FEDERAL AGRICULTURAL MORTGAGE CORP

Reconciliations of Farmer Mac's net income attributable to common stockholders to core earnings and core earnings per share are presented in the following tables along with information about the composition of core earnings:

Table 6

(1)Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 10 for a reconciliation of net interest income to net effective spread.

(2)Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3)Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4)Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

(1)Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 10 for a reconciliation of net interest income to net effective spread.

(2)Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3)Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4)Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Table 7

The non-GAAP reconciling items between net income attributable to common stockholders and core earnings are:

1. (Losses)/gains on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above: (a) (Losses)/gains on undesignated financial derivatives due to fair value changes; and (b) Gains/(losses) on hedging activities due to fair value changes.

2. Unrealized (losses)/gains on trading securities. The unrealized (losses)/gains on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period.

3. The net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value. The amount of this non-GAAP reconciling item is the recorded amount of premium, discount, or deferred gain amortization during the reporting period on those assets for which the premium, discount, or deferred gain was based on the application of an accounting principle (e.g., consolidation of variable interest entities) rather than on a cash transaction (e.g., a purchase price premium or discount).

4. The net effects of terminations or net settlements on financial derivatives. These terminations or net settlements relate to:

•Forward contracts on the debt of other GSEs and futures contracts on U.S. Treasury securities. These contracts are used as a short-term economic hedge of the issuance of debt. For GAAP purposes, realized gains or losses on settlements of these contracts are reported in the consolidated statements of operations in the period in which they occur. For core earnings purposes, these realized gains or losses are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years.

The following sections provide more detail about specific components of Farmer Mac's results of operations.

Net Interest Income. The following table provides information about interest-earning assets and funding for the three and six months ended June 30, 2024 and 2023. The average balance of non-accruing loans is included in the average balance of loans, Farmer Mac Guaranteed Securities, and USDA Securities presented, though the related income is accounted for on a cash basis. Therefore, as the average balance of non-accruing loans and the income received increases or decreases, the net interest income and yield will fluctuate accordingly. The average balance of loans in consolidated trusts with beneficial interests owned by third parties (single-class) and for which Farmer Mac guarantees all classes of securities issued is disclosed in the net effect of consolidated trusts and is not included in the average balances of interest-earning assets and interest-bearing liabilities. The interest income and expense associated with these trusts are shown in the net effect of consolidated trusts.

Table 8

(1)Excludes interest income of $9.9 million and $8.6 million in second quarter 2024 and 2023, respectively, related to consolidated trusts with beneficial interests owned by third parties (single-class).

(2)Includes current portion of long-term notes.

(3)Excludes interest expense of $8.5 million and $7.5 million in second quarter 2024 and 2023, respectively, related to consolidated trusts with beneficial interests owned by third parties (single-class).

(4)Includes the effect of consolidated trusts with beneficial interests owned by third parties (single-class).

(1)Excludes interest income of $18.9 million and $17.1 million in the first half of 2024 and 2023, respectively, related to consolidated trusts with beneficial interests owned by third parties (single-class).

(2)Includes current portion of long-term notes.

(3)Excludes interest expense of $16.5 million and $15.0 million in the first half of 2024 and 2023, respectively, related to consolidated trusts with beneficial interests owned by third parties (single-class).

(4)Includes the effect of consolidated trusts with beneficial interests owned by third parties (single-class).

The following table sets forth information about changes in the components of Farmer Mac's net interest income prior to consolidation of certain trusts for the periods indicated. For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by prior rate), and changes in rate (change in rate multiplied by old volume), and then allocated based on the relative size of rate and volume changes from the prior period.

Table 9

(1)Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties (single-class).

The following table presents a reconciliation of net interest income and net interest yield to net effective spread. Net effective spread is measured by: including (1) expenses related to undesignated financial derivatives, which consists of income or expense related to contractual amounts due on financial derivatives not designated in hedge relationships (the income or expense related to financial derivatives designated in hedge accounting relationships is already included in net interest income), and (2) the amortization of losses due to terminations or net settlements of financial derivatives; and excluding (1) the amortization of premiums and discounts on assets consolidated at fair value, (2) the net effects of consolidated trusts with beneficial interests owned by third parties (single-class), and (3) the fair value changes of financial derivatives and corresponding financial assets or liabilities in fair value hedge relationships. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for more information about net effective spread.

Table 10

The $7.6 million year-over-year increase in net effective spread was primarily due to a $7.7 million increase from a shift in the composition of new business volume towards higher-yielding loans, partially offset by a $0.4 million increase in 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, during fourth quarter 2023, debt spreads widened, and we've continued to experience the effects of that along with other issuers in the market. Further, we lengthened the tenor of our liquidity investment portfolio as part of our overall balance sheet management strategy and to mitigate volatility from decreases in the rate environment. In percentage terms, the year-over-year decrease of 0.03% was primarily attributable to a decrease of 0.03% on net business volume changes.

See Note 10 to the consolidated financial statements for more information about net interest income and net effective spread from Farmer Mac's individual business segments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Information" for quarterly net effective spread by line of business.

Provision for and Release of Allowance for Losses and Reserve for Losses. The following table summarizes the components of Farmer Mac's total allowance for losses for the three month period ended June 30, 2024 and 2023:

Table 11

See Notes 5 and 6 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

During second quarter 2024, we recorded a $6.2 million net provision to the total allowance for losses primarily as a result of a single permanent planting loan that is in bankruptcy, which resulted in a $3.9 million charge-off to reflect the amount that we have deemed uncollectible. The remaining $2.2 million provision was the result of new business volume.

Guarantee and Commitment Fees. The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three and six months ended June 30, 2024 and 2023:

Table 12

Guarantee and commitment fees increased for the three and six months ended June 30, 2024 compared to 2023, which was due to increases in the average outstanding balance of LTSPCs during the period. As adjusted for the core earnings presentation, guarantee and commitment fees were $5.3 million and $10.2 million for the three and six months ended June 30, 2024, respectively, compared to $4.6 million and $9.2 million for the three and six months ended June 30, 2023, respectively.

In Farmer Mac's presentation of core earnings, guarantee and commitment fees include interest income and interest expense related to consolidated trusts owned by third parties to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on those consolidated Farmer Mac Guaranteed Securities. Farmer Mac has also excluded guarantee asset fair value changes from the presentation of core earnings because these fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations if Farmer Mac fulfills its guarantee obligation throughout the term of the guaranteed securities, as is expected.

For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see Table 6 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

(Losses)/gains on financial derivatives. The components of gains and losses on financial derivatives for the three and six months ended June 30, 2024 and 2023 are summarized in the following table:

Table 13

These changes in fair value are primarily the result of fluctuations in long-term interest rates. The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are undesignated financial derivatives is shown as income or expense related to financial derivatives. Payments or receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S. Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "(Losses)/gains due to terminations or net settlements" in the table above. See Note 4 to the consolidated financial statements for more information about Farmer Mac's financial derivatives.

Losses on sale of mortgage loans. During second quarter 2024, Farmer Mac sold a portion of a Corporate AgFinance agricultural storage and processing loan at a loss of $1.1 million to reduce the overall exposure to the borrower. Farmer Mac sold $7.0 million of the overall $14.4 million loan leaving a remaining exposure of $7.4 million as of June 30, 2024. After that sale, the borrower restructured its credit facilities to address short-term headwinds resulting from an imbalance in supply and demand that occurred in 2023 and from internal adverse events, such as a fire and other equipment failures, all of which the borrower resolved in the first half of 2024.

Gains on sale of available-for-sale investment securities. During second quarter 2024, Farmer Mac sold available-for-sale investment securities at a gain of $1.1 million. Those sales were done to rebalance the liquidity investment portfolio given the lower level of business volume activity while demonstrating that the portfolio provides strong contingent liquidity.

Table 14

Compensation and Employee Benefits. The increase in compensation and employee benefits expenses for the three and six months ended June 30, 2024 compared to 2023 was largely due to increased headcount and increased stock compensation expense.

General and Administrative Expenses (G&A). The increase in G&A expenses for the six months ended June 30, 2024 compared to 2023 was primarily due to increased spending on software licenses and information technology and other consultants to support growth and strategic initiatives. The decrease in G&A expenses for the three months ended June 30, 2024 compared to 2023 was primarily due to a decrease in consulting costs related to technology strategic initiatives because more of the costs were capitalized during the current year than in the prior-year period. One of those initiatives is a multi-year effort to replace Farmer Mac's platform for securities trades and to implement a treasury management system. That initiative is expected to be completed during 2024.

Income Tax Expense. The following table presents income tax expense and the effective income tax rate for the three and six months ended June 30, 2024 and 2023:

Table 15

Business Volume.

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the three and six months ended June 30, 2024 and 2023:

Table 16

(1)Categories of Farmer Mac Guaranteed Securities.

(2)An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

(3)Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.

Farmer Mac's outstanding business volume was $28.8 billion as of June 30, 2024, a net decrease of $0.1 billion from March 31, 2024 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The $0.4 billion net decrease in Farm & Ranch during second quarter 2024 resulted from $1.1 billion of scheduled maturities and repayments, partially offset by $0.7 billion of new purchases, commitments, and guarantees. Included in the $0.7 billion is the purchase of $390.2 million of Farm & Ranch loans. Scheduled loan maturities and repayments in the aggregate amount of $133.1 million partially offset those purchases.

During second quarter 2024, a total of $0.8 billion in Farm & Ranch AgVantage Securities matured without refinancing, which primarily reflected slower loan growth resulting in less liquidity needs from Farmer Mac's AgVantage counterparties. The $0.8 billion in maturities and repayments were partially offset by $0.2 billion in new purchases.

The $0.1 billion net increase in Corporate AgFinance during second quarter 2024 resulted from $0.3 billion of new purchases and unfunded loan commitments, which was partially offset by $0.2 billion of scheduled maturities, repayments, sales, and paydowns on revolving commitments. Included in the $0.3 billion is $243.7 million of purchases of Corporate AgFinance loans and unfunded commitments, which was partially offset by $172.4 million of scheduled repayments. The net increase in Corporate AgFinance loan purchases and unfunded commitments primarily reflected a more active market for agribusiness transactions during the quarter.

The $0.1 billion net increase in Rural Utilities during second quarter 2024 resulted from $241.4 million of new purchases, unfunded loan commitments, and guarantees, which was partially offset by $117.7 million of scheduled maturities and repayments.

The $0.1 billion net increase in Renewable Energy during second quarter 2024 primarily reflects $271.9 million in loan purchases and unfunded commitments, partially offset by $138.7 million in repayments. The net increase in Renewable Energy loan purchases and unfunded commitments primarily reflects the continued strong demand for renewable power generation and storage.

Farmer Mac's outstanding business volume was $26.7 billion as of June 30, 2023, a net increase of $0.3 billion from March 31, 2023 after taking into account all new business, servicing rights acquisitions,

maturities, sales, and paydowns on existing assets.

The $0.4 billion increase in Farm & Ranch during second quarter 2023 resulted from $1.6 billion of new

purchases, commitments, guarantees, and loans serviced for others, partially offset by $1.1 billion of

scheduled maturities and repayments. Included in the $1.6 billion of new volume is newly purchased

servicing rights on $0.6 billion of loans (i.e., loans serviced for others). These new servicing rights were

acquired to further leverage our loan servicing function. Loans serviced for others earn servicing fee

income rather than interest income and are a component of outstanding business volume because they are

assets under our management.

Farmer Mac purchased a total of $0.2 billion in Farm & Ranch loans during second quarter 2023, partially offset by $0.1 billion in repayments. The $0.1 billion net increase was primarily driven by improved borrower economics despite the continued higher interest rate environment.

Farmer Mac also purchased a total of $0.7 billion in Farm & Ranch AgVantage Securities during second

quarter 2023, which primarily reflected the refinancing of maturing securities. The $0.7 billion in gross

purchases was more than offset by $0.9 billion in scheduled maturities.

The $0.1 billion net increase in Corporate AgFinance during second quarter 2023 resulted from $0.2

billion of new purchases and commitments, which was partially offset by $0.1 billion of scheduled

maturities, repayments, and sales. Farmer Mac purchased a total of $105.3 million in loans, which was

partially offset by $90.3 million in scheduled maturities and repayments. The increase in loan purchases

was primarily due to Farmer Mac's continued focus to support loans to larger and more complex

agribusinesses focused on food and fiber processing and other food supply chain production.

The $0.3 billion net decrease in Rural Utilities during second quarter 2023 resulted from $0.3 billion of

new purchases, commitments, and guarantees, which was more than offset by $0.6 billion of scheduled

maturities and repayments. Farmer Mac purchased a total of $150.0 million in AgVantage Securities,

$80.1 million in telecommunications loans, and $55.2 million in electric distribution and generation and

transmission loans. The $135.3 million in loan purchases was partially offset by $31.4 million in

scheduled maturities and repayments. The net increase in loan purchases primarily reflected borrowers'

normal-course capital expenditures related to maintaining and upgrading utility infrastructure as well as

investments in broadband infrastructure, and Farmer Mac's continued focus to support

telecommunications investment in rural America.

The $19.4 million net increase in Renewable Energy during second quarter 2023 primarily reflects

$71.6 million in loan purchases and unfunded commitments, partially offset by $52.2 million in

repayments.

The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, loan sales, scheduled maturities, and repayments on existing assets from year to year. This relationship in turn depends on a variety of factors both internal and external to Farmer Mac. The external factors include general market forces, competition, and our counterparties’ liquidity needs, access to alternative funding, desired products, and assessment of strategic factors. The internal factors include our assessment of profitability, mission fulfillment, credit risk, and customer relationships. For more information about potential growth opportunities in Farmer Mac's lines of business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook" in this report.

The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the periods indicated:

Table 17

Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those securitized loans. During second quarter 2024, Farmer Mac executed its fourth structured securitization transaction, whereby it sold and securitized agricultural mortgage loans resulting in $305.6 million of Farmer Mac Guaranteed Securities. In this transaction, Farmer Mac transferred selected loans to a depositor which then deposited the loans into a trust, at which time the loans became assets of the trust. Farmer Mac concluded that it was the primary beneficiary of the trust because Farmer Mac retained significant interest and has power over the activities most significant to the economic performance of the Variable Interest Entity in its role as Master Servicer. Therefore, Farmer Mac consolidates the assets and liabilities of the trust for this structured securitization. Farmer Mac does not consider the assets held by the related securitization trust to be available to satisfy the claims of the

creditors of Farmer Mac and/or the depositor.

During the three and six months ended June 30, 2024 and 2023, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts. Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets.

During the three and six months ended June 30, 2024 and 2023, Farmer Mac realized no gains or losses from the issuance of Farmer Mac Guaranteed USDA Securities or AgVantage Securities.

The following table sets forth information about outstanding volume in each of Farmer Mac's lines of business as of the dates indicated:

Table 18

(1)A type of Farmer Mac Guaranteed Security.

(2)An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

(3)Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.

The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of June 30, 2024:

Table 19

Of Farmer Mac's $28.8 billion outstanding principal balance of business volume as of June 30, 2024, $9.7 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines of business. Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due. Changes in quarterly AgVantage securities volume are primarily driven by the generally larger transaction sizes for that product, scheduled maturity amounts for a particular quarter, the liquidity needs of Farmer Mac’s AgVantage counterparties, and changes in the pricing and availability of wholesale funding. Based on these factors, Farmer Mac expects its business volumes in AgVantage securities to continue to be volatile. The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of June 30, 2024:

Table 20

(1)Includes various maturities ranging from 2029 to 2044.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.1 years as of June 30, 2024.