Federal Agricultural Mortgage (AGM) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Results Overview Farmer Mac achieved record Q2 2025 results, with significant growth in core earnings, net effective spread, and total outstanding business volume, while maintaining a strong capital position Key Financial and Operational Highlights Farmer Mac delivered record results in Q2 2025, with core earnings and net effective spread growing significantly year-over-year. The company surpassed $30 billion in total outstanding business volume for the first time, maintained a strong capital position, and increased its share repurchase authorization - Farmer Mac achieved record results in Q2 2025, with core earnings and net effective spread increasing by 19% and 12% year-over-year, respectively. Total outstanding business volume exceeded $30 billion for the first time[3] Second Quarter 2025 Key Financial Metrics | Metric ($ in thousands, except per share) | Q2 2025 | Q1 2025 | Q2 2024 | Sequential % Change | YoY % Change | | :--------------------------------------- | :------ | :------ | :------ | :------------------ | :----------- | | Net Change in Business Volume | $831,916 | $232,313 | $(88,891) | N/A | N/A | | Net Interest Income (GAAP) | $96,797 | $90,939 | $87,340 | 6% | 11% | | Net Effective Spread (Non-GAAP) | $93,893 | $89,990 | $83,596 | 4% | 12% | | Diluted EPS (GAAP) | $4.48 | $4.01 | $3.68 | 12% | 22% | | Core EPS (Non-GAAP) | $4.32 | $4.19 | $3.63 | 3% | 19% | - The company provided $2.1 billion in liquidity and lending capacity to rural America, maintained a strong capital position with total core capital of $1.6 billion (exceeding statutory requirement by 63%), and increased its share repurchase program authorization to $50.0 million[5] Use of Non-GAAP Measures This section defines and explains non-GAAP financial measures, including core earnings, core EPS, and net effective spread, highlighting their adjustments from GAAP to reflect core business performance Core Earnings and Core Earnings Per Share Core earnings and Core EPS are non-GAAP measures that exclude the effects of fair value fluctuations and specified infrequent or unusual transactions, providing management with a clearer view of Farmer Mac's economic performance and business trends by focusing on core business operations - Core earnings and Core EPS are non-GAAP measures that differ from GAAP net income and EPS by excluding fair value fluctuations, which are not expected to have a cumulative net impact if financial instruments are held to maturity[9] - These non-GAAP measures also exclude infrequent or unusual transactions that are not indicative of future operating results or core business trends, such as losses on the retirement of preferred stock[9] Net Effective Spread Net effective spread is a non-GAAP measure used to assess the comprehensive net spread earned between interest-earning assets and their funding costs, including derivatives. It adjusts GAAP net interest income by reclassifying certain items and including others to reflect the economic performance of Farmer Mac's core business - Net effective spread measures the net spread Farmer Mac earns between its interest-earning assets and the related net funding costs, including any associated derivatives[10][13] - It excludes interest income and expense from consolidated trusts (reclassified as guarantee fees) and fair value changes of financial derivatives in hedge accounting relationships, as these are not expected to have an economic effect if held to maturity[12] - It includes the accrual of income and expense related to contractual amounts on undesignated financial derivatives and the net effects of terminations or net settlements on these derivatives[13][14] Corporate Information This section outlines forward-looking statements, associated risk factors, Farmer Mac's mission to support rural America, and essential contact information Forward-Looking Statements and Risk Factors Management's future expectations involve inherent assumptions, estimates, and risks. Various known and unknown factors, including financing availability, regulatory changes, market fluctuations, and economic conditions, could cause actual results to differ materially from forward-looking statements - Future results may differ materially from expectations due to uncertainties regarding debt and equity financing availability and terms[16] - Legislative, regulatory, or political developments, fluctuations in asset fair value, and the level of lender interest in Farmer Mac's products are significant risk factors[16] - Economic conditions (e.g., inflation, interest rates, trade policies, commodity prices) and other factors affecting agricultural mortgage lending or borrower repayment capacity (e.g., weather, real estate values) pose risks[19] About Farmer Mac Farmer Mac's mission is to enhance the accessibility of financing and provide vital liquidity for American agriculture and rural infrastructure. It offers diverse solutions to financial institutions across various markets, including agriculture, agribusiness, broadband, power, utilities, and renewable energy - Farmer Mac's mission is to increase the accessibility of financing to provide vital liquidity for American agriculture and rural infrastructure[18] - The company offers solutions to financial institutions for growth, liquidity, risk management, and capital relief across diverse markets, including agriculture, agribusiness, broadband infrastructure, power and utilities, and renewable energy[18] Contact Information Contact details for investor relations and media inquiries are provided for Farmer Mac - Jalpa Nazareth is the contact for Investor Relations, and Lisa Meyer handles Media Inquiries, both reachable at (202) 872-7700[19] Consolidated Financial Statements This section presents Farmer Mac's consolidated balance sheets and statements of operations, detailing asset and liability growth, net interest income, and net income for Q2 2025 Consolidated Balance Sheets Farmer Mac's consolidated balance sheet shows an increase in total assets by approximately $1.67 billion from December 31, 2024, to June 30, 2025, primarily driven by growth in investment securities and loans. Total liabilities and equity also increased proportionally Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Total Assets | $32,995,909 | $31,324,742 | | Total Liabilities | $31,451,602 | $29,835,716 | | Total Equity | $1,544,307 | $1,489,026 | | Cash & Equivalents| $1,030,329 | $1,024,007 | | Total Inv. Sec. | $6,697,258 | $5,973,301 | | Total Loans, net | $14,479,983 | $13,204,638 | | Notes Payable | $28,843,331 | $27,371,174 | - Total assets increased by $1,671,167 thousand (5.3%) from December 31, 2024, to June 30, 2025, primarily due to increases in investment securities and loans[20] Consolidated Statements of Operations For the three months ended June 30, 2025, Farmer Mac reported an 11% year-over-year increase in Net Interest Income and a 22% increase in Net Income Attributable to Common Stockholders, despite a slight decrease in total interest income. Operating expenses also saw an increase Consolidated Statements of Operations Highlights (in thousands, except per share) | Item | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Interest Income | $399,022 | $403,706 | -1.16% | $780,436 | $800,023 | -2.45% | | Total Interest Expense | $302,225 | $316,366 | -4.47% | $592,700 | $626,315 | -5.37% | | Net Interest Income | $96,797 | $87,340 | +10.83% | $187,736 | $173,708 | +8.07% | | Provision for losses | $(7,713) | $(6,179) | +24.82% | $(9,397) | $(4,378) | +114.66% | | Non-interest income | $5,837 | $2,526 | +131.00% | $9,217 | $9,840 | -6.33% | | Operating expenses | $29,490 | $24,469 | +20.59% | $59,000 | $51,706 | +14.10% | | Net income attributable to common stockholders | $49,170 | $40,313 | +22.00% | $93,155 | $87,268 | +6.75% | | Diluted earnings per common share | $4.48 | $3.68 | +21.74% | $8.49 | $7.96 | +6.66% | Reconciliations of Non-GAAP Measures This section provides detailed reconciliations of GAAP net income and EPS to non-GAAP core earnings and core EPS, and GAAP net interest income to net effective spread Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings This section reconciles GAAP net income attributable to common stockholders to non-GAAP core earnings, detailing adjustments for fair value changes in financial derivatives and hedging activities. Core earnings for Q2 2025 increased by 19% year-over-year Core Earnings Reconciliation (in thousands) | Item | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net income attributable to common stockholders | $49,170 | $43,985 | $40,313 | $93,155 | $87,268 | | Less reconciling items (Sub-total) | $1,805 | $(1,981) | $536 | $(176) | $4,099 | | Core earnings | $47,365 | $45,966 | $39,777 | $93,331 | $83,169 | - Core earnings for the three months ended June 30, 2025, increased by 19% year-over-year, reaching $47,365 thousand[23] - Key reconciling items include losses/gains on undesignated financial derivatives due to fair value changes and gains on hedging activities due to fair value changes[23][25] Reconciliation of GAAP EPS to Core EPS This reconciliation details the adjustments from GAAP basic and diluted EPS to their non-GAAP core equivalents, showing that Core Diluted EPS for Q2 2025 grew by 19% year-over-year, reflecting the impact of excluding fair value fluctuations Core EPS Reconciliation (except per share amounts) | Item | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | GAAP - Basic EPS | $4.50 | $4.04 | $3.71 | $8.53 | $8.04 | | Sub-total (reconciling items) | $0.17 | $(0.18) | $0.05 | $(0.02) | $0.38 | | Core Earnings - Basic EPS | $4.33 | $4.22 | $3.66 | $8.55 | $7.66 | | GAAP - Diluted EPS | $4.48 | $4.01 | $3.68 | $8.49 | $7.96 | | Sub-total (reconciling items) | $0.16 | $(0.18) | $0.05 | $(0.02) | $0.37 | | Core Earnings - Diluted EPS | $4.32 | $4.19 | $3.63 | $8.51 | $7.59 | - Core Diluted EPS for Q2 2025 was $4.32, representing a 19% increase from $3.63 in Q2 2024[27] Reconciliation of GAAP Net Interest Income/Yield to Net Effective Spread This section reconciles GAAP net interest income and yield to non-GAAP net effective spread, showing the adjustments made for consolidated trusts, undesignated financial derivatives, and fair value hedge relationships. Net effective spread for Q2 2025 increased by 12% year-over-year Net Effective Spread Reconciliation (dollars in thousands) | Item | Q2 2025 ($) | Yield (Q2 2025) | Q1 2025 ($) | Yield (Q1 2025) | Q2 2024 ($) | Yield (Q2 2024) | H1 2025 ($) | Yield (H1 2025) | H1 2024 ($) | Yield (H1 2024) | | :-------------------------------------- | :----------- | :-------------- | :----------- | :-------------- | :----------- | :-------------- | :----------- | :-------------- | :----------- | :-------------- | | Net interest income/yield | $96,797 | 1.20% | $90,939 | 1.15% | $87,340 | 1.15% | $187,736 | 1.17% | $173,708 | 1.15% | | Net effects of consolidated trusts | $(987) | 0.02% | $(1,371) | 0.02% | $(1,010) | 0.02% | $(1,998) | 0.02% | $(2,423) | 0.02% | | Expense related to undesignated financial derivatives | $(208) | —% | $(486) | (0.01)% | $318 | —% | $110 | —% | $(521) | —% | | Amortization of premiums/discounts on assets consolidated at fair value | $(22) | —% | — | —% | $(25) | —% | $(47) | —% | $(48) | —% | | Amortization of losses due to terminations or net settlements on financial derivatives | $1,022 | 0.01% | $738 | 0.01% | $867 | 0.01% | $1,890 | 0.01% | $1,530 | 0.01% | | Fair value changes on fair value hedge relationships | $(2,709) | (0.04)% | $(2,604) | (0.03)% | $(1,099) | (0.01)% | $(3,808) | (0.02)% | $(5,606) | (0.04)% | | Net effective spread | $93,893 | 1.19% | $89,990 | 1.17% | $83,596 | 1.14% | $183,883 | 1.18% | $166,640 | 1.14% | - Net effective spread for Q2 2025 was $93,893 thousand, an increase of 12% from $83,596 thousand in Q2 2024[29] Supplemental Information This section offers detailed breakdowns of core earnings by business segment, outstanding business volume, net effective spread by segment, and quarterly core earnings reconciliation to net income Core Earnings by Business Segment For Q2 2025, Farmer Mac's total segment core earnings were $59,531 thousand, with significant contributions from Agricultural Finance and Treasury Funding. The report also details the on- and off-balance sheet assets managed by each segment Core Earnings by Business Segment (Q2 2025, in thousands) | Segment | Net Effective Spread | Guarantee & Commitment Fees | Other Income/(Expense) | Provision for Losses | Operating Expenses | Income Tax Expense | Segment Core Earnings | | :----------------------- | :------------------- | :-------------------------- | :--------------------- | :------------------- | :----------------- | :----------------- | :-------------------- | | Farm & Ranch AgFinance | $35,710 | $4,551 | $313 | $(4,494) | $(7,020) | $(6,101) | $22,959 | | Corporate AgFinance | $8,609 | $224 | $345 | $(614) | $(2,378) | $(1,300) | $4,886 | | Power & Utilities | $5,636 | $215 | — | $(73) | $(1,156) | $(970) | $3,652 | | Broadband Infrastructure | $3,932 | $564 | — | $(666) | $(1,274) | $(537) | $2,019 | | Renewable Energy | $6,227 | $320 | $8 | $(1,964) | $(1,560) | $(637) | $2,394 | | Treasury Funding | $31,668 | — | — | — | $(3,003) | $(6,020) | $22,645 | | Treasury Investments | $2,111 | — | $14 | $(1) | $(888) | $(260) | $976 | | Total Segment Core Earnings | $93,893 | $5,874 | $680 | $(7,812) | $(17,279) | $(15,825) | $59,531 | - Total on- and off-balance sheet segment assets at principal balance amounted to $30,587,259 thousand as of June 30, 2025[31] Outstanding Business Volume Farmer Mac's total outstanding business volume increased to $30,587,259 thousand as of June 30, 2025, up from $29,523,030 thousand at December 31, 2024. This growth was primarily driven by a significant increase in Infrastructure Finance, while Agricultural Finance saw a slight decrease Outstanding Business Volume (in thousands) | Line of Business | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------------- | :------------ | :---------------- | :----------- | :--------- | | Agricultural Finance | $20,171,428 | $20,494,673 | $(323,245) | -1.58% | | Infrastructure Finance | $10,415,831 | $9,028,357 | $1,387,474 | +15.37% | | Total | $30,587,259 | $29,523,030 | $1,064,229 | +3.60% | - Infrastructure Finance experienced substantial growth, with Power & Utilities increasing from $6,809,366 thousand to $7,300,354 thousand, Broadband Infrastructure from $802,466 thousand to $1,174,441 thousand, and Renewable Energy from $1,416,525 thousand to $1,941,036 thousand[32] Net Effective Spread by Segment The quarterly net effective spread by segment shows consistent performance, with total net effective spread reaching $93,893 thousand in Q2 2025 at a yield of 1.19%. Agricultural Finance and Treasury Funding remain key contributors, while Infrastructure Finance segments show varying yields Quarterly Net Effective Spread by Segment (in thousands) | Segment | Q2 2025 ($) | Q2 2025 Yield | Q1 2025 ($) | Q1 2025 Yield | Q2 2024 ($) | Q2 2024 Yield | | :----------------------- | :---------- | :------------ | :---------- | :------------ | :---------- | :------------ | | Farm & Ranch AgFinance | $35,710 | 1.07% | $33,885 | 1.01% | $34,156 | 0.98% | | Corporate AgFinance | $8,609 | 2.07% | $8,640 | 2.09% | $7,866 | 1.91% | | Power & Utilities | $5,636 | 0.33% | $5,329 | 0.32% | $5,253 | 0.32% | | Broadband Infrastructure | $3,932 | 2.24% | $3,566 | 2.27% | $2,393 | 2.16% | | Renewable Energy | $6,227 | 1.68% | $5,112 | 1.55% | $2,999 | 1.86% | | Treasury Funding | $31,668 | 0.40% | $31,604 | 0.41% | $30,268 | 0.41% | | Treasury Investments | $2,111 | 0.11% | $1,854 | 0.10% | $661 | 0.04% | | Total Net Effective Spread | $93,893 | 1.19% | $89,990 | 1.17% | $83,596 | 1.14% | Quarterly Core Earnings Reconciliation to Net Income This table provides a detailed quarterly breakdown of core earnings and its reconciliation to net income attributable to common stockholders, showing trends in revenues, expenses, and the impact of reconciling items over several quarters Quarterly Core Earnings and Net Income (in thousands) | Item | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net effective spread | $93,893 | $89,990 | $87,528 | $85,396 | $83,596 | | Total revenues | $100,509 | $96,793 | $92,123 | $91,526 | $89,238 | | Total credit related expense/(income) | $7,873 | $1,651 | $3,872 | $3,454 | $6,230 | | Total operating expenses | $29,490 | $29,510 | $29,093 | $24,587 | $24,469 | | Income tax expense | $10,114 | $14,000 | $9,938 | $12,681 | $11,970 | | Preferred stock dividends | $5,667 | $5,666 | $5,666 | $5,897 | $6,792 | | Core earnings | $47,365 | $45,966 | $43,554 | $44,907 | $39,777 | | Net income attributable to common stockholders | $49,170 | $43,985 | $50,848 | $42,312 | $40,313 | - Reconciling items, primarily fair value changes on financial derivatives and hedging activities, significantly impact the difference between core earnings and net income attributable to common stockholders[35]