FEDERAL AGRICULTURAL MORTGAGE CORP

Previous wording

•we provided $1.4 billion in liquidity and lending capacity to lenders serving rural America;

Current wording

•we provided $1.5 billion in liquidity and lending capacity to lenders serving rural America;

Previous wording

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

Current wording

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

Previous wording

•we maintained our strong capital position, well above regulatory requirements, and uninterrupted access to the debt capital markets.

Current wording

•we maintained our strong capital position, well above regulatory requirements, and uninterrupted access to the debt capital markets; and

Previous wording

The $6.1 million sequential increase in net income attributable to common stockholders was due to a $3.3 million after-tax increase in net interest income, a $3.1 million after-tax increase in the fair value of undesignated financial derivatives, and a $1.0 million after-tax decrease in our provision for credit losses. These factors were partially offset by a $1.6 million after-tax increase in operating expenses.

Current wording

The $6.6 million sequential decrease in net income attributable to common stockholders was due to a $6.4 million after-tax increase in our provision for credit losses and a $3.1 million after-tax decrease in the fair value of undesignated financial derivatives. These factors were partially offset by a $2.2 million after-tax decrease in operating expenses.

Previous wording

The $6.7 million year-over-year increase in net income attributable to common stockholders was due to a $5.8 million after-tax increase in net interest income, a $2.1 million after-tax decrease in our provision for credit losses, and a $1.3 million after-tax increase in the fair value of undesignated financial derivatives. These factors were partially offset by a $2.8 million increase in operating expenses.

Current wording

The $0.1 million year-over-year decrease in net income attributable to common stockholders was due to a $4.0 million after-tax increase in our provision for credit losses, a $2.8 million after-tax decrease in the fair value of undesignated financial derivatives, and a $0.2 million increase in operating expenses. These factors were partially offset by a $6.8 million after-tax increase in net interest income.

Previous wording

The $1.5 million sequential decrease in core earnings was due to a $1.2 million after-tax decrease in net effective spread and a $1.6 million after-tax increase in operating expenses. These factors were partially offset by a $1.0 million after-tax decrease in our provision for credit losses.

Current wording

The $3.6 million sequential decrease in core earnings was due to a $6.4 million after-tax increase in our provision for credit losses. This factor was partially offset by a $2.2 million after-tax decrease in operating expenses.

Previous wording

The $4.5 million year-over-year increase in core earnings was due to a $4.6 million after-tax increase in net effective spread and a $2.1 million after-tax decrease in our provision for credit losses. These factors were partially offset by a $2.8 million increase in operating expenses.

Current wording

The $2.4 million year-over-year decrease in core earnings was due to a $4.0 million after-tax increase in our provision for credit losses. This factor was partially offset by a $1.4 million after-tax increase in net effective spread.

Previous wording

The $5.9 million year-over-year increase in net effective spread was primarily due to a $3.4 million increase from net new business volume and a $1.7 million decrease in non-GAAP funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity. In percentage terms, the year-over-year decrease of 0.01% was primarily attributable to a decrease of 0.02% on net new business volume and was partially offset by a decrease of 0.01% in non-GAAP funding costs.

Current wording

The $1.8 million year-over-year increase in net effective spread was primarily due to a $4.2 million increase from a shift in the composition of new business volume towards higher-yielding loans. This factor was partially offset by an increase of $2.1 million of non-GAAP funding costs, which was primarily attributable to opportunistic issuance of debt at advantageous rates in advance of the funding needs of our business in addition to the debt spread and liquidity portfolio factors described above. In percentage terms, the year-over-year decrease of 0.06% was primarily attributable to a decrease of 0.03% on net business volume changes and a decrease of 0.02% related to the increases in non-GAAP funding costs.

Previous wording

Our outstanding business volume was $28.8 billion as of March 31, 2024, a net increase of $0.4 billion from December 31, 2023 after taking into account all new business, maturities, and paydowns on existing assets. The net increase was primarily attributable to a net increase of $0.2 billion in the Rural Infrastructure Finance line of business, primarily driven by net new Renewable Energy loan volume, and a net increase of $0.2 billion in the Agricultural Finance line of business.

Current wording

Our outstanding business volume was $28.8 billion as of June 30, 2024, a net decrease of $88.9 million from March 31, 2024 after taking into account all new business, maturities, sales, and paydowns on existing assets. The net decrease was primarily attributable to a net decrease of $345.8 million in the Agricultural Finance line of business, partially offset by a net increase of $256.9 million in the Rural Infrastructure Finance line of business.

Previous wording

The following table presents Agricultural Finance on- and off-balance sheet substandard assets, in dollars and as a percentage of the respective portfolio as of March 31, 2024 and December 31, 2023:

Current wording

During second quarter 2024, we recorded a charge-off of $3.9 million on a single permanent planting loan that is in bankruptcy to reflect the amount of the loan that was deemed uncollectible. The following table presents Agricultural Finance on- and off-balance sheet substandard assets, in dollars and as a percentage of the respective portfolio as of June 30, 2024, March 31, 2024, and December 31, 2023:

Previous wording

The increase of $73.0 million in on-balance sheet substandard assets during first quarter was primarily driven by credit downgrades in permanent plantings, livestock, crops, part-time farms, and agricultural storage and processing. The $3.8 million decrease in substandard assets in our off-balance sheet portfolios during first quarter was primarily due to credit upgrades in permanent plantings, crops, and livestock and was partially offset by credit downgrades in part-time farms. Although substandard Agricultural Finance loans increased during the quarter, there was not a significant provision for loss associated with that increase because of the net realizable value of those loans.

Current wording

The decrease of $6.2 million in on-balance sheet substandard assets during second quarter was primarily driven by credit upgrades in permanent plantings, and was partially offset by downgrades in agricultural storage and processing, part-time farms, crops, and livestock. The $1.0 million decrease in substandard assets in our off-balance sheet portfolios during second quarter was primarily due to credit upgrades in crops, part-time farms, and permanent plantings, and was partially offset by downgrades in livestock.

Previous wording

On-balance sheet Agricultural Finance assets 90 or more days delinquent increased in permanent plantings, crops, and livestock. Off-balance sheet Agricultural Finance assets 90 days or more delinquent increased in permanent plantings and was partially offset by decreases in crops and part-time farms. The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural Finance portfolio represented over half of the aggregate 90-day delinquencies as of March 31, 2024.

Current wording

On-balance sheet Agricultural Finance assets 90 or more days delinquent decreased in crops, permanent plantings, and livestock, and were partially offset by increases in part-time farms. Off-balance sheet Agricultural Finance assets 90 days or more delinquent decreased in permanent plantings, part-time farms, and livestock, and was partially offset by increases in crops. The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural Finance portfolio represented over half of the aggregate 90-day delinquencies as of June 30, 2024.

Previous wording

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

Current wording

The main difference between core earnings and core earnings per share (non-GAAP measures) and net income attributable to common stockholders and earnings per common share (GAAP measures) is that those non-GAAP measures exclude the effects of fair value fluctuations. These fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected. Another difference is that these two non-GAAP measures exclude specified infrequent or unusual transactions that we believe are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. For example, in prior periods, we excluded any losses on retirement of preferred stock from core earnings and core earnings per share. Farmer Mac redeemed all outstanding shares of its Series C Preferred Stock on July 18, 2024 and plans to exclude any losses on retirement of preferred stock from core earnings and core earnings per share in the presentation of its core earnings for third quarter 2024. For a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."

Previous wording

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

Current wording

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