Table of Contents




PART I				4
Item 1.1 .			Financial Statements		4
			Consolidated Balance Sheets		54
			Consolidated Statements of Operations		65
			Consolidated Statements of Comprehensive Income		76
			Consolidated Statements of Equity		87
			Consolidated Statements of Cash Flows		108
			Notes to Consolidated Financial Statements		119
Item 2.2 .			Management's Discussion and Analysis of Financial Condition and Results of Operations		5651
			Forward-Looking Statements		5651
			Overview		5852
			Use of Non-GAAP Measures		6159
			Results of Operations		6360
			Outlook		7974
			Balance Sheet Review		8379
			~~Off-Balance Sheet Arrangements~~Risk Management		8480
			~~Risk Management~~		84
	Liquidity and Capital Resources	9997
			Regulatory Matters		~~101~~98
			Other Matters		~~102~~99
			Supplemental Information		~~103~~100
Item 3.3 .			Quantitative and Qualitative Disclosures About Market Risk		~~108~~105
Item 4.4 .			Controls and Procedures		~~108~~105
PART II						~~108~~106
Item 1.1 .			Legal Proceedings		~~108~~106
Item ~~1A.~~1A .			Risk Factors		~~108~~106
Item 2.2 .			Unregistered Sales of Equity Securities and Use of Proceeds		~~109~~112
Item 3.			~~Defaults~~Default Upon Senior Securities		~~109~~112
Item 4.			Mine Safety Disclosures		~~109~~112
Item 5.			Other Information		~~110~~112
Item 6.6 .			Exhibits		~~110~~113
Signatures					~~111~~114

PART I

Item 1.Financial Statements

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)


	As of
	March 31, 2020		December 31, 2019
	(in thousands)
Assets:
Cash and cash equivalents	$	1,231,585	$	604,381
Investment securities:
Available-for-sale, at fair value (amortized cost of $2,959,694 and $2,961,430, respectively)	2,961,157		2,959,843
Held-to-maturity, at amortized cost	45,032		45,032
Total Investment Securities	3,006,189		3,004,875
Farmer Mac Guaranteed Securities:
Available-for-sale, at fair value (amortized cost of $7,273,303 and $7,016,971, respectively)	7,587,186		7,143,025
Held-to-maturity, at amortized cost	1,447,883		1,447,451
Total Farmer Mac Guaranteed Securities	9,035,069		8,590,476
USDA Securities:
Trading, at fair value	8,408		8,913
Held-to-maturity, at amortized cost	2,269,611		2,232,160
Total USDA Securities	2,278,019		2,241,073
Loans:
Loans held for investment, at amortized cost	5,789,391		5,390,977
Loans held for investment in consolidated trusts, at amortized cost	1,540,689		1,600,917
Allowance for losses	(14,856)		(10,454)
Total loans, net of allowance	7,315,224		6,981,440

Financial derivatives, at fair value	12,692		10,519
Interest receivable (includes $11,944 and $20,568, respectively, related to consolidated trusts)	154,836		199,195
Guarantee and commitment fees receivable	37,521		38,442
Deferred tax asset, net	47,842		16,510
Prepaid expenses and other assets	61,133		22,463
Total Assets	$	23,180,110	$	21,709,374

Liabilities and Equity:
Liabilities:


Notes payable	20,665,020		19,098,648
Debt securities of consolidated trusts held by third parties	1,549,527		1,616,504
Financial derivatives, at fair value	53,795		27,042
Accrued interest payable (includes $9,588 and $18,018, respectively, related to consolidated trusts)	104,380		106,959
Guarantee and commitment obligation	35,939		36,700
Accounts payable and accrued expenses	74,412		22,081

Reserve for losses	3,420		2,164
Total Liabilities	22,486,493		20,910,098
Commitments and Contingencies (Note 6)
Equity:
Preferred stock:
Series A, par value $25 per share, 2,400,000 shares authorized, issued and outstanding	58,333		58,333
Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding	73,382		73,382
Series D, par value $25 per share, 4,000,000 shares authorized, issued and outstanding	96,659		96,659
Common stock:
Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding	1,031		1,031
Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding	500		500
Class C Non-Voting, $1 par value, no maximum authorization, 9,192,047 shares and 9,180,744 shares outstanding, respectively	9,192		9,181
Additional paid-in capital	120,412		119,304
Accumulated other comprehensive loss, net of tax	(121,437)		(16,161)
Retained earnings	455,545		457,047
Total Equity	693,617		799,276
Total Liabilities and Equity	$	23,180,110	$	21,709,374

As of
June 30, 2019 December 31, 2018
(in thousands)
Assets:
Cash and cash equivalents $ 396,602
$ 425,256
Investment securities:

Available-for-sale, at fair value 2,922,504
2,217,852
Held-to-maturity, at amortized cost 45,032
45,032
Total Investment Securities 2,967,536
2,262,884
Farmer Mac Guaranteed Securities:

Available-for-sale, at fair value 7,035,668
5,974,497
Held-to-maturity, at amortized cost 1,579,175
2,096,618
Total Farmer Mac Guaranteed Securities 8,614,843
8,071,115
USDA Securities:

Trading, at fair value 9,201
9,999
Held-to-maturity, at amortized cost 2,128,378
2,166,174
Total USDA Securities 2,137,579
2,176,173
Loans:

Loans held for investment, at amortized cost 4,760,046
4,004,968
Loans held for investment in consolidated trusts, at amortized cost 1,563,223
1,517,101
Allowance for loan losses (7,264 ) (7,017 )
Total loans, net of allowance 6,316,005
5,515,052
Real estate owned, at lower of cost or fair value 1,770
128
Financial derivatives, at fair value 7,560
7,487
Interest receivable (includes $18,811 and $19,783, respectively, related to consolidated trusts) 184,693
180,080
Guarantee and commitment fees receivable 38,809
40,366
Deferred tax asset, net 10,543
6,369
Prepaid expenses and other assets 62,220
9,418
Total Assets $ 20,738,160
$ 18,694,328

Liabilities and Equity:

Liabilities:

Notes payable:

Due within one year $ 9,939,589
$ 7,757,050
Due after one year 8,247,829
8,486,647
Total notes payable 18,187,418
16,243,697
Debt securities of consolidated trusts held by third parties 1,570,862
1,528,957
Financial derivatives, at fair value 27,429
19,633
Accrued interest payable (includes $16,077 and $17,125, respectively, related to consolidated trusts) 108,129
96,743
Guarantee and commitment obligation 37,246
38,683
Accounts payable and accrued expenses 31,454
11,891
Reserve for losses 1,880
2,167
Total Liabilities 19,964,418
17,941,771
Commitments and Contingencies (Note 6)

Equity:

Preferred stock:

Series A, par value $25 per share, 2,400,000 shares authorized, issued and outstanding 58,333
58,333
Series B, par value $25 per share, 3,000,000 shares authorized, issued and outstanding as of December 31, 2018 (redemption value $75,000,000) —
73,044
Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding 73,382
73,382
Series D, par value $25 per share, 4,000,000 shares authorized, issued and outstanding 96,659
—
Common stock:

Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding 1,031
1,031
Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding 500
500
Class C Non-Voting, $1 par value, no maximum authorization, 9,168,893 shares and 9,137,550 shares outstanding, respectively 9,169
9,138
Additional paid-in capital 118,942
118,822
Accumulated other comprehensive income, net of tax (12,843 ) 24,956
Retained earnings 428,569
393,351
Total Equity 773,742
752,557
Total Liabilities and Equity $ 20,738,160
$ 18,694,328

The accompanying notes are an integral part of these consolidated financial statements.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	For the Three Months Ended						For the Six Months Ended							For the Three Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018				March 31, 2020		March 31, 2019
	(in thousands, except per share amounts)													(in thousands, except per share amounts)
Interest income:													Interest income:
Investments and cash equivalents	$	20,156		$	12,095		$	38,863		$	23,558		Investments and cash equivalents	$	17,741	$	18,707
Farmer Mac Guaranteed Securities and USDA Securities	85,569			74,179			170,980			136,609			Farmer Mac Guaranteed Securities and USDA Securities	71,517		85,411
Loans	59,403			49,396			110,800			95,049			Loans	60,596		51,397
Total interest income	165,128			135,670			320,643			255,216			Total interest income	149,854		155,515
Total interest expense	122,074			91,737			236,990			168,054			Total interest expense	108,542		114,916
Net interest income	43,054			43,933			83,653			87,162			Net interest income	41,312		40,599
(Provision for)/release of loan losses	(578		)	(424		)	(314		)	7
Net interest income after (provision for)/release of loan losses	42,476			43,509			83,339			87,169
Non-interest income:
(Provision for)/release of losses													(Provision for)/release of losses	(3,438)		264
Net interest income after (provision for)/release of losses													Net interest income after (provision for)/release of losses	37,874		40,863
Non-interest (expense)/income:													Non-interest (expense)/income:
Guarantee and commitment fees	3,403			3,481			6,916			6,980			Guarantee and commitment fees	3,196		3,513
Gains/(losses) on financial derivatives	8,913			2,534			8,553			(1,316		)
Losses on financial derivatives													Losses on financial derivatives	(9,298)		(360)
Gains on trading securities	61			11			105			27			Gains on trading securities	106		44

Gains on sale of real estate owned	—			34			—			34			Gains on sale of real estate owned	485		—
(Provision for)/release of reserve for losses													(Provision for)/release of reserve for losses	(393)		129
Other income	355			320			848			894			Other income	816		493
Non-interest income	12,732			6,380			16,422			6,619
Non-interest expense:
Non-interest (expense)/income													Non-interest (expense)/income	(5,088)		3,819
Operating expenses:													Operating expenses:
Compensation and employee benefits	6,770			6,936			14,376			13,590			Compensation and employee benefits	10,127		7,606
General and administrative	4,689			5,202			9,285			9,528			General and administrative	5,363		4,596
Regulatory fees	687			625			1,375			1,250			Regulatory fees	725		688
Real estate owned operating costs, net	64			—			64			16
(Release of)/provision for reserve for losses	(158		)	158			(287		)	179
Non-interest expense	12,052			12,921			24,813			24,563

Operating expenses													Operating expenses	16,215		12,890
Income before income taxes	43,156			36,968			74,948			69,225			Income before income taxes	16,571		31,792
Income tax expense	9,111			7,332			15,733			13,770			Income tax expense	3,741		6,622

Net income attributable to Farmer Mac	34,045			29,636			59,215			55,455			Net income attributable to Farmer Mac	12,830		25,170
Preferred stock dividends	(3,785		)	(3,296		)	(7,081		)	(6,591		)	Preferred stock dividends	(3,431)		(3,296)
Loss on retirement of preferred stock	(1,956		)	—			(1,956		)	—

Net income attributable to common stockholders	$	28,304		$	26,340		$	50,178		$	48,864		Net income attributable to common stockholders	$	9,399	$	21,874

Earnings per common share:													Earnings per common share:
Basic earnings per common share	$	2.65		$	2.47		$	4.70		$	4.59		Basic earnings per common share	$	0.88	$	2.05
Diluted earnings per common share	$	2.63		$	2.45		$	4.66		$	4.55		Diluted earnings per common share	$	0.87	$	2.03

The accompanying notes are an integral part of these consolidated financial statements.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
(in thousands)
Net income $ 34,045
$ 29,636
$ 59,215
$ 55,455
Other comprehensive income before taxes:
Net unrealized (losses)/gains on available-for-sale securities (28,588 ) 996
(25,347 ) 22,224
Net changes in held-to-maturity securities (4,601 ) (1,546 ) (6,863 ) (2,856 )
Net unrealized (losses)/gains on cash flow hedges (9,972 ) 2,194
(15,637 ) 8,857
Other comprehensive (loss)/income before tax (43,161 ) 1,644
(47,847 ) 28,225
Income tax benefit/(expense) related to other comprehensive (loss)/income 9,064
(345 ) 10,048
(5,927 )
Other comprehensive (loss)/income net of tax (34,097 ) 1,299
(37,799 ) 22,298
Comprehensive (loss)/income attributable to Farmer Mac $ (52 ) $ 30,935
$ 21,416
$ 77,753


	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands)
Net income	$	12,830	$	25,170
Other comprehensive income before taxes:
Net unrealized (losses)/gains on available-for-sale securities	(99,316)		3,241
Net changes in held-to-maturity securities	(5,688)		(2,262)
Net unrealized losses on cash flow hedges	(28,256)		(5,665)
Other comprehensive loss before tax	(133,260)		(4,686)
Income tax benefit related to other comprehensive loss	27,984		984
Other comprehensive loss net of tax	(105,276)		(3,702)


Comprehensive (loss)/income attributable to Farmer Mac	$	(92,446)	$	21,468

The accompanying notes are an integral part of these consolidated financial statements.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

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, 2018 8,400
$ 204,759
10,669
$ 10,669
$ 118,822
$ 24,956
$ 393,351
$ 752,557
Net income attributable to Farmer Mac —
—
—
—
—
—
25,170
25,170
Other comprehensive loss, net of tax —
—
—
—
—
(3,702 ) —
(3,702 )
Cash dividends:
Preferred stock —
—
—
—
—
—
(3,296 ) (3,296 )
Common stock (cash dividend of $0.70 per share) —
—
—
—
—
—
(7,470 ) (7,470 )
Issuance of Class C common stock —
—
20
20
3
—
—
23
Stock-based compensation cost —
—
—
—
724
—
—
724
Other stock-based award activity —
—
—
—
(708 ) —
—
(708 )
Balance as of March 31, 2019 8,400
$ 204,759
10,689
$ 10,689
$ 118,841
$ 21,254
$ 407,755
$ 763,298
Net income attributable to Farmer Mac —
—
—
—
—
—
34,045
34,045
Other comprehensive loss, net of tax —
—
—
—
—
(34,097 ) —
(34,097 )
Cash dividends:
Preferred stock —
—
—
—
—
—
(3,785 ) (3,785 )
Common stock (cash dividend of $0.70 per share) —
—
—
—
—
—
(7,490 ) (7,490 )
Issuance of Series D preferred stock 4,000
96,659

—
—
—
96,659
Redemption of Series B preferred stock (3,000 ) (73,044 ) —
—
—
—
—
(73,044 )
Loss on retirement of preferred stock —
—
—
—
—
—
(1,956 ) (1,956 )
Issuance of Class C common stock —
—
11
11
3
—
—
14
Stock-based compensation cost —
—
—
—
533
—
—
533
Other stock-based award activity —
—
—
—
(435 ) —
—
(435 )
Balance as of June 30, 2019 9,400
$ 228,374
10,700
$ 10,700
$ 118,942
$ (12,843 ) $ 428,569
$ 773,742

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, 2017 8,400
$ 204,759
10,619
$ 10,619
$ 118,979
$ 51,085
$ 322,704
$ 708,146
Cumulative effect from change in hedge accounting —
—
—
—
—
27
471
498
Balance as of January 1, 2018 8,400
$ 204,759
10,619
$ 10,619
$ 118,979
$ 51,112
$ 323,175
$ 708,644
Net income attributable to Farmer Mac —
—
—
—
—
—
25,819
25,819
Other comprehensive income, net of tax —
—
—
—
—
20,999
—
20,999
Cash dividends:
Preferred stock —
—
—
—
—
—
(3,295 ) (3,295 )
Common stock (cash dividend of $0.58 per share) —
—
—
—
—
—
(6,161 ) (6,161 )
Issuance of Class C common stock —
—
31
31
3
—
—
34
Stock-based compensation cost —
—
—
—
664
—
—
664
Other stock-based award activity —
—
—
—
(1,438 ) —
—
(1,438 )
Balance as of March 31, 2018 8,400
$ 204,759
10,650
$ 10,650
$ 118,208
$ 72,111
$ 339,538
$ 745,266
Net income attributable to Farmer Mac —
—
—
—
—
—
29,636
29,636
Other comprehensive income, net of tax —
—
—
—
—
1,299
—
1,299
Cash dividends:
Preferred stock —
—
—
—
—
—
(3,296 ) (3,296 )
Common stock (cash dividend of $0.58 per share) —
—
—
—
—
—
(6,186 ) (6,186 )
Issuance of Class C common stock —
—
17
17
4
—
—
21
Stock-based compensation cost —
—
—
—
605
—
—
605
Other stock-based award activity —
—
—
—
(1,133 ) —
—
(1,133 )
Balance as of June 30, 2018 8,400
$ 204,759
10,667
$ 10,667
$ 117,684
$ 73,410
$ 359,692
$ 766,212


									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, 2018	8,400	$	204,759	10,669	$	10,669	$	118,822	$	24,956	$	393,351	$	752,557
Net income attributable to Farmer Mac	—	—		—	—		—		—		25,170		25,170
Other comprehensive loss, net of tax	—	—		—	—		—		(3,702)		—		(3,702)
Cash dividends:
Preferred stock	—	—		—	—		—		—		(3,296)		(3,296)
Common stock (cash dividend of $0.70 per share)	—	—		—	—		—		—		(7,470)		(7,470)
Issuance of Class C common stock	—	—		20	20		3		—		—		23
Stock-based compensation cost	—	—		—	—		724		—		—		724
Other stock-based award activity	—	—		—	—		(708)		—		—		(708)
Balance as of March 31, 2019	8,400	$	204,759	10,689	$	10,689	$	118,841	$	21,254	$	407,755	$	763,298

Balance as of December 31, 2019	9,400	$	228,374	10,712	$	10,712	$	119,304	$	(16,161)	$	457,047	$	799,276
Cumulative effect adjustment from adoption of current expected credit loss standard	—	—		—	—		—		—		(2,099)		(2,099)
Balance as of January 1, 2020	9,400	$	228,374	10,712	$	10,712	$	119,304	$	(16,161)	$	454,948	$	797,177
Net income attributable to Farmer Mac	—	—		—	—		—		—		12,830		12,830
Other comprehensive loss, net of tax	—	—		—	—		—		(105,276)		—		(105,276)
Cash dividends:
Preferred stock	—	—		—	—		—		—		(3,431)		(3,431)
Common stock (cash dividend of $0.80 per share)	—	—		—	—		—		—		(8,571)		(8,571)
Issuance of Class C common stock	—	—		15	15		19		—		—		34
Repurchase of Class C Common Stock	—	—		(4)	(4)		—		—		(231)		(235)
Stock-based compensation cost	—	—		—	—		1,293		—				1,293
Other stock-based award activity	—	—		—	—		(204)		—		—		(204)
Balance as of March 31, 2020	9,400	$	228,374	10,723	$	10,723	$	120,412	$	(121,437)	$	455,545	$	693,617

The accompanying notes are an integral part of these consolidated financial statements.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands)
Cash flows from operating activities:
Net income	$	12,830	$	25,170
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	(177)		(2,204)
Amortization of debt premiums, discounts, and issuance costs	9,221		10,826
Net change in fair value of trading securities, hedged assets, and financial derivatives	(379,004)		(69,096)
Gain on sale of real estate owned	(485)		—
Total provision for/(release of) allowance for losses	3,831		(393)
Excess tax benefits related to stock-based awards	(508)		127
Deferred income taxes	(3,347)		2,902

Stock-based compensation expense	1,293		724


Proceeds from repayment of loans purchased as held for sale	20,674		18,671
Net change in:
Interest receivable	44,679		36,204
Guarantee and commitment fees receivable	160		58
Other assets	(39,783)		(5,674)
Accrued interest payable	(2,579)		(2,323)
Other liabilities	2,884		3,528
Net cash (used in)/provided by operating activities	(330,311)		18,520
Cash flows from investing activities:
Purchases of available-for-sale investment securities	(704,306)		(473,326)

Purchases of Farmer Mac Guaranteed Securities and USDA Securities	(657,959)		(857,511)
Purchases of loans held for investment	(554,771)		(748,553)

Proceeds from repayment of available-for-sale investment securities	706,061		205,240
Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities	408,103		554,340
Proceeds from repayment of loans purchased as held for investment	345,736		222,980

Proceeds from sale of Farmer Mac Guaranteed Securities	28,050		116,708
Proceeds from sale of real estate owned	2,191		—
Net cash used in investing activities	(426,895)		(980,122)
Cash flows from financing activities:
Proceeds from issuance of discount notes	17,783,348		12,773,401
Proceeds from issuance of medium-term notes	3,734,025		2,124,252
Payments to redeem discount notes	(17,387,222)		(12,597,517)
Payments to redeem medium-term notes	(2,633,565)		(1,311,954)

Payments to third parties on debt securities of consolidated trusts	(99,769)		(64,263)
Proceeds from common stock issuance	19		3



Tax payments related to share-based awards	(189)		(688)
Purchases of common stock	(235)		—
Dividends paid on common and preferred stock	(12,002)		(10,766)
Net cash provided by financing activities	1,384,410		912,468
Net change in cash and cash equivalents	627,204		(49,134)
Cash and cash equivalents at beginning of period	604,381		425,256
Cash and cash equivalents at end of period	$	1,231,585	$	376,122
Non-cash activity:

Loans acquired and securitized as Farmer Mac Guaranteed Securities	28,050		116,708
Consolidation of Farmer Mac Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties	28,050		97,780
Reclassification of defaulted loans from loans held for investment in consolidated trusts to loans held for investment	4,742		4,721
Maturity of investment security - not yet settled	—		(40,310)
Purchases of securities - traded, not yet settled	50,000		35,100

For the Six Months Ended
June 30, 2019 June 30, 2018
(in thousands)
Cash flows from operating activities:
Net income $ 59,215
$ 55,455
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 (4,922 ) 1,536
Amortization of debt premiums, discounts and issuance costs 24,022
13,701
Net change in fair value of trading securities, hedged assets, and financial derivatives (208,213 ) 26,100
Gain on sale of real estate owned —
(34 )
Total provision for losses 27
172
Excess tax benefits related to stock-based awards 259
903
Deferred income taxes 5,874
(2,457 )
Stock-based compensation expense 1,257
1,269
Proceeds from repayment of loans purchased as held for sale 23,239
62,078
Net change in:
Interest receivable (4,578 ) (879 )
Guarantee and commitment fees receivable 120
8
Other assets (9,006 ) (12,877 )
Accrued interest payable 11,386
13,104
Other liabilities 651
4,075
Net cash (used by)/provided by operating activities (100,669 ) 162,154
Cash flows from investing activities:

Purchases of available-for-sale investment securities (1,217,901 ) (539,667 )
Purchases of Farmer Mac Guaranteed Securities and USDA Securities (1,660,280 ) (1,843,294 )
Purchases of loans held for investment (1,101,705 ) (491,858 )
Proceeds from repayment of available-for-sale investment securities 500,462
403,018
Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities 1,241,156
1,331,245
Proceeds from repayment of loans purchased as held for investment 330,387
335,808
Proceeds from sale of Farmer Mac Guaranteed Securities 166,351
196,290
Proceeds from sale of real estate owned —
101
Net cash used by investing activities (1,741,530 ) (608,357 )
Cash flows from financing activities:

Proceeds from issuance of discount notes 28,265,587
21,036,787
Proceeds from issuance of medium-term notes 4,467,265
4,103,234
Payments to redeem discount notes (27,730,461 ) (21,157,585 )
Payments to redeem medium-term notes (3,106,538 ) (3,313,236 )
Payments to third parties on debt securities of consolidated trusts (80,820 ) (72,752 )
Proceeds from common stock issuance 6
7
Retirement of Series B preferred stock (75,000 ) —
Proceeds from Series D preferred stock issuance, net of stock issuance costs 96,659
—
Tax payments related to share-based awards (1,112 ) (2,523 )
Dividends paid on common and preferred stock (22,041 ) (18,939 )
Net cash provided by financing activities 1,813,545
574,993
Net change in cash and cash equivalents (28,654 ) 128,790
Cash and cash equivalents at beginning of period 425,256
302,022
Cash and cash equivalents at end of period $ 396,602
$ 430,812
Non-cash activity:
Loans acquired and securitized as Farmer Mac Guaranteed Securities 166,351
196,290
Consolidation of Farmer Mac Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties 118,004
116,983
Reclassification of defaulted loans from loans held for investment in consolidated trusts to loans held for investment 4,721
721
Maturity of investment security - not yet settled (35,075 ) —
Purchases of securities - traded, not yet settled 10,000
48,600

The accompanying notes are an integral part of these consolidated financial statements.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim unaudited consolidated financial statements of the Federal Agricultural Mortgage Corporation ("Farmer Mac") and subsidiaries have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial position and the results of operations and cash flows of Farmer Mac and subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted as permitted by SEC rules and regulations. The December 31, ~~2018~~2019 consolidated balance sheet presented in this report has been derived from Farmer Mac's audited ~~2018~~2019 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the ~~2018~~2019 consolidated financial statements of Farmer Mac and subsidiaries included in Farmer Mac's Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019, as filed with the SEC on February ~~21, 2019.~~25, 2020. Results for interim periods are not necessarily indicative of those that may be expected for the fiscal year. Presented below are Farmer Mac's significant accounting policies that contain updated information for the three ~~and six~~ months ended ~~June 30, 2019.~~March 31, 2020.

Principles of Consolidation

The consolidated financial statements include the accounts of Farmer Mac and its ~~two~~2 subsidiaries during the year: (1) Farmer Mac Mortgage Securities Corporation ("FMMSC"), whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities; and (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Guarantees line of business – primarily the acquisition of USDA Securities. The consolidated financial statements also include the accounts of Variable Interest Entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary.

The following tables present, by line of business, details about the consolidation of VIEs:

Table 1.1

Consolidation of Variable Interest Entities
As of June 30, 2019
Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Total
(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost $ 1,563,223
$ —
$ —
$ —
$ —
$ 1,563,223
Debt securities of consolidated trusts held by third parties ⁽¹⁾
1,570,862
—
—
—
—
1,570,862
   Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Carrying value ⁽²⁾
—
33,778
—
—
—
33,778
      Maximum exposure to loss ⁽³⁾
—
33,583
—
—
—
33,583
   Investment securities:
        Carrying value ⁽⁴⁾
—
—
—
—
1,115,618
1,115,618
        Maximum exposure to loss ^{(3) (4)}
—
—
—
—
1,117,506
1,117,506
Off-Balance Sheet:
Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Maximum exposure to loss ^{(3) (5)}
121,064
398,710
—
—
—
519,774


⁽¹⁾	~~Includes borrower remittances of $7.6 million. The borrower remittances had not been passed through to third party investors as of June 30, 2019.~~


⁽²⁾	~~Includes $0.2 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.~~


⁽³⁾	~~Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.~~


⁽⁴⁾	~~Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.~~


⁽⁵⁾	~~The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.~~


	Consolidation of Variable Interest Entities
	As of March 31, 2020
	Farm & Ranch		USDA Guarantees		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,540,689	$	—	$	—	$	1,540,689
Debt securities of consolidated trusts held by third parties ⁽¹⁾	1,549,527		—		—		1,549,527
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value ⁽²⁾	—		33,512		—		33,512
Maximum exposure to loss ⁽³⁾	—		33,440		—		33,440
Investment securities:
Carrying value ⁽⁴⁾	—		—		1,291,950		1,291,950
Maximum exposure to loss ^{(3) (4)}	—		—		1,302,410		1,302,410
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss ^{(3) (5)}	97,302		370,903		—		468,205

⁽¹⁾Includes borrower remittances of $8.8 million. The borrower remittances had not been passed through to third party investors as of March 31, 2020.

⁽²⁾Includes $0.1 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.

⁽³⁾Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.

⁽⁴⁾Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.

⁽⁵⁾The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

1210


	Consolidation of Variable Interest Entities
	As of December 31, 2019
	Farm & Ranch		USDA Guarantees		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,600,917	$	—	$	—	$	1,600,917
Debt securities of consolidated trusts held by third parties ⁽¹⁾	1,616,504		—		—		1,616,504
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value ⁽²⁾	—		32,041		—		32,041
Maximum exposure to loss ⁽³⁾	—		31,887		—		31,887
Investment securities:
Carrying value ⁽⁴⁾	—		—		1,117,203		1,117,203
Maximum exposure to loss ^{(3) (4)}	—		—		1,120,765		1,120,765
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss ^{(3) (5)}	107,322		389,216		—		496,538

⁽¹⁾Includes borrower remittances of $15.6 million. The borrower remittances had not been passed through to third party investors as of December 31, 2019.

⁽²⁾Includes $0.2 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.

⁽³⁾Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.

⁽⁴⁾Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.

(a)Earnings Per Common Share

Consolidation of Variable Interest Entities
As of December 31, 2018
Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Total
(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost $ 1,517,101
$ —
$ —
$ —
$ —
$ 1,517,101
Debt securities of consolidated trusts held by third parties ⁽¹⁾
1,528,957
—
—
—
—
1,528,957
   Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Carrying value ⁽²⁾
—
27,627
—
—
—
27,627
      Maximum exposure to loss ⁽³⁾
—
27,383
—
—
—
27,383
   Investment securities:
        Carrying value ⁽⁴⁾
—
—
—
—
1,000,942
1,000,942
        Maximum exposure to loss ^{(3) (4)}
—
—
—
—
1,003,968
1,003,968
Off-Balance Sheet:
Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Maximum exposure to loss ^{(3) (5)}
135,862
367,684
—
—
—
503,546


⁽¹⁾	~~Includes borrower remittances of $11.9 million. The borrower remittances had not been passed through to third party investors as of December 31, 2018.~~


⁽²⁾	~~Includes $0.2 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.~~


⁽³⁾	~~Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.~~


⁽⁴⁾	~~Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.~~


⁽⁵⁾	~~The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.~~


~~(a)~~	~~Earnings Per Common Share~~

Basic earnings per common share ("EPS") is based on the daily weighted-average number of shares of common stock outstanding. Diluted earnings per common share is based on the daily weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive stock appreciation rights ("SARs") and unvested restricted stock awards. The following schedule reconciles basic and diluted EPS for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Table 1.2


	For the Three Months Ended
	March 31, 2020								March 31, 2019
	Net Income		Weighted-Average Shares	$ per Share		Net Income		Weighted-Average Shares	$ per Share
	(in thousands, except per share amounts)
Basic EPS
Net income attributable to common stockholders	$	9,399	10,712	$	0.88	$	21,874	10,670	$	2.05
Effect of dilutive securities⁽¹⁾
SARs and restricted stock	—		70	(0.01)		—		107	(0.02)
Diluted EPS	$	9,399	10,782	$	0.87	$	21,874	10,777	$	2.03

⁽¹⁾For the three months ended March 31, 2020 and 2019, SARs and restricted stock of 87,148 and 56,976, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the three months ended March 31, 2020 and 2019, contingent shares of unvested restricted stock of 12,680 and 12,284, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.

For the Three Months Ended
June 30, 2019 June 30, 2018
Net
Income Weighted-Average Shares $ per
Share Net
Income Weighted-Average Shares $ per
Share
(in thousands, except per share amounts)
Basic EPS
Net income attributable to common stockholders $ 28,304
10,698
$ 2.65
$ 26,340
10,658
$ 2.47
Effect of dilutive securities⁽¹⁾

SARs and restricted stock —
72
(0.02 ) —
84
(0.02 )
Diluted EPS $ 28,304
10,770
$ 2.63
$ 26,340
10,742
$ 2.45

⁽¹⁾

For the three months ended June 30, 2019 and 2018, SARs and restricted stock of 62,660 and 0, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the three months ended June 30, 2019 and 2018, contingent shares of unvested restricted stock of 12,284 and 13,138, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.

For the Six Months Ended
June 30, 2019 June 30, 2018
Net
Income Weighted-Average Shares $ per
Share Net
Income Weighted-Average Shares $ per
Share
(in thousands, except per share amounts)
Basic EPS
Net income attributable to common stockholders $ 50,178
10,684
$ 4.70
$ 48,864
10,640
$ 4.59
Effect of dilutive securities⁽¹⁾

SARs and restricted stock —
90
(0.04 ) —
102
(0.04 )
Diluted EPS $ 50,178
10,774
$ 4.66
$ 48,864
10,742
$ 4.55

⁽¹⁾(b)Comprehensive Income

For the six months ended June 30, 2019 and 2018, SARs and restricted stock of 59,818 and 25,062, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the six months ended June 30, 2019 and 2018, contingent shares of unvested restricted stock of 12,284 and 13,138, 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.


~~(b)~~	~~Comprehensive Income~~

Comprehensive income represents all changes in stockholders' equity except those resulting from investments by or distributions to stockholders, and is comprised of net income and unrealized gains and losses on available-for-sale securities, certain held-to-maturity securities transferred from the available-for-sale classification, and cash flow hedges, net of related taxes.

The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

~~Table 1.3~~

As of June 30, 2019 As of June 30, 2018
Available-for-Sale Securities Held-to-Maturity Securities Cash Flow Hedges Total Available-for-Sale Securities Held-to-Maturity Securities Cash Flow Hedges Total
(in thousands)
For the Three Months Ended:
Beginning Balance $ (22,800 ) $ 41,656
$ 2,398
$ 21,254
$ 15,094
$ 47,201
$ 9,816
$ 72,111
Other comprehensive (loss)/income before reclassifications (21,711 ) —
(7,512 ) (29,223 ) 2,209
—
1,778
3,987
Amounts reclassified from AOCI (873 ) (3,635 ) (366 ) (4,874 ) (1,421 ) (1,222 ) (45 ) (2,688 )
Net comprehensive (loss)/income (22,584 ) (3,635 ) (7,878 ) (34,097 ) 788
(1,222 ) 1,733
1,299
Ending Balance $ (45,384 ) $ 38,021
$ (5,480 ) $ (12,843 ) $ 15,882
$ 45,979
$ 11,549
$ 73,410

For the Six Months Ended:
Beginning Balance $ (25,360 ) $ 43,443
$ 6,873
$ 24,956
$ (1,676 ) $ 48,236
$ 4,525
$ 51,085
Cumulative effect from change in hedge accounting —
—
—
—
—
—
27
27
Adjusted Beginning Balance (25,360 ) 43,443
6,873
24,956
(1,676 ) 48,236
4,552
51,112
Other comprehensive (loss)/income before reclassifications (18,393 ) —
(11,608 ) (30,001 ) 20,396
—
6,831
27,227
Amounts reclassified from AOCI (1,631 ) (5,422 ) (745 ) (7,798 ) (2,838 ) (2,257 ) 166
(4,929 )
Net comprehensive (loss)/income (20,024 ) (5,422 ) (12,353 ) (37,799 ) 17,558
(2,257 ) 6,997
22,298
Ending Balance $ (45,384 ) $ 38,021
$ (5,480 ) $ (12,843 ) $ 15,882
$ 45,979
$ 11,549
$ 73,410

Table 1.3


	As of March 31, 2020														As of March 31, 2019
	Available-for-Sale Securities		Held-to-Maturity Securities		Cash Flow Hedges		Total		Available-for-Sale Securities		Held-to-Maturity Securities		Cash Flow Hedges		Total
	(in thousands)
For the Three Months Ended:
Beginning Balance	$	(43,397)	$	32,845	$	(5,609)	$	(16,161)	$	(25,360)	$	43,443	$	6,873	$	24,956
Other comprehensive (loss)/income before reclassifications	(77,685)		—		(22,668)		(100,353)		3,318		—		(4,095)		(777)
Amounts reclassified from AOCI	(776)		(4,494)		347		(4,923)		(758)		(1,787)		(380)		(2,925)
Net comprehensive (loss)/income	(78,461)		(4,494)		(22,321)		(105,276)		2,560		(1,787)		(4,475)		(3,702)
Ending Balance	$	(121,858)	$	28,351	$	(27,930)	$	(121,437)	$	(22,800)	$	41,656	$	2,398	$	21,254

The following table presents other comprehensive income activity, the impact on net income of amounts reclassified from each component of AOCI, and the related tax impact for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Table 1.4


	For the Three Months Ended
	March 31, 2020										March 31, 2019
	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax
	(in thousands)
Other comprehensive income:
Available-for-sale-securities:
Unrealized holding (losses)/gains on available-for-sale securities	$	(98,334)	$	(20,649)	$	(77,685)	$	4,200	$	882	$	3,318
Less reclassification adjustments included in:
Net interest income⁽¹⁾	(969)		(203)		(766)		(953)		(200)		(753)

Other income⁽²⁾	(13)		(3)		(10)		(6)		(1)		(5)
Total	$	(99,316)	$	(20,855)	$	(78,461)	$	3,241	$	681	$	2,560
Held-to-maturity securities:
Less reclassification adjustments included in:
Net interest income⁽³⁾	(5,688)		(1,194)		(4,494)		(2,262)		(475)		(1,787)
Total	$	(5,688)	$	(1,194)	$	(4,494)	$	(2,262)	$	(475)	$	(1,787)
Cash flow hedges
Unrealized (losses)/gains on cash flow hedges	$	(28,695)	$	(6,027)	$	(22,668)	$	(5,184)	$	(1,089)	$	(4,095)
Less reclassification adjustments included in:
Net interest income⁽⁴⁾	439		92		347		(481)		(101)		(380)
Total	$	(28,256)	$	(5,935)	$	(22,321)	$	(5,665)	$	(1,190)	$	(4,475)
Other comprehensive (loss)/income	$	(133,260)	$	(27,984)	$	(105,276)	$	(4,686)	$	(984)	$	(3,702)

⁽¹⁾Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.

⁽²⁾Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.

⁽³⁾Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income.

⁽⁴⁾Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.

(c)Allowance for Losses and Reserve for Losses

For the Three Months Ended
June 30, 2019 June 30, 2018
Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax
(in thousands)
Other comprehensive income:
Available-for-sale-securities:
Unrealized holding (losses)/gains on available-for-sale-securities $ (27,482 ) $ (5,771 ) $ (21,711 ) $ 2,795
$ 586
$ 2,209
Less reclassification adjustments included in:
Net interest income⁽¹⁾
(956 ) (201 ) (755 ) (1,791 ) (376 ) (1,415 )
Other income⁽²⁾
(150 ) (32 ) (118 ) (8 ) (2 ) (6 )
Total $ (28,588 ) $ (6,004 ) $ (22,584 ) $ 996
$ 208
$ 788
Held-to-maturity securities:
Less reclassification adjustments included in:
Net interest income⁽³⁾
(4,601 ) (966 ) (3,635 ) (1,546 ) (324 ) (1,222 )
Total $ (4,601 ) $ (966 ) $ (3,635 ) $ (1,546 ) $ (324 ) $ (1,222 )
Cash flow hedges
Unrealized (losses)/gains on cash flow hedges $ (9,510 ) $ (1,998 ) (7,512 ) $ 2,251
$ 473
1,778
Less reclassification adjustments included in:
Net interest income⁽⁴⁾
(462 ) (96 ) (366 ) (57 ) (12 ) (45 )
Total $ (9,972 ) $ (2,094 ) $ (7,878 ) $ 2,194
$ 461
$ 1,733
Other comprehensive (loss)/income $ (43,161 ) $ (9,064 ) $ (34,097 ) $ 1,644
$ 345
$ 1,299


⁽¹⁾	~~Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.~~


⁽²⁾	~~Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.~~

⁽³⁾

Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income.


⁽⁴⁾	~~Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.~~

On January 1, 2020, Farmer Mac adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, ("CECL"). Under CECL, Farmer Mac's allowance for credit losses represents the difference between the carrying amount of the related financial instruments and the present value of their expected cash flows discounted at their effective interest rates, as of the respective balance sheet date. Under CECL, Farmer Mac's reserve for losses represents the difference between the outstanding amount of off-balance sheet credit exposures and the present value of their expected cash flows discounted at their effective interest rates.

For the Six Months Ended
June 30, 2019 June 30, 2018
Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax
(in thousands)
Other comprehensive income:
Available-for-sale-securities:
Unrealized holding (losses)/gains on available-for-sale-securities $ (23,282 ) $ (4,889 ) $ (18,393 ) $ 25,817
$ 5,421
$ 20,396
Less reclassification adjustments included in:
Net interest income⁽¹⁾
(1,909 ) (401 ) (1,508 ) (3,578 ) (752 ) (2,826 )
Other income⁽²⁾
(156 ) (33 ) (123 ) (15 ) (3 ) (12 )
Total $ (25,347 ) $ (5,323 ) $ (20,024 ) $ 22,224
$ 4,666
$ 17,558
Held-to-maturity securities:
Less reclassification adjustments included in:
Net interest income⁽³⁾
(6,863 ) (1,441 ) (5,422 ) (2,856 ) (599 ) (2,257 )
Total $ (6,863 ) $ (1,441 ) $ (5,422 ) $ (2,856 ) $ (599 ) $ (2,257 )
Cash flow hedges
Unrealized (losses)/gains on cash flow hedges $ (14,695 ) $ (3,087 ) (11,608 ) $ 8,647
$ 1,816
6,831
Less reclassification adjustments included in:
Net interest income⁽⁴⁾
(942 ) (197 ) (745 ) 210
44
166
Total $ (15,637 ) $ (3,284 ) $ (12,353 ) $ 8,857
$ 1,860
$ 6,997
Other comprehensive (loss)/income $ (47,847 ) $ (10,048 ) $ (37,799 ) $ 28,225
$ 5,927
$ 22,298
Farmer Mac maintains an allowance for losses to cover current expected credit losses as of the balance sheet date for on-balance sheet investment securities, loans held for investment, and Farmer Mac Guaranteed Securities (collectively referred to as "allowance for losses"). Additionally, Farmer Mac maintains a reserve for losses to cover current expected credit losses as of the balance sheet date for off-balance sheet loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (collectively referred to as "reserve for losses"). Both the allowance for losses and reserve for losses are based on historical information and reasonable and supportable forecasts.

⁽¹⁾

Farmer Mac has never experienced a credit loss in its Rural Utilities line of business. Upon the adoption of CECL, Farmer Mac is now required to measure its expected credit losses for the expected life of all financial instruments, including its Rural Utilities loans. To estimate expected credit losses on these loans, Farmer Mac relies upon industry historical credit loss data from ratings agencies and publicly available information as disclosed in the securities filings of other major lenders who serve the utilities industry.

The allowance for losses increases through periodic provisions for loan losses that are charged against net interest income and the reserve for losses increases through provisions for losses that are charged to non-interest expense. Both the allowance for losses and reserve for losses are decreased by charge-offs for realized losses, net of recoveries. Releases from the allowance for losses or reserve for losses occur when the estimate of expected credit losses as of the end of a period is less than the estimate at the beginning of the period.

The total allowance for losses consists of the allowance for losses and the reserve for losses.

Charge-offs

Farmer Mac records a charge-off against the allowance for losses principally when a loss has been confirmed through the receipt of assets, generally the underlying collateral, in full satisfaction of the loan. The loss equals the excess of the recorded investment in the loan over the fair value of the collateral less estimated selling costs.

Estimation Methodology

Farmer Mac bases its methodology for determining its current estimate of expected losses on a statistical model, which incorporates credit loss history and reasonable and supportable forecasts. Farmer Mac's estimation methodology is comprised of the following key components:

•An economic model for each of our portfolios, including Farm & Ranch, Rural Utilities, and Institutional Credit;

•A migration matrix for each portfolio that reasonably predicts the movement of each financial asset among various risk categories over the course of each asset's expected life. The migration matrix forms the basis for our estimate of the probability of default of each financial asset;

•A loss-given-default ("LGD") model that reasonably predicts the amount of loss that Farmer Mac would incur upon the default of each financial asset;

•An economic factor forecast that updates the migration matrix model and the LGD model with current assumptions for the economic indicators that Farmer Mac has determined are most correlated with or relevant to the performance of each portfolio of assets; including Gross Domestic Product ("GDP"), credit spreads, unemployment rates, land values, and commodity prices; and

~~Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.~~


⁽²⁾	~~Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.~~

1614

•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.

⁽³⁾

Management evaluates these assumptions by considering many relevant factors, including:

•economic conditions;

•geographic and agricultural commodity/product concentrations in the portfolio;

•the credit profile of the portfolio, including risk ratings and financial metrics;

•delinquency trends of the portfolio;

•historical charge-off and recovery activities of the portfolio; and

•other factors to capture current portfolio trends and characteristics that differ from historical experience.

Management believes that its methodology produces a reasonable estimate of expected credit losses, as of the balance sheet date, for the expected life of all of its financial assets.

Allowance for Loss on Available-for-Sale (AFS) Securities

To measure current expected credit losses on impaired AFS securities, Farmer Mac first considers those impaired securities that: 1) Farmer Mac does not intend to sell, and 2) it is not more likely than not that Farmer Mac will be required to sell before recovering its amortized cost basis. In assessing whether a credit loss exists, Farmer Mac compares the present value, discounted at the security's effective interest rate, of cash flows expected to be collected from an impaired AFS debt security to its amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis of the impaired security, a credit loss exists and Farmer Mac records an allowance for loss for that credit loss. However, the amount of that allowance is limited by the amount that the security’s fair value is less than its amortized cost basis. Accrued interest receivable is recorded separately on the Consolidated Balance Sheet, and the allowance for credit losses excludes uncollectible accrued interest receivable.

Collateral Dependent Assets ("CDAs")

CDAs are loans, loans underlying LTSPCs, or off-balance sheet credit exposures in which the borrower is either in foreclosure or is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral by Farmer Mac. Farmer Mac estimates the current expected credit loss on CDAs based upon the appraised value of the collateral, the costs to sell it, and any applicable credit protection such as a guarantee.

(d)New Accounting Standards


⁽⁴⁾	~~Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.~~


~~(c)~~	~~New Accounting Standards~~

Recently Adopted Accounting Guidance



Standard			Description	Date of Adoption	Effect on Consolidated Financial Statements
~~ASU 2016-02, Leases (Topic 842)~~	This Update provides new guidance intended to improve financial reporting about leasing transactions. This Update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. It also requires new disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.	~~January 1, 2019~~	~~The adoption of this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.~~

~~Recently Issued Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements~~



~~Standard~~	~~Description~~	~~Date of Planned Adoption~~	~~Effect on Consolidated Financial Statements~~
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments			This Update ~~will require~~required entities to measure all expected credit losses for financial assets held at amortized cost at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, as well as ~~require~~requiring entities to use forward-looking information to form their credit loss estimates.	January 1, 2020	In first quarter 2020 Farmer Mac ~~is currently developing its accounting policy, planning for changes~~adopted the new guidance. The cumulative-effect adjustment to ~~its loss estimation methodologies, and evaluating the impact that~~retained earnings as of January 1, 2020 reflected application of the new guidance ~~will~~and did not have a material effect on ~~its consolidated~~Farmer Mac's financial ~~statements. The impact will primarily result from~~position, results of operations, or cash flows. For more information on the ~~new requirements to recognize all expected losses rather than just incurred losses as of the reporting date.~~transition adjustment see Table 1.5 below.
ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities			The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium by requiring the premium to be amortized to the earliest call date. There is no required accounting change for securities held at a discount in this ~~ASU.~~Update.	January 1, 2020	~~Farmer Mac does not expect that~~The adoption of ~~the new guidance will~~this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement			The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements, including the consideration of costs and benefits. Certain disclosure requirements were either removed, modified, or added.	January 1, 2020	~~Farmer Mac does not expect that~~The adoption of ~~the new guidance will~~this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

The following table presents the impact of adopting CECL on January 1, 2020 on our allowance and retained earnings:

Table 1.5


	December 31, 2019		Transition Adjustment		January 1, 2020
	(in thousands)
Allowance:
Farm & Ranch:
Loans	$	10,454	$	(3,909)	$	6,545
Long-term standby purchase commitments and guarantees	2,164		(148)		2,016
Rural Utilities:
Loans	—		5,378		5,378
Long-term standby purchase commitments	—		1,011		1,011
Farmer Mac Guaranteed Securities:
AgVantage	—		315		315
Investment Securities	—		9		9
Total Allowance	$	12,618	$	2,656	$	15,274

Retained Earnings	$	457,047	$	(2,099)	$	454,948

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements

Standard

Description

Date of Planned Adoption

Effect on Consolidated Financial Statements

ASU ~~2018-15~~2020-04, ~~Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40)~~Reference Rate Reform (Topic 848): ~~Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting

The amendments in this Update ~~align~~provide optional guidance for a limited period of time to ease the ~~requirements~~potential burden in accounting for ~~capitalizing implementation costs incurred~~reference rate reform on financial reporting. They provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in ~~a hosting arrangement that is a service contract with the requirements~~this update are effective for ~~capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).~~all entities as of March 12, 2020 through December 31, 2022.

~~January 1, 2020~~

Farmer Mac ~~does not expect that adoption~~is currently evaluating the impact of the ~~new~~discontinuation of LIBOR on the consolidated financial statements and the applicability of the optional guidance ~~will have a material effect on Farmer Mac's financial position, results of operations, or cash flows.~~provided by this ASU.

(e)Reclassifications


~~(d)~~	~~Reclassifications~~

Certain reclassifications of prior period information were made to conform to the current period presentation.

2.INVESTMENT SECURITIES

The following tables set forth information about Farmer Mac's investment securities as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Table 2.1


	As of March 31, 2020
	Amount Outstanding		Unamortized Premium/(Discount)		Amortized Cost⁽¹⁾		Allowance for losses⁽²⁾		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,700	$	—	$	19,700	$	(24)	$	—	$	(2,955)	$	16,721
Floating rate asset-backed securities	10,521		—		10,521		—		—		(18)		10,503

Floating rate Government/GSE guaranteed mortgage-backed securities	1,783,998		295		1,784,293		—		4,985		(11,279)		1,777,999
Fixed rate GSE guaranteed mortgage-backed securities	306		—		306		—		29		—		335
Fixed rate U.S. Treasuries	1,140,465		4,409		1,144,874		—		10,725		—		1,155,599
Total available-for-sale	2,954,990		4,704		2,959,694		(24)		15,739		(14,252)		2,961,157
Held-to-maturity:
Floating rate Government/GSE guaranteed mortgage-backed securities⁽³⁾	45,032		—		45,032		—		131		—		45,163
Total investment securities	$	3,000,022	$	4,704	$	3,004,726	$	(24)	$	15,870	$	(14,252)	$	3,006,320

⁽¹⁾Amounts presented exclude $8.3 million of accrued interest receivable on investment securities as of March 31, 2020.

⁽²⁾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.

⁽³⁾The held-to-maturity investment securities had a weighted average yield of 3.0% as of March 31, 2020.

As of June 30, 2019
Amount Outstanding Unamortized Premium/(Discount) Amortized
Cost Unrealized
Gains Unrealized
Losses Fair Value
(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,700
$ —
$ 19,700
$ —
$ (492 ) $ 19,208
Floating rate asset-backed securities 26,118
(123 ) 25,995
—
(193 ) 25,802
Floating rate Government/GSE guaranteed mortgage-backed securities 1,601,067
1,354
1,602,421
4,168
(3,219 ) 1,603,370
Fixed rate GSE guaranteed mortgage-backed securities 335
—
335
23
—
358
Fixed rate U.S. Treasuries 1,277,187
(5,479 ) 1,271,708
2,067
(9 ) 1,273,766
Total available-for-sale 2,924,407
(4,248 ) 2,920,159
6,258
(3,913 ) 2,922,504
Held-to-maturity:
Fixed rate Government/GSE guaranteed mortgage-backed securities⁽¹⁾
45,032
—
45,032
729
—
45,761
Total investment securities $ 2,969,439
$ (4,248 ) $ 2,965,191
$ 6,987
$ (3,913 ) $ 2,968,265


⁽¹⁾	~~The held-to-maturity investment securities had a weighted average yield of 3.8% as of June 30, 2019.~~


	As of December 31, 2019
	Amount Outstanding		Unamortized Premium/(Discount)		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,700	$	—	$	19,700	$	—	$	(788)	$	18,912
Floating rate asset-backed securities	11,092		—		11,092		—		(7)		11,085
Floating rate Government/GSE guaranteed mortgage-backed securities	1,633,731		1,174		1,634,905		2,414		(4,736)		1,632,583
Fixed rate GSE guaranteed mortgage-backed securities	315		—		315		25		—		340
Fixed rate U.S. Treasuries	1,295,210		208		1,295,418		1,520		(15)		1,296,923
Total available-for-sale	2,960,048		1,382		2,961,430		3,959		(5,546)		2,959,843
Held-to-maturity:
Floating rate Government/GSE guaranteed mortgage-backed securities⁽¹⁾	45,032		—		45,032		953		—		45,985
Total investment securities	$	3,005,080	$	1,382	$	3,006,462	$	4,912	$	(5,546)	$	3,005,828

⁽¹⁾The held-to-maturity investment securities had a weighted average yield of 3.3% as of December 31, 2019.

As of December 31, 2018
Amount Outstanding Unamortized Premium/(Discount) Amortized
Cost Unrealized
Gains Unrealized
Losses Fair Value
(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,700
$ —
$ 19,700
$ —
$ (985 ) $ 18,715
Floating rate asset-backed securities 28,940
(136 ) 28,804
2
(128 ) 28,678
Floating rate Government/GSE guaranteed mortgage-backed securities 1,379,472
1,528
1,381,000
721
(4,267 ) 1,377,454
Fixed rate GSE guaranteed mortgage-backed securities 384
1
385
18
—
403
Fixed rate U.S. Treasuries 797,913
(4,882 ) 793,031
119
(548 ) 792,602
Total available-for-sale 2,226,409
(3,489 ) 2,222,920
860
(5,928 ) 2,217,852
Held-to-maturity:
Fixed rate Government/GSE guaranteed mortgage-backed securities⁽¹⁾
45,032
—
45,032
562
—
45,594
Total investment securities $ 2,271,441
$ (3,489 ) $ 2,267,952
$ 1,422
$ (5,928 ) $ 2,263,446


⁽¹⁾	~~The held-to-maturity investment securities had a weighted average yield of 3.5% as of December 31, 2018.~~

Farmer Mac did not sell any securities from its available-for-sale investment portfolio during the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, unrealized losses on available-for-sale investment securities were as follows:

Table 2.2


	As of March 31, 2020
	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)
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	16,721	$	(2,955)
Floating rate asset-backed securities	2,544		(9)		7,959		(9)
Floating rate Government/GSE guaranteed mortgage-backed securities	871,617		(6,208)		411,651		(5,071)



Total	$	874,161	$	(6,217)	$	436,331	$	(8,035)

Number of securities in loss position			65				67

As of June 30, 2019
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)
Floating rate auction-rate certificates backed by Government guaranteed student loans $ —
$ —
$ 19,208
$ (492 )
Floating rate asset-backed securities 8,978
(65 ) 16,824
(128 )
Floating rate Government/GSE guaranteed mortgage-backed securities 376,791
(1,270 ) 281,180
(1,949 )
Fixed rate U.S. Treasuries 79,700
(9 ) —
—
Total $ 465,469
$ (1,344 ) $ 317,212
$ (2,569 )

Number of securities in loss position 37
46

As of December 31, 2018
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)
Floating rate auction-rate certificates backed by Government guaranteed student loans $ —
$ —
$ 18,715
$ (985 )
Floating rate asset-backed securities 6,456
(38 ) 19,058
(90 )
Floating rate Government/GSE guaranteed mortgage-backed securities 927,416
(2,907 ) 196,416
(1,360 )
Fixed rate U.S. Treasuries 499,581
(336 ) 81,597
(212 )
Total $ 1,433,453
$ (3,281 ) $ 315,786
$ (2,647 )

Number of securities in loss position 72
48


	As of December 31, 2019
	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)
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	18,912	$	(788)
Floating rate asset-backed securities	2,583		(1)		8,502		(6)
Floating rate Government/GSE guaranteed mortgage-backed securities	841,993		(2,244)		436,621		(2,492)
Fixed rate U.S. Treasuries	35,107		(15)		—		—
Total	$	879,683	$	(2,260)	$	464,035	$	(3,286)

Number of securities in loss position			57				62

The unrealized losses presented above are principally due to a general widening of market spreads and ~~an increase~~changes in the levels of interest rates from the dates of acquisition to ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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 ~~June 30, 2019, all of the investment securities in an unrealized loss position either were backed by the full faith~~both March 31, 2020 and credit of the U.S. government or had credit ratings of at least "AA+," except one floating rate asset-backed security with a book value of $1.7 million and a fair value of $1.7 million that had a rating of "B." As of December 31, ~~2018,~~2019, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+."

Securities in unrealized loss positions for 12 months or longer have a fair value as of ~~June 30, 2019~~March 31, 2020 that is, on average, approximately ~~99.2%~~98.2% 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 or changes in credit spreads. ~~Accordingly, Farmer Mac has concluded that none of the unrealized losses on these available-for-sale investment securities are other-than-temporary impairment as of June 30, 2019 and~~

December 31, 2018. Farmer Mac does not intend to sell these securities, and it is not "more likely than not" that Farmer Mac will be required to sell the securities before recovery of the amortized cost basis.

The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by remaining contractual maturity as of ~~June 30, 2019~~March 31, 2020 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 2.3


	As of March 31, 2020
	Available-for-Sale Securities
	Amortized Cost		Fair Value		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	1,013,044	$	1,021,217	2.03%
Due after one year through five years	399,388		399,311		2.02%
Due after five years through ten years	808,042		804,652		2.03%
Due after ten years	739,220		735,977		1.91%
Total	$	2,959,694	$	2,961,157	2.00%

As of June 30, 2019
Available-for-Sale Securities
Amortized
Cost Fair Value Weighted-
Average
Yield
(dollars in thousands)
Due within one year $ 1,265,454
$ 1,267,431
1.41%
Due after one year through five years 212,838
212,891
2.89%
Due after five years through ten years 761,882
760,584
2.84%
Due after ten years 679,985
681,598
3.01%
Total $ 2,920,159
$ 2,922,504
2.26%

3.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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Table 3.1


	As of March 31, 2020
	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	$	1,415,120	$	(110)	$	1,415,010	$	(640)	$	31,294	$	—	$	1,445,664
Farmer Mac Guaranteed USDA Securities	33,440		73		33,513		—		879		—		34,392
Total Farmer Mac Guaranteed Securities	1,448,560		(37)		1,448,523		(640)		32,173		—		1,480,056
USDA Securities	2,234,027		35,584		2,269,611		—		68,166		(1,637)		2,336,140
Total held-to-maturity	$	3,682,587	$	35,547	$	3,718,134	$	(640)	$	100,339	$	(1,637)	$	3,816,196
Available-for-sale:
AgVantage	$	7,273,414	$	(111)	$	7,273,303	$	(166)	$	378,974	$	(64,925)	$	7,587,186
Trading:
USDA Securities⁽³⁾	$	7,835	$	433	$	8,268	$	—	$	149	$	(9)	$	8,408

As of June 30, 2019
Unpaid Principal Balance Unamortized Premium/(Discount) Amortized
Cost Unrealized
Gains Unrealized
Losses Fair Value
(in thousands)
Held-to-maturity:
AgVantage $ 1,545,629
$ (232 ) $ 1,545,397
$ 14,003
$ (1,593 ) $ 1,557,807
Farmer Mac Guaranteed USDA Securities 33,583
195
33,778
624
—
34,402
Total Farmer Mac Guaranteed Securities 1,579,212
(37 ) 1,579,175
14,627
(1,593 ) 1,592,209
USDA Securities 2,080,284
48,094
2,128,378
6,211
(1,924 ) 2,132,665
Total held-to-maturity $ 3,659,496
$ 48,057
$ 3,707,553
$ 20,838
$ (3,517 ) $ 3,724,874
Available-for-sale:
AgVantage $ 6,923,464
$ (149 ) $ 6,923,315
$ 143,685
$ (31,332 ) $ 7,035,668
Trading:

USDA Securities⁽¹⁾
$ 8,818
$ 570
$ 9,388
$ 15
$ (202 ) $ 9,201
⁽¹⁾Amounts presented exclude $35.9 million, $40.6 million, and $0.2 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of March 31, 2020.

⁽¹⁾

⁽²⁾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.

⁽³⁾The trading USDA securities had a weighted average yield of 5.19% as of March 31, 2020.


	As of December 31, 2019
	Unpaid Principal Balance		Unamortized Premium/(Discount)		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Held-to-maturity:
AgVantage	$	1,415,584	$	(174)	$	1,415,410	$	15,300	$	(164)	$	1,430,546
Farmer Mac Guaranteed USDA Securities	31,887		154		32,041		839		—		32,880
Total Farmer Mac Guaranteed Securities	1,447,471		(20)		1,447,451		16,139		(164)		1,463,426
USDA Securities	2,190,671		41,489		2,232,160		54,356		(758)		2,285,758
Total held-to-maturity	$	3,638,142	$	41,469	$	3,679,611	$	70,495	$	(922)	$	3,749,184
Available-for-sale:
AgVantage	$	7,017,095	$	(124)	$	7,016,971	$	161,316	$	(35,262)	$	7,143,025
Trading:
USDA Securities⁽¹⁾	$	8,400	$	479	$	8,879	$	61	$	(27)	$	8,913

⁽¹⁾The trading USDA securities had a weighted average yield of 5.20% as of December 31, 2019.

~~The trading USDA securities had a weighted average yield of 5.23% as of June 30, 2019.~~

As of December 31, 2018
Unpaid Principal Balance Unamortized Premium/(Discount) Amortized
Cost Unrealized
Gains Unrealized
Losses Fair Value
(in thousands)
Held-to-maturity:
AgVantage $ 2,069,185
$ (194 ) $ 2,068,991
$ 2,637
$ (11,948 ) $ 2,059,680
Farmer Mac Guaranteed USDA Securities 27,383
244
27,627
98
—
27,725
Total Farmer Mac Guaranteed Securities 2,096,568
50
2,096,618
2,735
(11,948 ) 2,087,405
USDA Securities 2,110,963
55,211
2,166,174
—
(62,227 ) 2,103,947
Total held-to-maturity $ 4,207,531
$ 55,261
$ 4,262,792
$ 2,735
$ (74,175 ) $ 4,191,352
Available-for-sale:
AgVantage $ 6,003,733
$ (204 ) $ 6,003,529
$ 22,335
$ (51,367 ) $ 5,974,497
Trading:

USDA Securities⁽¹⁾
$ 9,591
$ 701
$ 10,292
$ 20
$ (313 ) $ 9,999


⁽¹⁾	~~The trading USDA securities had a weighted average yield of 5.21% as of December 31, 2018.~~

As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, unrealized losses on held-to-maturity and available-for-sale on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities were as follows:

Table 3.2


	As of March 31, 2020
	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)
Held-to-maturity:


USDA Securities	$	—	$	—	$	25,066	$	(1,637)
Total held-to-maturity	$	—	$	—	$	25,066	$	(1,637)

Available-for-sale:
AgVantage	$	244,823	$	(540)	$	830,797	$	(64,385)

As of June 30, 2019
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)
Held-to-maturity:
AgVantage $ —
$ —
$ 480,032
$ (1,593 )
USDA Securities —
—
285,968
(1,924 )
Total held-to-maturity $ —
$ —
$ 766,000
$ (3,517 )

Available-for-sale:
AgVantage $ 921,296
$ (6,351 ) $ 1,378,063
$ (24,981 )

As of December 31, 2018
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)
Held-to-maturity:
AgVantage $ 669,610
$ (1,760 ) $ 976,318
$ (10,188 )
USDA Securities 38,203
(696 ) 2,065,743
(61,531 )
Total held-to-maturity $ 707,813
$ (2,456 ) $ 3,042,061
$ (71,719 )

Available-for-sale:
AgVantage $ 1,480,423
$ (9,364 ) $ 1,599,679
$ (42,003 )


	As of December 31, 2019
	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)
Held-to-maturity:
AgVantage	$	—	$	—	$	301,836	$	(164)
USDA Securities	—		—		27,089		(758)
Total held-to-maturity	$	—	$	—	$	328,925	$	(922)

Available-for-sale:
AgVantage	$	225,239	$	(2,203)	$	1,394,802	$	(33,059)

The unrealized losses presented above are principally due to ~~higher~~changes in interest rates from the date of acquisition to ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, as applicable. The unrealized losses on the held-to-maturity USDA Securities as of both ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 reflect their increased cost basis resulting from their transfer to held-to-maturity as of October 1, 2016.

The credit exposure related to Farmer Mac's USDA Guarantees line of business is covered by the full faith and credit guarantee of the United States.

The unrealized losses from AgVantage securities were on 289 and 3817 available-for-sale securities as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. There were 110 and 434 held-to-maturity AgVantage securities with an unrealized loss as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. As of ~~June 30,~~March 31, 2020 and December 31, 2019, 166 and 13 available-for-sale AgVantage securities, respectively, had been in a loss position for more than 12 months. As of December 31, 2018, 21 available-for-sale AgVantage securities had been in a loss position for more than 12 months. Farmer Mac has concluded that none of the unrealized losses on its held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities and available-for-sale Farmer Mac Guaranteed Securities are other-than-temporarily impaired as of either June 30, 2019 or December 31, 2018. Farmer Mac does not intend to sell these securities, and it is not "more likely than not" that Farmer Mac will be required to sell the securities before recovery of the amortized cost basis.

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ Farmer Mac ~~realized~~had no ~~gains or losses from the sale~~sales of Farmer Mac Guaranteed Securities or USDA ~~Securities.~~Securities and, therefore, Farmer Mac realized no gains or losses.

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 ~~June 30, 2019~~March 31, 2020 are set forth below. The balances presented are based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

Table 3.3


	As of March 31, 2020
	Available-for-Sale Securities
	Amortized Cost⁽¹⁾		Fair Value⁽²⁾		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	1,202,779	$	1,207,673	1.82	%
Due after one year through five years	3,358,079		3,479,730		2.77	%
Due after five years through ten years	1,181,538		1,259,191		2.86	%
Due after ten years	1,530,907		1,640,758		3.10	%
Total	$	7,273,303	$	7,587,352	2.70	%

As of June 30, 2019
Available-for-Sale Securities
Amortized
Cost Fair Value Weighted-
Average
Yield
(dollars in thousands)
Due within one year $ 586,896
$ 586,944
2.92 %
Due after one year through five years 3,432,197
3,466,313
3.09 %
Due after five years through ten years 1,347,781
1,383,218
3.26 %
Due after ten years 1,556,441
1,599,193
3.55 %
Total $ 6,923,315
$ 7,035,668
3.21 %
⁽¹⁾Amounts presented exclude $35.9 million of accrued interest receivable.

⁽²⁾Amounts presented exclude $0.2 million related to the allowance for losses.

As of June 30, 2019
Held-to-Maturity Securities
Amortized
Cost Fair Value Weighted-
Average
Yield
(dollars in thousands)
Due within one year $ 539,516
$ 538,274
2.24 %
Due after one year through five years 1,094,543
1,108,105
3.32 %
Due after five years through ten years 203,660
203,644
3.48 %
Due after ten years 1,869,834
1,874,851
3.63 %
Total $ 3,707,553
$ 3,724,874
3.33 %


	As of March 31, 2020
	Held-to-Maturity Securities
	Amortized Cost⁽¹⁾		Fair Value⁽²⁾		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	655,928	$	660,512	2.57	%
Due after one year through five years	840,702		869,401		3.27	%
Due after five years through ten years	210,888		216,447		3.34	%
Due after ten years	2,010,616		2,070,476		3.52	%
Total	$	3,718,134	$	3,816,836	3.29	%

⁽¹⁾Amounts presented exclude $40.6 million of accrued interest receivable.

⁽²⁾Amounts presented exclude $0.6 million related to the allowance for losses.

4.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, and not for trading or speculative purposes. For more information about Farmer Mac's financial derivatives, see Note 6 in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019.~~25, 2020.

2322

The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~

2019:

Table 4.1

   As of June 30, 2019
   Fair Value Weighted-
Average
Pay Rate Weighted-
Average Receive Rate Weighted-
Average
Forward
Price Weighted-
Average
Remaining
Term (in years)
   Notional Amount Asset (Liability)
   (dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable $ 4,708,809
$ 3,481
$ (5,531 ) 2.52% 2.52% 11.04
Receive fixed non-callable 1,822,200
518
(5,017 ) 2.47% 2.02% 1.41
Receive fixed callable 300,000
1,250
—
2.41% 2.76% 2.19
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable 373,000
887
(1,100 ) 2.40% 2.81% 5.62
No hedge designation:
Interest rate swaps:
Pay fixed non-callable 319,252
—
(15,469 ) 3.69% 2.57% 5.83
Receive fixed non-callable 2,758,595
—
—
2.43% 2.38% 1.06
Receive fixed callable 330,000
294
—
2.39% 2.48% 0.83
Basis swaps 2,545,500
1,132
(162 ) 2.27% 2.35% 1.07
Treasury futures 29,100
(188 ) 127.32

Credit valuation adjustment (2 ) 38

Total financial derivatives $ 13,186,456
$ 7,560
$ (27,429 )
Collateral (held)/pledged (4,425 ) 100,830

Net amount $ 3,135
$ 73,401


	As of March 31, 2020
			Fair Value					Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Term (in years)
	Notional Amount		Asset		(Liability)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	5,099,293	$	4,339	$	(6,583)	2.42%	1.54%		11.64
Receive fixed non-callable	2,201,500		1,303		(9,730)		1.66%	2.06%		2.22
Receive fixed callable	413,000		4,954		(26)		1.36%	1.95%		3.38
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	458,000		1,434		(11,391)		2.31%	1.22%		5.36
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	339,721		—		(22,683)		3.54%	1.69%		5.32
Receive fixed non-callable	3,111,639		—		—		1.17%	1.39%		1.01
Receive fixed callable	500,000		604		—		1.52%	1.75%		0.86
Basis swaps	2,850,000		58		(3,385)		1.49%	0.66%		0.91
Treasury futures	18,500				(114)				138.07
Credit valuation adjustment			—		117
Total financial derivatives	$	14,991,653	$	12,692	$	(53,795)
Collateral (held)/pledged			(2,525)		225,404
Net amount			$	10,167	$	171,609

2423

   As of December 31, 2018
   Fair Value Weighted-
Average
Pay Rate Weighted-
Average Receive Rate Weighted-
Average
Forward
Price Weighted-
Average
Remaining
Term (in years)
   Notional Amount Asset (Liability)
   (dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable $ 3,097,084
$ 3,004
$ (4,326 ) 2.42% 2.58% 9.75
Receive fixed non-callable 1,871,200
547
(4,484 ) 2.50% 1.84% 1.58
Receive fixed callable 160,000
338
(28 ) 2.35% 3.06% 2.91
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable 373,000
2,441
(99 ) 2.40% 2.83% 6.12
No hedge designation:
Interest rate swaps:
Pay fixed non-callable 316,664
796
(10,399 ) 3.69% 2.52% 6.25
Receive fixed non-callable 2,347,371
—
—
2.37% 2.10% 0.86
Basis swaps 1,770,026
421
(130 ) 2.45% 2.49% 1.27
Treasury futures 20,400
—
(188 ) 121.09

Credit valuation adjustment (60 ) 21

Total financial derivatives $ 9,955,745
$ 7,487
$ (19,633 )
Collateral (held)/pledged (1,778 ) 47,018

Net amount $ 5,709
$ 27,385


	As of December 31, 2019
			Fair Value					Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Term (in years)
	Notional Amount		Asset		(Liability)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	4,955,686	$	7,163	$	(3,281)	2.47%	1.93%		11.26
Receive fixed non-callable	1,413,200		76		(5,329)		1.88%	2.13%		1.25
Receive fixed callable	524,000		476		(772)		1.52%	1.91%		2.83
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	428,000		1,882		(1,514)		2.36%	2.12%		5.43
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	342,745		7		(14,046)		3.55%	2.00%		5.51
Receive fixed non-callable	3,124,148		49		(1,637)		1.88%	2.06%		1.66
Receive fixed callable	525,000		79		(80)		1.64%	1.68%		0.83
Basis swaps	2,670,000		787		(395)		1.86%	1.76%		0.90
Treasury futures	39,400		—		(51)				128.29
Credit valuation adjustment			—		63
Total financial derivatives	$	14,022,179	$	10,519	$	(27,042)
Collateral (held)/pledged			(2,685)		132,129
Net amount			$	7,834	$	105,087

As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac expects to reclassify ~~$0.3~~$5.2 million after tax from accumulated other comprehensive income to earnings over the next twelve months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges after ~~June 30, 2019.~~March 31, 2020. During the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018,~~2019, there were no0 gains or losses from interest rate swaps designated as cash flow hedges reclassified to earnings because it ~~became~~was probable that the ~~original~~originally forecasted ~~transaction~~transactions would ~~not~~ occur.

2524

The following table summarizes the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Table 4.2


	For the Three Months Ended March 31, 2020
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income										Non-Interest Income	Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		Losses on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	71,517	$	60,596	$	(108,542)	$	(9,298)	$	14,273
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(6,152)		(1,877)		1,634		—		(6,395)
Recognized on hedged items	31,826		8,677		(14,276)		—		26,227
Discount amortization recognized on hedged items	—		—		(180)		—		(180)
Income/(expense) related to interest settlements on fair value hedging relationships	$	25,674	$	6,800	$	(12,822)	$	—	$	19,652

(Losses)/gains on fair value hedging relationships:
Recognized on derivatives	$	(293,932)	$	(145,906)	$	58,934	$	—	$	(380,904)
Recognized on hedged items	290,379		145,409		(60,565)		—		375,223
(Losses)/gains on fair value hedging relationships	$	(3,553)	$	(497)	$	(1,631)	$	—	$	(5,681)

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	(439)	$	—	$	(439)
Recognized on hedged items	—		—		(2,123)		—		(2,123)
Discount amortization recognized on hedged items	—		—		(1)		—		(1)
Expense recognized on cash flow hedges	$	—	$	—	$	(2,563)	$	—	$	(2,563)

Losses on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps	$	—	$	—	$	—	$	(6,550)	$	(6,550)
Interest expense on interest rate swaps	—		—		—		(862)		(862)

Treasury futures	—		—		—		(1,886)		(1,886)
Losses on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	(9,298)	$	(9,298)

~~Table 4.2~~


	For the Three Months Ended June 30, 2019																For The Three Months Ended March 31, 2019
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives																Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income									Non-Interest Income			Total				Net Interest Income											Non-Interest Income	Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities			Interest Income Loans			Total Interest Expense			Gains/(losses) on financial derivatives							Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		Losses on financial derivatives				Total
	(in thousands)																(in thousands)
Total amounts presented in the consolidated statement of operations:	$	85,569		$	59,403		$	(122,074	)	$	8,913		$	31,811		Total amounts presented in the consolidated statement of operations:	$	85,411	$	51,397	$	(114,916)	$	(360)	$	21,532
Income/(expense) related to interest settlements on fair value hedging relationships:																Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	1,167			(202		)	(2,572		)	—			(1,607		)	Recognized on derivatives	1,550		(22)		(3,218)		—		(1,690)
Recognized on hedged items	30,380			6,323			(11,779		)	—			24,924			Recognized on hedged items	24,565		4,555		(9,922)		—		19,198
Discount amortization recognized on hedged items	—			—			(164		)	—			(164		)	Discount amortization recognized on hedged items	—		—		(149)		—		(149)
Income/(expense) related to interest settlements on fair value hedging relationships	$	31,547		$	6,121		$	(14,515	)	$	—		$	23,153		Income/(expense) related to interest settlements on fair value hedging relationships	$	26,115	$	4,533	$	(13,289)	$	—	$	17,359

Gains/(losses) on fair value hedging relationships:																Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	(116,405	)	$	(33,953	)	$	16,146		$	—		$	(134,212	)	Recognized on derivatives	$	(58,987)	$	(20,082)	$	8,978	$	—	$	(70,091)
Recognized on hedged items	114,638			33,795			(15,649		)	—			132,784			Recognized on hedged items	59,352		16,237		(8,197)		—		67,392
Gains/(losses) on fair value hedging relationships	$	(1,767	)	$	(158	)	$	497		$	—		$	(1,428	)	Gains/(losses) on fair value hedging relationships	$	365	$	(3,845)	$	781	$	—	$	(2,699)

Expense related to interest settlements on cash flow hedging relationships:																Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—		$	—		$	462		$	—		$	462		Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	481	$	—	$	481
Recognized on hedged items	—			—			(2,697		)	—			(2,697		)	Recognized on hedged items	—		—		(2,688)		—		(2,688)
Discount amortization recognized on hedged items	—			—			(1		)	—			(1		)	Discount amortization recognized on hedged items	—		—		(1)		—		(1)
Expense recognized on cash flow hedges	$	—		$	—		$	(2,236	)	$	—		$	(2,236	)	Expense recognized on cash flow hedges	$	—	$	—	$	(2,208)	$	—	$	(2,208)

Gains on financial derivatives not designated in hedge relationships:
Losses on financial derivatives not designated in hedge relationships:																Losses on financial derivatives not designated in hedge relationships:
Gains on interest rate swaps	$	—		$	—		$	—		$	11,152		$	11,152		Gains on interest rate swaps	$	—	$	—	$	—	$	2,168	$	2,168
Interest expense on interest rate swaps	—			—			—			(1,146		)	(1,146		)	Interest expense on interest rate swaps	—		—		—		(2,300)		(2,300)

Treasury futures	—			—			—			(1,093		)	(1,093		)	Treasury futures	—		—		—		(228)		(228)
Gains on financial derivatives not designated in hedge relationships	$	—		$	—		$	—		$	8,913		$	8,913
Losses on financial derivatives not designated in hedge relationships																Losses on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	(360)	$	(360)

For the Three Months Ended June 30, 2018
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest Income Non-Interest Income Total
Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains/(losses) on financial derivatives
(in thousands)
Total amounts presented in the consolidated statement of operations $ 74,179
$ 49,396
$ (91,737 ) $ 2,534
$ 34,372
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives 681
(165 ) (2,320 ) —
(1,804 )
Recognized on hedged items 15,923
1,545
(10,074 ) —
7,394
Discount amortization recognized on hedged items —
—
(188 ) —
(188 )
Income/(expense) related to interest settlements on fair value hedging relationships $ 16,604
$ 1,380
$ (12,582 ) $ —
$ 5,402

Gains/(losses) on fair value hedging relationships:
Recognized on derivatives $ 12,485
$ 2,235
$ (2,731 ) $ —
$ 11,989
Recognized on hedged items (10,849 ) (2,472 ) 3,194
—
(10,127 )
Gains/(losses) on fair value hedging relationships $ 1,636
$ (237 ) $ 463
$ —
$ 1,862

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives $ —
$ —
$ 57
$ —
$ 57
Recognized on hedged items —
—
(2,330 ) —
(2,330 )
Discount amortization recognized on hedged items —
—
(2 ) —
(2 )
Expense recognized on cash flow hedges $ —
$ —
$ (2,275 ) $ —
$ (2,275 )

Gains on financial derivatives not designated in hedging relationships:
Gains on interest rate swaps $ —
$ —
$ —
$ 6,265
$ 6,265
Interest expense on interest rate swaps —
—
—
(3,869 ) (3,869 )
Treasury futures —
—
—
138
138
Gains on financial derivatives not designated in hedge relationships $ —
$ —
$ —
$ 2,534
$ 2,534

For the Six Months Ended June 30, 2019
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest Income Non-Interest Income Total
Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains/(losses) on financial derivatives
(in thousands)
Total amounts presented in the consolidated statement of operations $ 170,980
$ 110,800
$ (236,990 ) $ 8,553
$ 53,343
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives 2,717
(224 ) (5,790 ) —
(3,297 )
Recognized on hedged items 55,198
10,878
(21,811 ) —
44,265
Discount amortization recognized on hedged items —
—
(314 ) —
(314 )
Income/(expense) related to interest settlements on fair value hedging relationships $ 57,915
$ 10,654
$ (27,915 ) $ —
$ 40,654

Gains/(losses) on fair value hedging relationships:
Recognized on derivatives $ (175,392 ) $ (54,034 ) $ 25,123
$ —
$ (204,303 )
Recognized on hedged items 173,990
50,031
(23,846 ) —
200,175
Gains/(losses) on fair value hedging relationships $ (1,402 ) $ (4,003 ) $ 1,277
$ —
$ (4,128 )

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives $ —
$ —
$ 942
$ —
$ 942
Recognized on hedged items —
—
(5,417 ) —
(5,417 )
Discount amortization recognized on hedged items —
—
(2 ) —
(2 )
Expense recognized on cash flow hedges $ —
$ —
$ (4,477 ) $ —
$ (4,477 )

Gains on financial derivatives not designated in hedging relationships:
Gains on interest rate swaps $ —
$ —
$ —
$ 13,320
$ 13,320
Interest expense on interest rate swaps —
—
—
(3,446 ) (3,446 )
Treasury futures —
—
—
(1,321 ) (1,321 )
Gains on financial derivatives not designated in hedge relationships $ —
$ —
$ —
$ 8,553
$ 8,553

For the Six Months Ended June 30, 2018
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest Income Non-Interest Income Total
Interest Income
Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains/(losses) on financial derivatives
(in thousands)
Total amounts presented in the consolidated statement of operations: $ 136,609
$ 95,049
$ (168,054 ) $ (1,316 ) $ 62,288
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives (807 ) (463 ) (2,614 ) —
(3,884 )
Recognized on hedged items 29,409
2,959
(18,628 ) —
13,740
Discount amortization recognized on hedged items —
—
(353 ) —
(353 )
Income/(expense) related to interest settlements on fair value hedging relationships $ 28,602
$ 2,496
$ (21,595 ) $ —
$ 9,503

Gains/(losses) on fair value hedging relationships:
Recognized on derivatives $ 32,934
$ 8,655
$ (12,377 ) $ —
$ 29,212
Recognized on hedged items (29,797 ) (9,045 ) 14,331
—
(24,511 )
Gains/(losses) on fair value hedging relationships $ 3,137
$ (390 ) $ 1,954
$ —
$ 4,701

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives $ —
$ —
$ (210 ) $ —
$ (210 )
Recognized on hedged items —
—
(4,110 ) —
(4,110 )
Discount amortization recognized on hedged items —
—
(4 ) —
(4 )
Expense recognized on cash flow hedges $ —
$ —
$ (4,324 ) $ —
$ (4,324 )

Losses on financial derivatives not designated in hedge relationships:
Gains on interest rate swaps $ —
$ —
$ —
$ 4,176
$ 4,176
Interest expense on interest rate swaps —
—
—
(5,855 ) (5,855 )
Treasury futures —
—
—
363
363
Losses on financial derivatives not designated in hedge relationships $ —
$ —
$ —
$ (1,316 ) $ (1,316 )

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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Table 4.3


	Hedged Items in Fair Value Relationship
	Carrying Amount of Hedged Assets/(Liabilities)						Cumulative Amount of Fair Value Hedging Adjustments included in the Carrying Amount of the Hedged Assets/(Liabilities)
	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
	(in thousands)
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value	$	4,281,350	$	4,092,611	$	470,588	$	180,215
Loans held for investment, at amortized cost	1,330,359		1,050,335		183,315		37,907

Notes Payable⁽¹⁾	(2,680,981)		(2,761,052)		(68,045)		(7,433)

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)
June 30, 2019 December 31, 2018 June 30, 2019 December 31, 2018
(in thousands)
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value $ 4,018,655
$ 2,882,919
$ 173,083
$ (906 )
Loans held for investment, at amortized cost 870,758
194,617
44,744
(5,287 )
Notes Payable, due after one year⁽¹⁾⁽²⁾
(2,136,383 ) (2,021,356 ) (15,156 ) 8,785
⁽¹⁾Carrying amount represents amortized cost.


⁽¹⁾	~~Carrying amount represents amortized cost.~~


⁽²⁾	~~Includes $0.2 million and $0.3 million of hedging adjustments on a discontinued hedging relationship as of June 30, 2019 and December 31, 2018, respectively.~~

The following table shows Farmer Mac's credit exposure to interest rate swap counterparties as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Table 4.4


	March 31, 2020
	Gross Amount Recognized⁽¹⁾		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swap	$	118,349	$	116,517	$	1,832
Liabilities:
Derivatives
Interest rate swap	$	780,184	$	776,764	$	3,420

June 30, 2019

Gross Amount Recognized⁽¹⁾
Counterparty Netting Net Amount Presented in the Consolidated Balance Sheet
(in thousands)
Assets:
Derivatives
Interest rate swap $ 51,760
$ 47,291
$ 4,469
Liabilities:
Derivatives
Interest rate swap $ 284,549
$ 268,132
$ 16,417


⁽¹⁾⁽¹⁾Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.	~~Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.~~

December 31, 2018

Gross Amount Recognized⁽¹⁾
Counterparty Netting Net Amount Presented in the Consolidated Balance Sheet
(in thousands)
Assets:
Derivatives
Interest rate swaps $ 51,267
$ 48,124
$ 3,143
Liabilities:
Derivatives
Interest rate swaps $ 78,437
$ 64,568
$ 13,869


⁽¹⁾	~~Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.~~


	December 31, 2019
	Gross Amount Recognized⁽¹⁾		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swaps	$	56,139	$	53,771	$	2,368
Liabilities:
Derivatives
Interest rate swaps	$	305,584	$	291,326	$	14,258

⁽¹⁾Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.

As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac held ~~$4.4~~$2.5 million of cash and no0 investment securities as collateral for its derivatives in net asset positions, ~~resulting in uncollateralized net asset positions of $44,000. As of December 31, 2018, Farmer Mac held $0.7~~compared to $2.7 million of cash and ~~$1.1 million of~~0 investment securities as collateral for its derivatives in net asset positions ~~resulting in uncollateralized net asset positions~~as of ~~$1.4 million.~~December 31, 2019.

Farmer Mac posted ~~$0.1~~$19.3 million of cash and ~~$100.7~~$206.1 million of investment securities as of ~~June 30, 2019~~March 31, 2020 and posted no$0.5 million cash and ~~$47.0~~$131.7 million investment securities as of December 31, ~~2018.~~2019. 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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, it could have been required to settle its obligations under the agreements, but would not have been required to post additional collateral. As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, there were no0 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 ~~$13.2~~$15.0 billion notional amount of interest rate swaps outstanding as of ~~June 30, 2019, $10.7~~March 31, 2020, $11.9 billion were cleared through the swap clearinghouse, the Chicago Mercantile Exchange ("CME"). Of Farmer Mac's ~~$9.9~~$14.0 billion notional amount of interest rate swaps outstanding as of December 31, ~~2018, $8.5~~2019, $11.0 billion were cleared through the ~~swap clearinghouse.~~CME. During first quarter 2020 and throughout 2019, the Company increased its use of non-cleared basis swaps as it began to prepare for the transition away from the use of LIBOR as a reference rate. For more information about interest rate swaps cleared through a clearinghouse, see Note 6 in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019.~~25, 2020.

5.LOANS ~~AND ALLOWANCE FOR LOSSES~~

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. The following table displays the composition of the loan balances as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Table 5.1


	As of March 31, 2020⁽¹⁾										As of December 31, 2019⁽²⁾
	Unsecuritized		In Consolidated Trusts		Total		Unsecuritized		In Consolidated Trusts		Total
	(in thousands)
Farm & Ranch	$	3,817,693	$	1,540,689	$	5,358,382	$	3,675,640	$	1,600,917	$	5,276,557
Rural Utilities	1,789,726		—		1,789,726		1,671,293		—		1,671,293
Total unpaid principal balance⁽³⁾	5,607,419		1,540,689		7,148,108		5,346,933		1,600,917		6,947,850
Unamortized premiums, discounts, fair value hedge basis adjustment, and other cost basis adjustments	181,972		—		181,972		44,044		—		44,044
Total loans	5,789,391		1,540,689		7,330,080		5,390,977		1,600,917		6,991,894
Allowance for losses	(13,663)		(1,193)		(14,856)		(8,853)		(1,601)		(10,454)
Total loans, net of allowance	$	5,775,728	$	1,539,496	$	7,315,224	$	5,382,124	$	1,599,316	$	6,981,440

As of June 30, 2019 As of December 31, 2018
Unsecuritized In Consolidated Trusts Total Unsecuritized In Consolidated Trusts Total
(in thousands)
Farm & Ranch $ 3,191,035
$ 1,563,223
$ 4,754,258
$ 3,071,222
$ 1,517,101
$ 4,588,323
Rural Utilities 1,527,150
—
1,527,150
938,843
—
938,843
Total unpaid principal balance⁽¹⁾
4,718,185
1,563,223
6,281,408
4,010,065
1,517,101
5,527,166
Unamortized premiums, discounts, and other cost basis adjustments 41,861
—
41,861
(5,097 ) —
(5,097 )
Total loans 4,760,046
1,563,223
6,323,269
4,004,968
1,517,101
5,522,069
Allowance for loan losses (5,822 ) (1,442 ) (7,264 ) (5,565 ) (1,452 ) (7,017 )
Total loans, net of allowance $ 4,754,224
$ 1,561,781
$ 6,316,005
$ 3,999,403
$ 1,515,649
$ 5,515,052


⁽¹⁾⁽¹⁾Allowance for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.	~~Unpaid principal balance is the basis of presentation in disclosures of outstanding balances for Farmer Mac's lines of business.~~

⁽²⁾Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020, Farmer Mac maintained an allowance for losses to cover estimated probable incurred losses on loans held.

⁽³⁾Unpaid principal balance is the basis of presentation in disclosures of outstanding balances for Farmer Mac's lines of business.

3128

Allowance for Losses

~~Farm & Ranch~~The following table is a summary, by asset type, of the allowance for losses as of March 31, 2020 and December 31, 2019:

Table 5.2


	March 31, 2020⁽¹⁾		December 31, 2019⁽²⁾
	Allowance for Losses		Allowance for Losses
	(in thousands)
Loans:
Farm & Ranch	$	7,353	$	10,454
Rural Utilities	7,503		—
Total	$	14,856	$	10,454

⁽¹⁾Allowance for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

⁽²⁾Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020, Farmer Mac maintained an allowance for loan losses to cover estimated probable incurred losses on loans held.

The following is a summary of the changes in the ~~total~~ allowance for losses for the three month period ended March 31, 2020 and ~~six months ended June 30, 2019 and 2018:~~2019:

~~Table 5.2~~

June 30, 2019 June 30, 2018
Allowance
for Loan
Losses Reserve
for Losses Total
Allowance
for Losses Allowance
for Loan
Losses Reserve
for Losses Total
Allowance
for Losses
(in thousands)
For the Three Months Ended:
Beginning Balance $ 6,753
$ 2,038
8,791
$ 6,365
$ 2,091
8,456
Provision for/(release of) losses 578
(158 ) 420
424
158
582
Charge-offs (67 ) —
(67 ) —
—
—
Ending Balance 7,264
1,880
9,144
6,789
2,249
9,038

For the Six Months Ended:
Beginning Balance $ 7,017
$ 2,167
9,184
$ 6,796
$ 2,070
8,866
Provision for/(release of) losses 314
(287 ) 27
(7 ) 179
172
Charge-offs (67 ) —
(67 ) —
—
—
Ending Balance 7,264
1,880
9,144
6,789
2,249
9,038

Table 5.3


	For the Three Months Ended
	March 31, 2020⁽¹⁾		March 31, 2019⁽²⁾
	Allowance for Losses		Allowance for Losses
	(in thousands)
Farm & Ranch:
Balance as of December 31,	$	10,454	$	7,017
Cumulative effect adjustment from adoption of current expected credit loss standard	(3,909)		—
Balance as of January 1,	6,545		7,017
Provision for/(release of) losses	$	808	$	(264)

Charge-offs	—		—
Ending Balance⁽³⁾	$	7,353	$	6,753

Rural Utilities:
Balance as of December 31,	$	—	$	—
Cumulative effect adjustment from adoption of current expected credit loss standard	5,378		—
Balance as of January 1,	5,378		—
Provision for/(release of) losses	$	2,125	$	—

Charge-offs	—		—
Ending Balance⁽⁴⁾	$	7,503	$	—

⁽¹⁾Allowance for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

⁽³⁾Allowance for losses includes $2.2 million for collateral dependent assets secured by commercial real estate.

⁽⁴⁾Allowance for losses includes 0 allowance for collateral dependent assets.

The cumulative transition adjustment decrease of $3.9 million in the Farm & Ranch portfolio was primarily driven by differences in the way that the two loss models measure the impact of low loan-to-value ratios in that portfolio. Under the previous accounting standard, the Company's estimated incurred loss model was based on historical weighted-average loss rates from realized losses within commodities and risk ratings. The historical weighted average loss rates were then applied to sub-portfolios, as

disaggregated by commodity and risk rating, to calculate the general allowance. Under the CECL accounting standard, the Company's current expected credit losses are calculated individually based on the expected probability of default and the expected loss-given-default for each loan. The low loan-to-value ratios in the Farm & Ranch portfolio result in low individual losses-given-default. Thus, our expected credit losses as of January 1, 2020 were less than our estimate of incurred losses as of December 31, 2019.

The cumulative transition adjustment increase of $5.4 million in the Rural Utilities portfolio was primarily driven by the change from measuring incurred probable credit losses to measuring expected credit losses over the expected lives of these loans. The Company has never experienced a credit loss in its Rural Utilities portfolio. Additionally, these loans have strong credit ratings and performance, which supported the Company's estimate of no incurred credit losses under the previous accounting standard. Upon the adoption of CECL, the Company is now required to measure its expected credit losses for the entire expected life of all financial instruments, including its Rural Utilities loans. To estimate expected credit losses on these loans, the Company relies upon industry data from ratings agencies and publicly available information as disclosed in the securities filings of other major lenders who serve the utilities industry. Under the CECL accounting standard, the Company's loss allowance model for these loans is primarily impacted by the long-term maturities of the loans and their low probability of prepayment. In addition, the highly-specialized nature of power generation and transmission facilities results in significant losses given default even though the probability of default is low. Thus, the long-term expected lives of these loans combined with high losses given default result in an estimate of expected losses although we have never incurred a credit loss in this portfolio.

The provision ~~for~~to the allowance for loan losses recorded during ~~second~~first quarter ~~2019~~2020 was ~~attributable to an increase in the general allowance~~primarily due to ~~net volume growth in on-balance sheet~~the impact of updated economic factor forecasts, particularly higher credit spreads and expected higher unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility. In addition, economic factor forecasts for lower commodity prices uniquely impacted the Farm & Ranch ~~loans and a slight decrease in the portfolio credit quality of loan purchases. The release from the reserve for losses recorded during second~~portfolio.

During first quarter 2019, ~~was primarily attributable~~the net release to ~~a net volume decrease in off-balance sheet Farm & Ranch LTSPCs and a slight improvement in off-balance sheet portfolio credit quality. The $0.1 million charge-off that occurred during~~ the ~~three and six months ended June 30, 2019 related to the foreclosure of one part-time farm loan.~~

~~During second quarter 2018, Farmer Mac recorded a provision to both its~~ allowance for loan losses and reserve for losses of $0.4 million and $0.2 million, respectively. The net provisions to the total allowance for loan losses recorded during second quarter 2018 were attributable to (1) a modest decrease in overall portfolio credit quality, and (2) an increase in the general allowancewas primarily due to ~~net volume growth~~a decrease in ~~both on and off-balance sheet~~ Farm & Ranch outstanding business volume and lower specific allowance amounts on loans ~~primarily related to new agricultural storage~~that Farmer Mac identified as impaired and ~~processing loans purchased~~individually evaluated. This was offset in part by a modest decline in credit quality during ~~second~~the first quarter ~~2018.~~of 2019. Farmer Mac recorded no charge-offs to its allowance for loan losses during ~~second~~first quarter ~~2018.~~2019.

The following ~~tables present~~table presents the ~~changes~~unpaid principal balances by delinquency status of Farmer Mac's loans and non-performing assets as of March 31, 2020:

Table 5.4


	As of March 31, 2020
	Accruing
	Current		30-59 Days		60-89 Days		90 Days and Greater⁽¹⁾		Total Past Due		Nonaccrual loans⁽²⁾⁽³⁾		Total Loans
	(in thousands)
Loans:
Farm & Ranch	$	5,206,313	$	4,821	$	3,024	$	22,152	$	29,997	$	122,072	$	5,358,382
Rural Utilities	1,789,726		—		—		—		—		—		1,789,726
Total	$	6,996,039	$	4,821	$	3,024	$	22,152	$	29,997	$	122,072	$	7,148,108

⁽¹⁾Includes loans in ~~the total allowance~~consolidated trusts with beneficial interests owned by third parties that are 90 days or more past due.

⁽²⁾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.

⁽³⁾Includes $24.0 million of nonaccrual loans for ~~losses for~~which there was no associated allowance. During the three ~~and six~~ months ended ~~June 30, 2019 and 2018 by commodity type:~~March 31, 2020, Farmer Mac received $1.0 million in interest on nonaccrual loans.

~~Table 5.3~~

June 30, 2019
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
For the Three Months Ended:
Beginning Balance $ 4,233
$ 1,934
$ 1,452
$ 413
$ 737
$ 22
$ 8,791
Provision for/(release of) losses 540
(8 ) (29 ) 54
(134 ) (3 ) 420
Charge-offs —
—
—
(67 ) —
—
(67 )
Ending Balance $ 4,773
$ 1,926
$ 1,423
$ 400
$ 603
$ 19
$ 9,144

For the Six Months Ended:
Beginning Balance $ 4,394
$ 2,126
$ 1,460
$ 474
$ 720
$ 10
$ 9,184
Provision for/(release of) losses 379
(200 ) (37 ) (7 ) (117 ) 9
27
Charge-offs —
—
—
(67 ) —
—
(67 )
Ending Balance $ 4,773
$ 1,926
$ 1,423
$ 400
$ 603
$ 19
$ 9,144

June 30, 2018
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
For the Three Months Ended:
Beginning Balance $ 3,793
$ 2,479
$ 1,236
$ 413
$ 522
$ 13
$ 8,456
Provision for/(release of) losses 332
(111 ) 86
35
198
42
582
Ending Balance $ 4,125
$ 2,368
$ 1,322
$ 448
$ 720
$ 55
$ 9,038

For the Six Months Ended:
Beginning Balance $ 4,081
$ 2,469
$ 1,211
$ 481
$ 606
$ 18
$ 8,866
Provision for/(release of) losses 44
(101 ) 111
(33 ) 114
37
172
Ending Balance $ 4,125
$ 2,368
$ 1,322
$ 448
$ 720
$ 55
$ 9,038

The following tables present the unpaid principal balances of loans held ~~and loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities)~~ and the related total allowance for losses by impairment method and commodity type as of ~~June 30, 2019 and~~ December 31, ~~2018:~~2019:

Table ~~5.4~~5.5


	As of December 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Ending Balance:
Collectively evaluated for impairment	$	2,664,362	$	1,161,900	$	871,341	$	356,920	$	10,360	$	4,597	$	5,069,480
Individually evaluated for impairment	108,815		51,256		39,962		7,044		—		—		207,077
Total Farm & Ranch loans	$	2,773,177	$	1,213,156	$	911,303	$	363,964	$	10,360	$	4,597	$	5,276,557
Allowance for Losses:
Collectively evaluated for impairment	$	1,880	$	1,362	$	714	$	249	$	47	$	4	$	4,256
Individually evaluated for impairment	2,628		1,008		2,447		115		—		—		6,198
Total Farm & Ranch loans	$	4,508	$	2,370	$	3,161	$	364	$	47	$	4	$	10,454

As of June 30, 2019
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
Ending Balance:
Collectively evaluated for impairment:
On-balance sheet $ 2,501,439
$ 1,021,253
$ 725,595
$ 333,130
$ 11,581
$ 4,620
$ 4,597,618
Off-balance sheet 1,185,547
492,572
608,511
163,365
68,979
2,962
2,521,936
Total $ 3,686,986
$ 1,513,825
$ 1,334,106
$ 496,495
$ 80,560
$ 7,582
$ 7,119,554
Individually evaluated for impairment:
On-balance sheet $ 90,891
$ 36,619
$ 21,932
$ 7,198
$ —
$ —
$ 156,640
Off-balance sheet 7,869
2,128
4,243
860
—
58
15,158
Total $ 98,760
$ 38,747
$ 26,175
$ 8,058
$ —
$ 58
$ 171,798
Total Farm & Ranch loans:
On-balance sheet $ 2,592,330
$ 1,057,872
$ 747,527
$ 340,328
$ 11,581
$ 4,620
$ 4,754,258
Off-balance sheet 1,193,416
494,700
612,754
164,225
68,979
3,020
2,537,094
Total $ 3,785,746
$ 1,552,572
$ 1,360,281
$ 504,553
$ 80,560
$ 7,640
$ 7,291,352
Allowance for Losses:

Collectively evaluated for impairment:
On-balance sheet $ 1,817
$ 932
$ 651
$ 251
$ 49
$ 14
$ 3,714
Off-balance sheet 612
112
277
25
554
5
1,585
Total $ 2,429
$ 1,044
$ 928
$ 276
$ 603
$ 19
$ 5,299
Individually evaluated for impairment:
On-balance sheet $ 2,194
$ 832
$ 418
$ 106
$ —
$ —
$ 3,550
Off-balance sheet 150
50
77
18
—
—
295
Total $ 2,344
$ 882
$ 495
$ 124
$ —
$ —
$ 3,845
Total Farm & Ranch loans:
On-balance sheet $ 4,011
$ 1,764
$ 1,069
$ 357
$ 49
$ 14
$ 7,264
Off-balance sheet 762
162
354
43
554
5
1,880
Total $ 4,773
$ 1,926
$ 1,423
$ 400
$ 603
$ 19
$ 9,144
31

As of December 31, 2018
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
Ending Balance:
Collectively evaluated for impairment:
On-balance sheet $ 2,452,803
$ 952,719
$ 705,752
$ 329,070
$ 12,097
$ 4,477
$ 4,456,918
Off-balance sheet 1,239,094
515,520
624,522
166,907
73,084
3,286
2,622,413
Total $ 3,691,897
$ 1,468,239
$ 1,330,274
$ 495,977
$ 85,181
$ 7,763
$ 7,079,331
Individually evaluated for impairment:
On-balance sheet $ 66,432
$ 36,333
$ 21,361
$ 7,278
$ —
$ —
$ 131,404
Off-balance sheet 13,298
5,249
3,737
883
—
69
23,236
Total $ 79,730
$ 41,582
$ 25,098
$ 8,161
$ —
$ 69
$ 154,640
Total Farm & Ranch loans:
On-balance sheet $ 2,519,235
$ 989,052
$ 727,113
$ 336,348
$ 12,097
$ 4,477
$ 4,588,322
Off-balance sheet 1,252,392
520,769
628,259
167,790
73,084
3,355
2,645,649
Total $ 3,771,627
$ 1,509,821
$ 1,355,372
$ 504,138
$ 85,181
$ 7,832
$ 7,233,971
Allowance for Losses:

Collectively evaluated for impairment:
On-balance sheet $ 2,120
$ 822
$ 731
$ 303
$ 84
$ 4
$ 4,064
Off-balance sheet 668
170
207
29
636
5
1,715
Total $ 2,788
$ 992
$ 938
$ 332
$ 720
$ 9
$ 5,779
Individually evaluated for impairment:
On-balance sheet $ 1,329
$ 1,065
$ 437
$ 122
$ —
$ —
$ 2,953
Off-balance sheet 277
69
85
20
—
1
452
Total $ 1,606
$ 1,134
$ 522
$ 142
$ —
$ 1
$ 3,405
Total Farm & Ranch loans:
On-balance sheet $ 3,449
$ 1,887
$ 1,168
$ 425
$ 84
$ 4
$ 7,017
Off-balance sheet 945
239
292
49
636
6
2,167
Total $ 4,394
$ 2,126
$ 1,460
$ 474
$ 720
$ 10
$ 9,184

The following tables present by commodity type the unpaid principal balances, recorded investment, and specific allowance for losses related to impaired loans and the recorded investment in loans on nonaccrual status as of ~~June 30, 2019 and~~ December 31, ~~2018:~~2019:

Table ~~5.5~~5.6


	As of December 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Impaired Loans:
With no specific allowance:
Recorded investment	$	30,846	$	16,696	$	3,195	$	1,398	$	—	$	56	$	52,191
Unpaid principal balance	30,741		16,638		3,185		1,394		—		56		52,014
With a specific allowance:
Recorded investment⁽¹⁾	84,044		36,852		47,113		6,376		—		—		174,385
Unpaid principal balance	83,772		36,732		46,984		6,356		—		—		173,844
Associated allowance	2,725		1,051		2,636		129		—		—		6,541
Total:
Recorded investment	114,890		53,548		50,308		7,774		—		56		226,576
Unpaid principal balance	114,513		53,370		50,169		7,750		—		56		225,858
Associated allowance	2,725		1,051		2,636		129		—		—		6,541

Recorded investment of loans on nonaccrual status⁽²⁾	$	34,037	$	22,849	$	28,441	$	2,454	$	—	$	—	$	87,781

As of June 30, 2019
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
Impaired Loans:
With no specific allowance:
Recorded investment $ 25,163
$ 14,402
$ 7,475
$ 1,903
$ —
$ 58
$ 49,001
Unpaid principal balance 25,067
14,346
7,447
1,895
—
58
48,813
With a specific allowance:
Recorded investment⁽¹⁾
73,953
24,489
18,786
6,184
—
—
123,412
Unpaid principal balance 73,693
24,401
18,728
6,163
—
—
122,985
Associated allowance 2,344
882
495
124
—
—
3,845
Total:

Recorded investment 99,116
38,891
26,261
8,087
—
58
172,413
Unpaid principal balance 98,760
38,747
26,175
8,058
—
58
171,798
Associated allowance 2,344
882
495
124
—
—
3,845

Recorded investment of loans on nonaccrual status⁽²⁾
$ 35,437
$ 12,778
$ 10,289
$ 3,351
$ —
$ —
$ 61,855
⁽¹⁾Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $159.1 million (70%) of impaired loans as of December 31, 2019, which resulted in a specific allowance of $3.0 million.


⁽¹⁾ ⁽²⁾Includes $30.1 million of loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.	Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $121.0 million (70%) of impaired loans as of June 30, 2019, which resulted in a specific allowance of $2.6 million.


⁽²⁾	~~Includes $41.0 million of loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.~~

As of December 31, 2018
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
Impaired Loans:
With no specific allowance:
Recorded investment $ 20,734
$ 3,592
$ 5,764
$ 1,922
$ —
$ —
$ 32,012
Unpaid principal balance 20,632
3,573
5,737
1,912
—
—
31,854
With a specific allowance:

Recorded investment⁽¹⁾
59,335
38,176
19,443
6,276
—
70
123,300
Unpaid principal balance 59,098
38,009
19,361
6,249
—
69
122,786
Associated allowance 1,606
1,134
522
142
—
1
3,405
Total:

Recorded investment 80,069
41,768
25,207
8,198
—
70
155,312
Unpaid principal balance 79,730
41,582
25,098
8,161
—
69
154,640
Associated allowance 1,606
1,134
522
142
—
1
3,405

Recorded investment of loans on nonaccrual status⁽²⁾
$ 26,611
$ 21,349
$ 8,803
$ 4,645
$ —
$ —
$ 61,408


⁽¹⁾	Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $120.9 million (78%) of impaired loans as of December 31, 2018, which resulted in a specific allowance of $2.7 million.


⁽²⁾	~~Includes $41.8 million of loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.~~

The following table presents by commodity type the average recorded investment and interest income recognized on impaired loans for the three ~~and six~~ months ended ~~June 30, 2019 and 2018:~~March 31, 2019:

~~Table 5.6~~

June 30, 2019
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
For the Three Months Ended:
Average recorded investment in impaired loans $ 98,176
$ 39,056
$ 28,650
$ 7,675
$ —

$ 59
$ 173,616
Income recognized on impaired loans 379
121
304
55
—
—
859

For the Six Months Ended:
Average recorded investment in impaired loans $ 85,652
$ 41,903
$ 26,279
$ 8,268
$ —
$ 66
$ 162,168
Income recognized on impaired loans 701
420
417
122
—
—
1,660

June 30, 2018
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
For the Three Months Ended:
Average recorded investment in impaired loans $ 72,041
$ 49,919
$ 23,453
$ 9,214
$ —
$ 392
$ 155,019
Income recognized on impaired loans 327
492
60
62
—
—
941

For the Six Months Ended:
Average recorded investment in impaired loans $ 74,527
$ 45,945
$ 21,361
$ 8,780
$ —
$ 557
$ 151,170
Income recognized on impaired loans 719
664
139
117
—
—
1,639

Table 5.7


	March 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
For the Three Months Ended:
Average recorded investment in impaired loans	$	88,653	$	40,495	$	28,123	$	7,730	$	—	$	65	$	165,066
Income recognized on impaired loans	322		299		113		67		—		—		801

Net credit losses and 90-day delinquencies as of and for the periods indicated for loans held ~~and loans underlying off-balance sheet securities representing interests in pools of eligible Farm & Ranch loans ("Farm & Ranch Guaranteed Securities") and LTSPCs~~ are presented in the table below. As of ~~June 30,~~December 31, 2019, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities loan portfolio and Farmer Mac had not experienced credit losses on any Rural Utilities loans.

Table ~~5.7~~5.8

90-Day Delinquencies⁽¹⁾
Net Credit Losses/(Recoveries)
As of For the Six Months Ended
June 30, 2019 December 31, 2018 June 30, 2019 June 30, 2018
(in thousands)
On-balance sheet assets:
Farm & Ranch:
Loans $ 20,812
$ 19,577
$ 131
$ (18 )
Total on-balance sheet $ 20,812
$ 19,577
$ 131
$ (18 )
Off-balance sheet assets:

Farm & Ranch:

LTSPCs $ 7,233
$ 7,304
$ —
$ —
Total off-balance sheet $ 7,233
$ 7,304
$ —
$ —
Total $ 28,045
$ 26,881
$ 131
$ (18 )

90-Day Delinquencies⁽¹⁾

~~Includes loans and loans underlying off-balance sheet~~

Net Credit Losses/(Recoveries)

As of

For the Three Months Ended

December 31, 2019

March 31, 2019

(in thousands)

Farm & Ranch ~~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.~~

57,719

—

⁽¹⁾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.

Of the ~~$20.8 million of on-balance sheet loans reported as 90-day delinquencies as of June 30, 2019, $0.1 million were loans subject to "removal-of-account" provisions. Of the $19.6~~$57.7 million of on-balance sheet loans reported as 90-day delinquencies as of December 31, ~~2018, $0.1 million~~2019, 0 loans were ~~loans~~ subject to "removal-of-account" provisions.

Rural Utilities

As of December 31, 2019, no allowance for losses had been provided for Farmer Mac's Rural Utilities line of business based on the performance of the loans in this line of business and the credit quality of the collateral supporting these loans, as well as Farmer Mac's counterparty risk analysis. As of December 31, 2019, there were no delinquencies or probable losses inherent in Farmer Mac's Rural Utilities loans held or underlying LTSPCs.

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans ~~held~~ and Rural Utilities loans ~~underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities~~held as of ~~June 30, 2019 and December~~March 31, ~~2018:~~ 2020, by year of origination:

Table ~~5.8~~5.9


	As of March 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Farm & Ranch:
Internally Assigned Risk Rating:
Acceptable	$	286,971	$	819,220	$	588,761	$	688,649	$	555,678	$	1,452,711	$	468,114	$	4,860,104
Special mention⁽¹⁾	9,916		159,523		36,786		20,937		32,227		18,283		9,230		286,902
Substandard⁽²⁾	—		4,431		16,938		58,407		41,973		78,189		11,438		211,376
Total	$	296,887	$	983,174	$	642,485	$	767,993	$	629,878	$	1,549,183	$	488,782	$	5,358,382

Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

⁽¹⁾Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

⁽²⁾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 June 30, 2019
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
Credit risk profile by internally assigned grade⁽¹⁾

On-balance sheet:
Acceptable $ 2,421,677
$ 972,075
$ 691,516
$ 320,449
$ 11,581
$ 4,620
$ 4,421,918
Special mention⁽²⁾
79,905
49,178
34,079
12,681
—
—
175,843
Substandard⁽³⁾
90,748
36,619
21,932
7,198
—
—
156,497
Total on-balance sheet $ 2,592,330
$ 1,057,872
$ 747,527
$ 340,328
$ 11,581
$ 4,620
$ 4,754,258
Off-Balance Sheet:
Acceptable $ 1,069,784
$ 462,735
$ 552,051
$ 159,738
$ 68,979
$ 2,364
$ 2,315,651
Special mention⁽²⁾
77,264
23,893
33,223
857
—
—
135,237
Substandard⁽³⁾
46,368
8,072
27,480
3,630
—
656
86,206
Total off-balance sheet $ 1,193,416
$ 494,700
$ 612,754
$ 164,225
$ 68,979
$ 3,020
$ 2,537,094
Total Ending Balance:
Acceptable $ 3,491,461
$ 1,434,810
$ 1,243,567
$ 480,187
$ 80,560
$ 6,984
$ 6,737,569
Special mention⁽²⁾
157,169
73,071
67,302
13,538
—
—
311,080
Substandard⁽³⁾
137,116
44,691
49,412
10,828
—
656
242,703
Total $ 3,785,746
$ 1,552,572
$ 1,360,281
$ 504,553
$ 80,560
$ 7,640
$ 7,291,352

Commodity analysis of past due loans⁽¹⁾

On-balance sheet $ 10,677
$ 3,375
$ 4,854
$ 1,906
$ —
$ —
$ 20,812
Off-balance sheet 4,706
911
1,128
488
—
—
7,233
90 days or more past due $ 15,383
$ 4,286
$ 5,982
$ 2,394
$ —
$ —
$ 28,045


⁽¹⁾	~~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.~~


⁽²⁾	~~Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.~~


⁽³⁾	~~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 March 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Utilities:
Internally Assigned Risk Rating:
Acceptable	$	152,385	$	836,763	$	8,337	$	92,568	$	31,829	$	662,830	$	—	$	1,784,712
Special mention⁽¹⁾	—		—		—		—		—		—		—		—
Substandard⁽²⁾	—		—		—		—		—		5,014		—		5,014
Total	$	152,385	$	836,763	$	8,337	$	92,568	$	31,829	$	667,844	$	—	$	1,789,726

Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

⁽¹⁾Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

⁽²⁾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, 2018
Crops Permanent
Plantings Livestock Part-time
Farm Ag. Storage and
Processing Other Total
(in thousands)
Credit risk profile by internally assigned grade⁽¹⁾

On-balance sheet:
Acceptable $ 2,381,853
$ 937,793
$ 679,253
$ 321,345
$ 10,604
$ 4,477
$ 4,335,325
Special mention⁽²⁾
71,096
14,926
26,499
7,725
1,493
—
121,739
Substandard⁽³⁾
66,286
36,333
21,361
7,278
—
—
131,258
Total on-balance sheet $ 2,519,235
$ 989,052
$ 727,113
$ 336,348
$ 12,097
$ 4,477
$ 4,588,322
Off-Balance Sheet
Acceptable $ 1,128,787
$ 469,479
$ 577,708
$ 162,730
$ 71,959
$ 2,656
$ 2,413,319
Special mention⁽²⁾
62,430
36,778
30,703
1,023
—
—
130,934
Substandard⁽³⁾
61,175
14,512
19,848
4,037
1,125
699
101,396
Total off-balance sheet $ 1,252,392
$ 520,769
$ 628,259
$ 167,790
$ 73,084
$ 3,355
$ 2,645,649
Total Ending Balance:
Acceptable $ 3,510,640
$ 1,407,272
$ 1,256,961
$ 484,075
$ 82,563
$ 7,133
$ 6,748,644
Special mention⁽²⁾
133,526
51,704
57,202
8,748
1,493
—
252,673
Substandard⁽³⁾
127,461
50,845
41,209
11,315
1,125
699
232,654
Total $ 3,771,627
$ 1,509,821
$ 1,355,372
$ 504,138
$ 85,181
$ 7,832
$ 7,233,971

Commodity analysis of past due loans⁽¹⁾

On-balance sheet $ 8,345
$ 2,997
$ 4,059
$ 4,176
$ —
$ —
$ 19,577
Off-balance sheet 6,476
197
—
631
—
—
7,304
90 days or more past due $ 14,821
$ 3,194
$ 4,059
$ 4,807
$ —
$ —
$ 26,881


⁽¹⁾	~~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.~~


⁽²⁾	~~Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.~~


⁽³⁾	~~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.~~

~~Concentrations of Credit Risk~~

The following table ~~sets forth the geographic and commodity/collateral diversification, the range of original loan-to-value ratios, and the range in the size of borrower exposure for all~~presents credit quality indicators related to Farm & Ranch loans held ~~and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs~~ as of ~~June 30, 2019 and~~ December 31, ~~2018:~~

2019:

Table ~~5.9~~5.10


	As of December 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Internally Assigned Risk Rating⁽¹⁾
Acceptable	$	2,556,956	$	1,050,160	$	825,234	$	343,329	$	10,360	$	4,597	$	4,790,636
Special mention⁽²⁾	107,406		111,739		46,107		13,591		—		—		278,843
Substandard⁽³⁾	108,815		51,257		39,962		7,044		—		—		207,078
Total	$	2,773,177	$	1,213,156	$	911,303	$	363,964	$	10,360	$	4,597	$	5,276,557

Commodity analysis of past due loans⁽¹⁾	$	21,167	$	15,828	$	19,354	$	1,370	$	—	$	—	$	57,719

As of
June 30, 2019 December 31, 2018
(in thousands)
By commodity/collateral type:
Crops $ 3,785,746
$ 3,771,627
Permanent plantings 1,552,572
1,509,821
Livestock 1,360,281
1,355,372
Part-time farm 504,553
504,138
Ag. Storage and Processing 80,560
85,181
Other 7,640
7,832
Total $ 7,291,352
$ 7,233,971
By geographic region⁽¹⁾:

Northwest $ 847,475
$ 855,596
Southwest 2,337,303
2,273,184
Mid-North 2,304,637
2,296,073
Mid-South 891,870
883,279
Northeast 340,290
332,370
Southeast 569,777
593,469
Total $ 7,291,352
$ 7,233,971
By original loan-to-value ratio:

0.00% to 40.00% $ 1,298,487
$ 1,333,790
40.01% to 50.00% 1,856,262
1,811,166
50.01% to 60.00% 2,556,271
2,530,484
60.01% to 70.00% 1,268,048
1,244,823
70.01% to 80.00%⁽²⁾
292,080
289,427
80.01% to 90.00%⁽²⁾
20,204
24,281
Total $ 7,291,352
$ 7,233,971
By size of borrower exposure⁽³⁾:

Less than $1,000,000 $ 2,438,984
$ 2,431,296
$1,000,000 to $4,999,999 2,766,582
2,755,996
$5,000,000 to $9,999,999 927,153
916,422
$10,000,000 to $24,999,999 612,040
601,349
$25,000,000 and greater 546,593
528,908
Total $ 7,291,352
$ 7,233,971


⁽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).


⁽²⁾	~~Primarily part-time farm loans. Loans with original loan-to-value ratios of greater than 80% are required to have private mortgage insurance.~~


⁽³⁾	~~Includes multiple loans to the same borrower or borrower-related entities.~~

~~The original loan-to-value ratio is calculated by dividing the loan~~⁽¹⁾Amounts represent unpaid principal balance atof risk-rated loans, which is the ~~time~~basis Farmer Mac uses to analyze its portfolio, and recorded investment of ~~guarantee, purchase,~~past due loans.

⁽²⁾Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

⁽³⁾Substandard assets have a well-defined weakness or ~~commitment by the appraised value at the date of loan origination or, when~~weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

~~available, the updated appraised value at the time of guarantee, purchase, or commitment. Current loan-to-value ratios may be higher or lower than the original loan-to-value ratios.~~

6.GUARANTEES ~~AND LONG-TERM STANDBY PURCHASE COMMITMENTS~~

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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

Table 6.1


Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities
	As of March 31, 2020		As of December 31, 2019
	(in thousands)
Farm & Ranch:
Farmer Mac Guaranteed Securities	$	97,302	$	107,322
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities	370,903		389,216
Institutional Credit:
AgVantage Securities	7,567		7,567
Total off-balance sheet Farmer Mac Guaranteed Securities	$	475,772	$	504,105

Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities
As of June 30, 2019 As of December 31, 2018
(in thousands)
Farm & Ranch:
Guaranteed Securities $ 121,064
$ 135,862
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities 398,710
367,684
Institutional Credit:

AgVantage Securities 9,225
9,898
Revolving floating rate AgVantage facility⁽¹⁾
300,000
300,000
Total off-balance sheet Farmer Mac Guaranteed Securities $ 828,999
$ 813,444


⁽¹⁾	~~Relates to a revolving floating rate AgVantage facility subject to specified contractual terms. Farmer Mac receives a fixed fee based on the full dollar amount of the facility.~~

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 6.2


	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands)
Proceeds from new securitizations	$	28,050	$	116,708
Guarantee fees received	466		442

For the Six Months Ended
June 30, 2019 June 30, 2018
(in thousands)
Proceeds from new securitizations $ 166,351
$ 196,290
Guarantee fees received 861
1,063

Farmer Mac ~~has recorded~~presents a liability for its obligation to stand ready under ~~the~~its guarantee in ~~the guarantee~~"Guarantee and commitment ~~obligation~~obligation" on the consolidated balance sheets. ~~This~~The following table presents the liability ~~approximated $2.5 million~~ and ~~$2.8 million as of June 30, 2019 and December 31, 2018, respectively. As of June 30, 2019 and December 31, 2018,~~ the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed Securities, excluding AgVantage securities, was 10.1 years and 10.3 years, respectively. As of June 30, 2019 and December 31, 2018, the weighted-average remaining maturity of the off-balance sheet AgVantage securities was 2.6 years and 5.0 years, respectively.Securities:

Table 6.3

As of March 31, 2020

As of December 31, 2019

(dollars in thousands)

Guarantee and commitment obligation

2,080

2,230

Weighted average remaining maturity:

Farmer Mac Guaranteed Securities

9.7 years

9.8 years

AgVantage Securities

4.7 years

5.0 years

4235

Long-Term Standby Purchase Commitments

~~A LTSPC is a commitment by~~ Farmer Mac has recorded a liability for its obligation to ~~purchase eligible loans from an identified pool of loans~~stand ready under ~~specified circumstances set forth~~the guarantee in the ~~applicable agreement, either for cash or in exchange for Farmer Mac Guaranteed Securities,~~guarantee and commitment obligation on ~~one or more undetermined future dates. As consideration for its assumption of~~ the ~~credit risk on loans underlying an LTSPC, Farmer Mac receives a commitment fee payable monthly in arrears.~~

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, ~~was $3.0 billion and $3.2 billion~~ as ~~of June 30, 2019 and December 31, 2018, respectively.~~

~~As of both June 30, 2019 and December 31, 2018,~~well as the weighted-average remaining maturity of all loans underlying ~~LTSPCs was 15.3 years. For those~~LTSPCs:

Table 6.4


	As of March 31, 2020		As of December 31, 2019
	(dollars in thousands)
Guarantee and commitment obligation⁽¹⁾	$	33,859	$	34,470
Maximum principal amount	2,951,595		3,002,349
Weighted-average remaining maturity	15.2 years		15.2 years

⁽¹⁾Relates to LTSPCs issued or modified on or after January 1, ~~2003, Farmer Mac has recorded~~2003.

Reserve for Losses

The following table is a ~~liability~~summary, by asset type, of the reserve for ~~its obligation to stand ready under the commitment in the guarantee and commitment obligation on the consolidated balance sheets. This liability approximated $34.7 million and $35.9 million~~losses as of~~June 30, 2019~~ March 31, 2020 and December 31, ~~2018, respectively.~~2019:

Table 6.5


	March 31, 2020⁽¹⁾		December 31, 2019⁽²⁾
	Reserve for Losses		Reserve for Losses
	(in thousands)
Farm & Ranch:
LTSPCs and Farmer Mac Guaranteed Securities	$	2,020	$	2,164
Rural Utilities
LTSPCs	1,400		—
Total	$	3,420	$	2,164

⁽¹⁾Reserve for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

⁽²⁾Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020, Farmer Mac maintained a reserve for losses to cover estimated probable incurred losses on loans underlying LTSPCs and off-balance sheet Farm & Ranch Farmer Mac Guaranteed Securities.

The following is a summary of the changes in the reserve for losses for the three month period ended March 31, 2020 and 2019:

Table 6.6


	For the Three Months Ended
	March 31, 2020⁽¹⁾		March 31, 2019⁽²⁾
	Reserve for Losses		Reserve for Losses
	(in thousands)
Farm & Ranch:
Balance as of December 31,	$	2,164	$	2,167
Cumulative effect adjustment from adoption of current expected credit loss standard	(148)		—
Balance as of January 1,	2,016		2,167
Provision for/(release of) losses	$	4	$	(129)

Charge-offs	—		—
Ending Balance	$	2,020	$	2,038

Rural Utilities:
Balance as of December 31,	$	—	$	—
Cumulative effect adjustment from adoption of current expected credit loss standard	1,011		—
Balance as of January 1,	1,011		—
Provision for/(release of) losses	$	389	$	—

Charge-offs	—		—
Ending Balance	$	1,400	$	—

⁽¹⁾Reserve for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

The provision to the reserve for losses recorded during first quarter 2020 was primarily due to the impact of updated economic factor forecasts, particularly higher credit spreads and expected higher unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility.

The following table presents the unpaid principal balances by delinquency status of Farm & Ranch loans underlying LTSPCs. Farm & Ranch Farmer Mac Guaranteed Securities, Rural Utilities loans underlying LTSPCs, and non-performing assets as of March 31, 2020:

Table 6.7


	As of March 31, 2020
	Current		30-59 Days		60-89 Days		90 Days and Greater⁽¹⁾		Total Past Due		Total Loans
	(in thousands)
Farm and Ranch:
LTSPCs and Farmer Mac Guaranteed Securities	$	2,434,531	$	6,183	$	7,893	$	4,605	$	18,681	$	2,453,212
Rural Utilities:
LTSPCs	$	595,685	$	—	$	—	$	—	$	—	$	595,685

⁽¹⁾Includes loans underlying off-balance sheet Farm & Ranch 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.

The following tables present the unpaid principal balances of Farm & Ranch loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and the related reserve for losses by impairment method and commodity type as of December 31, 2019:

Table 6.8


	As of December 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Ending Balance:
Collectively evaluated for impairment:	$	1,151,983	$	511,991	$	581,377	$	167,395	$	66,106	$	2,760	$	2,481,612
Individually evaluated for impairment:	5,698		2,114		10,207		706		—		56		18,781
Total Farm & Ranch	$	1,157,681	$	514,105	$	591,584	$	168,101	$	66,106	$	2,816	$	2,500,393
Allowance for Losses:
Collectively evaluated for impairment:	$	599	$	96	$	308	$	50	$	767	$	1	$	1,821
Individually evaluated for impairment:	97		43		189		14		—		—		343
Total Farm & Ranch	$	696	$	139	$	497	$	64	$	767	$	1	$	2,164

Net credit losses and 90-day delinquencies as of and for the periods indicated for loans underlying off-balance sheet securities representing interests in pools of eligible Farm & Ranch LTSPCs are presented in the table below. As of December 31, 2019, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities LTSPCs portfolio and Farmer Mac had not experienced credit losses on any Rural Utilities LTSPCs.

Table 6.9

90-Day Delinquencies⁽¹⁾

Net Credit Losses/(Recoveries)

As of

For the Three Months Ended

December 31, 2019

March 31, 2019

(in thousands)

Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities

3,235

—

⁽¹⁾Includes loans underlying off-balance sheet Farm & Ranch 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.

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans underlying LTSPCs, Farm & Ranch Farmer Mac Guaranteed Securities, and Rural Utilities loans underlying LTSPCs as of March 31, 2020, by year of origination:

Table 6.10


	As of March 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities:
Internally Assigned Risk Rating:
Acceptable	$	31,243	$	219,342	$	183,228	$	249,022	$	225,466	$	1,132,870	$	173,082	$	2,214,253
Special mention⁽¹⁾	—		3,600		7,843		29,982		17,482		68,709		10,379		137,995
Substandard⁽²⁾	—		—		3,393		16,435		16,282		60,133		4,721		100,964
Total	$	31,243	$	222,942	$	194,464	$	295,439	$	259,230	$	1,261,712	$	188,182	$	2,453,212

Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

⁽¹⁾Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

⁽²⁾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 March 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Utilities LTSPCs:
Internally Assigned Risk Rating:
Acceptable	$	—	$	—	$	—	$	—	$	—	$	595,685	$	—	$	595,685
Special mention⁽¹⁾	—		—		—		—		—		—		—		—
Substandard⁽²⁾	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	595,685	$	—	$	595,685

Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

⁽¹⁾Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

⁽²⁾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.

The following table presents credit quality indicators related to Farm & Ranch loans underlying LTSPCs and off-balance sheet Farm & Ranch Farmer Mac Guaranteed Securities as of December 31, 2019:

Table 6.11


	As of December 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Internally Assigned Risk Rating⁽¹⁾
Acceptable	$	1,033,002	$	484,601	$	521,341	$	161,361	$	66,106	$	2,594	$	2,269,005
Special mention⁽²⁾	68,372		22,909		35,618		1,612		—		—		128,511
Substandard⁽³⁾	56,307		6,595		34,625		5,128		—		222		102,877
Total	$	1,157,681	$	514,105	$	591,584	$	168,101	$	66,106	$	2,816	$	2,500,393

Commodity analysis of past due loans⁽¹⁾	$	1,493	$	196	$	1,066	$	480	$	—	$	—	$	3,235

⁽¹⁾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.

⁽²⁾Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

⁽³⁾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.

7.~~EQUITY~~NOTES PAYABLE

~~Preferred Stock~~

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 1.0 year or less, whereas medium-term notes generally have maturities of 0.5 years to 15.0 years.

On May 13, 2019, Farmer Mac issued 4.0 million shares of 5.700% Non-Cumulative Preferred Stock, Series D ("Series D Preferred Stock"), which has a par value and liquidation preference of $25.00 per share, or $100.0 million aggregate outstanding. Farmer Mac incurred direct costs of $3.3 million

The following tables set forth information related to Farmer Mac's borrowings as of March 31, 2020 and December 31, 2019:

Table 7.1


	March 31, 2020
	Outstanding as of March 31						Average Outstanding During the Quarter
	Amount		Weighted- Average Rate		Amount		Weighted- Average Rate
	(dollars in thousands)
Due within one year:
Discount notes	$	2,598,091	0.82	%	$	2,043,407	1.52	%
Medium-term notes	1,203,723		1.18	%	971,050		1.79	%
Current portion of medium-term notes	7,346,370		1.39	%
Total due within one year	$	11,148,184	1.24	%
Due after one year:
Medium-term notes due in:
Two years	$	3,381,965	1.64	%
Three years	1,588,751		1.90	%
Four years	1,311,362		2.13	%
Five years	1,027,532		1.95	%
Thereafter	2,207,226		2.57	%
Total due after one year	9,516,836		2.00	%
Total	$	20,665,020	1.59	%


	December 31, 2019
	Outstanding as of December 31						Average Outstanding During the Year
	Amount		Weighted- Average Rate		Amount		Weighted- Average Rate
	(dollars in thousands)
Due within one year:
Discount notes	$	2,194,177	1.72	%	$	1,977,214	2.25	%
Medium-term notes	1,152,770		1.98	%	1,780,517		2.33	%
Current portion of medium-term notes	6,672,135		1.85	%
Total due within one year	$	10,019,082	1.84	%
Due after one year:
Medium-term notes due in:
Two years	$	3,700,835	2.04	%
Three years	1,594,709		2.15	%
Four years	1,205,276		2.27	%
Five years	760,887		2.25	%
Thereafter	1,817,859		2.89	%
Total due after one year	9,079,566		2.28	%
Total	$	19,098,648	2.05	%

During the ~~issuance~~three months ended March 31, 2020, the Company increased its use of short-term funding in order to fund the ~~Series D Preferred Stock.~~growth of short-term assets in its liquidity portfolio. The ~~dividend rate on the Series D Preferred Stock is a fixed rate of 5.700% per year for the life of the security.~~ D~~ividends on the Series D Preferred Stock are payable when, as, and if declared by the Board of Directors~~maximum amount of Farmer ~~Mac~~Mac's discount notes outstanding at any month end during the three months ended March 31, 2020 and ~~are non-cumulative, so dividends that are not declared for a quarterly payment date will not accrue. The Series D Preferred Stock has no maturity date, but~~2019 was $2.6 billion and $1.9 billion, respectively.

Callable medium-term notes give Farmer Mac ~~has~~ the option to redeem the ~~preferred stock~~debt at par value on a specified call date or at any ~~quarterly dividend payment~~time on or after a specified call date. The following table summarizes by maturity date onthe amounts and ~~after July 17, 2024.~~costs for Farmer Mac debt callable in 2020 as of March 31, 2020:

Table 7.2

~~On June 12,~~


Debt Callable in 2020 as of March 31, 2020, by Maturity
	Amount		Weighted-Average Rate
	(dollars in thousands)
Maturity:
2021	$	731,715	1.56	%
2022	209,852		1.80	%
2023	49,959		1.34	%
2024	206,716		2.12	%
Thereafter	397,740		2.59	%
Total	$	1,595,982	1.91	%

The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total borrowings outstanding as of March 31, 2020, including callable and non-callable medium-term notes, assuming callable notes are redeemed at the initial call date:

Table 7.3


	Earliest Interest Rate Reset Date, or Debt Maturities, of Borrowings Outstanding
	Amount		Weighted-Average Rate
	(dollars in thousands)
Debt with interest rate resets, or debt maturities in:
2020	$	11,565,193	1.13	%
2021	3,038,940		1.97	%
2022	1,483,282		2.02	%
2023	1,489,184		2.10	%
2024	945,152		2.04	%
Thereafter	2,143,269		2.67	%
Total	$	20,665,020	1.59	%

During the three months ended March 31, 2020 and 2019, Farmer Mac called $762.4 million and $47.1 million of callable medium-term notes, respectively. The decrease in market interest rates throughout 2019 and continuing into the first quarter 2020 led to an increase in called medium-term notes compared to the prior year.

Authority to Borrow from the U.S. Treasury

Farmer Mac's statutory charter authorizes it 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 ~~part~~solely for the purpose of fulfilling 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 ~~net proceeds from the sale~~United States as of the Series D Preferred Stock to redeem and repurchase all $75.0 million aggregate outstanding of Farmer Mac's 6.875% Non-Cumulative Preferred Stock, Series B ("Series B Preferred Stock"), plus any declared and unpaid dividends through and including the redemption date. As a resultlast day of the ~~retirement~~last calendar month ending before the date of the ~~Series B Preferred Stock,~~purchase of the obligations from Farmer

Mac. The charter requires Farmer Mac ~~recognized $2.0 million~~to repurchase any of ~~deferred issuance costs, which is presented as "Loss~~its debt obligations held by the U.S. Treasury within a reasonable time. As of March 31, 2020, Farmer Mac had not used this borrowing authority and does not expect to use this borrowing authority in the future.

Gains on ~~retirement~~Repurchase of ~~preferred stock" on~~Outstanding Debt

NaN outstanding debt repurchases were made in the ~~consolidated statements of operations.~~three months ended March 31, 2020 or 2019.

8.EQUITY

Common Stock

During first quarter 2020, Farmer Mac paid a quarterly dividend of $0.80 per share on all classes of its common stock. For ~~the first and second~~each quarter in 2019, Farmer Mac paid a quarterly dividend of $0.70 per share on all classes of its common stock. ~~For each quarter in 2018, Farmer Mac paid a quarterly dividend of $0.58 per share on all classes of its common stock.~~

Farmer Mac's ~~Board~~board of ~~Directors~~directors approved a share repurchase program during third quarter 2015 authorizing Farmer Mac to repurchase up to $25.0 million of its outstanding Class C non-voting common ~~stock for two years. In August 2017, Farmer Mac's Board of Directors approved the continuation of the~~

stock. The share repurchase program, last modified on its existing terms through August 2019 for the repurchase of up to $5.4 million of Farmer Mac's outstanding Class C non-voting common stock. This is the amount that was remaining under the share repurchase program that Farmer Mac's Board of Directors originally authorized in third quarter 2015 for the repurchase of up to $25.0 million of outstanding Class C non-voting common stock.

On March 14, 2019, authorized Farmer ~~Mac's Board of Directors modified the terms of the existing share~~Mac to repurchase ~~program by increasing the authorization for the repurchase to~~ up to $10.0 million of Farmer Mac's outstanding Class C non-voting common ~~stock and extending the term of the program through March 2021.~~stock. During first quarter 2020, Farmer Mac ~~did not repurchase any shares during the first half of 2019 under this program. As of June 30, 2019, Farmer Mac had~~ repurchased approximately ~~668,000~~4,000 shares of Class C non-voting common stock at a cost of approximately ~~$19.6~~$0.2 million. Shortly after these repurchases were completed, Farmer Mac indefinitely suspended its share repurchase program in an effort to preserve capital and liquidity in view of market volatility and uncertainty caused by the COVID-19 pandemic. As of March 31, 2020, 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 ~~and has not repurchased any shares~~ since ~~first quarter 2016.~~2015. The program expires at the end of March 2021.

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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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 ~~June 30, 2019,~~March 31, 2020, Farmer Mac's minimum capital requirement was ~~$595.0~~$649.3 million and its core capital level was ~~$786.6~~$815.1 million, which was ~~$191.6~~$165.8 million above the minimum capital requirement as of that date. As of December 31, ~~2018,~~2019, Farmer Mac's minimum capital requirement was ~~$545.0~~$618.8 million and its core capital level was ~~$727.6~~$815.4 million, which was ~~$182.6~~$196.6 million above the minimum capital requirement as of that date.

In accordance with ~~FCA's~~the Farm Credit Administration's rule 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.

8. 43

9.FAIR VALUE DISCLOSURES

~~As of June 30, 2019,~~Fair Value Classification and Transfers

The following tables present information about Farmer Mac's assets and liabilities ~~recorded~~measured at fair value ~~included financial instruments valued at $7.1 billion whose~~on a recurring basis as of March 31, 2020 and December 31, 2019, respectively, and indicate the fair ~~values were estimated~~value hierarchy of the valuation techniques used by ~~management in the absence~~Farmer Mac to determine such fair value:

Table 9.1


Assets and Liabilities Measured at Fair Value as of March 31, 2020
	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	$	—	$	—	$	16,721	$	16,721
Floating rate asset-backed securities	—		10,503		—		10,503

Floating rate Government/GSE guaranteed mortgage-backed securities	—		1,777,999		—		1,777,999
Fixed rate GSE guaranteed mortgage-backed securities	—		335		—		335

Fixed rate U.S. Treasuries	1,155,599		—		—		1,155,599
Total Investment Securities	1,155,599		1,788,837		16,721		2,961,157
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		7,587,186		7,587,186
Total Farmer Mac Guaranteed Securities	—		—		7,587,186		7,587,186
USDA Securities:
Trading	—		—		8,408		8,408
Total USDA Securities	—		—		8,408		8,408
Financial derivatives	—		12,692		—		12,692
Total Assets at fair value	$	1,155,599	$	1,801,529	$	7,612,315	$	10,569,443
Liabilities:
Financial derivatives	$	114	$	53,681	$	—	$	53,795
Total Liabilities at fair value	$	114	$	53,681	$	—	$	53,795

⁽¹⁾Level 3 assets represent 33% of ~~readily determinable fair values (i.e., level 3). These~~total assets and 72% of financial instruments measured as at fair value.


Assets and Liabilities Measured at Fair Value as of December 31, 2019
	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	$	—	$	—	$	18,912	$	18,912
Floating rate asset-backed securities	—		11,085		—		11,085
Floating rate Government/GSE guaranteed mortgage-backed securities	—		1,632,583		—		1,632,583
Fixed rate GSE guaranteed mortgage-backed securities	—		340		—		340
Fixed rate U.S. Treasuries	1,296,923		—		—		1,296,923
Total available-for-sale	1,296,923		1,644,008		18,912		2,959,843
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		7,143,025		7,143,025
Total Farmer Mac Guaranteed Securities	—		—		7,143,025		7,143,025
USDA Securities:
Trading	—		—		8,913		8,913
Total USDA Securities	—		—		8,913		8,913
Financial derivatives	—		10,519		—		10,519
Total Assets at fair value	$	1,296,923	$	1,654,527	$	7,170,850	$	10,122,300
Liabilities:
Financial derivatives	$	51	$	26,991	$	—	$	27,042
Total Liabilities at fair value	$	51	$	26,991	$	—	$	27,042

⁽¹⁾Level 3 ~~represented 34%~~assets represent 33% of total assets and 71% of financial instruments measured at fair ~~value as of June 30, 2019. As of December 31, 2018, Farmer Mac's~~value.

There were no significant assets ~~and~~or liabilities recorded at fair value included financial instruments valued at $6.0 billion whose fair values were estimated by management in the absence of readily determinable fair values. These financial instruments measured as level 3 represented 32% of total assets and 73% of financial instruments measured at fair value on a non-recurring basis as of March 31, 2020 or December 31, ~~2018.~~2019.

Transfers in and/or out of the different levels within the fair value hierarchy are based on the fair values of the assets and liabilities as of the beginning of the reporting period. During the ~~first half of both~~three months ended March 31, 2020 and 2019, ~~and 2018,~~ there were no transfers within the fair value hierarchy for fair value measurements of Farmer Mac's investment securities, Farmer Mac Guaranteed Securities, USDA Securities, and financial derivatives.

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

~~Table 8.1~~

Assets and Liabilities Measured at Fair Value as of June 30, 2019
Level 1 Level 2 Level 3 Total
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ —
$ —
$ 19,208
$ 19,208
Floating rate asset-backed securities —
25,802
—
25,802
Floating rate Government/GSE guaranteed mortgage-backed securities —
1,603,370
—
1,603,370
Fixed rate GSE guaranteed mortgage-backed securities —
358
—
358
Fixed rate U.S. Treasuries 1,273,766
—
—
1,273,766
Total Investment Securities 1,273,766
1,629,530
19,208
2,922,504
Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage —
—
7,035,668
7,035,668
Total Farmer Mac Guaranteed Securities —
—
7,035,668
7,035,668
USDA Securities:

Trading —
—
9,201
9,201
Total USDA Securities —
—
9,201
9,201
Financial derivatives —
7,560
—
7,560
Total Assets at fair value $ 1,273,766
$ 1,637,090
$ 7,064,077
$ 9,974,933
Liabilities:

Financial derivatives $ 188
$ 27,241
$ —
$ 27,429
Total Liabilities at fair value $ 188
$ 27,241
$ —
$ 27,429

Assets and Liabilities Measured at Fair Value as of December 31, 2018
Level 1 Level 2 Level 3 Total
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ —
$ —
$ 18,715
$ 18,715
Floating rate asset-backed securities —
28,678
—
28,678
Floating rate Government/GSE guaranteed mortgage-backed securities —
1,377,454
—
1,377,454
Fixed rate GSE guaranteed mortgage-backed securities —
403
—
403
Fixed rate U.S. Treasuries 792,602
—
—
792,602
Total available-for-sale 792,602
1,406,535
18,715
2,217,852
Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage —
—
5,974,497
5,974,497
Total Farmer Mac Guaranteed Securities —
—
5,974,497
5,974,497
USDA Securities:

Trading —
—
9,999
9,999
Total USDA Securities —
—
9,999
9,999
Financial derivatives —
7,487
—
7,487
Total Assets at fair value $ 792,602
$ 1,414,022
$ 6,003,211
$ 8,209,835
Liabilities:

Financial derivatives $ 188
$ 19,445
$ —
$ 19,633
Total Liabilities at fair value $ 188
$ 19,445
$ —
$ 19,633

~~There were no significant assets or liabilities measured at fair value on a non-recurring basis as of June 30, 2019 or December 31, 2018.~~

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 three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

Table ~~8.2~~9.2


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended March 31, 2020
	Beginning Balance		Purchases		Sales		Settlements		Allowance for Losses		Realized and Unrealized Gains 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	$	18,912	$	—	$	—	$	—	$	(24)	$	—	$	(2,167)	$	16,721
Total available-for-sale	18,912		—		—		—		(24)		—		(2,167)		16,721
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	7,143,025		483,580		—		(227,255)		(166)		290,380		(102,378)		7,587,186
Total available-for-sale	7,143,025		483,580		—		(227,255)		(166)		290,380		(102,378)		7,587,186
USDA Securities:

Trading	8,913		—		—		(611)		—		106		—		8,408
Total USDA Securities	8,913		—		—		(611)				106		—		8,408
Total Assets at fair value	$	7,170,850	$	483,580	$	—	$	(227,866)	$	(190)	$	290,486	$	(104,545)	$	7,612,315


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended March 31, 2019
	Beginning Balance		Purchases		Sales		Settlements		Realized and Unrealized Gains included in Income		Unrealized Gains included in Other Comprehensive Income		Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	18,715	$	—	$	—	$	—	$	—	$	197	$	18,912
Total available-for-sale	18,715		—		—		—		—		197		18,912
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	5,974,497		776,332		—		(371,733)		59,352		3,176		6,441,624
Total available-for-sale	5,974,497		776,332		—		(371,733)		59,352		3,176		6,441,624
USDA Securities:
Available-for-sale	—		18,928		(18,928)		—		—		—		—
Trading	9,999		—		—		(556)		44		—		9,487
Total USDA Securities	9,999		18,928		(18,928)		(556)		44		—		9,487
Total Assets at fair value	$	6,003,211	$	795,260	$	(18,928)	$	(372,289)	$	59,396	$	3,373	$	6,470,023

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2019
Beginning
Balance Purchases Sales Settlements Realized and
Unrealized Gains included
in Income Unrealized Gains/(Losses)
included in Other
Comprehensive
Income Ending
Balance
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ 18,912
$ —
$ —
$ —
$ —
$ 296
$ 19,208
Total available-for-sale 18,912
—
—
—
—
296
19,208
Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage 6,441,624
613,764
—
(98,579 ) 114,638
(35,779 ) 7,035,668
Total available-for-sale 6,441,624
613,764
—
(98,579 ) 114,638
(35,779 ) 7,035,668
USDA Securities:

Available-for-sale —
29,419
(29,419 ) —
—
—
—
Trading 9,487
—
—
(347 ) 61
—
9,201
Total USDA Securities 9,487
29,419
(29,419 ) (347 ) 61
—
9,201
Total Assets at fair value $ 6,470,023
$ 643,183
$ (29,419 ) $ (98,926 ) $ 114,699
$ (35,483 ) $ 7,064,077

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2018
Beginning
Balance Purchases Sales Settlements Realized and
Unrealized (Losses)/Gains included
in Income Unrealized Gains included in Other
Comprehensive
Income Ending
Balance
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,010
$ —
$ —
$ —
$ —
$ —
$ 19,010
Fixed rate GSE guaranteed mortgage-backed securities 4,120
—
—
(2,028 ) (2,092 ) —
—
Total available-for-sale 23,130
—
—
(2,028 ) (2,092 ) —
19,010
Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage 5,839,387
303,517
—
(149,193 ) (10,850 ) 2,945
5,985,806
Total available-for-sale 5,839,387
303,517
—
(149,193 ) (10,850 ) 2,945
5,985,806
USDA Securities:

Available-for-sale —
45,014
(45,014 ) —
—
—
—
Trading⁽¹⁾
11,558
—
—
(821 ) 11
—
10,748
Total USDA Securities 11,558
45,014
(45,014 ) (821 ) 11
—
10,748
Total Assets at fair value $ 5,874,075
$ 348,531
$ (45,014 ) $ (152,042 ) $ (12,931 ) $ 2,945
$ 6,015,564


⁽¹⁾	~~Includes unrealized gains of $11,000 attributable to assets still held as of June 30, 2018 that are recorded in "Gains on trading securities."~~

Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2019
Beginning
Balance Purchases Sales Settlements Realized and
Unrealized Gains included
in Income Unrealized Gains/(Losses)
included in Other
Comprehensive
Income Ending
Balance
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ 18,715
$ —
$ —
$ —
$ —
$ 493
$ 19,208
Total available-for-sale 18,715
—
—
—
—
493
19,208
Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage 5,974,497
1,390,096
—
(470,312 ) 173,990
(32,603 ) 7,035,668
Total available-for-sale 5,974,497
1,390,096
—
(470,312 ) 173,990
(32,603 ) 7,035,668
USDA Securities:

Available-for-sale —
48,347
(48,347 ) —
—
—
—
Trading 9,999
—
—
(903 ) 105
—
9,201
Total USDA Securities 9,999
48,347
(48,347 ) (903 ) 105
—
9,201
Total Assets at fair value $ 6,003,211
$ 1,438,443
$ (48,347 ) $ (471,215 ) $ 174,095
$ (32,110 ) $ 7,064,077

Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2018
Beginning
Balance Cumulative Effect from Change in Hedge Accounting Purchases Sales Settlements Realized and
Unrealized (Losses)/Gains included
in Income Unrealized Gains/(Losses) included in Other
Comprehen-sive
Income Ending
Balance
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans $ 18,814
$ —
$ —
$ —
$ —
$ —
$ 196
$ 19,010
Fixed rate GSE guaranteed mortgage-backed securities 4,333
—
—
—
(2,137 ) (2,092 ) (104 ) —
Total available-for-sale 23,147
—
—
—
(2,137 ) (2,092 ) 92
19,010
Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage 5,471,914
487
958,964
—
(439,461 ) (29,798 ) 23,700
5,985,806
Total available-for-sale 5,471,914
487
958,964
—
(439,461 ) (29,798 ) 23,700
5,985,806
USDA Securities:

Available-for-sale —
—
79,307
(79,307 ) —
—
—
—
Trading⁽¹⁾
13,515
—
—
—
(2,794 ) 27
—
10,748
Total USDA Securities 13,515
—
79,307
(79,307 ) (2,794 ) 27
—
10,748
Total Assets at fair value $ 5,508,576
$ 487
$ 1,038,271
$ (79,307 ) $ (444,392 ) $ (31,863 ) $ 23,792
$ 6,015,564


⁽¹⁾	~~Includes unrealized gains of $0.1 million attributable to assets still held as of June 30, 2018 that are recorded in "Gains on trading securities."~~

The following tables present additional information about the significant unobservable inputs, such as discount rates and constant prepayment rates ("CPR"), used in the fair value measurements categorized in ~~level~~Level 3 of the fair value hierarchy as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

~~Table 8.3~~

As of June 30, 2019
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 $ 19,208
Indicative bids Range of broker quotes 97.5% - 97.5% (97.5%)
Farmer Mac Guaranteed Securities:
AgVantage $ 7,035,668
Discounted cash flow Discount rate 2.7% - 4.0% (3.0%)

USDA Securities $ 9,201
Discounted cash flow Discount rate 3.0% - 5.2% (4.9%)
CPR 8% - 20% (19%)

As of December 31, 2018
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 $ 18,715
Indicative bids Range of broker quotes 95.0% - 95.0% (95.0%)

Farmer Mac Guaranteed Securities:
AgVantage $ 5,974,497
Discounted cash flow Discount rate 3.0% - 4.4% (3.3%)

USDA Securities $ 9,999
Discounted cash flow Discount rate 3.2% - 5.2% (4.9%)
CPR 7% - 17% (16%)

Table 9.3

As of March 31, 2020

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

16,721

Indicative bids

Range of broker quotes

85.0% - 85.0% (85.0%)

Farmer Mac Guaranteed Securities:

AgVantage

7,587,186

Discounted cash flow

Discount rate

1.1% - 2.2% (1.4%)

USDA Securities

8,408

Discounted cash flow

Discount rate

1.6% - 2.2% (1.6%)

CPR

13% - 23% (21%)

As of December 31, 2019

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

18,912

Indicative bids

Range of broker quotes

96.0% - 96.0% (96.0%)

Farmer Mac Guaranteed Securities:

AgVantage

7,143,025

Discounted cash flow

Discount rate

2.3% - 5.5% (2.6%)

USDA Securities

8,913

Discounted cash flow

Discount rate

2.3% - 2.6% (2.1%)

CPR

10% - 21% (19%)

The significant unobservable input used in the fair value measurements of AgVantage Farmer Mac Guaranteed Securities is the discount rate commensurate with the risks involved. Typically, significant increases (decreases) in this input in isolation may result in materially lower (higher) fair value measurements. Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease. Prepayment rates are not presented in the table above for AgVantage securities because they generally have fixed maturity dates when the secured general obligations are due and don't prepay.

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

rates. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease and would likely expect a corresponding increase in forecasted prepayment rates.

Disclosures on Fair Value of Financial Instruments

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

~~Table 8.4~~

As of June 30, 2019 As of December 31, 2018
Fair Value Carrying
Amount Fair Value Carrying
Amount
(in thousands)
Financial assets:
Cash and cash equivalents $ 396,602
$ 396,602
$ 425,256
$ 425,256
Investment securities 2,968,265
2,967,536
2,263,446
2,262,884
Farmer Mac Guaranteed Securities 8,627,877
8,614,843
8,061,903
8,071,115
USDA Securities 2,141,866
2,137,579
2,113,946
2,176,173
Loans 6,403,950
6,316,005
5,512,781
5,515,052
Financial derivatives 7,560
7,560
7,487
7,487
Guarantee and commitment fees receivable:
LTSPCs 33,678
35,835
37,461
36,870
Farmer Mac Guaranteed Securities 2,721
2,974
3,424
3,496
Financial liabilities:
Notes payable:
Due within one year 9,937,380
9,939,589
7,744,388
7,757,050
Due after one year 8,360,759
8,247,829
8,473,558
8,486,647
Debt securities of consolidated trusts held by third parties 1,583,839
1,570,862
1,501,754
1,528,957
Financial derivatives 27,429
27,429
19,633
19,633
Guarantee and commitment obligations:
LTSPCs 32,549
34,706
36,471
35,880
Farmer Mac Guaranteed Securities 2,287
2,540
2,731
2,803

Table 9.4


	As of March 31, 2020						As of December 31, 2019
	Fair Value		Carrying Amount		Fair Value		Carrying Amount
	(in thousands)
Financial assets:
Cash and cash equivalents	$	1,231,585	$	1,231,585	$	604,381	$	604,381
Investment securities	3,006,320		3,006,189		3,005,828		3,004,875
Farmer Mac Guaranteed Securities	9,067,242		9,035,069		8,606,451		8,590,476
USDA Securities	2,344,548		2,278,019		2,294,671		2,241,073
Loans	7,553,328		7,315,224		7,317,091		6,981,440
Financial derivatives	12,692		12,692		10,519		10,519
Guarantee and commitment fees receivable	32,420		37,521		36,732		38,442
Financial liabilities:
Notes payable	20,975,163		20,665,020		19,234,079		19,098,648
Debt securities of consolidated trusts held by third parties	1,605,021		1,549,527		1,663,177		1,616,504
Financial derivatives	53,795		53,795		27,042		27,042
Guarantee and commitment obligations	30,838		35,939		34,990		36,700

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

market prices observed for similar agency securities and are also classified as Level 3. Because the cash flows of Farmer Mac's financial instruments may be interest rate path dependent, estimated fair values and projected discount rates for Level 3 financial instruments are derived using a Monte Carlo simulation

model. Different market assumptions and estimation methodologies could significantly affect estimated fair value amounts.


9.	~~BUSINESS SEGMENT REPORTING~~

10.BUSINESS SEGMENT REPORTING

The following tables present core earnings for Farmer Mac's operating segments and a reconciliation to consolidated net income for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~

2019:

Table ~~9.1~~

10.1

Core Earnings by Business Segment
For the Three Months Ended June 30, 2019
Farm & Ranch USDA Guarantees
Rural
Utilities
Institutional Credit Corporate Reconciling
Adjustments Consolidated Net Income
(in thousands)
Net interest income $ 15,797
$ 4,112
$ 3,936
$ 16,385
$ 2,824
$ —
$ 43,054
Less: reconciling adjustments^(1)(2)(3)
(2,462 ) (15 ) 60
986
(268 ) 1,699
—
Net effective spread 13,335
4,097
3,996
17,371
2,556
1,699
—
Guarantee and commitment fees⁽²⁾
4,594
238
358
86
—
(1,873 ) 3,403
Other income/(expense)⁽³⁾
188
—
7
—
582
8,552
9,329
Non-interest income/(loss) 4,782
238
365
86
582
6,679
12,732

Provision for loan losses (578 ) —
—
—
—
—
(578 )

Release of reserve for losses 158
—
—
—
—
—
158
Other non-interest expense (4,587 ) (1,345 ) (816 ) (2,034 ) (3,428 ) —
(12,210 )
Non-interest expense⁽⁴⁾
(4,429 ) (1,345 ) (816 ) (2,034 ) (3,428 ) —
(12,052 )
Core earnings before income taxes 13,110
2,990
3,545
15,423
(290 ) 8,378
⁽⁵⁾
43,156
Income tax (expense)/benefit (2,753 ) (628 ) (744 ) (3,239 ) 13
(1,760 ) (9,111 )
Core earnings before preferred stock dividends and attribution of income to non-controlling interest 10,357
2,362
2,801
12,184
(277 ) 6,618
⁽⁵⁾
34,045
Preferred stock dividends —
—
—
—
(3,785 ) —
(3,785 )
Loss on retirement of preferred stock —
—
—
—
—
(1,956 ) (1,956 )
Segment core earnings/(losses) $ 10,357
$ 2,362
$ 2,801
$ 12,184
$ (4,062 ) $ 4,662
⁽⁵⁾
$ 28,304

Total assets at carrying value $ 4,872,766
$ 2,198,514
$ 1,580,979
$ 8,633,059
$ 3,452,842
$ —
$ 20,738,160
Total on- and off-balance sheet program assets at principal balance $ 7,291,352
$ 2,521,394
$ 2,155,671
$ 8,778,318
$ —
$ —
$ 20,746,735

⁽¹⁾


Core Earnings by Business Segment
For the Three Months Ended March 31, 2020
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Reconciling Adjustments			Consolidated Net Income
	(in thousands)


Net interest income	$	16,365	$	4,541	$	4,747	$	13,804	$	1,855	$	—		$	41,312
Less: reconciling adjustments^(1)(2)(3)	(1,427)		84		173		3,898		123		(2,851)			—
Net effective spread	14,938		4,625		4,920		17,702		1,978		(2,851)			—
Guarantee and commitment fees⁽²⁾	4,317		235		335		9		—		(1,700)			3,196
Other income/(expense)⁽³⁾	1,169		112		7		—		(129)		(9,050)			(7,891)
Non-interest income/(loss)	5,486		347		342		9		(129)		(10,750)			(4,695)

Provision for loan losses	(808)		—		(2,125)		(491)		(14)		—			(3,438)

Provision for reserve for losses	(4)		—		(389)		—		—		—			(393)
Other non-interest expense	(5,997)		(1,818)		(1,604)		(2,363)		(4,433)		—			(16,215)
Non-interest expense⁽⁴⁾	(6,001)		(1,818)		(1,993)		(2,363)		(4,433)		—			(16,608)
Core earnings before income taxes	13,615		3,154		1,144		14,857		(2,598)		(13,601)		⁽⁵⁾	16,571
Income tax (expense)/benefit	(2,859)		(662)		(240)		(3,120)		283		2,857			(3,741)
Core earnings before preferred stock dividends	10,756		2,492		904		11,737		(2,315)		(10,744)		⁽⁵⁾	12,830
Preferred stock dividends	—		—		—		—		(3,431)		—			(3,431)

Segment core earnings/(losses)	$	10,756	$	2,492	$	904	$	11,737	$	(5,746)	$	(10,744)	⁽⁵⁾	$	9,399

Total assets at carrying value	$	5,457,134	$	2,341,698	$	1,964,901	$	9,049,154	$	4,367,223	$	—		$	23,180,110
Total on- and off-balance sheet program assets at principal balance	$	7,811,594	$	2,646,206	$	2,385,411	$	8,696,101	$	—	$	—		$	21,539,312

⁽¹⁾Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

⁽²⁾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.

⁽³⁾Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Losses on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.

⁽⁴⁾Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

⁽⁵⁾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.

~~Excludes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts~~


⁽²⁾	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.


⁽³⁾	Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.


⁽⁴⁾	~~Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.~~


⁽⁵⁾	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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.

5249


Core Earnings by Business Segment
For the Three Months Ended March 31, 2019
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Reconciling Adjustments			Consolidated Net Income
	(in thousands)


Net interest income	$	15,282	$	4,442	$	(274)	$	18,187	$	2,962	$	—		$	40,599
Less: reconciling adjustments^(1)(2)(3)	(2,545)		(478)		3,507		(1,814)		(468)		1,798			—
Net effective spread	12,737		3,964		3,233		16,373		2,494		1,798			—
Guarantee and commitment fees⁽²⁾	4,744		224		363		88		—		(1,906)			3,513
Other income/(expense)⁽³⁾	480		—		7		—		22		(332)			177
Non-interest income/(loss)	5,224		224		370		88		22		(2,238)			3,690

Release of losses	264		—		—		—		—		—			264

Release of reserve for losses	129		—		—		—		—		—			129
Other non-interest expense	(4,799)		(1,428)		(866)		(2,159)		(3,638)		—			(12,890)
Non-interest expense⁽⁴⁾	(4,670)		(1,428)		(866)		(2,159)		(3,638)		—			(12,761)
Core earnings before income taxes	13,555		2,760		2,737		14,302		(1,122)		(440)		⁽⁵⁾	31,792
Income tax (expense)/benefit	(2,847)		(580)		(575)		(3,003)		290		93			(6,622)
Core earnings before preferred stock dividends	10,708		2,180		2,162		11,299		(832)		(347)		⁽⁵⁾	25,170
Preferred stock dividends	—		—		—		—		(3,296)		—			(3,296)
Segment core earnings/(losses)	$	10,708	$	2,180	$	2,162	$	11,299	$	(4,128)	$	(347)	⁽⁵⁾	$	21,874

Total assets at carrying value	$	4,698,250	$	2,191,896	$	1,443,393	$	8,502,084	$	2,962,154	$	—		$	19,797,777
Total on- and off-balance sheet program assets at principal balance	$	7,215,585	$	2,484,779	$	2,074,714	$	8,731,835	$	—	$	—		$	20,506,913

⁽¹⁾Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

⁽⁴⁾Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

Core Earnings by Business Segment
For the Three Months Ended June 30, 2018
Farm & Ranch USDA Guarantees Rural
Utilities Institutional Credit Corporate
Reconciling
Adjustments
Consolidated Net Income
(in thousands)
Net interest income $ 15,889
$ 5,072
$ 3,313
$ 18,805
$ 854
$ —
$ 43,933
Less: reconciling adjustments^(1)(2)(3)
(2,542 ) (674 ) (390 ) (3,585 ) (580 ) 7,771
—
Net effective spread 13,347
4,398
2,923
15,220
274
7,771
—
Guarantee and commitment fees⁽²⁾
4,488
190
402
91
—
(1,690 ) 3,481
Other income/(expense)⁽³⁾
341
8
5
—
(209 ) 2,754
2,899
Non-interest income/(loss) 4,829
198
407
91
(209 ) 1,064
6,380

Provision for loan losses (424 ) —
—
—
—
—
(424 )

Provision for reserve for losses (158 ) —
—
—
—
—
(158 )
Other non-interest expense (4,954 ) (1,312 ) (739 ) (2,030 ) (3,728 ) —
(12,763 )
Non-interest expense⁽⁴⁾
(5,112 ) (1,312 ) (739 ) (2,030 ) (3,728 ) —
(12,921 )
Core earnings before income taxes 12,640
3,284
2,591
13,281
(3,663 ) 8,835
⁽⁵⁾
36,968
Income tax (expense)/benefit (2,654 ) (690 ) (544 ) (2,789 ) 1,200
(1,855 ) (7,332 )
Core earnings before preferred stock dividends and attribution of income to non-controlling interest 9,986
2,594
2,047
10,492
(2,463 ) 6,980
⁽⁵⁾
29,636
Preferred stock dividends —
—
—
—
(3,296 ) —
(3,296 )
Segment core earnings/(losses) $ 9,986
$ 2,594
$ 2,047
$ 10,492
$ (5,759 ) $ 6,980
⁽⁵⁾
$ 26,340

Total assets at carrying value $ 4,428,172
$ 2,177,345
$ 995,068
$ 8,144,763
$ 2,881,423
$ —
$ 18,626,771
Total on- and off-balance sheet program assets at principal balance $ 7,045,397
$ 2,418,115
$ 1,669,440
$ 8,391,885
$ —
$ —
$ 19,524,837


⁽¹⁾	~~Excludes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.~~


⁽²⁾	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.


⁽³⁾	Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.


⁽⁴⁾	~~Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.~~


⁽⁵⁾	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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.

Core Earnings by Business Segment
For the Six Months Ended June 30, 2019
Farm & Ranch USDA Guarantees
Rural
Utilities
Institutional Credit Corporate Reconciling
Adjustments Consolidated Net Income
(in thousands)
Net interest income $ 31,079
$ 8,554
$ 3,662
$ 34,572
$ 5,786
$ —
$ 83,653
Less: reconciling adjustments^(1)(2)(3)
(5,007 ) (493 ) 3,567
(828 ) (736 ) 3,497
—
Net effective spread 26,072
8,061
7,229
33,744
5,050
3,497
—
Guarantee and commitment fees⁽²⁾
9,338
462
721
174
—
(3,779 ) 6,916
Other income/(expense)⁽³⁾
668
—
14
—
604
8,220
9,506
Non-interest income/(loss) 10,006
462
735
174
604
4,441
16,422

Provision for loan losses (314 ) —
—
—
—
—
(314 )

Release of reserve for losses 287
—
—
—
—
—
287
Other non-interest expense (9,386 ) (2,773 ) (1,682 ) (4,193 ) (7,066 ) —
(25,100 )
Non-interest expense⁽⁴⁾
(9,099 ) (2,773 ) (1,682 ) (4,193 ) (7,066 ) —
(24,813 )
Core earnings before income taxes 26,665
5,750
6,282
29,725
(1,412 ) 7,938
⁽⁵⁾
74,948
Income tax (expense)/benefit (5,600 ) (1,208 ) (1,319 ) (6,242 ) 303
(1,667 ) (15,733 )
Core earnings before preferred stock dividends and attribution of income to non-controlling interest 21,065
4,542
4,963
23,483
(1,109 ) 6,271
⁽⁵⁾
59,215
Preferred stock dividends —
—
—
—
(7,081 ) —
(7,081 )
Loss on retirement of preferred stock —
—
—
—
—
(1,956 ) (1,956 )
Segment core earnings/(losses) $ 21,065
$ 4,542
$ 4,963
$ 23,483
$ (8,190 ) $ 4,315
⁽⁵⁾
$ 50,178

Total assets at carrying value $ 4,872,766
$ 2,198,514
$ 1,580,979
$ 8,633,059
$ 3,452,842
$ —
$ 20,738,160
Total on- and off-balance sheet program assets at principal balance $ 7,291,352
$ 2,521,394
$ 2,155,671
$ 8,778,318
$ —
$ —
$ 20,746,735


⁽¹⁾	~~Excludes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts~~


⁽²⁾	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.


⁽³⁾	Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.


⁽⁴⁾	~~Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.~~


⁽⁵⁾	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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.

Core Earnings by Business Segment
For the Six Months Ended June 30, 2018
Farm & Ranch USDA Guarantees Rural
Utilities Institutional Credit Corporate
Reconciling
Adjustments
Consolidated Net Income
(in thousands)
Net interest income $ 30,830
$ 10,142
$ 5,850
$ 36,637
$ 3,703
$ —
$ 87,162
Less: reconciling adjustments^(1)(2)(3)
(4,943 ) (1,344 ) 23
(6,593 ) (1,042 ) 13,899
—
Net effective spread 25,887
8,798
5,873
30,044
2,661
13,899
—
Guarantee and commitment fees⁽²⁾
8,867
356
851
180
—
(3,274 ) 6,980
Other income/(expense)⁽³⁾
899
13
10
—
(349 ) (934 ) (361 )
Non-interest income/(loss) 9,766
369
861
180
(349 ) (4,208 ) 6,619

Release of loan losses 7
—
—
—
—
—
7

Provision for reserve for losses (179 ) —
—
—
—
—
(179 )
Other non-interest expense (9,474 ) (2,505 ) (1,412 ) (3,876 ) (7,117 ) —
(24,384 )
Non-interest expense⁽⁴⁾
(9,653 ) (2,505 ) (1,412 ) (3,876 ) (7,117 ) —
(24,563 )
Core earnings before income taxes 26,007
6,662
5,322
26,348
(4,805 ) 9,691
⁽⁵⁾
69,225
Income tax (expense)/benefit (5,461 ) (1,399 ) (1,118 ) (5,533 ) 1,775
(2,034 ) (13,770 )
Core earnings before preferred stock dividends and attribution of income to non-controlling interest 20,546
5,263
4,204
20,815
(3,030 ) 7,657
⁽⁵⁾
55,455
Preferred stock dividends —
—
—
—
(6,591 ) —
(6,591 )
Segment core earnings/(losses) $ 20,546
$ 5,263
$ 4,204
$ 20,815
$ (9,621 ) $ 7,657
⁽⁵⁾
$ 48,864

Total assets at carrying value $ 4,428,172
$ 2,177,345
$ 995,068
$ 8,144,763
$ 2,881,423
$ —
$ 18,626,771
Total on- and off-balance sheet program assets at principal balance $ 7,045,397
$ 2,418,115
$ 1,669,440
$ 8,391,885
$ —
$ —
$ 19,524,837


⁽¹⁾	~~Excludes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.~~


⁽²⁾	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.


⁽³⁾	Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.


⁽⁴⁾	~~Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.~~


⁽⁵⁾	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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

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: (1) the interim unaudited consolidated financial statements and the related notes that appear elsewhere in this report; and (2) Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019, as filed with the SEC on February ~~21, 2019.~~25, 2020.

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 & Analysis of Financial Condition and Results of Operations" section, are "forward-looking statements" under 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," "expects," "intends," "plans," "potential," "may," "could," "should," and similar phrases. 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;

•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 Farmer Mac's Annual Report on Form 10-K for the fiscal period ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019,~~25, 2020, the factors discussed under "Risk Factors" in Part II, Item 1A of this report, and uncertainties about:

•the effects of the novel coronavirus disease 2019 ("COVID-19") pandemic on the business operations of agricultural and rural borrowers, the capital markets, and Farmer Mac's business operations;

•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 the agricultural or rural utilities industries;

•fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries;

•the ~~rate and direction~~level of ~~development of the secondary market for agricultural mortgage and rural utilities loans, including~~ 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 utilities indebtedness;

•the effect of economic conditions ~~including the effects of flooding~~ and ~~other weather-related conditions and fluctuations in agricultural real estate values,~~geopolitics on agricultural mortgage or rural utilities lending, ~~and~~ borrower repayment ~~capacity;~~capacity, or collateral values, including fluctuations in interest rates, changes in U.S. trade policies, fluctuations in export demand for U.S. agricultural products, and volatility in commodity prices;

•the ~~effect of any changes~~degree to which Farmer Mac is exposed to interest rate risk resulting from fluctuations in Farmer Mac's ~~executive leadership;~~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;

~~changes in~~ •the ~~level and direction~~effect of ~~interest rates, which could, among other things, affect the value of collateral securing Farmer Mac's agricultural mortgage loan assets;~~

~~the degree to which Farmer Mac is exposed to basis risk, which results from fluctuations~~any changes in Farmer Mac's ~~borrowing costs relative to market indexes;~~executive leadership; and

~~volatility in commodity prices relative to costs~~•other factors that could have a negative effect on agricultural mortgage lending or borrower repayment capacity, including the effects of ~~production, changes in U.S. trade policies, or~~weather and fluctuations in ~~export demand for U.S.~~ agricultural ~~products.~~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 or regulation.~~law. The information in this report is not necessarily indicative of future results.

Overview

We increased our outstanding business volume by a net $239.8 million, or 1.2%, to $20.7 billion during second quarter 2019. This increase was driven by net growth across all four of our lines of business.

Our overall credit quality as of June 30, 2019 decreased modestly compared to December 31, 2018. Our 90-day delinquencies and substandard assets each increased both in dollars and as a percentage of the Farm & Ranch portfolio compared to year-end 2018, though Farmer Mac's 90-day delinquency rate and substandard asset rate each remained below Farmer Mac's historical averages. In second quarter 2019, we recorded a provision for net total losses of $0.4 million because of an increase in our Farm & Ranch outstanding business volume and slightly lower credit quality. In the first six months of 2019 and 2018 we provided for loan losses of $27,000 and $0.2 million, respectively.

On May 13, 2019, Farmer Mac issued $100.0 million of 5.700% Non-Cumulative Preferred Stock, Series D (the "Series D Preferred Stock"). The dividend rate on the Series D Preferred Stock is a fixed rate of 5.700% per year for the life of the security with dividends payable quarterly on a non-cumulative basis when, as, and if declared by Farmer Mac's Board of Directors.

On June 12, 2019, Farmer Mac used $75.0 million of the net proceeds from the issuance of the Series D Preferred Stock authorized by Farmer Mac's board of directors to redeem and repurchase all of the aggregate outstanding 6.875% non-cumulative preferred stock, Series B (the "Series B Preferred Stock"). Farmer Mac accrued dividends on both Series B Preferred Stock and Series D Preferred Stock for 30 days during the second quarter and recognized the Series B deferred issuance costs of $2.0 million. Because of this period of paying dividends on both the Series B and Series D Preferred Stock, Farmer Mac accrued $3.8 million in preferred stock dividends in second quarter 2019. Beginning in third quarter 2019, we expect our aggregate quarterly preferred stock dividend payments to be $3.4 million until such time as there is a change in the total amount of preferred stock outstanding. This represents an aggregate quarterly increase of $0.1 million as compared to first quarter 2019, and $0.5 million on an annual basis.

The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are measures of financial performance that are not presented in accordance with ~~GAAP.~~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."

The Effect of the COVID-19 Pandemic

Farmer Mac continues to closely monitor the effect of the COVID-19 pandemic on our financial condition and operations. We have maintained uninterrupted continuity of our operations and our liquidity levels remain well above regulatory requirements, which has enabled us to execute our mission to support rural America during this pandemic. For example:

•we have maintained uninterrupted access to the debt capital markets;

•we provided a total of $1.3 billion in liquidity and lending capacity to lenders serving rural America during the quarter-ended March 31, 2020, resulting in net growth in our outstanding business volume of $0.4 billion;

•we are working with our loan servicers to respond to and facilitate payment deferment requests from borrowers;

•we are maintaining strong liquidity in our investment portfolio, as evidenced by our quarter-end cash position of $1.2 billion; and

•we are preserving capital and liquidity by indefinitely suspending our share repurchase program.

The economic deterioration from the COVID-19 pandemic caused our provision for credit losses during the first quarter to be higher than it would have been without the economic effects from the pandemic. On January 1, 2020 we adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Loss (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL"). Under CECL, our allowances and reserve for credit losses reflect our estimate of expected losses over the lives of our financial instruments based on historical information and reasonable and supportable forecasts. Both the adoption of this new accounting standard and the economic effects from the COVID-19 pandemic resulted in an increase to the amount of our total allowance for losses as of March 31, 2020 and our total provision for losses for the three months ended March 31, 2020. The economic effects from the COVID-19 pandemic that most affected our estimate of expected credit losses were the effects on credit spreads and higher unemployment. Of the $3.8 million expected credit loss provision that we recorded in first quarter 2020, $3.5 million was attributable to updated economic factors, predominantly related to COVID-19. For more information about the impact of COVID-19 on Farmer Mac's expected credit losses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans & Guarantees."

We have also observed an increase in payment deferment requests from our loan servicers on behalf of borrowers in our loan portfolio, as well as from our AgVantage counterparties for loans collateralizing their obligations. For more information about Farm & Ranch payment deferments, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees." For more information about AgVantage loan collateral payment deferments, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional."

Net Income and Core Earnings

~~Our~~The following table shows our net income attributable to common stockholders and core earnings for ~~second quarter 2019 was $28.3 million, compared~~the periods presented. Core earnings and core earnings per share are non-GAAP measures that principally differ from net income attributable to ~~$21.9 million in first quarter 2019~~common stockholders and ~~$26.3 million in second quarter 2018.~~earnings per common share, respectively, by excluding the effects of fair value fluctuations as well as the effects of specified infrequent or unusual transactions.

Table 1


	For the Three Months Ended
	March 31, 2020		December 31, 2019		March 31, 2019
	(in thousands)
Net income attributable to common stockholders	$	9,399	$	29,066	$	21,874
Core earnings	20,143		24,484		22,221

The ~~$6.4~~$19.7 million sequential ~~increase~~decrease in net income attributable to common stockholders was primarily due to a ~~$7.3~~$10.6 million after-tax decrease in the fair value of financial derivatives not designated in hedge accounting relationships (undesignated financial derivatives) due to fluctuations in long-term interest rates, a $6.4 million after-tax decrease in net interest income, and a $2.4 million after-tax increase in fair value of undesignated financial derivatives and a $1.9 million after-tax increase in net interest income. These sequential positive factors were offset in part by the recognition of $2.0 million in deferred issuance costs for Series B Preferred Stock and the $0.5 million increase in preferred stock dividends.operating expenses.

The ~~$2.0~~$12.5 million year-over-year ~~increase~~decrease in net income attributable to common stockholders was primarily due to a ~~$5.0~~$7.1 million after-tax decrease in the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates, a $2.6 million after-tax increase in ~~fair value on undesignated financial derivatives. This positive factor was partially offset by the recognition of $2.0~~operating expenses, and a $3.3 million ~~in deferred issuance costs for Series B~~

~~Preferred Stock, the $0.5 million~~after-tax increase in ~~preferred stock dividends, and a decrease in net interest income of $0.7 million after tax.~~

the total provision for losses.

~~Our non-GAAP core earnings for second quarter 2019 were $23.6 million, compared to $22.2 million in first quarter 2019 and $19.4 million~~
~~in second quarter 2018.~~

The ~~$1.4~~$4.3 million sequential ~~increase~~decrease in core earnings was primarily due to a ~~$2.0~~$2.4 million after-tax increase in operating expenses, a $1.4 million after-tax decrease in net effective ~~spread. This positive factor was partially offset by~~spread because in the ~~$0.5~~prior quarter we received a one-time prepayment penalty of $1.4 million, and a $0.8 million after-tax increase in ~~preferred stock dividends.~~the total provision for losses.

The ~~$4.2~~$2.1 million year-over-year ~~increase~~decrease in core earnings was primarily due to a ~~$4.1~~$3.3 million after-tax increase in the total provision for losses and a $2.6 million after-tax increase in operating expenses. These decreases were partially offset by a $4.2 million after-tax increase in net effective spread ~~and a $0.5 million after-tax decrease in operating expenses. The decrease in operating expenses was~~resulting primarily ~~due to a decrease in hiring expenses and servicing advances. These positive factors were partially offset by the $0.5 million~~from an increase in ~~preferred stock dividends.~~outstanding business volume.

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

~~Net interest income was $43.1 million~~for second quarter 2019, compared to $40.6 million for first quarter 2019 and $43.9 million in second quarter 2018. The overall net interest yield was 0.87% for second quarter 2019, compared to 0.86% for first quarter 2019 and 0.96% for second quarter 2018.

The ~~$2.5 million sequential increase in~~following table shows our net interest income ~~was primarily due to a $1.2 million increase related to net business volume growth~~ and a $1.3 million increase in fair value changes from derivatives and hedged items in fair value hedge accounting relationships. The 1 basis point sequential increase was primarily attributable to a 3 basis point increase in fair value changes from financial derivatives and hedged items that are in fair value hedge accounting relationships, partially offset by a 1 basis point increase in LIBOR-based funding costs.

The $0.8 million year-over-year decrease in net interest income was primarily due to a $3.3 million decrease in fair value changes from financial derivatives and hedged items in fair value hedge accounting relationships and a $2.3 million decrease in income from interest earning assets indexed to LIBOR. These negative factors were partially offset by a $2.6 million increase in interest income generated from new business volume and the absence of a $2.0 million premium amortization that occurred in the prior period related to the payoff of an interest-only security. The 9 basis point year-over-year decrease was primarily attributable to a 7 basis point decrease in fair value changes from financial derivatives and hedged items that are in fair value hedge accounting relationships and a 5 basis point decrease in income from interest earning assets indexed to LIBOR. These factors were partially offset by a 4 basis point increase due to the absence of premium amortization that occurred in the prior period related to the payoff of an interest-only security.

~~Net effective spread, a non-GAAP measure, was $41.4 million in second quarter 2019, compared to $38.8 million in first quarter 2019 and $36.2 million in second quarter 2018. In percentage terms,~~ net effective spread ~~was 0.91%~~ in ~~second quarter 2019, compared to 0.89% in first quarter 2019~~both dollars and ~~0.86% in second quarter 2018.~~percentage yield or spread for the periods presented. Farmer Mac uses net effective spread, a non-GAAP measure, as an alternative ~~measure~~ 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


	For the Three Months Ended
	March 31, 2020			December 31, 2019			March 31, 2019
	(in thousands)
Net interest income	$	41,312		$	49,370		$	40,599
Net interest yield %	0.78		%	0.95		%	0.86		%
Net effective spread	44,163			45,991			38,801
Net effective spread %	0.89		%	0.95		%	0.89		%

The ~~$2.6~~$8.1 million sequential ~~increase~~decrease in net ~~effective spread in dollars~~interest income was primarily due to a ~~$1.2~~$6.4 million decrease in net fair value changes from derivatives designated in fair value hedge accounting relationships (designated financial derivatives) and a decrease in prepayment penalties because in the prior quarter we received a one-time prepayment penalty of $1.4 million. In percentage terms, the decrease of 0.17% was primarily attributable to a decrease of 0.12% in net fair value changes from designated financial derivatives, a decrease of 0.03% related to the decrease in prepayment penalties mentioned above, and an increase of 0.02% in funding and liquidity costs.

The $0.7 million year-over-year increase in net interest income was primarily due to net growth across all lines of business, which contributed to a $3.8 million increase in net interest ~~income generated~~income. This increase was largely offset by the decrease of $3.0 million in net fair value changes from designated financial derivatives due to fluctuations in long-term interest rates. In percentage terms, the 0.08% decrease was primarily attributable to a decrease of 0.06% in net fair value changes from designated financial derivatives, an increase of 0.06% in funding and liquidity costs, partially offset by an increase of 0.03% in new business ~~volume~~volume.

The $1.8 million sequential decrease in net effective spread was due to a $2.0 million decrease in certain non-recurring cash-based income items, including the absence of a $1.4 million one-time prepayment penalty that we received in fourth quarter 2019, and a $0.6 million increase in non-GAAP funding costs. These decreases were partially offset by a $0.8 million increase ~~in cash basis interest income and one additional day~~from net business volume across all lines of ~~interest in the current quarter.~~business. In percentage terms, net effective spread ~~increased by 2 basis points~~decreased 0.06%, which was primarily ~~due~~attributable to a ~~1 basis point increase~~decrease of 0.04% related to the absence of the one-time prepayment penalty mentioned above and a decrease of 0.02% in ~~cash basis interest income.~~non-GAAP funding and liquidity costs.

The ~~$5.2~~$5.4 million year-over-year increase in net effective spread ~~in dollars~~ was primarily due to ~~a $2.6 million increase~~growth in outstanding business volume, which increased net effective spread ~~from new business volume and the absence of the $2.0 million premium amortization from the payoff of an interest-only security. Net effective spread in~~by approximately $5.2 million. In percentage terms, increased by 5 basis points which was primarily due to the 4 basis point increase from the absence of the premium amortization from the payoff of an interest-only security and the 1 basis point increase in net effective spread ~~from new business volume.~~remained at 0.89% in both first quarter 2020 and first quarter 2019.

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 611 in ~~"Management's~~

"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 ~~$20.7~~$21.5 billion as of ~~June 30, 2019,~~March 31, 2020, a net increase of ~~$239.8~~$421.4 million from ~~March~~December 31, 2019, after taking into account all new business, maturities, and paydowns on existing assets. This net increase was across all four ~~of our~~ lines of business: ~~$80.9~~$255.9 million in Institutional Credit, $104.8 million in Rural Utilities, ~~$75.8~~$34.6 million in Farm & Ranch, ~~$46.5 million in Institutional Credit,~~ and ~~$36.6~~$26.0 million in USDA Guarantees.

Farmer Mac's ~~outstanding~~net business volume growth of ~~$20.7 billion as~~$421.4 million in first quarter 2020 was $361.0 million less than the $782.4 million of ~~June 30,~~net growth achieved in first quarter 2019. Net growth in first quarter 2019 isincluded one large, unique transaction – the purchase of a ~~$1.0 billion increase~~$546.2 million portfolio of participations in seasoned Rural Utilities loans from ~~$19.7 billion as~~CoBank, which was our first purchase of ~~December 31, 2018.~~program assets from CoBank in any of our lines of business. Portfolio purchases of that size are unusual and are not expected to occur regularly, if at all, in future periods. Excluding the impact from the unique CoBank transaction in first quarter 2019, Farmer Mac's net growth in first quarter 2020 compared to first quarter 2019 was $185.2 million.

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

AsTable 3


	As of
	March 31, 2020		December 31, 2019
	(in thousands)
Core capital	$	815,054	$	815,437
Capital in excess of minimum capital level required	165,722		196,669

The decrease in capital in excess of ~~June 30, 2019, our core capital level was $786.6 million, which was $191.6 million above~~ the minimum capital level required ~~by our statutory charter. As of December 31, 2018, our core capital level~~ was ~~$727.6 million, which was $182.6 million above the minimum capital requirement. The increase in capital above the minimum capital level was~~primarily due to net growth in outstanding business volume of $421.4 million and a decrease in retained earnings.

Current Expected Credit Loss

As noted above, Farmer Mac adopted CECL on January 1, 2020. Under CECL, we estimate and recognize expected credit losses over the ~~Board-authorized issuance~~lives of our financial assets. We base our estimate of expected losses on historical loss information and reasonable and supportable forecasts. In first quarter 2020, our reasonable and supportable forecasts included the impact of the ~~Series D Preferred Stock~~COVID-19 pandemic on economic factors such as credit spreads and unemployment. Thus, our total provision for credit losses during the ~~increase in retained earnings partially offset~~three months ended March 31, 2020 was affected by ~~growth in our outstanding business volume.~~both the implementation of the new accounting standard and by the economic effects of the COVID-19 pandemic.

~~Credit Quality~~

As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac's allowance for losses on its on-balance sheet loan portfolio was ~~$9.1~~$14.9 million ~~(0.13%~~(0.20% of all loans), compared to $10.5 million (0.15% of all loans) as of December 31, 2019. The first quarter increase was comprised of a $1.5 million transition adjustment related to the adoption of CECL on January 1, 2020 and an additional $2.9 million provision for losses. The transition

adjustment was the difference between (1) the allowance for losses on December 31, 2019 that reflected probable incurred losses on loans and (2) the allowance for losses on January 1, 2020 that reflected expected losses on loans. The first quarter provision for losses was primarily related to the impact of the COVID-19 pandemic on economic factors, including credit spreads and unemployment. Economic factor forecasts for lower commodity prices uniquely impacted the Farm & Ranch ~~portfolio)~~portfolio.

As of March 31, 2020, Farmer Mac's reserve for losses on its off-balance sheet LTSPCs and Guaranteed Securities was $3.4 million (0.10% of all off-balance sheet LTSPCs and Guaranteed Securities), compared to ~~$8.8~~$2.2 million ~~(0.12%~~(0.06% of all off-balance sheet LTSPCs and Guaranteed Securities) on December 31, 2019. The first quarter increase was comprised of a $0.9 million transition adjustment related to the adoption of CECL on January 1, 2020 and an additional $0.4 million provision to the reserve. The transition adjustment was the difference between (1) the reserve for losses on December 31, 2019 that reflected probable incurred losses on off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities and (2) the reserve for losses on January 1, 2020 that reflected expected losses on off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities. The first quarter reserve for losses was primarily related to the impact of the COVID-19 pandemic on economic factors, including credit spreads and unemployment. Economic factor forecasts for lower commodity prices uniquely impacted the Farm & Ranch ~~portfolio) as of March 31, 2019 and $9.2 million (0.13% of the~~portfolio.

Credit Quality

The following table presents Farm & Ranch portfolio) as of December 31, 2018. The $0.3 million increase in the total allowance for losses from first quarter 2019 was primarily due to an increase in our Farm & Ranch outstanding business volume and slightly lower credit quality.

~~As of June 30, 2019, Farmer Mac's~~ substandard assets, ~~were $242.7 million~~ (~~3.3%of the Farm & Ranch portfolio)~~, compared to $246.7 million (3.4% of the Farm & Ranch portfolio) as of March 31, 2019 and $232.7 million (3.2% of the Farm & Ranch portfolio) as of December 31, 2018. The $10.0 million increase in substandard assets in the first half of 2019 was due to the downgrade of more assets into the substandard category than those that paid off or migrated to a more favorable category. Of the assets that were downgraded into the substandard category, the majority of the loan volume was in the cattle and calves, dairy, and cotton commodity sub-groups.

As of June 30, 2019, Farmer Mac's 90-day delinquencies were $28.0 million (0.38% of the Farm & Ranch portfolio), compared to $52.4 million (0.73% of the Farm & Ranch portfolio) as of March 31, 2019 and $26.9 million (0.37% of the Farm & Ranch portfolio) as of December 31, 2018. The sequential decrease in 90-day delinquencies is consistent with the seasonal pattern of Farmer Mac's 90-day delinquencies fluctuating from quarter to quarter, both in dollars and as a percentage of the ~~outstanding~~ Farm & Ranch portfolio, ~~with higher levels generally observed at~~for both on- and off-balance sheet assets as of March 31, 2020 and December 31, 2019:

Table 4


	Farm & Ranch Line of Business
	On-Balance Sheet						Off-Balance Sheet
	Substandard Assets		% of Portfolio		Substandard Assets		% of Portfolio
	(in thousands)
March 31, 2020	$	211,376	3.9	%	$	100,964	4.1	%
December 31, 2019	207,078		3.9	%	102,877		4.1	%

Increase/(decrease) from prior quarter-ending	$	4,298	—	%	$	(1,913)	—	%

The increase of $4.3 million in on-balance sheet substandard assets during first quarter 2020 reflected growth in the ~~end~~business volume of that portfolio during the quarter and consistency in the credit quality of the ~~first~~portfolio, as the percentage of substandard assets remained unchanged. Similarly, the $1.9 million decrease in substandard assets in our off-balance sheet portfolio was due to a net decrease in business volume, with credit quality remaining unchanged overall during the period. For an analysis of current loan-to-value ratios across substandard and ~~third quarters~~other internally assigned risk ratings, see Table 27 in "Management's Discussion and ~~lower levels generally observed at the end~~Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

The following table presents Farm & Ranch 90-day delinquencies, in dollars and as a percentage of the ~~second~~Farm & Ranch portfolio, for both on- and ~~fourth quarters~~off-balance sheet assets as of ~~each year. As of June 30, 2019,~~March 31, 2020 and December 31, 2019:

Table 5


	Farm & Ranch Line of Business
	On-Balance Sheet						Off-Balance Sheet
	90-Day Delinquencies		% of Portfolio		90-Day Delinquencies		% of Portfolio
	(in thousands)
March 31, 2020	$	75,117	1.40	%	$	4,605	0.19	%
December 31, 2019	57,719		1.09	%	3,235		0.13	%

Increase/(decrease) from prior quarter ending	$	17,398	0.31	%	$	1,370	0.06	%

The sequential increase in 90-day delinquencies ~~had improved across all major~~is primarily due to seasonal delinquencies associated with loans that have annual (January 1st) and semi-annual (January 1st and July 1st) payment terms, which account for most of the loans in the Farm & Ranch portfolio. In addition, the sequential increase was driven by two commodity groups: (1) agricultural storage and processing, and (2) crops. The other commodity groups ~~compared to~~either experienced decreases or remained constant. The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of March 31, ~~2019.~~2020.

In the Rural Utilities portfolio, one $5.0 million loan was rated as a substandard asset and there were no delinquencies as of March 31, 2020.

For more information about Farmer Mac's credit metrics, including 90-day delinquencies, the total allowance for losses, and substandard assets, as well as the effects of the COVID-19 pandemic on loan

payment deferments, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

Use of Non-GAAP Measures

In the accompanying analysis of its financial information, Farmer Mac ~~sometimes~~ 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.

Core Earnings and Core Earnings Per Share

Core earnings and core earnings per share principally differ from net income attributable to common stockholders and earnings per common share, respectively, by excluding 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.

Core earnings and core earnings per share also differ from net income attributable to common stockholders and earnings per common share, respectively, by excluding 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 have excluded from core earnings losses on retirement of preferred stock and the re-measurement of the deferred tax asset. 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. 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, which are presented on Farmer Mac's consolidated balance sheets as "Loans held for investment in consolidated 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.

Farmer Mac excludes from net effective spread the premiums and discounts on assets consolidated at fair value because they either do not reflect actual cash premiums paid for the assets at acquisition or are not expected to have an economic effect on Farmer Mac's financial performance if the assets are held to maturity, as is expected. Farmer Mac also 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 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 principally 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/(losses)~~"Losses 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.

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 611 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

Results of Operations

Farmer Mac's net income attributable to common stockholders for the three months ended June 30, 2019 was $28.3 million ($2.63 per diluted common share), compared to $26.3 million ($2.45 per diluted common share) for the same period in 2018. For the six months ended June 30, 2019, Farmer Mac's net income attributable to common stockholders was $50.2 million ($4.66 per diluted common share), compared to $48.9 million ($4.55 per diluted common share) for the same period in 2018. Farmer Mac's non-GAAP core earnings for the three months ended June 30, 2019 were $23.6 million ($2.20 per diluted common share), compared to $19.4 million ($1.80 per diluted common share) for the same period in 2018. Farmer Mac's non-GAAP core earnings for the six months ended June 30, 2019 were $45.9 million ($4.26 per diluted common share), compared to $41.2 million ($3.84 per diluted common share) for the same period in 2018. For more information about the changes in net income attributable to common stockholders and core earnings, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview—Net Income and Core Earnings."

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:

6360

Table 16


Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands, except per share amounts)
Net income attributable to common stockholders	$	9,399	$	21,874
Less reconciling items:
(Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 14)	(6,484)		2,240
Losses on hedging activities due to fair value changes	(5,925)		(2,817)
Unrealized gains on trading securities	106		44
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value	3		(16)
Net effects of terminations or net settlements on financial derivatives	(1,300)		110


Income tax effect related to reconciling items	2,856		92
Sub-total	(10,744)		(347)
Core earnings	$	20,143	$	22,221

Composition of Core Earnings:
Revenues:
Net effective spread⁽¹⁾	$	44,163	$	38,801
Guarantee and commitment fees⁽²⁾	4,896		5,419
Other⁽³⁾	674		509
Total revenues	49,733		44,729

Credit related expense (GAAP):
Provision for/(release of) losses	3,831		(393)

Gains on sale of REO	(485)		—
Total credit related expense	3,346		(393)

Operating expenses (GAAP):
Compensation and employee benefits	10,127		7,606
General and administrative	5,363		4,596
Regulatory fees	725		688
Total operating expenses	16,215		12,890

Net earnings	30,172		32,232
Income tax expense⁽⁴⁾	6,598		6,715

Preferred stock dividends (GAAP)	3,431		3,296
Core earnings	$	20,143	$	22,221

Core earnings per share:
Basic	$	1.88	$	2.08
Diluted	1.87		2.06
Weighted-average shares:
Basic	10,712		10,670
Diluted	10,782		10,777

⁽¹⁾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 11 for a reconciliation of net interest income to net effective spread.

⁽²⁾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.

⁽³⁾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.

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
For the Three Months Ended
June 30, 2019 June 30, 2018
(in thousands, except per share amounts)
Net income attributable to common stockholders $ 28,304
$ 26,340
Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 8) 10,485
6,709
(Losses)/gains on hedging activities due to fair value changes (1,438 ) 1,687
Unrealized gains on trading securities 61
11
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (139 ) 196
Net effects of terminations or net settlements on financial derivatives (592 ) 232
Issuance costs on the retirement of preferred stock (1,956 ) —
Income tax effect related to reconciling items (1,759 ) (1,855 )
Sub-total 4,662
6,980
Core earnings $ 23,642
$ 19,360

Composition of Core Earnings:
Revenues:
Net effective spread⁽¹⁾
$ 41,355
$ 36,162
Guarantee and commitment fees⁽²⁾
5,276
5,171
Other⁽³⁾
777
111
Total revenues 47,408
41,444

Credit related expense (GAAP):
Provision for losses 420
582
REO operating expenses 64
—
Gain on sale of REO —
(34 )
Total credit related expense 484
548

Operating expenses (GAAP):
Compensation and employee benefits 6,770
6,936
General and administrative 4,689
5,202
Regulatory fees 687
625
Total operating expenses 12,146
12,763

Net earnings 34,778
28,133
Income tax expense⁽⁴⁾
7,351
5,477
Preferred stock dividends (GAAP) 3,785
3,296
Core earnings $ 23,642
$ 19,360

Core earnings per share:
  Basic $ 2.21
$ 1.82
  Diluted 2.20
1.80
Weighted-average shares:
  Basic 10,698
10,658
  Diluted 10,770
10,742
⁽⁴⁾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
	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands, except per share amounts)
GAAP - Basic EPS	$	0.88	$	2.05
Less reconciling items:
(Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 14)	(0.61)		0.21
Losses on hedging activities due to fair value changes	(0.55)		(0.26)
Unrealized gains on trading securities	0.01		—

Net effects of terminations or net settlements on financial derivatives	(0.12)		0.01
Income tax effect related to reconciling items	0.27		0.01
Sub-total	(1.00)		(0.03)
Core Earnings - Basic EPS	$	1.88	$	2.08

Shares used in per share calculation (GAAP and Core Earnings)	10,712		10,670


Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share
	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands, except per share amounts)
GAAP - Diluted EPS	$	0.87	$	2.03
Less reconciling items:
(Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 14)	(0.60)		0.21
Losses on hedging activities due to fair value changes	(0.55)		(0.26)
Unrealized gains on trading securities	0.01		—

Net effects of terminations or net settlements on financial derivatives	(0.12)		0.01
Income tax effect related to reconciling items	0.26		0.01
Sub-total	(1.00)		(0.03)
Core Earnings - Diluted EPS	$	1.87	$	2.06

Shares used in per share calculation (GAAP and Core Earnings)	10,782		10,777

6462


⁽¹⁾	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 6 for a reconciliation of net interest income to net effective spread.


⁽²⁾	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.

⁽³⁾

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.


⁽⁴⁾	~~Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.~~

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
For the Six Months Ended
June 30, 2019 June 30, 2018
(in thousands, except per share amounts)
Net income attributable to common stockholders $ 50,178
$ 48,864
Less reconciling items:

Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 8) 12,725
4,430
(Losses)/gains on hedging activities due to fair value changes (4,255 ) 4,251
Unrealized gains on trading securities 105
27
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (155 ) (490 )
Net effects of terminations or net settlements on financial derivatives (482 ) 1,474
Issuance costs on the retirement of preferred stock (1,956 ) —
Income tax effect related to reconciling items (1,667 ) (2,035 )
Sub-total 4,315
7,657
Core earnings $ 45,863
$ 41,207

Composition of Core Earnings:
Revenues:
Net effective spread⁽¹⁾
$ 80,156
$ 73,263
Guarantee and commitment fees⁽²⁾
10,695
10,254
Other⁽³⁾
1,286
539
Total revenues 92,137
84,056

Credit related expense (GAAP):
Provision for losses 27
172
REO operating expenses 64
16
Gain on sale of REO —
(34 )
Total credit related expense 91
154

Operating expenses (GAAP):
Compensation and employee benefits 14,376
13,590
General and administrative 9,285
9,528
Regulatory fees 1,375
1,250
Total operating expenses 25,036
24,368

Net earnings 67,010
59,534
Income tax expense⁽⁴⁾
14,066
11,736
Preferred stock dividends (GAAP) 7,081
6,591
Core earnings $ 45,863
$ 41,207

Core earnings per share:
  Basic $ 4.29
$ 3.87
  Diluted 4.26
3.84
Weighted-average shares:
  Basic 10,684
10,640
  Diluted 10,774
10,742


⁽¹⁾	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 6 for a reconciliation of net interest income to net effective spread.


⁽²⁾	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.

⁽³⁾


⁽⁴⁾	~~Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.~~

~~Table 2~~

Reconciliation of GAAP Basic Earnings Per Share to Core Earnings - Basic Earnings Per Share
For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
(in thousands, except per share amounts)
GAAP - Basic EPS $ 2.65
$ 2.47
$ 4.70
$ 4.59
Less reconciling items:
Gains on undesignated financial derivatives due to fair value changes (see Table 8) 0.98
0.63
1.19
0.42
(Losses)/gains on hedging activities due to fair value changes (0.13 ) 0.16
(0.39 ) 0.40
Unrealized gains on trading securities 0.01
—
0.01
—
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (0.01 ) 0.02
(0.01 ) (0.05 )
Net effects of terminations or net settlements on financial derivatives (0.06 ) 0.02
(0.05 ) 0.14
Issuance costs on the retirement of preferred stock (0.18 ) —
(0.18 ) —
Income tax effect related to reconciling items (0.17 ) (0.18 ) (0.16 ) (0.19 )
Sub-total 0.44
0.65
0.41
0.72
Core Earnings - Basic EPS $ 2.21
$ 1.82
$ 4.29
$ 3.87

Shares used in per share calculation (GAAP and Core Earnings) 10,698
10,658
10,684
10,640

Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share
For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
(in thousands, except per share amounts)
GAAP - Diluted EPS $ 2.63
$ 2.45
$ 4.66
$ 4.55
Less reconciling items:
Gains on undesignated financial derivatives due to fair value changes (see Table 8) 0.96
0.62
1.17
0.41
(Losses)/gains on hedging activities due to fair value changes (0.14 ) 0.16
(0.40 ) 0.40
Unrealized gains on trading securities 0.01
—
0.01
—
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (0.01 ) 0.02
(0.01 ) (0.05 )
Net effects of terminations or net settlements on financial derivatives (0.05 ) 0.02
(0.04 ) 0.14
Issuance costs on the retirement of preferred stock (0.18 ) —
(0.18 ) —
Income tax effect related to reconciling items (0.16 ) (0.17 ) (0.15 ) (0.19 )
Sub-total 0.43
0.65
0.40
0.71
Core Earnings - Diluted EPS $ 2.20
$ 1.80
$ 4.26
$ 3.84

Shares used in per share calculation (GAAP and Core Earnings) 10,770
10,742
10,774
10,742

The non-GAAP reconciling items between net income attributable to common stockholders and core earnings are:

1. ~~Gains/(losses)~~Losses on financial derivatives due to fair value changes are presented by two reconciling items in Table 16 above: ~~(1) Gains/(losses)~~(a) (Losses)/gains on undesignated financial derivatives due to fair value changes; and ~~(2) (Losses)/gains~~(b) Losses on hedging activities due to fair value changes. The table below calculates the non-GAAP reconciling item for ~~(losses)/gains~~losses on hedging activities due to fair value changes:

Table 38


Non-GAAP Reconciling Items for (Losses)/Gains on Hedging Activities due to Fair Value Changes
	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands)
Losses due to fair value changes (see Table 4.2)	$	(5,681)	$	(2,699)
Initial cash payment (received) at inception of swap	(244)		(118)
Losses on hedging activities due to fair value changes	$	(5,925)	$	(2,817)

Non-GAAP Reconciling Items for (Losses)/Gains on Hedging Activities due to Fair Value Changes
For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
(in thousands)
(Losses)/gains due to fair value changes (see Table 4.2) $ (1,428 ) $ 1,862
$ (4,128 ) $ 4,701
Initial cash payment received at inception of swap (10 ) (175 ) (127 ) (449 )
(Losses)/gains on hedging activities due to fair value changes

$ (1,438 ) $ 1,687
$ (4,255 ) $ 4,252

2. Unrealized gains 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. 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.

•Initial cash payments received by Farmer Mac upon the inception of certain swaps. When there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt. For GAAP purposes, changes in fair value of the swaps are recognized in "Gains on financial derivatives," while the economically offsetting discount on the associated hedged debt is amortized over the term of the debt as an adjustment to its yield. For purposes of core earnings, ~~purposes,~~ these initial cash payments are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years.

5. The recognition of deferred issuance costs on the retirement of the Series B Preferred Stock in second quarter 2019 has been excluded from core earnings because it is not a frequently occurring transaction, nor

~~is it indicative of future operating results. This is consistent with Farmer Mac's previous treatment of deferred issuance costs associated with the retirement of preferred stock.~~

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 ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019. 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 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.

Table 49


	For the Three Months Ended
	March 31, 2020										March 31, 2019
	Average Balance		Income/ Expense		Average Rate		Average Balance		Income/ Expense		Average Rate
	(dollars in thousands)
Interest-earning assets:
Cash and investments	$	3,708,499	$	17,741	1.91	%	$	2,815,695	$	18,707	2.66	%
Loans, Farmer Mac Guaranteed Securities and USDA Securities⁽¹⁾	16,075,354		117,230		2.92	%	14,557,209		121,781		3.35	%
Total interest-earning assets	19,783,853		134,971		2.73	%	17,372,904		140,488		3.23	%
Funding:
Notes payable due within one year	3,014,566		12,132		1.61	%	3,510,208		21,265		2.42	%
Notes payable due after one year⁽²⁾	16,393,917		83,227		2.03	%	13,187,397		80,529		2.44	%
Total interest-bearing liabilities⁽³⁾	19,408,483		95,359		1.97	%	16,697,605		101,794		2.44	%
Net non-interest-bearing funding	375,370		—				675,299		—
Total funding	19,783,853		95,359		1.93	%	17,372,904		101,794		2.34	%
Net interest income/yield prior to consolidation of certain trusts	19,783,853		39,612		0.80	%	17,372,904		38,694		0.89	%
Net effect of consolidated trusts⁽⁴⁾	1,530,301		1,700		0.44	%	1,544,172		1,905		0.49	%
Net interest income/yield	$	21,314,154	$	41,312	0.78	%	$	18,917,076	$	40,599	0.86	%

For the Six Months Ended
June 30, 2019 June 30, 2018
Average
Balance Income/
Expense Average
Rate Average
Balance Income/
Expense Average
Rate
(dollars in thousands)
Interest-earning assets:
Cash and investments $ 2,894,225
$ 38,863
2.69 % $ 2,749,770
$ 23,558
1.71 %
Loans, Farmer Mac Guaranteed Securities and USDA Securities⁽¹⁾
14,853,973
251,338
3.38 % 13,832,070
205,259
2.97 %
Total interest-earning assets 17,748,198
290,201
3.27 % 16,581,840
228,817
2.76 %
Funding:

Notes payable due within one year 3,667,842
44,848
2.45 % 3,726,865
29,457
1.58 %
Notes payable due after one year⁽²⁾
13,421,483
165,479
2.47 % 12,139,318
115,472
1.90 %
Total interest-bearing liabilities⁽³⁾
17,089,325
210,327
2.46 % 15,866,183
144,929
1.83 %
Net non-interest-bearing funding 658,873
—

715,657
—

Total funding 17,748,198
210,327
2.37 % 16,581,840
144,929
1.75 %
Net interest income/yield prior to consolidation of certain trusts 17,748,198
79,874
0.90 % 16,581,840
83,888
1.01 %
Net effect of consolidated trusts⁽⁴⁾
1,553,815
3,779
0.49 % 1,411,749
3,274
0.46 %
Net interest income/yield $ 19,302,013
$ 83,653
0.87 % $ 17,993,589
$ 87,162
0.97 %


⁽¹⁾⁽¹⁾Excludes interest income of $14.9 million and $15.0 million, in first quarter 2020 and 2019, respectively, related to consolidated trusts with beneficial interests owned by third parties.	~~Excludes interest income of $30.4 million and $26.4 million in the first half of 2019 and 2018, respectively, related to consolidated trusts with beneficial interests owned by third parties.~~


⁽²⁾	~~Includes current portion of long-term notes.~~


⁽³⁾	~~Excludes interest expense of $26.7 million and $23.1 million in the first half of 2019 and 2018, respectively, related to consolidated trusts with beneficial interests owned by third parties.~~


⁽⁴⁾	~~Includes the effect of consolidated trusts with beneficial interests owned by third parties.~~

~~For~~⁽²⁾Includes current portion of long-term notes.

⁽³⁾Excludes interest expense of $13.2 million and $13.1 million in first quarter 2020 and 2019, respectively, related to consolidated trusts with beneficial interests owned by third parties.

⁽⁴⁾Includes the ~~first six months~~effect of ~~2019 compared to the same period in 2018, the $3.5~~consolidated trusts with beneficial interests owned by third parties.

The $0.7 million ~~decrease~~year-over-year increase in net interest income was primarily due to ~~a $8.8~~net growth across all lines of business, which contributed $3.8 million towards the increase in net interest income. This increase was partially offset by the decrease of $3.0 million in net fair value changes from ~~financial derivatives and hedged items~~fair value hedge accounting relationships, as a result of material changes in market interest rates.

In percentage terms, the decrease of 0.08% was primarily attributable to a decrease of 0.06% in net fair value changes from fair value hedge accounting relationships and ~~a $2.0 million decrease~~an increase of 0.03% in ~~income from interest earning assets indexed to LIBOR. These negative factors were partially offset by a $4.7 million increase in interest income generated from new business volume~~funding and the absence of a $2.0 million premium amortization that occurred in the prior period related to the payoff of an interest-only security. The 10 basis point year-over-year decrease was primarily attributable to a 9 basis point decrease in fair value changes from financial derivatives and hedged items that are in fair value hedge accounting relationships and a 4 basis point decrease in income from interest earning assets indexed to LIBOR;liquidity costs.

~~partially offset by a 2 basis point increase due to the absence of premium amortization that occurred in the prior period related to the payoff of an interest-only security.~~

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 old rate) and changes in rate (change in rate multiplied by old volume). Combined rate/volume variances, the third element of the calculation, are allocated based on their relative size.

~~Table 5~~

For the Six Months Ended June 30, 2019 Compared to Same Period in 2018
Increase/(Decrease) Due to
Rate Volume Total
(in thousands)
Income from interest-earning assets:
Cash and investments $ 14,008
$ 1,297
$ 15,305
Loans, Farmer Mac Guaranteed Securities and USDA Securities 30,181
15,898
46,079
Total 44,189
17,195
61,384
Expense from other interest-bearing liabilities 53,520
11,878
65,398
Change in net interest income prior to consolidation of certain trusts⁽¹⁾
$ (9,331 ) $ 5,317
$ (4,014 )
Table 10

⁽¹⁾


	For the Three Months Ended March 31, 2020 Compared to Same Period in 2019
	Increase/(Decrease) Due to
	Rate		Volume		Total
	(in thousands)
Income from interest-earning assets:
Cash and investments	$	(6,016)	$	5,050	$	(966)
Loans, Farmer Mac Guaranteed Securities and USDA Securities	(16,521)		11,969		(4,552)
Total	(22,537)		17,019		(5,518)
Expense from other interest-bearing liabilities	(21,502)		15,066		(6,436)
Change in net interest income prior to consolidation of certain trusts⁽¹⁾	$	(1,035)	$	1,953	$	918

⁽¹⁾Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties.

~~Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties.~~

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 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 (3) the amortization of premiums and discounts on assets consolidated at fair value, (4) the net effects of consolidated trusts with beneficial interests owned by third parties, and (5) 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 ~~the explanation of~~ net effective spread.

Table 611


	For the Three Months Ended
	March 31, 2020						March 31, 2019
	Dollars		Yield		Dollars		Yield
	(dollars in thousands)
Net interest income/yield	$	41,312	0.78	%	$	40,599	0.86	%
Net effects of consolidated trusts	(1,700)		0.02	%	(1,905)		0.03	%
Expense related to undesignated financial derivatives	(1,190)		(0.02)	%	(2,544)		(0.06)	%
Amortization of premiums/discounts on assets consolidated at fair value	11		—	%	23		—	%
Amortization of losses due to terminations or net settlements on financial derivatives	49		—	%	(71)		—	%
Fair value changes on fair value hedge relationships	5,681		0.11	%	2,699		0.06	%
Net effective spread	$	44,163	0.89	%	$	38,801	0.89	%

For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Dollars Yield Dollars Yield Dollars Yield Dollars Yield
(dollars in thousands)
Net interest income/yield $ 43,054
0.87 % $ 43,933
0.96 % $ 83,653
0.87 % $ 87,162
0.97 %
Net effects of consolidated trusts (1,873 ) 0.03 % (1,690 ) 0.04 % (3,778 ) 0.03 % (3,274 ) 0.04 %
Expense related to undesignated financial derivatives (1,557 ) (0.03 )% (3,998 ) (0.09 )% (4,102 ) (0.05 )% (6,299 ) (0.08 )%
Amortization of premiums/discounts on assets consolidated at fair value 289
0.01 % (188 ) (0.01 )% 311
— % 506
0.01 %
Amortization of losses due to terminations or net settlements on financial derivatives 14
— % (33 ) — % (56 ) — % (131 ) — %
Fair value changes on fair value hedge relationships 1,428
0.03 % (1,862 ) (0.04 )% 4,128
0.05 % (4,701 ) (0.06 )%
Net effective spread $ 41,355
0.91 % $ 36,162
0.86 % $ 80,156
0.90 % $ 73,263
0.88 %

For ~~the three months ended June 30, 2019~~first quarter 2020 compared to the same period in ~~2018,~~2019, the ~~$5.2~~$5.4 million increase in net effective spread in dollars was primarily due to ~~a $2.6 million increase~~growth in outstanding business volume, which increased net effective spread from new business volume and the absence of a $2.0 million premium amortization that occurred in the prior period related to the payoff of an interest-only security. Net effective spread in percentage terms increased by 5 basis points which was primarily due to the 4 basis point increase from the absence of the premium amortization that occurred in the prior period from the payoff of an interest-only security and the 1 basis point increase in net effective spread from new business volume.approximately $5.2 million.

For the first six months of 2019 compared to the same period in 2018, the $6.9 million increase in net effective spread in dollars was primarily due to a $4.7 million increase in interest income generated from new business volume and the absence of a $2.0 million premium amortization that occurred in the prior period related to the payoff of an interest-only security. The 2 basis point year-over-year increase was primarily due to the absence of premium amortization that occurred in the prior period related to the payoff of an interest-only security.

See Note 910 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 ~~Loan~~ Losses and Reserve for Losses. The following table summarizes the components of Farmer Mac's total allowance for losses for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Table 712


	For the Three Months Ended
	March 31, 2020										March 31, 2019
	Allowance for Losses		Reserve for Losses		Total Allowance for Losses		Allowance for Losses		Reserve for Losses		Total Allowance for Losses
	(in thousands)
Beginning balance	$	10,454	$	2,164	$	12,618	$	7,017	$	2,167	$	9,184
Cumulative effect adjustment from adoption of current expected credit loss standard	1,793		863		2,656		—		—		—
Adjusted beginning balance	12,247		3,027		15,274		7,017		2,167		9,184
Provision for losses	3,438		393		3,831		(264)		(129)		(393)

Ending balance	$	15,685	$	3,420	$	19,105	$	6,753	$	2,038	$	8,791

As of June 30, 2019 As of June 30, 2018
Allowance
for Loan
Losses Reserve
for Losses Total
Allowance
for Losses Allowance
for Loan
Losses Reserve
for Losses Total
Allowance
for Losses
(in thousands)
For the Three Months Ended:
Beginning Balance $ 6,753
$ 2,038
$ 8,791
$ 6,365
$ 2,091
$ 8,456
Provision for/(release of) losses 578
(158 ) 420
424
158
582
Charge-offs (67 ) —
(67 ) —
—
—
Ending Balance $ 7,264
$ 1,880
$ 9,144
$ 6,789
$ 2,249
$ 9,038

For the Six Months Ended:
Beginning Balance $ 7,017
$ 2,167
$ 9,184
$ 6,796
$ 2,070
$ 8,866
Provision for/(release of) losses 314
(287 ) 27
(7 ) 179
172
Charge-offs (67 ) —
(67 ) —
—
—
Ending Balance $ 7,264
$ 1,880
$ 9,144
$ 6,789
$ 2,249
$ 9,038

The ~~provision~~cumulative effect adjustment from the adoption of CECL on January 1, 2020 was $2.7 million and was recorded directly to retained earnings, net of tax. The transition adjustment was the difference between (1) the total allowance for losses on December 31, 2019 that reflected probable incurred losses and (2) the total allowance for losses on January 1, 2020 that reflected expected losses.

The cumulative effect adjustment for credit losses on on-balance sheet assets was $1.8 million and was comprised of an increase of $5.4 million to the allowance for ~~loan~~ losses ~~recorded during the three months ended June 30, 2019 was attributable to an increase~~on Rural Utilities loans and Farmer Mac Guaranteed Securities and a $3.6 million decrease in the ~~general~~ allowance ~~due to net volume growth in on-balance sheet~~for losses on Farm & Ranch loans and ~~a slight decrease~~Farmer Mac Guaranteed Securities. Although Farmer Mac has never experienced any credit losses in its portfolio of Rural Utilities loans and Farmer Mac Guaranteed Securities, our estimate of expected losses is based upon reasonable and supportable forecasts over the ~~portfolio credit quality~~expected lives of ~~loan purchases.~~these assets. The ~~provision for~~reduction in the allowance for ~~loan~~ losses during the six months ended June 30, 2019 of $27,000 was because the portfolio growth and the slight decrease in credit quality experienced in second quarter 2019 offset the first quarter 2019 release from the allowance for loan losses. The release from the reserve for losses recorded during the three and six months ended June 30, 2019 was primarily attributable to a net volume decrease in off-balance sheet Farm & Ranch LTSPCs and a slight improvement in off-balance sheet portfolio credit quality.

As of June 30, 2019, Farmer Mac individually evaluated $51.4 million of the $172.4 million of recorded investment in impaired assets for collateral shortfalls against updated appraised values, other updated collateral valuations, or discounted values. For the remaining $121.0 million of impaired assets for which updated valuations were not available, Farmer Mac evaluated them in the aggregate in consideration of their similar risk characteristics and historical statistics. Farmer Mac recorded specific allowances of $3.8 million for undercollateralized assets as of June 30, 2019. Farmer Mac's general allowance was $5.3 million as of June 30, 2019.

The provision for the allowance for loan losses recorded during the three months ended June 30, 2018 were attributable to (1) a modest decrease in overall portfolio credit quality and (2) an increase in the general allowance due to net volume growth in both on ~~and off-balance sheet~~ Farm & Ranch loans ~~primarily related to new agricultural storage~~ and ~~processing loans purchased during second~~Farmer Mac Guaranteed Securities reflects the expected recovery rate based on loan-to-value ratios in those portfolios.

The cumulative effect adjustment for credit losses on LTSPCs was $0.9 million and was comprised of an increase of $1.0 million on Rural Utilities LTSPCs and a decrease of $0.1 million on Farm & Ranch LTSPCs.

In first quarter ~~2018. The net release~~2020, our forecasts included the effect of the COVID-19 pandemic on economic factors such as land values, gross domestic product, credit spreads, and unemployment. Primarily due to these updated economic factors, Farmer Mac recorded a total provision for losses of $3.8 million.

The provision to Farmer Mac's allowance for ~~loan~~ losses ~~recorded during the six months ended June 30, 2018 were attributable to (1) paydowns or payoffs~~for on-balance sheet assets was $3.4 million and was comprised of $2.2 million for expected losses on Rural Utilities loans ~~with an existing allowance in amounts that exceeded the increase in the allowance associated with net volume growth in~~and Farmer Mac Guaranteed Securities and $1.2 million on Farm & Ranch loans ~~recorded during the six months ended June 30, 2018~~ and ~~(2) paydowns on existing substandard loans or an improvement in the risk ratings of certain substandard loans, which resulted in a decrease in the amount of substandard assets~~

~~rated in the lowest credit quality tier.~~Farmer Mac Guaranteed Securities. The ~~net~~ provision ~~for the~~to Farmer Mac's reserve for losses ~~recorded~~on LTSPCs was $0.4 million and was primarily on Rural Utilities LTSPCs.

Our estimates of expected losses are based on historical information and reasonable and supportable forecasts. Our reasonable and supportable forecasts incorporate economic factor forecasts and are

sensitive to changes in those economics factor forecasts. As of March 31, 2020 our estimate of expected credit losses considered the economic volatility from the COVID-19 pandemic. In particular, the volatility in credit spreads and unemployment expectations were the two economic factors that had the most significant impact. These economic factors also had a more significant impact on our estimate of expected losses in Farmer Mac's Rural Utilities portfolio than in the Farm & Ranch portfolio. The effect of these economic factors on our estimate of expected losses was less significant on Farmer Mac's Farm & Ranch portfolio than on the Rural Utilities portfolio because of stable farm land values and stable credit quality in the Farm & Ranch portfolio during the ~~three~~quarter. In addition to the impact of volatility in our economic forecasts as the end of the first quarter, growth in net outstanding business volume across all portfolios also increased Farmer Mac's total allowance for losses, and ~~six months ended June 30, 2018 was primarily attributable to a net increase in the balance of loans underlying LTSPCs.~~thereby Farmer Mac's total provision for losses.

See ~~Note~~Notes 5 and 6 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."

Guarantee and Commitment Fees. ~~Guarantee~~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, ~~were $3.4 million and $6.9 million~~ for the three ~~and six~~ months ended ~~June 30, 2019, compared to $3.5 million~~March 31, 2020 and ~~$7.0 million for the same periods in 2018, respectively.~~2019:

Table 13


	For the Three Months Ended
					Change
	March 31, 2020		March 31, 2019		$		%
	(dollars in thousands)
Guarantee and commitment fees	$	3,196	$	3,513	$	(317)	(9)	%

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 the consolidated Farmer Mac Guaranteed Securities. As adjusted for the core earnings presentation, guarantee and commitment fees were ~~$5.3 million and $10.7~~$4.9 million for ~~the three and six months ended June 30, 2019,~~first quarter 2020 compared to ~~$5.2~~$5.4 million ~~and $10.3 million for the same periods~~ in ~~2018, respectively.~~first quarter 2019.

~~Gains/(losses)~~Losses on financial derivatives. The components of gains and losses on financial derivatives for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ are summarized in the following table:

Table 814


	For the Three Months Ended
					Change
	March 31, 2020		March 31, 2019		$		%
	(dollars in thousands)
(Losses)/gains due to fair value changes	$	(6,484)	$	2,240	$	(8,724)	(389)	%
Accrual of contractual payments	(1,190)		(2,544)		1,354		(53)	%
(Losses)/gains due to terminations or net settlements	(1,624)		(56)		(1,568)		2,800	%
Losses on financial derivatives	$	(9,298)	$	(360)	$	(8,938)	2,483	%

For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
(in thousands)
Gains/(losses) on financial derivatives:
Gains due to fair value changes $ 10,485
$ 6,709
$ 12,725
$ 4,429
Accrual of contractual payments (1,557 ) (3,998 ) (4,101 ) (6,299 )
(Losses)/gains due to terminations or net settlements (15 ) (177 ) (71 ) 554
Gains/(losses) on financial derivatives $ 8,913
$ 2,534
$ 8,553
$ (1,316 )

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 undesignated interest rate swaps ~~that are not designated in hedge accounting relationships~~ is shown as 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 ~~that are not designated in hedge accounting relationships~~ and initial cash payments received upon the inception of certain undesignated swaps ~~not designated in hedge accounting relationships~~ are included in ~~"(Losses)/gains~~"Gains due to terminations or net settlements" in the table above. For undesignated swaps, ~~not designated in a hedge accounting relationship,~~ when there is no direct

payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt. Changes in the fair value of these swaps are recognized immediately in "Gains/(losses) on financial derivatives," while the offsetting discount on the hedged debt is amortized over the term of the debt as an adjustment to its yield. The amounts of initial cash payments received by Farmer Mac vary depending on the number of the aforementioned type of swaps it executes during a quarter.

Other Income. ~~Other~~The following table presents other income ~~totaled $0.4 million and $0.8 million~~ for the three ~~and six~~ months ended ~~June 30, 2019, respectively, compared to $0.3 million~~March 31, 2020 and ~~$0.9 million for the same periods in 2018, respectively. Other income includes late fees~~2019:

Table 15


	For the Three Months Ended
					Change
	March 31, 2020		March 31, 2019		$		%
	(dollars in thousands)
Late fees	$	592	$	415	$	177	43	%
Other	224		78		146		187	%
Total other income	$	816	$	493	$	323	66	%

Operating Expenses. The components of ~~$0.2 million and $0.6 million on Farm & Ranch loans,~~operating expenses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~compared to $0.3 million and $0.8 million for~~are summarized in the ~~same periods in 2018, respectively.~~following table:

Table 16


	For the Three Months Ended
					Change
	March 31, 2020		March 31, 2019		$		%
	(dollars in thousands)
Compensation and employee benefits	$	10,127	$	7,606	$	2,521	33	%
General and administrative	5,363		4,596		767		17	%
Regulatory fees	725		688		37		5	%
Total Operating Expenses	$	16,215	$	12,890	$	3,325	26	%

a.Compensation and Employee Benefits. Compensation and employee benefits were $6.8 million and $14.4 million for the three and six months ended June 30, 2019, respectively, compared to $6.9 million and $13.6 million for the same periods in 2018, respectively. The year-over year increase in compensation and employee benefits ~~in the six months ended June 30, 2019 compared to the same period in 2018~~ was primarily due to an ~~overall~~ increase in ~~headcount~~bonus expense due to 2019 financial performance and ~~related employee health insurance costs.~~the severance payments made to an executive who resigned in first quarter 2020.

b.General and Administrative Expenses (G&A). ~~G&A expenses were $4.7 million and $9.3 million for the three and six months ended June 30, 2019, respectively, compared to $5.2 million and $9.5 million for the same periods in 2018, respectively.~~ The ~~decrease~~year-over-year increase in G&A expenses was primarily due to increased spending on software licenses and information technology consultants to support growth and strategic initiatives.

Income Tax Expense. The following table presents income tax expense and the effective income tax rate for the three months ended ~~June 30, 2019 compared to the same period in 2018 was primarily due to decreases in executive hiring expenses of $0.3 million~~March 31, 2020 and in servicing advances of $0.3 million. The decrease in G&A expenses for the six months ended June 30, 2019 compared to the same period in 2018 was primarily due to a decrease in legal fees of $0.4 million.2019:

Table 17


	For the Three Months Ended
							Change
	March 31, 2020			March 31, 2019			$		%
	(dollars in thousands)
Income tax expense	$	3,741		$	6,622		$	(2,881)	(44)	%
Effective tax rate	22.6		%	20.8		%			1.8	%

~~Regulatory Fees~~. Regulatory fees, which consist of the fees paid to the Farm Credit Administration ("FCA"), an independent agency in the executive branch of the United States government that regulates Farmer Mac, were $0.7 million and $1.4 million for the three and six months ended June 30, 2019, respectively, compared to $0.6 million and $1.3 million for the same periods in 2018, respectively. FCA has advised Farmer Mac that its estimated fees for the federal government fiscal year ending September 30, 2019 would increase to $2.75 million ($0.688 million per federal government fiscal quarter). After the end of a federal government fiscal year, FCA may revise its prior year estimated assessments to reflect actual costs incurred, and has issued both additional assessments and refunds in the past.

~~Income Tax Expense~~. Income tax expense was $9.1 million and $15.7 million for the three and six months ended June 30, 2019, respectively, compared to $7.3 million and $13.8 million for the same periods in 2018, respectively. The effective federal tax rate for the first half of 2019 closely approximates the 21.0% statutory federal corporate tax rate. For the first half of 2018, the effective tax rate was 20.0% due to tax benefits associated with stock compensation exercises.

Business Volume.

The following table sets forth the net growth or decrease under Farmer Mac's lines of business for the three months ended March 31, 2020 and 2019:

Table 18


Net New Business Volume – Farmer Mac Loan Purchases, Guarantees, LTSPCs, and AgVantage Securities
	For the Three Months Ended
	March 31, 2020		March 31, 2019
	Net Growth/(Decrease)		Net Growth/(Decrease)
	(in thousands)
Farm & Ranch:
Loans	$	81,826	$	22,574
LTSPCs	(47,181)		(40,962)
USDA Guarantees:
USDA Securities	44,344		(39,644)
Farmer Mac Guaranteed USDA Securities	(18,313)		8,803
Rural Utilities:
Loans	118,433		490,258
LTSPCs	(13,594)		(7,660)
Institutional Credit:
AgVantage securities	255,855		349,018

Total purchases, guarantees, LTSPCs, and AgVantage securities	$	421,370	$	782,387

Farmer Mac's net business volume growth of $421.4 million in first quarter 2020 was $361.0 million less than the $782.4 million of net growth achieved in first quarter 2019. Net growth in first quarter 2019 included one large, unique transaction – the purchase of a $546.2 million portfolio of participations in seasoned Rural Utilities loans from CoBank, which was Farmer Mac's first purchase of program assets from CoBank in any of our lines of business. Portfolio purchases of that size are unusual and are not expected to occur regularly, if at all, in future periods. Excluding the impact from the CoBank transaction in first quarter 2019, Farmer Mac's net growth in first quarter 2020 compared to first quarter 2019 was $185.2 million.

Our outstanding business volume was ~~$20.7~~$21.5 billion as of ~~June 30, 2019,~~March 31, 2020, a net increase of ~~$239.8~~$421.4 millionfrom ~~March~~December 31, 2019, after taking into account all new business, maturities, and paydowns on existing assets. This net increase was ~~driven by net growth~~across all four lines of ~~$81.0~~business: $255.9 million in Institutional Credit, $104.8 million in Rural Utilities, ~~$75.8~~$34.6 million in Farm & Ranch, ~~$46.5~~and $26.0 million in the USDA Guarantees line of business.

The $255.9 million net growth in the Institutional Credit ~~and $36.6 million~~line of business during first quarter 2020 was due primarily to two large counterparties who either upsized in ~~USDA Guarantees.~~connection with the refinancing of maturing bonds or issued new bonds that Farmer Mac purchased, which combined for net growth of $232.4 million. We also experienced net growth from smaller fund counterparties.

The $104.8 million net growth in our Rural Utilities line of business during first quarter 2020 was primarily due to the purchase of ~~four~~$152.7 million in loans from the ~~largest~~two main counterparties in that line of ~~which was $50.0 million. These purchases were~~business, partially offset by ~~repayments~~regularly scheduled payments, prepayments, and maturities of ~~$7.0 million during~~loans previously purchased and loans under LTSPCs. Net growth in our Rural Utilities line of business also included the ~~quarter.~~financing of a renewable energy project.

The ~~$75.8~~$34.6 million net increase in our Farm & Ranch line of business was comprised of a ~~$143.4~~$81.8 million net increase in outstanding loan purchase volume, partially offset by a ~~$67.6~~$47.2 million net decrease in loans under LTSPCs. ~~Based~~The net growth in first quarter 2020 reflected our ability to retain borrowers in a decreasing interest rate environment by proactively engaging with our customers and adjusting their rates and loan sizes to reflect current market conditions and their specific funding needs. The net growth in first quarter 2020 is also noteworthy because January 1^st is the date with the largest number of borrower payments due each year for the loans in Farmer Mac's portfolio, with most amortizing loans having a scheduled principal payment on ~~our analysis of bank and Farm Credit System call report data, the growth rate of the overall agricultural mortgage market decreased in 2018. Nevertheless, our~~that date. Our net growth of ~~8.6%~~16.2% in Farm & Ranch loan purchases over the twelve months ended ~~June 30, 2019 compared favorably to~~March 31, 2020 is significantly higher than the ~~4.7%~~2.5% net growth of the overall agricultural mortgage loan market over the twelve months ended ~~March~~December 31, ~~2019. Although~~2019 (based on our ~~gross purchase volume slowed during the first half~~analysis of ~~2019, the loan prepayment rate during that period was among the lowest we have ever experienced.~~bank and Farm Credit System call report data).

Our Institutional Credit line of business grew during second quarter 2019 through net growth of $25.0 million in AgVantage securities from one of our large counterparties and net growth of $45.7 million from two of our smaller financial fund counterparties.

Our USDA Guarantees line of business grew by ~~$36.6~~$26.0 million in first quarter 2020. The first quarter gross volume of $147.9 million was the highest gross volume that we have recorded since second quarter 2017. This growth reflected the positive effect of adjustments that we made to our product structure in the second half of 2019 ~~compared~~ to ~~net growth of $26.4 million~~more effectively meet customer demands in ~~second quarter 2018. This increase~~an increasingly competitive environment and in ~~growth reflects~~response to increased loan ~~volume being processed through~~limits mandated by the ~~USDA since the government shut-down during January 2019.~~2018 Farm Bill described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook" in this report.

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.

The following table sets forth ~~gross purchase volumes of non-delinquent eligible loans, new loans added under LTSPCs, and new guarantees~~information about the Farmer Mac Guaranteed Securities issued during the periods indicated in the Farm & Ranch, USDA Guarantees, and Rural Utilities lines of business, as well as purchases of AgVantage securities in the Institutional Credit line of business. The table also sets forth the net growth or decrease under Farmer Mac's lines of business, after maturities, principal paydowns, and sales:indicated:

Table 919


	For the Three Months Ended
	March 31, 2020		March 31, 2019
	(in thousands)
Loans securitized and sold as Farm & Ranch Guaranteed Securities	$	28,050	$	97,780
Farmer Mac Guaranteed USDA Securities	28,050		18,928
AgVantage securities	560,395		825,417
Total Farmer Mac Guaranteed Securities Issuances	$	616,495	$	942,125

New Business Volume – Farmer Mac Loan Purchases, Guarantees, LTSPCs, and AgVantage Securities
For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Gross volume Net growth/(decrease) Gross Volume Net growth/(decrease) Gross volume Net growth/(decrease) Gross Volume Net growth/(decrease)
(in thousands)
Farm & Ranch:
Loans $ 248,152
$ 143,361
$ 224,101
$ 104,600
$ 451,308
$ 165,936
$ 483,212
$ 180,226
LTSPCs 57,321
(67,594 ) 126,066
8,796
148,536
(108,556 ) 285,131
(2,414 )
USDA Guarantees:
USDA Securities 88,916
14,392
84,946
(14,841 ) 127,212
(25,252 ) 174,178
(5,534 )
Farmer Mac Guaranteed USDA Securities 29,419
22,223
45,014
41,217
48,346
31,026
79,307
71,435
Rural Utilities:
Loans 105,000
98,049
—
(51,659 ) 651,198
588,307
8,645
(84,473 )
LTSPCs —
(17,092 ) —
(8,699 ) —
(24,752 ) —
(128,721 )
Institutional Credit:
AgVantage securities 659,447
46,483
825,203
65,980
1,484,864
395,501
1,638,540
487,007
Total purchases, guarantees, LTSPCs, and AgVantage securities $ 1,188,255
$ 239,822
$ 1,305,330
$ 145,394
$ 2,911,464
$ 1,022,210
$ 2,669,013
$ 517,526

During the first half of 2019, we purchased 971 Farm & Ranch term loans and revolving line of credit draws. These purchases consisted of 361 term loans with an average unpaid principal balance of $923,000 and 610 revolving line of credit draws with an average unpaid principal balance of $195,000. During the first half of 2018, we purchased 1,071 Farm & Ranch term loans and revolving line of credit draws. These purchases consisted of 464 term loans with an average unpaid principal balance of $907,000 and 607 revolving line of credit draws with an average unpaid principal balance of $104,000.

Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans. The weighted-average age of the Farm & Ranch non-delinquent eligible loans purchased and retained (excluding the purchases of defaulted loans) during both ~~second~~first quarter ~~2019~~2020 and ~~2018~~2019 was less than one year. Of those loans, ~~63%~~53% and ~~55%~~65% had principal amortization periods longer than the maturity date, resulting in balloon payments at maturity, with a weighted-average remaining term to maturity of ~~15.0~~22.8 years and ~~17.7~~18.8 years, respectively.

During ~~second~~first quarter ~~2019~~2020 and ~~2018,~~2019, Farmer Mac securitized some of the Farm & Ranch loans it had purchased and sold the resulting Farmer Mac Guaranteed Securities, as shown below. During ~~the three~~first quarter 2020 and ~~six months ended June 30,~~ 2019, ~~and 2018,~~ Farmer Mac realized no gains or losses from the sale of Farmer Mac Guaranteed Securities or USDA Securities. Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets. ~~For the three and six months ended June 30, 2019,~~In first quarter 2020 none ~~and $63.1 million, respectively,~~

of our Farmer Mac Guaranteed Securities were sold to a related party to Farmer Mac, compared to first quarter 2019, in which $63.1 million of our Farmer Mac Guaranteed Securities were sold to a related party to Farmer Mac (which is related by virtue of its owning more than 10% of Farmer Mac's Class A voting common ~~stock, compared to none and $29.8 million for the same periods in 2018, respectively.~~stock).

~~The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the periods indicated:~~

~~Table 10~~

For the Three Months Ended For the Six Months Ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
(in thousands)
Loans securitized and sold as Farm & Ranch Guaranteed Securities $ 20,224
$ 20,074
$ 118,004
$ 116,982
Farmer Mac Guaranteed USDA Securities 29,419
45,014
48,347
79,307
AgVantage securities 659,447
825,203
1,484,864
1,638,540
Total Farmer Mac Guaranteed Securities issuances $ 709,090
$ 890,291
$ 1,651,215
$ 1,834,829

The following table sets forth information about outstanding volume in each of Farmer Mac's four lines of business as of the dates indicated:

Table 1120


Lines of Business - Outstanding Business Volume
	As of March 31, 2020		As of December 31, 2019
	(in thousands)
Farm & Ranch:
Loans	$	3,817,693	$	3,675,640
Loans held in trusts:
Beneficial interests owned by third party investors	1,540,689		1,600,917
LTSPCs	2,355,910		2,393,071
Guaranteed Securities	97,302		107,322
USDA Guarantees:
USDA Securities	2,241,863		2,199,072
Farmer Mac Guaranteed USDA Securities	404,343		421,103
Rural Utilities:
Loans	1,789,726		1,671,293
LTSPCs⁽¹⁾	595,685		609,278
Institutional Credit
AgVantage Securities	8,696,101		8,440,246
Total	$	21,539,312	$	21,117,942

⁽¹⁾As of both March 31, 2020 and December 31, 2019, includes $20.0 million related to one-year loan purchase commitments on which Farmer Mac receives a nominal unused commitment fee.

Lines of Business - Outstanding Business Volume
As of June 30, 2019 As of December 31, 2018
(in thousands)
Farm & Ranch:
Loans $ 3,191,035
$ 3,071,222
Loans held in trusts:
Beneficial interests owned by third party investors 1,563,223
1,517,101
LTSPCs 2,416,030
2,509,787
Guaranteed Securities 121,064
135,862
USDA Guarantees:
USDA Securities 2,089,101
2,120,553
Farmer Mac Guaranteed USDA Securities 432,293
395,067
Rural Utilities:
Loans 1,527,150
938,843
LTSPCs⁽¹⁾
628,521
653,272
Institutional Credit
AgVantage Securities 8,478,318
8,082,817
Revolving floating rate AgVantage facility⁽²⁾
300,000
300,000
Total $ 20,746,735
$ 19,724,524
72


⁽¹⁾	As of June 30, 2019 and December 31, 2018, includes $20.0 million and $17.0 million, respectively, related to one-year loan purchase commitments on which Farmer Mac receives a nominal unused commitment fee.


⁽²⁾	~~During the~~ ~~first half of both 2019 and 2018~~, $100.0 million of this facility was drawn and subsequently repaid. Farmer Mac receives a fixed fee based on the full dollar amount of the facility. If the counterparty draws on the facility, the amounts drawn will be in the form of AgVantage securities, and Farmer Mac will earn interest income on those securities.

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 ~~June 30, 2019:~~March 31, 2020:

Table 1221

Schedule of Principal Amortization as of June 30, 2019
Loans Held Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs USDA Securities and Farmer Mac Guaranteed USDA Securities Total
(in thousands)
2019 $ 125,483
$ 113,910
$ 48,055
$ 287,448
2020 284,922
242,538
115,977
643,437
2021 294,115
272,934
111,310
678,359
2022 257,100
209,608
115,287
581,995
2023 270,102
196,436
118,765
585,303
Thereafter 5,049,686
2,130,189
2,012,000
9,191,875
Total $ 6,281,408
$ 3,165,615
$ 2,521,394
$ 11,968,417


Schedule of Principal Amortization as of March 31, 2020
	Loans Held		Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs		USDA Securities and Farmer Mac Guaranteed USDA Securities		Total
	(in thousands)
2020	$	186,699	$	173,573	$	82,597	$	442,869
2021	333,292		278,556		114,890		726,738
2022	293,415		224,775		117,543		635,733
2023	307,318		199,305		122,379		629,002
2024	309,324		179,630		120,344		609,298
Thereafter	5,718,060		1,993,058		2,088,453		9,799,571
Total	$	7,148,108	$	3,048,897	$	2,646,206	$	12,843,211

Of the ~~$20.7~~$21.5 billion outstanding principal balance of volume included in Farmer Mac's four lines of business as of ~~June 30, 2019, $8.8~~March 31, 2020, $8.7 billion were AgVantage securities included in the Institutional Credit line 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 ~~June 30, 2019~~:March 31, 2020:

Table 1322


AgVantage Balances by Year of Maturity
	As of
	March 31, 2020
	(in thousands)
2020	$	1,485,829
2021	1,712,562
2022	1,441,962
2023	824,370
2024	817,711
Thereafter⁽¹⁾	2,413,667
Total	$	8,696,101

AgVantage Balances by Year of Maturity
As of
June 30, 2019
(in thousands)
2019 $ 509,219
2020 1,336,760
2021 1,605,084
2022⁽¹⁾
1,595,909
2023 799,143
Thereafter⁽²⁾
2,932,203
Total $ 8,778,318


⁽¹⁾⁽¹⁾Includes various maturities ranging from 2025 to 2044.	~~Includes the expiration of the $300.0 million revolving floating rate AgVantage facility.~~


⁽²⁾	~~Includes various maturities ranging from 2024 to 2044.~~

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was ~~5.4~~4.9 years as of March 31, 2020.

~~June 30, 2019~~.

Outlook

Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as the secondary market that helps meet the financing needs of rural America. ~~While the~~The pace of Farmer ~~Mac's~~Mac’s growth will depend on the capital and liquidity needs of the ~~participants~~lending institutions in the agricultural and rural financing business as well as the overall health of agriculture and rural borrowers in the sectors we serve.

Farmer Mac foresees opportunities for ~~continued~~ growth across our lines of business driven by several key factors:

•As agricultural and rural utilities lenders seek to manage equity capital and return on equity capital requirements or seek to reduce exposure due to lending limits or concentration limits, Farmer Mac can provide relief for those institutions through loan and portfolio purchases, participations, guarantees, LTSPCs, or wholesale funding.

•While overall loan growth within the rural utilities industry appears to be ~~modest~~moderate in the near term due to generally flat demand for capital, future growth opportunities may increase in Farmer ~~Mac's~~Mac’s Rural Utilities line of business from ~~transacting~~deepening business relationships with ~~new~~eligible counterparties and exploring new types of loan products. These opportunities may be limited by sector growth, credit quality, and the competitiveness of Farmer ~~Mac's~~Mac’s products.

•As a result of business ~~development efforts, targeted marketing~~ and ~~brand awareness initiatives,~~ product development efforts, and continued interest in the agricultural asset class from institutional investors, Farmer ~~Mac's~~Mac’s customer base and product set continue to expand, which may generate more demand for Farmer ~~Mac's~~Mac’s products from new sources.

•Consolidation within the agricultural finance industry, coupled with Farmer ~~Mac's~~Mac’s relationships with larger regional and national lenders, continue to provide opportunities that could influence Farmer ~~Mac's~~Mac’s loan demand and increase the average transaction size within Farmer ~~Mac's~~Mac’s Farm & Ranch line of business.

•Expansion and refinancing opportunities for agricultural producers resulting from ~~the~~a decrease in interest rates have increased financing requirements for mergers and acquisitions, consolidation, and vertical integration ~~that is occurring~~ across many sectors of the agricultural industry, which may also generate demand for Farmer ~~Mac's Farm & Ranch~~Mac’s loan products.

~~We believe~~The COVID-19 pandemic and related efforts to contain it are creating extensive disruptions to the global economy, adversely affecting the functioning of financial markets, increasing market uncertainty, and disrupting global trade and supply chains. These disruptions could impact or alter our growth objectives given that the duration and full effects of the COVID-19 pandemic are rapidly evolving and still not fully known. The pandemic's impacts on our growth objectives will depend on many factors, including:

•The closure of county offices and reductions in available staff has negatively affected the established process for mortgages, title work, and other loan closing requirements in some areas and in many cases has delayed and may continue to delay borrowers' ability to close on their agricultural loans, which has delayed and may continue to delay our ability to purchase those loans.

•The inability of borrowers to close on renewable energy loans due to delays in receiving components, installation inefficiencies caused by social distancing among workers, and difficulties in obtaining inspections and grid interconnection on a timely basis could result in fewer opportunities for us in the Rural Utilities sector.

•Responding to borrowers' payment deferral requests, including payments made to holders of Farmer Mac Guaranteed Securities to cover principal and interest shortfalls and the corresponding capital consumption could delay planned growth initiatives. For more information about the impact of COVID-19 on Farmer Mac's payment deferral requests received to date, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

•The economic effects of government and employer responses to the COVID-19 pandemic, such as decreasing production capacity to comply with social distancing requirements, may provide opportunities for Farmer Mac to provide capital and liquidity to agricultural producers and rural utilities cooperatives, to help them maintain operations or as they face drawing on their reserves during this crisis.

•Many states have imposed a moratorium from shutting off electrical service to customers due to the non-payment of power bills. The degree to which this will affect the financial condition of the cooperative utilities financed by Farmer Mac remains unclear. The potential need for temporary liquidity on the part of cooperative utilities could present opportunities for Farmer Mac to provide financing.

•The impact of aggressive social distancing requirements has caused some borrowers’ operations to close or be significantly reduced, which may have the effect of delaying or postponing planned or potential mergers and acquisitions, consolidations, and vertical integrations and, consequently, reducing the need for Farmer Mac’s products and services until these effects subside.

•As borrowers may seek to obtain additional financing and liquidity from lenders to maintain operations and production during this time, these short-term funding requirements could create additional growth opportunities ~~will be important~~for Farmer Mac as lenders look to manage lending limits and credit concentrations as financing demands arise.

•Financial market volatility, coupled with uncertainty regarding the long-term impacts of the pandemic, is causing some financial institutions to delay or cease capital deployment to many sectors that Farmer Mac serves. While these reductions could reduce our loan purchase opportunities, Farmer Mac could also provide a much-needed source of secondary market liquidity to help stimulate capital deployment during this time of uncertainty.

•The disruptions in ~~replacing income earned on~~capital markets and the widening of credit spreads could impact Farmer Mac’s funding costs and could result in higher interest rates charged for our ~~loans~~products and ~~other assets as they mature, pay down, or are reinvested at potentially lower spreads.~~

services, which could adversely affect our competitiveness in the sectors we serve.

Operating Expense ~~Outlook~~. Farmer Mac continues to expand its investments in human capital, technology, and business infrastructure to increase capacity and efficiency as it seeks to accommodate its growth opportunities and achieve its long-term strategic objectives. Accordingly, Farmer Mac expects ~~the annual~~continued increases in its operating expenses ~~to be above historical averages~~ over the next several years. ~~Although~~We expect these efforts to continue and increase through 2020 as we innovate and grow our business.

Operations. On March 12, 2020, Farmer Mac activated its business continuity plan and has been operating ~~expenses (compensation~~uninterrupted since then with all of its employees working remotely from their homes. Farmer Mac has provided guidance and ~~employee benefits, general~~support to all of its employees to ensure that they have the tools and ~~administrative expenses,~~knowledge needed to effectively work from home, and ~~regulatory fees)~~Farmer Mac’s technology platform and business continuity plan have been functioning as designed in support of all functions of the organization with no

material disruption of business. We do not expect Farmer Mac's remote-working environment to have a material effect on our operations either in the near term or for the ~~six months ended June 30, 2019~~foreseeable future. As a secondary market participant in the agricultural and rural utility lending space, Farmer Mac's business model is already based on remote interface with its customers and vendors. As of the date of this report, we have ~~increased by only 3% over the comparable prior year period,~~not identified any significant disruptions with our primary vendors (including our loan servicers) that we continue to believe that aggregate operating expenses will increase by approximately 8% to 9% in 2019 relative to 2018 due to the timing of various growth and strategic initiatives planned for the second half of 2019.expect would materially affect our business operations.

Agricultural Industry. The agricultural industry includes many diverse sectors that respond in different ways to changes in economic conditions. Those individual sectors often are affected differently, sometimes positively and sometimes negatively, by prevailing domestic and global economic factors and regional weather conditions. ~~This~~The interconnectedness between sectors typically results in cycles where one or more ~~sectors~~segments may be under stress while others are not. ~~The profitability of agricultural sectors~~

Through disrupted supply chains and commodity demand, the COVID-19 pandemic is ~~also affected by the demand for and supply of agricultural commodities and products on a domestic and global basis, which can vary largely as a result~~

~~of global production trends, international trade policies, weather patterns, access to water supply, and harvest conditions.~~

pressuring farm incomes in 2020. Net cash income, one of the ~~USDA's~~USDA’s benchmark measures of economic activity in the agricultural industry, has ~~declined significantly since reaching~~leveled off near the long-run, inflation-adjusted historical average for the sector. Mandatory school and restaurant closures in March and April in many states dramatically changed the demand functions for food production, particularly in the protein and fresh fruit and produce sectors. The reduction in gasoline consumption during those months eroded demand for ethanol, and many plants cut production in response, which reduced corn purchases. The global demand for soybeans and cotton fell short of expectations as well. Nearly all primary agricultural commodity prices fell in first quarter 2020 as a ~~cyclical peak~~result of changing market dynamics. The combined effects of the pandemic will likely result in ~~2013. However, changes~~lower total farm revenue in 2020. While Farmer Mac has no direct exposure to cattle or hog processing, the Farm & Ranch portfolio does include some direct exposure to dairy processing ($21 million) and hog production ($40 million) and larger exposures to indirectly impacted industries like corn and soybeans ($2.4 billion), cattle and calves ($0.7 billion), and dairy ($0.5 billion). For more information on Farmer Mac's commodity concentration levels and cumulative losses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

The decline in revenue has multiple potential offsets to help support producers’ profitability. First, farm ~~income levels are largely localized~~expenses fell for many producers during first quarter 2020. Lower energy prices improved the cost of fuel and ~~depend on producer region~~fertilizer ahead of the planting season. Lower grain prices led to a decrease in animal feed input costs, and ~~commodity production type.~~lower replacement animal prices improved the cost structure for many protein producers. Second, there was a final cash payment from the 2019 Market Facilitation Program (MFP) for many crop and protein producers. The USDA ~~forecasts~~has expressed its plans to pay nearly $3.7 billion in assistance payments from last year’s MFP program in April and May 2020. In April 2020, the USDA announced a $19 billion emergency aid package, including $16 billion in direct payments to distribute to producers in May or June 2020 and $3 billion in food purchases. It is expected that ~~aggregate net cash income levels decreased year-over-year~~the USDA will receive an additional $14 billion in ~~2018 due~~authorized funding in July 2020, giving the department more resources to ~~rising farm production expenses that were not entirely offset by higher revenues. The USDA projects net cash income growth will rebound by 4.7%~~support farmers, ranchers, and the American food, fiber, and fuel system later in ~~2019 due to slight improvements in commodity prices and moderating cash farm expenses.~~ the growing season.

Farmland values ~~appear~~have continued to ~~have held steady in 2018, even in~~increase on average, rising at approximately the ~~Midwest region where producers are most exposed to changes in~~rate of inflation for the ~~grain markets.~~last two years. Data released in ~~2018~~2019 by the USDA indicates an average ~~increase~~decrease in farm real estate values of ~~2.7%~~0.2% in ~~2018~~2019 in Corn Belt states (Illinois, Indiana, Iowa, Missouri, and Ohio), but ~~a decrease~~an increase of ~~1.4%~~2.8% in Northern Plains states (Kansas, Nebraska, North Dakota, and South Dakota). In all other regions, farmland value averages are reported to be flat to increasing. The COVID-19 pandemic has slowed public auctions and sales in 2020, but transactions are progressing and values were holding through the first quarter. While regional averages for farmland values provide a good barometer for the overall movement

in U.S. farmland values, economic forces affecting land markets are highly localized and some markets may experience greater volatility than state or national averages indicate.

Over the past few decades, the U.S. agricultural industry has become increasingly connected to global trade, and agricultural export demand depends significantly on trading relationships in numerous foreign markets, as well as on foreign exchange rates. A ~~slowdown~~prolonged decline in global economic growth or continued tightening in trade policies and agreements could adversely affect the demand for certain U.S. agricultural exports, which may result in downward pressure on commodity prices. ~~For example,~~Also, the ~~series~~strength of ~~reciprocal import tariffs placed on various agricultural products by China and~~ the U.S. during 2018 and 2019 has materially affected the export sales for these products, particularly soybeans produced in the U.S. In May 2019, Canada and Mexico removed retaliatory tariffs from U.S. agricultural imports, which improved export demand from the U.S.'s largest agricultural trading partners.

~~In 2018 and 2019, the USDA has used direct financial aid~~dollar relative to try to dampen the effects of market disruption due to retaliatory tariffs placed by trading partners on agricultural exports. In August 2018, the USDA announced details on a $12 billion aid package for U.S. agricultural producers designed to help offset expected market losses resulting from trade disruptions. The American Farm Bureau reports that, as of May 13, 2019, more than $8.5 billiontrading-partner currencies has been directly distributed to producers through the USDA's Market Facilitation Program (MFP), the largest and most direct component of the trade aid package. The 2018 MFP payments constitute approximately 9.3% of 2018 net cash income, which equates to approximately 60% of the estimated decrease in net cash income for 2018. Farmer Mac estimates that about 50% of outstanding Farm & Ranch loan volume as of June 30, 2019 was to borrowers who were eligible for a payment under the 2018 MFP. In May 2019, the USDA released initial details on a new relief package totaling up to $16 billion in aid, $14.5 billion of which could come from direct MFP payments. The USDA expects payments to occur in three tranches from August 2019 through January 2020, and any future payments would be cancelable if market conditions improve. Farmer Mac estimates that about 65% of outstanding Farm & Ranch loan volume as of June 30, 2019 was to borrowers who would be eligible for a payment under the 2019 MFP. Coincident with the trade stresses, the U.S. dollarelevated since 2016 (as measured by the U.S. Dollar Index) ~~strengthened by approximately 5% during 2018. This decreased~~. A strong U.S. dollar decreases the competitiveness of U.S. agricultural exports ~~and thereby diminished their~~by raising U.S. prices relative to other countries’ producers. The COVID-19 pandemic has the potential to disrupt global demand for U.S. agriculture throughout 2020. However, free-trade agreements with Canada, Mexico, and ~~contributed to reduced producer profitability. Through second quarter 2019,~~Japan as well as positive trade talks with China, the ~~U.S. dollar strength remained relatively unchanged from late 2018. We believe that our portfolio is sufficiently diverse by product~~U.K., and ~~production region to be able to withstand any short-term market volatility that may arise~~the E.U. present strong opportunities for export markets when COVID-19 recedes.

because of changes in trade policy or sentiment. However, a prolonged trade dispute between one or more primary agricultural markets without substantial offsetting relief could put significant financial stress on the U.S. agricultural industry, which could have an adverse effect on Farmer Mac's portfolio.

In addition to global trade disruptions, many U.S. farmers and ranchers experienced difficult weather conditions during the first half of 2019. Due to excessive soil moisture, record-setting precipitation, and cool temperatures early in the growing cycle, many corn and soybean growers throughout the Midwest were either significantly delayed or prevented from planting their intended crop for 2019. Delays in corn and soybean planting reduce crop yield potential and, ultimately, total grain production. USDA has reported that, through early June 2019, corn planting progress set a record slow pace in 23 states including most of the Midwestern Corn Belt. Farmer Mac estimates that 27% of outstanding Farm & Ranch loan volume as of June 30, 2019 was to borrowers growing corn and soybeans in the affected area. Also, the clear majority of corn and soybean acres are enrolled in federally-subsidized crop insurance programs. According to USDA data, nearly 90% of all U.S. corn and soybean acres planted between 2016 and 2018 were enrolled in federal crop insurance programs, and most policies include a provision that allows for insurance payment claims on acres that were prevented from planting due to inclement weather. Farmer Mac estimates that about 85% of outstanding Farm & Ranch loan volume to borrowers growing some corn or soybeans in the affected states likely maintain federal crop insurance coverage. The reduced supply expectations for grains attributable to adverse weather conditions put upward pressure on market prices during second quarter 2019. Corn and soybean futures prices rose 19% and 10%, respectively, between May and July. Although planting conditions were difficult in 2019, Farmer Mac believes that there are enough risk mitigators in its grain portfolio to offset the short-term pressure to grain profitability related to adverse weather.

~~In recent years, the~~has experienced higher 90-day delinquencies and ~~credit losses~~substandard asset ratings in ~~Farmer Mac's portfolio have remained low~~recent quarters. The increase is a function of agricultural cycles trending toward tighter industry profitability levels compared to ~~historical averages. However, some indications of stress have emerged, as the volume of Farmer Mac's substandard assets has generally increased since~~peaks experienced from 2012 to 2015. To date, the fluctuations in 90-day delinquencies and the increase in substandard assets have not yet translated into rising credit losses. Farmer Mac believes that ~~any losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of~~ its portfolio ~~which Farmer Mac believes~~ is ~~adequately collateralized. Farmer Mac believes that its portfolio remains sufficiently~~highly diversified, both geographically and by commodity, and that its portfolio has been underwritten to high credit quality standards. Therefore, Farmer Mac ~~therefore~~ believes that its portfolio is well-positioned to endure reasonably foreseeable volatility in commodity prices and farmland ~~values~~values. However, the COVID-19 pandemic and ~~commodity prices.~~a subsequent economic downturn could alter the trajectory of the current agricultural cycle. A prolonged disruption may result in elevated loan delinquencies, and a higher percentage of loans rated substandard as more payments become due in July. Loan deferments approved through May 1, 2020 represent 1 percent of the Farm & Ranch portfolio, but this level could also rise as more loans reach payment due dates in July. Finally, the $3.8 million increase in Farmer ~~Mac also continues to closely monitor sector profitability,~~Mac’s allowance for credit losses in first quarter 2020 reflects the current expected increased default and substandard rates in future periods. This amount could fluctuate in future quarters based on loan performance and economic ~~and weather~~ conditions ~~and agricultural land value and geographic trends to tailor underwriting practices to changing conditions.~~in the coming months. For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Farm & Ranch loans in Farmer ~~Mac's~~Mac’s portfolio as of ~~June 30, 2019,~~March 31, 2020, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

In response to the COVID-19 pandemic and the related economic effects, Congress passed a series of stimulus measures, including the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which contained over $23 billion directed to agricultural and commodity support. For more information on the CARES Act, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Matters." In addition to legislation and stimulus in response to COVID-19, Farmer Mac continues to monitor the establishment and evolution of legislation and regulations ~~as well as the status of various international trade agreements and partnerships,~~ that could affect farmers, ranchers, rural lenders, and rural America in general. The Agricultural Improvement Act of 2018, also referred to as the ~~"farm bill,~~"Farm Bill," was signed into law in December 2018. Many provisions in the new farm bill are a continuation of existing federal agricultural policies in effect under the previous farm bill, including those affecting crop insurance, commodity support programs, and other aspects of agricultural production. We will continue to monitor the effects of any altered federal agricultural policies as the USDA adopts final regulations implementing the new farm bill.

~~The farm bill includes~~included a provision that amends Farmer Mac's charter to expand the acreage exception to the loan amount limitation on Farm & Ranch loans (currently ~~$13.1~~$13.2 million) from 1,000 acres to 2,000 acres, subject to ~~FCA's~~ assessment by Farmer Mac's prudential regulator, the Farm Credit Administration ("FCA"), of the feasibility of the ~~change. FCA~~change, which it submitted ~~its assessment~~ to Congress on June 18, 2019. In that assessment, FCA concluded that increasing the acreage exception from 1,000 to 2,000 acres is feasible, would not raise any safety and soundness concerns, and would provide additional farming operations unconstrained access to Farmer Mac’s secondary market. Accordingly, the acreage exception will increase to 2,000 acres on June 18, 2020, meaning that the statutory loan amount limitation will not apply to Farm & Ranch loans secured by 2,000 acres of agricultural real estate or less. Farmer Mac will continue to evaluate this future increase in the

acreage limitation to determine the potential benefits to Farmer Mac's customers and the related effects on our business.

Under the ~~farm bill,~~Farm Bill, the authorized limit for the amount of new guarantees issued by the USDA under the Consolidated Farm and Rural Development Act ~~which~~(which are eligible for Farmer Mac's USDA Guarantees line of ~~business,~~business) was increased from $3.026 billion to $7.0 billion for each government fiscal year through September 2023. Also, the limit for the size of individual loans to which these guarantees are applied was increased from $1.399 million to $1.75 million, which thereby increases the authorized amount of the USDA-guaranteed portion for an individual loan. These higher loan limits likely contributed to additional growth in the USDA Guarantees purchased by Farmer Mac during first quarter 2020, and they could result in ~~increased~~more increases in new business volume in our USDA Guarantees line of business ~~and we have already purchased USDA-guaranteed portions allowed under~~in the ~~raised individual loan limit.~~future.

Farmer Mac also continues to monitor ~~the impact of~~ state legislation and regulations that could impact U.S. agriculture. For example, groundwater management ~~practices,~~regulations, including in California, may result in tighter restrictions on groundwater usage that could affect agricultural producers in the future. Farmer Mac will monitor the effects that any changes in legislation or regulation (federal or state) could have on Farmer Mac or its customers.

Farmer Mac's marketing and brand awareness initiatives directed towards the Farm & Ranch line of business focus on lenders that have demonstrated a commitment to agricultural lending based on their lending history. Farmer Mac conducts its outreach efforts to these lenders through direct personal contact, which is facilitated through Farmer Mac's frequent participation in state and national banking conferences, its alliances with the American Bankers Association and the Independent Community Bankers of America, and its business relationships with members of the Farm Credit System. Farmer Mac's initiatives to increase the awareness of Farmer Mac and its products within the agricultural lender community and the larger agricultural industry have included hosting events on relevant agricultural lending topics, participating on speaker panels at agriculture-related regional and national conferences, and distributing original content about conditions in the agricultural economy. Demand for Farmer Mac's secondary market tools also depends on the fluctuating needs of rural lenders as they seek to maintain liquidity and adequate capital levels.

Farmer Mac also directs marketing efforts towards the agricultural industry by trying to identify and develop relationships with potential issuers of AgVantage securities, including insurance company agricultural lenders, agricultural finance companies, and bank and non-bank agricultural lenders such as agricultural mortgage funds, all of whom can pledge loans as collateral to obtain financing as part of Farmer Mac's Institutional Credit line of business. Farmer Mac offers other AgVantage products tailored to fund investors in agricultural mortgages. Farmer Mac directs its outreach efforts to these potential issuers through its business relationships within the agricultural community and through executive outreach to

institutions whose profile presents an opportunity to benefit from wholesale financing. As institutional investment in agricultural assets continues to grow, Farmer Mac believes that it is in a unique position to help increase access to capital for these types of counterparties and thereby provide a new source of capital to benefit rural America. Farmer Mac believes there is opportunity to expand this type of business as both the trend toward institutional investment in agricultural assets and awareness of Farmer Mac's AgVantage product offerings continue to grow.~~For more information about the AgVantage products, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional."~~

Rural Utilities Industry. Prospects for loan growth within the rural utilities industry overall appear to be ~~modest~~moderate in the near term due to generally flat demand for capital, as capital expenditures for large generation assets have decreased and increased revenues for electrical cooperatives have driven a de-leveraging trend. ~~Future~~Farmer Mac's future growth opportunities ~~within~~for lending to the ~~rural utilities~~electrical cooperative industry may be ~~impacted~~affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the continuation of a low interest rate environment, and competitive dynamics within the rural utilities cooperative finance industry. ~~In the coming years, the~~The retirement of coal generation assets, ~~the~~ growth in renewable energy generation, ~~the~~ deployment of energy storage technologies, expansion of broadband service in rural areas, and the deepening of relationships with new and existing counterparties, all may provide new business opportunities for Farmer Mac. To address some of these trends, Farmer Mac has deployed new financing products tailored to the renewable energy sector, which represents a new market opportunity for Farmer Mac. Under this new program, Farmer Mac purchased a participation interest in a solar project financing in late 2019 and additional solar project participation interests from a new counterparty during first quarter 2020. Farmer Mac anticipates further growth in this area during 2020.

Balance Sheet Review

The following table summarizes the balance sheet as of the periods indicated:

Table 23


	As of								Change
	March 31, 2020			December 31, 2019		$			%
	(in thousands)
Assets
Cash and cash equivalents	$	1,231,585		$	604,381	$	627,204		104	%
Investment securities, net of allowance	3,006,189			3,004,875		1,314			—	%
Farmer Mac Guaranteed Securities, net of allowance	9,035,069			8,590,476		444,593			5	%
USDA Securities	2,278,019			2,241,073		36,946			2	%
Loans, net of allowance	7,315,224			6,981,440		333,784			5	%
Other	314,024			287,129		26,895			9	%
Total assets	$	23,180,110	23,180,110	$	21,709,374	$	1,470,736		7	%
Liabilities
Notes Payable	20,665,020			19,098,648		1,566,372			8	%
Other	1,821,473			1,811,450		10,023			1	%
Total liabilities	$	22,486,493		$	20,910,098	$	1,576,395	1576395	8	%
Total equity	693,617			799,276		(105,659)			(13)	%
Total liabilities and equity	$	23,180,110		$	21,709,374	$	1,470,736		7	%

Assets. ~~Farmer Mac's total assets as of June 30, 2019 were $20.7 billion, compared to $18.7 billion as of December 31, 2018.~~ The increase in total assets was primarily attributable to the net growth in our outstanding business volume across all lines of business.

~~As of June 30, 2019, Farmer Mac had $0.4 billion of~~The increase in cash and cash equivalents was primarily due to a decision to increase our liquidity investment portfolio due to the COVID-19 pandemic and ~~$3.0 billion of investment securities, compared~~ to $0.4 billion of cash and cash equivalents and $2.3 billion of investment securities as of December 31, 2018. As of June 30, 2019, Farmer Mac had $8.6 billion of Farmer Mac Guaranteed Securities, $6.3 billion of loans, net of allowance, and $2.1 billion of USDA Securities. This compares to $8.1 billion of Farmer Mac Guaranteed Securities, $5.5 billion of loans, net of allowance, and $2.2 billion of USDA Securities as of December 31, 2018.support our program asset growth.

Liabilities. ~~Farmer Mac's total liabilities were $20.0 billion as of June 30, 2019, compared to $17.9 billion as of December 31, 2018.~~ The increase in total liabilities was primarily ~~attributable~~due to an increase in total notes ~~payable.~~payable to support our program asset growth.

Equity. ~~As of June 30, 2019, Farmer Mac had total equity of $773.7 million, compared to $752.6 million as of December 31, 2018.~~ The ~~net increase~~decrease in total equity ~~of $21.1 million~~ was ~~a result of the Board-authorized Series D Preferred Stock issuance of $100.0 million,~~primarily due to an increase in ~~retained earnings of $35.2 million, partially offset by the redemption of $75.0 million of Series B Preferred Stock and a decrease in accumulated~~ other comprehensive ~~income~~losses, net of ~~$37.8 million.~~tax, primarily due to decreases in the fair value of available-for-sale securities and financial derivatives designated in cash flow hedge accounting relationships.

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) Farmer Mac Guaranteed Securities, which are available through each of the Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit lines of business; and (2) LTSPCs, which are available through the Farm & Ranch and Rural Utilities 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 de-consolidation, both of these alternatives create off-balance sheet obligations for Farmer Mac. See Note 6 to the consolidated financial statements for more information about consolidation and Farmer Mac's off-balance sheet business activities.

Risk Management

Credit Risk – Loans and Guarantees.

COVID-19

Farmer Mac continues to monitor the effects of the COVID-19 pandemic on Farmer Mac's credit risk related to Farmer Mac's borrower exposures. Farmer Mac has seen an increase in payment deferment requests from its network of loan servicers on behalf of borrowers in Farmer Mac's Farm & Ranch loan portfolio, and we expect these requests to increase over the near term. To address these requests, Farmer Mac has established criteria for approval of payment deferments for borrowers impacted by the COVID-19 pandemic and have communicated these criteria to key counterparties. Farmer Mac will monitor the criteria as the impact of the pandemic continues to unfold and determine if any changes should be incorporated. Most of the payment deferments Farmer Mac has approved for loans it has purchased or securitized in its Farm & Ranch portfolio have been for three months, with the deferred principal and interest payments re-amortized into the outstanding principal balance at the end of the deferral period. Approved payment deferments for loans in LTSPC have varied from three-month payment deferments for principal and interest to deferred interest only payments for up to twelve months, depending on the applicable LTSPC lender's deferment policy.

In addition, FCA has issued regulatory guidance encouraging Farmer Mac to work with its lending and servicing partners in approving servicing actions for borrowers impacted by COVID-19. The table below presents approved payment deferments through May 1, 2020 in the Farm & Ranch line of business. Farmer Mac has not received any payment deferment requests in the Rural Utilities line of business For more information about FCA's regulatory guidance related to the COVID-19 pandemic, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Matters."

Table 24


Farm & Ranch COVID-19 Deferments through May 1, 2020
Program	Number of Loans Approved	Unpaid Principal Balance
	(in thousands, except loan counts)
Farm & Ranch:
Loans held in consolidated trusts	26	$	25,412
Loans held for investment	19	18,358
LTSPCs	26	35,147
Total	71	$	78,917

Farm & Ranch

Farmer Mac's direct credit exposure to Farm & Ranch loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs as of ~~June 30, 2019~~March 31, 2020 was ~~$7.3~~$7.8 billion across 48 states. For more information about Farmer Mac's underwriting and collateral valuation standards for Farm & Ranch loans, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Valuation (Appraisal) Standards" in Farmer ~~Mac's~~Mac’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019.~~25, 2020.

Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of June 30, 2019 was $2.1 billion across 43 states, of which $1.7 billion were loans to electric distribution cooperatives and $0.4 billion were loans to Generation & Transmission cooperatives. For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Utilities loans, see "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 21, 2019. As of June 30, 2019, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans, and Farmer Mac had not experienced any credit losses on Rural Utilities loans since Congress authorized Farmer Mac's Rural Utilities line of business in 2008. Based on this performance, Farmer Mac excludes the loans in the Rural Utilities line of business from the credit risk metrics it discloses.80

Farmer Mac has indirect credit exposure to the Farm & Ranch loans ~~and Rural Utilities loans~~ that secure AgVantage securities included in the Institutional Credit line of business. For more information about Farmer Mac's underwriting and collateral valuation standards for Institutional Credit securities, see "Business—Farmer Mac's Lines of Business—Institutional Credit" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 21, 2019.

As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac had not experienced any credit losses on any AgVantage ~~securities and does not expect to incur any such losses in the future.~~securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional" for more information about Farmer Mac's credit risk on AgVantage securities.

The credit exposure on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is covered by the full faith and credit of the United States. Therefore, Farmer Mac believes that we have little or no credit risk exposure in the USDA Guarantees line of business because of the USDA guarantee. As of ~~June 30, 2019, Farmer Mac had not experienced any credit losses on any~~

~~business under the USDA Guarantees line of business and does not expect to incur any such losses in the future.~~

Farmer Mac considers a 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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the average unpaid loan balances for loans outstanding in the Farm & Ranch line of business was ~~$644,000~~$686,000 and ~~$640,000,~~$683,000, respectively. Farmer Mac calculates the ~~original loan-to-value~~"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 ~~consolidated~~combined basis rather than on a loan-by-loan basis. The weighted-average original loan-to-value ratio for Farm & Ranch loans purchased during ~~second~~first quarter ~~2019~~2020 was ~~53%~~54%, compared to ~~46%~~48% for loans purchased during ~~second~~first quarter ~~2018.~~2019. The weighted-average original loan-to-value ratio for all Farm & Ranch loans held and all loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was 51% as of both ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. The weighted-average original loan-to-value ratio for all 90-day delinquencies was ~~52%~~49% and 53% as of ~~both June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019, respectively.

The weighted-average current loan-to-value ratio (the ~~loan-to-value~~loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect ~~loan~~ amortization) for Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was 45% as of both ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018. See Table 16 for more information.~~2019.

For more information about the credit quality of Farmer Mac's Farm & Ranch portfolio and the associated allowance for losses please refer to Note 5 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."

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. As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac's 90-day delinquencies were ~~$28.0~~$79.7 million ~~(0.38%~~(1.02% of the Farm & Ranch portfolio), compared to ~~$26.9~~$61.0 million ~~(0.37%~~(0.78% of the Farm & Ranch portfolio) as of December 31, ~~2018 and $43.1 million (0.61% of the Farm & Ranch portfolio) as of June 30, 2018.~~2019. Those 90-day delinquencies were comprised of 5372 delinquent loans as of ~~June 30, 2019,~~March 31, 2020, compared to 4757 delinquent loans as of December 31, ~~2018 and 54 delinquent loans as of June 30, 2018.~~2019. The ~~slight~~sequential increase in 90-day delinquencies ~~as a percentage~~is primarily due to seasonal delinquencies associated with loans that have annual (January 1st) and semi-annual (January 1st and July 1st) payment terms, which account for most of the loans in the Farm & Ranch ~~portfolio compared to December~~portfolio. In addition, the sequential increase was driven by two commodity groups: (1) agricultural storage and processing, and (2) crops. The other commodity groups either experienced decreases or remained constant. The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of March 31, ~~2018 is primarily due to idiosyncratic rather than macroeconomic factors.~~2020.

Farmer Mac's 90-day delinquencies have historically fluctuated from quarter to quarter, both in dollars and as a percentage of the outstanding Farm & Ranch portfolio, with higher levels generally observed at the end of the first and third quarters and lower levels generally observed at the end of the second and fourth quarters of each year as a result of the annual (January 1st) and semi-annual (January 1st and July 1st) payment terms of most Farm & Ranch loans. Farmer Mac believes that it remains adequately collateralized on its delinquent loans. ~~Farmer Mac expects that over time its~~The COVID-19 pandemic is expected to negatively impact our 90-day delinquency rate, ~~will revert closer~~but the full extent of the impact remains to be seen. Our 90-day delinquency rate, as of March 31, 2020, currently approximates Farmer Mac's historical ~~average, and possibly~~average. In the near-term our delinquency rate is expected to exceed itour historical average (which it did in third quarter 2017), due to ~~macroeconomic factors and~~ the ~~cyclical nature~~expected impact of the COVID-19 pandemic on the agricultural economy. Farmer Mac's

average 90-day delinquency rate as a percentage of its Farm & Ranch 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 then-held ethanol loan portfolio that Farmer Mac no longer holds.

The following table presents historical information about Farmer Mac's 90-day delinquencies in the Farm & Ranch line of business compared to the unpaid principal balance of all Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs:

Table 1425

Farm & Ranch Line of Business 90-Day
Delinquencies Percentage
(dollars in thousands)
As of:
June 30, 2019 $ 7,291,352
$ 28,045
0.38 %
March 31, 2019 7,215,585
52,366
0.73 %
December 31, 2018 7,233,971
26,881
0.37 %
September 30, 2018 7,072,018
37,545
0.53 %
June 30, 2018 7,045,397
43,076
0.61 %
March 31, 2018 6,932,002
47,560
0.69 %
December 31, 2017 6,867,586
48,444
0.71 %
September 30, 2017 6,557,030
66,381
1.01 %
June 30, 2017 6,426,518
41,901
0.65 %

When analyzing the overall risk profile of its lines of business, Farmer Mac considers more than the Farm & Ranch loan delinquency percentages provided above. The lines of business also include AgVantage securities and Rural Utilities loans held and underlying LTSPCs, neither of which have any delinquencies, and USDA Securities, which are backed by the full faith and credit of the United States.


	Farm & Ranch Line of Business		90-Day Delinquencies		Percentage
	(dollars in thousands)
As of:
March 31, 2020	$	7,811,594	$	79,722	1.02	%
December 31, 2019	7,776,950		60,954		0.78	%
September 30, 2019	7,393,728		59,691		0.81	%
June 30, 2019	7,291,352		28,045		0.38	%
March 31, 2019	7,215,585		52,366		0.73	%
December 31, 2018	7,233,971		26,881		0.37	%
September 30, 2018	7,072,018		37,545		0.53	%
June 30, 2018	7,045,397		43,076		0.61	%
March 31, 2018	6,932,002		47,560		0.69	%

Across all of Farmer Mac's lines of business, 90-day delinquencies represented ~~0.14%~~0.37% of total outstanding business volume as of ~~June 30, 2019,~~March 31, 2020, compared to ~~0.14%~~0.29% as of December 31, ~~2018 and 0.22% as of June 30, 2018.~~2019. The following table presents outstanding Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities and 90-day delinquencies as of ~~June 30, 2019~~March 31, 2020 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Table 26

~~Table 15~~


Farm & Ranch 90-Day Delinquencies as of March 31, 2020
	Distribution of Farm & Ranch Line of Business		Farm & Ranch Line of Business		90-Day Delinquencies⁽¹⁾		Percentage
	(dollars in thousands)
By year of origination:
2010 and prior	10	%	$	717,613	$	6,198	0.86	%
2011	2	%	156,035		1,242		0.80	%
2012	5	%	403,866		1,377		0.34	%
2013	8	%	614,760		5,513		0.90	%
2014	6	%	504,681		4,974		0.99	%
2015	9	%	674,217		1,986		0.29	%
2016	13	%	1,021,637		21,618		2.12	%
2017	15	%	1,152,060		30,766		2.67	%
2018	12	%	943,163		4,498		0.48	%
2019	16	%	1,274,305		1,550		0.12	%
2020	4	%	349,257		—		0.12	%
Total	100	%	$	7,811,594	$	79,722	1.02	%
By geographic region⁽²⁾:
Northwest	12	%	$	964,613	$	17,008	1.76	%
Southwest	33	%	2,592,832		16,713		0.64	%
Mid-North	30	%	2,328,418		28,813		1.24	%
Mid-South	12	%	951,290		5,753		0.60	%
Northeast	5	%	356,692		2,746		0.77	%
Southeast	8	%	617,749		8,689		1.41	%
Total	100	%	$	7,811,594	$	79,722	1.02	%
By commodity/collateral type:
Crops	50	%	$	3,914,569	$	34,995	0.89	%
Permanent plantings	23	%	1,779,827		14,286		0.80	%
Livestock	19	%	1,479,442		16,921		1.14	%
Part-time farm	7	%	543,289		655		0.12	%
Ag. Storage and Processing	1	%	87,591		12,865		14.69	%
Other	—		6,876		—		—	%
Total	100	%	$	7,811,594	$	79,722	1.02	%
By original loan-to-value ratio:
0.00% to 40.00%	18	%	$	1,368,472	$	10,311	0.75	%
40.01% to 50.00%	26	%	2,034,994		39,677		1.95	%
50.01% to 60.00%	34	%	2,652,829		22,605		0.85	%
60.01% to 70.00%	18	%	1,402,053		7,019		0.50	%
70.01% to 80.00%⁽³⁾	4	%	336,142		—		—	%
80.01% to 90.00%⁽³⁾	—	%	17,104		110		0.64	%
Total	100	%	$	7,811,594	$	79,722	1.02	%
By size of borrower exposure⁽⁴⁾:
Less than $1,000,000	31	%	$	2,447,607	$	15,333	0.63	%
$1,000,000 to $4,999,999	36	%	2,795,637		51,525		1.84	%
$5,000,000 to $9,999,999	14	%	1,067,904		—		—	%
$10,000,000 to $24,999,999	11	%	888,976		12,864		1.45	%
$25,000,000 and greater	8	%	611,470		—		—	%
Total	100	%	$	7,811,594	$	79,722	1.02	%

Farm & Ranch 90-Day Delinquencies as of June 30, 2019
Distribution of Farm & Ranch Line of Business Farm & Ranch Line of Business
90-Day Delinquencies⁽¹⁾
Percentage
(dollars in thousands)
By year of origination:
2009 and prior 10 % $ 736,581
$ 6,229
0.85 %
2010 2 % 133,976
—
— %
2011 3 % 190,896
2,740
1.44 %
2012 6 % 478,175
105
0.02 %
2013 9 % 688,330
3,041
0.44 %
2014 8 % 555,915
1,913
0.34 %
2015 10 % 720,763
566
0.08 %
2016 15 % 1,070,142
7,566
0.71 %
2017 17 % 1,253,471
5,563
0.44 %
2018 14 % 1,036,673
322
0.03 %
2019 6 % 426,430
—
— %
Total 100 % $ 7,291,352
$ 28,045
0.38 %
By geographic region⁽²⁾:

Northwest 11 % $ 847,475
$ 11,513
1.36 %
Southwest 32 % 2,337,303
4,552
0.19 %
Mid-North 32 % 2,304,637
4,386
0.19 %
Mid-South 12 % 891,870
2,133
0.24 %
Northeast 5 % 340,290
4,986
1.47 %
Southeast 8 % 569,777
475
0.08 %
Total 100 % $ 7,291,352
$ 28,045
0.38 %
By commodity/collateral type:

Crops 52 % $ 3,785,746
$ 15,383
0.41 %
Permanent plantings 21 % 1,552,572
4,286
0.28 %
Livestock 19 % 1,360,281
5,982
0.44 %
Part-time farm 7 % 504,553
2,394
0.47 %
Ag. Storage and Processing 1 % 80,560
—
— %
Other —
7,640
—
— %
Total 100 % $ 7,291,352
$ 28,045
0.38 %
By original loan-to-value ratio:
0.00% to 40.00% 18 % $ 1,298,487
$ 4,524
0.35 %
40.01% to 50.00% 26 % 1,856,262
5,221
0.28 %
50.01% to 60.00% 35 % 2,556,271
11,026
0.43 %
60.01% to 70.00% 17 % 1,268,048
6,645
0.52 %
70.01% to 80.00%⁽³⁾
4 % 292,080
332
0.11 %
80.01% to 90.00%⁽³⁾
— % 20,204
297
1.47 %
Total 100 % $ 7,291,352
$ 28,045
0.38 %
By size of borrower exposure⁽⁴⁾:

Less than $1,000,000 34 % $ 2,438,984
$ 11,976
0.49 %
$1,000,000 to $4,999,999 38 % 2,766,582
16,069
0.58 %
$5,000,000 to $9,999,999 13 % 927,153
—
— %
$10,000,000 to $24,999,999 8 % 612,040
—
— %
$25,000,000 and greater 7 % 546,593
—
— %
Total 100 % $ 7,291,352
$ 28,045
0.38 %


⁽¹⁾⁽¹⁾Includes loans held and loans underlying off-balance sheet Farm & Ranch 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.	Includes loans held and loans underlying off-balance sheet Farm & Ranch 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.


⁽²⁾	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).


⁽³⁾	~~Primarily part-time farm loans. Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance.~~


⁽⁴⁾	~~Includes aggregated loans to single borrowers or borrower-related entities.~~

⁽²⁾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).

⁽³⁾Primarily part-time farm loans. Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance.

⁽⁴⁾Includes aggregated loans to single borrowers or borrower-related entities.

8783

Another indicator that Farmer Mac considers in analyzing the credit quality of its Farm & Ranch portfolio is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding Farm & Ranch 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 ~~June 30, 2019,~~March 31, 2020, Farmer Mac's substandard assets were ~~$242.7~~$312.3 million ~~(3.3%~~(4.0% of the Farm & Ranch portfolio), compared to ~~$232.7~~$310.0 million ~~(3.2%~~(4.0% of the Farm & Ranch portfolio) as of December 31, ~~2018.~~2019. Those substandard assets were comprised of ~~336~~355 loans as of ~~June 30, 2019~~March 31, 2020 and ~~318~~353 loans as of December 31, ~~2018.~~ 2019.

The ~~$10.0~~increase of $2.3 million in substandard assets during first quarter 2020 reflected overall consistency in the credit quality of the portfolio as the amount of substandard assets remained constant as a percentage of the Farm & Ranch portfolio. The $2.3 million increase in substandard assets ~~during the first half~~is reflective of 2019 compared to December 31, 2018 was due to the downgrade of more assets into the substandard category than those that paid off or migrated to a more favorable category. Of the assets that were downgraded into the substandard category, the majority of the loanoverall business volume ~~was~~growth in the cattle and calves, dairy, and cotton commodity sub-groups. As of June 30, 2019, substandard asset volume included several large exposures and represents a relatively diverse set of commodities. Farmer Mac did not experience a significant change in the concentration of its substandard assets among commodities during second quarter 2019 compared to December 31, 2018. Feed grains, oilseeds, and cattle and calves continue to be the top three commodity sub-groups represented in the substandard asset category, comprising 59%Farm & Ranch portfolio. The percentage of substandard assets ~~as of June 30, 2019.~~within the portfolio is at the historical average.

Farmer Mac's average substandard assets as a percentage of its Farm & Ranch portfolio over the last 15 years is approximately 4%. Due to ~~macroeconomic factors and~~ the ~~cyclical nature~~COVID-19 pandemic, we believe that the substandard rate will rise above that historical average in the short-term. The full extent of the ~~agricultural economy, Farmer Mac expects that over time~~impact of the COVID-19 pandemic remains to be seen, and we will continue to monitor its impact on our substandard asset ~~rate will eventually revert closer to, and possibly exceed, Farmer Mac's historical average.~~rate. The highest substandard asset rate observed during that period occurred in 2010 at approximately 8%, which coincided with an increase in substandard loans within Farmer Mac's then-held ethanol portfolio that Farmer Mac no longer holds. 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 ~~any~~ losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its portfolio, which Farmer Mac believes is adequately collateralized.

The following table presents the current loan-to-value ratios for the Farm & Ranch portfolio, as disaggregated by internally assigned risk ~~grades:~~ratings:

Table 1627


Farm & Ranch current loan-to-value ratio by internally assigned risk rating as of March 31, 2020
	Acceptable		Special Mention		Substandard		Total
	(in thousands)
Current loan-to-value ratio⁽¹⁾:
0.00% to 40.00%	$	2,556,424	$	98,164	$	91,622	$	2,746,210
40.01% to 50.00%	1,937,767		119,123		74,370		2,131,260
50.01% to 60.00%	1,531,582		136,322		81,086		1,748,990
60.01% to 70.00%	808,115		48,104		26,472		882,691
70.01% to 80.00%	236,131		22,348		9,248		267,727
80.01% and greater	4,339		835		29,542		34,716
Total	$	7,074,358	$	424,896	$	312,340	$	7,811,594

⁽¹⁾The current loan-to-value ratio is based on original appraised value (or most recently obtained appraisal, if available) and current outstanding loan amount adjusted to reflect loan amortization.

Farm & Ranch current loan-to-value ratio by internally assigned grade as of June 30, 2019
Acceptable Special Mention Substandard Total
( in thousands)
Current loan-to-value ratio⁽¹⁾:

0.00% to 40.00% $ 2,418,595
$ 74,096
$ 74,902
$ 2,567,593
40.01% to 50.00% 1,831,726
80,712
70,702
1,983,140
50.01% to 60.00% 1,569,828
116,114
57,387
1,743,329
60.01% to 70.00% 659,946
27,927
20,299
708,172
70.01% to 80.00% 244,467
9,822
4,056
258,345
80.01% and greater 13,007
2,409
15,357
30,773
Total $ 6,737,569
$ 311,080
$ 242,703
$ 7,291,352


⁽¹⁾	~~The current loan-to-value ratio is based on original appraised value and current outstanding loan amount adjusted to reflect loan amortization.~~

The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Farm & Ranch loans purchased and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities as of ~~June 30, 2019~~March 31, 2020 by year of origination, geographic region, and commodity/collateral type. The purpose of this information is to present information about realized losses relative to original Farm & Ranch purchases, guarantees, and commitments.

Table 1728


Farm & Ranch Credit Losses Relative to Cumulative
Original Loans, Guarantees, and LTSPCs as of March 31, 2020
	Cumulative Original Loans, Guarantees and LTSPCs		Cumulative Net Credit Losses/(Recoveries)		Cumulative Loss Rate
	(dollars in thousands)
By year of origination:
2010 and prior	$	15,324,437	$	29,709	0.19	%
2011	780,402		3,661		0.47	%
2012	1,160,415		—		—	%
2013	1,450,157		—		—	%
2014	1,026,726		—		—	%
2015	1,181,215		(516)		(0.04)	%
2016	1,467,693		—		—	%
2017	1,542,961		—		—	%
2018	1,262,712		—		—	%
2019	1,461,128		—		—	%
2020	362,196				—	%
Total	$	27,020,042	$	32,854	0.12	%
By geographic region⁽¹⁾:
Northwest	$	3,561,201	$	11,191	0.31	%
Southwest	9,579,965		8,126		0.08	%
Mid-North	6,760,002		12,855		0.19	%
Mid-South	3,204,244		(613)		(0.02)	%
Northeast	1,543,065		323		0.02	%
Southeast	2,371,565		972		0.04	%
Total	$	27,020,042	$	32,854	0.12	%
By commodity/collateral type:
Crops	$	12,312,263	$	2,887	0.02	%
Permanent plantings	6,003,450		9,368		0.16	%
Livestock	6,228,123		3,836		0.06	%
Part-time farm	1,583,891		1,090		0.07	%
Ag. Storage and Processing	737,698		15,673		2.12	%
Other	154,617		—		—	%
Total	$	27,020,042	$	32,854	0.12	%

⁽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).

Farm & Ranch Credit Losses Relative to Cumulative
Original Loans, Guarantees, and LTSPCs as of June 30, 2019
Cumulative Original Loans, Guarantees and LTSPCs Cumulative Net Credit Losses/(Recoveries) Cumulative Loss Rate
(dollars in thousands)
By year of origination:
2009 and prior $ 14,668,614
$ 30,146
0.21 %
2010 664,342
5
— %
2011 778,334
3,661
0.47 %
2012 1,153,414
—
— %
2013 1,420,773
—
— %
2014 982,847
—
— %
2015 1,110,900
(473 ) (0.04 )%
2016 1,425,856
—
— %
2017 1,519,696
—
— %
2018 1,229,963
—
— %
2019 476,724
—
— %
Total $ 25,431,463
$ 33,339
0.13 %
By geographic region⁽¹⁾:

Northwest $ 3,333,994
$ 11,191
0.34 %
Southwest 8,955,370
8,167
0.09 %
Mid-North 6,392,476
12,897
0.20 %
Mid-South 3,031,869
(211 ) (0.01 )%
Northeast 1,495,754
323
0.02 %
Southeast 2,222,000
972
0.04 %
Total $ 25,431,463
$ 33,339
0.13 %
By commodity/collateral type:

Crops $ 11,632,762
$ 2,887
0.02 %
Permanent plantings 5,559,748
9,368
0.17 %
Livestock 5,890,627
3,877
0.07 %
Part-time farm 1,479,721
1,534
0.10 %
Ag. Storage and Processing 712,497
15,673
2.20 %
Other 156,108
—
— %
Total $ 25,431,463
$ 33,339
0.13 %
85


⁽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).

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 Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

Table 1829


	As of March 31, 2020
	Farm & Ranch 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	$	440,421		$	159,022		$	271,682		$	88,246		$	5,182		$	60		$	964,613
	5.6		%	2.0		%	3.5		%	1.1		%	0.1		%	—		%	12.3		%
Southwest	582,809			1,344,110			511,876			103,803			45,947			4,287			2,592,832
	7.5		%	17.2		%	6.6		%	1.3		%	0.6		%	0.1		%	33.3		%
Mid-North	1,939,071			12,193			215,670			140,067			19,194			2,223			2,328,418
	24.8		%	0.2		%	2.8		%	1.8		%	0.2		%	—		%	29.8		%
Mid-South	569,915			28,451			280,827			64,372			7,701			24			951,290
	7.3		%	0.4		%	3.6		%	0.8		%	0.1		%	—		%	12.2		%
Northeast	151,737			63,691			64,412			73,141			3,711			—			356,692
	1.9		%	0.8		%	0.8		%	1.0		%	—		%	—		%	4.5		%
Southeast	230,616			172,360			134,975			73,660			5,856			282			617,749
	3.0		%	2.2		%	1.7		%	0.9		%	0.1		%	—		%	7.9		%
Total	$	3,914,569		$	1,779,827		$	1,479,442		$	543,289		$	87,591		$	6,876		$	7,811,594
	50.1		%	22.8		%	19.0		%	6.9		%	1.1		%	0.1		%	100.0		%

As of June 30, 2019
Farm & Ranch 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 $ 395,843
$ 131,937
$ 241,673
$ 77,628
$ —
$ 394
$ 847,475
5.4 % 1.7 % 3.3 % 1.0 % — % — % 11.4 %
Southwest 541,021
1,212,675
440,280
85,443
53,918
3,966
2,337,303
7.4 % 16.7 % 6.0 % 1.2 % 0.7 % 0.1 % 32.1 %
Mid-North 1,946,157
14,908
196,136
137,370
7,634
2,432
2,304,637
26.7 % 0.2 % 2.7 % 1.9 % 0.1 % — % 31.6 %
Mid-South 552,692
5,025
265,620
59,666
8,525
342
891,870
7.6 % 0.1 % 3.7 % 0.8 % 0.1 % — % 12.3 %
Northeast 166,853
30,720
66,273
72,286
4,158
—
340,290
2.3 % 0.4 % 0.9 % 1.0 % 0.1 % — % 4.7 %
Southeast 183,180
157,307
150,299
72,160
6,325
506
569,777
2.5 % 2.2 % 2.1 % 1.0 % 0.1 % — % 7.9 %
Total $ 3,785,746
$ 1,552,572
$ 1,360,281
$ 504,553
$ 80,560
$ 7,640
$ 7,291,352
51.9 % 21.3 % 18.7 % 6.9 % 1.1 % 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).

Table 30


	As of March 31, 2020
	Farm & Ranch 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:
2010 and prior	$	3,427	$	9,368	$	3,836	$	1,066	$	12,012	$	29,709
2011	—		—		—		—		3,661		3,661
2012	—		—		—		—		—		—
2013	—		—		—		—		—		—
2014	—		—		—		—		—		—
2015	(540)		—		—		24		—		(516)
2016	—		—		—		—		—		—
2017	—		—		—		—		—		—
2018	—		—		—		—		—		—
2019	—		—		—		—		—		—
2020	—		—		—		—		—		—
Total	$	2,887	$	9,368	$	3,836	$	1,090	$	15,673	$	32,854

Rural Utilities

Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of March 31, 2020 was $2.4 billion across 43 states. For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Utilities loans, see "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting" in Farmer Mac’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 25, 2020. As of March 31, 2020, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans.

Farmer Mac has indirect credit exposure to Rural Utilities loans that secure AgVantage securities included in the Institutional Credit line of business. As of March 31, 2020, Farmer Mac had not experienced any credit losses on any AgVantage securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional" for more information about Farmer Mac's credit risk on AgVantage securities.

Farmer Mac has never experienced a credit loss in its Rural Utilities line of business. Upon the adoption of the current expected credit loss accounting standard ("CECL") on January 1, 2020, we are now required to forecast and disclose our expected credit losses for the expected life of our Rural Utilities portfolio assets. To do this, Farmer Mac relies upon industry data purchased from ratings agencies as well as publicly available information as disclosed in the securities filings of other major lenders who serve this industry. 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."

Farmer Mac evaluates credit risk for these 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.

9087

The following table presents Farmer Mac’s portfolio of generation and transmission ("G&T") and distribution cooperative borrowers, as well as renewable energy loans, disaggregated by internally assigned risk ratings.

Table 1931


	Rural Utilities portfolio by internally assigned risk rating as of March 31, 2020
	Acceptable		Special Mention		Substandard		Total
	(in thousands)
Distribution Cooperative	$	1,918,153	$	—	$	5,014	$	1,923,167
G&T Cooperative	442,442		—		—		442,442
Renewable Energy	19,802		—		—		19,802
Rural Utilities Total	$	2,380,397	$	—	$	5,014	$	2,385,411

As of June 30, 2019

Farm & Ranch 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:
2009 and Prior $ 3,427
$ 9,368
$ 3,872
$ 1,467
$ 12,012
$ 30,146
2010 —
—
5
—
—
5
2011 —
—
—
—
3,661
3,661
2012 —
—
—
—
—
—
2013 —
—
—
—
—
—
2014 —
—
—
—
—
—
2015 (540 ) —
—
67
—
(473 )
2016 —
—
—
—
—
—
2017 —
—
—
—
—
—
2018 —
—
—
—
—
—
2019 —
—
—
—
—
—
Total $ 2,887
$ 9,368
$ 3,877
$ 1,534
$ 15,673
$ 33,339

For more information about the credit quality of Farmer Mac's Rural Utilities portfolio and the associated allowance for losses please refer to Notes 5 and 6 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 in the USDA Guarantees line of business because of the USDA guarantee. As of March 31, 2020, Farmer Mac had not experienced any credit losses on any business under the USDA Guarantees line of business 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 Guaranteed Securities.

Farmer Mac requires most approved lenders to make representations and warranties about the conformity of eligible agricultural mortgage and ~~rural utilities~~Rural Utilities 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 ~~June 30, 2019,~~March 31, 2020, there have been no breaches of representations and warranties by ~~sellers.~~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 real estate mortgage loans (other than rural housing and part-time farm mortgage loans) and ~~rural utilities~~Rural Utilities loans on which ~~its~~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 without exception. For more information about Farmer Mac's loan eligibility requirements and underwriting standards, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Loan Eligibility," "Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Valuation (Appraisal) Standards," "Business—Farmer Mac's Lines of Business—Rural Utilities—Loan Eligibility," and "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting" in Farmer ~~Mac's~~Mac’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019, as filed with the SEC on February ~~21, 2019.~~25, 2020.

Under contracts with Farmer Mac and in consideration for servicing fees, Farmer Mac-approved ~~central~~ servicers service loans in accordance with Farmer Mac's requirements. ~~Central servicers~~Servicers are responsible to Farmer Mac for serious errors in the servicing of those loans. If a ~~central~~ servicer materially breaches the terms of its servicing 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 ~~central~~ 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 ~~central~~ servicer. Farmer Mac also can proceed against the ~~central~~ servicer in arbitration or exercise

any remedies available to it under law. During the previous three years ended ~~June 30, 2019,~~March 31, 2020, Farmer Mac had not exercised any remedies or taken any formal action against any ~~central~~ servicers. For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Servicing" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Servicing" in Farmer ~~Mac's~~Mac’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019.~~25, 2020.

Credit Risk – Institutional. Farmer Mac is exposed to credit risk arising from its business relationships with other institutions, ~~including:~~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 any loan that becomes more than 30 days delinquent in the payment of principal or interest and to substitute an eligible loan that is current in payment to maintain the minimum required collateralization level. Since the onset of the COVID-19 pandemic, Farmer Mac has approved and expects to continue to approve payment deferments on loans collateralizing AgVantage securities, allowing the AgVantage counterparty to keep these loans in its collateral pool without replacing them. The criteria currently in place for approving payment deferments for these loans is similar to the criteria Farmer Mac has established for loans in its Farm & Ranch portfolio that are affected by the COVID-19 pandemic.

In the event of a default on ~~the general obligation,~~an AgVantage security, Farmer Mac would have recourse to the pledged collateral and have rights to the ongoing borrower payments of principal and interest. For Farm Equity AgVantage counterparties and smaller financial funds or entities, Farmer Mac also requires that the counterparty generally (1) maintain a higher collateralization level through lower loan-to-value ratio thresholds ~~and higher overcollateralization~~ than required for traditional AgVantage securities and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default. For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Institutional ~~Credit—AgVantage Securities"~~Credit" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019.~~

25, 2020.

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Farm & Ranch line of business totaled ~~$5.4~~$5.6 billion as of ~~June 30, 2019~~March 31, 2020 and ~~$5.3~~$5.5 billion as of December 31, ~~2018~~.2019. The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Utilities line of business totaled $3.1 billion as of ~~June 30, 2019~~March 31, 2020 and ~~$2.8~~ $2.9

billion as of December 31, ~~2018~~.2019. The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $7.6 million as of both March 31, 2020 and December 31, 2019. A $0.3 billion asoff-balance sheet AgVantage revolving line of credit facility was terminated during fourth quarter 2019.

~~June 30, 2019~~ ~~and $0.3 billion as of December 31, 2018.~~

The following table provides information about the issuers of AgVantage securities, as well as the required collateralization levels for those transactions as of March 31, 2020 and 2019:

Table 32


	As of March 31, 2020							As of December 31, 2019
Counterparty	Balance		Credit Rating	Required Collateralization	Balance		Credit Rating	Required Collateralization
	(dollars in thousands)
AgVantage:
CFC	$	3,081,862	A	100%	$	2,949,500	A	100%
MetLife	2,550,000		AA-	103%	2,550,000		AA-	103%
Rabo AgriFinance	2,325,000		None	110%	2,225,000		None	110%
Other⁽¹⁾	459,358		None	106% to 125%	436,041		None	106% to 125%
Farm Equity AgVantage⁽²⁾	279,881		None	110%	279,705		None	110%
Total outstanding	$	8,696,101			$	8,440,246

⁽¹⁾~~June 30, 2019~~Consists of AgVantage securities issued by 6 different issuers as of both March 31, 2020 and December 31, ~~2018:~~2019.

⁽²⁾Consists of AgVantage securities issued by 5 different issuers as of both March 31, 2020 and December 31, 2019.

~~Table 20~~

As of June 30, 2019 As of December 31, 2018
Counterparty Balance Credit Rating Required Collateralization Balance Credit Rating Required Collateralization
(dollars in thousands)
AgVantage:
CFC⁽¹⁾
$ 3,361,167
A 100% $ 3,070,455
A 100%
MetLife 2,550,000
AA- 103% 2,550,000
AA- 103%
Rabo AgriFinance 2,225,000
None 110% 2,075,000
None 110%
Other⁽²⁾
362,735

⁽³⁾
106% to 125% 407,572

⁽³⁾
106% to 125%
Farm Equity AgVantage⁽⁴⁾
279,416
None 110% 279,790
None 110%
Total outstanding $ 8,778,318
$ 8,382,817


⁽¹⁾	~~Includes $300.0 million related to a revolving floating rate AgVantage facility. Farmer Mac receives a fixed fee based on the full dollar amount of the facility.~~


⁽²⁾	~~Consists of AgVantage securities issued by 5 different issuers as of June 30, 2019 and 6 different issuers as of December 31, 2018.~~


⁽³⁾	~~Consists of AgVantage securities from 5 different issuers without a credit rating as of June 30, 2019 and 6 different issuers without a credit rating as of December 31, 2018.~~


⁽⁴⁾	~~Consists of AgVantage securities from 5 different issuers as of both June 30, 2019 and December 31, 2018.~~

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 bank credit rating agency reports. For more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Approved Lenders" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Approved Lenders" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019, as filed with the SEC on February ~~21, 2019.~~25, 2020.

Farmer Mac manages institutional credit risk related to its interest rate swap counterparties through collateralization provisions contained in each of its swap agreements that varies based on the market value of its ~~swaps~~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 (the effective date of new rules that established zero threshold requirements for the exchange of variation margin between Farmer Mac and its swap dealer counterparties in those transactions).~~2017. Farmer Mac transacts interest rate swaps with multiple counterparties to reduce ~~any~~ counterparty credit exposure concentration. Farmer ~~Mac also uses the clearing process for~~Mac's usage of cleared derivatives has increased over time as has its exposure to clearinghouses. The usage of cleared swap transactions ~~as another mechanism for managing its derivative counterparty risk.~~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 4 to the consolidated financial statements.

Credit Risk – Other Investments. As of ~~June 30, 2019~~,March 31, 2020, Farmer Mac had ~~$0.4~~$1.2 billion of cash and cash equivalents and $3.0 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 the liquidity and investment regulations for Farmer Mac, which were issued by FCA and which establish criteria for investments that are eligible for Farmer Mac's investment portfolio, including limitations on asset class, dollar amount,

issuer concentration, and credit quality. 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.

Farmer Mac's liquidity and investment regulations and 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 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.

Farmer Mac's liquidity and investment regulations and internal policies also establish concentration limits, which are intended to limit exposure to any single entity, issuer, or obligor. Farmer Mac's 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 (~~$79.6~~($83.4 million as of ~~June 30, 2019)~~March 31, 2020). However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($~~39.8~~41.7 million as of ~~June 30, 2019)~~March 31, 2020). 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 assets retained on its balance sheet because of ~~possible~~ timing differences in the cash flows of the assets and related liabilities. This risk is primarily related to loans, ~~held,~~loan participation interests, Farmer Mac Guaranteed Securities, ~~(excluding AgVantage securities),~~ and USDA Securities due to the ability of borrowers to prepay their loans before the scheduled ~~maturities, thereby increasing the risk of asset and liability cash flow mismatches.~~maturities. Cash flow mismatches in a changing interest rate environment can reduce the earnings of Farmer Mac if assets ~~repay~~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, or~~reduced. Alternatively, Farmer Mac could see a drop in income if assets repay more slowly than expected in a rising interest rate environment and the associated debt must be replaced by higher-cost debt. ~~As discussed below, Farmer Mac manages this interest rate risk by funding assets purchased with liabilities matching the duration, convexity, and cash flow characteristics of the assets purchased.~~

Interest Rate Risk Management

The goal of interest rate risk management at Farmer Mac is to create and maintain a portfolio that generates stable earnings and value across a variety of interest rate environments. Recognizing that interest rate sensitivity may change with the passage of time and as interest rates change, Farmer Mac assesses this exposure regularly and, if necessary, readjusts its portfolio of assets and ~~liabilities by:~~

~~purchasing assets in the ordinary course of business;~~

~~refinancing existing liabilities; or~~

~~using financial derivatives to alter the characteristics of existing assets or~~ liabilities.

Farmer Mac's objective is to ensure exposure to interest rate risk is within appropriate limits, as approved by Farmer Mac's board of directors. Farmer Mac's management-level Asset and Liability Committee

9491

("ALCO") is tasked with oversight and approval of strategies to ensure interest rate risk remains within the board-established limits.

Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with liabilities that have similar duration and ~~cash flow~~convexity characteristics so that they will perform ~~similarly~~in a similar fashion as interest rates change. ~~To match these characteristics,~~ As part of the liability issuance strategy, Farmer Mac seeks to issue a blend of liabilities across a variety of maturities to help better align the liability cashflows with the asset cashflows. Along with the liability issuance strategy, Farmer Mac uses interest rate derivatives to minimize its economic exposure to cashflow mismatches.

Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of ~~maturities. Farmer Mac issues callable~~maturities to execute its liability issuance strategy. Callable debt is issued to ~~offset the~~minimize prepayment risk associated with ~~some loans.~~assets held on balance sheet. By using a blend of liabilities that includes callable debt, the interest rate sensitivities of the liabilities tend to increase or decrease as interest rates change in a manner similar to changes in the interest rate sensitivities of the assets. Farmer Mac ~~also~~ uses financial derivatives, primarily interest rate swaps, as another tool to better match the durations of Farmer Mac's assets and liabilities, thereby reducing overall interest rate sensitivity.

Taking into consideration the prepayment provisions and the default probabilities associated with its loan assets, Farmer Mac uses prepayment models when projecting and valuing cash flows associated with these assets. Because 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.

Generally, the values of Farmer Mac's eligible loan assets, and the debt issued to fund these assets, increase when interest rates decline, and their values decrease as interest rates rise. Furthermore, changesChanges in interest rates may affect loan prepayment rates which may, in turn, affect durations and values of the loans. Declining interest rates generally increase prepayment rates, which shortens the duration of these assets, while rising interest rates tend to slow loan prepayments, thereby extending the duration of the loans.

Farmer Mac is ~~also~~ subject to interest rate risk on loans that Farmer Mac has committed to acquire but has not yet purchased ~~other~~(other than delinquent loans purchased through LTSPCs or loans designated for securitization under a forward purchase ~~agreement.~~agreement). When Farmer Mac commits to purchase these loans, 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 those loans.

Farmer Mac manages the interest rate risk related to these loans by using futures contracts involving U.S. Treasury securities ~~and/or forward sale contracts on the debt securities of~~and other ~~GSEs.~~financial derivatives. Farmer Mac uses U.S. Treasury futures contracts as a hedge against the level of interest rates, while forward sale contracts on GSE securities reduce its interest rate exposure to changes in both U.S. Treasury rates and spreads on Farmer Mac debt and certain Farmer Mac Guaranteed Securities. Issuing debt to fund the loans as investments does not fully eliminate interest rate risk due to the possible timing differences in the cash flows of the assets and related liabilities, as discussed above.

rates.

Farmer Mac's ~~$0.4~~$1.2 billion of cash and cash equivalents mature within three months and are funded with discount notes having similar maturities. As of ~~June 30, 2019, $2.90~~March 31, 2020, $2.8 billion of the $~~2.97~~$3.0 billion of investment securities (~~98%~~(94%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year. Those securities are funded with effectively floating rate debt that closely matches the rate adjustment dates of the associated investments.

Interest Rate Risk Metrics

Farmer Mac regularly stress tests its portfolio for interest rate risk and uses a variety of metrics to quantify and manage its interest rate risk. These metrics include sensitivity to interest rate movements of market

value of equity ("MVE") and projected net effective spread ("NES") as well as duration gap analysis.

MVE represents management's estimate of the present value of all future cash flows from 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. MVE sensitivity analysis is used to measure the degree to which the market values of Farmer Mac's assets and liabilities change for a given change in interest rates. Because this analysis evaluates the ~~impact~~effect of interest rate movements on the value of all future cash flows, this measure provides an evaluation of Farmer Mac's long-term interest rate risk.

Farmer Mac's NES simulation represents the difference between projected income from interest-earning assets and interest expense produced by the related funding, including associated derivatives. Farmer Mac's NES may be affected by changes in market interest rates resulting from timing differences between maturities and re-pricing characteristics of assets and liabilities. The direction and magnitude of any such effect depends on the direction and magnitude of the change in interest rates as well as the composition of Farmer Mac's portfolio. The NES forecast 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, NES sensitivity statistics provide a short-term view of Farmer Mac's interest rate sensitivity.

Duration is a measure of a financial instrument's sensitivity to small changes in interest rates. Duration gap is the difference between the estimated durations of Farmer Mac's assets and liabilities. Because duration is a measure of market value sensitivity, duration gap summarizes the extent to which estimated market value sensitivities for assets and liabilities are matched. 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 assets is greater than the duration of its liabilities. A positive duration gap indicates that the market value of Farmer Mac's assets is more sensitive to small interest rate movements than is the market value of its liabilities. Conversely, a negative duration gap indicates that Farmer Mac's assets are less sensitive to small interest rate movements than are its liabilities.

Each of the metrics is produced using asset/liability models and is derived based on management's best estimates of factors such as projected interest rates, interest rate volatility, and prepayment speeds. Accordingly, these metrics should be understood as estimates rather than as precise measurements. Actual results may differ to the extent there are material changes to Farmer Mac's portfolio or changes in strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.

9693

The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

Table 2133


	Percentage Change in MVE from Base Case
Interest Rate Scenario⁽¹⁾	As of March 31, 2020		As of December 31, 2019
+100 basis points	8.6	%	2.7	%
-100 basis points	(0.6)	%	(8.4)	%

Percentage Change in MVE from Base Case
Interest Rate Scenario As of June 30, 2019 As of December 31, 2018
+100 basis points 1.4 % (0.7 )%
-100 basis points (7.0 )% (5.9 )%


	Percentage Change in NES from Base Case
Interest Rate Scenario⁽¹⁾	As of March 31, 2020		As of December 31, 2019
+100 basis points	4.4	%	0.8	%
-100 basis points	(0.1)	%	0.1	%

⁽¹⁾The Down 100 basis points shock scenario was replaced with a proportional shock relative to 50% of the 3-month Treasury bill rate, with the approval of the Financial Risk Committee of the Board of Directors.

Percentage Change in NES from Base Case
Interest Rate Scenario As of June 30, 2019 As of December 31, 2018
+100 basis points (1.6 )% 3.0 %
-100 basis points 2.3 % (3.0 )%

As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac's effective duration gap was negative ~~1.7~~3.3 months, compared to negative ~~0.8~~2.5 months as of December 31, ~~2018. During~~2019. Interest rates declined significantly during the first ~~six months~~quarter of ~~2019, interest rates decreased significantly.~~2020. This rate movement reduced the duration of Farmer Mac's assets relative to its liabilities, thereby widening 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 enters into the following financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of assets, future cash flows, credit exposure, and debt issuance, 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; and

•"basis swaps," in which Farmer Mac pays variable rates of interest based on one index to, and receives variable rates of interest based on another index from, counterparties.

As of ~~June 30, 2019~~,March 31, 2020, Farmer Mac had ~~$13.2~~$15.0 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to thirty years, of which ~~$5.4~~$5.9 billion were pay-fixed interest rate swaps, ~~$5.2~~$6.2 billion were receive-fixed interest rate swaps, and ~~$2.6~~$2.9 billion were basis swaps.

Farmer Mac enters into interest rate swap contracts to ~~synthetically adjust the characteristics of its debt to match~~ more closely match the cash flow and duration characteristics of its ~~loans and other~~ assets ~~thereby reducing interest rate risk and often deriving an overall lower effective cost~~with those of ~~borrowing than would otherwise be available to Farmer Mac in the conventional debt market. Specifically, interest~~its liabilities. Interest rate swaps ~~synthetically convert~~paired with the ~~variable cash flows related to the forecasted~~ issuance of short-term debt ~~into~~can create effectively fixed rate ~~medium-term notes~~funding that provides a similar duration match ~~the anticipated duration and interest rate characteristics of~~with the corresponding ~~assets.~~assets being funded. Farmer Mac evaluates the overall cost of using the swap market as a funding alternative and uses interest rate swaps to manage ~~specific~~ interest rate risks ~~for specific transactions.~~ across the balance sheet.

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., LIBOR). ~~Furthermore,~~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 4 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 financial derivatives are reported in ~~"Gains/(losses)~~"Losses 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 ~~primarily fixed rate AgVantage securities and fixed rate medium-term notes,~~ 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 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. All of Farmer Mac's financial derivatives transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty. As of ~~June 30,~~March 31, 2020 and December 31, 2019, Farmer Mac had ~~$44,000 of~~no uncollateralized net ~~exposures to two counterparties. As of December 31, 2018, Farmer Mac had uncollateralized net exposures of $1.4 million to three counterparties.~~exposures.

~~Basis Risk~~Re-funding and repricing risk

In addition to being exposed to the risk of asset and liability cash flow mismatches, Farmer Mac is exposed to the risk related to changes in its cost of funds relative to floating rate market indexes (such as LIBOR) on ~~some~~many of the floating rate assets it holds. This exposure is referred to as ~~"basis~~"re-funding and repricing risk." ~~Some~~Re-funding and repricing risk arises from the potential changes in funding costs when Farmer Mac funds floating rate, or synthetic floating rate, assets with floating rate liabilities with shorter maturities. Changes in Farmer Mac's funding costs relative to the benchmark rate to which the assets are indexed can cause changes to net interest income from funding those assets.

Farmer Mac is subject to re-funding and repricing risk on any floating rate assets that are not funded to contractual maturity. In addition, many of Farmer Mac's floating rate assets ~~reset on rate adjustment dates based on a floating rate market index, while~~have the ~~related debt that~~ability to prepay before the contractual maturity date. Farmer Mac ~~issued~~is also subject to ~~fund those~~re-funding and repricing risk on some of its fixed rate assets ~~until their maturities may be refinanced based on Farmer Mac’s cost~~as a result of ~~funds at a particular time. Basis risk arises~~its use of pay-fixed receive-floating interest rate swaps that effectively convert the required funding needed from ~~the potential variability between the rates at which those~~fixed rate to floating rate. These fixed rate assets are then effectively synthetically floating rate assets ~~reset and the rates at which~~ that require floating rate funding.

Farmer Mac can ~~issue debt to fund those assets. Farmer Mac can fund these~~meet floating rate ~~assets~~funding needs in several ways, including:

•issuing short-term 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 ~~maturities of the assets;~~assets being funded;

•issuing non-maturity matched, floating rate medium-term ~~notes;~~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 match the interest rate reset dates of the assets as an alternative source of effectively floating rate funding.

To meet floating rate funding needs, Farmer Mac ~~primarily~~frequently uses ~~the last two options in the list above to fund floating~~shorter-term floating-rate medium-term notes or fixed rate ~~assets~~medium-term notes paired with an interest rate swap because these options 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 ~~for~~in the ~~remaining life~~context of ~~the assets.~~ Farmer Mac's overall liability issuance and liquidity management strategies.

However, ~~for example,~~ if the ~~rates on~~funding cost of Farmer Mac’s discount notes or medium-term notes were to deteriorate relative to LIBOR (or some other market index to which the assets are being funded) during the time between when these floating rate assets were first funded and when Farmer Mac ~~refinances~~refinanced the associated debt, Farmer Mac iswould be exposed to a commensurate reduction in its net effective spread on the associated assets. Conversely, if the ~~rates~~funding cost on Farmer Mac’s

discount notes or medium-term notes were to improve relative to LIBOR during that time, Farmer Mac would benefit from a commensurate increase in its net effective spread on those assets.

Farmer ~~Mac~~Mac's liability issuance strategy targets balancing liquidity risk and re-funding and repricing risk while maintaining an appropriate liability management profile that is ~~also subject to basis risk on some of its fixed rate assets as a result of its use of pay-fixed interest rate swaps, combined~~consistent with a series of discount note or medium-term note issuances, as an alternative source of effectively fixed rate funding. This risk arises because the rates at which Farmer Mac refinances its funding for some fixed rate assets through the issuance of discount notes or medium-term notes may vary from the agreed-upon rates based on the floating rate market index received by Farmer Mac on the associated swaps. In these cases, for example, if the rates on Farmer Mac's discount notes or medium-term notes were to deteriorate relative to LIBOR, Farmer Mac would be exposed to a commensurate reduction in its net interest income and net effective spread. Conversely, if the rates onrisk tolerance. ALCO regularly reviews Farmer Mac's ~~discount notes or medium-term notes were~~liability issuance strategy to ~~improve relative to LIBOR, Farmer Mac would benefit from a commensurate increase in its net interest income~~ensure that re-funding and ~~net effective spread.~~repricing risk is appropriately managed.

~~To mitigate this basis risk, Farmer Mac seeks to issue debt of sufficient maturity to reduce the frequency of required refinancing of that debt over the life of the associated asset.~~ As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac held ~~$6.3~~$6.8 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indexes, primarily one-month and three-month LIBOR. As of the same date, Farmer Mac also had ~~$5.4~~$5.9 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest.

Throughout the first quarter 2020, Farmer Mac's ~~short-term~~ funding ~~costs~~ relative to LIBOR ~~have varied throughout 2018. For the first half of the year, funding costs relative~~remained stable with spreads comparable to ~~LIBOR were at levels generally more favorable than~~historical averages. Farmer ~~Mac’s historical experience. During first quarter 2019, these levels had deteriorated to levels less favorable than Farmer Mac's historical experience. Farmer~~ Mac regularly adjusts its funding strategies to mitigate the effects of ~~this~~spread variability from time to time and seeks to maintain an effective funding ~~cost.~~cost in the context of its overall liability management and liquidity management strategies.

Discontinuation of LIBOR

As described in "Risk Factors—Market ~~Risk,"~~Risk" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 25, 2020, Farmer Mac faces risks associated with the reform, replacement, or discontinuation of the LIBOR benchmark interest rate and the transition to an alternative benchmark interest rate. We are currently evaluating the potential effect on our business of the replacement of the LIBOR benchmark interest rate, including the possibility of ~~SOFR as a dominant replacement.~~replacement benchmark interest rates. As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac held ~~$5.1~~$5.5 billion of floating rate assets in its lines of business and its investment portfolio, had issued $4.1 billion of floating rate debt, and ~~$13.0~~had entered into $14.8 billion notional amount of interest rate swaps, each of which reset based on LIBOR. In addition, our Non-Cumulative Series C Preferred Stock currently pays a fixed rate of interest until July 17, 2024. It becomes redeemable at our option on July 18, 2024 and thereafter pays interest at a floating rate equal to three-month LIBOR plus 3.260%. The market transition away from LIBOR and towards ~~SOFR, or any other~~an alternative benchmark interest rate that may be developed is expected to be complicated and may require ~~significant work, possibly requiring~~ the development of term and credit adjustments to accommodate for differences between the benchmark interest rates. The transition may also result in different financial performance for previously booked transactions, require different hedging strategies, or require renegotiation of previously booked transactions. ~~During~~As of March 31, 2020, we have issued $1.0 billion in medium-term notes based on the ~~first half of 2019, we issued $255 million in SOFR-based medium-term notes.~~Secured Overnight Financing Rate (SOFR), a potential alternative benchmark interest rate.

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 maturities of AgVantage securities. Farmer Mac regularly accesses the capital markets for funding, and Farmer Mac

has maintained access to the capital markets at favorable rates ~~throughout 2018 and 2019.~~through first quarter 2020. 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 public capital markets. As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac had outstanding discount notes of ~~$2.2~~$2.6 billion, medium-term notes that mature within one year of ~~$7.8~~$8.6 billion, and medium-term notes that mature after one year of ~~$8.2~~$9.5 billion. ~~Farmer Mac's Board of Directors has authorized the issuance of up to $20.0 billion of discount notes and medium-term notes (of which $18.2 billion was outstanding as of June 30, 2019).~~

Assuming continued access to the 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 also has a ~~liquidity~~ contingency funding plan to manage unanticipated disruptions in its access to the capital markets. That plan involves borrowing through repurchase agreement arrangements and the sale of liquid assets. Farmer Mac must maintain a minimum of 90 days of liquidity under its liquidity and investment regulations. Under the methodology for calculating available days of liquidity prescribed by those regulations, Farmer Mac maintained an average of ~~170~~183 days of liquidity during ~~second~~first quarter ~~2019~~2020 and had ~~179~~202 days of liquidity as of ~~June 30, 2019.~~March 31, 2020. ALCO regularly reviews Farmer Mac's liquidity position and ensures the required minimums are maintained.

Farmer Mac maintains cash, cash equivalents (including U.S. Treasury securities 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;

•municipal securities;

•international and multilateral development bank obligations;

•money market instruments;

•diversified investment funds;

•asset-backed securities;

•corporate debt securities; and

•mortgage-backed securities.

The following table presents these assets as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

Table 2234


	As of March 31, 2020		As of December 31, 2019
	(in thousands)
Cash and cash equivalents	$	1,231,585	$	604,381
Investment securities:
Guaranteed by U.S. Government and its agencies	1,669,231		1,842,640
Guaranteed by GSEs	1,320,237		1,143,323
Asset-backed securities	16,745		18,912
Total	$	4,237,798	$	3,609,256

As of June 30, 2019 As of December 31, 2018
(in thousands)
Cash and cash equivalents $ 396,602
$ 425,256
Investment securities:

Guaranteed by U.S. Government and its agencies 1,806,886
1,216,911
Guaranteed by GSEs 1,128,541
1,013,281
Asset-backed securities 32,109
32,692
Total $ 3,364,138
$ 2,688,140
The increase in the investment portfolio since December 31, 2019 was to provide a greater level of liquidity in response to the COVID-19 pandemic, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth as the overall funding needs for the balance sheet increased.

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 ~~June 30, 2019,~~March 31, 2020, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level I" (the highest compliance level).

In accordance with FCA's rule on capital planning, Farmer Mac's ~~Board~~board of ~~Directors~~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 ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, Farmer Mac's Tier 1 capital ratio was ~~13.6%~~12.6% and ~~13.4%~~12.9%, respectively. The ~~increase~~decrease in our Tier 1 capital ratio was due to the fact that ~~capital growth, which reflects the issuance of the Series D Preferred Stock, outpaced the~~ growth in risk-weighted assets outpaced capital growth during ~~second~~first quarter ~~2019.~~2020. As of ~~June 30, 2019,~~March 31, 2020, Farmer Mac was in compliance with its capital adequacy policy. Farmer Mac does not expect its compliance on an ongoing basis with 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.

For more information about the capital requirements applicable to Farmer Mac, its capital adequacy policy, and FCA's rule on capital planning, see ~~Note 9 to the consolidated financial statements and~~

~~100~~

~~"Business—~~"Business—Government Regulation of Farmer Mac—Capital Standards" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 filed with the SEC on February ~~21, 2019~~25, 2020. See Note 8 to the consolidated financial statements for more information ~~on the~~about Farmer Mac's capital ~~requirements applicable to Farmer Mac.~~position.

Regulatory Matters

In response to the economic effects of the COVID-19 pandemic, FCA has issued regulatory guidance to encourage Farmer Mac to work with its lending and servicing partners in approving servicing actions for borrowers impacted by COVID-19, including working with other Farm Credit System institutions on approvals for loans to which statutory borrower rights are attached (primarily in LTSPCs). FCA also provided guidance about under what circumstances loans with approved servicing actions due exclusively to the economic effects of the COVID-19 pandemic should not be classified as nonaccrual or troubled debt restructurings.

Also in response to the COVID-19 pandemic, Congress passed a series of measures, including the CARES Act on March 27, 2020, which provided over $2 trillion in economic stimulus to support various aspects of the U.S. economy. The CARES Act contained a $9.5 billion emergency fund for the USDA aimed toward providing help to livestock, dairy, and produce providers who sell locally. It also included a $14 billion replenishment of the Commodity Credit Corporation ("CCC"), a line of credit at the U.S. Treasury Department that USDA uses primarily to help crop growers. Most recently, USDA used the CCC to create the Market Facilitation Program that provided farmers and ranchers with direct payments to offset losses related to trade issues in 2018 and 2019.

On April 17, 2020, USDA announced that it would use $19 billion of the CARES Act funding for the Coronavirus Food Assistance Program ("CFAP"). The CFAP is intended to provide $16 billion in direct

support to farmers and ranchers based on actual losses from disruptions to prices and market supply chains and for projected impacts to marketing costs resulting from lost demand and short-term oversupply for the 2020 marketing year caused by the coronavirus. As part of the CFAP, USDA also announced that it would purchase $3 billion in fresh produce, dairy, and meat. These purchases are aimed at propping up commodity prices while providing commodities to food banks, community and faith based organizations, and other non-profits serving Americans in need.

The Agricultural Improvement Act of 2018, known as the "Farm Bill," was signed into law on December 20, 2018 and contains provisions that affect Farmer Mac, as discussed in more detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Matters" in Farmer Mac's Annual Report on Form 10-K for the fiscal period ended December 31, 2018 filed with the SEC on February 21, 2019. The Farm Bill requiresrequired FCA to prepare a study ~~with two components related~~analyzing Farmer Mac's loan risk and capital requirements compared to ~~Farmer Mac: (1) an analysis and comparison~~those of ~~the financial risks inherent in loans made, held, securitized, or purchased by~~ Farm Credit System ~~("FCS")~~ banks and associations and ~~Farmer Mac, and how those risks are required to be capitalized under statutes and regulations currently in effect; and (2) an assessment of~~assessing the feasibility of ~~an increase to~~increasing the acreage limitation ~~applicable~~securing loans of a maximum threshold amount from 1,000 acres to ~~Farmer Mac's maximum loan size that includes FCA's opinion on alternatives other than the current acreage limitation to adequately address any safety and soundness issues.~~2,000 acres. FCA submitted its assessment to Congress on June 18, ~~2019.~~

In the first component of the study, FCA analyzed the loan risk and capital requirements of Farmer Mac compared to FCS banks and associations. FCA concluded that "compared with the System, Farmer Mac has a significantly lower risk profile from a total portfolio perspective" (footnote omitted explaining statistical significance) and that "[t]his difference in the two GSEs' risk profiles is appropriate given their differing statutory authorities, business models, and large proportions of volume in lines of business that the other is not engaged in." In comparing capital requirements, FCA concluded that "[t]here are important differences in capital requirements that are driven by the two GSEs' differing statutory purposes, lending authorities, and asset composition, among other factors"; that Farmer Mac's Basel approach was "appropriate for Farmer Mac’s unique rural-focused secondary market business model and the product mix in its program portfolio"; and that "[d]ifferences in authorities, business mode[l]s, and business practices, as well as the magnitude of those differences as measured by credit metrics, support the GSEs’ differing capital requirements, both statutory and regulatory." Overall, FCA noted that "the major differences between the two GSEs’ statutory authorities, business models, and portfolio contents result in different risk profiles"; that "the practical reality of both GSEs’ capital requirements is that they generally follow the Basel framework"; and that "both GSEs' capital provisions make appropriate adjustments to the Basel framework consistent with the differences in their business models and risk profiles."

~~In the second component of the study, FCA concluded~~2019, concluding that increasing the acreage exception from 1,000 to 2,000 acres is feasible, would not raise any safety and soundness concerns, and would provide additional farming operations unconstrained access to Farmer Mac’s secondary market. Accordingly, the acreage exception will increase to 2,000 acres on June 18, 2020, meaning that the statutory loan amount limitation will not apply to Farm & Ranch loans secured by 2,000 acres of agricultural real estate or less. Farmer Mac will continue to evaluate this future increase in the acreage limitation to determine the potential benefits to Farmer Mac's customers and the related effects on our business.

Consistent with Congress’ guidance in the 2018 Farm Bill Conference Report, FCA also examined alternatives to the acreage rule (whether 1,000 or 2,000 acres). FCA concluded that the acreage rule does not result in Farmer Mac safety and soundness protections and considered alternatives focused on the risk of exposure concentrations in individual borrowers. FCA's report recommends that Congress direct FCA

~~101~~

to use its regulatory authorities to establish exposure concentration limits to replace both the dollar limit and the acreage exception to the limit in Farmer Mac's charter.

Other Matters

~~Common Stock Dividends~~. For first and second quarter 2019, Farmer Mac paid a quarterly dividend of $0.70 per share on all classes of its common stock. For each quarter in 2018, Farmer Mac paid a quarterly dividend of $0.58 per share on all classes of its common stock. Farmer Mac's ability to declare and pay dividends on common stock could be restricted if it fails to comply with applicable capital requirements. See "Business—Government Regulation of Farmer Mac—Capital Standards—Enforcement Levels" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on February 21, 2019.

~~Preferred Stock Dividends~~. ~~For each~~The expected effects of ~~first quarter and second quarter 2019 and for each quarter of 2018, Farmer Mac paid the following quarterly dividends on its outstanding preferred stock:~~

~~$0.3672 per share on its 5.875% Non-Cumulative Preferred Stock, Series A;~~

~~$0.4297 per share on its 6.875% Non-Cumulative Preferred Stock, Series B; and~~

~~$0.3750 per share on its 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C.~~

~~For second quarter 2019, Farmer Mac also paid $0.2626 per share~~recently issued accounting pronouncements on the ~~Series B Preferred Stock for~~consolidated financial statements are presented in Note 1(d) to the period from but not including April 17, 2019 to and including the June 12, 2019 redemption date. The first quarterly dividend payment date for the newly issued Series D Preferred Stock is scheduled to occur during third quarter 2019.consolidated financial statements.

~~102~~99

Supplemental Information

The following tables present quarterly and annual information about new business volume, repayments, and outstanding business volume:

Table 2335


New Business Volume
	Farm & Ranch						USDA Guarantees		Rural Utilities			Institutional Credit
	Loans		LTSPCs		USDA Securities		Loans			AgVantage		Total
	(in thousands)
For the quarter ended:
March 31, 2020	$	401,853	$	73,674	$	147,906	$	152,668		$	560,395	$	1,336,496
December 31, 2019	602,750		65,614		143,565		102,900			371,075		1,285,904
September 30, 2019	309,805		125,022		113,664		117,279			402,611		1,068,381
June 30, 2019	248,152		57,321		118,335		105,000			659,447		1,188,255
March 31, 2019	203,156		91,215		57,223		546,198			825,417		1,723,209
December 31, 2018	285,008		80,840		90,297		3,000			585,814		1,044,959
September 30, 2018	192,628		64,100		116,339		—			1,085,953		1,459,020
June 30, 2018	224,101		126,066		129,960		—			825,203		1,305,330
March 31, 2018	259,111		159,065		123,525		8,645			813,337		1,363,683

For the year ended:
December 31, 2019	$	1,363,863	$	339,172	$	432,787	$	871,377		$	2,258,550	$	5,265,749
December 31, 2018	960,848		430,071		460,121		11,645			3,310,307		5,172,992

100

New Business Volume
Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit
Loans LTSPCs USDA Securities Loans LTSPCs AgVantage Total
(in thousands)
For the quarter ended:
June 30, 2019 $ 248,152
$ 57,321
$ 118,335
$ 105,000
$ —
$ 659,447
$ 1,188,255
March 31, 2019 203,156
91,215
57,223
546,198
—
825,417
1,723,209
December 31, 2018 285,008
80,840
90,297
3,000
—
585,814
1,044,959
September 30, 2018 192,628
64,100
116,339
—
—
1,085,953
1,459,020
June 30, 2018 224,101
126,066
129,960
—
—
825,203
1,305,330
March 31, 2018 259,111
159,065
123,525
8,645
—
813,337
1,363,683
December 31, 2017 204,917
282,809
100,024
15,000
—
234,753
837,503
September 30, 2017 298,274
102,774
131,298
70,000
—
290,995
893,341
June 30, 2017 312,217
55,899
169,261
25,000
—
1,296,757
1,859,134

For the year ended:
December 31, 2018 960,848
430,071
460,121
11,645
—
3,310,307
5,172,992
December 31, 2017 1,129,545
554,743
531,684
137,341
—
2,383,912
4,737,225
Table 36


Repayments of Assets by Line of Business
	Farm & Ranch										USDA Guarantees		Rural Utilities				Institutional Credit
	Loans		Guaranteed Securities		LTSPCs		USDA Securities		Loans		LTSPCs		AgVantage		Total
	(in thousands)
For the quarter ended:
Scheduled	$	128,768	$	6,132	$	50,393	$	43,069	$	34,235	$	13,593	$	304,540	$	580,730
Unscheduled	191,260		3,888		60,442		78,806		—		—		—		334,396
March 31, 2020	$	320,028	$	10,020	$	110,835	$	121,875	$	34,235	$	13,593	$	304,540	$	915,126

Scheduled	$	57,488	$	4,737	$	39,878	$	25,142	$	10,317	$	10,551	$	656,095	$	804,208
Unscheduled	105,671		3,247		74,121		66,011		34,063		—		13,000		296,113
December 31, 2019	$	163,159	$	7,984	$	113,999	$	91,153	$	44,380	$	10,551	$	669,095	$	1,100,321

Scheduled	$	97,421	$	3,095	$	22,713	$	27,853	$	31,656	$	8,692	$	441,575	$	633,005
Unscheduled	129,676		2,663		76,883		39,442		—		—		1,088		249,752
September 30, 2019	$	227,097	$	5,758	$	99,596	$	67,295	$	31,656	$	8,692	$	442,663	$	882,757

Scheduled	$	39,879	$	3,758	$	58,779	$	38,676	$	6,951	$	17,092	$	612,964	$	778,099
Unscheduled	64,912		3,399		58,979		43,044		—		—		—		170,334
June 30, 2019	$	104,791	$	7,157	$	117,758	$	81,720	$	6,951	$	17,092	$	612,964	$	948,433

Scheduled	$	112,973	$	5,843	$	74,054	$	41,266	$	31,492	$	7,660	$	470,812	$	744,100
Unscheduled	67,608		1,798		50,482		46,798		24,448		—		5,587		196,721
March 31, 2019	$	180,581	$	7,641	$	124,536	$	88,064	$	55,940	$	7,660	$	476,399	$	940,821

Scheduled	$	36,006	$	8,331	$	35,682	$	24,793	$	6,321	$	16,062	$	568,277	$	695,472
Unscheduled	56,299		9,257		33,319		21,135		20,538		—		—		140,548
December 31, 2018	$	92,305	$	17,588	$	69,001	$	45,928	$	26,859	$	16,062	$	568,277	$	836,020

Scheduled	$	73,476	$	5,677	$	21,742	$	28,135	$	25,640	$	8,286	$	1,102,798	$	1,265,754
Unscheduled	77,492		4,562		47,159		35,068		3,476		—		9,760		177,517
September 30, 2018	$	150,968	$	10,239	$	68,901	$	63,203	$	29,116	$	8,286	$	1,112,558	$	1,443,271

Scheduled	$	33,075	$	8,391	$	31,067	$	36,983	$	353	$	8,699	$	759,223	$	877,791
Unscheduled	86,426		8,273		69,539		66,601		51,306		—		—		282,145
June 30, 2018	$	119,501	$	16,664	$	100,606	$	103,584	$	51,659	$	8,699	$	759,223	$	1,159,936

Scheduled	$	110,733	$	14,085	$	70,057	$	40,811	$	26,507	$	—	$	392,310	$	654,503
Unscheduled	73,502		4,929		81,204		43,189		14,952		120,022		—		337,798
March 31, 2018	$	184,235	$	19,014	$	151,261	$	84,000	$	41,459	$	120,022	$	392,310	$	992,301

For the year ended:
Scheduled	$	307,761	$	17,433	$	195,424	$	132,937	$	80,416	$	43,995	$	2,181,446	$	2,959,412
Unscheduled	367,867		11,107		260,465		195,295		58,511		—		19,675		912,920
December 31, 2019	$	675,628	$	28,540	$	455,889	$	328,232	$	138,927	$	43,995	$	2,201,121	$	3,872,332

Scheduled	$	253,290	$	36,484	$	158,548	$	130,722	$	58,821	$	33,047	$	2,822,608	$	3,493,520
Unscheduled	293,719		27,021		231,221		165,993		90,272		120,022		9,760		938,008
December 31, 2018	$	547,009	$	63,505	$	389,769	$	296,715	$	149,093	$	153,069	$	2,832,368	$	4,431,528

~~103~~101

Table 37


Lines of Business - Outstanding Business Volume
	Farm & Ranch										USDA Guarantees		Rural Utilities				Institutional Credit
	Loans		Guaranteed Securities		LTSPCs		USDA Securities		Loans		LTSPCs		AgVantage		Total
	(in thousands)
As of:
March 31, 2020	$	5,358,382	$	97,302	$	2,355,910	$	2,646,206	$	1,789,726	$	595,685	$	8,696,101	$	21,539,312
December 31, 2019	5,276,557		107,322		2,393,071		2,620,175		1,671,293		609,278		8,440,246		21,117,942
September 30, 2019	4,836,966		115,306		2,441,456		2,567,763		1,612,773		619,829		8,738,266		20,932,359
June 30, 2019	4,754,258		121,064		2,416,030		2,521,394		1,527,150		628,521		8,778,318		20,746,735
March 31, 2019	4,610,897		128,221		2,476,467		2,484,779		1,429,101		645,613		8,731,835		20,506,913
December 31, 2018	4,588,322		135,862		2,509,787		2,515,620		938,843		653,273		8,382,817		19,724,524
September 30, 2018	4,420,619		287,594		2,363,805		2,471,251		962,702		669,335		8,365,280		19,540,586
June 30, 2018	4,378,958		297,833		2,368,606		2,418,115		991,819		677,621		8,391,885		19,524,837
March 31, 2018	4,274,359		314,497		2,343,146		2,391,739		1,043,477		686,320		8,325,905		19,379,443

Table 24

Repayments of Assets by Line of Business
Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit
Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total
(in thousands)
For the quarter ended:
Scheduled $ 39,879
$ 3,758
$ 58,779
$ 38,676
$ 6,951
$ 17,092
$ 612,964
$ 778,099
Unscheduled 64,912
3,399
58,979
43,044
—
—
—
170,334
June 30, 2019 $ 104,791
$ 7,157
$ 117,758
$ 81,720
$ 6,951
$ 17,092
$ 612,964
$ 948,433

Scheduled $ 112,973
$ 5,843
$ 74,054
$ 41,266
$ 31,492
$ 7,660
$ 470,812
$ 744,100
Unscheduled 67,608
1,798
50,482
46,798
24,448
—
5,587
196,721
March 31, 2019 $ 180,581
$ 7,641
$ 124,536
$ 88,064
$ 55,940
$ 7,660
$ 476,399
$ 940,821

Scheduled $ 36,006
$ 8,331
$ 35,682
$ 24,793
$ 6,321
$ 16,062
$ 568,277
$ 695,472
Unscheduled 56,299
9,257
33,319
21,135
20,538
—
—
140,548
December 31, 2018 $ 92,305
$ 17,588
$ 69,001
$ 45,928
$ 26,859
$ 16,062
$ 568,277
$ 836,020

Scheduled $ 73,476
$ 5,677
$ 21,742
$ 28,135
$ 25,640
$ 8,286
$ 1,102,798
$ 1,265,754
Unscheduled 77,492
4,562
47,159
35,068
3,476
—
9,760
177,517
September 30, 2018 $ 150,968
$ 10,239
$ 68,901
$ 63,203
$ 29,116
$ 8,286
$ 1,112,558
$ 1,443,271

Scheduled $ 33,075
$ 8,391
$ 31,067
$ 36,983
$ 353
$ 8,699
$ 759,223
$ 877,791
Unscheduled 86,426
8,273
69,539
66,601
51,306
—
—
282,145
June 30, 2018 $ 119,501
$ 16,664
$ 100,606
$ 103,584
$ 51,659
$ 8,699
$ 759,223
$ 1,159,936

Scheduled $ 110,733
$ 14,085
$ 70,057
$ 40,811
$ 26,507
$ —
$ 392,310
$ 654,503
Unscheduled 73,502
4,929
81,204
43,189
14,952
120,022
—
337,798
March 31, 2018 $ 184,235
$ 19,014
$ 151,261
$ 84,000
$ 41,459
$ 120,022
$ 392,310
$ 992,301
��
Scheduled $ 25,848
$ 14,371
$ 36,806
$ 22,381
$ 315
$ 13,621
$ 231,717
$ 345,059
Unscheduled 49,229
6,941
43,975
24,385
4,876
—
—
129,406
December 31, 2017 $ 75,077
$ 21,312
$ 80,781
$ 46,766
$ 5,191
$ 13,621
$ 231,717
$ 474,465

Scheduled $ 61,961
$ 6,735
$ 21,409
$ 24,163
$ 27,191
$ 39,816
$ 100,571
$ 281,846
Unscheduled 49,894
5,861
124,676
45,192
457
—
—
226,080
September 30, 2017 $ 111,855
$ 12,596
$ 146,085
$ 69,355
$ 27,648
$ 39,816
$ 100,571
$ 507,926

Scheduled $ 21,687
$ 9,116
$ 41,821
$ 35,169
$ —
$ 9,885
$ 1,166,922
$ 1,284,600
Unscheduled 51,442
10,737
47,262
46,776
—
—
4,000
160,217
June 30, 2017 $ 73,129
$ 19,853
$ 89,083
$ 81,945
$ —
$ 9,885
$ 1,170,922
$ 1,444,817

For the year ended:
Scheduled $ 253,290
$ 36,484
$ 158,548
$ 130,722
$ 58,821
$ 33,047
$ 2,822,608
$ 3,493,520
Unscheduled 293,719
27,021
231,221
165,993
90,272
120,022
9,760
938,008
December 31, 2018 $ 547,009
$ 63,505
$ 389,769
$ 296,715
$ 149,093
$ 153,069
$ 2,832,368
$ 4,431,528

Scheduled $ 179,890
$ 46,406
$ 148,411
$ 118,035
$ 54,415
$ 72,256
$ 1,660,661
$ 2,280,074
Unscheduled 265,376
35,524
280,399
155,810
6,147
—
106,059
849,315
December 31, 2017 $ 445,266
$ 81,930
$ 428,810
$ 273,845
$ 60,562
$ 72,256
$ 1,766,720
$ 3,129,389


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)
As of:
March 31, 2020	$	10,296,598	$	2,818,869	$	4,996,478	$	18,111,945
December 31, 2019	10,045,712		2,863,199		4,702,577		17,611,488
September 30, 2019	9,642,802		2,850,000		4,549,689		17,042,491
June 30, 2019	9,446,117		2,825,151		4,601,917		16,873,185
March 31, 2019	9,206,082		2,720,639		4,643,506		16,570,227
December 31, 2018	8,325,347		2,717,505		4,705,169		15,748,021
September 30, 2018	7,945,007		2,629,612		4,986,987		15,561,606
June 30, 2018	7,551,149		2,594,399		5,398,021		15,543,569
March 31, 2018	7,507,581		2,498,985		5,432,923		15,439,489

~~104~~102

~~Table 25~~

Lines of Business - Outstanding Business Volume
Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit
Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total
(in thousands)
As of:
June 30, 2019 $ 4,754,258
$ 121,064
$ 2,416,030
$ 2,521,394
$ 1,527,150
$ 628,521
$ 8,778,318
$ 20,746,735
March 31, 2019 4,610,897
128,221
2,476,467
2,484,779
1,429,101
645,613
8,731,835
20,506,913
December 31, 2018 4,588,322
135,862
2,509,787
2,515,620
938,843
653,273
8,382,817
19,724,524
September 30, 2018 4,420,619
287,594
2,363,805
2,471,251
962,702
669,335
8,365,280
19,540,586
June 30, 2018 4,378,958
297,833
2,368,606
2,418,115
991,819
677,621
8,391,885
19,524,837
March 31, 2018 4,274,359
314,497
2,343,146
2,391,739
1,043,477
686,320
8,325,905
19,379,443
December 31, 2017 4,198,733
333,511
2,335,342
2,352,214
1,076,291
806,342
7,904,878
19,007,311
September 30, 2017 4,068,893
354,823
2,133,314
2,298,956
1,066,482
819,963
7,901,842
18,644,273
June 30, 2017 3,882,474
367,419
2,176,625
2,237,013
1,024,130
859,779
7,711,418
18,258,858

~~Table 26~~

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)
As of:
June 30, 2019 $ 9,446,117
$ 2,825,151
$ 4,601,917
$ 16,873,185
March 31, 2019 9,206,082
2,720,639
4,643,506
16,570,227
December 31, 2018 8,325,347
2,717,505
4,705,169
15,748,021
September 30, 2018 7,945,007
2,629,612
4,986,987
15,561,606
June 30, 2018 7,551,149
2,594,399
5,398,021
15,543,569
March 31, 2018 7,507,581
2,498,985
5,432,923
15,439,489
December 31, 2017 7,158,014
2,499,203
5,309,126
14,966,343
September 30, 2017 6,921,477
2,447,923
5,426,757
14,796,157
June 30, 2017 6,722,463
2,406,120
5,226,982
14,355,565

~~105~~

The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:

Table 2739


	Net Effective Spread by Line of Business
	Farm & Ranch						USDA Guarantees						Rural Utilities						Institutional Credit						Corporate	Net Effective Spread
	Dollars		Yield		Dollars		Yield		Dollars		Yield		Dollars		Yield		Dollars		Yield		Dollars		Yield
	(dollars in thousands)
For the quarter ended:
March 31, 2020⁽¹⁾	$	14,938	1.64	%	$	4,625	0.81	%	$	4,920	1.14	%	$	17,702	0.84	%	$	1,978	0.21	%	$	44,163	0.89	%
December 31, 2019	16,374		1.90	%	4,363		0.78	%	4,871		1.17	%	18,008		0.85	%	2,375		0.27	%	45,991		0.95	%
September 30, 2019	13,181		1.66	%	4,314		0.79	%	4,502		1.16	%	17,807		0.84	%	2,657		0.30	%	42,461		0.90	%
June 30, 2019	13,335		1.72	%	4,097		0.76	%	3,996		1.10	%	17,371		0.82	%	2,556		0.34	%	41,355		0.91	%
March 31, 2019⁽¹⁾	12,737		1.70	%	3,964		0.74	%	3,233		1.12	%	16,373		0.79	%	2,494		0.35	%	38,801		0.89	%
December 31, 2018	13,288		1.79	%	4,630		0.85	%	2,833		1.19	%	15,751		0.80	%	2,353		0.36	%	38,855		0.93	%
September 30, 2018	13,887		1.91	%	4,627		0.86	%	2,877		1.18	%	15,642		0.78	%	2,044		0.30	%	39,077		0.93	%
June 30, 2018	13,347		1.86	%	4,398		0.83	%	2,923		1.15	%	15,220		0.76	%	274		0.04	%	36,162		0.86	%
March 31, 2018	12,540		1.80	%	4,400		0.82	%	2,950		1.12	%	14,824		0.78	%	2,387		0.36	%	37,101		0.91	%

⁽¹⁾See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended March 31, 2020 and 2019.

Net Effective Spread by Line of Business
Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Net Effective Spread
Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield
(dollars in thousands)
For the quarter ended:
June 30, 2019⁽¹⁾
$ 13,335
1.72 % $ 4,097
0.76 % $ 3,996
1.10 % $ 17,371
0.82 % $ 2,556
0.34 % $ 41,355
0.91 %
March 31, 2019 12,737
1.70 % 3,964
0.74 % 3,233
1.12 % 16,373
0.79 % 2,494
0.35 % 38,801
0.89 %
December 31, 2018 13,288
1.79 % 4,630
0.85 % 2,833
1.19 % 15,751
0.80 % 2,353
0.36 % 38,855
0.93 %
September 30, 2018 13,887
1.91 % 4,627
0.86 % 2,877
1.18 % 15,642
0.78 % 2,044
0.30 % 39,077
0.93 %
June 30, 2018⁽¹⁾
13,347
1.86 % 4,398
0.83 % 2,923
1.15 % 15,220
0.76 % 274
0.04 % 36,162
0.86 %
March 31, 2018 12,540
1.80 % 4,400
0.82 % 2,950
1.12 % 14,824
0.78 % 2,387
0.36 % 37,101
0.91 %
December 31, 2017 12,396
1.80 % 4,979
0.93 % 3,057
1.14 % 14,800
0.78 % 2,235
0.35 % 37,467
0.93 %
September 30, 2017 11,303
1.73 % 4,728
0.90 % 2,765
1.07 % 14,455
0.78 % 2,725
0.41 % 35,976
0.91 %
June 30, 2017 11,158
1.77 % 4,551
0.87 % 2,669
1.06 % 14,467
0.81 % 2,489
0.36 % 35,334
0.91 %
103


⁽¹⁾	See Note 9 to the consolidated financial statements for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended June 30, 2019 and 2018.

~~106~~

The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income attributable to common stockholders:

Table 40


	Core Earnings by Quarter End
	March 2020		December 2019		September 2019		June 2019		March 2019		December 2018		September 2018		June 2018		March 2018
	(in thousands)
Revenues:
Net effective spread	$	44,163	$	45,991	$	42,461	$	41,355	$	38,801	$	38,855	$	39,077	$	36,162	$	37,101
Guarantee and commitment fees	4,896		5,432		5,208		5,276		5,419		5,309		5,170		5,171		5,083
Other	674		100		389		777		509		(129)		110		111		428
Total revenues	49,733		51,523		48,058		47,408		44,729		44,035		44,357		41,444		42,612

Credit related expense/(income):
Provision for/(release of) losses	3,831		2,851		623		420		(393)		166		(3)		582		(410)
REO operating expenses	—		—		—		64		—		—		—		—		16
(Gains)/losses on sale of REO	(485)		—		—		—		—		—		41		(34)		—
Total credit related expense/(income)	3,346		2,851		623		484		(393)		166		38		548		(394)

Operating expenses:
Compensation and employee benefits	10,127		6,732		7,654		6,770		7,606		7,167		6,777		6,936		6,654
General and administrative	5,363		5,773		5,253		4,689		4,596		5,829		4,350		5,202		4,326
Regulatory fees	725		725		688		687		688		687		625		625		625
Total operating expenses	16,215��		13,230		13,595		12,146		12,890		13,683		11,752		12,763		11,605

Net earnings	30,172		35,442		33,840		34,778		32,232		30,186		32,567		28,133		31,401
Income tax expense	6,598		7,526		7,018		7,351		6,715		6,431		6,891		5,477		6,259

Preferred stock dividends	3,431		3,432		3,427		3,785		3,296		3,296		3,295		3,296		3,295
Core earnings	$	20,143	$	24,484	$	23,395	$	23,642	$	22,221	$	20,459	$	22,381	$	19,360	$	21,847

Reconciling items:
Gains/(losses) on undesignated financial derivatives due to fair value changes	(6,484)		4,469		(7,117)		10,485		2,240		(96)		3,625		6,709		(2,279)
(Losses)/gains on hedging activities due to fair value changes	(5,925)		(220)		(4,535)		(1,438)		(2,817)		(853)		1,051		1,687		2,564
Unrealized gains/(losses) on trading assets	106		172		49		61		44		57		(3)		11		16
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value	3		40		(7)		(139)		(16)		67		(38)		196		(686)
Net effects of terminations or net settlements on financial derivatives	(1,300)		1,339		232		(592)		110		(312)		546		232		1,242
Issuance costs on the retirement of preferred stock	—		—		—		(1,956)		—		—		—		—		—

Income tax effect related to reconciling items	2,856		(1,218)		2,389		(1,759)		92		238		(1,088)		(1,855)		(180)
Net income attributable to common stockholders	$	9,399	$	29,066	$	14,406	$	28,304	$	21,874	$	19,560	$	26,474	$	26,340	$	22,524

~~Table 28~~

104

Core Earnings by Quarter Ended
June 2019 March 2019 December 2018 September 2018 June 2018 March 2018 December 2017 September 2017 June 2017

Revenues:
Net effective spread $ 41,355
$ 38,801
$ 38,855
$ 39,077
$ 36,162
$ 37,101
$ 37,467
$ 35,976
$ 35,334
Guarantee and commitment fees 5,276
5,419
5,309
5,170
5,171
5,083
5,157
4,935
4,942
Other 777
509
(129 ) 110
111
428
69
274
107
Total revenues 47,408
44,729
44,035
44,357
41,444
42,612
42,693
41,185
40,383

Credit related expense/(income):
Provision for/(release of) losses 420
(393 ) 166
(3 ) 582
(410 ) 464
384
466
REO operating expenses 64
—
—
—
—
16
—
—
23
Losses/(gains) on sale of REO —
—
—
41
(34 ) —
(964 ) (32 ) (757 )
Total credit related expense/(income) 484
(393 ) 166
38
548
(394 ) (500 ) 352
(268 )

Operating expenses:
Compensation and employee benefits 6,770
7,606
7,167
6,777
6,936
6,654
5,247
5,987
6,682
General and administrative 4,689
4,596
5,829
4,350
5,202
4,326
4,348
3,890
3,921
Regulatory fees 687
688
687
625
625
625
625
625
625
Total operating expenses 12,146
12,890
13,683
11,752
12,763
11,605
10,220
10,502
11,228

Net earnings 34,778
32,232
30,186
32,567
28,133
31,401
32,973
30,331
29,423
Income tax expense 7,351
6,715
6,431
6,891
5,477
6,259
11,796
10,268
10,307
Net loss attributable to non-controlling interest⁽¹⁾
—
—
—
—
—
—
—
—
(150 )
Preferred stock dividends 3,785
3,296
3,296
3,295
3,296
3,295
3,296
3,295
3,296
Core earnings $ 23,642
$ 22,221
$ 20,459
$ 22,381
$ 19,360
$ 21,847
$ 17,881
$ 16,768
$ 15,970

Reconciling items:
Gains/(losses) on undesignated financial derivatives due to fair value changes 10,485
2,240
(96 ) 3,625
6,709
(2,279 ) (261 ) 995
801
(Losses)/gains on hedging activities due to fair value changes (1,438 ) (2,817 ) (853 ) 1,051
1,687
2,564
(3 ) 1,742
1,420
Unrealized gains/(losses) on trading assets 61
44
57
(3 ) 11
16
60
—
(2 )
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (139 ) (16 ) 67
(38 ) 196
(686 ) (129 ) (954 ) (117 )
Net effects of terminations or net settlements on financial derivatives (592 ) 110
(312 ) 546
232
1,242
632
862
232
Issuance costs on the retirement of preferred stock (1,956 ) —
—
—
—
—
—
—
—
Re-measurement of net deferred tax asset due to enactment of new tax legislation —
—
—
—
—
—
(1,365 ) —
—
Income tax effect related to reconciling items (1,759 ) 92
238
(1,088 ) (1,855 ) (180 ) (105 ) (926 ) (816 )
Net income attributable to common stockholders $ 28,304
$ 21,874
$ 19,560
$ 26,474
$ 26,340
$ 22,524
$ 16,710
$ 18,487
$ 17,488


⁽¹⁾	As of May 1, 2017, Farmer Mac transferred its entire 65% ownership interest in AgVisory back to the limited liability company. Before then, AgVisory was a majority-owned subsidiary of Farmer Mac that operated an agricultural real estate appraisal business.

~~107~~

Item 3.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 information about Farmer Mac's use of financial derivatives and related accounting policies, see Note 4 to the consolidated financial statements.

Item 4.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 ~~(the “Exchange~~(“Exchange Act”), including this Quarterly Report on Form 10-Q, 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 ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer,~~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 ~~June 30, 2019.~~March 31, 2020.

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 ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer.~~Chief Financial Officer. Based upon this evaluation, the ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer~~Chief Financial Officer concluded that Farmer Mac's disclosure controls and procedures were effective as of ~~June 30, 2019.~~March 31, 2020.

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 ~~June 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, Farmer Mac's internal control over financial reporting.

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PART II

Item 1.Legal Proceedings

None.

Item 1A.Risk Factors

~~There were no material changes from~~The risk factors in this section update and supplement the risk factors ~~previously disclosed~~described in "Risk Factors" in Part I, Item 1A of Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 ("2019 Form 10-K"), as filed with the SEC on February ~~21, 2019.~~25, 2020, and as updated by Farmer Mac's Current Report on Form 8-K filed with the SEC on April 6, 2020. In addition to the other information in this report, you should carefully consider all of the risk factors discussed in the 2019 Form 10-K and below. The primary risks to our business and how we seek to manage those risks are also described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management," in the 2019 Form 10-K and in this report. The COVID-19 pandemic has heightened some of the risks Farmer Mac normally faces in operating its business, and Farmer Mac's risk factor disclosures are qualified by the information relating to the COVID-19 pandemic and related effects described in this report, including the updated risk factors below. The risks we face could materially affect our business, operations, operating results, financial condition, liquidity, capital levels, or future results and could cause our actual results to differ materially from our past results or the results contemplated by any forward-looking statements we make.

Farmer Mac’s efforts to manage and mitigate these risk factors may be unsuccessful, and the effectiveness of these efforts and the extent to which the COVID-19 pandemic affects Farmer Mac’s business, results of operations, and financial condition will depend on factors beyond its control, including: the duration, severity, and spread of the pandemic; third-party and government actions taken to contain COVID-19 or treat its impact and mitigate public health and economic effects; the nature and extent of the deferments approved for borrowers negatively affected by COVID-19; the behavior of agricultural producer borrowers in response to the COVID-19 pandemic and how quickly and to what extent affected borrowers can recover from the negative economic impact of the pandemic; and how quickly and to what extent normal economic and operating conditions can resume, including whether any future COVID-19 outbreaks interrupt economic recovery. Even after the COVID-19 pandemic is over, Farmer Mac may continue to experience material adverse effects to its business as a result of the disruption in the global economy, the domestic agricultural economy, and any resulting recession. Because there have been no comparable recent global pandemics that resulted in similar global macroeconomic impact, Farmer Mac does not yet know the full extent of the effects on its business, operations, or the global economy as a whole, but they could materially and adversely affect Farmer Mac’s business, operations, operating results, financial condition, liquidity, or capital levels as discussed in more detail below.

The effects of the COVID-19 pandemic are uncertain and could have a material adverse effect on Farmer Mac's business, operations, operating results, financial condition, liquidity, or capital levels.

The COVID-19 pandemic is creating extensive disruptions to the global economy and to the lives of individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including quarantines, travel bans and restrictions, shelter in place orders, closures of businesses and schools, fiscal stimulus, and legislation designed to deliver monetary aid and other relief. The scope, duration, and full effects of COVID-19 remain uncertain, but it is clear that the pandemic and related efforts to contain it have disrupted global

106

economic activity, adversely affected the functioning of financial markets, increased economic and market uncertainty, and disrupted trade and supply chains, and may continue to do so for the foreseeable future. Although Farmer Mac has not observed a material effect on its business from the effects of the COVID-19 pandemic, if these effects continue for a protracted period or result in sustained economic stress or recession, many of the risks identified in Farmer Mac’s 2019 Form 10-K could be exacerbated and could manifest in a number of ways related to credit, collateral, customer demand, funding, operations, interest rate risk, and human capital, possibly with materially greater material adverse effect than Farmer Mac currently anticipates.

The effects of the COVID-19 pandemic may negatively affect counterparties’ profitability and ability to repay their loans and other obligations 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.

Farmer Mac assumes the ultimate credit risk of borrower defaults on its agricultural mortgage and rural utilities loan assets, including AgVantage securities, and Farmer Mac's earnings depend significantly on their performance. Farmer Mac recognizes that the COVID-19 pandemic may create significant stress for agricultural and rural borrowers because of disruptions to employees, markets, transportation, and other factors important to their operations. If the effects of COVID-19 result in widespread and sustained repayment shortfalls on loans in Farmer Mac's portfolio or defaults by AgVantage counterparties, Farmer Mac could incur significant credit losses, particularly if conditions cause land and asset values to deteriorate and the available collateral is insufficient to cover Farmer Mac's exposure, which likely would have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.

Concentrated exposure to a particular borrower or AgVantage counterparty may exacerbate the credit risk Farmer Mac faces from the effects of the COVID-19 pandemic, which could materially and adversely affect its business, operating results, or financial condition.

Farmer Mac may be subject to credit risk due to concentrated exposure to a particular borrower. Farmer Mac’s Farm & Ranch 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 due to the effects of the COVID-19 pandemic could negatively affect Farmer Mac's financial condition. Farmer Mac also has concentrated 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 counterparty defaults and the market value of the loan collateral has declined, whether due to the negative effects of the COVID-19 pandemic or otherwise. If an AgVantage counterparty experiences stress in its loan collateral portfolio due to increased borrower defaults, whether from the effects of the COVID-19 pandemic or otherwise, it may also increase the likelihood of the AgVantage counterparty defaulting. 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, particularly if those loans are experiencing default or stress due to COVID-19. Most of Farmer Mac's AgVantage exposure is concentrated in a small number of issuers. As of March 31, 2020, $8.0 billion of the $8.7 billion of AgVantage securities outstanding had been issued by three counterparties. A default by any of these counterparties could have a significant adverse effect on Farmer Mac's business, operating results, or financial condition.

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Disruptions in the food supply chain due to the COVID-19 pandemic could have a negative effect on borrowers' profitability and repayment capacity, which could have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.

The COVID-19 pandemic has caused and may continue to cause restrictions and closures of businesses, including agricultural producers, as employers and government authorities respond to the public health crisis. Not only could these restrictions and closures affect the profitability of the businesses experiencing them, but the corresponding disruptions in the supply chain may also put downward pressure on the demand for agricultural commodities and products and negatively affect the profitability of those producers. Borrowers who have loans in Farmer Mac's portfolio and who are experiencing negative effects on their profitability from restrictions or closures or from supply chain disruptions may also experience challenges in their ability to repay those loans. These effects may be exacerbated the longer these conditions continue. Widespread and prolonged restrictions, closures, and supply chain disruptions due to the COVID-19 pandemic that negatively affect agricultural producers could lead to significant delinquencies and defaults in Farmer Mac's loan portfolio, which could have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.

A large number of loan payment deferments resulting from the COVID-19 pandemic could have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.

As the negative economic conditions triggered by the COVID-19 pandemic continue, Farmer Mac has observed an increase in payment deferment requests from loan servicers on behalf of borrowers to help them avoid default on their loans, and we expect those requests to continue to increase. For more information on Farmer Mac's Farm & Ranch payment deferments, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans & Guarantees." Farmer Mac funds these loans through its issuance of debt in the capital markets. If Farmer Mac approves a significant volume of deferment requests for loans held in its portfolio, it will receive diminished or no income on these loans for a period of time while still having required debt payments, which could materially and adversely affect Farmer Mac's financial condition, results of operations, liquidity, or capital levels. Deferment requests may also come from borrowers whose loans collateralize securities on which Farmer Mac has guaranteed timely payment of principal and interest. If Farmer Mac approves a significant volume of deferment requests for loans collateralizing these guaranteed securities, Farmer Mac will be required to make guarantee payments to the holders of many of these securities, or may elect to repurchase the loans from the pools collateralizing these securities, either of which could materially and adversely affect Farmer Mac's financial condition, results of operations, liquidity, or capital levels. As of the date of this report, Farmer Mac was not subject to any legislative or regulatory requirements or directives that would require forbearance of loan payments for a specified time or that would limit its ability to pursue all available remedies in the event of a loan default, but there is no assurance that such measures will not be implemented in the future. If Farmer Mac became subject to a regulatory requirement to forgive, forbear, or defer all or part of borrowers' loan payments due to the effects of the COVID-19 pandemic, Farmer Mac's volume of payment deferments could significantly increase, which could have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.

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The effects of the COVID-19 pandemic may affect the demand for Farmer Mac’s secondary market, the price or marketability of Farmer Mac’s products, and Farmer Mac’s ability to offer its products and services, which could materially and adversely affect Farmer Mac's business, operating results, financial condition, or capital levels.

The success of Farmer Mac's business may be affected by a variety of external factors that may affect the price or marketability of Farmer Mac's products and services, including disruptions in the capital markets, changes in interest rates that may increase Farmer Mac's funding costs, and reduced demand for Farmer Mac’s products due to economic conditions. The effects of COVID-19 on economic activity could negatively affect the demand for or profitability of Farmer Mac’s products and services by farmers, ranchers, rural utilities, and their lenders, which could materially and adversely affect Farmer Mac’s business, operating results, financial condition, or capital levels.

Disruptions in the equity and debt capital markets from the COVID-19 pandemic could have a material adverse effect on Farmer Mac's business, operating results, financial condition, liquidity, capital levels, or its ability to offer competitive products.

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 capacity to remain adequately capitalized through the issuance of equity and debt securities at favorable rates and terms in the U.S. financial markets. Farmer Mac's potential for growth and future net income depends in part on Farmer Mac's ability to access equity markets to raise efficient capital. The issuance of debt securities is Farmer Mac's primary source for repaying or refinancing existing debt, and one of the primary sources of Farmer Mac's revenue is the net interest income earned from the difference, or "spread," between the return received on assets held and the related borrowing costs. If the recent disruptions and volatility in the U.S. financial markets related to the COVID-19 pandemic continues or intensifies in a way that prevents Farmer Mac from accessing those markets to issue equity or debt securities at favorable rates and terms, Farmer Mac's business, operating results, or financial condition could be adversely affected.

Farmer Mac’s daily access to the debt capital markets continued to be strong through the date of this report. Issuances with maturities beyond five years have seen modest upward pressure on funding costs since mid-March 2020, although Farmer Mac has maintained access to funding beyond five years. If the upward pressure on funding costs for longer-term issuances continues or increases, or if Farmer Mac begins to experience upward pressure on shorter-term maturities, the competitiveness of and demand for Farmer Mac’s corresponding rate products may be adversely affected.

The COVID-19 pandemic has exposed Farmer Mac to increased cybersecurity risk and operational risk, which could adversely affect Farmer Mac’s business, results of operations, or financial condition.

Farmer Mac relies on business processes that largely depend on people, technology, and the use of complex systems and models to manage its business, including access to information systems and models as well as information, applications, payment systems, and other services provided by third parties. In response to the challenges presented by the COVID-19 pandemic, Farmer Mac has modified its business practices to focus on protecting its employees and the public while continuing to fulfill its critical mission and maintaining its regular business operations in support of the farmers, ranchers, and rural utilities of America. On March 12, 2020, Farmer Mac activated its Business Continuity Plan (“BCP”) and has been operating uninterrupted since then with all of its employees working remotely from their homes. Farmer Mac has provided guidance and support to its employees to ensure that they have the tools and knowledge needed to effectively work from home, and Farmer Mac’s technology platform and BCP have been

109

functioning as designed in support of all functions of the organization. Nonetheless, because the technology in employees’ homes may not be as robust as in Farmer Mac’s offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than Farmer Mac’s in-office technology, the continuation of these work-from-home measures introduces additional operational risk. These risks include but are not limited to greater cybersecurity risks, strain on the local technology networks for remote operations, and potential impairment of the ability to perform critical functions, all of which could adversely affect Farmer Mac’s business, results of operations, and financial condition. Farmer Mac regularly monitors attempts by third parties to gain unauthorized access to its network and information systems through cyber-attacks. Despite the increased cybersecurity risks presented by a workforce that is operating entirely remotely, Farmer Mac had not experienced any cyber-attacks or other privacy or data security incidents through the date of this report that negatively affected the confidentiality, integrity, or availability of Farmer Mac’s information resources.

Operational disruptions or challenges due to the COVID-19 pandemic faced by third parties upon whom Farmer Mac relies in its own business operations could have a material adverse impact on its results of operations or financial condition.

Farmer Mac relies on many third parties, including vendors that supply essential services and local and federal government agencies, offices, and courthouses, in the performance of its business operations. In light of measures undertaken as a result of the COVID-19 pandemic, many of these entities have limited and may continue to limit the access and availability of their services. For example, Farmer Mac has observed delays in loan closings related to reductions in available staff in recording offices or the closing of courthouses to walk-in traffic in some rural counties, which is slowing the established process and turnaround times for title work and mortgage and UCC filings in those counties. Reduced personnel at or closures of USDA field offices as a result of the COVID-19 pandemic could negatively affect growth in Farmer Mac’s USDA Guarantees line of business because that business depends on obtaining a valid assignment of guarantee signed by an authorized USDA official. Farmer Mac continues to closely monitor the third parties who provide the information and services required to operate its business and their ability to continue to operate effectively in the face of the nationwide challenges posed by COVID-19. These entities include loan servicers; providers of financial information, systems, and analytical tools; providers of electronic payment and settlement systems; and providers of information technology infrastructure and business continuity services. Farmer Mac had not identified any significant disruptions with these third parties that had materially affected Farmer Mac’s business operations as of the date of this report. If some of the identified limitations in the availability of some services continue for a prolonged period or if additional limitations or potential disruptions in the ability to provide services materialize (which may be caused by a third party’s own financial or operational difficulties), it may inhibit or otherwise negatively affect the normal operations and processes for Farmer Mac’s business, which could have a material adverse impact on its results of operations or financial condition.

The effects of the COVID-19 pandemic on interest rates could materially and adversely affect Farmer Mac’s net income, operating results, or financial condition.

Farmer Mac is exposed to interest rate risk that could materially and adversely affect its business, operating results, or financial condition and 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’s financing activities, hedging activities, net effective spread, and profitability could be negatively affected by volatility in interest rates caused by uncertainties stemming from COVID-19, as evidenced by

110

the recent actions of the Federal Reserve to significantly lower the target range for the federal funds rate based on concerns about the disruption to economic activity. Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with liabilities that have similar duration and convexity characteristics so that they will perform similarly as interest rates change. However, a prolonged period of extremely volatile and unstable market conditions would likely increase Farmer Mac’s hedging and funding costs while negatively affecting market risk mitigation strategies. In that scenario, Farmer Mac may adjust its funding strategy for long-term fixed rate assets. Alternative funding strategies could result in greater exposure to re-funding risk and higher income volatility from changes in interest rates and movements in re-funding terms and spreads to benchmark indices such as LIBOR, which could have a material adverse effect on Farmer Mac's net income, operating results, or financial condition.

Significant disruption in the continuity of Farmer Mac's employees or executive leaders from the COVID-19 pandemic may materially and adversely affect Farmer Mac's business performance, operations, or financial condition.

Farmer Mac relies on its employees' breadth and depth of knowledge of Farmer Mac and the industries in which it operates to run its business operations successfully. A significant percentage of Farmer Mac’s employees and executive leaders live and work in the geographic region of its main office in Washington, D.C, with about 25% of the total workforce of 112 individuals distributed in other geographic locations in the United States. This concentration of Farmer Mac's personnel, technology, and facilities increases Farmer Mac's risk of business disruptions if the negative impacts of the COVID-19 pandemic affect the Washington, D.C. metropolitan area disproportionately compared to other regions of the country. If Farmer Mac experiences widespread cases of COVID-19 among its employees, it would place more pressure on the remaining employees to perform all functions across the organization, could require Farmer Mac to divert or expend more resources to cover key personnel functions, and could impair the company’s ability to conduct business. A significant disruption in the continuity of Farmer Mac's employees or executive leaders caused by the COVID-19 pandemic could materially and adversely affect Farmer Mac's business performance, operations, or financial condition.

Disruption in the operations of Farmer Mac’s service providers caused by the COVID-19 pandemic or from government or third-party responses to the COVID-19 pandemic could materially and adversely affect Farmer Mac’s business, operating results, or financial condition.

Farmer Mac relies on many third-party service providers to conduct its business, including loan servicers, information systems providers, software-as-a-service (SaaS) providers, cloud computing service providers, consultants on key technology initiatives, and other service providers. Although Farmer Mac has continued to operate effectively through a fully remote workforce, disruptions in the operations of Farmer Mac’s third-party service providers caused by COVID-19-related illnesses or government or third-party actions taken to mitigate the public health effects of the COVID-19 pandemic, including stay-at-home orders, could impact Farmer Mac’s operations, which could materially and adversely affect Farmer Mac’s business, operating results, or financial condition.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(a)Farmer Mac is a federally chartered instrumentality of the United States whose debt and equity securities are exempt from registration under Section 3(a)(2) of the Securities Act of 1933. During ~~second~~first quarter ~~2019,~~2020, the following transactions occurred related to Farmer Mac's equity securities that were not registered under the Securities Act of 1933 and were not otherwise reported on a Current Report on Form 8-K:

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Class C Non-Voting Common ~~Stock~~Stock.. Under 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 50225 shares of its Class C non-voting common stock ~~on April 2, 2019~~in January 2020 to the ~~three~~four directors who elected to receive stock in lieu of their cash retainers. Farmer Mac calculated the number of shares issued to the directors based on a price of ~~$72.43~~$83.50 per share, which was the closing price of the Class C non-voting common stock on ~~March 29,~~December 31, 2019 (the last trading day of the previous quarter) as reported by the New York Stock Exchange.

~~On April 15, 2019,~~(b)Not applicable.

(c)The table below sets forth information regarding Farmer ~~Mac granted an aggregate~~Mac's purchases of ~~12,182~~ shares of ~~restricted~~its outstanding Class C non-voting common stock ~~under its Amended and Restated 2008 Omnibus Incentive plan at a grant price~~during the quarter ended March 31, 2020:


	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan⁽¹⁾	Approximate Maximum Dollar Value That May Yet Be Purchased Under the Plan
	(dollars in thousands, except per share information)
Period:
January 1, 2020 – January 31, 2020	—	$	—	—	$	10,000
February 1, 2020 – February 29, 2020	—	—		—	10,000
March 1, 2020 – March 31, 2020	4,402	53.49		4,402	9,765
Total	4,402	$	53.49	4,402

⁽¹⁾In March 2019, Farmer Mac's board of ~~$75.64 per~~directors amended an existing share repurchase program first approved in 2015 to ~~31 employees as incentive compensation. All of these shares of restricted stock granted to each employee will "cliff" vest on April 15, 2022 if the employee remains employed by~~authorize Farmer Mac to repurchase up to $10.0 million of Farmer Mac's outstanding Class C non-voting common stock. Repurchases of Class C non-voting common stock will be based on guidance from the board of directors and made at management's discretion from time to time in the open market at prevailing market prices, through private transactions, or block trades, in each case subject to compliance with all SEC rules and other legal requirements, and may be made in part under one or more Rule 10b5-1 plans. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements, and other factors. Shortly after the the repurchase of the 4,402 shares reported above, Farmer Mac terminated its Rule 10b5-1 Plan then in place, thereby indefinitely suspending its share repurchases in an effort to preserve capital and liquidity in view of market volatility and uncertainty caused by the COVID-19 pandemic. The Board authorization for share repurchases of up to $9,765,000 remains in place through March 2021, and Farmer Mac may determine to resume its share repurchases before that ~~date.~~expiration date in its sole discretion.


~~(b)~~	~~Not applicable.~~


~~(c)~~	~~None.~~

Item 3.Defaults Upon Senior Securities

(a) None.

(b) None.


~~Item 4.~~	~~Mine Safety Disclosures~~

Item 4.Mine Safety Disclosures

Not applicable.

~~109~~

Item 5.Other Information

(a) None.

(b) None.

112

Item 6.Exhibits

3.1

—

Title VIII of the Farm Credit Act of 1971, as most recently amended by the Agricultural Improvement Act of 2018 (Previously filed as Exhibit 3.1 to Form 10-K filed February 21, 2019).

3.2

—

Amended and Restated By-Laws of the Registrant (Previously filed as Exhibit 3.1 to Form 8-K filed May 9, 2019).

4.1

—

Specimen Certificate for Farmer Mac Class A Voting Common Stock (Previously filed as Exhibit 4.1 to Form 10-Q filed May 15, 2003).

4.2

—

Specimen Certificate for Farmer Mac Class B Voting Common Stock (Previously filed as Exhibit 4.2 to Form 10-Q filed May 15, 2003).

4.3

—

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).

4.4

—

Specimen Certificate for 5.875% Non-Cumulative Preferred Stock, Series A (Previously filed as Exhibit 4.4.1 to Form 10-Q filed May 9, 2013).

4.4.1

—

Certificate of Designation of Terms and Conditions of 5.875% Non-Cumulative Preferred Stock, Series A (Previously filed as Exhibit 4.1 to Form 8-A filed January 17, 2013).

4.5

—

~~Specimen Certificate for 6.875% Non-Cumulative Preferred Stock, Series B (Previously filed as Exhibit 4.5 to Form 10-Q filed May 12, 2014).~~

~~4.5.1~~

—

~~Certificate of Designation of Terms and Conditions of 6.875% Non-Cumulative Preferred Stock, Series B (Previously filed as Exhibit 4.1 to Form 8-A filed March 25, 2014).~~

~~4.6~~

—

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).

~~4.6.1~~4.5.1

—

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).

~~4.7~~4.6

—

Specimen Certificate for 5.700% Non-Cumulative Preferred Stock, Series D.D (Previously filed as Exhibit 4.7 to Form 10-Q filed August 1, 2019).

~~4.7.1~~4.6.1

—

Certificate of Designation of Terms and Conditions of 5.700% Non-Cumulative Preferred Stock, Series D ~~(previously~~(Previously filed as Exhibit 4.1 to Form 8-A filed May 13, 2019).

~~31.1~~4.7

—

Description of the Registrant's securities that are registered under Section 12 of the Securities Exchange Act of 1934 (Previously filed as Exhibit 4.7 to Form 10-K filed February 25, 2020).

10.1

—

Form of Performance-Based Restricted Stock Award Agreement for grants made to non-directors on or after March 3, 2020 (Previously filed as Exhibit 10.1 to Form 8-K filed March 10, 2020).

—

List of the Registrant's subsidiaries (Previously filed as Exhibit 21 to Form 10-K filed March 8, 2018).

31.1

—

Certification of Registrant's principal executive officer relating to the Registrant's Quarterly Report on Form ~~10-Q~~10-Q for the quarter ended ~~June 30, 2019,~~March 31, 20 20 , pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

—

Certification of Registrant's principal financial officer relating to the Registrant's Quarterly Report on Form ~~10-Q~~10-Q for the ~~quarter~~qua rter ended ~~June 30, 2019,~~March 31, 20 20 , pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

—

Certification of Registrant's principal executive officer and principal financial officer relating to the Registrant's Quarterly Report on Form ~~10-Q~~10-Q for the quarter ended ~~June 30, 2019,~~March 31, 20 20 , pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

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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

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Inline XBRL Taxonomy Extension Schema

101.CAL

—

Inline XBRL Taxonomy Extension Calculation

101.DEF

—

Inline XBRL Taxonomy Extension Definition

101.LAB

—

Inline XBRL Taxonomy Extension Label

101.PRE

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Inline XBRL Taxonomy Extension Presentation

104

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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.

~~110~~113

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

~~August 1, 2019~~

May 11, 2020

By:

Bradford T. Nordholm

Date

President and Chief Executive Officer

(Principal Executive Officer)

/s/ ~~Gregory N. Ramsey~~Aparna Ramesh

~~August 1, 2019~~

May 11, 2020

By:

~~Gregory N. Ramsey~~Aparna Ramesh

Date

Executive Vice President ~~– Controller~~- Chief Financial Officer and Treasurer

(Principal ~~Financial~~Executive Officer)

~~111~~114



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Exact name of registrant as specified in its charter)



(202)			872-7700
(Registrant's telephone number, including area code)



	Consolidation of Variable Interest Entities
	As of June 30, 2019
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,563,223	$	—	$	—	$	—	$	—	$	1,563,223
Debt securities of consolidated trusts held by third parties ⁽¹⁾	1,570,862		—		—		—		—		1,570,862
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value ⁽²⁾	—		33,778		—		—		—		33,778
Maximum exposure to loss ⁽³⁾	—		33,583		—		—		—		33,583
Investment securities:
Carrying value ⁽⁴⁾	—		—		—		—		1,115,618		1,115,618
Maximum exposure to loss ^{(3) (4)}	—		—		—		—		1,117,506		1,117,506
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss ^{(3) (5)}	121,064		398,710		—		—		—		519,774



	Consolidation of Variable Interest Entities
	As of December 31, 2018
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,517,101	$	—	$	—	$	—	$	—	$	1,517,101
Debt securities of consolidated trusts held by third parties ⁽¹⁾	1,528,957		—		—		—		—		1,528,957
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value ⁽²⁾	—		27,627		—		—		—		27,627
Maximum exposure to loss ⁽³⁾	—		27,383		—		—		—		27,383
Investment securities:
Carrying value ⁽⁴⁾	—		—		—		—		1,000,942		1,000,942
Maximum exposure to loss ^{(3) (4)}	—		—		—		—		1,003,968		1,003,968
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss ^{(3) (5)}	135,862		367,684		—		—		—		503,546



	As of June 30, 2019												As of June 30, 2018
	Available-for-Sale Securities			Held-to-Maturity Securities			Cash Flow Hedges			Total			Available-for-Sale Securities			Held-to-Maturity Securities			Cash Flow Hedges			Total
	(in thousands)
For the Three Months Ended:
Beginning Balance	$	(22,800	)	$	41,656		$	2,398		$	21,254		$	15,094		$	47,201		$	9,816		$	72,111
Other comprehensive (loss)/income before reclassifications	(21,711		)	—			(7,512		)	(29,223		)	2,209			—			1,778			3,987
Amounts reclassified from AOCI	(873		)	(3,635		)	(366		)	(4,874		)	(1,421		)	(1,222		)	(45		)	(2,688		)
Net comprehensive (loss)/income	(22,584		)	(3,635		)	(7,878		)	(34,097		)	788			(1,222		)	1,733			1,299
Ending Balance	$	(45,384	)	$	38,021		$	(5,480	)	$	(12,843	)	$	15,882		$	45,979		$	11,549		$	73,410

For the Six Months Ended:
Beginning Balance	$	(25,360	)	$	43,443		$	6,873		$	24,956		$	(1,676	)	$	48,236		$	4,525		$	51,085
Cumulative effect from change in hedge accounting	—			—			—			—			—			—			27			27
Adjusted Beginning Balance	(25,360		)	43,443			6,873			24,956			(1,676		)	48,236			4,552			51,112
Other comprehensive (loss)/income before reclassifications	(18,393		)	—			(11,608		)	(30,001		)	20,396			—			6,831			27,227
Amounts reclassified from AOCI	(1,631		)	(5,422		)	(745		)	(7,798		)	(2,838		)	(2,257		)	166			(4,929		)
Net comprehensive (loss)/income	(20,024		)	(5,422		)	(12,353		)	(37,799		)	17,558			(2,257		)	6,997			22,298
Ending Balance	$	(45,384	)	$	38,021		$	(5,480	)	$	(12,843	)	$	15,882		$	45,979		$	11,549		$	73,410



	For the Six Months Ended June 30, 2019
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income									Non-Interest Income			Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities			Interest Income Loans			Total Interest Expense			Gains/(losses) on financial derivatives			Total
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	170,980		$	110,800		$	(236,990	)	$	8,553		$	53,343
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	2,717			(224		)	(5,790		)	—			(3,297		)
Recognized on hedged items	55,198			10,878			(21,811		)	—			44,265
Discount amortization recognized on hedged items	—			—			(314		)	—			(314		)
Income/(expense) related to interest settlements on fair value hedging relationships	$	57,915		$	10,654		$	(27,915	)	$	—		$	40,654

Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	(175,392	)	$	(54,034	)	$	25,123		$	—		$	(204,303	)
Recognized on hedged items	173,990			50,031			(23,846		)	—			200,175
Gains/(losses) on fair value hedging relationships	$	(1,402	)	$	(4,003	)	$	1,277		$	—		$	(4,128	)

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—		$	—		$	942		$	—		$	942
Recognized on hedged items	—			—			(5,417		)	—			(5,417		)
Discount amortization recognized on hedged items	—			—			(2		)	—			(2		)
Expense recognized on cash flow hedges	$	—		$	—		$	(4,477	)	$	—		$	(4,477	)

Gains on financial derivatives not designated in hedging relationships:
Gains on interest rate swaps	$	—		$	—		$	—		$	13,320		$	13,320
Interest expense on interest rate swaps	—			—			—			(3,446		)	(3,446		)
Treasury futures	—			—			—			(1,321		)	(1,321		)
Gains on financial derivatives not designated in hedge relationships	$	—		$	—		$	—		$	8,553		$	8,553



	For the Six Months Ended June 30, 2018
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income									Non-Interest Income			Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities			Interest Income Loans			Total Interest Expense			Gains/(losses) on financial derivatives			Total
	(in thousands)
Total amounts presented in the consolidated statement of operations:	$	136,609		$	95,049		$	(168,054	)	$	(1,316	)	$	62,288
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(807		)	(463		)	(2,614		)	—			(3,884		)
Recognized on hedged items	29,409			2,959			(18,628		)	—			13,740
Discount amortization recognized on hedged items	—			—			(353		)	—			(353		)
Income/(expense) related to interest settlements on fair value hedging relationships	$	28,602		$	2,496		$	(21,595	)	$	—		$	9,503

Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	32,934		$	8,655		$	(12,377	)	$	—		$	29,212
Recognized on hedged items	(29,797		)	(9,045		)	14,331			—			(24,511		)
Gains/(losses) on fair value hedging relationships	$	3,137		$	(390	)	$	1,954		$	—		$	4,701

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—		$	—		$	(210	)	$	—		$	(210	)
Recognized on hedged items	—			—			(4,110		)	—			(4,110		)
Discount amortization recognized on hedged items	—			—			(4		)	—			(4		)
Expense recognized on cash flow hedges	$	—		$	—		$	(4,324	)	$	—		$	(4,324	)

Losses on financial derivatives not designated in hedge relationships:
Gains on interest rate swaps	$	—		$	—		$	—		$	4,176		$	4,176
Interest expense on interest rate swaps	—			—			—			(5,855		)	(5,855		)
Treasury futures	—			—			—			363			363
Losses on financial derivatives not designated in hedge relationships	$	—		$	—		$	—		$	(1,316	)	$	(1,316	)



	June 30, 2019								June 30, 2018
	Allowance for Loan Losses			Reserve for Losses			Total Allowance for Losses		Allowance for Loan Losses			Reserve for Losses		Total Allowance for Losses
	(in thousands)
For the Three Months Ended:
Beginning Balance	$	6,753		$	2,038		8,791		$	6,365		$	2,091	8,456
Provision for/(release of) losses	578			(158		)	420		424			158		582
Charge-offs	(67		)	—			(67	)	—			—		—
Ending Balance	7,264			1,880			9,144		6,789			2,249		9,038

For the Six Months Ended:
Beginning Balance	$	7,017		$	2,167		9,184		$	6,796		$	2,070	8,866
Provision for/(release of) losses	314			(287		)	27		(7		)	179		172
Charge-offs	(67		)	—			(67	)	—			—		—
Ending Balance	7,264			1,880			9,144		6,789			2,249		9,038



	Percentage Change in MVE from Base Case
Interest Rate Scenario	As of June 30, 2019		As of December 31, 2018
+100 basis points	1.4	%	(0.7	)%
-100 basis points	(7.0	)%	(5.9	)%



Core Earnings by Quarter Ended
	June 2019			March 2019			December 2018			September 2018			June 2018			March 2018			December 2017			September 2017			June 2017

Revenues:
Net effective spread	$	41,355		$	38,801		$	38,855		$	39,077		$	36,162		$	37,101		$	37,467		$	35,976		$	35,334
Guarantee and commitment fees	5,276			5,419			5,309			5,170			5,171			5,083			5,157			4,935			4,942
Other	777			509			(129		)	110			111			428			69			274			107
Total revenues	47,408			44,729			44,035			44,357			41,444			42,612			42,693			41,185			40,383

Credit related expense/(income):
Provision for/(release of) losses	420			(393		)	166			(3		)	582			(410		)	464			384			466
REO operating expenses	64			—			—			—			—			16			—			—			23
Losses/(gains) on sale of REO	—			—			—			41			(34		)	—			(964		)	(32		)	(757		)
Total credit related expense/(income)	484			(393		)	166			38			548			(394		)	(500		)	352			(268		)

Operating expenses:
Compensation and employee benefits	6,770			7,606			7,167			6,777			6,936			6,654			5,247			5,987			6,682
General and administrative	4,689			4,596			5,829			4,350			5,202			4,326			4,348			3,890			3,921
Regulatory fees	687			688			687			625			625			625			625			625			625
Total operating expenses	12,146			12,890			13,683			11,752			12,763			11,605			10,220			10,502			11,228

Net earnings	34,778			32,232			30,186			32,567			28,133			31,401			32,973			30,331			29,423
Income tax expense	7,351			6,715			6,431			6,891			5,477			6,259			11,796			10,268			10,307
Net loss attributable to non-controlling interest⁽¹⁾	—			—			—			—			—			—			—			—			(150		)
Preferred stock dividends	3,785			3,296			3,296			3,295			3,296			3,295			3,296			3,295			3,296
Core earnings	$	23,642		$	22,221		$	20,459		$	22,381		$	19,360		$	21,847		$	17,881		$	16,768		$	15,970

Reconciling items:
Gains/(losses) on undesignated financial derivatives due to fair value changes	10,485			2,240			(96		)	3,625			6,709			(2,279		)	(261		)	995			801
(Losses)/gains on hedging activities due to fair value changes	(1,438		)	(2,817		)	(853		)	1,051			1,687			2,564			(3		)	1,742			1,420
Unrealized gains/(losses) on trading assets	61			44			57			(3		)	11			16			60			—			(2		)
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value	(139		)	(16		)	67			(38		)	196			(686		)	(129		)	(954		)	(117		)
Net effects of terminations or net settlements on financial derivatives	(592		)	110			(312		)	546			232			1,242			632			862			232
Issuance costs on the retirement of preferred stock	(1,956		)	—			—			—			—			—			—			—			—
Re-measurement of net deferred tax asset due to enactment of new tax legislation	—			—			—			—			—			—			(1,365		)	—			—
Income tax effect related to reconciling items	(1,759		)	92			238			(1,088		)	(1,855		)	(180		)	(105		)	(926		)	(816		)
Net income attributable to common stockholders	$	28,304		$	21,874		$	19,560		$	26,474		$	26,340		$	22,524		$	16,710		$	18,487		$	17,488