# FEDERAL AGRICULTURAL MORTGAGE CORP (AGM) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from FEDERAL AGRICULTURAL MORTGAGE CORP's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/845877/000084587723000026/agm-20221231.htm
Accession: 0000845877-23-000026
Filing date: 2023-02-24
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/AGM/
All MD&A years: /company/AGM/mda/
Previous year: /company/AGM/mda/fy2021/ (FY 2021)
Next year: /company/AGM/mda/fy2023/ (FY 2023)

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations

The objective of this section of the report is to provide a discussion and analysis, from management’s

perspective, of the material information necessary to assess Farmer Mac's financial condition and results

of operations for the year ended December 31, 2022. Financial information included in this report is

consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage

Securities Corporation and Farmer Mac II LLC. This discussion and analysis of financial condition and

results of operations should be read together with Farmer Mac's consolidated financial statements and the

related notes to the consolidated financial statements for the fiscal years ended December 31, 2022, 2021, and 2020.

Overview

Farmer Mac is a mission-focused, purpose-driven company determined to drive economic opportunity and prosperity by increasing the accessibility of financing for American agriculture and rural infrastructure. As the nation’s secondary market for agricultural and rural infrastructure loans, we help strengthen and connect rural America by providing a broad array of financial solutions to lenders that support flexible low-cost financing to farmers, ranchers, agribusinesses, renewable energy projects, rural utilities, and other related rural businesses and enterprises. Farmer Mac also serves as a critical investment tool for entities such as states, counties, municipalities, pension funds, banks, public trust funds, and credit unions. Farmer Mac offers those entities a variety of investment opportunities that may diversify their investment portfolios and provide the opportunity to earn a competitive return on their investment dollars.

During 2022:

•we provided $9.0 billion in liquidity and lending capacity to lenders serving rural America;

•we closed our second structured securitization transaction involving approximately $300 million of agricultural mortgage loans;

•we maintained uninterrupted access to the debt capital markets and a strong capital position; and

•we maintained strong liquidity in our investment portfolio well above regulatory requirements.

Farmer Mac’s performance during 2022, described in more detail below, reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to increase the accessibility of financing for American agriculture and rural infrastructure. Despite ongoing macroeconomic concerns and potential headwinds such as deteriorating macroeconomic conditions, inflation, rising interest rates, and war in Ukraine, Farmer Mac delivered solid financial results. These financial results in 2022 reflected a variety of factors, including: (1) the resilience of the farm economy, as producers have benefited from healthy farm incomes and liquidity from relatively high commodity prices resulting from heightened demand, with revenues rising faster than the costs of inputs; (2) an increase in Farmer Mac's outstanding business volume at higher spreads while credit quality improved; (3) Farmer Mac's disciplined approach to interest rate risk management that helps to protect earnings from the effects of interest rate volatility and are accretive to Farmer Mac during periods of rising interest rates; and (4) Farmer Mac's effective funding strategies that resulted in advantageous funding during 2022, which have also benefited from the rising interest rate environment in the current period. The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are measures of financial performance not presented in accordance with generally accepted accounting principles in the United

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States ("GAAP"). For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

Net Income and Core Earnings

The following table shows our net income attributable to common stockholders and core earnings for the periods presented. Core earnings and core earnings per share are non-GAAP measures that differ from net income attributable to common stockholders and earnings per common share, respectively, by excluding the effects of fair value fluctuations and specified infrequent or unusual transactions.

Table 1

[[GREPCENT_TABLE]]
[["","For the Years Ended December 31,"],["","2022","","2021","","2020"],["","(in thousands)"],["Net income attributable to common stockholders","$","150,979","","","$","111,412","","","$","94,904"],["Core earnings","124,314","","","113,570","","","100,612"]]
[[/GREPCENT_TABLE]]

The $39.6 million year-over-year increase in net income attributable to common stockholders was due to a $38.7 million after-tax increase in net interest income and a $17.6 million after-tax increase in the fair value of undesignated financial derivatives. These factors were partially offset by a $5.2 million after-tax decrease related to the non-recurrence of the gain on the sale of mortgage loans that occurred in the prior period, a $6.6 million increase in operating expenses, a $2.5 million increase in preferred stock dividends, and a $2.4 million increase in our provision for credit losses.

The $16.5 million increase in net income attributable to common stockholders for 2021 compared to 2020 was due to a $20.6 million after-tax increase in net interest income, a net change in our (release)/provision for credit losses of $8.1 million after tax, and a $5.2 million after-tax gain on sale of mortgage loans. These factors were partially offset by a $9.5 million after-tax increase in operating expenses, a $6.9 million increase in preferred stock dividends, and a $1.1 million after-tax decrease in the fair value of undesignated financial derivatives.

The $10.7 million year-over-year increase in core earnings was due to a $27.5 million after-tax increase in net effective spread. This factor was partially offset by a $5.2 million after-tax decrease related to the non-recurrence of the gain on the sale of mortgage loans that occurred in the prior period, a $6.6 million increase in operating expenses, a $2.5 million increase in preferred stock dividends, and a $2.4 million increase in our provision for credit losses.

The $13.0 million increase in core earnings for 2021 compared to 2020 was due to a $18.7 million after-tax increase in net effective spread, a net change in our (release)/provision for credit losses of $8.1 million after tax, and a $5.2 million after-tax gain on sale of mortgage loans. These factors were partially offset by a $9.5 million after-tax increase in operating expenses, a $6.9 million increase in preferred stock dividends, a $1.3 million after-tax decrease in guarantee fees, and a $0.8 million after-tax decrease in other income.

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

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Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

Net Interest Income and Net Effective Spread

The following table shows our net interest income and net effective spread in both dollars and percentage yield or spread for the periods presented. Farmer Mac uses net effective spread, a non-GAAP measure, as an alternative to net interest income because management believes it is a useful metric that reflects the economics of the net spread between all the assets owned by Farmer Mac and all related funding, including any associated derivatives, some of which may not be included in net interest income.

Table 2

[[GREPCENT_TABLE]]
[["","For the Years Ended December 31,"],["","2022","","2021","","2020"],["","(in thousands)"],["Net interest income","$","270,940","","","$","221,951","","","$","195,848"],["Net interest yield %","1.04","%","","0.94","%","","0.87","%"],["Net effective spread","$","255,529","","","$","220,668","","","$","196,956"],["Net effective spread %","1.02","%","","0.98","%","","0.93","%"]]
[[/GREPCENT_TABLE]]

The $49.0 million year-over-year increase in net interest income was primarily attributable to a $21.9 million increase from net new business volume and a $21.4 million decrease in funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity, and a $6.1 million increase in the fair value of designated financial derivatives. In percentage terms, the year-over-year 0.10% increase was primarily attributable to a decrease of 0.08% in funding costs and an increase of 0.02% in net fair value changes from financial derivatives designated in hedge accounting relationships (designated financial derivatives).

The $26.1 million increase in net interest income for 2021 compared to 2020 was primarily due to a $16.7 million increase related to net new business volume, a $6.9 million decrease in funding costs, and a $3.6 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). In percentage terms, the 0.07% increase was primarily attributable to an increase of 0.04% in net new business volume, an increase of 0.02% in net fair value changes from designated financial derivatives, and a decrease of 0.01% in funding costs.

The $34.9 million year-over-year increase in net effective spread in dollars was primarily due to a $23.6 million increase from net new business volume, a $7.7 million decrease in non-GAAP funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity, a $2.4 million increase in net servicing revenue, and a $0.9 million increase in cash-basis interest income. In percentage terms, the year-over-year increase of 0.04% was primarily attributable to a decrease of 0.03% in non-GAAP funding costs and an increase of 0.01% in cash-basis interest income.

The $23.7 million increase in net effective spread in dollars for 2021 compared to 2020 was primarily due to an increase of $16.7 million from net new business volume and a $6.3 million decrease in non-GAAP funding costs. In percentage terms, the year-over-year increase of 0.05% was primarily attributable to an increase of 0.04% in net new business volume and a decrease of 0.01% in non-GAAP funding costs.

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For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 10 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

Business Volume

Our outstanding business volume was $25.9 billion as of December 31, 2022, a net increase of $2.3 billion from December 31, 2021 after taking into account all new business, maturities, sales, and paydowns on existing assets. The net increase was primarily attributable to net increases of $1.7 billion in the Agricultural Finance line of business and $0.6 billion in the Rural Infrastructure Finance line of business.

For more information about Farmer Mac's business volume, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

Capital

Table 3

[[GREPCENT_TABLE]]
[["","As of"],["","December 31, 2022","","December 31, 2021"],["","(in thousands)"],["Core capital","$","1,322,801","","","$","1,209,847"],["Capital in excess of minimum capital level required","516,882","","","496,771"]]
[[/GREPCENT_TABLE]]

The increase in capital in excess of the minimum capital level required was primarily due to an increase in retained earnings.

Credit Quality

The following table presents Agricultural Finance on- and off-balance sheet substandard assets, in dollars and as a percentage of the respective portfolio as of December 31, 2022 and 2021:

Table 4

[[GREPCENT_TABLE]]
[["","On-Balance Sheet","","Off-Balance Sheet"],["","Substandard Assets","","% of Portfolio","","Substandard Assets","","% of Portfolio"],["","(dollars in thousands)"],["December 31, 2022","$","169,667","","","2.3","%","","$","39,733","","","1.2","%"],["December 31, 2021","185,758","","","2.7","%","","60,922","","","2.1","%"],["Increase/(decrease) from prior year-ending","$","(16,091)","","","(0.4)","%","","$","(21,189)","","","(0.9)","%"]]
[[/GREPCENT_TABLE]]

The decrease of $16.1 million in on-balance sheet substandard assets during 2022 was primarily driven by credit upgrades in crops, livestock, and permanent plantings, and was partially offset by credit downgrades in agricultural storage and processing and part-time farms. The on-balance sheet Agricultural Finance portfolio grew by $681.6 million, which when combined with the net credit upgrades caused the percentage of substandard assets to decrease. The $21.2 million decrease in substandard assets in our off-balance sheet portfolios during 2022 was primarily due to credit upgrades in crops, livestock, and

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permanent plantings, and was partially offset by credit downgrades in part-time farms. The off-balance sheet Agricultural Finance portfolio grew by $188.3 million, which when combined with the net credit upgrades caused the percentage of substandard assets to decrease.

There were no substandard assets in the Rural Infrastructure Finance portfolio as of December 31, 2022 and one loan classified as substandard in that portfolio as of December 31, 2021.

For an analysis of current loan-to-value ratios across substandard and other internally assigned risk ratings, see Table 25 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

The following table presents 90-day delinquencies for the on- and off-balance sheet Agricultural Finance portfolios, in dollars and as a percentage of the respective balance sheet category as of December 31, 2022 and 2021:

Table 5

[[GREPCENT_TABLE]]
[["","On-Balance Sheet","","Off-Balance Sheet"],["","90-Day Delinquencies","","% of Portfolio","","90-Day Delinquencies","","% of Portfolio"],["","(dollars in thousands)"],["December 31, 2022","$","39,681","","","0.53","%","","$","3,817","","","0.12","%"],["December 31, 2021","43,710","","","0.64","%","","3,597","","","0.12","%"],["Increase/(decrease) from prior year-ending","$","(4,029)","","","(0.11)","%","","$","220","","","\u2014","%"]]
[[/GREPCENT_TABLE]]

On-balance sheet Agricultural Finance assets 90 or more days delinquent decreased in crops and livestock, and was partially offset by increases in agricultural storage and processing, part-time farms, and permanent plantings. Off-balance sheet Agricultural Finance assets 90 days or more delinquent increased in part-time farms and livestock, and was partially offset by decreases in crops and permanent plantings. The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural Finance portfolio represented over half of the aggregate 90-day delinquencies as of December 31, 2022.

As of both December 31, 2022 and 2021, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.

For more information about Farmer Mac's credit metrics, including 90-day delinquencies, the total allowance for losses, and substandard assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

Critical Accounting Estimates

The preparation of Farmer Mac's consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented. Farmer Mac considers an accounting estimate made in accordance with GAAP to be critical when it involves a significant level of estimation uncertainty and it has had or is likely to have a material impact on our financial condition or results of operations.

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The accounting estimate that Farmer Mac considers to be critical in the preparation of its consolidated financial statements is the estimation of the fair value of AgVantage Securities that are classified as available for sale (AgVantage AFS). Farmer Mac considers the fair value of AgVantage AFS to be a critical estimate due to the significance of the periodic measurement of mark-to-market adjustments relative to the company's total assets, comprehensive income, and equity. Farmer Mac also considers the fair value of AgVantage AFS to be a critical accounting estimate because Farmer Mac applies a discount rate in calculating the net present value of future expected cash flows that is both significant to the estimate of their fair value and unobservable in the market. Farmer Mac relies upon this significant unobservable input to estimate the fair value of AgVantage AFS because there are no observable transactions in these securities in the market.

The fair value of AgVantage AFS had accumulated unrealized gains in the amount of $2.1 million and $212.9 million as of December 31, 2022 and 2021, respectively. See Note 5 to the consolidated financial statements – Farmer Mac Guaranteed Securities and USDA Securities for more information.

Farmer Mac applies discount rates that are commensurate with the risks involved to estimate the fair value measurement of AgVantage AFS. As of December 31, 2022, Farmer Mac applied discount rates that ranged from 4.7% to 6.1% (with a weighted average of 5.1%), As of December 31, 2021, Farmer Mac applied discount rates that ranged from 0.9% to 2.1% (with a weighted average of 1.7%).

Use of different discount rates than those selected by Farmer Mac may result in materially different estimates of fair value for AgVantage AFS. Farmer Mac selects the discount rate for each AgVantage AFS security by analyzing credit default swap levels and the long-term credit outlook of Farmer Mac's major counterparties and estimating an appropriate credit spread relative to U.S. Treasury yields. The periodic measurement of fair value and underlying discount rate methodology is subject to Farmer Mac’s internal controls and review by management. As of December 31, 2022, a 0.50% increase in the discount rates used to determine the fair value of AgVantage AFS would decrease the overall GAAP carrying value by approximately 1.98%. See Note 13 to the consolidated financial statements – Fair Value Disclosures for more information.

For a description of Farmer Mac’s accounting policy for fair value measurements, see Note 2(n) to the consolidated financial statements – Significant Accounting Policies, Fair Value Measurements.

Use of Non-GAAP Measures

In the accompanying analysis of its financial information, Farmer Mac uses "non-GAAP measures," which are measures of financial performance that are not presented in accordance with GAAP. Specifically, Farmer Mac uses the following non-GAAP measures: "core earnings," "core earnings per share," and "net effective spread." Farmer Mac uses these non-GAAP measures to measure corporate economic performance and develop financial plans because, in management's view, they are useful alternative measures in understanding Farmer Mac's economic performance, transaction economics, and business trends.

The non-GAAP financial measures that Farmer Mac uses may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of these non-GAAP measures is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP.

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Core Earnings and Core Earnings Per Share

The main difference between core earnings and core earnings per share (non-GAAP measures) and net income attributable to common stockholders and earnings per common share (GAAP measures) is that those non-GAAP measures exclude the effects of fair value fluctuations. These fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected. Another difference is that these two non-GAAP measures exclude specified infrequent or unusual transactions that we believe are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. For example, we have excluded from core earnings and core earnings per share any losses on retirement of preferred stock. For a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."

Net Effective Spread

Farmer Mac uses net effective spread to measure the net spread Farmer Mac earns between its interest-earning assets and the related net funding costs of these assets. As further explained below, net effective spread differs from net interest income and net interest yield by excluding certain items from net interest income and net interest yield and including certain other items that net interest income and net interest yield do not contain.

Farmer Mac excludes from net effective spread the interest income and interest expense associated with the consolidated trusts and the average balance of the loans underlying these trusts to reflect management's view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee. Accordingly, the excluded interest income and interest expense associated with consolidated trusts is reclassified to guarantee and commitment fees in determining Farmer Mac's core earnings. Farmer Mac also excludes from net effective spread the fair value changes of financial derivatives and the corresponding assets or liabilities designated in fair value hedge accounting relationships because they are not expected to have an economic effect on Farmer Mac's financial performance, as we expect to hold the financial derivatives and corresponding hedged items to maturity.

Net effective spread also differs from net interest income and net interest yield because it includes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships ("undesignated financial derivatives"). Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities. The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income. For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains on financial derivatives" on the consolidated statements of operations. However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread.

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Net effective spread also differs from net interest income and net interest yield because it includes the net effects of terminations or net settlements on financial derivatives, which consist of: (1) the net effects of cash settlements on agency forward contracts on the debt of other GSEs and U.S. Treasury security futures that we use as short-term economic hedges on the issuance of debt; and (2) the net effects of initial cash payments that Farmer Mac receives upon the inception of certain swaps. The inclusion of these items in net effective spread is intended to reflect our view of the complete net spread between an asset and all of its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship.

For a reconciliation of net interest income and net interest yield to net effective spread, see Table 10 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

Results of Operations

Reconciliations of Farmer Mac's net income attributable to common stockholders to core earnings and core earnings per share are presented in the following tables along with information about the composition of core earnings:

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Table 6

[[GREPCENT_TABLE]]
[["Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings"],["","For the Years Ended December 31,"],["","2022","","2021","","2020"],["","(in thousands, except per share amounts)"],["Net income attributable to common stockholders","$","150,979","","","$","111,412","","","$","94,904"],["Less reconciling items:"],["Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 13)","13,495","","","(1,431)","","","(1,701)"],["Gains/(losses) on hedging activities due to fair value changes","5,343","","","(1,810)","","","(4,759)"],["Unrealized (losses)/gains on trading securities","(917)","","","(115)","","","51"],["Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value","39","","","130","","","58"],["Net effects of terminations or net settlements on financial derivatives","15,794","","","494","","","1,236"],["Issuance costs on the retirement of preferred stock","\u2014","","","\u2014","","","(1,667)"],["Income tax effect related to reconciling items","(7,089)","","","574","","","1,074"],["Sub-total","26,665","","","(2,158)","","","(5,708)"],["Core earnings","$","124,314","","","$","113,570","","","$","100,612"],["Composition of Core Earnings:"],["Revenues:"],["Net effective spread(1)","$","255,529","","","$","220,668","","","$","196,956"],["Guarantee and commitment fees(2)","18,144","","","17,533","","","19,150"],["Gains on sale of mortgage loans","\u2014","","","6,539","","","\u2014"],["Other(3)","1,684","","","1,680","","","2,687"],["Total revenues","275,357","","","246,420","","","218,793"],["Credit related expense (GAAP):"],["Provision for/(release of) losses","806","","","(2,187)","","","8,055"],["REO operating expenses","819","","","\u2014","","","\u2014"],["Gains on sale of REO","\u2014","","","\u2014","","","(463)"],["Total credit related expense","1,625","","","(2,187)","","","7,592"],["Operating expenses (GAAP):"],["Compensation and employee benefits","48,766","","","42,847","","","36,502"],["General and administrative","29,772","","","27,507","","","21,976"],["Regulatory fees","3,269","","","3,062","","","2,925"],["Total operating expenses","81,807","","","73,416","","","61,403"],["Net earnings","191,925","","","175,191","","","149,798"],["Income tax expense(4)","40,446","","","36,944","","","31,381"],["Preferred stock dividends (GAAP)","27,165","","","24,677","","","17,805"],["Core earnings","$","124,314","","","$","113,570","","","$","100,612"],["Core earnings per share:"],["Basic","$","11.52","","","$","10.56","","","$","9.38"],["Diluted","$","11.42","","","$","10.47","","","9.33"],["Weighted-average shares:"],["Basic","10,791","","","10,758","","","10,728"],["Diluted","10,883","","","10,846","","","10,786"]]
[[/GREPCENT_TABLE]]

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(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 10 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.

Table 7

[[GREPCENT_TABLE]]
[["Reconciliation of GAAP Basic Earnings Per Share to Core Earnings - Basic Earnings Per Share"],["","","","For the Years Ended December 31,"],["","","","","","2022","","2021","","2020"],["","","","","","(in thousands, except per share amounts)"],["GAAP - Basic EPS","","","","","$","14.00","","","$","10.36","","","$","8.85"],["Less reconciling items:"],["Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 13)","","","","","1.25","","","(0.13)","","","(0.16)"],["Gains/(losses) on hedging activities due to fair value changes","","","","","0.50","","","(0.17)","","","(0.44)"],["Unrealized losses on trading securities","","","","","(0.08)","","","(0.01)","","","\u2014"],["Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value","","","","","\u2014","","","0.01","","","0.01"],["Net effects of terminations or net settlements on financial derivatives","","","","","1.47","","","0.04","","","0.12"],["Issuance costs on the retirement of preferred stock","","","","","\u2014","","","\u2014","","","(0.16)"],["Income tax effect related to reconciling items","","","","","(0.66)","","","0.06","","","0.10"],["Sub-total","","","","","2.48","","","(0.20)","","","(0.53)"],["Core Earnings - Basic EPS","","","","","$","11.52","","","$","10.56","","","$","9.38"],["Shares used in per share calculation (GAAP and Core Earnings)","","","","","10,791","","","10,758","","","10,728"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share"],["","","","For the Years Ended December 31,"],["","","","","","2022","","2021","","2020"],["","","","","","(in thousands, except per share amounts)"],["GAAP - Diluted EPS","","","","","$","13.87","","","$","10.27","","","$","8.80"],["Less reconciling items:"],["Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 13)","","","","","1.24","","","(0.13)","","","(0.16)"],["Gains/(losses) on hedging activities due to fair value changes","","","","","0.49","","","(0.17)","","","(0.44)"],["Unrealized losses on trading securities","","","","","(0.08)","","","(0.01)","","","\u2014"],["Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value","","","","","\u2014","","","0.01","","","0.01"],["Net effects of terminations or net settlements on financial derivatives","","","","","1.45","","","0.05","","","0.11"],["Issuance costs on the retirement of preferred stock","","","","","\u2014","","","\u2014","","","(0.15)"],["Income tax effect related to reconciling items","","","","","(0.65)","","","0.05","","","0.10"],["Sub-total","","","","","2.45","","","(0.20)","","","(0.53)"],["Core Earnings - Diluted EPS","","","","","$","11.42","","","$","10.47","","","$","9.33"],["Shares used in per share calculation (GAAP and Core Earnings)","","","","","10,883","","","10,846","","","10,786"]]
[[/GREPCENT_TABLE]]

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

1. Gains/(losses) on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above: (a) Gains/(losses) on undesignated financial derivatives due to fair value changes; and (b) Gains/(losses) on hedging activities due to fair value changes.

2. Unrealized (losses)/gains on trading securities. The unrealized (losses)/gains on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period.

3. The net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value. The amount of this non-GAAP reconciling item is the recorded amount of premium, discount, or deferred gain amortization during the reporting period on those assets for which the premium, discount, or deferred gain was based on the application of an accounting principle (e.g., consolidation of variable interest entities) rather than on a cash transaction (e.g., a purchase price premium or discount).

4. The net effects of terminations or net settlements on financial derivatives. These terminations or net settlements relate to:

•Forward contracts on the debt of other GSEs and futures contracts on U.S. Treasury securities. These contracts are used as a short-term economic hedge of the issuance of debt. For GAAP purposes, realized gains or losses on settlements of these contracts are reported in the consolidated statements of operations in the period in which they occur. For core earnings purposes, these realized gains or losses are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years.

5. The recognition of deferred issuance costs on the retirement of the Series A Preferred Stock in 2020 has been excluded from core earnings because they are not frequently occurring transactions, nor are they 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 next eligible preferred stock redemption date is in 2024.

The following sections provide more detail about specific components of Farmer Mac's results of operations.

Net Interest Income. The following table provides information about interest-earning assets and funding for the years ended December 31, 2022, 2021, and 2020. 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. 

63

Table 8

[[GREPCENT_TABLE]]
[["","For the Year Ended"],["","December 31, 2022","","December 31, 2021","","December 31, 2020"],["","Average Balance","","Income/ Expense","","Average Rate","","Average Balance","","Income/ Expense","","Average Rate","","Average Balance","","Income/ Expense","","Average Rate"],["","(dollars in thousands)"],["Interest-earning assets:"],["Cash and investments","$","5,236,118","","","$","82,659","","","1.58","%","","$","4,726,552","","","$","18,660","","","0.39","%","","$","4,180,158","","","$","42,144","","","1.01","%"],["Loans, Farmer Mac Guaranteed Securities and USDA Securities(1)","19,882,489","","","602,537","","","3.03","%","","17,838,238","","","368,330","","","2.06","%","","16,950,819","","","412,556","","","2.43","%"],["Total interest-earning assets","25,118,607","","","685,196","","","2.73","%","","22,564,790","","","386,990","","","1.72","%","","21,130,977","","","454,700","","","2.15","%"],["Funding:"],["Notes payable due within one year","2,876,452","","","48,481","","","1.69","%","","3,779,689","","","3,820","","","0.10","%","","3,937,104","","","24,242","","","0.62","%"],["Notes payable due after one year(2)","20,987,990","","","370,014","","","1.76","%","","18,004,757","","","166,083","","","0.92","%","","16,869,918","","","241,211","","","1.43","%"],["Total interest-bearing liabilities(3)","23,864,442","","","418,495","","","1.75","%","","21,784,446","","","169,903","","","0.78","%","","20,807,022","","","265,453","","","1.28","%"],["Net non-interest-bearing funding","1,254,165","","","\u2014","","","","","780,344","","","\u2014","","","","","323,955","","","\u2014"],["Total funding","25,118,607","","","418,495","","","1.67","%","","22,564,790","","","169,903","","","0.75","%","","21,130,977","","","265,453","","","1.26","%"],["Net interest income/yield prior to consolidation of certain trusts","25,118,607","","","266,701","","","1.06","%","","22,564,790","","","217,087","","","0.96","%","","21,130,977","","","189,247","","","0.90","%"],["Net effect of consolidated trusts(4)","850,916","","","4,239","","","0.50","%","","1,049,521","","","4,864","","","0.46","%","","1,396,850","","","6,601","","","0.47","%"],["Net interest income/yield","$","25,969,523","","","$","270,940","","","1.04","%","","$","23,614,311","","","$","221,951","","","0.94","%","","$","22,527,827","","","$","195,848","","","0.87","%"]]
[[/GREPCENT_TABLE]]

(1)Excludes interest income of $31.7 million, $39.0 million, and $54.1 million in 2022, 2021, and 2020, 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 $27.4 million, $34.1 million, and $47.5 million in 2022, 2021, and 2020, 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.

The $49.0 million year-over-year increase in net interest income was primarily attributable to a $21.9 million increase from net new business volume, a $21.4 million decrease in funding costs due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity, and a $6.1 million increase in the fair value of designated financial derivatives. In percentage terms, the year-over-year 0.10% increase was primarily attributable to a decrease of 0.08% in funding costs and an increase of 0.02% in net fair value changes from financial derivatives designated in hedge accounting relationships (designated financial derivatives).

The $26.1 million increase in net interest income for 2021 compared to 2020 was primarily due to a $16.7 million increase related to net new business volume, a $6.9 million decrease in funding costs, and a $3.6 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). In percentage terms, the 0.07% increase was primarily attributable to an increase of 0.04% in net new business volume, an increase of 0.02% in net fair value changes from designated financial derivatives, and a decrease of 0.01% in funding costs.

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), and then allocated based on the relative size of rate and volume changes from the prior period.  

64

Table 9

[[GREPCENT_TABLE]]
[["","2022 vs. 2021","","2021 vs. 2020"],["","Increase/(Decrease) Due to","","Increase/(Decrease) Due to"],["","Rate","","Volume","","Total","","Rate","","Volume","","Total"],["","(in thousands)"],["Income from interest-earning assets:"],["Cash and investments","$","61,778","","","$","2,221","","","$","63,999","","","$","(28,400)","","","$","4,916","","","$","(23,484)"],["Loans, Farmer Mac Guaranteed Securities and USDA Securities","188,111","","","46,096","","","234,207","","","(64,984)","","","20,758","","","(44,226)"],["Total","249,889","","","48,317","","","298,206","","","(93,384)","","","25,674","","","(67,710)"],["Expense from other interest-bearing liabilities","230,931","","","17,661","","","248,592","","","(107,497)","","","11,947","","","(95,550)"],["Change in net interest income prior to consolidation of certain trusts(1)","$","18,958","","","$","30,656","","","$","49,614","","","$","14,113","","","$","13,727","","","$","27,840"]]
[[/GREPCENT_TABLE]]

(1)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 accounting relationships is already included in net interest income), and (2) the amortization of losses due to terminations or net settlements of financial derivatives; and excluding (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 net effective spread.

Table 10

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","2022","","2021","","2020"],["","","","","","","","","","Dollars","","Yield","","Dollars","","Yield","","Dollars","","Yield"],["","","","","","","","","","(dollars in thousands)"],["Net interest income/yield","","","","","","","","","$","270,940","","","1.04","%","","$","221,951","","","0.94","%","","$","195,848","","","0.87","%"],["Net effects of consolidated trusts","","","","","","","","","(4,239)","","","0.02","%","","(4,864)","","","0.02","%","","(6,601)","","","0.02","%"],["Expense related to undesignated financial derivatives","","","","","","","","","(7,756)","","","(0.03)","%","","2,841","","","0.01","%","","3,468","","","0.02","%"],["Amortization of premiums/discounts on assets consolidated at fair value","","","","","","","","","(24)","","","\u2014","%","","(45)","","","\u2014","%","","197","","","\u2014","%"],["Amortization of losses due to terminations or net settlements on financial derivatives","","","","","","","","","2,413","","","0.01","%","","446","","","\u2014","%","","120","","","\u2014","%"],["Fair value changes on fair value hedge relationships","","","","","","","","","(5,805)","","","(0.02)","%","","339","","","0.01","%","","3,924","","","0.02","%"],["Net effective spread","","","","","","","","","$","255,529","","","1.02","%","","$","220,668","","","0.98","%","","$","196,956","","","0.93","%"]]
[[/GREPCENT_TABLE]]

The $34.9 million year-over-year increase in net effective spread in dollars was primarily due to a $23.6 million increase from net new business volume, a $7.7 million decrease in non-GAAP funding costs due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity, a $2.4 million increase in net servicing revenue, and a $0.9 million increase in cash-basis interest income. In percentage terms, the year-over-year increase of 0.04% was primarily attributable to an decrease of 0.03% in non-GAAP funding costs and an increase of 0.01% in cash-basis interest income.

65

For 2021 compared to 2020, the $23.7 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $16.7 million from net new business volume and a $6.3 million decrease in non-GAAP funding costs. In percentage terms, the increase of 0.05% was primarily attributable to an increase of 0.04% in net new business volume and a decrease of 0.01% in non-GAAP funding costs.

See Note 14 to the consolidated financial statements for more information about net interest income and net effective spread from Farmer Mac's individual business segments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Information" for quarterly net effective spread by line of business.

Provision for and Release of Allowance for Losses and Reserve for Losses. The following table summarizes the components of Farmer Mac's total allowance for losses for the three-year period ended December 31, 2022:

Table 11

[[GREPCENT_TABLE]]
[["","Allowance for Losses","","Reserve for Losses","","Total Allowance for Losses"],["","(in thousands)"],["Balance as of December 31, 2019","$","10,454","","","$","2,164","","","$","12,618"],["Cumulative effect adjustment from adoption of current expected credit loss standard","1,793","","","863","","","2,656"],["Adjusted Beginning Balance","$","12,247","","","$","3,027","","","$","15,274"],["Provision for losses","7,810","","","250","","","8,060"],["Charge-offs","(5,759)","","","\u2014","","","(5,759)"],["Balance as of December 31, 2020","$","14,298","","","$","3,277","","","$","17,575"],["Release of losses","(860)","","","(1,327)","","","(2,187)"],["Recovery","1,054","","","\u2014","","","1,054"],["Balance as of December 31, 2021","$","14,492","","","$","1,950","","","$","16,442"],["Provision for/(release of) losses","1,323","","","(517)","","","806"],["Charge-offs","(84)","","","\u2014","","","(84)"],["Balance as of December 31, 2022","$","15,731","","","$","1,433","","","$","17,164"]]
[[/GREPCENT_TABLE]]

See Notes 8 and 12 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

During 2022, we recorded a $0.8 million provision to the allowance primarily as a result of one agricultural storage and processing loan that received a risk rating downgrade during the year, due to the borrower's ongoing bankruptcy.

Guarantee Fees. The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the years ended December 31, 2022, 2021, and 2020:

66

Table 12

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","","","","","2022","","2021","","2020"],["","","","","","","","","","(dollars in thousands)"],["Contractual guarantee fees","","","","","","","","","$","14,235","","","$","12,669","","","$","12,549"],["Guarantee obligation amortization","","","","","","","","","5,913","","","7,257","","","\u2014"],["Guarantee asset fair value changes","","","","","","","","","(7,108)","","","(7,257)","","","\u2014"],["Guarantee fee income","","","","","","","","","$","13,040","","","$","12,669","","","$","12,549"]]
[[/GREPCENT_TABLE]]

Guarantee and commitment fees increased for the year ended December 31, 2022 compared to 2021, which was due to increases in the average outstanding balance of LTSPCs during the period. As adjusted for the core earnings presentation, guarantee and commitment fees were $18.1 million for the year ended December 31, 2022, compared to $17.5 million and $19.2 million for the years ended December 31, 2021 and 2020, respectively.

In Farmer Mac's presentation of core earnings, guarantee and commitment fees include interest income and interest expense related to consolidated trusts owned by third parties to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on those consolidated Farmer Mac Guaranteed Securities. Additionally, Farmer Mac has excluded guarantee asset fair value changes, because these fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations if Farmer Mac fulfills its guarantee obligation throughout the term of the guaranteed securities, as is expected.

For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see Table 6 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

Gains on financial derivatives. The components of gains and losses on financial derivatives for the years ended December 31, 2022, 2021, and 2020 are summarized in the following table:

Table 13

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","","","","","2022","","2021","","2020"],["","","","","","","","","","(dollars in thousands)"],["Gains/(losses) due to fair value changes","","","","","","","","","$","13,495","","","$","(1,431)","","","$","(1,701)"],["Accrual of contractual payments","","","","","","","","","(7,756)","","","2,841","","","3,468"],["Gains/(losses) due to terminations or net settlements","","","","","","","","","16,892","","","(1,086)","","","(23)"],["Gains on financial derivatives","","","","","","","","","$","22,631","","","$","324","","","$","1,744"]]
[[/GREPCENT_TABLE]]

These changes in fair value are primarily the result of fluctuations in long-term interest rates. The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are undesignated financial derivatives is shown as expense related to financial derivatives. Payments or receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S. Treasury security futures and initial cash payments received

67

upon the inception of certain undesignated swaps are included in "Gains/(losses) due to terminations or net settlements" in the table above. 

Gains on Sale of Mortgage Loans

Table 14

[[GREPCENT_TABLE]]
[["","For the Years Ended December 31,"],["","2022","","2021","","2020"],["","(in thousands)"],["Gains on sale of mortgage loans","$","\u2014","","","$","6,539","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

In 2021, Farmer Mac executed a structured securitization of Farm & Ranch loans that was treated as an off-balance sheet transaction, which resulted in a gain of $6.5 million.

Operating Expenses. The components of operating expenses for the years ended December 31, 2022, 2021, and 2020 are summarized in the following table:

Table 15

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","","","","","2022","","2021","","2020"],["","","","","","","","","","(dollars in thousands)"],["Compensation and employee benefits","","","","","","","","","$","48,766","","","$","42,847","","","$","36,502"],["General and administrative","","","","","","","","","29,772","","","27,507","","","21,976"],["Regulatory fees","","","","","","","","","3,269","","","3,062","","","2,925"],["Total Operating Expenses","","","","","","","","","$","81,807","","","$","73,416","","","$","61,403"]]
[[/GREPCENT_TABLE]]

Compensation and Employee Benefits. The increase in compensation and employee benefits expenses for 2022 compared to 2021 was due to increased headcount (full year impact of 32 net new hires in 2021 and 5 net new hires in 2022) and increased executive stock compensation. The increase in compensation and employee benefits expenses for 2021 compared to 2020 was due to increased headcount. We hired 32 net new employees in 2021, including ten new employees in connection with the strategic acquisition of loan servicing rights in third quarter 2021.

General and Administrative Expenses (G&A). The increase in G&A expenses for 2022 compared to 2021 was primarily due to increased spending on software licenses and information technology and other consultants to support growth and strategic initiatives. During 2021, we entered into a transition services agreement in connection with the strategic acquisition of loan servicing rights in third quarter 2021. Under that agreement, we paid $1.25 million to the seller of the servicing rights in installments through December 31, 2022 for continuing transition assistance.

68

Income Tax Expense. The following table presents income tax expense and the effective income tax rate for the years ended December 31, 2022, 2021, and 2020:

Table 16

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","","","","","2022","","2021","","2020"],["","","","","","","","","","(dollars in thousands)"],["Income tax expense","","","","","","","","","$","47,535","","","$","36,372","","","$","30,307"],["Effective tax rate","","","","","","","","","21.1","%","","21.1","%","","20.9","%"]]
[[/GREPCENT_TABLE]]

69

Business Volume.  

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the years ended December 31, 2022 and 2021:

Table 17

[[GREPCENT_TABLE]]
[["Net New Business Volume"],["","","","","","","For the Year Ended"],["","","","","","","","","December 31, 2022","","December 31, 2021"],["","","On or Off Balance Sheet","","","","","","Net Growth/(Decrease)","","Net Growth/(Decrease)"],["","","","","","","","","(in thousands)"],["Agricultural Finance:"],["Farm & Ranch:"],["Loans","","On-balance sheet","","","","","","$","375,680","","","$","795,216"],["Loans held in consolidated trusts:"],["Beneficial interests owned by third-party investors (Pass-Through)1","","On-balance sheet","","","","","","(33,705)","","","(338,422)"],["Beneficial interests owned by third-party investors (Structured)1","","On-balance sheet","","","","","","296,658","","","\u2014"],["IO-FMGS2","","On-balance sheet","","","","","","(1,675)","","","12,297"],["USDA Securities","","On-balance sheet","","","","","","(38,504)","","","(41,614)"],["AgVantage Securities1","","On-balance sheet","","","","","","880,000","","","300,000"],["LTSPCs and unfunded commitments","","Off-balance sheet","","","","","","235,155","","","272,189"],["Other Farmer Mac Guaranteed Securities3","","Off-balance sheet","","","","","","(77,405)","","","199,748"],["Loans serviced for others","","Off-balance sheet","","","","","","(2,051)","","","22,331"],["Total Farm & Ranch","","","","","","","","$","1,634,153","","","$","1,221,745"],["Corporate AgFinance:"],["Loans","","On-balance sheet","","","","","","$","42,953","","","$","213,761"],["AgVantage Securities1","","On-balance sheet","","","","","","(7,864)","","","(376,646)"],["Unfunded commitments","","Off-balance sheet","","","","","","30,584","","","36,604"],["Total Corporate AgFinance","","","","","","","","$","65,673","","","$","(126,281)"],["Total Agricultural Finance","","","","","","","","$","1,699,826","","","$","1,095,464"],["Rural Infrastructure Finance:"],["Rural Utilities:"],["Loans","","On-balance sheet","","","","","","$","499,323","","","$","114,996"],["AgVantage Securities1","","On-balance sheet","","","","","","10,894","","","467,425"],["LTSPCs and unfunded commitments","","Off-balance sheet","","","","","","(44,245)","","","412"],["Other Farmer Mac Guaranteed Securities3","","Off-balance sheet","","","","","","(1,586)","","","(1,657)"],["Total Rural Utilities","","","","","","","","$","464,386","","","$","581,176"],["Renewable Energy:"],["Loans","","On-balance sheet","","","","","","$","132,807","","","$","13,728"],["Unfunded commitments","","Off-balance sheet","","","","","","10,600","","","\u2014"],["Total Renewable Energy","","","","","","","","$","143,407","","","$","13,728"],["Total Rural Infrastructure Finance","","","","","","","","$","607,793","","","$","594,904"],["Total","","","","","","","","$","2,307,619","","","$","1,690,368"]]
[[/GREPCENT_TABLE]]

1Categories of Farmer Mac Guaranteed Securities.

2An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

3 Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.

70

Farmer Mac's outstanding business volume was $25.9 billion as of December 31, 2022, a net increase of $2.3 billion from December 31, 2021 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The $1.6 billion net increase in Farm & Ranch during 2022 resulted from $6.9 billion of new purchases, commitments, and guarantees, mostly offset by $5.3 billion of scheduled maturities and repayments. Farmer Mac purchased a total of $1.4 billion in loans, which was primarily driven by improved borrower economics albeit navigating a substantially higher interest rate environment. The $1.4 billion in gross Farm & Ranch loan purchases was partially offset by $1.1 billion in scheduled maturities and repayments.

Farmer Mac also purchased a total of $4.2 billion in Farm & Ranch AgVantage Securities during 2022, which primarily reflected the refinancing of maturing securities as well as financial counterparties seeking to add longer-term AgVantage securities to manage their asset-liability maturity profile given recent increases in credit spreads and interest rates. The $4.2 billion in gross purchases was partially offset by $3.3 billion in scheduled maturities. Of the AgVantage Securities that were acquired during 2022 and were still outstanding as of December 31, 2022, $470.0 million will mature by June 30, 2023 and an additional $600.0 million will mature by December 31, 2023.

The $65.7 million net increase in Corporate AgFinance during 2022 resulted from $546.6 million of new purchases and commitments, which was partially offset by $480.9 million of scheduled maturities, repayments, and sales. Farmer Mac purchased a total of $328.9 million in loans, which was partially offset by $276.9 million in scheduled maturities and repayments. The increase in loan purchases was primarily due to Farmer Mac's continued focus to support loans to larger and more complex agribusinesses focused on food and fiber processing and other food supply chain production.

The $464.4 million net increase in Rural Utilities during 2022 resulted from $1.4 billion of new purchases, commitments, and guarantees, which was partially offset by $927.8 million of scheduled maturities and repayments. Farmer Mac purchased a total of $670.0 million in AgVantage Securities, $231.0 million in telecommunications loans, and $449.5 million in electric distribution and generation and transmission loans. The $680.5 million in loan purchases was partially offset by $181.2 million in scheduled maturities and repayments. The net increase in loan purchases primarily reflected borrowers' normal-course capital expenditures related to maintaining and upgrading utility infrastructure as well as investments in broadband infrastructure, and Farmer Mac's continued focus to support telecommunications investment in rural America.

The $143.4 million net increase in Renewable Energy during 2022 primarily reflects $182.3 million in loan purchases and unfunded commitments, partially offset by $38.9 million in repayments.

Farmer Mac's outstanding business volume was $23.6 billion as of December 31, 2021, a net increase of $1.7 billion from December 31, 2020 after taking into account all new business, scheduled maturities, and paydowns on existing assets.

71

The $1.2 billion net increase in Farm & Ranch was comprised of $5.9 billion of new purchases and guarantees, partially offset by $4.7 billion of scheduled maturities, repayments, and sales. Farmer Mac purchased a total of $2.1 billion in loans, which was primarily driven by farm real estate acquisitions due to improved borrower economics as well as a continued competitive interest rate environment resulting in demand for long-term financing solutions. The $2.1 billion in gross Farm & Ranch loan purchases was partially offset by $1.3 billion in scheduled maturities, repayments, and sales, including the sale of $299.4 million of agricultural mortgage loans through Farmer Mac's newly-designed structured securitization executed in the fourth quarter. The securitization resulted in $289.5 million in Farmer Mac Guaranteed Securities backed by the sold loans.

Farmer Mac also purchased a total of $2.2 billion in AgVantage Securities, which primarily reflected the refinancing of maturing securities as well as financial counterparties seeking additional short-term, low-cost securities to manage their asset-liability maturity profile. The $2.2 billion in gross purchases was partially offset by $1.9 billion in scheduled maturities. While the short-term nature of the AgVantage securities added during 2021 may create volatility in AgVantage volumes, Farmer Mac does not anticipate a material impact to its net effective spread given the low-cost nature of these securities due to the short maturity profile.

Farmer Mac entered into $788.3 million of new LTSPCs, which was offset by $516.1 million of maturities on existing LTSPCs. The new volume in LTSPCs during 2021 was driven primarily by Farm Credit System institutions seeking credit risk management solutions to address increasing commodity and borrower hold limits resulting from strong loan growth in in their regional portfolios.

The $126.3 million net decrease in Corporate AgFinance was comprised of $880.2 million of new loan and AgVantage security purchases, which was offset by $1.0 billion of scheduled maturities, repayments, and sales. Farmer Mac purchased a total of $314.9 million in AgVantage Securities, which was offset by $691.6 million in scheduled maturities and repayments. This net decrease in AgVantage Securities was primarily due to improved borrower economics that reduced the demand for higher priced institutional financing, counterparties diversifying wholesale funding sources, and competitive funding availability for institutional counterparties.

Farmer Mac purchased a total of $509.1 million in Corporate AgFinance loans in furtherance of Farmer Mac's strategic initiative to support larger and more complex farming operations, agribusinesses focused on agriculture production, food and fiber processing, and other supply chain production. The $509.1 million in gross purchases was partially offset by $295.4 million in scheduled maturities and repayments.

The $581.2 million net increase in Rural Utilities was comprised of $1.8 billion of new purchases and guarantees, which was partially offset by $1.2 billion of scheduled maturities and repayments. Farmer Mac purchased a total of $1.5 billion in AgVantage Securities which was partially offset by $982.6 million in scheduled maturities. The net increase in AgVantage Securities of $467.4 million was a result of a key counterparty proactively managing its capital structure as well as Farmer Mac's ability to offer competitively priced financing structures.

Farmer Mac purchased a total of $313.4 million in Rural Utilities loans, which was fueled by a competitive interest rate environment resulting in demand for long-term financing solutions for planned maintenance, capital expenditures, and refinancing higher cost debt. The $313.4 million in loan purchases was partially offset by $198.4 million in scheduled maturities and repayments.

72

The $13.7 million net increase in Renewable Energy was comprised of $43.6 million of new loan purchases, which was partially offset by $29.9 million of repayments.

The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, loan sales, scheduled maturities, and repayments on existing assets from year to year. This relationship in turn depends on a variety of factors both internal and external to Farmer Mac. The external factors include general market forces, competition, and our counterparties’ liquidity needs, access to alternative funding, desired products, and assessment of strategic factors. The internal factors include our assessment of profitability, mission fulfillment, credit risk, and customer relationships. For more information about potential growth opportunities in Farmer Mac's lines of business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook" in this report.

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

Table 18

[[GREPCENT_TABLE]]
[["","","","For the Years Ended December 31,"],["","","","","","2022","","2021","","2020"],["","","","","","(dollars in thousands)"],["AgVantage securities","","","","","$","4,990,483","","","$","3,919,907","","","$","1,298,751"],["Structured securitization transactions (not consolidated)","","","","","\u2014","","","289,519","","","\u2014"],["Loans securitized and held in consolidated trusts with beneficial interests owned by third parties","","","","","460,588","","","113,175","","","165,054"],["Total Farmer Mac Guaranteed Securities Issuances","","","","","$","5,451,071","","","$","4,322,601","","","$","1,463,805"]]
[[/GREPCENT_TABLE]]

Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans. During 2022, Farmer Mac executed its second structured securitization transaction, whereby it sold and securitized agricultural mortgage loans resulting in $297.7 million of Farmer Mac Guaranteed Securities. In this transaction, Farmer Mac transferred selected loans to a depositor which then deposited the loans into a trust, at which time the loans became assets of the trust. Farmer Mac concluded that it was the primary beneficiary of the trust because Farmer Mac controls the trust in its role as Master Servicer. Therefore, Farmer Mac consolidates the assets and liabilities of the trust for this structured securitization. Farmer Mac does not consider the assets held by the related securitization trust to be available to satisfy the claims of the creditors of Farmer Mac and/or the depositor.

During 2022 and 2021, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts. Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets.

During 2021, Farmer Mac realized $5.2 million gain after tax from the sale of Farmer Mac Guaranteed Securities in its structured securitization transaction.

During 2022 and 2021, Farmer Mac realized no gains or losses from the issuance of Farmer Mac Guaranteed USDA Securities or AgVantage Securities.

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

Table 19

[[GREPCENT_TABLE]]
[["Outstanding Business Volume"],["","","","","As of December 31,"],["","","On or Off Balance Sheet","","2022","","2021","","2020"],["","","","","(in thousands)"],["Agricultural Finance:"],["Farm & Ranch:"],["Loans","","On-balance sheet","","$","5,150,750","","","$","4,775,070","","","$","3,979,854"],["Loans held in consolidated trusts:"],["Beneficial interests owned by third-party investors (Pass-Through)1","","On-balance sheet","","914,918","","","948,623","","","1,287,045"],["Beneficial interests owned by third-party investors (Structured)1","","On-balance sheet","","296,658","","","\u2014"],["IO-FMGS2","","On-balance sheet","","10,622","","","12,297","","","\u2014"],["USDA Securities","","On-balance sheet","","2,407,302","","","2,445,806","","","2,487,420"],["AgVantage Securities1","","On-balance sheet","","5,605,000","","","4,725,000","","","4,425,000"],["LTSPCs and unfunded commitments","","Off-balance sheet","","2,822,309","","","2,587,154","","","2,314,965"],["Other Farmer Mac Guaranteed Securities3","","Off-balance sheet","","500,953","","","578,358","","","378,610"],["Loans serviced for others","","Off-balance sheet","","20,280","","","22,331","","","\u2014"],["Total Farm & Ranch","","","","$","17,728,792","","","$","16,094,639","","","$","14,872,894"],["Corporate AgFinance:"],["Loans","","On-balance sheet","","$","1,166,253","","","$","1,123,300","","","$","909,539"],["AgVantage Securities1","","On-balance sheet","","359,600","","","367,464","","","744,110"],["Unfunded commitments","","Off-balance sheet","","77,654","","","47,070","","","10,466"],["Total Corporate AgFinance","","","","$","1,603,507","","","$","1,537,834","","","$","1,664,115"],["Total Agricultural Finance","","","","$","19,332,299","","","$","17,632,473","","","$","16,537,009"],["Rural Infrastructure Finance:"],["Rural Utilities:"],["Loans","","On-balance sheet","","$","2,801,696","","","$","2,302,373","","","$","2,187,377"],["AgVantage Securities1","","On-balance sheet","","3,044,156","","","3,033,262","","","2,565,837"],["LTSPCs and unfunded commitments","","Off-balance sheet","","512,592","","","556,837","","","556,425"],["Other Farmer Mac Guaranteed Securities3","","Off-balance sheet","","1,169","","","2,755","","","4,412"],["Total Rural Utilities","","","","$","6,359,613","","","$","5,895,227","","","$","5,314,051"],["Renewable Energy:"],["Loans","","On-balance sheet","","$","219,570","","","$","86,763","","","$","73,035"],["Unfunded commitments","","Off-balance sheet","","10,600","","","\u2014","","","\u2014"],["Total Renewable Energy","","","","$","230,170","","","$","86,763","","","$","73,035"],["Total Rural Infrastructure Finance","","","","$","6,589,783","","","$","5,981,990","","","$","5,387,086"],["Total","","","","$","25,922,082","","","$","23,614,463","","","$","21,924,095"]]
[[/GREPCENT_TABLE]]

1.A Farmer Mac Guaranteed Security.

2.An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

3. Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.

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The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of December 31, 2022:

Table 20

[[GREPCENT_TABLE]]
[["Schedule of Principal Amortization as of December 31, 2022"],["","Loans","","Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs","","USDA Securities and Farmer Mac Guaranteed USDA Securities","","Total"],["","(in thousands)"],["2023","$","477,190","","","$","288,844","","","$","113,008","","","$","879,042"],["2024","458,986","","","227,400","","","112,129","","","798,515"],["2025","498,676","","","225,519","","","116,010","","","840,205"],["2026","502,316","","","255,773","","","118,922","","","877,011"],["2027","610,614","","","230,267","","","119,323","","","960,204"],["Thereafter","8,002,063","","","2,486,381","","","2,037,834","","","12,526,278"],["Total","$","10,549,845","","","$","3,714,184","","","$","2,617,226","","","$","16,881,255"]]
[[/GREPCENT_TABLE]]

Of Farmer Mac's $25.9 billion outstanding principal balance of business volume as of December 31, 2022, $9.0 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines of business. Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due. The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of December 31, 2022:

Table 21

[[GREPCENT_TABLE]]
[["AgVantage Balances by Year of Maturity"],["","As of"],["","December 31, 2022"],["","(in thousands)"],["2023","$","2,120,447"],["2024","1,272,770"],["2025","916,625"],["2026","975,660"],["2027","979,698"],["Thereafter(1)","2,744,725"],["Total","$","9,009,925"]]
[[/GREPCENT_TABLE]]

(1)Includes various maturities ranging from 2027 to 2044.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.9 years as of December 31, 2022.  

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Related Party Transactions. As provided by Farmer Mac's statutory charter, only banks, insurance companies, and other financial institutions or similar entities may hold Farmer Mac's Class A voting common stock, and only institutions of the FCS may hold Farmer Mac's Class B voting common stock. Farmer Mac's charter also provides that holders of Class A voting common stock elect five members of Farmer Mac's 15-member board of directors and that holders of Class B voting common stock elect five members of the board of directors. The ownership of Farmer Mac's two classes of voting common stock is currently concentrated in a small number of institutions. Approximately 53% of the Class A voting common stock is held by four financial institutions, with 31% held by one institution. Approximately 97% of the Class B voting common stock is held by five FCS institutions (two of which are related to each other through a parent-subsidiary relationship).   

Unlike some other GSEs, specifically other FCS institutions and the Federal Home Loan Banks, Farmer Mac is not structured as a cooperative owned exclusively by member institutions and established to provide services exclusively to its members. Farmer Mac, as a stockholder-owned, publicly-traded corporation, seeks to fulfill its mission of serving the financing needs of rural America in a way that is consistent with providing a return on the investment of its stockholders, including those who do not directly participate in the secondary market provided by Farmer Mac. Farmer Mac's generally requires most financial institutions that participate in Farmer Mac's Agricultural Finance line of business to own a requisite amount of common stock, based on the size and type of institution. As a result of this requirement, coupled with the ability of holders of Class A and Class B voting common stock to elect two-thirds of Farmer Mac's board of directors, Farmer Mac regularly conducts business with "related parties," including institutions affiliated with members of Farmer Mac's board of directors and institutions that own large amounts of Farmer Mac's voting common stock. Farmer Mac has adopted a Code of Business Conduct and Ethics and other related corporate policies that govern any conflicts of interest that may arise in these transactions, and Farmer Mac's policy is to require that any transactions with related parties be conducted in the ordinary course of business, with terms and conditions comparable to those available to any other counterparty not related to Farmer Mac.

The following table summarizes the material relationships between Farmer Mac and certain related parties. The related parties listed in the table below consist of (1) all holders of at least five percent of a class of Farmer Mac voting common stock as of December 31, 2022 and (2) other institutions that are considered "related parties" through an affiliation with a Farmer Mac director and that have conducted business with Farmer Mac during the two years ended December 31, 2022. The table below does not specify any relationships based on the ownership of Farmer Mac's non-voting common stock or any series of preferred stock.

Table 22

[[GREPCENT_TABLE]]
[["Name of Institution","","Ownership of Farmer Mac Voting Common Stock","","Affiliation with Any Farmer Mac Directors","","Primary Aspects of Institution's Business Relationship with Farmer Mac"],["AgFirst Farm Credit Bank","","84,024 shares of Class B voting common stock (16.79% of outstanding Class B stock and 5.49% of total voting common stock outstanding)","","None","","In both 2022 and 2021, Farmer Mac earned approximately $1.2 million in fees attributable to transactions with AgFirst, primarily commitment fees for LTSPCs."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["Name of Institution","","Ownership of Farmer Mac Voting Common Stock","","Affiliation with Any Farmer Mac Directors","","Primary Aspects of Institution's Business Relationship with Farmer Mac"],["AgriBank, FCB","","201,621 shares of Class B voting common stock (40.30% of outstanding Class B stock and 13.17% of total voting common stock outstanding)","","Farmer Mac director Richard H. Davidson served as director of AgriBank until March 2021 and former Farmer Mac director (through May 2021) Daniel L. Shaw served as director of AgriBank until March 2022.","","Farmer Mac did not conduct any business with AgriBank during 2022 or 2021."],["Bath State Bank","","Less than 5% ownership","","Farmer Mac director Dennis L. Brack serves as a director of Bath State Bank and Bath State Bancorp, the holding company of Bath State Bank.","","Farmer Mac purchased none and $2.3 million in USDA Securities from Bath State Bank in 2022 and 2021, respectively. Additionally, Farmer Mac purchased $2.1 million and $5.0 million in Agricultural Finance mortgage loans from Bath State Bank in 2022 and 2021, respectively."],["CoBank, ACB","","163,253 shares of Class B voting common stock (32.63% of outstanding Class B stock and 10.66% of total voting common stock outstanding)","","Farmer Mac director Everett M. Dobrinski served as a director of CoBank through December 2019. Although no longer a director of CoBank, Mr. Dobrinski currently serves on CoBank's independent nominating committee that screens and interviews director candidates and recommends a slate of candidates for consideration by CoBank's membership.","","Farmer Mac purchased $376.0 million and $207.5 million in participation interests in loans from CoBank in 2022 and 2021, respectively. This represented 45.4% and 60.2% of loan purchases under the Rural Infrastructure Finance line of business for 2022 and 2021, respectively."],["","","","Farmer Mac entered into $46.3 million and $72.0 million in unfunded commitments from CoBank in 2022 and 2021, respectively."],["","","","In 2022 and 2021, CoBank retained $3.5 million and $3.2 million of servicing fees related to the loan participations sold to Farmer Mac, respectively."],["Farm Credit Bank of Texas (FCBT)","","38,503 shares of Class B voting common stock (7.70% of outstanding Class B stock and 2.51% of total voting common stock outstanding)","","None","","In 2022 and 2021, Farmer Mac earned approximately $2.9 million and $1.9 million, respectively, in fees attributable to transactions with FCBT, primarily commitment fees for LTSPCs."],["","","","In both 2022 and 2021, FCBT retained approximately $0.1 million in servicing fees for its work as a Farmer Mac servicer."],["Matthew 25 Management Corp.","","80,254 shares of Class A voting common stock (7.79% of outstanding Class A stock and 5.24% of total voting common stock outstanding)","","None","","Farmer Mac did not conduct any business with Matthew 25 Management Corp. during 2022 or 2021."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["Name of Institution","","Ownership of Farmer Mac Voting Common Stock","","Affiliation with Any Farmer Mac Directors","","Primary Aspects of Institution's Business Relationship with Farmer Mac"],["National Rural Utilities Cooperative Finance Corporation (CFC)","","81,500 shares of Class A voting common stock (7.91% of outstanding Class A stock and 5.32% of total voting common stock outstanding)","","Farmer Mac director Todd P. Ware served as a director of CFC from June 2015 through June 2021.","","Transactions with CFC represented 46.7% and 36.9% of loan purchases under the Rural Infrastructure Finance line of business during 2022 and 2021, respectively."],["","","","In 2022 and 2021, Farmer Mac earned commitment fees of approximately $1.1 million and $1.2 million, respectively, attributable to transactions with CFC."],["","","","In 2022 and 2021, Farmer Mac earned interest income of $79.4 million and $50.0 million, respectively, attributable to AgVantage transactions with CFC."],["","","","In 2022 and 2021, CFC retained approximately $3.4 million and $3.3 million in servicing fees for its work as a Farmer Mac servicer, respectively."],["The Vanguard Group, Inc.","","58,649 shares of Class A voting common stock (5.69% of outstanding Class A stock and 3.83% of total voting common stock outstanding)","","None","","Farmer Mac did not conduct any business with The Vanguard Group during 2022 or 2021."],["Zions Bancorporation, National Association (Zions)","","322,100 shares of Class A voting common stock (31.25% of outstanding Class A stock and 21.04% of total voting common stock outstanding)","","None","","In 2022 and 2021, Farmer Mac's purchases of on-balance sheet Agricultural Finance mortgage loans from Zions represented approximately 12.9% and 8.0%, respectively, of Agricultural Finance mortgage loan purchase volume for those years. Those purchases represented 9.6% and 5.6%, respectively, of total Agricultural Finance mortgage loan business volume (excluding AgVantage and USDA Securities) for those years. The purchases of USDA Securities from Zions represented approximately 1.5% and 2.1%, respectively, of the USDA Guarantees purchases for the years ended December 31, 2022 and 2021. Transactions with Zions represented 3.5% and 3.4%, respectively, of Farmer Mac's total outstanding business volume as of December 31, 2022 and 2021."],["","","","","","","In 2022 and 2021, Zions retained approximately $10.4 million and $11.0 million, respectively, in servicing fees for its work as a Farmer Mac servicer."]]
[[/GREPCENT_TABLE]]

As discussed in more detail in Note 2(o) to the consolidated financial statements, Farmer Mac’s consolidated financial statements include the accounts of variable interest entities ("VIEs") in which Farmer Mac determines itself to be the primary beneficiary, including securitization trusts where Farmer Mac shares the power to make decisions about default mitigation with a related party. If that related party status changes, consolidation or deconsolidation of securitization trusts may occur. For more information about related party transactions, see Note 3 to the consolidated financial statements.

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Outlook  

Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as a secondary market that helps meet the financing needs of rural America. The pace and trajectory of Farmer Mac's growth will depend on the capital and liquidity needs of the lending institutions serving agriculture and rural infrastructure businesses and the overall financial health of borrowers in the sectors we serve. Farmer Mac foresees opportunities for profitable growth across our lines of business driven by several key factors:

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

•As a result of business and product development efforts and continued interest in the agricultural asset class from institutional investors and nontraditional agricultural real estate lenders, Farmer Mac's customer base and product set continue to expand and diversify, which may generate more demand for Farmer Mac's products from new sources.

•Farmer Mac's growing relationships with larger regional and national lenders, as well as consolidation within the agricultural lending industry, continue to provide opportunities that could influence Farmer Mac's loan demand and increase the average transaction size within Farmer Mac's lines of business.

•Future growth opportunities in Farmer Mac's Rural Infrastructure Finance line of business may evolve by deepening business relationships with eligible counterparties, financing broadband-related capital expenditures and rural telecommunications facilities, growing opportunities for renewable energy project finance, and exploring new types of loan products. These opportunities may be limited by sector growth, credit quality, and the competitiveness of Farmer Mac's products.

•Expansion and acquisition opportunities for agricultural producers resulting from high agricultural incomes and rising costs have increased financing requirements for mergers and acquisitions, consolidation, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac's loan products.

•Investments necessary to support consumer demand could increase the need for financing within the food and agriculture supply chain, which may increase the need for incremental capital support from the secondary market.

•Market interest rates have increased significantly since the lows experienced in 2021, and interest rates on Farmer Mac products at the end of 2022 were higher than Farmer Mac's 15-year historical averages. New loan origination and sales volumes tend to correlate inversely with changes in interest rates. However, prepayment rates also generally correlate inversely with changes in interest rates, with higher interest rates typically slowing the pace of portfolio loan repayments. Future changes to monetary policy and the overall level and pace of the increase in interest rates could continue to impact the pace and timing of Agricultural Finance mortgage loan purchase demand and repayments.

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The war in Ukraine continues to affect volatility for commodity prices and agricultural production costs for farmers and ranchers, who were already challenged by an inflationary environment. While agricultural commodity prices have thus far outpaced the significant increase in input costs, the impact on global commodity markets from the Ukraine conflict creates further uncertainty for farmers and ranchers in terms of global production, prices, and costs heading into 2023. Heightened market volatility is likely to persist until there is more certainty around the outcome of the war in Ukraine.

In addition to continued uncertainty from supply-side disruptions, market interest rates increased rapidly during 2022, driven by the Federal Reserve’s accelerated efforts to achieve monetary policy normalization and decelerate inflation. A higher interest rate environment could slow the pace of farm mortgage refinancing. While lower refinances could result in lower levels of new loan purchases in Farm & Ranch and USDA Guarantees products, it could also result in lower portfolio prepayment speeds, as was Farmer Mac’s experience between 2014 and 2018. Loan prepayment speeds in 2022 fell to pre-pandemic levels, and they are likely to correlate inversely with interest rates. Farmer Mac offers a range of interest rates, tenors, and rate resetting options for loan products, allowing flexibility for originators and borrowers in all interest rate environments.

The U.S. economy exhibited signs of slowing in fourth quarter 2022 after a rapid expansion in 2021. Higher consumer price inflation in 2022, particularly for food and energy, combined with a rising interest rate environment, has dampened economists’ outlooks for the U.S. economy in 2023. And while labor markets remain resilient, slower consumer spending and declines in residential housing investment indicate that the probability of a U.S. or global recession is increasing. Farmer Mac believes that its portfolio is sufficiently balanced to withstand the market volatility that arises with an economic recession, as the agricultural, food, and infrastructure industries tend not to be directly correlated with the general economy. Farmer Mac believes these sectors are generally well positioned to withstand an economic downturn due to ample consumer demand and government support.

Operating Expense. 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. Farmer Mac expects continued increases in its operating expenses over the next several years. We will continue making investments in our infrastructure and funding platforms to support these strategies and scale with our growth.

During 2021, we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Securities portfolios. This acquisition provides opportunities to increase our interest income on our Farm & Ranch loans and USDA Securities that we service because there will not be any third-party central servicer retaining a central servicer fee on those assets. That increased interest income is expected to be partially offset by the increase in our operating expenses relating to our enhanced internal loan servicing operations. In the short term, we do not expect the effect on core earnings to be significant. In the medium to long term, the effect will depend on the size of our portfolio that we service and the long-run costs of our servicing operations.

Agricultural Industry. The agricultural economy experienced largely favorable conditions in fourth quarter 2022, with stable commodity prices and easing input price inflation. In response to Russia's invasion of Ukraine in early 2022, grain commodity prices rose rapidly during first half of 2022 and continued to be elevated during much of the second half of 2022. Higher commodity prices for grains and many animal proteins are likely to substantially increase gross cash receipts for the 2022 marketing year. Farm expense

80

price levels eased in fourth quarter 2022, driven by moderating feed, energy, and fertilizer prices. However, several farm expense categories such as interest, labor, and other inputs remain elevated and could experience additional upward pressure in 2023. Major commodity prices could remain elevated in 2023 as a result of the global supply shortages in food and energy, as well as a weakening U.S. dollar. Any such price stability would help support farm incomes in 2023.

Overall farm income reached new highs in 2022 following a very profitable year in 2021. Net cash farm income increased by more than 28% in 2021 to $149.5 billion. The USDA estimates that net cash farm income climbed another 27% to $189.9 billion in 2022, a new all-time high. For both years, the primary driver of increased profitability was higher cash revenues and not government support payments like in 2019 and 2020. The USDA estimates production expenses rose by 19% in 2022, a level experienced in the 1970s and again in the 2012-2014 agricultural economy expansion. Looking forward, the USDA expects net cash farm income to fall by 21% to $150.6 billion in 2023 due to moderating commodity prices and rising farm expenses. However, the 2023 farm income projections are 20% higher than the 10-year average, demonstrating the continued strength in the farm economy.

The increase in farm profitability combined with low interest rates in 2020 and 2021 drove a rapid rise in land values and a decrease in farm delinquencies and bankruptcies. Land value survey data from the USDA show a 12.4% increase in average farm real estate values from June 2021 to June 2022. Annual farm real estate value gains were highest in the Northern Plains (19.8%) and the Corn Belt (14.9%) but also strong in the Lake states (13.7%), the Southern Plains (11.3%), and the Pacific (9.7%). The Federal Reserve Bank of Chicago AgLetter reported a 20% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between October 2021 and October 2022. Data from the Federal Reserve Bank of Kansas City show a similar rise in land values in the Tenth District (primarily Kansas, Missouri, Nebraska, and Oklahoma) during that same period. Historically, rising farm real estate values have correlated with an increase in real estate secured debt. 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 in farmland values than state or national averages indicate.

Economic conditions are likely to bring mixed effects to credit demand heading into 2023. Strong asset appreciation and rising interest rates could signal a credit cycle expansion as financial decision-makers look to lock in long-term economics for their appreciating farm and agribusiness assets. Farm profitability generally increases asset values and demand for the asset class, which also contributes to increasing credit demand. An elevated interest rate environment could have mixed effects on mortgage portfolios, potentially lowering new sales and originations but also potentially slowing portfolio prepayments. Finally, a changing yield curve coupled with widening market credit spreads could increase opportunities for corporate and institutional lending, as Farmer Mac's programs become more attractive at higher costs of capital. Combined, these factors are expected to be generally supportive of continued net portfolio growth for Farmer Mac into 2023.

Positive economic conditions in the agricultural economy improved Farmer Mac's agricultural portfolio performance in 2022, and they could continue to positively influence loan delinquencies and losses in 2023. Farmer Mac's 90-day delinquency levels decreased slightly in fourth quarter 2022 relative to third quarter 2022. The overall delinquency rate decreased from 0.42% of the Agricultural Finance line of business as of September 30, 2022 to 0.41% of the Agricultural Finance line of business as of December 31, 2022, and the fourth quarter 2022 percentage is lower than the 0.48% delinquency rate as of December 31, 2021. The percentage of the portfolio rated substandard also continued to improve in fourth quarter

81

2022 to the lowest levels since 2016. However, rising input costs, market volatility, and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural credit sector, which could negatively affect the trajectory of the current agricultural cycle. Farmer Mac believes that its portfolio continues to be highly diversified, both geographically and by commodity and that its portfolio has been underwritten to high credit quality standards. Therefore, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility from cyclical and external factors. For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Agricultural Finance mortgage loans in Farmer Mac's portfolio as of December 31, 2022, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

Exogenous factors facing farm and food producers can create uncertainty and market instability within the sector. External market conditions that could adversely impact the farm and food sectors in 2023 include the relative value of the U.S. dollar, supply chain disruptions, foreign trade and trade policy, and environmental conditions. The U.S. agricultural sector has become increasingly dependent on foreign markets as a source of demand, making trade policy increasingly important to farms and food. The USDA's estimate for fiscal year 2022 is a sizable increase in export value over 2021, and through November 2022, agricultural export values were up nearly 12% in 2022 compared to 2021. The value of the U.S. dollar relative to other major currencies fell 8% in fourth quarter 2022, which may have helped support major commodities to end the year. Continued disruptions to global grain supplies in Ukraine and Russia could maintain elevated demand for U.S. agricultural product demand. Slower global growth could be a headwind for consumer-oriented products like animal proteins, dairy, fruits, and nuts, and Ukrainian corn and wheat production may eventually stabilize. Because Farmer Mac has significant exposure to crop commodities like corn, soybeans, hay, wheat, and cotton, a sustained rally in agricultural commodities is likely to continue to benefit Farmer Mac's overall portfolio credit quality more than degradation from downward pressure on livestock and consumer product profitability.

Severe weather conditions and long-term environmental change continue to shape agricultural sectors. The U.S. experienced 18 separate billion-dollar weather disasters in 2022, as tracked by the National Oceanic and Atmospheric Administration. Many of those events affected agriculture, including midwestern storms, western wildfires, and drought. Federal crop insurance provides a strong mitigator against this risk, but farmers and ranchers face increasingly-severe weather incidents. Long and persistent drought conditions affected agricultural production regions in the western and midwestern parts of the United States in 2021 and 2022, but there has been a sizable improvement in conditions in fourth quarter 2022 and early 2023, particularly in California. Roughly 7% of the continental U.S. remained in exceptional or extreme drought as of January 31, 2023, according to data from the National Drought Mitigation Center. While this represents the lowest level of widespread drought since 2020, the current drought cycle is the longest in nearly 20 years. Extended periods of drought and dryness can reduce agricultural productivity, cause lasting damage to permanent crops like fruit and tree nuts, and result in producers leaving some fields fallow due to lack of water. States also regulate water use, and state laws like California's Sustainable Groundwater Management Act (SGMA) will continue to shape state-led efforts to manage water infrastructure and use and could potentially impact producers. Agricultural production in California, Oregon, Washington, Arizona, and Utah is likely to experience the greatest impact from the 2021 and 2022 droughts. For loans in areas that commonly experience exceptional drought (primarily in California), Farmer Mac's underwriting process includes an assessment of anticipated long-term water availability for the related property and how that impacts the collateral value and borrower's cash flow position to mitigate that risk.

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Rural Infrastructure Industry. Economic conditions affecting the rural infrastructure industry typically follow those in the general economy. According to data from the U.S. Energy Information Administration, sales and the revenue from the sale of electricity to customers increased by 2.0% and 14.3%, respectively, in the last 12 months through November 2022 compared to November 2021. This increase was driven by a sharp increase in sales to the commercial, industrial, and transportation sectors and an increase in the retail price of electricity. Higher energy input prices such as natural gas and coal became a headwind in 2022. Natural gas prices rose consistently in 2021 and 2022 because of reduced supply and additional demand for U.S. liquified natural gas from European countries. Coal prices also rapidly increased in third quarter 2022, driven by higher natural gas prices and additional overseas demand to offset limited Russian coal exports. Despite higher input costs, power producers are generally able to pass cost increases through higher retail electricity prices, which has contributed to the increase in electricity costs impacting retail customers during third quarter 2022. Oil and natural gas prices were volatile during third quarter 2022 but moderated in fourth quarter 2022 and early 2023. Through December 31, 2022, Farmer Mac had not observed material degradation in the financial performance of its rural infrastructure portfolio, and that portfolio has never experienced a serious delinquency or default since inception.

Prospects for loan growth within the rural infrastructure industry overall appear to be moderate in the near term, as ongoing normal-course capital expenditures related to maintaining and upgrading utility infrastructure continue at typical levels. Farmer Mac's future growth opportunities for financing the electric cooperative industry may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the changing interest rate environment, increased policy initiatives to support rural connectivity, and competitive dynamics within the rural utilities cooperative finance industry. Cooperatives and service providers have access to numerous federally funded programs, such as the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF), the USDA’s ReConnect, and the USDA’s Telecommunications Infrastructure Loan and Loan Guarantee program. In addition to capital projects spurred by these programs, Farmer Mac could see an increase in financing opportunities for other telecommunications providers in rural areas, with wireless broadband increasingly important to economic opportunity and precision agriculture.

The growth in renewable energy generation and deployment of energy storage technologies may help deepen Farmer Mac's relationships with existing customers through new business opportunities. According to data from the U.S. Energy Information Administration, renewable electricity capacity is expected to grow by 48% in the next five years, compared to total electric capacity growth of 10%. The rising cost of fossil fuel-based inputs combined with the falling costs of renewable power generation may hasten this increase in capacity along with recently enacted legislature, such as the Inflation Reduction Act of 2022 that incentivizes domestic production in clean energy technologies such as solar and wind. Any such growth in renewable energy capacity may broaden Farmer Mac's customer base with cooperative lenders focused on lending to renewable energy customers. In response to this expected growth, Farmer Mac has deployed new financing products tailored to the renewable energy sector, which represents a new market opportunity for Farmer Mac. Under this initiative, Farmer Mac's total outstanding loans and loan commitments of renewable energy financing transactions was $230.2 million as of December 31, 2022.

Legislative and Regulatory Outlook. Farmer Mac continues to monitor potential legislative and regulatory changes that could affect Farmer Mac or its stakeholders, including:

•The current farm bill expires on September 30, 2023. Covering a variety of programs impacting farm profitability, agricultural credit, and rural infrastructure it is a critical piece of legislation for rural America and the agricultural sector. Congress has started an extensive process to review

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programs included in the farm bill in preparation for reauthorization. Farmer Mac is seeking enhancement to its charter during the farm bill reauthorization to enhance its partnerships and services in support of farmers, ranchers, agribusinesses, and rural infrastructure. Farmer Mac will continue to monitor this legislation for any impact it may have on Farmer Mac and its stakeholders.

•On January 13, 2023, the FCA board approved an advanced notice of proposed rulemaking to review Farmer Mac's capital framework. The notice seeks public comment on Farmer Mac's capital requirements in the context of its business activities. The comment period closes March 27, 2023.

•On September 29, 2022, the U.S. Senate confirmed Vincent Logan to be a member of the FCA board. Mr. Logan was subsequently appointed to be the Chairman and CEO of the FCA by President Biden on October 21, 2022. The remaining two members of the board are currently serving in holdover status because their terms have expired. They will continue to serve in their roles until replacements are nominated by the President and confirmed by the U.S. Senate. Farmer Mac will continue to monitor changes to the composition of the FCA board, as it may affect Farmer Mac's regulatory environment.

Balance Sheet Review

The following table summarizes Farmer Mac's balance sheet as of the periods indicated:

Table 23

[[GREPCENT_TABLE]]
[["","As of","","Change"],["","December 31, 2022","","December 31, 2021","","$","","%"],["","(in thousands)"],["Assets"],["Cash and cash equivalents","$","861,002","","","$","908,785","","","$","(47,783)","","","(5)","%"],["Investment securities","4,628,268","","","3,882,590","","","745,678","","","19","%"],["Farmer Mac Guaranteed Securities","8,628,380","","","8,361,798","","","266,582","","","3","%"],["USDA Securities","2,411,601","","","2,440,732","","","(29,131)","","","(1)","%"],["Loans, net of allowance","8,997,191","","","8,300,619","","","696,572","","","8","%"],["Loans held in trusts","1,211,116","","","948,059","","","263,057","","","28","%"],["Other","595,552","","","278,426","","","317,126","","","114","%"],["Total assets","$","27,333,110","","27,333,110","","$","25,121,009","","","$","2,212,101","","","9","%"],["Liabilities"],["Notes Payable","$","24,469,113","","","$","22,713,771","","","$","1,755,342","","","8","%"],["Debt securities of consolidated trusts held by third parties","1,181,948","","","981,379","","","200,569","","","20","%"],["Other","410,091","","","212,159","","","197,932","","","93","%"],["Total liabilities","$","26,061,152","","","$","23,907,309","","","$","2,153,843","","","9","%"],["Total equity","1,271,958","","","1,213,700","","","58,258","","","5","%"],["Total liabilities and equity","$","27,333,110","","","$","25,121,009","","","$","2,212,101","","","9","%"]]
[[/GREPCENT_TABLE]]

Assets. The increase in total assets was primarily attributable to new loan volume and a larger investment portfolio.

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Liabilities. The increase in total liabilities was primarily due to an increase in total notes payable to fund the acquisition of loan volume.

Equity. The increase in total equity was primarily due to an increase in retained earnings, partially offset by a decrease in accumulated other comprehensive income.

Risk Management

Credit Risk – Loans and Guarantees.  

Agricultural Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of December 31, 2022 was $10.7 billion across 48 states. Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to loan purchases, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information. For Corporate AgFinance loans, which are often larger loan exposures to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, and which may have risk profiles that differ from smaller agricultural mortgage loans, Farmer Mac has implemented methodologies and parameters that help assess credit risk based on the appropriate sector, borrower construct, and transaction complexity. For more information about Farmer Mac's underwriting and collateral valuation standards for Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance."

Farmer Mac's 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy. For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of December 31, 2022, were $43.5 million (0.41% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $47.3 million (0.48% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2021. Those 90-day delinquencies were comprised of 37 delinquent loans as of December 31, 2022, compared to 32 delinquent loans as of December 31, 2021. The decrease in 90-day delinquencies was primarily driven by decreased delinquencies in crops and livestock and was partially offset by increased delinquencies in permanent plantings and part-time farms. The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of December 31, 2022. Farmer Mac believes that it remains adequately collateralized on its delinquent loans.

Farmer Mac's 90-day delinquency rate as of December 31, 2022 was below Farmer Mac's historical average. In the near-term, our delinquency rate may exceed our historical average due to the impact of adverse weather events and/or supply chain disruptions on the agricultural economy. Farmer Mac's average 90-day delinquency rate as a percentage of its Agricultural Finance mortgage loan portfolio over the last 15 years is approximately 1%. The highest 90-day delinquency rate observed during that period occurred in 2009 at approximately 2%, which coincided with increased delinquencies in loans within Farmer Mac's ethanol loan portfolio.

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The following table presents historical information about Farmer Mac's 90-day delinquencies in the Agricultural Finance mortgage loan portfolio compared to the unpaid principal balance of all Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure:

Table 24

[[GREPCENT_TABLE]]
[["","Agricultural Finance Mortgage Loans","","90-Day Delinquencies","","Percentage"],["","(dollars in thousands)"],["As of:"],["December 31, 2022","$","10,719,571","","","$","43,498","","","0.41","%"],["September 30, 2022","10,508,549","","","44,232","","","0.42","%"],["June 30, 2022","10,128,083","","","20,623","","","0.20","%"],["March 31, 2022","9,879,978","","","55,847","","","0.57","%"],["December 31, 2021","9,811,749","","","47,307","","","0.48","%"],["September 30, 2021","9,445,359","","","54,792","","","0.58","%"],["June 30, 2021","9,056,152","","","63,076","","","0.70","%"],["March 31, 2021","8,629,352","","","72,346","","","0.84","%"],["December 31, 2020","8,581,181","","","46,232","","","0.54","%"]]
[[/GREPCENT_TABLE]]

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.17% of total outstanding business volume as of December 31, 2022, compared to 0.20% as of December 31, 2021 and 0.21% as of December 31, 2020.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of December 31, 2022 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

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Table 25

[[GREPCENT_TABLE]]
[["Agricultural Finance Mortgage Loans 90-Day Delinquencies as of December 31, 2022"],["","Distribution of Agricultural Loans","","Agricultural Loans","","90-Day Delinquencies(1)","","Percentage"],["","(dollars in thousands)"],["By year of origination:"],["2012 and prior","6","%","","$","617,085","","","$","2,272","","","0.37","%"],["2013","2","%","","267,394","","","117","","","0.04","%"],["2014","2","%","","225,497","","","\u2014","","","\u2014","%"],["2015","3","%","","359,547","","","10,349","","","2.88","%"],["2016","5","%","","556,574","","","636","","","0.11","%"],["2017","5","%","","552,495","","","3,133","","","0.57","%"],["2018","6","%","","625,131","","","8,606","","","1.38","%"],["2019","8","%","","860,319","","","\u2014","","","\u2014","%"],["2020","20","%","","2,118,173","","","8,834","","","0.42","%"],["2021","26","%","","2,757,351","","","4,319","","","0.16","%"],["2022","17","%","","1,780,005","","","5,232","","","0.16","%"],["Total","100","%","","$","10,719,571","","","$","43,498","","","0.41","%"],["By geographic region(2):"],["Northwest","13","%","","$","1,382,143","","","$","2,297","","","0.17","%"],["Southwest","31","%","","3,306,849","","","18,109","","","0.55","%"],["Mid-North","26","%","","2,812,751","","","8,646","","","0.31","%"],["Mid-South","17","%","","1,870,319","","","9,815","","","0.52","%"],["Northeast","4","%","","427,531","","","1,412","","","0.33","%"],["Southeast","9","%","","919,978","","","3,219","","","0.35","%"],["Total","100","%","","$","10,719,571","","","$","43,498","","","0.41","%"],["By commodity/collateral type:"],["Crops","50","%","","$","5,385,259","","","$","17,220","","","0.32","%"],["Permanent plantings","22","%","","2,389,661","","","4,180","","","0.17","%"],["Livestock","18","%","","1,967,954","","","3,712","","","0.19","%"],["Part-time farm","5","%","","483,550","","","2,823","","","0.58","%"],["Ag. Storage and Processing","5","%","","475,485","","","15,563","","","3.27","%"],["Other","\u2014","","","17,662","","","\u2014","","","\u2014","%"],["Total","100","%","","$","10,719,571","","","$","43,498","","","0.41","%"],["By original loan-to-value ratio:"],["0.00% to 40.00%","19","%","","$","2,021,834","","","$","18,597","","","0.92","%"],["40.01% to 50.00%","23","%","","2,473,289","","","6,715","","","0.27","%"],["50.01% to 60.00%","36","%","","3,800,377","","","15,611","","","0.41","%"],["60.01% to 70.00%","20","%","","2,145,937","","","2,124","","","0.10","%"],["70.01% to 80.00%(3)","2","%","","250,980","","","451","","","0.18","%"],["80.01% to 90.00%(3)","\u2014","%","","27,154","","","\u2014","","","\u2014","%"],["Total","100","%","","$","10,719,571","","","$","43,498","","","0.41","%"],["By size of borrower exposure(4):"],["Less than $1,000,000","26","%","","$","2,794,986","","","$","8,755","","","0.31","%"],["$1,000,000 to $4,999,999","37","%","","3,955,557","","","19,258","","","0.49","%"],["$5,000,000 to $9,999,999","16","%","","1,674,698","","","5,900","","","0.35","%"],["$10,000,000 to $24,999,999","13","%","","1,385,886","","","9,585","","","0.69","%"],["$25,000,000 and greater","8","%","","908,444","","","\u2014","","","\u2014","%"],["Total","100","%","","$","10,719,571","","","$","43,498","","","0.41","%"]]
[[/GREPCENT_TABLE]]

(1)Includes loans held and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(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.

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Another indicator that Farmer Mac considers in analyzing the credit quality of its Agricultural Finance mortgage loans is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding portfolio. Assets categorized as "substandard" have a well-defined weakness or weaknesses, and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. As of December 31, 2022, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $209.4 million (2.0% of the portfolio), compared to $246.7 million (2.5% of the portfolio) as of December 31, 2021. Those substandard assets comprised 243 loans as of December 31, 2022 and 274 loans as of December 31, 2021.

The decrease of $37.3 million in substandard assets during 2022 was driven by credit upgrades in both our on-balance sheet and off-balance sheet portfolios. Substandard assets decreased as a percentage of both portfolios due to a combination of credit upgrades and volume growth.

The percentage of substandard assets within the portfolio as of December 31, 2022 was below the historical average. Farmer Mac's average substandard assets as a percentage of its Agricultural Finance mortgage loans over the last 15 years is approximately 4%. The highest substandard asset rate observed during the last 15 years occurred in 2010 at approximately 8%, which coincided with an increase in substandard loans within Farmer Mac's ethanol portfolio. If Farmer Mac's substandard asset rate increases from current levels, it is likely that Farmer Mac's provision to the allowance for loan losses and the reserve for losses will also increase.

Although some credit losses are inherent to the business of agricultural lending, Farmer Mac believes that losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its portfolio, which Farmer Mac believes is adequately collateralized.

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 December 31, 2022 and 2021, the average unpaid principal balances for Agricultural Finance mortgage loans outstanding and to which Farmer Mac has direct credit exposure was $806,000 and $790,000, respectively. Farmer Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan principal balance by the original appraised property value. This calculation does not reflect any amortization of the original loan balance or any adjustment to the original appraised value to provide a current market value. The original loan-to-value ratio of any cross-collateralized loans is calculated on a combined basis rather than on a loan-by-loan basis. The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans purchased during 2022 was 43%, compared to 49% for loans purchased during 2021. The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs was 51% and 52% as of December 31, 2022 and 2021, respectively. The weighted-average original loan-to-value ratio for all 90-day delinquencies was 46% and 51% as of December 31, 2022 and 2021, respectively.

The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Agricultural Finance mortgage loans and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs was 46% and 47% as of December 31, 2022 and 2021, respectively.

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The following table presents the current loan-to-value ratios for the Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, as disaggregated by internally assigned risk ratings:

Table 26

[[GREPCENT_TABLE]]
[["Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of December 31, 2022"],["","Acceptable","","Special Mention","","Substandard","","Total"],["","(in thousands)"],["Current loan-to-value ratio(1):"],["0.00% to 40.00%","$","3,036,770","","","$","59,865","","","$","72,356","","","$","3,168,991"],["40.01% to 50.00%","2,679,917","","","94,381","","","53,220","","","2,827,518"],["50.01% to 60.00%","2,942,745","","","80,982","","","42,382","","","3,066,109"],["60.01% to 70.00%","1,371,349","","","43,140","","","22,702","","","1,437,191"],["70.01% to 80.00%","155,527","","","16,208","","","14,766","","","186,501"],["80.01% and greater","29,024","","","263","","","3,974","","","33,261"],["Total","$","10,215,332","","","$","294,839","","","$","209,400","","","$","10,719,571"]]
[[/GREPCENT_TABLE]]

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

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The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of December 31, 2022 by year of origination, geographic region, and commodity/collateral type. The purpose of this table is to present information about realized losses relative to original Farm & Ranch purchases, guarantees, and commitments.

Table 27

[[GREPCENT_TABLE]]
[["Agricultural Finance Mortgage Loans Credit Losses Relative to Cumulative"],["Original Loans, Guarantees, and LTSPCs as of December 31, 2022"],["","Cumulative Original Loans, Guarantees and LTSPCs","","Cumulative Net Credit Losses/(Recoveries)","","Cumulative Loss Rate"],["","(dollars in thousands)"],["By year of origination:"],["2012 and prior","$","17,260,722","","","$","33,785","","","0.20","%"],["2013","1,478,735","","","\u2014","","","\u2014","%"],["2014","1,085,667","","","\u2014","","","\u2014","%"],["2015","1,245,487","","","(516)","","","(0.04)","%"],["2016","1,587,592","","","903","","","0.06","%"],["2017","1,682,147","","","4,311","","","0.26","%"],["2018","1,390,137","","","\u2014","","","\u2014","%"],["2019","1,588,911","","","\u2014","","","\u2014","%"],["2020","2,893,635","","","\u2014","","","\u2014","%"],["2021","3,278,075","","","\u2014","","","\u2014","%"],["2022","1,915,097","","","","","\u2014","%"],["Total","$","35,406,205","","","$","38,483","","","0.11","%"],["By geographic region(1):"],["Northwest","$","4,571,621","","","$","12,094","","","0.26","%"],["Southwest","11,927,424","","","8,542","","","0.07","%"],["Mid-North","8,815,061","","","17,165","","","0.19","%"],["Mid-South","5,063,574","","","(613)","","","(0.01)","%"],["Northeast","1,830,153","","","323","","","0.02","%"],["Southeast","3,198,372","","","972","","","0.03","%"],["Total","$","35,406,205","","","$","38,483","","","0.11","%"],["By commodity/collateral type:"],["Crops","$","16,422,355","","","$","3,790","","","0.02","%"],["Permanent plantings","7,707,066","","","9,783","","","0.13","%"],["Livestock","7,784,896","","","3,836","","","0.05","%"],["Part-time farm","1,896,547","","","1,090","","","0.06","%"],["Ag. Storage and Processing","1,426,801","","","19,984","","","1.40","%"],["Other","168,540","","","\u2014","","","\u2014","%"],["Total","$","35,406,205","","","$","38,483","","","0.11","%"]]
[[/GREPCENT_TABLE]]

(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).

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Analysis of portfolio performance indicates that commodity type is the primary determinant of Farmer Mac's exposure to loss on a given loan. The following tables present concentrations of Agricultural Finance mortgage loans by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

Table 28

[[GREPCENT_TABLE]]
[["","As of December 31, 2022"],["","Agricultural Finance Mortgage Loans Concentrations by Commodity Type within Geographic Region"],["","Crops","","Permanent Plantings","","Livestock","","Part-time Farm","","Ag. Storage and Processing","","Other","","Total"],["","(dollars in thousands)"],["By geographic region(1):"],["Northwest","$","722,805","","","$","224,214","","","$","290,599","","","$","111,547","","","$","32,955","","","$","23","","","$","1,382,143"],["","6.7","%","","2.1","%","","2.7","%","","1.0","%","","0.3","%","","\u2014","%","","12.8","%"],["Southwest","698,041","","","1,788,082","","","564,464","","","110,072","","","130,377","","","15,813","","","3,306,849"],["","6.5","%","","16.7","%","","5.3","%","","1.0","%","","1.2","%","","0.1","%","","30.8","%"],["Mid-North","2,372,177","","","10,567","","","233,371","","","87,669","","","107,355","","","1,612","","","2,812,751"],["","22.1","%","","0.1","%","","2.2","%","","0.8","%","","1.0","%","","\u2014","%","","26.2","%"],["Mid-South","1,081,669","","","79,235","","","576,522","","","61,962","","","70,914","","","17","","","1,870,319"],["","10.1","%","","0.7","%","","5.4","%","","0.6","%","","0.7","%","","\u2014","%","","17.5","%"],["Northeast","191,635","","","45,513","","","76,071","","","50,877","","","63,435","","","\u2014","","","427,531"],["","1.8","%","","0.4","%","","0.7","%","","0.5","%","","0.6","%","","\u2014","%","","4.0","%"],["Southeast","318,932","","","242,050","","","226,927","","","61,423","","","70,449","","","197","","","919,978"],["","3.0","%","","2.3","%","","2.1","%","","0.6","%","","0.7","%","","\u2014","%","","8.7","%"],["Total","$5,385,259","","$2,389,661","","$1,967,954","","$483,550","","$475,485","","$17,662","","$10,719,571"],["","50.2","%","","22.3","%","","18.4","%","","4.5","%","","4.5","%","","0.1","%","","100.0","%"]]
[[/GREPCENT_TABLE]]

(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).

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Table 29

[[GREPCENT_TABLE]]
[["","As of December 31, 2022"],["","Agricultural Loans Cumulative Credit Losses by Origination Year and Commodity Type"],["","Crops","","Permanent Plantings","","Livestock","","Part-time Farm","","Ag. Storage and Processing","","Total"],["","(in thousands)"],["By year of origination:"],["2012 and prior","$","3,427","","","$","9,783","","","$","3,836","","","$","1,066","","","$","15,673","","","$","33,785"],["2013","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["2014","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["2015","(540)","","","\u2014","","","\u2014","","","24","","","\u2014","","","(516)"],["2016","903","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","903"],["2017","\u2014","","","\u2014","","","\u2014","","","\u2014","","","4,311","","","4,311"],["2018","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["2019","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["2020","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["2021","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["2022","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total","$","3,790","","","$","9,783","","","$","3,836","","","$","1,090","","","$","19,984","","","$","38,483"]]
[[/GREPCENT_TABLE]]

For more information about the credit quality of Farmer Mac's Agricultural Finance mortgage loans and the associated allowance for losses please refer to Note 8 and Note 12 to the consolidated financial statements. Activity affecting the allowance for loan losses and reserve for losses is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Provision for and Release of Allowance for Loan Losses and Reserve for Losses."

Rural Infrastructure Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of December 31, 2022 was $3.5 billion across 45 states. For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Infrastructure Finance loans, see "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral Standards." As of December 31, 2022, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

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.

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.

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Table 30

[[GREPCENT_TABLE]]
[["","Rural Infrastructure Finance portfolio by internally assigned risk rating as of December 31, 2022"],["","Acceptable","","Special Mention","","Substandard","","Total"],["","(in thousands)"],["Distribution Cooperative","$","2,290,695","","","$","\u2014","","","$","\u2014","","","$","2,290,695"],["G&T Cooperative","706,976","","","\u2014","","","\u2014","","","706,976"],["Renewable Energy","230,170","","","\u2014","","","\u2014","","","230,170"],["Telecommunications","316,617","","","\u2014","","","\u2014","","","316,617"],["Rural Infrastructure Total","$","3,544,458","","$","\u2014","","$","\u2014","","$","\u2014","","$","\u2014","","$","\u2014","","$","3,544,458"]]
[[/GREPCENT_TABLE]]

For more information about the credit quality of Farmer Mac's Rural Infrastructure Finance portfolio and the associated allowance for losses please refer to Notes 8 and 12 of the consolidated financial statements.

Other Considerations Regarding Credit Risk Related to Loans and Guarantees

The credit exposure on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is guaranteed by the full faith and credit of the United States. Therefore, Farmer Mac believes that we have little or no credit risk exposure to the USDA Securities in the Agricultural Finance line of business because of the USDA guarantee. As of December 31, 2022, Farmer Mac had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities and does not expect to incur any such losses in the future. Because we do not expect credit losses on this portfolio, Farmer Mac does not provide an allowance for losses on its portfolio of USDA Securities.

Farmer Mac requires many lenders to make representations and warranties about the conformity of Agricultural Finance mortgage loans and Rural Infrastructure Finance loans to Farmer Mac's standards, the accuracy of loan data provided to Farmer Mac, and other requirements related to the loans. Sellers who make these representations and warranties are responsible to Farmer Mac for breaches of those representations and warranties. Farmer Mac has the ability to require a seller to cure, replace, or repurchase a loan sold or transferred to Farmer Mac if any breach of a representation or warranty is discovered that was material to Farmer Mac's decision to purchase the loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred by the seller to Farmer Mac. During the previous three years ended December 31, 2022, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan. In addition to relying on the representations and warranties of sellers, Farmer Mac also underwrites the Agricultural Finance mortgage loans (other than rural housing and part-time farm mortgage loans) and Rural Infrastructure Finance loans on which it has direct credit exposure. For rural housing and part-time farm mortgage loans, Farmer Mac relies on representations and warranties from the seller that those loans conform to Farmer Mac's specified underwriting criteria. For more information about Farmer Mac's loan eligibility requirements and underwriting standards, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Eligibility," "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch," "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance," and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral Standards."

Under contracts with Farmer Mac and in consideration for servicing fees, Farmer Mac-approved servicers service loans in accordance with Farmer Mac's requirements. Servicers are responsible to Farmer Mac for material errors in the servicing of those loans. If a servicer materially breaches the terms of its servicing

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agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any corresponding damages to Farmer Mac and, in most cases, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the servicer. Farmer Mac also can proceed against the servicer in arbitration or exercise any remedies available to it under law. During the previous three years ended December 31, 2022, Farmer Mac had not exercised any remedies or taken any formal action against any servicers. For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Servicing" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing."

Credit Risk – Counterparty Risk. Farmer Mac is exposed to credit risk arising from its business relationships with other institutions, which include:

•issuers of AgVantage securities;

•approved lenders and servicers; and

•interest rate swap counterparties.

Farmer Mac approves AgVantage counterparties and manages institutional credit risk related to those AgVantage counterparties by requiring them to meet Farmer Mac's standards for creditworthiness for the particular counterparty type and transaction. The required collateralization level is established when the AgVantage facility is entered into with the counterparty and does not change during the life of the AgVantage securities issued under the facility without Farmer Mac's consent. In AgVantage transactions, the corporate obligor is typically required to remove from the pool of pledged collateral loans that become and remain (within specified parameters) delinquent in the payment of principal or interest and to substitute eligible loans that are current in payment or pay down the AgVantage securities to maintain the minimum required collateralization level. 

In the event of a default on an AgVantage security, Farmer Mac would have recourse to the pledged collateral and have rights to the ongoing borrower payments of principal and interest. As a result, Farmer Mac has indirect credit exposure to the Agricultural Finance mortgage loans and Rural Infrastructure loans that secure AgVantage securities. For AgVantage counterparties that are institutional real estate investors or financial funds and other similar entities, Farmer Mac also typically requires that the counterparty (1) maintain a higher collateralization level, through either a higher overcollateralization percentage or lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default. As of December 31, 2022, Farmer Mac had not experienced any credit losses on any AgVantage securities. For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Other Products – Agricultural Finance—AgVantage Securities" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Other Products – Rural Infrastructure Finance—AgVantage Securities."

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $6.0 billion as of December 31, 2022 and $5.1 billion as of December 31, 2021. The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Infrastructure Finance line of business totaled $3.0 billion as of both December 31, 2022 and December 31, 2021. The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $1.2 million as of December 31, 2022 and $2.8 million as of December 31, 2021.

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The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of December 31, 2022 and 2021:

Table 31

[[GREPCENT_TABLE]]
[["","","As of December 31, 2022","","As of December 31, 2021"],["Counterparty","","Balance","","","","Required Collateralization","","Balance","","","","Required Collateralization"],["","","(dollars in thousands)"],["AgVantage:"],["CFC","","$","3,045,325","","","","","100%","","$","3,036,017","","","","","100%"],["MetLife","","2,050,000","","","","","103%","","2,050,000","","","","","103%"],["Rabo AgriFinance","","2,855,000","","","","","105%","","2,550,000","","","","","105%"],["Other(1)","","1,059,600","","","","","100% to 125%","","492,464","","","","","106% to 125%"],["Total outstanding","","$","9,009,925","","","","","","","$","8,128,481"]]
[[/GREPCENT_TABLE]]

(1)Consists of AgVantage securities issued by 12 and 13 different issuers as of December 31, 2022 and 2021, respectively.

Farmer Mac manages institutional credit risk related to lenders and servicers by requiring those institutions to meet Farmer Mac's standards for creditworthiness. Farmer Mac monitors the financial condition of those institutions by evaluating financial statements and credit rating agency reports. For more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Lenders" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing."

Farmer Mac manages institutional credit risk related to its interest rate swap counterparties through collateralization provisions contained in each of its swap agreements that vary based on the market value of its swap portfolio with each counterparty. Farmer Mac and its interest rate swap counterparties are required to fully collateralize their derivatives positions without any minimum threshold for cleared swap transactions, as well as for non-cleared swap transactions entered into after March 1, 2017. Farmer Mac transacts interest rate swaps with multiple counterparties to reduce counterparty credit exposure concentration. Farmer Mac's usage of cleared derivatives has increased over time as has its exposure to clearinghouses. The usage of cleared swap transactions reduces Farmer Mac's exposure to individual counterparties with the central clearinghouse acting to settle the change in value of contracts on a daily basis. Credit risk related to interest rate swap contracts is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk" and Note 4 to the consolidated financial statements.

Credit Risk – Other Investments. As of December 31, 2022, Farmer Mac had $0.9 billion of cash and cash equivalents and $4.6 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 Farmer Mac's Liquidity and Investment Regulations. In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.

The Liquidity and Investment Regulations and Farmer Mac's internal policies require that investments held in Farmer Mac's investment portfolio meet the following creditworthiness standards: (1) at a minimum, at least one obligor of the investment must have a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally present a very low risk of default; (2) if the obligor whose capacity to meet financial

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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.

The Liquidity and Investment Regulations and Farmer Mac's internal policies also establish concentration limits, which are intended to limit exposure to any single entity, issuer, or obligor. The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single entity, issuer, or obligor of securities to 10% of Farmer Mac's regulatory capital ($134.0 million as of December 31, 2022). However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($67.0 million as of December 31, 2022). These exposure limits do not apply to obligations of U.S. government agencies or GSEs, although Farmer Mac's current policy restricts investing more than 100% of regulatory capital in the senior non-convertible debt securities of any one GSE.

Although the Liquidity and Investments Regulations do not establish limits on the maximum amount, expressed as a percentage of Farmer Mac's investment portfolio, that can be invested in each eligible asset class, Farmer Mac's internal policies set forth asset class limits as part of Farmer Mac's overall risk management framework.

Interest Rate Risk. Farmer Mac is subject to interest rate risk on all interest-earning assets on its balance sheet because of timing differences in the cash flows due to maturity, paydown, or repricing of the assets and debt together with financial derivatives. Cash flow mismatches due to changing interest rates can reduce the earnings of Farmer Mac if assets prepay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments when Farmer Mac's funding costs cannot be correspondingly reduced. Alternatively, Farmer Mac could realize a decline in income if assets repay more slowly than originally forecasted and the associated maturing debt must be replaced by debt issuances at higher interest rates.

Interest Rate Risk Management

The goal of interest rate risk management at Farmer Mac is to manage the balance sheet in a manner that generates stable earnings and value across a variety of interest rate environments. Recognizing that interest rate sensitivities may change with the passage of time and as interest rates change, Farmer Mac regularly assesses this exposure and, if necessary, adjusts its portfolio of interest-earning assets, debt, and financial derivatives.

Farmer Mac's objective is to maintain its exposure to interest rate risk within appropriate limits, as approved by Farmer Mac's board of directors. Farmer Mac's management-level Asset and Liability Committee ("ALCO") provides oversight, establishes guidelines, and approves strategies to maintain interest rate risk within the board-established limits.

Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt that together with financial derivatives have similar duration and convexity characteristics and help mitigate impacts from interest rate changes across the yield curve. As part of this strategy, Farmer Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

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Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities to execute its debt issuance strategy. Portions of Farmer Mac's callable debt is issued to mitigate prepayment risk associated with certain interest-earning assets held on balance sheet. In general, as interest rates decline, prepayments typically increase, and Farmer Mac is able to economically extinguish certain callable debt issuances. In addition, Farmer Mac enters into financial derivatives, primarily interest rate swaps, to better match the durations of Farmer Mac's assets and liabilities, thereby reducing overall sensitivity to changing interest rates.

Taking into consideration the prepayment provisions and the default probabilities associated with its portfolio of interest-earning assets, Farmer Mac incorporates behavioral models when projecting and valuing cash flows associated with these assets. In recognition that borrowers' behaviors in various interest rate environments may change over time, Farmer Mac periodically evaluates the effectiveness of these models compared to actual prepayment experience and adjusts and refines the models as necessary to improve the precision of future prepayment forecasts.

Changes in interest rates may affect the timing of asset prepayments which may, in turn, impact durations and values of the assets. Declining interest rates generally result in increased prepayments, which shortens the duration of these assets, while rising interest rates generally result in lower prepayments, thereby extending the duration of the assets.

Farmer Mac is subject to interest rate risk on loans and securities it has committed to acquire but not yet purchased (other than delinquent loans purchased through LTSPCs or loans designated for securitization under a forward purchase agreement). When Farmer Mac commits to purchase these assets, it is exposed to interest rate risk between the time it commits to purchase the loans and the time it issues debt to fund the purchase of these loans. Farmer Mac manages the interest rate risk exposure related to these loans by entering into exchange-traded futures contracts involving U.S. Treasury securities and other financial derivatives. Similarly, when Farmer Mac commits to sell certain assets, the associated interest rate exposure is primarily managed with exchange-traded futures contracts involving U.S. Treasury securities and other financial derivatives.

Farmer Mac's $0.9 billion of cash and cash equivalents held as of December 31, 2022 mature within three months. As of December 31, 2022, $3.2 billion of the $4.6 billion of investment securities (70%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year. Farmer Mac's floating rate investment securities are funded with floating rate debt. The fixed rate investment securities are generally funded in a manner consistent with Farmer Mac's overall funding strategy that approximates a duration and convexity match.

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Interest Rate Risk Metrics

Farmer Mac regularly evaluates and conducts interest rate shock simulations on its portfolio of financial assets, debt, and financial derivatives and examines a variety of metrics to quantify and manage its exposure to interest rate risk. These metrics include sensitivity to interest rate movements on the market value of equity ("MVE") and forecasted net effective spread ("NES") as well as a duration gap analysis.

MVE represents management's estimate of the present value of all future cash flows from its current portfolio of on- and off-balance sheet assets, liabilities, and financial derivatives, discounted at current interest rates and appropriate spreads. However, MVE is not indicative of the market value of Farmer Mac as a going concern because these market values are theoretical and do not reflect future business activities. The MVE sensitivity analysis measures the degree to which the market values of Farmer Mac's assets, liabilities, and financial derivatives are estimated to change for a given change in interest rates.

Farmer Mac's NES simulation represents the difference between projected income over the next twelve months from the current portfolio of interest-earning assets and interest expense produced by the related funding, including associated financial derivatives. Farmer Mac's NES simulation may be impacted by changes in market interest rates resulting from timing differences between maturities and re-pricing characteristics of funded assets and debt together with the associated financial derivatives. The direction and magnitude of any such effect depends on the direction and magnitude of the change in interest rates across the yield curve as well as the composition of Farmer Mac's portfolio. The NES simulation represents an estimate of the net effective spread income that Farmer Mac's current portfolio is expected to produce over a twelve-month horizon. As a result, the NES simulation sensitivity statistics provide a short-term view of Farmer Mac's NES income sensitivity to interest rate shocks.

Duration is a measure of a financial instrument's fair value sensitivity to small changes in interest rates. Duration gap is calculated using the net estimated durations of Farmer Mac's interest-earning assets, debt, and financial derivatives. Duration gap quantifies the extent to which estimated fair value sensitivities are matched for interest-earning assets, debt and financial derivatives. Duration gap provides a relatively concise measure of the interest rate risk inherent in Farmer Mac's outstanding portfolio.

A positive duration gap denotes that the duration of Farmer Mac's interest-earning assets is greater than the duration of its debt and financial derivatives. A positive duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's interest-earning assets is more sensitive than the fair value change of its debt and financial derivatives. Conversely, a negative duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's interest-earning assets are less sensitive than the fair value change of its debt and financial derivatives. A duration gap of zero indicates that with small changes in interest rate movements the fair value change of Farmer Mac's interest-earning assets is effectively offset by the fair value change of its debt and financial derivatives.

Each of the interest rate risk metrics is quantified using asset/liability models and derived based on management's best estimates of factors such as implied forward interest rates across the yield curve, interest rate volatility, and timing of asset prepayments and callable debt redemptions. Accordingly, these metrics are estimates rather than precise measurements. Actual results may differ to the extent there are material changes to Farmer Mac's financial asset portfolio or changes in funding or hedging strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.

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The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of December 31, 2022 and 2021 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

Table 32

[[GREPCENT_TABLE]]
[["","","Percentage Change in MVE from Base Case"],["Interest Rate Scenario(1)","","As of December 31, 2022","","As of December 31, 2021(1)"],["+100 basis points","","(3.7)","%","","3.7","%"],["-100 basis points","","2.7","%","","(0.1)","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Percentage Change in NES from Base Case"],["Interest Rate Scenario","","As of December 31, 2022","","As of December 31, 2021(1)"],["+100 basis points","","0.4","%","","6.6","%"],["-100 basis points","","(0.6)","%","","(0.1)","%"]]
[[/GREPCENT_TABLE]]

(1)The down 100 basis points shock scenario was replaced in 2020 with a proportional shock relative to 50% of the 3-month Treasury bill rate, with the approval of the Finance Committee of the Board of Directors. The replacement down shock scenario was negative 2 basis points as of December 31, 2021.

As of December 31, 2022, Farmer Mac's duration gap was positive 3.6 months, compared to negative 1.5 months as of December 31, 2021. Interest rates within the yield curve flattened during 2022 with the 2-year and 10-year U.S. Treasury Note yield-to-maturity increasing by approximately 370 basis points and 237 basis points, respectively, versus year-end 2021. This rate movement contributed to extending the duration of Farmer Mac's funded assets compared to its debt and financial derivatives, thereby lengthening Farmer Mac's duration gap.

Financial Derivatives Transactions

The economic effects of financial derivatives are included in Farmer Mac's MVE, NES, and duration gap analyses. Farmer Mac typically enters into the following types of financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of interest-earning assets, future cash flows, and debt issuance, and not for trading or speculative purposes:

•"pay-fixed" interest rate swaps, in which Farmer Mac pays fixed rates of interest to, and receives floating rates of interest from, counterparties;

•"receive-fixed" interest rate swaps, in which Farmer Mac receives fixed rates of interest from, and pays floating rates of interest to, counterparties;

•"basis swaps," in which Farmer Mac pays floating rates of interest based on one index to, and receives floating rates of interest based on a different index from, counterparties; and

•exchange-traded futures contracts involving U.S. Treasury securities.

As of December 31, 2022, Farmer Mac had $23.9 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $8.9 billion were pay-fixed interest rate swaps, $13.1 billion were receive-fixed interest rate swaps, and $1.9 billion were basis swaps.

Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its interest-earning assets with those of its debt. For example, Farmer Mac transacts pay-fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that approximately matches the duration of the corresponding fixed rate assets being funded. Farmer Mac evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding

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alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks 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 or SOFR). Also, certain financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt.

As discussed in Note 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 undesignated financial derivatives are reported in "Gains on financial derivatives" in the consolidated statements of operations. For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items related to the risk being hedged are reported in "Net interest income" in the consolidated statements of operations. Interest accruals on derivatives designated in fair value hedge accounting relationships are also recorded in "Net interest income" in the consolidated statements of operations. For financial derivatives designated in cash flow hedge accounting relationships, the unrealized gain or loss on the derivative is recorded in other comprehensive income. Because the hedging instrument is an interest rate swap and the hedged forecasted transactions are future interest payments on floating rate debt, amounts recorded in accumulated other comprehensive income are reclassified to "Total interest expense" in conjunction with the recognition of interest expense on the debt. All of Farmer Mac's interest rate swap transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty. As of both December 31, 2022 and 2021, Farmer Mac had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps

Re-funding and repricing risk

Farmer Mac is subject to re-funding and repricing risk on any floating rate assets that are not funded to contractual maturity. Re-funding and repricing risk arises from potential changes in funding costs resulting from a funding strategy whereby Farmer Mac issues floating rate debt across a variety of maturities to fund floating rate or synthetically floating rate assets that on average may have longer maturities. Changes in Farmer Mac's funding costs relative to the benchmark market index rate to which the assets are indexed can cause changes to net interest income when debt matures and is reissued at then current interest rates to continue funding those assets.

Farmer Mac is subject to re-funding and repricing risk on a portion of its fixed rate assets as a result of its use of pay-fixed receive-floating interest rate swaps that effectively convert the required funding needed from fixed rate to floating rate. These fixed rate assets are then effectively floating rate assets that require floating rate funding.

Farmer Mac can meet floating rate funding needs in several ways, including:

•issuing short-term fixed rate discount notes with maturities that match the reset period of the assets;

•issuing floating rate medium-term notes with maturities and reset frequencies that match the assets being funded;

•issuing non-maturity matched, floating rate medium-term notes with reset frequencies that match the assets being funded; or

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•issuing non-maturity matched, fixed rate discount notes or medium-term notes swapped to floating rate to match the interest rate reset dates of the assets.

To meet certain floating rate funding needs, Farmer Mac frequently issues shorter-term floating-rate medium-term notes or fixed rate medium-term notes paired with a received-fixed interest rate swap because these funding alternatives generally provide a lower cost of funding while generating an effective interest rate match. As funding for these floating rate assets matures, Farmer Mac seeks to refinance the debt associated with these assets in a similar fashion to achieve an appropriate interest rate match in the context of Farmer Mac's overall debt issuance and liquidity management strategies.

However, if the funding cost of Farmer Mac’s discount notes or medium-term notes increased relative to the benchmark market index of the associated assets during the time between when these floating rate assets were first funded and when Farmer Mac refinanced the associated debt, Farmer Mac would be exposed to a commensurate reduction of net effective spread. Conversely, if the funding cost on Farmer Mac’s discount notes or medium-term notes decreased relative to the benchmark market index during that time, Farmer Mac would benefit from a commensurate increase to net effective spread.

Farmer Mac's debt issuance strategy targets balancing liquidity risk and re-funding and repricing risk while maintaining an appropriate liability management profile that is consistent with Farmer Mac's risk tolerance. Farmer Mac regularly adjusts its funding strategies to mitigate the effects of interest rate variability and seeks to maintain an effective mixture of funding structures in the context of its overall liability and liquidity management strategies.

As of December 31, 2022, Farmer Mac held $6.9 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as LIBOR or SOFR. As of the same date, Farmer Mac also had $8.9 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily LIBOR or SOFR.

Discontinuation of LIBOR

As described in "Risk Factors—Market Risk" in Part I, Item 1A, 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. Farmer Mac is evaluating the potential effect on our business of replacement benchmark interest rates expected to replace LIBOR, including SOFR, which is the replacement benchmark rate recommended by the Alternative Reference Rates Committee and designated by Adjustable Interest Rate (LIBOR) Act and implementing regulations.

As of December 31, 2022, Farmer Mac held $2.9 billion of floating rate assets in its lines of business and its investment portfolio, had issued $0.2 billion of floating rate debt, and had entered into $10.5 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 alternative benchmark interest rate indices may be complicated and are expected to require term and credit adjustments to accommodate for differences between the benchmark interest rate indices. The transition may also result in different financial performance for existing transactions, may require different hedging strategies, or may require

101

renegotiation of existing transactions. As of December 31, 2022, we had $1.3 billion outstanding in medium-term notes based on SOFR, a potential alternative benchmark interest rate index.

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 and investment securities. Farmer Mac regularly accesses the debt capital markets for funding, and Farmer Mac has maintained steady access to the debt capital markets throughout 2022. Farmer Mac funds its purchases of eligible loan assets, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets and finances its operations primarily by issuing debt obligations of various maturities in the debt capital markets. As of December 31, 2022, Farmer Mac had outstanding discount notes of $0.6 billion, medium-term notes that mature within one year of $7.5 billion, and medium-term notes that mature after one year of $17.0 billion.

Assuming continued access to the debt capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future. Farmer Mac has a contingency funding plan to manage unanticipated disruptions in its access to the debt capital markets. Farmer Mac must maintain a minimum of 90 days of liquidity under the Liquidity and Investment Regulations prescribed for Farmer Mac by FCA. In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 368 days of liquidity throughout 2022 and had 324 days of liquidity as of December 31, 2022.

Farmer Mac maintains cash, cash equivalents (including U.S. Treasury securities, operational deposits, and other short-term money market instruments), and other investment securities that can be drawn upon for liquidity needs. Farmer Mac's current policies authorize liquidity investments in:

•obligations of or fully guaranteed by the United States or a U.S. government agency;

•obligations of or fully guaranteed by GSEs;

•municipal securities;

•international and multilateral development bank obligations;

•money market instruments;

•diversified investment funds;

•asset-backed securities;

•corporate debt securities; and

•mortgage-backed securities.

102

The following table presents these assets as of December 31, 2022 and 2021:

Table 33

[[GREPCENT_TABLE]]
[["","As of December 31, 2022","","As of December 31, 2021"],["","(in thousands)"],["Cash and cash equivalents","$","861,002","","","$","908,785"],["Investment securities:"],["Guaranteed by U.S. Government and its agencies","1,444,650","","","1,579,452"],["Guaranteed by GSEs","3,160,919","","","2,282,655"],["Asset-backed securities","19,027","","","19,254"],["Total","$","5,485,598","","","$","4,790,146"]]
[[/GREPCENT_TABLE]]

The objectives of the investment portfolio as of December 31, 2022 and 2021 are to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.

Capital Requirements. Farmer Mac is subject to the following statutory capital requirements – minimum, critical, and risk-based. Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement. As of December 31, 2022, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

In accordance with FCA's rule on capital planning, Farmer Mac's board of directors has adopted a policy for maintaining a sufficient level of "Tier 1" capital (consisting of retained earnings, paid-in capital, common stock, and qualifying preferred stock). That policy restricts Tier 1-eligible dividends and any discretionary bonus payments if Tier 1 capital falls below specified thresholds. As of December 31, 2022 and 2021, Farmer Mac's Tier 1 capital ratio was 14.9% and 14.8%, respectively. As of December 31, 2022, 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 "Business—Government Regulation of Farmer Mac—Capital Standards." See Note 9 to the consolidated financial statements for more information about Farmer Mac's capital position.

Discount and Medium-term Notes. The following table presents the amount and timing of Farmer Mac's known, fixed, and determinable discount and medium-term note obligations by payment date as of December 31, 2022. The payment amounts represent those amounts due to the investor (including return of discount and interest on debt) and do not include unamortized premiums or discounts or other similar carrying value adjustments.

103

Table 34

[[GREPCENT_TABLE]]
[["","One Year or Less","","One to Three Years","","Three to Five Years","","Over Five Years","","Total"],["","(in thousands)"],["Discount notes(1)","$","568,079","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","568,079"],["Medium-term notes(1)","7,469,450","","","7,583,077","","","5,333,762","","","4,066,485","","","24,452,774"],["Interest payments on fixed rate medium-term notes(2)","374,223","","","467,003","","","271,625","","","337,919","","","1,450,770"],["Interest payments on floating rate medium-term notes(3)","84,757","","","121,559","","","81,188","","","48,219","","","335,723"]]
[[/GREPCENT_TABLE]]

(1)Future events, including additional issuance of discount notes and medium-term notes and refinancing of those notes, could cause actual payments to differ significantly from these amounts. For more information regarding discount notes and medium-term notes, see Note 7 to the consolidated financial statements.

(2)Interest payments on callable medium-term notes are calculated based on maturity. Future calls of these notes could cause actual interest payments to differ significantly from the amounts presented.

(3)Calculated using the effective interest rates as of December 31, 2022. As a result, these amounts do not reflect the effects of changes in the interest rates effective on future interest rate reset dates.

Farmer Mac enters into financial derivatives contracts under which it either receives cash from counterparties, or is required to pay cash to them, depending on changes in interest rates. Financial derivatives are carried on the consolidated balance sheets at fair value, representing the net present value of expected future cash payments or receipts based on market interest rates as of the balance sheet date adjusted for the consideration of credit risk of Farmer Mac and its counterparties. The fair values of the contracts change daily as market interest rates change. Because the financial derivative liabilities recorded on the consolidated balance sheet as of December 31, 2022 do not represent the amounts that may ultimately be paid under the financial derivative contracts, those liabilities are not included in the table presented above. More information about financial derivatives is included in Note 2(f) and Note 6 to the consolidated financial statements.

Contingent Liabilities. In conducting its loan purchase activities, Farmer Mac enters into mandatory delivery commitments to purchase agricultural mortgage loans and USDA Securities. In conducting its LTSPC activities, Farmer Mac commits, subject to the applicable LTSPC agreement, to a future purchase of one or more loans from identified pools of eligible loans that met Farmer Mac's standards when the applicable transaction was entered into and Farmer Mac assumed the credit risk on the loans. The following table presents these significant commitments:

Table 35

[[GREPCENT_TABLE]]
[["","As of December 31,"],["","2022","","2021"],["","(in thousands)"],["LTSPCs","$","3,423,155","","","$","3,191,061"],["Mandatory commitments to purchase loans and USDA Securities","9,907","","","75,589"]]
[[/GREPCENT_TABLE]]

For more information about Farmer Mac's commitments to purchase loans, see Note 12 to the consolidated financial statements.

Off-Balance Sheet Arrangements 

Farmer Mac offers approved lenders two credit enhancement alternatives to increase their liquidity or lending capacity while retaining the cash flow benefits of their loans: (1) certain categories of Farmer Mac Guaranteed Securities; and (2) LTSPCs. Both products are available through each of the Agricultural Finance and Rural Infrastructure Finance lines of business. For securitization trusts where Farmer Mac is the primary beneficiary, the trust assets and liabilities are included on Farmer Mac's consolidated balance

104

sheet. For securitization trusts where Farmer Mac is not the primary beneficiary and in the event of deconsolidation, both of these alternatives create off-balance sheet obligations for Farmer Mac. See Note 12 to the consolidated financial statements for more information about consolidation and Farmer Mac's off-balance sheet business activities.

As of December 31, 2022 and 2021, outstanding off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities totaled $3.9 billion and $3.8 billion, respectively. The following table presents the balance of outstanding LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities as of December 31, 2022 and 2021:

Table 36

[[GREPCENT_TABLE]]
[["Outstanding Balance of LTSPCs and Off-Balance Sheet Farmer Mac Guaranteed Securities"],["","As of December 31,"],["","2022","","2021"],["","(in thousands)"],["Agricultural Finance:"],["Corporate AgFinance:"],["Unfunded Loan Commitments","$","77,654","","","$","47,070"],["Farm & Ranch:"],["LTSPCs and unfunded commitments","2,822,309","","","2,587,154"],["Farmer Mac Guaranteed Securities","500,953","","","578,358"],["Total Agricultural Finance obligations","3,400,916","","","3,212,582"],["Rural Infrastructure:"],["Rural Utilities:"],["LTSPCs and Unfunded Loan Commitments","512,592","","","556,837"],["Farmer Mac Guaranteed Securities","1,169","","","2,755"],["Renewable Energy:"],["Unfunded Loan Commitments","10,600","","","\u2014"],["Total Rural Infrastructure obligations","524,361","","","559,592"],["Total off-balance sheet","$","3,925,277","","","$","3,772,174"]]
[[/GREPCENT_TABLE]]

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees" and Notes 2(c), 2(d), 5 and 12 to the consolidated financial statements for more information about Farmer Mac Guaranteed Securities and Notes 2(m) and 12 to the consolidated financial statements for more information about LTSPCs.

Other Matters

None.

105

Supplemental Information

The following tables present quarterly and annual information about new business volume, repayments, and outstanding business volume:

Table 37

[[GREPCENT_TABLE]]
[["New Business Volume"],["","Agricultural Finance","","Rural Infrastructure Finance"],["","Farm & Ranch","","Corporate AgFinance","","Rural Utilities","","Renewable Energy","","Total"],["","(in thousands)"],["For the quarter ended:"],["December 31, 2022","$","1,114,255","","","$","165,395","","","$","140,222","","","$","43,737","","","$","1,463,609"],["September 30, 2022","1,927,209","","","169,932","","","547,117","","","61,653","","","2,705,911"],["June 30, 2022","1,418,397","","","107,916","","","326,899","","","35,307","","","1,888,519"],["March 31, 2022","2,452,539","","","103,353","","","377,965","","","41,636","","","2,975,493"],["December 31, 2021","2,075,540","","","411,838","","","631,338","","","12,594","","","3,131,310"],["September 30, 2021","1,791,662","","","122,043","","","609,745","","","4,152","","","2,527,602"],["June 30, 2021","925,950","","","159,958","","","410,666","","","3,441","","","1,500,015"],["March 31, 2021","1,087,897","","","186,393","","","171,546","","","23,484","","","1,469,320"],["December 31, 2020","907,316","","","242,394","","","145,416","","","44,313","","","1,339,439"],["For the year ended:"],["December 31, 2022","$","6,912,400","","","$","546,596","","","$","1,392,203","","","$","182,333","","","$","9,033,532"],["December 31, 2021","5,881,049","","","880,232","","","1,823,295","","","43,671","","","8,628,247"]]
[[/GREPCENT_TABLE]]

106

Table 38

[[GREPCENT_TABLE]]
[["Repayments of Assets"],["","Agricultural Finance","","Rural Infrastructure Finance"],["","Farm & Ranch","","Corporate AgFinance","","Rural Utilities","","Renewable Energy","","Total"],["","(in thousands)"],["For the quarter ended:"],["Scheduled","$","447,976","","","$","64,308","","","$","75,671","","","$","9,809","","","$","597,764"],["Unscheduled","136,245","","","132,366","","","1,201","","","\u2014","","","269,812"],["December 31, 2022","$","584,221","","","$","196,674","","","$","76,872","","","$","9,809","","","$","867,576"],["Scheduled","$","724,580","","","$","38,018","","","$","422,917","","","$","13,429","","","$","1,198,944"],["Unscheduled","296,763","","","64,439","","","\u2014","","","\u2014","","","361,202"],["September 30, 2022","$","1,021,343","","","$","102,457","","","$","422,917","","","$","13,429","","","$","1,560,146"],["Scheduled","$","1,114,779","","","$","42,162","","","$","159,491","","","$","7,898","","","$","1,324,330"],["Unscheduled","286,303","","","30,203","","","1,791","","","\u2014","","","318,297"],["June 30, 2022","$","1,401,082","","","$","72,365","","","$","161,282","","","$","7,898","","","$","1,642,627"],["Scheduled","$","1,535,369","","","$","39,480","","","$","266,349","","","$","7,790","","","$","1,848,988"],["Unscheduled","434,794","","","60,947","","","397","","","\u2014","","","496,138"],["March 31, 2022","$","1,970,163","","","$","100,427","","","$","266,746","","","$","7,790","","","$","2,345,126"],["Scheduled","$","928,663","","","$","205,778","","","$","816,802","","","$","18,526","","","$","1,969,769"],["Unscheduled","318,024","","","48,042","","","\u2014","","","\u2014","","","366,066"],["December 31, 2021","$","1,246,687","","","$","253,820","","","$","816,802","","","$","18,526","","","$","2,335,835"],["Scheduled","$","725,713","","","$","406,285","","","$","95,443","","","$","4,043","","","$","1,231,484"],["Unscheduled","374,287","","","\u2014","","","201","","","\u2014","","","374,488"],["September 30, 2021","$","1,100,000","","","$","406,285","","","$","95,644","","","$","4,043","","","$","1,605,972"],["Scheduled","$","380,684","","","$","139,774","","","$","225,257","","","$","4,704","","","$","750,419"],["Unscheduled","409,393","","","3,921","","","1,652","","","\u2014","","","414,966"],["June 30, 2021","$","790,077","","","$","143,695","","","$","226,909","","","$","4,704","","","$","1,165,385"],["Scheduled","$","721,090","","","$","120,621","","","$","100,482","","","$","2,671","","","$","944,864"],["Unscheduled","501,651","","","82,090","","","2,279","","","\u2014","","","586,020"],["March 31, 2021","$","1,222,741","","","$","202,711","","","$","102,761","","","$","2,671","","","$","1,530,884"],["Scheduled","$","365,732","","","$","197,108","","","$","405,597","","","$","561","","","$","968,998"],["Unscheduled","400,809","","","27,850","","","1,610","","","\u2014","","","430,269"],["December 31, 2020","$","766,541","","","$","224,958","","","$","407,207","","","$","561","","","$","1,399,267"],["For the year ended:"],["Scheduled","$","3,822,704","","","$","183,968","","","$","924,428","","","$","38,926","","","$","4,970,026"],["Unscheduled","1,154,105","","","287,955","","","3,389","","","\u2014","","","1,445,449"],["December 31, 2022","$","4,976,809","","","$","471,923","","","$","927,817","","","$","38,926","","","$","6,415,475"],["Scheduled","$","2,756,150","","","$","872,458","","","$","1,237,984","","","$","29,944","","","$","4,896,536"],["Unscheduled","1,603,355","","","134,053","","","4,132","","","\u2014","","","1,741,540"],["December 31, 2021","$","4,359,505","","","$","1,006,511","","","$","1,242,116","","","$","29,944","","","$","6,638,076"]]
[[/GREPCENT_TABLE]]

107

Table 39

[[GREPCENT_TABLE]]
[["Outstanding Business Volume"],["","Agricultural Finance","","Rural Infrastructure Finance"],["","Farm & Ranch","","Corporate AgFinance","","Rural Utilities","","Renewable Energy","","Total"],["","(in thousands)"],["As of:"],["December 31, 2022","$","17,728,792","","","$","1,603,507","","","$","6,359,613","","","$","230,170","","","$","25,922,082"],["September 30, 2022","17,199,347","","","1,634,786","","","6,296,263","","","196,242","","","25,326,638"],["June 30, 2022","16,591,999","","","1,567,311","","","6,172,063","","","148,018","","","24,479,391"],["March 31, 2022","16,575,595","","","1,540,760","","","6,006,446","","","120,609","","","24,243,410"],["December 31, 2021","16,094,639","","","1,537,834","","","5,895,227","","","86,763","","","23,614,463"],["September 30, 2021","15,565,589","","","1,379,816","","","6,080,691","","","92,695","","","23,118,791"],["June 30, 2021","14,873,926","","","1,664,059","","","5,566,591","","","92,585","","","22,197,161"],["March 31, 2021","14,738,052","","","1,647,796","","","5,382,835","","","93,848","","","21,862,531"],["December 31, 2020","14,872,894","","","1,664,115","","","5,314,051","","","73,035","","","21,924,095"]]
[[/GREPCENT_TABLE]]

Table 40

[[GREPCENT_TABLE]]
[["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:"],["December 31, 2022","$","13,693,810","","","$","3,031,288","","","$","5,251,427","","","$","21,976,525"],["September 30, 2022","13,810,162","","","2,960,596","","","4,644,958","","","21,415,716"],["June 30, 2022","13,798,771","","","2,939,467","","","3,993,956","","","20,732,194"],["March 31, 2022","14,174,611","","","2,858,521","","","3,443,816","","","20,476,948"],["December 31, 2021","13,228,675","","","2,896,014","","","3,695,269","","","19,819,958"],["September 30, 2021","12,921,572","","","2,872,499","","","3,818,550","","","19,612,621"],["June 30, 2021","11,800,429","","","2,878,637","","","4,254,625","","","18,933,691"],["March 31, 2021","11,454,321","","","2,824,551","","","4,410,661","","","18,689,533"],["December 31, 2020","11,330,414","","","2,816,840","","","4,511,964","","","18,659,218"]]
[[/GREPCENT_TABLE]]

108

The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:

Table 41

[[GREPCENT_TABLE]]
[["","Net Effective Spread(1)"],["","Agricultural Finance","","Rural Infrastructure Finance","","Treasury"],["","Farm & Ranch","","Corporate AgFinance","","Rural Utilities","","Renewable Energy","","Funding","","Investments","","Net Effective Spread"],["","Dollars","","Yield","","Dollars","","Yield","","Dollars","","Yield","","Dollars","","Yield","","Dollars","","Yield","","Dollars","","Yield","","Dollars","","Yield"],["","(dollars in thousands)"],["For the quarter ended:"],["December 31, 2022(2)","$","32,770","","","0.98","%","","$","7,471","","","1.94","%","","$","4,960","","","0.34","%","","$","935","","","1.76","%","","$","27,656","","","0.42","%","","$","(2,689)","","","0.19","%","","$","71,103","","","1.07","%"],["September 30, 2022","33,343","","","1.04","%","","7,600","","","1.99","%","","4,220","","","0.30","%","","705","","","1.97","%","","22,564","","","0.36","%","","(2,791)","","","(0.21)","%","","65,641","","","1.03","%"],["June 30, 2022","32,590","","","1.05","%","","6,929","","","1.87","%","","3,733","","","0.27","%","","468","","","1.78","%","","18,508","","","0.30","%","","(1,282)","","","(0.10)","%","","60,946","","","0.99","%"],["March 31, 2022","30,354","","","1.02","%","","7,209","","","1.96","%","","3,159","","","0.23","%","","375","","","1.69","%","","16,738","","","0.28","%","","4","","","\u2014","%","","57,839","","","0.97","%"],["December 31, 2021(2)","28,998","","","0.99","%","","6,321","","","1.84","%","","2,521","","","0.19","%","","356","","","1.53","%","","15,979","","","0.28","%","","158","","","0.01","%","","54,333","","","0.94","%"],["September 30, 2021","28,914","","","1.06","%","","7,163","","","1.80","%","","2,067","","","0.16","%","","236","","","1.09","%","","17,386","","","0.31","%","","159","","","0.01","%","","55,925","","","0.99","%"],["June 30, 2021","29,163","","","1.06","%","","6,676","","","1.65","%","","1,759","","","0.14","%","","378","","","1.80","%","","18,449","","","0.33","%","","126","","","0.01","%","","56,551","","","1.01","%"],["March 31, 2021","26,461","","","0.98","%","","6,921","","","1.67","%","","1,720","","","0.14","%","","249","","","1.28","%","","18,394","","","0.33","%","","114","","","0.01","%","","53,859","","","0.97","%"],["December 31, 2020","25,596","","","0.95","%","","6,237","","","1.53","%","","1,838","","","0.15","%","","123","","","1.20","%","","20,585","","","0.37","%","","143","","","0.01","%","","54,522","","","0.98","%"]]
[[/GREPCENT_TABLE]]

(1)Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets.

(2)See Note 14 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for the years ended December 31, 2022 and 2021.

109

The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income attributable to common stockholders:

Table 42

[[GREPCENT_TABLE]]
[["","Core Earnings by Quarter End"],["","December 2022","","September 2022","","June 2022","","March 2022","","December 2021","","September 2021","","June 2021","","March 2021","","December 2020"],["","(in thousands)"],["Revenues:"],["Net effective spread","$","71,103","","","$","65,641","","","$","60,946","","","$","57,839","","","$","54,333","","","$","55,925","","","$","56,551","","","$","53,859","","","$","54,522"],["Guarantee and commitment fees","4,677","","","4,201","","","4,709","","","4,557","","","4,637","","","4,322","","","4,334","","","4,240","","","4,652"],["Gains on sale of mortgage loans","\u2014","","","\u2014","","","\u2014","","","\u2014","","","6,539","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Other","390","","","473","","","307","","","514","","","241","","","687","","","301","","","451","","","512"],["Total revenues","76,170","","","70,315","","","65,962","","","62,910","","","65,750","","","60,934","","","61,186","","","58,550","","","59,686"],["Credit related expense/(income):"],["Provision for/(release of) losses","1,945","","","450","","","(1,535)","","","(54)","","","(1,428)","","","255","","","(983)","","","(31)","","","2,973"],["REO operating expenses","819","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Losses on sale of REO","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","22"],["Total credit related expense/(income)","2,764","","","450","","","(1,535)","","","(54)","","","(1,428)","","","255","","","(983)","","","(31)","","","2,995"],["Operating expenses:"],["Compensation and employee benefits","12,105","","","11,648","","","11,715","","","13,298","","","11,246","","","10,027","","","9,779","","","11,795","","","9,497"],["General and administrative","8,055","","","6,919","","","7,520","","","7,278","","","8,492","","","6,330","","","6,349","","","6,336","","","6,274"],["Regulatory fees","832","","","812","","","813","","","812","","","812","","","750","","","750","","","750","","","750"],["Total operating expenses","20,992","","","19,379","","","20,048","","","21,388","","","20,550","","","17,107","","","16,878","","","18,881","","","16,521"],["Net earnings","52,414","","","50,486","","","47,449","","","41,576","","","46,628","","","43,572","","","45,291","","","39,700","","","40,170"],["Income tax expense","11,210","","","10,303","","","9,909","","","9,024","","","9,809","","","9,152","","","9,463","","","8,520","","","8,470"],["Preferred stock dividends","6,791","","","6,791","","","6,792","","","6,791","","","6,792","","","6,774","","","5,842","","","5,269","","","5,269"],["Core earnings","$","34,413","","","$","33,392","","","$","30,748","","","$","25,761","","","$","30,027","","","$","27,646","","","$","29,986","","","$","25,911","","","$","26,431"],["Reconciling items:"],["Gains/(losses) on undesignated financial derivatives due to fair value changes","$","1,596","","","$","6,441","","","$","2,846","","","$","2,612","","","$","(1,242)","","","$","(405)","","","$","(3,020)","","","$","3,236","","","$","(3,005)"],["(Losses)/gains on hedging activities due to fair value changes","(148)","","","(624)","","","428","","","5,687","","","(2,079)","","","1,818","","","(5,866)","","","4,317","","","7,954"],["Unrealized gains/(losses) on trading assets","31","","","(757)","","","(285)","","","94","","","(76)","","","36","","","(61)","","","(14)","","","223"],["Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value","57","","","24","","","(62)","","","20","","","71","","","23","","","20","","","16","","","(77)"],["Net effects of terminations or net settlements on financial derivatives","1,268","","","(3,522)","","","2,536","","","15,512","","","(429)","","","(351)","","","109","","","1,165","","","1,583"],["Income tax effect related to reconciling items","(590)","","","(327)","","","(1,148)","","","(5,024)","","","789","","","(236)","","","1,852","","","(1,831)","","","(1,403)"],["Net income attributable to common stockholders","$","36,627","","","$","34,627","","","$","35,063","","","$","44,662","","","$","27,061","","","$","28,531","","","$","23,020","","","$","32,800","","","$","31,706"]]
[[/GREPCENT_TABLE]]