Summary of Federal Agricultural Mortgage Corporation (Farmer Mac) FY Conference Call Company Overview - **Company Name**: Federal Agricultural Mortgage Corporation (Farmer Mac) - **Ticker Symbol**: AGM - **Market Capitalization**: Approximately $2 billion - **Total Assets**: About $40 billion, with $31 billion in business volume - **Employee Efficiency**: Core earnings per employee at approximately $900,000 [6][7][12] Core Business Segments - **Agricultural Finance**: Accounts for about two-thirds of business volume, with core farmland mortgages at $18.2 billion [14] - **Infrastructure Finance**: Comprises one-third of business volume, including power and utilities, renewable energy, and broadband infrastructure [16][19] Financial Performance - **Revenue and EPS Growth**: Low double digits compound annual growth rate over the last 10 years [7] - **Net Effective Spread**: Increased from 90 basis points to 120 basis points over five years [21] - **Cumulative Losses**: Only 12 basis points of cumulative losses in agricultural finance loans [28] Market Dynamics - **Agricultural Sector**: Challenges in soybean, cotton, and rice markets due to reliance on exports, particularly to China [42][45] - **Renewable Energy**: Significant growth in renewable energy financing, particularly solar and battery projects, with expectations for continued expansion [17][18] - **Broadband Infrastructure**: Focus on providing liquidity for telecommunication services and data centers, with strong growth anticipated [20] Strategic Initiatives - **Diversification**: Expanded into corporate agricultural finance and infrastructure to mitigate risks and enhance growth [9][15] - **Securitization**: Completed six securitization transactions totaling $1.8 billion, with plans for more [34][35] - **GSE Funding Advantage**: Access to capital markets similar to other government-sponsored enterprises, providing competitive rates [39][40] Risk Management - **Asset Liability Management**: Focus on matching interest rate risk and maintaining liquidity with $8 billion in liquidity reserves [12][31] - **Credit Quality**: Strong credit metrics with no significant sector concerns, supported by diversification across commodities [28][29] Shareholder Returns - **Dividend Growth**: 14 consecutive years of dividend increases, with a current yield of 3.5% [36][49] - **Future Outlook**: Optimistic about market opportunities and potential for continued dividend growth as business matures [37][49] Conclusion - **Unique Positioning**: Farmer Mac is a mission-driven public company with a unique focus on providing liquidity across agriculture and infrastructure sectors, supported by a strong GSE funding advantage and disciplined risk management practices [38][49]

I rarely issue a "strong buy," but when I do, I tend to follow up on the stock more than usual. When I published my previous article on Farmer Mac ( AGM ), I was looking forward to seeing the company’sThe Investment Doctor is a financial writer, highlighting European small-caps with a 5-7 year investment horizon. He strongly believes a portfolio should consist of a mixture of dividend and growth stocks. He is the leader of the investment group European Small Cap Ideas which offers exclusive access to action ...

I rarely issue a "strong buy," but when I do, I tend to follow up on the stock more than usual. When I published my previous article on Farmer Mac ( AGM ), I was looking forward to seeing the company’sThe Investment Doctor is a financial writer, highlighting European small-caps with a 5-7 year investment horizon. He strongly believes a portfolio should consist of a mixture of dividend and growth stocks. He is the leader of the investment group European Small Cap Ideas which offers exclusive access to action ...

Core Insights - Farmer Mac's third quarter performance was positively received by the market despite missing revenue expectations, driven by strong non-GAAP earnings and significant portfolio growth [1] - The management attributed the performance to expansion in infrastructure finance and renewable energy, along with disciplined asset liability management [1] - CEO Bradford Nordholm highlighted the importance of diversifying into newer business lines, such as broadband and renewable projects, to mitigate seasonal pressures in traditional agricultural lending [1] Financial Highlights - Revenue for Q3 was reported at $94.96 million, missing analyst estimates of $101 million, representing an 11.1% year-on-year growth but a 6% miss [5] - Adjusted EPS was $4.52, slightly beating analyst estimates of $4.47, marking a 1.2% increase [5] - Operating margin decreased to 70.2% from 72.9% in the same quarter last year [5] - Market capitalization stands at $1.75 billion [5] Analyst Insights - Questions from analysts during the earnings call focused on various topics, including net effective spreads and the impact of tariffs and commodity price volatility on agricultural borrowers [5] - CEO Nordholm explained that Farmer Mac's asset liability structure is designed to be neutral to interest rate shifts, with spreads influenced more by business mix than market rates [5] - The company acknowledged headline risks from tariffs but pointed to portfolio diversity and resilient commodity sectors as mitigating factors [5] - There was broad-based demand for Farm & Ranch loans across over 100 commodities, driven by strong liquidity-seeking borrowers [5] - Prepayment trends are expected to remain modest as most borrowers locked in low fixed rates in recent years [5] - Key drivers for net effective spread increases include rapid growth in rural infrastructure and a shift away from lower-spread AgVantage securities [5]

Financial Data and Key Metrics Changes - The company achieved a record net effective spread of $97.8 million and core earnings of $49.6 million for Q3 2025 [6][25] - Year-to-date net effective spread and core earnings reached $281 million and $143 million, respectively, reflecting double-digit year-over-year growth [7][25] - The total allowance for losses was $37.2 million, or 12 basis points of total outstanding business volume [11] Business Line Data and Key Metrics Changes - The infrastructure finance line of business grew by $600 million this quarter to $11 billion, driven by strong interest in data centers and renewable energy projects [17] - The renewable energy segment more than doubled year-over-year to $2.3 billion, with expectations for continued growth [18] - The broadband infrastructure segment also doubled year-over-year to $1.3 billion, reflecting increased demand for data centers [20] - The agricultural finance portfolio grew by $285 million in Q3, outpacing scheduled maturities [21] Market Data and Key Metrics Changes - The company reported a modest uptick in 90-day delinquencies, attributed to seasonal impacts rather than identifiable trends [11] - Despite market uncertainties, the company has not seen significant effects on its portfolio related to political developments or government actions [12] Company Strategy and Development Direction - The company is focused on diversifying its loan portfolio into newer lines of business, including renewable energy and broadband infrastructure, to leverage competitive advantages [7][14] - The securitization program is a strategic initiative aimed at optimizing the balance sheet and enhancing growth opportunities [15] - The company plans to continue evaluating capital management tools to optimize its overall capital position [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall health of the portfolio, supported by strong asset quality metrics [4][24] - The company anticipates continued growth in its diversified business segments despite broader market uncertainties [24] - Management noted that the agricultural sector is experiencing financial pressures, but they believe farmers are adapting to market conditions [42][45] Other Important Information - The company successfully issued $100 million of Series H preferred stock, strengthening its capital position [13] - Management is in the process of searching for a new CFO, with expectations for an announcement in Q4 2025 [26] Q&A Session Summary Question: Outlook for spreads given Fed rate cuts - Management indicated that a cut in interest rates should have no impact on the net effective spread due to their asset-liability management strategy [30] Question: Impact of tariffs on crops - Management noted that while there are financial pressures in major crops, some prices have increased, and they do not see systemic risks affecting their portfolio [42][45] Question: Changes in loan structure and prepayment expectations - Management confirmed that they are seeing significant increases in loan applications and approvals, with a focus on new money loans [52][58] Question: Credit provision levels - Management characterized the provision as episodic and not indicative of systemic issues, with no significant increases expected in the near term [38][66] Question: Share repurchase activity - Management disclosed a repurchase of approximately 30,000 shares for about $5 million [68]

Financial Data and Key Metrics Changes - The company achieved a record net effective spread of $97.8 million and core earnings of $49.6 million for Q3 2025 [6][25] - Year-to-date net effective spread and core earnings reached $281 million and $143 million, respectively, reflecting double-digit year-over-year growth [7][25] - The total allowance for losses was $37.2 million, or 12 basis points of total outstanding business volume, indicating a well-diversified portfolio [11][13] Business Line Data and Key Metrics Changes - The infrastructure finance line of business grew by $600 million to $11 billion, driven by strong interest in data centers and renewable energy projects [17] - The renewable energy segment more than doubled year-over-year to $2.3 billion, with expectations for continued growth [18] - The broadband infrastructure segment also doubled year-over-year to $1.3 billion, reflecting increased demand for data centers [20] Market Data and Key Metrics Changes - The agricultural finance portfolio showed strong loan purchase growth, with a $285 million increase in the farm and ranch loan purchase portfolio [21] - Despite market uncertainties, the company reported stable credit quality metrics, with a modest uptick in 90-day delinquencies attributed to seasonal impacts [11][12] Company Strategy and Development Direction - The company is focused on diversifying its loan portfolio into newer lines of business, including renewable energy and broadband infrastructure, to enhance growth and resilience [7][14] - A successful preferred stock issuance strengthened the capital base, supporting long-term growth objectives [4][13] - The securitization program is a strategic initiative aimed at optimizing the balance sheet and enhancing growth opportunities [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall health of the portfolio, citing strong asset quality metrics despite market volatility [4][12] - The company anticipates continued growth in its diversified business segments, particularly in infrastructure finance and renewable energy [18][24] - Management noted that they have not seen significant effects on the portfolio from political developments or government actions [12] Other Important Information - The company repurchased approximately 30,000 shares of Class C common stock for about $5 million, demonstrating a commitment to returning capital to shareholders [15][68] - The company is in the process of searching for a new CFO, with expectations for an announcement in the fourth quarter of 2025 [26] Q&A Session Summary Question: Outlook for spreads given Fed rate cuts - Management indicated that a cut in interest rates by the Fed should have no impact on the net effective spread due to their asset-liability management strategy [29][30] Question: Impact of tariffs on agriculture - Management noted that while there are financial pressures in major crops, they have not seen significant impacts on their portfolio, and market stabilization payments are expected soon [41][45] Question: Changes in loan structure and prepayment expectations - Management confirmed an increase in loan applications and approvals, with a focus on new money loans, and indicated that prepayments are expected to remain low [52][58] Question: Credit provision levels and charge-offs - Management characterized the credit provision as episodic and not indicative of systemic risks, with a mix of growth and specific allowances impacting the current levels [36][66]

Financial Data and Key Metrics Changes - The company achieved record net effective spread of $97.8 million and core earnings of $49.6 million for Q3 2025, with year-to-date net effective spread and core earnings at $281 million and $143 million respectively, reflecting double-digit year-over-year growth [5][6][22] - The total allowance for losses was $37.2 million, or 12 basis points of total outstanding business volume, indicating a well-diversified portfolio [11][12] Business Line Data and Key Metrics Changes - The infrastructure finance line of business grew by $600 million to $11 billion, driven by strong interest in data centers and renewable energy projects [16][19] - The renewable energy segment more than doubled year-over-year to $2.3 billion, with expectations for continued growth supported by a strong near-term pipeline [17] - The broadband infrastructure segment also doubled year-over-year to $1.3 billion, reflecting increased demand for data centers [18] Market Data and Key Metrics Changes - The agricultural finance portfolio reflected strong loan purchase growth, with the farm and ranch loan purchase portfolio growing by $285 million in Q3 2025 [19][20] - Despite market uncertainties, the company reported stable credit quality metrics, with a modest uptick in 90-day delinquencies attributed to seasonal impacts [11][22] Company Strategy and Development Direction - The company is focused on diversifying its loan portfolio into newer lines of business such as renewable energy and broadband infrastructure, which are seen as key growth areas [6][14] - The securitization program is a strategic initiative aimed at optimizing the balance sheet and enhancing growth opportunities [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the overall health of the portfolio, citing strong asset quality metrics and a diversified business model [4][12] - The company anticipates continued growth in its various segments despite market volatility and uncertainties [22] Other Important Information - The company successfully issued $100 million of Series H preferred stock, strengthening its capital position and improving its Tier 1 capital ratio to 13.9% [12][13] - The company repurchased approximately 30,000 shares of Class C common stock for about $5 million, demonstrating a commitment to returning capital to shareholders [14] Q&A Session Summary Question: Outlook for spreads given Fed rate cuts - Management indicated that a cut in interest rates by the Fed should have no impact on the net effective spread due to their asset-liability management strategy [25][26] Question: Credit provision levels - Management noted that the current provision levels are low compared to other financial institutions and reflect episodic events rather than systemic risks [31][32] Question: Impact of tariffs on agriculture - Management clarified that while there are financial pressures in major crops, they have not seen significant negative impacts on their portfolio, and market stabilization payments are expected soon [36][37] Question: Loan structure and prepayment expectations - Management stated that they are seeing significant increases in loan applications and approvals, with a mix of fixed and variable rate loans, and prepayment speeds are expected to remain low [41][45]

Equity Investor Presentation Third Quarter 2025 Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about Farmer Mac's plans, objectives, expectations, beliefs and intentions and other statements including words such as "may," "likely," "believe," "expect," "consider," "intend," "should," "estimate," "continue," and "commit," or the negative o ...

Financial Performance - Net income attributable to common stockholders for Q3 2025 was $48.7 million, a decrease of $0.5 million from Q2 2025, while core earnings increased to $49.6 million[148][150]. - Year-over-year net income increased by $6.4 million, primarily due to an $11.7 million increase in net interest income[149]. - Core earnings for the three months ended September 30, 2025, were $49.6 million, compared to $44.9 million for the same period in 2024, reflecting an increase of 4.8%[173]. - Total revenues for the three months ended September 30, 2025, were $105.1 million, compared to $91.5 million in 2024, marking an increase of 14.8%[173]. - GAAP Basic EPS for Q3 2025 was $4.45, up from $3.89 in Q3 2024, representing a 14.4% increase[176]. - Core EPS for the three months ended September 30, 2025, was $4.54, compared to $4.13 in 2024, representing a growth of 9.9%[173]. - Net interest income for Q3 2025 was $98.5 million, a sequential increase of $1.7 million[153]. - The net effective spread for Q3 2025 was 1.20%, up from 1.19% in Q2 2025[154]. - The provision for losses for the nine months ended September 30, 2025, was $16.8 million, compared to $7.6 million in the same period of 2024, reflecting a significant increase in credit-related expenses[175]. - The company reported a decrease in funding costs by $3.9 million in Q3 2025 compared to Q3 2024[186]. Business Volume and Assets - Outstanding business volume reached $31.1 billion as of September 30, 2025, reflecting a net increase of $0.5 billion from the previous quarter[156]. - Total assets increased by $2.05 billion (7%) to $33.38 billion as of September 30, 2025, primarily due to new loan volume and a larger investment portfolio[250]. - Loans, net of allowance, rose by $1.99 billion (18%) to $13.16 billion, indicating strong growth in loan origination[250]. - The total outstanding business volume reached $31,119,162 thousand, an increase from $30,587,259 thousand as of June 30, 2025, representing a growth of approximately 1.74%[328]. - The on-balance sheet outstanding business volume as of September 30, 2025, was $25,854,546 thousand, compared to $25,329,911 thousand on June 30, 2025, indicating a growth of about 2.07%[329]. Delinquencies and Credit Quality - As of September 30, 2025, 90-day delinquencies for on-balance sheet Agricultural Finance portfolios were $164.8 million, representing 1.7% of the portfolio, while off-balance sheet delinquencies were $13.0 million, or 0.4%[161]. - The increase in on-balance sheet delinquencies from the prior quarter was $41.4 million (0.4%) and from the prior year was $63.4 million (0.6%)[161]. - The total amount of 90-day delinquencies increased to $177.76 million, with 106 delinquent loans reported as of September 30, 2025[254]. - The 90-day delinquency rate for Agricultural Finance mortgage loans was 1.35% as of September 30, 2025, up from 0.88% at the end of 2024[254][255]. - The increase in delinquencies was primarily attributed to challenges in profitability within certain agricultural commodity segments, particularly in the Southwest region[254]. Capital and Funding - Core capital increased to $1.69 billion as of September 30, 2025, up from $1.50 billion at the end of 2024[157]. - The capital in excess of the minimum capital level required increased to $723.4 million as of September 30, 2025, from $583.5 million at the end of 2024[157]. - Total liabilities increased by $1.86 billion (6%) to $31.69 billion, mainly driven by an increase in notes payable to fund loan volume[251]. - Farmer Mac's Tier 1 capital ratio was 13.9% as of September 30, 2025, slightly down from 14.2% as of December 31, 2024[322]. - Farmer Mac was classified as within "level 1" compliance with statutory capital requirements as of September 30, 2025[321]. Operating Expenses - Operating expenses for the nine months ended September 30, 2025, totaled $88.8 million, a 16% increase from $76.3 million in the same period of 2024, driven by higher compensation and employee benefits expenses[197]. - The company’s total operating expenses for the three months ended September 30, 2025, were $29.8 million, reflecting a 21% increase from $24.6 million in the same period of 2024[197]. - Operating expenses totaled $29,510,000, slightly down from $29,795,000 in the previous quarter, showing a reduction of 1.0%[331]. Market and Economic Conditions - The USDA forecasts a 29% increase in net cash farm income for 2025, reaching one of the highest inflation-adjusted levels in history, driven by over $40 billion in government support[224]. - The agricultural sector is expected to face volatility due to evolving U.S. trade policies, which could impact demand for U.S. agricultural products[227]. - Average farm real estate values increased by 4.3% from June 2024 to June 2025, with the highest gains in the Southern Plains (5.9%) and Lake states (5.7%)[230]. - The USDA projects U.S. agricultural exports to drop to $173 billion in 2025, a 1% decrease from 2024 and a 12% decline from peak levels in 2022[233]. - Drought conditions increased, with approximately 23% of the continental U.S. classified as experiencing severe to exceptional drought as of October 2025[234]. Renewable Energy and Infrastructure - The Renewable Energy segment saw a $0.3 billion increase in outstanding business volume during Q3 2025, reflecting strong demand for renewable power generation[201]. - Farmer Mac expects to continue participating in renewable energy project finance transactions despite potential challenges from tax credit phase-outs[239]. - Farmer Mac's Infrastructure Finance portfolio included $2.911 billion in Distribution Cooperative loans, $780.822 million in Generation and Transmission Cooperative loans, and $2.283 billion in Renewable Energy loans[273]. Risk Management - Farmer Mac is actively managing interest rate risk through financial derivatives and monitoring exposure to changes in interest rates[332]. - The company is subject to interest rate risk on loans and securities it has committed to acquire but not yet purchased, managing this risk through financial derivatives[297]. - Farmer Mac's strategy includes issuing debt securities across various maturities to align cash flows from assets and liabilities[293].

Financial Performance - Outstanding business volume reached $31.1 billion for the third quarter of 2025, reflecting strong growth momentum[1] - Net interest income increased by 13% year-over-year to $98.5 million, up from $86.8 million in the same quarter last year[5] - Core earnings reached $49.6 million, or $4.52 per diluted common share, reflecting a 10% growth year-over-year[5] - Net income attributable to common stockholders for the three months ended September 30, 2025, was $48,700 thousand, a 15.4% increase from $42,312 thousand for the same period in 2024[22] - Basic earnings per common share for the three months ended September 30, 2025, was $4.45, up from $3.89 for the same period in 2024, representing a growth of 14.4%[22] - Net income attributable to common stockholders for the nine months ended September 30, 2025, was $141,855,000, an increase of 9.7% from $129,580,000 in the same period of 2024[26] - Total revenues for the nine months ended September 30, 2025, reached $302,388,000, up 11.3% from $269,867,000 in 2024[26] - Core earnings for the nine months ended September 30, 2025, were $142,953,000, compared to $128,076,000 in 2024, reflecting a growth of 11.6%[26] - For the three months ended September 30, 2025, total core earnings amounted to $63,353,000, with segment contributions from Agricultural Finance at $23,481,000 and Infrastructure Finance at $39,872,000[31] - The company reported a net income of $55,003,000 after accounting for unallocated expenses and income tax effects related to reconciling items[31] - Net earnings for September 2025 were $67,858,000, compared to $63,146,000 in June 2025, marking an increase of 7.0%[36] Capital and Liquidity - The company maintained a strong capital position with total core capital of $1.7 billion, exceeding statutory requirements by 75%[5] - As of September 30, 2025, Farmer Mac had 317 days of liquidity available[5] - The Tier 1 Capital Ratio stood at 13.9% as of the end of the third quarter[5] - The company issued $100 million of Tier 1 capital through a public offering of 6.500% Series H non-cumulative preferred stock[5] Asset and Liability Management - Total assets increased to $33,379,560 thousand as of September 30, 2025, up from $31,324,742 thousand at December 31, 2024, representing a growth of 6.56%[20] - Total liabilities rose to $31,692,477 thousand as of September 30, 2025, compared to $29,835,716 thousand at December 31, 2024, indicating an increase of 6.16%[20] - Loans held for investment increased to $13,192,117 thousand as of September 30, 2025, up from $11,183,408 thousand at December 31, 2024, marking an increase of 17.94%[20] - Total assets on the consolidated balance sheets reached $33,379,560,000, with total on- and off-balance sheet segment assets at $31,119,162,000[31] Interest and Spread - Net effective spread rose to a record $97.8 million, representing a 14% increase compared to the prior-year period[5] - Interest income for the period was $415,341,000, while interest expense totaled $316,864,000, resulting in a net effective spread of $97,769,000[31] - The net effective spread for the quarter ended September 30, 2025, was 1.20%, an increase from 1.19% in June 2025[34] Expenses and Provisions - Total operating expenses for the nine months ended September 30, 2025, were $88,795 thousand, up from $76,293 thousand for the same period in 2024, indicating a rise of 16.4%[22] - The allowance for losses increased to $35,340 thousand as of September 30, 2025, compared to $23,223 thousand at December 31, 2024, reflecting a rise of 52.0%[20] - Provision for losses increased to $16,828,000 for the nine months ended September 30, 2025, compared to $7,618,000 in 2024, indicating a rise of 121.5%[26] - The provision for losses for September 2025 was $7,433,000, slightly down from $7,812,000 in June 2025, showing a decrease of 4.8%[36] - Operating expenses for the quarter were $29,795,000, a marginal increase from $29,490,000 in the previous quarter, representing a rise of 1.0%[36] Segment Performance - Outstanding business volume in Agricultural Finance as of September 30, 2025, was $20,109,983,000, a decrease from $20,494,673,000 as of December 31, 2024[32] - Loans in the Power & Utilities segment increased to $7,426,517,000 as of September 30, 2025, compared to $6,809,366,000 at the end of 2024[32] - The total outstanding volume for Infrastructure Finance was $11,009,179,000, reflecting growth from $9,028,357,000 in the previous year[32] - The total loans for Farm & Ranch on-balance sheet increased to $5,915,220,000 from $5,414,732,000[32] - Unfunded loan commitments in the Renewable Energy segment rose to $290,048,000, up from $150,825,000[32]