Federal Agricultural Mortgage Q2 2025 Earnings Report

Federal Agricultural Mortgage EPS Results

• Actual EPS: $4.32
• Consensus EPS: $4.29
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

Federal Agricultural Mortgage Revenue Results

• Actual Revenue: $100.51 million
• Expected Revenue: $96.54 million
• Beat/Miss: Beat by +$3.97 million
• YoY Revenue Growth: N/A

Federal Agricultural Mortgage Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 4:30PM ET

Federal Agricultural Mortgage (NYSE:AGM) provides a secondary market for various loans made to borrowers in the United States. It operates through four segments: Corporate AgFinance, Farm & Ranch, Rural Utilities, and Renewable Energy. The company's Agricultural Finance line of business engages in purchasing and retaining eligible loans and securities; guaranteeing the payment of principal and interest on securities that represent interests in or obligations secured by pools of eligible loans; servicing eligible loans; and issuing LTSPCs for eligible loans. Its Rural Infrastructure Finance line of business is involved in the purchase of rural utilities loans and renewable energy loans and guarantees of securities backed by loans, as well as LTSPCs for pools of eligible rural utilities loans; by loans for electric or telecommunications facilities by lenders organized as cooperatives to borrowers; and other financial institutions that are secured by pools of eligible loans. Federal Agricultural Mortgage Corporation was incorporated in 1987 and is headquartered in Washington, the District of Columbia.

Federal Agricultural Mortgage Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Farmer Mac delivered record Q2 2025 results with core earnings up 19% year-over-year to $47.4 M, net effective spread reaching $93.9 M, and total outstanding business volume surpassing $30 B.
• Positive Sentiment: Strategic diversification into renewable energy, broadband infrastructure, and corporate agribusiness drove a shift toward higher-spread loans, bolstering net effective spread growth.
• Negative Sentiment: Credit expenses increased with a $7.8 M net provision, including $2.8 M in charge-offs on two agricultural loans and downgrades in the infrastructure and broadband segments.
• Positive Sentiment: The Board expanded the share repurchase authorization from $9.8 M to $50 M and extended the program to August 2027, signaling strong capital position and confidence in share valuation.
• Positive Sentiment: Infrastructure finance volume grew by $644 M to $10.4 B, and the renewable energy segment jumped 122% year-over-year with a $332 M increase, reflecting robust market demand.

Presentation

[Operator]

Afternoon, ladies and gentlemen, and welcome to the Farmer Mac Second Quarter twenty twenty five Earnings Results Conference Call. At this time, all participant lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. Please press 0 for the operator. Also note that this call is being recorded on 08/07/2025.

[Operator]

I would now like to turn the conference over to Jalpa Nazareth. Please go ahead.

[Jalpa Nazareth, Senior director - IR & Finance Strategy at Federal Agricultural Mortgage]

Good afternoon, and thank you for joining us for our second quarter twenty twenty five earnings conference call. I'm Joplin Nazareth, senior director of investor relations and finance strategy here at Farmer Mac. As we begin, please note that the information provided during this call may contain forward looking statements about the company's business, strategies, and prospects, which are based on management's current expectations and assumptions. These statements are not a guarantee of future performance and are subject to the risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Farmer Mac's 2024 annual report and subsequent SEC filings for a full discussion of the company's risk factors.

[Jalpa Nazareth, Senior director - IR & Finance Strategy at Federal Agricultural Mortgage]

On today's call, we will also be discussing certain non GAAP financial measures. Disclosures and reconciliations of these non GAAP measures can be found in the most recent Form 10 Q and earnings release posted on Farmer Mac's website, farmermac.com, under the Financial Information portion of the Investors section. Today, I'm joined by President and Chief Executive Officer Brad Nordholm, who will lead our discussion on second quarter twenty twenty five results, and our Chief Business Officer, Zach Carpenter, who will discuss customer and market developments. Select members of our management team will also be joining us for the question and answer period. At this time, I'll turn the call over to President and CEO, Brad Nordholm. Brad?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Thanks, Jalpa. Good afternoon, everyone, and thank you for joining us. I'm very pleased to announce that we've achieved record results across the board during the second quarter twenty twenty five. More specifically, we grew core earnings 19% year over year. We grew net effective spread over 12% compared to the same period last year and we surpassed $30,000,000,000 in total outstanding business volume for the first time.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Our total portfolio is well diversified by both commodity and geography, and we remain confident in the overall health of our portfolio as evidenced by our continued strong asset quality metrics. We ended the quarter with a record $47,400,000 in core earnings and a record net effective spread of $93,900,000 The growth in spreads was driven by higher average loan balances and the continued shift to higher spread business, which has been a key driver of the increase in net effective spread over the past several years. Our strategic decision to diversify our loan portfolio into newer lines of business such as renewable energy, broadband infrastructure and corporate agribusiness has been a key priority and that diversification is benefiting us through changing market cycles and it is benefiting rural America. Also reflected in our core earnings results this quarter is the purchase of $35,600,000 of renewable energy investment tax credits. That resulted in a benefit of about $3,200,000 We continue to actively evaluate these types of renewable energy credits during 2025 as we continue to be a significant participant in the project finance market, which gives us unique insights into the value of these credits.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Partially offsetting the growth in net effective spread in second quarter was an increase in operating expenses related to headcount, technology investments and higher transaction related legal fees. The higher legal fees during the quarter were related to the new renewable energy tax credit purchases I mentioned and business transactions in our new segments of business. Our efficiency ratio remains in line with the long term strategic target of 30% and reflects our disciplined approach to expense management as we monitor and manage expense growth proactively against our incoming revenue streams. We take pride in our focus on effective expense management as we scale our business and we'll continue to assess appropriate investments in our operational platforms and resources to support our future growth, our ability to innovate and our ability to drive profitability. In terms of credit expense, several factors contributed to the 7,800,000 net provision to the total allowance for losses this quarter.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

First, we recorded a $2,800,000 charge off related to two specific borrower relationships, one, a permanent planting loan and the other a crop loan, for a portion of each loan deemed uncollectible as of June 30. However, after quarter end, we recovered approximately $1,700,000 related to the permanent planting loan, which we expect to be reflected as a recovery in our third quarter results. Other factors contributing to the provision in the second quarter were downgrades of two loans in the infrastructure finance line of business and higher allowances related new volume growth in broadband, infrastructure and renewable energy segments. Finally, declining economic forecast that flows as does the volume growth in broadband and infrastructure through our CECL models. These new segments carry different risks and different risk rate resulting in larger CECL derived allowances.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

But they are also generally businesses with higher effective spreads. We believe that our total portfolio is well diversified both by industries and segments and that we're well positioned given our strong levels of capital. The fundamentals of our underwriting guidelines and credit policies enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle. While some credit losses are inherent in lending, we believe that any losses in our current credit cycle will be moderated by the strength and diversity of our overall portfolio. And in fact, our overall credit profile remains strong as both ninety day delinquencies and substandard assets decreased quarter over quarter.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Despite heightened volatility and market uncertainty, our prudent underwriting approach emphasizing loan to value and cash flow metrics positions us well to withstand market cycles. To date, we have not seen any significant effects on our portfolio related to government actions or changes in policy. We will continue to closely monitor industry and credit conditions as new government policies are implemented. I'm also pleased to share that after quarter end, our Board of Directors modified the terms of Farmer Mac's share repurchase program to increase the total authorized amount of repurchases from $9,800,000 to $50,000,000 of Farmer Mac's outstanding C class common stock. The board also extended the term of that program to August 2027.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Farmer Mac intends to repurchase shares when it views repurchases as accretive and consistent with our strategic objectives. We successfully closed on our sixth farm securitization transaction in June in some challenging and volatile market conditions, which is a testament to the strength and demand of the farm program. We're working towards a second transaction later this year and also continue to explore alternative securitization structures that will allow us to expand our offerings while serving as another source of capital management. The securitization program remains an important strategic initiative for Farmer Mac as it allows us to enhance and optimize the balance sheet by efficient deployment of capital and also enable our growth strategy by targeting new asset opportunities. We're very pleased with the tremendous support we've seen from our stakeholders for this program and expect to be in the market before the end of the year with another securitization transaction.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Farmer Mac's core capital increased by $35,000,000 to $1,600,000,000 as of 06/30/2025, exceeding our statutory requirement by $6.00 $2,000,000 or 63%. The sequential increase reflects higher retained earnings, partially offset by capital impact due to growth in total assets. Our Tier one capital ratio modestly declined to 13.6% this quarter from 13.9% last quarter, primarily due to growth in assets in our newer segments. As mentioned on prior calls, this dynamic is expected as we continue to grow our book of business in more accretive segments that require an incrementally higher amount of capital. Looking ahead, we'll continue to evaluate all the capital management tools we have available to achieve our goal of optimizing our overall capital position and maintaining an opportunistic approach to add to our capital buffer.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

A strong capital position has enabled us to grow and diversify revenue streams, remain resilient in volatile credit environments, and continue to offer competitively priced liquidity to our customers and their borrowers even in challenging times. I also want to comment on the passage of the One Big Beautiful Bill, also known as HR1, which contain many provisions that have the potential to impact Farmer Mac and its stakeholders, including farmers, ranchers, and the renewable energy industry. This legislation includes updates to the federal crop insurance and revenue protection programs, as well as tax benefits on interest income earned on qualified rural or agricultural real estate loans. These are potentially positive for Farmer Mac. We're actively monitoring and assessing the impacts of this new law on us and industries we serve.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

We believe our inclusion in the legislation reflects the importance of our mission to increase the accessibility of financing to provide vital liquidity for American agriculture and rural infrastructure. And now I'd like to turn the call over to Zach Carpenter, our Chief Business Officer to discuss our customer and market developments in more detail. Zach?

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

Thanks Brad. We had another solid quarter of outstanding business volume growth. We achieved $800,000,000 of net new business volume with new volume increases across all segments in our portfolio, resulting in total outstanding business volume of $30,600,000,000 as of quarter end. The growth in our portfolio this quarter once again demonstrates our successful efforts over the last few years to strategically grow and diversify our business segments and revenue streams throughout changing market cycles. The shift to higher spread business has been a key driver of our record results, and we believe our pipeline and business composition will continue to position us well for the remainder of the year.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

The infrastructure finance line of business grew by $644,000,000 in the second quarter to $10,400,000,000 as of quarter end, reflecting the continued strong demand for electric power, the continued investment in renewable energy generation and storage, and the significant demand for liquidity for data center investments. Our renewable energy segment grew $332,000,000 in the 2025, a 122% increase year over year, ending the quarter at nearly $2,000,000,000. Our near term pipeline does remain strong. Despite the increase in policy uncertainty around the overall renewable power investment market following the passage of HR one, we expect to continue to participate in renewable energy power transactions for both new projects and refinancing opportunities of existing projects. In addition to the substantial increase in need for new power generation, the tax credit phase outs for renewable energy generation projects in HR one will likely result in a flurry of activity over the next twelve months for projects to start construction to meet required milestones to maintain tax incentives.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

Our broadband infrastructure segment grew $200,000,000 this quarter to $1,200,000,000 as of quarter end. We anticipate increased financing opportunities for rural telecommunications providers driven by fiber line expansion, wireless broadband deployment, data center build outs, industry consolidation, and mergers and acquisitions. These developments are crucial for rural economic growth and the connectivity needs for rural America. Our Power and Utilities segment grew $112,000,000 this quarter, largely due to strong loan purchase activity supporting investment needs of rural electric generation, transmission, and distribution cooperatives. Growing business volume in our infrastructure finance line of business remains a top priority, and we will continue to focus on strategic investments in these areas to build out our expertise and capacity as market opportunities arise.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

Turning to the agricultural finance line of business, volume increased by $188,000,000 in the second quarter to $20,200,000,000 as of quarter end. Growth in the second quarter consisted largely of strong loan purchase volume in both the Farm and Ranch and Corporate Ag Finance segments. Our Farm and Ranch segment business volume increased by a net $123,000,000 in the second quarter to $18,200,000,000 as of quarter end. As our farm and ranch loan purchases portfolio grew by $429,000,000 outpacing scheduled maturities. We believe that we will see loan purchase growth continue into the foreseeable future due to the continuing agricultural economic tightening, the potential for increased tariffs and trade policy changes, and continued inflationary dynamics for agricultural inputs.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

As Brad mentioned, we are actively assessing the provisions in HR one that have a direct impact on Farmer Mac related to enhanced tax benefits for qualifying agricultural real estate loans. We do believe our inclusion in the new law will provide Farmer Mac with an opportunity to further our mission of finding innovative ways to increase access to capital and reduce the cost of credit for farmers and ranchers. The farm and ranch segment is core to our mission, and we remain committed to bringing our customers products that provide capital and risk management solutions, as well as supporting their borrowers financial needs. Our Corporate Ag Finance segment grew $64,000,000 in the second quarter to $2,000,000,000 at quarter end. Although quarterly volume can be unpredictable, opportunities in this segment are more accretive to net effective spread compared to the Farm and Ranch segment.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

We are continuing our efforts to further our relationships and modernize our internal infrastructure and anticipate increased credit demand to support larger, more complex agribusinesses in the coming quarters. We continue to be excited about the strategic direction of the company and remain focused on our mission to provide capital through the agricultural and economic cycles. We believe we are well positioned to make continuous progress on our long term strategic growth initiatives as we navigate this backdrop of broader market uncertainties stemming from factors such as interest rates, regulatory shifts, and policy changes that could have a potential impact on the industries we serve. And with that, Brad, I'll turn it back to you.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Good. Well, thank you very much, Zach. Our team delivered record financial results in the second quarter while fulfilling several important strategic and revenue objectives. We delivered core earnings that were a record. We maintained a strong credit profile.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

We reported a core return on equity of 17% while holding our efficiency ratio below our strategic target of 30%. We're optimistic about the future and we believe that we continue to be well positioned to deliver on our multi year strategy with strong liquidity and capital levels, a diversified business mix, highly effective risk management practices, and most importantly, a talented team of dedicated professionals here at Farmer Mac. And before, operator, I turn to the Q and A period, I'd like to take a moment to thank Aparna Ramesh for her contributions to Farmer Mac over the last six years. Her leadership contributed to a very strong, creative, disciplined and resilient finance team that continues to execute on our strategic initiatives without missing a beat. While we are sad to see Aparna leave us, we are proud when Farmer Mac is a springboard to exceptional opportunities for talented leaders.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

As we noted previously, we have launched a nationwide search for a new CFO and we'll provide updates as appropriate. And now, I'd like to see if we have any questions from anyone who's on the line with us today.

[Operator]

Thank you, sir. This time, please press star followed by one on your touch tone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by 2. And if you're using your And your first question will be from Bose George at KBW. Please go ahead.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

Hey, everyone. Good afternoon. Actually, wanted to ask first about the spread outlook. I mean, I think the last couple of quarters, we've talked about spreads potentially sort of moving down a little bit. Obviously, they've held up well and actually gone up further.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

So A, how should we think about the outlook there? Also this quarter, like looking at the farm and ranch, especially the spreads in there, within the segment itself went up, I think it was six basis points. So can you just talk about the drivers of that as well?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Zach, go ahead, please.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

Yeah, happy to. I'll stick with Farm and Ranch first to your second question. I think this is a strong mix question that we saw in the second quarter. We had a very strong growth rate of loan purchase in our core Farm and Ranch loan purchase product that outpaced significant maturities in AgVantage. So the delta of that mix having strong accretive NES on the loan purchase side resulted in higher accretion in the overall segment and effective spread percentage as the AgVantage balance decreased.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

We typically see much tighter credit spreads in AgVantage, and so the delta there is really the driver of that growth.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

Can you

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

talk about spread outlook? I think this contemplates the diversity of our portfolio. As we've seen over the last few years, we've seen a lot faster growth in these newer segments. And those newer segments do carry more accretive credit spreads than I'd say our historical segments. So as we've seen the mix shift more towards higher growth in these newer segments, we're going to see that accretion in our overall net effective spread percentage.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

And again, I'll highlight that as we've seen AgVantage product growth decline over the last eighteen months, that is also supporting that higher net effective spread growth.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

So as we look to

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

the second half of the year, as we noted, we do see pipeline activity that's fairly strong in our newer lines of business. And we'll see to ascertain those more accretive spreads as it grows our business platform.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. So spreads staying around these levels, at least for the next couple of quarters, is reasonable?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Bose, I think what we have here is a little bit of a contest going on between the, frankly, above expected growth rate of some of these new segments, including broadband, renewable energy project finance, and corporate ag business, which are all doing really, really well this year. So between that, which is putting a little bit of upward, a little bit of a lift on spreads, and then the question of the timing and or pay down of ag advantage bonds. And I think you referenced past years where maybe we thought we're going to have a little bit of downward pressure. That in part was because of the expectation of more closing and draws on egg advantage bonds that have just been slow to materialize. We still have some ones that could materialize in the later half of the year.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

And that's where this contest comes down. Will they materialize enough to drag down what will be otherwise a continuing accretion driven by these higher segments of business or not? But I think starting with a place that the expectation is about where we are today is a good place to start.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay, great. That's very helpful. Thanks. And then the $3,500,000 the tax credit that you mentioned, does that flow through as a lower tax rate? Is that where we see that?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Yeah. I'm going to ask Greg Ramsey, who's our principal accounting officer who's with us today, to give you the details. That's a good technical question, Bose.

[Gregory Ramsey, VP - Chief Accounting Officer at Federal Agricultural Mortgage]

Yeah, hi Bose. This is Greg Ramsey. Thanks for the question. Yeah, the benefit that we receive from those tax credits, it flows right through and reduces our tax expenses. So you would see our effective tax rate this quarter actually below the statutory rate.

[Gregory Ramsey, VP - Chief Accounting Officer at Federal Agricultural Mortgage]

And that's really the first time that seen that. And that's a result of those tax credits that have accumulated since we started buying them in the fourth quarter of last year.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. And then actually one sort of related question. I think, Brad, you mentioned there was some legal costs related to that. Is that in OpEx? Or does that net out kind of through that number and through the tax number?

[Gregory Ramsey, VP - Chief Accounting Officer at Federal Agricultural Mortgage]

Yeah. So this is Greg again. Yeah, you're right. There are some administrative expenses dealing with those transactions. And those expenses do flow through our general administrative expenses, through our operating expenses. That's right.

[Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay, great. Thanks a lot.

[Operator]

Thank you. And our next question will be from Bill Ryan at Seaport Research Partners. Please go ahead.

[William Ryan, Senior Analyst at Seaport Research Partners]

Thanks, and good afternoon. I'd like to start off with a couple of questions about HR one. You mentioned that there was some potential tax benefit. I was wondering if you could maybe elaborate on that a little bit more and how it might stimulate some incremental farm and ranch loan demand and then along the same lines of HR1. And I guess this is a little bit more qualitative.

[William Ryan, Senior Analyst at Seaport Research Partners]

There's been a lot of questions about whether, I guess going back to 2024, it's like 93%, 94% of new energy production that came online was renewable. Is this something that you think Congress might have to revisit? Mean, fossil fuels ramping up enough to kind of offset the expected decline that might take place in 2027 and beyond? Was just again, it's a little bit more qualitative question, but I was curious as to your thoughts on that.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Sure. As it relates to HR1 and tax savings, specifically there's a provision in there that we mentioned that's referred to as ACRE. And it provides a partial exclusion from taxation for interest income on new, not refinancing, first mortgage loans on production agriculture. This is something that is not baked into an accretive line in our pro form a. From our standpoint, we expect it to be fairly neutral.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

But at the end of the day, if it can result in savings to Americans farmers and ranchers, it's a good thing. And that's why it was important to us to be a part of it. So it's not something that will drive significant changes in any pro form a for our farm and ranch business, at least from an earnings standpoint. As it relates to new energy production, it's a fascinating question. I think as you know, Bill, I spent almost twenty years in the electric power industry before coming to Farmer Mac.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

And so what's going on is of not just keen interest to me, but I can kind of understand some of the issues. And absolutely, you're correct. Over the last couple of years, incremental capacity in The United States has been dominated by investment in new capacity and solar and wind. And we now have a phase out of credits. And we also, probably something that we're keeping an even closer eye on over the last week or so, is that we have an executive order which is designed, it's a very clearly stated objective, designed to make it more difficult to complete permitting for renewable energy projects that otherwise might be done before credits expire or even after credits expire.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

So we're keeping a very close eye on that. But I think when you look at the fundamentals in The United States and your question about whether it will need to be revisited, I think most are well aware that data centers are driving a significant high single digit CAGR increase in electric power demand in The United States, that projection for electric power demand is really broken from GDP and is much higher. And there's the question, where are these electrons going to come from? And it takes ten to fifteen years to permit and build a nuclear power plant, which we haven't done, by the way, for thirty, forty years. And there are no contractors who will guarantee completion and cost of that.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

So there's the question of risk allocation. It takes and there's a significant backlog for gas turbines are now for new simple cycle or combined cycle natural gas fired electric power plants. And the permitting time for that is at least two to three years plus construction cost as construction timetable of couple of years, maybe five years best case. What's going to be happening as you point out, 2027, 2028, 2029, the fact is that solar and wind are the fastest response of new capacity. And also when combined with batteries are the fastest response to that.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

And despite the changes in policy, some of the big drivers of this market now, and they include Google and Amazon and Facebook and Microsoft, they're out very, very actively looking for anyone who can provide electrons, preferably green electrons, but any kind of electrons right now to support their demand. And we believe that it will result in new renewable projects being built even without tax credits post the wind down of the existing ones. But a lot is in flux and we are taking the approach as we always have. We're debt not equity in this projects. And so we're responsive to real projects that are getting built and our risks are well mitigated.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

But we're taking a wait and see approach for exactly how the future growth and future demand does adjust.

[William Ryan, Senior Analyst at Seaport Research Partners]

Okay. Thanks for the color on that, Brent. And just one kind of follow-up is just an update. Curious about the any additional impact on tariffs. I know they kind of just started the last time you did your conference call.

[William Ryan, Senior Analyst at Seaport Research Partners]

If you can maybe talk about any update there and how are the market, I think they were called market facilitation payments to farmers, how that's progressing to kind of keep farmers in check financially?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Zach, can you provide some color on that?

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

Yeah, hi Bill. It's definitely something we've been watching constantly and clearly I think there's just a lot of uncertainty as it pertains to the tariff and especially the whiplash. Mean recently the tariffs for many countries were set in place after some of the delays. And I also think it's really hard to paint a broad brush in terms of where we're going to see the impacts. For example, there's a significant amount of US soybeans that are exported to China.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

And so we've seen a decline in exports there. But in many cases, there's other markets that have opened up. And so we're assessing what the pricing impact to the soybean is to the farmers and ranchers for these changes in exports. On the other side of the spectrum, you've got corn, and there's very little export, or it's not nearly as much as soybeans, and we're going to see significant increase in ethanol. The UK trade structured agreement has increased demand for ethanol from US producers.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

Feed is a significant component of corn, we've seen that that significantly grow. So it's really hard to assess currently what the overall impact is going to be as some of these structured agreements become put in place, as well as what other potential retaliation or other agreements are made. The one thing I would say is that the American Relief Act in December 24 gave or allocated $33,000,000,000 of disaster relief to farmers and ranchers, we're starting to see that trickle out there. The USDA does indicate that 2025 will be a fairly high year of net cash farm income for farmers and ranchers, heavily driven by government payments. Farmers and ranchers don't necessarily want show positive income from government payments, but it is a support for the farmers and ranchers during this follow-up time.

[Zachary Carpenter, Executive VP & Chief Business Officer at Federal Agricultural Mortgage]

And I think also with HR1 and the passage of price loss coverage and agricultural risk coverage programs and increase in reference prices is another safety net that we're supportive of to help the farmers manage through this potential volatility time of tariffs.

[William Ryan, Senior Analyst at Seaport Research Partners]

Okay. Thanks for that, Dan. Thanks for taking my questions.

[Operator]

Thank you. Next question will be from Brandon McCarthy at Sidoti. Please go ahead.

[Brendan McCarthy, Equity Research Analyst at Sidoti & Company]

Great. Thanks. Good afternoon, everyone. Thanks for taking my questions here. I just wanted to follow-up on the renewable energy tax credits.

[Brendan McCarthy, Equity Research Analyst at Sidoti & Company]

Just given the those credits are due to phase out, I'm curious on what the timing of that phase out looks like. And and, Zach, I think you alluded to there may be, you know, a a ramp up in new projects to kinda get ahead of that deadline. I'm wondering if we can maybe expect a similar quarterly run rate in renewable energy tax credits going forward.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Well,

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

As it relates to tax credits distinct from project finance opportunities and renewable energy projects, we do those opportunistically because they're structured to be very, very low risk and be a very nice kind of discounted arbitrage that results in net income for us. We will continue to monitor the opportunity to purchase those as long as they remain low risk. But it's not a fundamental part of our P and L strategy. It is something around which we are just being opportunistic. As it relates to project finance though, a lot of the credits are scheduled to phase out next year.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Some of the ones, retail credits, EVs, some of the home solar, some of the home improvement, those are phasing out later this year. But for the commercial projects next year, you then get into a very complicated discussion about commencement of construction and requirements that have to be satisfied in order to lock in those credits. And so when you cut all the way through that, it means that large projects may be in construction next year and not be finished for a year or two after that. So again, we're going to continue to be very disciplined as we always have been in underwriting these project finance loans. Again, we're not equity, we're debt, we're responding to mature opportunities of these projects.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Where the tax credits and the power purchase agreements and the engineering procurement construction contracts and the operating agreements and permitting are all locked in and continue to pursue those. And it's a huge addressable market. So even if it contracts by some, there's still a huge opportunity for us going forward. And then we'll see what happens in back years. As I mentioned earlier, I do believe that we will see some of these projects move ahead even without credits in the future.

[Brendan McCarthy, Equity Research Analyst at Sidoti & Company]

Great. Thanks, Brett. I appreciate that detail. I wanted to turn to the $7,800,000 credit provision in the quarter. You mentioned there's a $2,800,000 charge off from two loans. Can you go into detail on those two loans?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Yeah, think we generically describe them as a permanent potting loan and a crop loan. We're certainly not going to discuss individual borrowers. But Mark, could you give maybe a little bit more of a generic explanation, generally where they are and kind of some of the circumstances surrounding them?

[Marc Crady, Senior VP & Chief Credit Officer at Federal Agricultural Mortgage]

Yeah. Yeah. So two loans, the charge in the quarter

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

I'm sorry, this is Mark Grady, our Chief Credit Officer is here.

[Marc Crady, Senior VP & Chief Credit Officer at Federal Agricultural Mortgage]

Yeah. Hi, thank you. Yeah. You mentioned the provision, we took $2,800,000 in charges in the quarter on two different loans. One, the first is a permanent crop loan based in the Southwest Region.

[Marc Crady, Senior VP & Chief Credit Officer at Federal Agricultural Mortgage]

We took a $1,700,000 charge on that loan as we deemed it uncollectible at the end of the quarter. But after we closed our books for the quarter, we received that $1,700,000 we received a $1,700,000 payment on that loan. And so at this point, we think we're well secured on that loan. The second loan is a crop loan also based in the Southwest Region that became delinquent in the second quarter due to weak operating performance. A receiver has been appointed to liquidate our collateral.

[Marc Crady, Senior VP & Chief Credit Officer at Federal Agricultural Mortgage]

And as we assess the value of our collateral as part of that process, we deemed $1,200,000 to be uncollectible and record a charge.

[Brendan McCarthy, Equity Research Analyst at Sidoti & Company]

Got it. Thanks. I appreciate the detail there. And then you you also mentioned, I think, two loans in the infrastructure finance segment. Just curious as what what lines of business does that come from? I think just the 2,700,000.0 provision. Sorry.

[Marc Crady, Senior VP & Chief Credit Officer at Federal Agricultural Mortgage]

Yep. That's right. Yep. Downgraded two loans in our infrastructure finance portfolio. The first is a solar project that's based in the Southeast, about $17,000,000 of exposure.

[Marc Crady, Senior VP & Chief Credit Officer at Federal Agricultural Mortgage]

The project became operational in mid last year and has had weak performance since becoming operational, but the company is still current on payments. The second is in our broadband infrastructure portfolio. It's a rural provider of communication services in the Southeast. The company had engaged in a kind of high growth strategy to build out its network. That resulted in cost overruns and other operational challenges.

[Marc Crady, Senior VP & Chief Credit Officer at Federal Agricultural Mortgage]

And as a result, the borrower became over levered and tight on liquidity. The company right now is out looking for additional capital. And so we should have more information on that goes over the next couple months.

[Brendan McCarthy, Equity Research Analyst at Sidoti & Company]

Got it. Thank you. And last question for me just on the share repurchase authorization. How does that kind of fit into your capital allocation priorities? Do you think you'll be more active buying back shares?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Yeah. We have a number of tools here at Farmer Mac for being adequately capitalized from an equity standpoint. That includes the rate, the pace of our dividends. I think you have seen us be incredibly consistent in how we think about that. And as a result in fourteen consecutive years of dividend increases here at Farmer Mac.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

We have share repurchase as a tool when it is accretive, when stock price is very low. We have the opportunity to put new preferred capital on our balance sheet, which is something you've seen us do numerous times. And that's an option that we have today. And you've seen us use securitization strategically for diversifying our funding and transferring funding risk away from Farmer Mac, but also for more capital efficiency because from regulatory allocated capital to securitizations is less than if we're holding all the risk on our balance sheet. So we have all these tools.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

We are pursuing securitizations basically as we have the right pools of assets to do those securitizations and we remain committed in the future. We're constantly evaluating the use of preferreds and potential other securitization, asset pool securitization techniques for managing the aggregate amount or relative amount through a percentage of capital relative to assets. And then we have share repurchase. So there's never a time when one of those is the answer. We are going to be extremely cautious and steady about how we manage dividend declarations here at Farmer Mac.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

And then the others we're going to use routinely in the case of Farmer Mac securitizations and the others opportunistically, depending on what is basically the best, cheapest, most enduring form of capital depending on what our objectives are for us at that given time.

[Brendan McCarthy, Equity Research Analyst at Sidoti & Company]

Understood. Thanks, Brad. Thanks, everybody. That's all for me.

[Operator]

Thank you. Next will be Gary Gordon. Please go ahead.

[Analyst]

Okay. Thank you. Actually, of my questions have been answered. Just one sort of technical one on the share repurchase. Should we think of the capital that could be used for share repurchase as part of what historically you talked about as your 35% payout ratio?

[Analyst]

Or are those separate issues and that would be in addition to the 35% in any given year?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Yeah. As I attempted to just communicate, we are committed to being very, very consistent and disciplined about how we declare our dividends. So you mentioned a target ratio and we've been somewhere in that vicinity for a number of years now. We really don't want to change that. So this share repurchase should be seen as, again, something that is opportunistic.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

And that is there as a tool and attractive as a tool when our market stock price gets too cheap.

[Analyst]

Okay. And maybe that's you just answered this one, but why now? Why the share repurchase authorization now versus a year or two ago?

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Yeah, a couple of things. We hadn't looked at it in a while. We are a larger organization. It is appropriate that we size it at a larger level than the last time we really focused on this. And it's no secret in the last few weeks, we've had some softness, I think really unwarranted, but some softness in our stock price. And so it's a combination of factors.

[Analyst]

Okay. Thank you.

[Operator]

Thank you. And at this time, it appears we have no other questions registered. I will turn the call back over to Mr. Nordholm.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

Good. Well, thank you very much, operator, and thank you all for participating in this call. We're really proud of the results from this last quarter. We feel very confident about the remainder of the year and look forward to giving you another update in a quarter. As always, if you have follow-up questions or just want to generally get a little bit more clarification on some of the things we've discussed today or other things that you see as you go through our release, Please get in touch with JELPA and we will be as responsive as we possibly can.

[Bradford Nordholm, President & CEO at Federal Agricultural Mortgage]

And with that, thank you all again. And I hope you have a really terrific and maybe a bit restful August.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Participants

Executives

• Jalpa Nazareth, Senior director - IR & Finance Strategy
• Bradford Nordholm, President & CEO
• Zachary Carpenter, Executive VP & Chief Business Officer
• Gregory Ramsey, VP - Chief Accounting Officer
• Marc Crady, Senior VP & Chief Credit Officer

Analysts

• Bose George, Managing Director at Keefe, Bruyette & Woods (KBW)
• William Ryan, Senior Analyst at Seaport Research Partners
• Brendan McCarthy, Equity Research Analyst at Sidoti & Company
• Analyst