2014 Q2 10-Q
As filed with the Securities and Exchange Commission on August 11, 2014

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
Commission File Number 001-14951 
 ____________________________________________________________
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Exact name of registrant as specified in its charter)
Federally chartered instrumentality
of the United States
 
52-1578738
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer identification number)
 
 
 
1999 K Street, N.W., 4th Floor,
Washington, D.C.
 
20006
(Address of principal executive offices)
 
(Zip code)
(202) 872-7700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes        x                               No           o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes        x                                No          o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  (Check one):
Large accelerated filer
o
Accelerated filer
x
Non-accelerated filer
o
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes        o                                No           x
As of August 1, 2014, the registrant had outstanding 1,030,780 shares of Class A voting common stock, 500,301 shares of Class B voting common stock and 9,393,199 shares of Class C non-voting common stock.



Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




2


PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements


3

Table of Contents

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
 
As of
 
June 30,
2014
 
December 31,
2013
 
(in thousands)
Assets:
 
 
 
Cash and cash equivalents
$
384,123

 
$
749,313

Securities purchased under agreements to resell
1,640,686

 

Investment securities:
 

 
 

Available-for-sale, at fair value
2,315,963

 
2,483,147

Trading, at fair value
880

 
928

Total investment securities
2,316,843

 
2,484,075

Farmer Mac Guaranteed Securities:
 

 
 

Available-for-sale, at fair value
3,437,556

 
5,091,600

Held-to-maturity, at amortized cost
1,656,454

 

Total Farmer Mac Guaranteed Securities
5,094,010

 
5,091,600

USDA Securities:
 

 
 

Available-for-sale, at fair value
1,636,930

 
1,553,669

Trading, at fair value
46,099

 
58,344

Total USDA Securities
1,683,029

 
1,612,013

Loans:
 

 
 

Loans held for investment, at amortized cost
2,671,451

 
2,570,125

Loans held for investment in consolidated trusts, at amortized cost
668,736

 
629,989

Allowance for loan losses
(5,770
)
 
(6,866
)
Total loans, net of allowance
3,334,417

 
3,193,248

Real estate owned, at lower of cost or fair value
1,182

 
2,617

Financial derivatives, at fair value
7,318

 
19,718

Interest receivable (includes $8,037 and $9,276, respectively, related to consolidated trusts)
94,288

 
107,201

Guarantee and commitment fees receivable
43,477

 
43,904

Deferred tax asset, net
40,545

 
44,045

Prepaid expenses and other assets
30,184

 
14,046

Total Assets
$
14,670,102

 
$
13,361,780

 
 
 
 
Liabilities and Equity:
 

 
 

Liabilities:
 

 
 

Notes payable:
 

 
 

Due within one year
$
6,265,018

 
$
7,338,781

Due after one year
5,401,118

 
5,001,169

Total notes payable
11,666,136

 
12,339,950

Securities sold, not yet purchased
1,673,532

 

Debt securities of consolidated trusts held by third parties
377,518

 
261,760

Financial derivatives, at fair value
78,296

 
75,708

Accrued interest payable (includes $3,827 and $2,823, respectively, related to consolidated trusts)
49,587

 
53,772

Guarantee and commitment obligation
39,503

 
39,667

Accounts payable and accrued expenses
7,661

 
9,986

Reserve for losses
5,595

 
6,468

Total Liabilities
13,897,828

 
12,787,311

Commitments and Contingencies (Note 6)


 


Equity:
 

 
 

Preferred stock:
 

 
 

Series A, par value $25 per share, 2,400,000 shares authorized, issued and outstanding
58,333

 
58,333

Series B, par value $25 per share, 3,000,000 shares authorized, issued and outstanding
73,061

 

      Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding
73,380

 

Common stock:
 

 
 

Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding
1,031

 
1,031

Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding
500

 
500

Class C Non-Voting, $1 par value, no maximum authorization, 9,393,077 shares and 9,354,804 shares outstanding, respectively
9,393

 
9,355

Additional paid-in capital
111,958

 
110,722

Accumulated other comprehensive income/(loss), net of tax
21,923

 
(16,202
)
Retained earnings
186,842

 
168,877

Total Stockholders' Equity
536,421

 
332,616

Non-controlling interest - preferred stock
235,853

 
241,853

Total Equity
772,274

 
574,469

Total Liabilities and Equity
$
14,670,102

 
$
13,361,780

See accompanying notes to consolidated financial statements.


4

Table of Contents

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
 
(in thousands except per share amounts)
Interest income:
 
 
 
 
 
 
 
Investments and cash equivalents
$
5,101

 
$
5,471

 
$
10,338

 
$
11,205

Farmer Mac Guaranteed Securities and USDA Securities
30,257

 
31,605

 
60,369

 
63,326

Loans
26,417

 
24,669

 
40,786

 
48,712

Total interest income
61,775

 
61,745

 
111,493

 
123,243

Total interest expense
42,502

 
33,584

 
77,228

 
66,712

Net interest income
19,273

 
28,161

 
34,265

 
56,531

Release of allowance for loan losses
1,583

 
529

 
1,010

 
99

Net interest income after release for loan losses
20,856

 
28,690

 
35,275

 
56,630

Non-interest income:
 
 
 
 
 
 
 
Guarantee and commitment fees
6,403

 
6,759

 
12,921

 
13,371

(Losses)/gains on financial derivatives and hedging activities
(5,698
)
 
14,983

 
(13,276
)
 
19,477

Gains/(losses) on trading securities
7,748

 
(327
)
 
8,403

 
(117
)
Gains on sale of available-for-sale investment securities
143

 
3,071

 
158

 
3,073

Gains on sale of real estate owned
168

 
1,124

 
165

 
1,171

Other income
200

 
873

 
292

 
1,953

Non-interest income
8,964

 
26,483

 
8,663

 
38,928

Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
4,889

 
4,571

 
9,345

 
9,269

General and administrative
3,288

 
2,715

 
6,082

 
5,632

Regulatory fees
594

 
594

 
1,188

 
1,188

Real estate owned operating costs, net
59

 
259

 
61

 
385

(Release of)/provision for reserve for losses
(974
)
 
(175
)
 
(873
)
 
571

Non-interest expense
7,856

 
7,964

 
15,803

 
17,045

Income before income taxes
21,964

 
47,209

 
28,135

 
78,513

Income tax (benefit)/expense
(6,368
)
 
13,036

 
(7,509
)
 
21,752

Net income
28,332

 
34,173

 
35,644

 
56,761

Less: Net income attributable to non-controlling interest - preferred stock dividends
(5,819
)
 
(5,547
)
 
(11,366
)
 
(11,094
)
Net income attributable to Farmer Mac
22,513

 
28,626

 
24,278

 
45,667

Preferred stock dividends
(2,308
)
 
(881
)
 
(3,260
)
 
(1,732
)
Net income attributable to common stockholders
$
20,205

 
$
27,745

 
$
21,018

 
$
43,935

 
 
 
 
 
 
 
 
Earnings per common share and dividends:
 
 
 
 
 
 
 
Basic earnings per common share
$
1.85

 
$
2.57

 
$
1.93

 
$
4.08

Diluted earnings per common share
$
1.78

 
$
2.48

 
$
1.85

 
$
3.93

Common stock dividends per common share
$
0.14

 
$
0.12

 
$
0.28

 
$
0.24

See accompanying notes to consolidated financial statements.


5

Table of Contents

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
 
(in thousands)
Net income
$
28,332

 
$
34,173

 
$
35,644

 
$
56,761

Other comprehensive income/(loss), net of tax:
 
 
 
 
 
 
 
Unrealized holding gains/(losses) on available-for-sale securities (1)
10,301

 
(48,190
)
 
44,542

 
(26,378
)
Unrealized losses on cash flow hedges (2)
(61
)
 

 
(129
)
 

Less reclassification adjustments included in:
 
 
 
 
 
 
 
(Losses)/gains on financial derivatives and hedging activities (3)
(3,106
)
 
(3,211
)
 
(6,207
)
 
(6,418
)
Gains on sale of available-for-sale investment securities (4)
(93
)
 
(1,996
)
 
(103
)
 
(1,997
)
Other income (5)
(72
)
 
(241
)
 
22

 
(455
)
Other comprehensive income/(loss)
6,969

 
(53,638
)
 
38,125

 
(35,248
)
Comprehensive income/(loss)
35,301

 
(19,465
)
 
73,769

 
21,513

Less: Comprehensive income attributable to noncontrolling interest - preferred stock dividends
(5,819
)
 
(5,547
)
 
(11,366
)
 
(11,094
)
Comprehensive income/(loss) attributable to Farmer Mac
$
29,482

 
$
(25,012
)
 
$
62,403

 
$
10,419

(1)
Presented net of income tax expense of $5.5 million and benefit of $25.9 million for the three months ended June 30, 2014 and 2013, respectively, and income tax expense of $24.0 million and benefit of $14.2 million for the six months ended June 30, 2014 and 2013, respectively.
(2)
Presented net of income tax benefit of $33,000 for the three months ended June 30, 2014 and tax benefit of $69,000 for the six months ended June 30, 2014.
(3)
Relates to the amortization of the unrealized gains on the hedged items prior to application of hedge accounting. Presented net of income tax benefit of $1.7 million for both the three months ended June 30, 2014 and 2013, and tax benefit of $3.3 million and $3.5 million for the six months ended June 30, 2014 and 2013, respectively.
(4)
Represents realized gains on sales of available-for-sale investment securities. Presented net of income tax benefit of $50,000 and $1.1 million for the three months ended June 30, 2014 and 2013, respectively, and income tax benefit of $55,000 and $1.1 million for the six months ended June 30, 2014 and 2013, respectively.
(5)
Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed Securities. Presented net of income tax benefit of $39,000 and $0.1 million for the three months ended June 30, 2014 and 2013, respectively, and income tax expense of $12,000 and tax benefit of $0.2 million for the six months ended June 30, 2014 and 2013, respectively.

See accompanying notes to consolidated financial statements.


6

Table of Contents

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
  
For the Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
Shares
 
Amount
 
Shares
 
Amount
 
(in thousands)
Preferred stock:
 
 
 
 
 
 
 
Balance, beginning of period
2,400

 
$
58,333

 
58

 
$
57,578

Issuance of Series A preferred stock

 

 
2,400

 
58,333

Issuance of Series B preferred stock
3,000

 
73,061

 

 

Issuance of Series C preferred stock
3,000

 
73,380

 

 

Redemption of retired Series C preferred stock (retired on January 17, 2013)

 

 
(58
)
 
(57,578
)
Balance, end of period
8,400

 
$
204,774

 
2,400

 
$
58,333

Common stock:
 

 
 

 
 

 
 

Balance, beginning of period
10,886

 
$
10,886

 
10,702

 
$
10,702

Issuance of Class C common stock
38

 
38

 
122

 
122

Balance, end of period
10,924

 
$
10,924

 
10,824

 
$
10,824

Additional paid-in capital:
 

 
 

 
 

 
 

Balance, beginning of period
 

 
$
110,722

 
 

 
$
106,617

Stock-based compensation expense
 

 
1,426

 
 

 
1,540

Issuance of Class C common stock
 

 
12

 
 

 
3

Tax effect of stock-based awards
 

 
(202
)
 
 

 
841

Balance, end of period
  

 
$
111,958

 
  

 
$
109,001

Retained earnings:
 

 
 

 
 

 
 

Balance, beginning of period
 

 
$
168,877

 
 

 
$
102,243

Net income attributable to Farmer Mac
 

 
24,278

 
 

 
45,667

Cash dividends:
 

 


 
 
 


Preferred stock, Series A ($0.7344 per share in 2014 and $0.6650 per share in 2013)
 
 
(1,762
)
 
 
 
(1,596
)
Preferred stock, Series B ($0.5347 per share)
 
 
(1,360
)
 
 
 

Preferred stock, Series C ($0.0458 per share)
 
 
(138
)
 
 
 

Preferred stock, retired Series C ($2.36 per share, retired on January 17, 2013)
 

 

 
 

 
(136
)
Common stock ($0.28 per share in 2014 and $0.24 per share in 2013)
 

 
(3,053
)
 
 

 
(2,589
)
Balance, end of period
 

 
$
186,842

 
 

 
$
143,589

Accumulated other comprehensive income:
 

 
 

 
 

 
 

Balance, beginning of period
 

 
$
(16,202
)
 
 

 
$
73,969

Other comprehensive income/(loss), net of tax
 

 
38,125

 
 

 
(35,248
)
Balance, end of period
 

 
$
21,923

 
 

 
$
38,721

Total Stockholders' Equity
 

 
$
536,421

 
 

 
$
360,468

Non-controlling interest - preferred stock:
 

 
 

 
 

 
 

Balance, beginning of period
 

 
$
241,853

 
 

 
$
241,853

Purchase of interest - Non-controlling interest - preferred stock
 
 
(6,000
)
 
 

 

Balance, end of period
 

 
$
235,853

 
 

 
$
241,853

Total Equity
 
 
$
772,274

 
 

 
$
602,321


See accompanying notes to consolidated financial statements.


7

Table of Contents

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
For the Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
35,644

 
$
56,761

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Net amortization of deferred gains, premiums, and discounts on loans, investments, Farmer Mac Guaranteed Securities, and USDA Securities
15,029

 
5,138

Amortization of debt premiums, discounts and issuance costs
5,144

 
6,286

Net change in fair value of trading securities, hedged assets, and financial derivatives
7,636

 
(25,626
)
Gains on sale of available-for-sale investment securities
(158
)
 
(3,073
)
Gains on sale of real estate owned
(165
)
 
(1,171
)
Total (release of)/provision for losses
(1,883
)
 
472

Deferred income taxes
(17,496
)
 
10,117

Stock-based compensation expense
1,427

 
1,539

Proceeds from repayment of trading investment securities
414

 
501

Proceeds from repayment of loans purchased as held for sale
58,930

 
76,841

Net change in:
 
 
 

Interest receivable
12,913

 
9,233

Guarantee and commitment fees receivable
427

 
(1,285
)
Other assets
(14,473
)
 
37,930

   Securities sold not yet purchased
1,673,532

 

Accrued interest payable
(4,185
)
 
954

Other liabilities
(3,955
)
 
(864
)
Net cash provided by operating activities
1,768,781

 
173,753

Cash flows from investing activities:
 

 
 

Net change in securities purchased under agreements to resell
(1,640,686
)
 

Purchases of available-for-sale investment securities
(1,138,711
)
 
(744,464
)
Purchases of Farmer Mac Guaranteed Securities and USDA Securities
(681,044
)
 
(858,084
)
Purchases of loans held for investment
(407,595
)
 
(426,506
)
Purchases of defaulted loans
(440
)
 
(6,075
)
Proceeds from repayment of available-for-sale investment securities
575,393

 
622,116

Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities
670,079

 
459,241

Proceeds from repayment of loans purchased as held for investment
199,774

 
131,932

Proceeds from sale of available-for-sale investment securities
730,527

 
170,614

Proceeds from sale of Farmer Mac Guaranteed Securities
126,857

 
35,891

Proceeds from sale of real estate owned
461

 
3,407

Net cash used in investing activities
(1,565,385
)
 
(611,928
)
Cash flows from financing activities:
 

 
 

Proceeds from issuance of discount notes
27,163,649

 
32,594,765

Proceeds from issuance of medium-term notes
1,759,012

 
1,725,931

Payments to redeem discount notes
(28,161,623
)
 
(32,998,256
)
Payments to redeem medium-term notes
(1,440,000
)
 
(972,000
)
Excess tax benefits related to stock-based awards
35

 
658

Payments to third parties on debt securities of consolidated trusts
(13,615
)
 
(35,024
)
Proceeds from common stock issuance
12

 
1,205

Proceeds from Series A Preferred stock issuance

 
58,333

Proceeds from Series B Preferred stock issuance
73,061

 

Proceeds from Series C Preferred stock issuance
73,380

 

Retirement of Series C Preferred stock

 
(57,578
)
Purchase of interest - Non-controlling interest - preferred stock
(6,000
)
 

Dividends paid - Non-controlling interest - preferred stock
(11,366
)
 
(11,094
)
Dividends paid on common and preferred stock
(5,131
)
 
(3,606
)
Net cash (used in)/provided by financing activities
(568,586
)
 
303,334

Net decrease in cash and cash equivalents
(365,190
)
 
(134,841
)
Cash and cash equivalents at beginning of period
749,313

 
785,564

Cash and cash equivalents at end of period
$
384,123

 
$
650,723

 See accompanying notes to consolidated financial statements.


8

Table of Contents

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


1.
ACCOUNTING POLICIES

The interim unaudited consolidated financial statements of the Federal Agricultural Mortgage Corporation ("Farmer Mac") and subsidiaries have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial position and the results of operations and cash flows of Farmer Mac and subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted as permitted by SEC rules and regulations. The December 31, 2013 consolidated balance sheet presented in this report has been derived from Farmer Mac's audited 2013 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the 2013 consolidated financial statements of Farmer Mac and subsidiaries included in Farmer Mac's Current Report on Form 8-K filed with the SEC on June 6, 2014 (the "Segment Recast 8-K"). The Segment Recast 8-K describes Farmer Mac's significant accounting policies, which include its policies on Principles of Consolidation; Cash and Cash Equivalents and Statements of Cash Flows; Investment Securities, Farmer Mac Guaranteed Securities, and USDA Securities; Loans; Securitization of Loans; Non-accrual Loans; Real Estate Owned; Financial Derivatives; Notes Payable; Allowance for Losses; Earnings Per Common Share; Income Taxes; Stock-Based Compensation; Comprehensive Income; Long-Term Standby Purchase Commitments; Fair Value Measurement; and Consolidation of Variable Interest Entities ("VIEs"). Results for interim periods are not necessarily indicative of those that may be expected for the fiscal year. Presented below are Farmer Mac's significant accounting policies that contain updated information for the three and six month periods ended June 30, 2014.


9

Table of Contents

Principles of Consolidation

The consolidated financial statements include the accounts of Farmer Mac and its two subsidiaries: (1) Farmer Mac Mortgage Securities Corporation ("FMMSC"), whose principal activities are to facilitate the purchase and issuance of securities guaranteed by Farmer Mac that represent interests in, or obligations secured by, pools of eligible loans ("Farmer Mac Guaranteed Securities") and (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Guarantees line of business – primarily the acquisition of USDA Securities.  The consolidated financial statements also include the accounts of VIEs in which Farmer Mac determined itself to be the primary beneficiary. 

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

Table 1.1

 
Consolidation of Variable Interest Entities
 
As of June 30, 2014
 
Farm & Ranch
 
USDA Guarantees
 
Rural Utilities
 
Institutional Credit
 
Corporate
 
Total
 
(in thousands)
On-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
Consolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
Loans held for investment in consolidated trusts, at amortized cost (1)
$
371,960

 
$

 
$
296,776

 
$

 
$

 
$
668,736

Debt securities of consolidated trusts held by third parties (2)
377,518

 

 

 

 

 
377,518

   Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Carrying value (3)

 
21,044

 

 
32,886

 

 
53,930

      Maximum exposure to loss (4)

 
20,675

 

 
30,000

 

 
50,675

   Investment securities:
 
 
 
 
 
 
 
 
 
 
 
        Carrying value (5)

 

 

 

 
488,783

 
488,783

        Maximum exposure to loss (4) (5)

 

 

 

 
492,849

 
492,849

Off-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
 Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Maximum exposure to loss (4) (6)
704,376

 
16,662

 

 
970,000

 

 
1,691,038


(1) Includes unamortized premiums related to the Rural Utilities line of business of $4.2 million.
(2) Includes unamortized premiums and borrower remittances of $5.6 million. The borrower remittances have not been passed through to third party investors as of June 30, 2014.
(3) Includes unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees and Institutional Credit lines of business of $0.4 million and $2.9 million, respectively.
(4) Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.
(5) Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.
(6) The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.



10

Table of Contents

 
Consolidation of Variable Interest Entities
 
As of December 31, 2013
 
Farm & Ranch
 
USDA Guarantees
 
Rural Utilities
 
Institutional Credit
 
Corporate
 
Total
 
(in thousands)
On-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
Consolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
Loans held for investment in consolidated trusts, at amortized cost (1)
$
259,509

 
$

 
$
370,480

 
$

 
$

 
$
629,989

Debt securities of consolidated trusts held by third parties (2)
261,760

 

 

 

 

 
261,760

   Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Carrying value (3)

 
21,234

 

 
33,248

 

 
54,482

      Maximum exposure to loss (4)

 
21,088

 

 
30,000

 

 
51,088

   Investment securities:
 
 
 
 
 
 
 
 
 
 
 
        Carrying value (5)

 

 

 

 
533,688

 
533,688

        Maximum exposure to loss (4) (5)

 

 

 

 
540,726

 
540,726

Off-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
 Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Maximum exposure to loss (4) (6)
765,751

 
20,222

 

 
970,000

 

 
1,755,973


(1) Includes unamortized premiums related to the Rural Utilities line of business of $16.2 million.
(2) Includes borrower remittances of $2.3 million, which have not been passed through to third party investors as of December 31, 2013.
(3) Includes unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees and Institutional Credit lines of business of $0.1 million and $3.2 million, respectively.
(4) Farmer Mac uses unpaid principal balance and the outstanding face amount of investment securities to represent maximum exposure to loss.
(5) Includes auction-rate certificates, asset-backed securities, and GSE-guaranteed mortgage-backed securities.
(6) The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

A guarantee by Farmer Mac of timely payment of principal and interest is an explicit element of the terms of all Farmer Mac Guaranteed Securities.  When Farmer Mac retains such securities in its portfolio, that guarantee is not extinguished.  For Farmer Mac Guaranteed Securities held in Farmer Mac's portfolio, Farmer Mac has entered into guarantee arrangements with FMMSC.  The guarantee fee rate established between Farmer Mac and FMMSC is an element in determining the fair value of these Farmer Mac Guaranteed Securities, and guarantee fees related to these securities are reflected in guarantee and commitment fees in the consolidated statements of operations.  These guarantee fees totaled $2.6 million and $5.2 million for the three and six months ended June 30, 2014, respectively, compared to $2.7 million and $5.4 million for the same periods in 2013. The corresponding expense of FMMSC has been eliminated against interest income in consolidation.  All other inter-company balances and transactions have been eliminated in consolidation.


Transfers of Financial Assets and Liabilities

Securities purchased under agreements to resell are treated as collateralized lending transactions. Farmer Mac's counterparties are required to pledge collateral for transactions involving securities purchased under agreements to resell. Farmer Mac considers the types of securities being pledged as collateral when determining how much to lend in these transactions. Additionally, on a daily basis, Farmer Mac reviews the fair values of these securities compared to amounts loaned and derivative counterparty collateral


11

Table of Contents

posting thresholds in an effort to minimize exposure to losses. These transactions are reported as securities purchased under agreements to resell in the consolidated balance sheets except for securities purchased under agreements to resell on an overnight basis, which are included in cash and cash equivalents in the consolidated balance sheets. Farmer Mac records securities purchased under agreements to resell at the amount loaned in the consolidated balance sheets. The resulting fees for these transactions are included in interest income in the consolidated statements of operations. As of June 30, 2014, the fair value of non-cash collateral accepted for securities purchased under agreements to resell or similar arrangements was $1.6 billion, all of which could be sold or repledged; $1.6 billion of the underlying collateral was sold or repledged as of June 30, 2014. There were no securities purchased under agreements to resell as of December 31, 2013.

Securities sold, not yet purchased, represent obligations of Farmer Mac to deliver specified securities at contracted prices, which would thereby require Farmer Mac to purchase the securities in the market at prevailing prices. Securities sold, not yet purchased consist of fixed rate U.S. Treasury securities. Farmer Mac records securities sold, not yet purchased in the consolidated balance sheets at fair value with changes in fair value recognized in "Gains/(losses) on trading securities" in the consolidated statements of operations. The resulting interest expense for these transactions is included in interest expense in the consolidated statements of operations.

(a)
Cash and Cash Equivalents and Statements of Cash Flows

Farmer Mac considers highly liquid investment securities with maturities at the time of purchase of three months or less to be cash equivalents.  Farmer Mac does not consider securities purchased under agreements to resell to be cash equivalents if it intends to reinvest the funds from maturing repurchase agreements into new repurchase agreements and the aggregate term of the repurchase agreements exceeds three months. The carrying value of cash and cash equivalents is a reasonable estimate of their approximate fair value.  Changes in the balance of cash and cash equivalents are reported in the consolidated statements of cash flows.  

The following table sets forth information regarding certain cash and non-cash transactions for the six months ended June 30, 2014 and 2013:

Table 1.2

 
For the Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
(in thousands)
Cash paid during the period for:
 
 
 
Interest
$
60,585

 
$
54,674

Income taxes
11,750

 
13,000

Non-cash activity:
 
 
 
Real estate owned acquired through loan liquidation

 
1,034

Loans acquired and securitized as Farmer Mac Guaranteed Securities
126,857

 
35,891

Consolidation of Farm & Ranch Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties
129,305

 
35,891

Transfers of loans held for sale to loans held for investment

 
673,991

Transfers of available-for-sale Farmer Mac Guaranteed Securities to held-to-maturity
1,589,775

 




12

Table of Contents


On January 1, 2014, Farmer Mac transferred $1.6 billion of Farmer Mac Guaranteed Securities from available-for-sale to held-to-maturity because Farmer Mac determined it has the ability and intent to hold these securities until maturity or payoff. Farmer Mac transferred these securities at fair value which reflected an unrealized holding gain of $22.3 million. Farmer Mac accounts for held-to-maturity securities at amortized cost. The unrealized holding gain is being amortized out of accumulated other comprehensive income over the remaining life of the transferred securities.

On January 1, 2013, Farmer Mac transferred $674.0 million of loans from held for sale to held for investment because Farmer Mac either (1) no longer intends to sell these loans in the foreseeable future or (2) securitizes these loans using VIEs that are ultimately consolidated on Farmer Mac's balance sheet and reported as "Loans held for investment in consolidated trusts, at amortized cost." Farmer Mac transferred these loans at the lower of cost or fair value (determined on a pooled basis). Farmer Mac recorded a $5.9 million unamortized discount for loans transferred at fair value. At the time of purchase, loans are classified as either held for sale or held for investment depending upon management's intent and ability to hold the loans for the foreseeable future. Cash receipts from the repayment of loans are classified within the statements of cash flows based on management's intent upon purchase of the loan.

      


13

Table of Contents

(b)
Earnings Per Common Share

Basic earnings per common share ("EPS") is based on the weighted-average number of shares of common stock outstanding.  Diluted earnings per common share is based on the weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive common stock options, stock appreciation rights ("SARs"), and non-vested restricted stock awards.  The following schedule reconciles basic and diluted EPS for the three and six months ended June 30, 2014 and 2013:

Table 1.3

 
For the Three Months Ended
 
June 30, 2014
 
June 30, 2013
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
(in thousands, except per share amounts)
Basic EPS
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
20,205

 
10,924

 
$
1.85

 
$
27,745

 
10,815

 
$
2.57

Effect of dilutive securities (1):
 
 
 
 
 
 
 

 
 

 
 

Stock options, SARs and restricted stock

 
437

 
(0.07
)
 

 
383

 
(0.09
)
Diluted EPS
$
20,205

 
11,361

 
$
1.78

 
$
27,745

 
11,198

 
$
2.48

(1)
For the three months ended June 30, 2014 and 2013, stock options and SARs of 121,468 and 89,937, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the three months ended June 30, 2014 and 2013, contingent shares of non-vested restricted stock of 42,514 and 44,894, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions were not met.


 
For the Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
(in thousands, except per share amounts)
Basic EPS
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
21,018

 
10,906

 
$
1.93

 
$
43,935

 
10,776

 
$
4.08

Effect of dilutive securities (1):
 
 
 
 
 
 
 

 
 

 
 

Stock options, SARs and restricted stock

 
448

 
(0.08
)
 

 
403

 
(0.15
)
Diluted EPS
$
21,018

 
11,354

 
$
1.85

 
$
43,935

 
11,179

 
$
3.93

(1)
For the six months ended June 30, 2014 and 2013, stock options and SARs of 77,226 and 46,969, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the six months ended June 30, 2014 and 2013, contingent shares of non-vested restricted stock of 37,054 and 35,097, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions were not met.


(c)
Reclassifications

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




14

Table of Contents

2.
INVESTMENT SECURITIES

The following tables present the amount outstanding, amortized cost, and fair values of Farmer Mac's investment securities as of June 30, 2014 and December 31, 2013:
 
Table 2.1

 
As of June 30, 2014
 
Amount Outstanding
 
Unamortized Premium/(Discount)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
 
(in thousands)
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
Floating rate auction-rate certificates backed by Government guaranteed student loans
$
61,600

 
$

 
$
61,600

 
$

 
$
(6,624
)
 
$
54,976

Floating rate asset-backed securities
120,002

 
(138
)
 
119,864

 
384

 
(4
)
 
120,244

Floating rate corporate debt securities
26,530

 

 
26,530

 
158

 

 
26,688

Fixed rate corporate debt securities
55,000

 
15

 
55,015

 
155

 

 
55,170

Floating rate Government/GSE guaranteed mortgage-backed securities
617,783

 
3,819

 
621,602

 
5,204

 
(262
)
 
626,544

Fixed rate GSE guaranteed mortgage-backed securities (1)
1,015

 
3,755

 
4,770

 
3,690

 

 
8,460

Floating rate GSE subordinated debt
70,000

 

 
70,000

 

 
(6,615
)
 
63,385

Fixed rate GSE preferred stock
78,500

 
138

 
78,638

 
3,787

 

 
82,425

Fixed rate taxable municipal bonds
11,960

 
15

 
11,975

 
3

 

 
11,978

Fixed rate senior agency debt
200,000

 
76

 
200,076

 
24

 

 
200,100

Floating rate U.S. Treasuries
75,000

 
(14
)
 
74,986

 
12

 

 
74,998

Fixed rate U.S. Treasuries
990,000

 
985

 
990,985

 
88

 
(78
)
 
990,995

Total available-for-sale
2,307,390

 
8,651

 
2,316,041

 
13,505

 
(13,583
)
 
2,315,963

Trading:
 
 
 
 
 

 
 

 
 

 
 

Floating rate asset-backed securities
3,139

 

 
3,139

 

 
(2,259
)
 
880

Total investment securities
$
2,310,529

 
$
8,651

 
$
2,319,180

 
$
13,505

 
$
(15,842
)
 
$
2,316,843

(1)
Fair value includes $7.4 million of an interest-only security with a notional amount of $152.4 million.







15

Table of Contents

 
As of December 31, 2013
 
Amount Outstanding
 
Unamortized Premium/(Discount)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
 
(in thousands)
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
Floating rate auction-rate certificates backed by Government guaranteed student loans
$
74,100

 
$

 
$
74,100

 
$

 
$
(8,815
)
 
$
65,285

Floating rate asset-backed securities
166,185

 
(217
)
 
165,968

 
195

 
(59
)
 
166,104

Floating rate corporate debt securities
109,345

 
(3
)
 
109,342

 
445

 
(18
)
 
109,769

Fixed rate corporate debt securities
55,000

 
48

 
55,048

 
97

 
(4
)
 
55,141

Floating rate Government/GSE guaranteed mortgage-backed securities
612,413

 
4,336

 
616,749

 
4,955

 
(435
)
 
621,269

Fixed rate GSE guaranteed mortgage-backed securities (1)
1,173

 
3,966

 
5,139

 
3,518

 

 
8,657

Floating rate GSE subordinated debt
70,000

 

 
70,000

 

 
(6,615
)
 
63,385

Fixed rate GSE preferred stock
78,500

 
365

 
78,865

 
4,296

 

 
83,161

Fixed rate taxable municipal bonds
30,595

 
84

 
30,679

 
5

 
(3
)
 
30,681

Fixed rate senior agency debt
523,691

 
294

 
523,985

 
107

 
(30
)
 
524,062

Fixed rate U.S. Treasuries
754,405

 
1,141

 
755,546

 
95

 
(8
)
 
755,633

Total available-for-sale
2,475,407

 
10,014

 
2,485,421

 
13,713

 
(15,987
)
 
2,483,147

Trading:
 
 
 
 
 

 
 

 
 

 
 

Floating rate asset-backed securities
3,553

 

 
3,553

 

 
(2,625
)
 
928

Total investment securities
$
2,478,960

 
$
10,014

 
$
2,488,974

 
$
13,713

 
$
(18,612
)
 
$
2,484,075

(1)
Fair value includes $7.4 million of an interest-only security with a notional amount of $152.4 million.


During the three months ended June 30, 2014, Farmer Mac received proceeds of $720.5 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized gains of $0.1 million, compared to proceeds of $155.6 million for the same period in 2013, resulting in gross realized gains of $3.1 million. During the six months ended June 30, 2014, Farmer Mac received proceeds of $730.5 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized gains of $0.2 million, compared to proceeds of $170.6 million for the six months ended June 30, 2013, resulting in gross realized gains of $3.1 million.



16

Table of Contents

As of June 30, 2014 and December 31, 2013, unrealized losses on available-for-sale investment securities were as follows:

Table 2.2

 
As of June 30, 2014
 
Available-for-Sale Securities
 
Unrealized loss position for
less than 12 months
 
Unrealized loss position for
more than 12 months
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
 
(in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans
$

 
$

 
$
54,976

 
$
(6,624
)
Floating rate asset-backed securities
6,102

 
(4
)
 
2,676

 
(1
)
Floating rate Government/GSE guaranteed mortgage-backed securities
204,085

 
(252
)
 
6,860

 
(10
)
Floating rate GSE subordinated debt

 

 
63,385

 
(6,615
)
Fixed rate U.S. Treasuries
578,065

 
(77
)
 

 

Total
$
788,252

 
$
(333
)
 
$
127,897

 
$
(13,250
)

 
As of December 31, 2013
 
Available-for-Sale Securities
 
Unrealized loss position for
less than 12 months
 
Unrealized loss position for
more than 12 months
 
Fair Value
 
Unrealized
Loss
 
Fair Value
 
Unrealized
Loss
 
(in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans
$

 
$

 
$
65,285

 
$
(8,815
)
Floating rate asset-backed securities
50,129

 
(59
)
 

 

Floating rate corporate debt securities
19,982

 
(18
)
 

 

Fixed rate corporate debt securities
10,058

 
(4
)
 

 

Floating rate Government/GSE guaranteed mortgage-backed securities
161,960

 
(435
)
 

 

Floating rate GSE subordinated debt

 

 
63,385

 
(6,615
)
Fixed rate taxable municipal bonds
8,041

 
(3
)
 

 

Fixed rate senior agency debt
316,273

 
(30
)
 

 

Fixed rate U.S. Treasuries
118,056

 
(8
)
 

 

Total
$
684,499

 
$
(557
)
 
$
128,670

 
$
(15,430
)

 
The unrealized losses presented above are principally due to a general widening of credit spreads from the dates of acquisition to June 30, 2014 and December 31, 2013, as applicable. The resulting decrease in fair values reflects an increase in the perceived risk by the financial markets related to those securities. As of June 30, 2014, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+," except one, comprising the floating rate GSE subordinated debt category, that was rated "A-." As of December 31, 2013, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+," except two that were rated "A-" and one that was rated "BBB+." The unrealized losses were on 33 and 64 individual investment securities as of June 30, 2014 and December 31, 2013, respectively.


17

Table of Contents


As of June 30, 2014, 10 of the securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $13.3 million. As of December 31, 2013, 7 of the securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $15.4 million.  Securities in unrealized loss positions for 12 months or longer have a fair value as of June 30, 2014 that is, on average, approximately 90.6 percent of their amortized cost basis. Farmer Mac believes that all of these unrealized losses are recoverable within a reasonable period of time by way of changes in credit spreads or maturity. Accordingly, Farmer Mac has concluded that none of the unrealized losses on these available-for-sale investment securities represents other-than-temporary impairment as of June 30, 2014 and December 31, 2013. Farmer Mac does not intend to sell these securities and it is not more likely than not that Farmer Mac will be required to sell the securities before recovery of the amortized cost basis.

Farmer Mac did not own any held-to-maturity investment securities as of June 30, 2014 and December 31, 2013. As of June 30, 2014, Farmer Mac owned trading investment securities with an amortized cost of $3.1 million, a fair value of $0.9 million, and a weighted average yield of 4.24 percent. As of December 31, 2013, Farmer Mac owned trading investment securities with an amortized cost of $3.6 million, a fair value of $0.9 million, and a weighted average yield of 4.25 percent.

The amortized cost, fair value, and weighted average yield of available-for-sale investment securities by remaining contractual maturity as of June 30, 2014 are set forth below. Asset-backed and mortgage-backed securities are included based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

Table 2.3

 
As of June 30, 2014
 
Available-for-Sale Securities
 
Amortized
Cost
 
Fair Value
 
Weighted-
Average
Yield
 
(dollars in thousands)
Due within one year
$
1,250,632

 
$
1,250,753

 
0.32%
Due after one year through five years
177,581

 
178,519

 
0.90%
Due after five years through ten years
303,144

 
301,413

 
0.79%
Due after ten years
584,684

 
585,278

 
2.35%
Total
$
2,316,041

 
$
2,315,963

 
0.94%





18

Table of Contents

3.
FARMER MAC GUARANTEED SECURITIES AND USDA SECURITIES

The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of June 30, 2014 and December 31, 2013:

Table 3.1

 
As of June 30, 2014
 
Unpaid Principal Balance
 
Unamortized Premium/(Discount)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
 
(in thousands)
Held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
AgVantage
$
1,640,650

 
$
15,804

 
$
1,656,454

 
$
4,161

 
$
(567
)
 
$
1,660,048

 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
AgVantage
$
3,410,393

 
$

 
$
3,410,393

 
$
37,497

 
$
(31,378
)
 
$
3,416,512

Farmer Mac Guaranteed USDA Securities
20,675

 
(467
)
 
20,208

 
840

 
(4
)
 
21,044

Total Farmer Mac Guaranteed Securities
3,431,068

 
(467
)
 
3,430,601

 
38,337

 
(31,382
)
 
3,437,556

USDA Securities
1,629,314

 
4,377

 
1,633,691

 
5,716

 
(2,477
)
 
1,636,930

Total available-for-sale
$
5,060,382

 
$
3,910

 
$
5,064,292

 
$
44,053

 
$
(33,859
)
 
$
5,074,486

Trading:
 
 
 
 
 

 
 

 
 

 
 

USDA Securities
$
43,684

 
$
4,197

 
$
47,881

 
$
147

 
$
(1,929
)
 
$
46,099


 
As of December 31, 2013
 
Unpaid Principal Balance
 
Unamortized Premium/(Discount)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
 
(in thousands)
Available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
AgVantage
$
5,066,855

 
$
125

 
$
5,066,980

 
$
64,051

 
$
(60,665
)
 
$
5,070,366

Farmer Mac Guaranteed USDA Securities
21,089

 
(518
)
 
20,571

 
669

 
(6
)
 
21,234

Total Farmer Mac Guaranteed Securities
5,087,944

 
(393
)
 
5,087,551

 
64,720

 
(60,671
)
 
5,091,600

USDA Securities
1,590,433

 
4,585

 
1,595,018

 
2,753

 
(44,102
)
 
1,553,669

Total available-for-sale
$
6,678,377

 
$
4,192

 
$
6,682,569

 
$
67,473

 
$
(104,773
)
 
$
6,645,269

Trading:
 
 
 
 
 

 
 

 
 

 
 

USDA Securities
$
55,373

 
$
4,972

 
$
60,345

 
$
193

 
$
(2,194
)
 
$
58,344



The unrealized losses presented above are principally due to higher interest rates from the date of acquisition to June 30, 2014 and December 31, 2013, as applicable.  The credit exposure related to Farmer Mac's USDA Guarantees line of business is covered by the full faith and credit guarantee of the United States.  As of June 30, 2014, 18 AgVantage securities in loss positions that are secured by Farm & Ranch loans had been in a loss position for more than 12 months with a total unrealized loss of $20.7 million. AgVantage® is a registered trademark of Farmer Mac used to designate Farmer Mac Guaranteed Securities that are general obligations of lenders secured by pools of eligible loans, with such Farmer Mac Guaranteed Securities referred to herein as AgVantage securities. Each AgVantage security backed by agricultural mortgages requires some level of overcollateralization, or, in the case of rural utilities loans, 100 percent collateralization, and is secured by eligible loans of the issuing institution with a requirement


19

Table of Contents

that delinquent loans be removed from the collateral pool and then replaced with current eligible loans. Thus, Farmer Mac does not believe it will realize any of the losses presented above. Farmer Mac has concluded that none of the unrealized losses on its available-for-sale Farmer Mac Guaranteed Securities and USDA Securities are other-than-temporary impairment as of June 30, 2014 and December 31, 2013.  Farmer Mac does not intend to sell these securities, and it is not more likely than not that Farmer Mac will be required to sell the securities before recovery of the amortized cost basis.

During the three and six months ended June 30, 2014 and 2013, Farmer Mac realized no gains or losses from the sale of Farmer Mac Guaranteed Securities and USDA Securities.

The amortized cost, fair value, and weighted average yield of available-for-sale and held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities by remaining contractual maturity as of June 30, 2014 are set forth below. The balances presented are based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

Table 3.2

 
As of June 30, 2014
 
Available-for-Sale Securities
 
Amortized
Cost
 
Fair Value
 
Weighted-
Average
Yield
 
(dollars in thousands)
Due within one year
$
436,272

 
$
437,209

 
2.42
%
Due after one year through five years
1,559,855

 
1,578,619

 
1.89
%
Due after five years through ten years
1,089,791

 
1,091,644

 
1.61
%
Due after ten years
1,978,374

 
1,967,014

 
2.54
%
Total
$
5,064,292

 
$
5,074,486

 
2.12
%
 
As of June 30, 2014
 
Held-to-Maturity Securities
 
Amortized
Cost
 
Fair Value
 
Weighted-
Average
Yield
 
(dollars in thousands)
Due within one year
$
501

 
$
501

 
5.75
%