Discounted cash flow Discount rate
CPR
As of December 31, 2022
8.3%
3%
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
Farmer Mac Guaranteed Securities:
$
19,027
Indicative bids
Range of broker quotes 96.8% - 96.8% (96.8%)
AgVantage
$ 7,599,379 Discounted cash flow Discount rate
Farmer Mac Guaranteed Securities
$
7,847 Discounted cash flow Discount rate
4.7% - 6.1% (5.1%)
4.8% - 5.3% (5.1%)
CPR
8%
USDA Securities
$
1,767 Discounted cash flow Discount rate
5.1% - 5.7% (5.3%)
CPR
19% - 27% (25%)
Guarantee Asset
$
4,467 Discounted cash flow Discount rate
5.4% - 5.9% (5.7%)
CPR
8%
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. CPR are not presented in the table above for AgVantage securities
189
because they generally have fixed maturity dates when the secured general obligations are due and do not
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, 2023 and 2022:
Table 13.4
Financial assets:
Cash and cash equivalents
Investment securities
Farmer Mac Guaranteed Securities
USDA Securities
Loans
Financial derivatives
Guarantee and commitment fees receivable
Financial liabilities:
Notes payable
As of December 31, 2023
As of December 31, 2022
Fair Value
Carrying
Amount
Fair Value
Carrying
Amount
(in thousands)
$
888,707
$
888,707 $
861,002
$
861,002
4,981,249
4,979,504
4,630,701
4,628,268
9,710,074
9,745,548
8,573,781
8,628,380
2,036,046
2,355,412
2,099,445
2,411,601
10,426,021
11,039,349
9,666,710
10,205,466
37,478
58,465
37,478
49,832
37,409
50,653
37,409
47,151
25,670,971
26,336,542
23,591,330
24,469,113
Debt securities of consolidated trusts held by third parties
1,268,563
1,351,069
1,106,837
1,181,948
Financial derivatives
Guarantee and commitment obligations
117,131
56,195
117,131
47,563
175,326
50,083
175,326
46,582
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 the market standard methodology of netting the discounted future fixed cash payments (or
190
receipts) and the discounted expected variable cash receipts (or payments) 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.
14.
BUSINESS SEGMENT REPORTING
The following table presents the alignment of the Farmer Mac's seven segments:
Agricultural Finance
Rural Infrastructure
Finance
Treasury
Farm &
Ranch
Corporate
AgFinance
Rural
Utilities
Renewable
Energy
Funding
Investments
Corporate
The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a
consolidated basis. Accordingly, the core earnings for Farmer Mac's segments would differ from any
stand-alone financial statements of Farmer Mac's subsidiaries. These differences would be due to various
factors, including the exclusion of unrealized gains and losses related to fair value changes of trading
assets and financial derivatives, as well as the allocation of certain expenses such as operating expenses,
dividends and interest expense related to the issuance of capital and the issuance of indebtedness managed
at the corporate level.
The following tables present core earnings for Farmer Mac's segments and a reconciliation to consolidated
net income for the years ended December 31, 2023, 2022, and 2021.
191
Release of/(provision
for) losses
(Provision for)/release
of reserve for losses
Operating expenses
Total non-interest
expense
Core earnings before
income taxes
Income tax (expense)/
benefit
Core earnings before
preferred stock
dividends
Preferred stock
dividends
Segment core
earnings/(losses)
Total Assets
Total on- and off-
balance sheet program
assets at principal
balance
Table 14.1
Core Earnings by Business Segment
For the Year Ended December 31, 2023
Agricultural Finance
Rural Infrastructure
Treasury
Farm &
Ranch
Corporate
AgFinance
Rural
Utilities
Renewable
Energy
Funding
Investments
Corporate
Reconciling
Adjustments
Consolidated
Net Income
(in thousands)
Net interest income
$ 137,079 $ 31,224 $ 25,187 $
4,648 $ 128,415 $
994 $
— $
—
$
327,547
Less: reconciling
adjustments(1)(2)(3)
(4,179)
—
(168)
—
3,594
Net effective spread
132,900
31,224
25,019
4,648
132,009
Guarantee and
commitment fees
Other income/
(expense)(3)
17,415
283
1,133
2,952
35
—
97
—
—
3
186
1,180
—
29
Total revenues
153,267
31,542
26,152
4,745
132,012
1,209
—
—
—
280
280
—
—
(97,099)
4
—
—
—
(97,099)
567
567
—
—
(2,216)
16,712
3,778
2,129
—
—
—
—
7,077
351,336
(858)
(278)
(97,099)
(97,377)
145
(207)
(581)
(219)
(652)
—
(652)
—
—
—
374
—
374
—
—
—
—
—
—
—
152,760
31,335
25,945
4,526
132,012
1,213
(96,819)
2,129
(4)
253,101
(32,079)
(6,581)
(5,449)
(951)
(27,721)
(255)
20,385
(447)
(53,098)
120,681
24,754
20,496
3,575
104,291
958
(76,434)
1,682
(4)
200,003
—
—
—
—
—
—
(27,165)
—
(27,165)
$ 120,681 $ 24,754 $ 20,496 $
3,575 $ 104,291 $
958 $ (103,599) $
1,682
(4) $
172,838
$ 15,052,606 $ 1,566,906 $ 7,002,620 $ 443,772 $
— $ 5,342,089 $ 116,389 $
—
$ 29,524,382
$ 18,808,801 $ 1,693,979 $ 7,480,723 $ 487,521 $
— $
— $
— $
—
$ 28,471,024
(1)
(2)
(3)
(4)
Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings
amounts.
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.
Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial
derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
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.
192
—
—
—
3
3
—
—
(81,807)
15,411
15,411
—
—
(5,104)
13,040
23,447
33,754
—
—
—
—
25,131
309,111
(1,323)
517
(82,626)
(82,109)
Core Earnings by Business Segment
For the Year Ended December 31, 2022
Agricultural Finance
Rural Infrastructure
Treasury
Farm &
Ranch
Corporate
AgFinance
Rural
Utilities
Renewable
Energy
Funding
Investments
Corporate
Reconciling
Adjustments
Consolidated
Net Income
(in thousands)
Net interest income
$ 133,218 $ 29,209 $
16,175 $
2,483 $
96,613 $
(6,758) $
— $
—
$
270,940
Less: reconciling
adjustments(1)(2)(3)
(4,161)
—
(103)
—
(11,147)
—
Net effective spread
129,057
29,209
16,072
2,483
85,466
(6,758)
Guarantee and
commitment fees
Other income/
(expense)(3)
16,718
1,420
139
261
1,238
—
49
—
—
—
—
—
Total revenues
147,195
29,609
17,310
2,532
85,466
(6,758)
(Provision for)/release
of losses
Release of reserve for
losses
Operating expenses
Total non-interest
expense
Core earnings before
income taxes
Income tax (expense)/
benefit
Core earnings before
preferred stock
dividends
Preferred stock
dividends
Segment core
earnings/(losses)
(1,463)
(2,136)
2,751
(494)
247
(819)
(572)
—
—
—
270
—
270
—
—
—
—
—
—
—
19
—
—
—
(81,807)
145,160
27,473
20,331
2,038
85,466
(6,739)
(81,804)
33,754
(4)
225,679
(30,482)
(5,768)
(4,268)
(428)
(17,949)
1,416
17,033
(7,089)
(47,535)
114,678
21,705
16,063
1,610
67,517
(5,323)
(64,771)
26,665
(4)
178,144
—
—
—
—
—
—
(27,165)
—
(27,165)
$ 114,678 $ 21,705 $
16,063 $
1,610 $
67,517 $
(5,323) $ (91,936) $
26,665
(4)
$
150,979
Total Assets
$ 14,623,596 $ 1,541,151 $ 5,867,517 $ 219,609 $
— $ 4,806,010 $ 275,227 $
—
$ 27,333,110
Total on- and off-
balance sheet program
assets at principal
balance
$ 17,728,792 $ 1,603,507 $ 6,359,613 $ 230,170 $
— $
— $
— $
—
$ 25,922,082
(1)
(2)
(3)
(4)
Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings
amounts.
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.
Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial
derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
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.
193
Core Earnings by Business Segment
For the Year Ended December 31, 2021
Agricultural Finance
Rural Infrastructure
Treasury
Farm &
Ranch
Corporate
AgFinance
Rural
Utilities
Renewable
Energy
Funding
Investments
Corporate
Reconciling
Adjustments
Consolidated
Net Income
(in thousands)
Net interest income
$ 118,289 $ 27,081 $
8,224 $
1,219 $
66,581 $
557 $
— $
—
$
221,951
Less: reconciling
adjustments(1)(2)(3)
(4,753)
—
(157)
—
3,627
Net effective spread
113,536
27,081
8,067
1,219
70,208
Guarantee and
commitment fees
Gain on sale of
mortgage loans
Other income/
(expense)(3)
16,178
6,539
1,966
48
—
—
1,287
—
5
20
—
—
—
—
—
Total revenues
138,219
27,129
9,359
1,239
70,208
—
557
—
—
—
557
(15)
—
—
—
—
—
—
1,283
1,283
—
—
(4,864)
12,669
—
6,539
(291)
(291)
851
(2,730)
2,531
243,690
860
1,327
(73,416)
(72,089)
Release of/(provision
for) losses
Release of reserve for
losses
Operating expenses
Total non-interest
expense
Core earnings before
income taxes
Income tax (expense)/
benefit
Core earnings before
preferred stock
dividends
Preferred stock
dividends
Segment core
earnings/(losses)
1,574
(210)
(291)
(198)
1,034
—
1,034
—
—
—
293
—
293
—
—
—
—
—
—
—
—
—
(73,416)
—
(73,416)
—
—
—
—
140,827
26,919
9,361
1,041
70,208
542
(73,707)
(2,730) (4)
172,461
(29,574)
(5,653)
(1,965)
(219)
(14,744)
(114)
15,325
572
(36,372)
111,253
21,266
7,396
822
55,464
428
(58,382)
(2,158) (4)
136,089
—
—
—
—
—
—
(24,677)
—
(24,677)
$ 111,253 $ 21,266 $
7,396 $
822 $
55,464 $
428 $ (83,059) $
(2,158) (4)
$
111,412
Total Assets
$ 13,112,193 $ 1,507,848 $ 5,344,707 $ 87,553 $
— $ 5,012,827 $ 55,881 $
—
$ 25,121,009
Total on- and off-
balance sheet program
assets at principal
balance
$ 16,094,640 $ 1,537,834 $ 5,895,226 $ 86,763 $
— $
— $
— $
—
$ 23,614,463
(1)
(2)
(3)
(4)
Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings
amounts.
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.
Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial
derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
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.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9.
None.
194
Item 9A.
Controls 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 (“Exchange Act”), including this Annual Report on Form 10-
K, 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 about 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 December 31, 2023.
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 December 31, 2023.
Management's Report on Internal Control Over Financial Reporting. See "Financial Statements—
Management's Report on Internal Control Over Financial Reporting" in Item 8 of this Annual Report on
Form 10-K.
Attestation Report of Independent Registered Public Accounting Firm. See "Financial Statements—
Report of Independent Registered Public Accounting Firm" in Item 8 of this Annual Report on Form 10-
K.
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 December 31, 2023 that have materially
affected, or are reasonably likely to materially affect, Farmer Mac's internal control over financial
reporting.
Item 9B.
Other Information
Director and Officer Trading Arrangements
None of Farmer Mac's directors or executive officers (as defined in Rule 16a-1(f) under the Exchange Act)
adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as
defined in Item 408(c) of Regulation S-K) during the three months ended December 31, 2023.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
195
Item 10.
Directors, Executive Officers, and Corporate Governance
PART III
The information required by this Item is incorporated by reference to Farmer Mac's definitive proxy
statement to be filed on or about April 17, 2024.
Item 11.
Executive Compensation
The information required by this Item is incorporated by reference to Farmer Mac's definitive proxy
statement to be filed on or about April 17, 2024.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The information required by this Item is incorporated by reference to Farmer Mac's definitive proxy
statement to be filed on or about April 17, 2024.
Item 13.
Certain Relationships and Related Transactions and Director Independence
The information required by this Item is incorporated by reference to Farmer Mac's definitive proxy
statement to be filed on or about April 17, 2024.
Item 14.
Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to Farmer Mac's definitive proxy
statement to be filed on or about April 17, 2024.
Item 15.
Exhibits and Financial Statement Schedules
PART IV
a.
(1) Financial Statements.
Refer to Item 8 above.
(2) Financial Statement Schedules.
There are no schedules because 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.
*
*
*
*
3.1
3.2
4.1
4.2
—
—
—
—
Title VIII of the Farm Credit Act of 1971, as most recently amended on June 18, 2020 (Previously filed as
Exhibit 3.1 to Form 10-Q filed August 10, 2020).
Amended and Restated By-Laws of the Registrant (Previously filed as Exhibit 3.2 to Form 10-K filed February
24, 2023).
Specimen Certificate for Farmer Mac Class A Voting Common Stock (Previously filed as Exhibit 4.1 to
Form 10-Q filed May 15, 2003).
Specimen Certificate for Farmer Mac Class B Voting Common Stock (Previously filed as Exhibit 4.2 to
Form 10-Q filed May 15, 2003).
196
*
*
*
*
*
*
*
*
*
*
*
*
4.3
4.4
4.4.1
4.5
4.5.1
4.6
4.6.1
4.7
4.7.1
4.8
4.8.1
4.9
†*
10.1
†*
10.1.1
†*
10.2
†*
10.2.1
†*
10.2.2
†*
10.2.3
†*
10.2.4
†*
10.3
†*
10.4
†*
†*
10.5
10.6
†**
10.7
†*
10.8
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—
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—
—
—
—
—
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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).
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).
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).
Specimen Certificate for 5.700% Non-Cumulative Preferred Stock, Series D (Previously filed as Exhibit 4.7 to
Form 10-Q filed August 1, 2019).
Certificate of Designation of Terms and Conditions of 5.700% Non-Cumulative Preferred Stock, Series D
(Previously filed as Exhibit 4.1 to Form 8-A filed May 13, 2019).
Specimen Certificate for 5.750% Non-Cumulative Preferred Stock, Series E (Previously filed as Exhibit 4.7 to
Form 10-Q filed August 10, 2020).
Certificate of Designation of Terms and Conditions of 5.750% Non-Cumulative Preferred Stock, Series E
(Previously filed as Exhibit 4.1 to Form 8-A filed May 20, 2020).
Specimen Certificate for 5.250% Non-Cumulative Preferred Stock, Series F (Previously filed as Exhibit 4.8 to
Form 10-Q filed November 9, 2020).
Certificate of Designation of Terms and Conditions of 5.250% Non-Cumulative Preferred Stock, Series F
(Previously filed as Exhibit 4.1 to Form 8-A filed August 20, 2020).
Specimen Certificate for 4.875% Non-Cumulative Preferred Stock, Series G (Previously filed as Exhibit 4.8 to
Form 10-Q filed August 5, 2021).
Certificate of Designation of Terms and Conditions of 4.875% Non-Cumulative Preferred Stock, Series G
(Previously filed as Exhibit 4.1 to Form 8-A filed May 27, 2021).
—
Description of the Registrant's securities that are registered under Section 12 of the Securities Exchange Act of
1934 (Previously filed as Exhibit 4.9 to Form 10-Q filed August 5, 2021).
Employment Agreement dated as of October 15, 2018 between Bradford T. Nordholm and the Registrant
(Previously filed as Exhibit 10.1 to Form 8-K filed October 1, 2019).
First Amendment to Amended Employment Agreement dated as of September 28, 2022 between Bradford T.
Nordholm and the Registrant (Previously filed as Exhibit 10.1 to Form 8-K filed October 4, 2022).
Form of Time-Based Restricted Stock Units Award Agreement for grants made to executive officers on or after
March 2, 2021. (Previously filed as Exhibit 10.1 to Form 8-K filed March 8, 2021).
Form of Time-Based Restricted Stock Units Award Agreement for grants made to directors on or after March
2, 2021 (Previously filed as Exhibit 10.2 to Form 8-K filed March 8, 2021).
Amended and Restated 2008 Omnibus Incentive Plan (Previously filed as Exhibit 10.2 to Form 10-Q filed
August 9, 2018).
Form of SARs Award Agreement under the 2008 Omnibus Incentive Plan for grants made from April 1, 2013
to March 31, 2015 (Previously filed as Exhibit 10.1 to Form 8-K filed April 5, 2013).
Form of SARs Award Agreement under the 2008 Omnibus Incentive Plan for grants made on or after April 1,
2015 (Previously filed as Exhibit 10.1 to Form 8-K filed on April 3, 2015).
Federal Agricultural Mortgage Corporation Amended and Restated Executive Officer Severance Plan
(effective January 16, 2020) (Previously filed as Exhibit 10.1 to Form 8-K filed January 23, 2020).
Form of Participation Agreement to the Federal Agricultural Mortgage Corporation Amended and Restated
Executive Officer Severance Plan (effective January 16, 2020) (Previously filed as Exhibit 10.2 to Form 8-K
filed January 23, 2020).
Nonqualified Deferred Compensation Plan (effective May 1, 2017) (Previously filed as Exhibit 10.2 to Form
10-Q filed May 10, 2017).
Adoption Agreement of the Nonqualified Deferred Compensation Plan (effective May 1, 2017) (Previously
filed as Exhibit 10.3 to Form 10-Q filed May 10, 2017).
Amended Adoption Agreement of the Nonqualified Deferred Compensation Plan, effective November 15,
2023.
Form of Indemnification Agreement for Directors (Previously filed as Exhibit 10.1 to Form 8-K filed April 9,
2008).
†**
10.9
Description of compensation agreement between the Registrant and its directors, effective January 1, 2024.
197
*#
10.10
Amended and Restated Master Central Servicing Agreement between Zions First National Bank and the
Registrant, dated as of May 1, 2004 (Previously filed as Exhibit 10.11.2 to Form 10-Q filed August 9, 2004).
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
10.10.1
10.10.2
10.11
10.11.1
10.11.2
10.11.3
10.11.4
10.12
10.12.1
10.13
10.14
10.14.1
10.15
10.16
10.17
10.18
10.19
21
Amendment No. 1 to Amended and Restated Master Central Servicing Agreement between Zions First
National Bank and the Registrant, dated as of June 1, 2009 (Previously filed as Exhibit 10.11.1 to Form 10-Q
filed August 10, 2009).
Amendment No. 2 to Amended and Restated Master Central Servicing Agreement between Zions First
National Bank and the Registrant, dated as of August 25, 2010 (Previously filed as Exhibit 10.11.2 to Form 10-
Q filed November 9, 2010).
Amended and Restated Note Purchase Agreement between Farmer Mac Mortgage Securities Corporation,
National Rural Utilities Cooperative Finance Corporation, and the Registrant, dated as of March 24, 2011
(Previously filed as Exhibit 10.22 to Form 10-Q filed May 10, 2011).
Amended and Restated First Supplemental Note Purchase Agreement between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant, dated as
of January 8, 2015 (Previously filed as Exhibit 10.1 to Form 8-K filed January 13, 2015).
Second Amended and Restated First Supplemental Note Purchase Agreement between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant, dated as
of February 26, 2018 (Previously filed as Exhibit 10.1 to Form 10-Q filed May 10, 2018).
Third Amended and Restated First Supplemental Note Purchase Agreement between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant, dated as
of May 20, 2021 (Previously filed as Exhibit 10.1 to Form 8-K filed May 20, 2021).
Fourth Amended and Restated First Supplemental Note Purchase Agreement between Farmer Mac Mortgage
Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant, dated as
of June 15, 2022 (Previously filed as Exhibit 10.1 to Form 8-K filed June 21, 2022).
Amended and Restated Master Sale and Servicing Agreement between National Rural Utilities Cooperative
Finance Corporation and the Registrant, dated as of August 12, 2011 (Previously filed as Exhibit 10.26 to Form
10-Q filed November 9, 2011).
Amendment No. 1 to Amended and Restated Master Sale and Servicing Agreement between National Rural
Utilities Cooperative Finance Corporation and the Registrant, dated as of November 28, 2016 (Previously filed
as Exhibit 10.17 to Form 10-K filed March 9, 2017)
Second Amended, Restated and Consolidated Pledge Agreement between Farmer Mac Mortgage Securities
Corporation, National Rural Utilities Cooperative Finance Corporation, U.S. Bank National Association, and
the Registrant, dated as of July 31, 2015 (Previously filed as Exhibit 10.3 to Form 10-Q filed November 9,
2015).
Long Term Standby Commitment to Purchase between National Rural Utilities Cooperative Finance
Corporation and the Registrant, dated as of August 31, 2015 (Previously filed as Exhibit 10.4 to Form 10-Q
filed November 9, 2015).
Amendment No. 1 to Long Term Standby Commitment to Purchase between National Rural Utilities
Cooperative Finance Corporation and the Registrant, dated as of May 31, 2016 (Previously filed as Exhibit
10.1 to Form 10-Q filed August 9, 2016).
Loan Participation Servicing Agreement between National Rural Utilities Cooperative Finance Corporation,
National Cooperative Services Corporation, and the Registrant, dated as of September 26, 2019 (Previously
filed as Exhibit 10 to Form 8-K filed October 9, 2019).
Master Non-Recourse Loan Participation Agreement between National Rural Utilities Cooperative Finance
Corporation and the Registrant, dated as of February 3, 2020 (Previously filed as Exhibit 10.1 to Form 8-K
filed February 7, 2020).
Loan Participation and Servicing Agreement between National Rural Utilities Cooperative Finance
Corporation and the Registrant, dated as of February 3, 2020 (Previously filed as Exhibit 10.2 to Form 8-K
filed February 7, 2020).
Master Non-Recourse Loan Participation Agreement between CoBank, ACB, CoBank, FCB, and the
Registrant, dated as of February 13, 2019 (Previously filed as Exhibit 10.1 to Form 8-K filed February 20,
2019).
Loan Participation and Servicing Agreement between CoBank, ACB and the Registrant, dated as of February
13, 2019 (Previously filed as Exhibit 10.2 to Form 8-K filed February 20, 2019).
List of the Registrant's subsidiaries (Previously filed as Exhibit 21 to Form 10-K filed March 8, 2018).
**
31.1
**
31.2
—
—
Certification of Registrant's principal executive officer relating to the Registrant's Quarterly Report on Form
10-K for the year ended December 31, 2023, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Certification of Registrant's principal financial officer relating to the Registrant's Quarterly Report on Form 10-
K for the year ended December 31, 2023, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
198
**
32
97.1
—
—
Certification of Registrant's principal executive officer and principal financial officer relating to the
Registrant's Quarterly Report on Form 10-K for the year ended December 31, 2023, pursuant to 18 U.S.C. §
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Policy relating to recovery of erroneously awarded compensation, as required by applicable listing standards
adopted pursuant to 17 CFR 240.10D-1
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 —
101.PRE —
104
—
Inline XBRL Taxonomy Extension Label
Inline XBRL Taxonomy Extension Presentation
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.
Portions of this exhibit have been omitted pursuant to a request for confidential treatment.
Management contract or compensatory plan.
**
**
**
**
**
**
**
**
*
**
#
†
Item 16.
Form 10-K Summary
None.
199
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. Nordholm
By: Bradford T. Nordholm
President and Chief Executive Officer
(Principal Executive Officer)
February 23, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
Name
Title
Date
/s/ Lowell L. Junkins
Chair of the Board of Directors
February 23, 2024
Lowell L. Junkins
/s/ Bradford T. Nordholm
Bradford T. Nordholm
President and Chief Executive Officer
(Principal Executive Officer)
February 23, 2024
/s/ Aparna Ramesh
Aparna Ramesh
Executive Vice President – Chief Financial
Officer and Treasurer
(Principal Financial Officer)
February 23, 2024
/s/ Gregory N. Ramsey
Gregory N. Ramsey
Vice President – Chief Accounting Officer
(Principal Accounting Officer)
February 23, 2024
200
Name
Title
Date
/s/ Dennis L. Brack
Dennis L. Brack
/s/ Chester J. Culver
Chester J. Culver
/s/ Richard H. Davidson
Richard H. Davidson
/s/ Everett M. Dobrinski
Everett M. Dobrinski
/s/ James R. Engebretsen
James R. Engebretsen
/s/ Sara L. Faivre
Sara L. Faivre
/s/ Amy H. Gales
Amy H. Gales
/s/ Mitchell A. Johnson
Mitchell A. Johnson
/s/ Eric T. McKissack
Eric T. McKissack
/s/ Robert G. Sexton
Robert G. Sexton
/s/ Charles A. Stones
Charles A. Stones
/s/ Roy H. Tiarks
Roy H. Tiarks
/s/ Todd P. Ware
Todd P. Ware
/s/ LaJuana S. Wilcher
LaJuana S. Wilcher
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
February 23, 2024
Director
Director
February 23, 2024
February 23, 2024
201
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
1999 K Street, N.W.
Fourth Floor
Washington, DC 20006
Phone: 202.872.7700
800.879.3276
Website: www.farmermac.com
STOCK EXCHANGE
Farmer Mac’s Class A voting common stock and
Class C non-voting common stock trade on the
New York Stock Exchange under the symbols
AGM.A and AGM, respectively.
ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 16, 2024, 8:00 a.m. EDT
The New York Stock Exchange
18 Broad Street
New York, NY 10005
Dial-In: 800.836.8184
Webcast: www.farmermac.com/investors/
events-presentations
Formal notice of the meeting, the proxy statement,
and the proxy card are being mailed to each
stockholder of record entitled to vote at the
meeting simultaneously with the mailing of this
Annual Report.
TRANSFER AGENT AND REGISTRAR
Equiniti Trust Company, LLC (“EQ”)
48 Wall Street, Floor 23
New York, NY 10005
Phone: 800.937.5449
Email: helpast@equiniti.com
Website: equiniti.com/us/ast-access/
CERTIFICATION
Farmer Mac has included as Exhibit 31 to
its Annual Report on Form 10-K for the fiscal year
ended December 31, 2023 filed with the SEC the
certifications of the Chief Executive Officer and
Chief Financial Officer certifying the quality of
Farmer Mac’s financial disclosures.
FORM 10-K
Stockholders may obtain, without charge, a copy of
Farmer Mac’s 2023 Annual Report on Form 10-K,
as filed with the SEC on February 23, 2024, from
Farmer Mac’s website or by contacting Farmer Mac’s
Secretary at Farmer Mac’s Corporate Headquarters.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDED
DECEMBER 31, 2023
PricewaterhouseCoopers LLP
655 New York Avenue, N.W.
Washington, DC 20001
1999 K Street, N.W. • Fourth Floor • Washington, DC 20006
Phone: 202.872.7700 or 800.879.3276
www.farmermac.com