FEDERAL AGRICULTURAL MORTGAGE CORP
For the period ended Sep 30, 2024. Filed Nov 4, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 4, 2024
AGM$180.20-9.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-05.
0000845877-24-000201
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking StatementsOverviewUse of Non-GAAP MeasuresCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-04.
0000845877-24-000243
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsForward-Looking StatementsOverviewUse of Non-GAAP MeasuresThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 82 previous paragraphs and 75 current paragraphs.
55 unchanged; 14 reworded; 6 added; 7 removed; 6 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
•we redeemed all $75.0 million of our Series C Preferred Stock.
Current report
The $2.0 million sequential increase in net income attributable to common stockholders was due to a $2.3 million after-tax decrease in our provision for credit losses, a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock, and a $0.6 million after-tax increase in late fee income. These factors were partially offset by the $1.6 million loss on retirement of the Series C Preferred Stock, related to deferred issuance costs.
Current report
The $5.1 million sequential increase in core earnings was due to a $2.3 million after-tax decrease in our provision for credit losses, a $1.4 million after-tax increase in net effective spread, a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock, and a $0.6 million after-tax increase in late fee income.
Current report
The $0.5 million sequential decrease in net interest income was primarily due to a $2.4 million decrease in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), a $0.9 million increase from a shift in the composition of new business volume towards higher-yielding loans, and a decrease of $0.9 million in our funding costs, which was primarily attributable to our proactive asset liability management practices such as calling fixed-rate debt in response to lower nominal interest rates. In percentage terms, net interest income remained consistent compared to second quarter 2024.
Current report
The $0.9 million year-over-year decrease in net interest income was primarily due to an increase of $3.0 million of funding costs, which was primarily attributable to (1) the widening of debt spreads that occurred in fourth quarter 2023, which increased our floating-rate funding costs, and (2) a $2.9 million decrease in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). These factors were partially offset by a $5.0 million increase from a shift in the composition of new business volume towards higher-yielding loans. In percentage terms, the year-over-year decrease of 0.07% was primarily attributable to an increase of 0.07% in funding costs and a decrease in the fair value of our designated financial derivatives of 0.03%, partially offset by an increase of 0.03% related to the shift in the composition of new business volume towards higher-yielding loans.
Removed paragraphs (7)
Previous report
(the "2023 Annual Report").
Previous report
•we closed our fourth structured securitization transaction involving approximately $300 million of agricultural mortgage loans.
Previous report
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 report
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 report
The $1.0 million sequential increase in net interest income was primarily due to a $1.3 million increase from a shift in the composition of new business volume towards higher-yielding loans and an increase of $0.9 million in cash-basis interest income. These factors were partially offset by an increase of $1.2 million in 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 have continued to experience the effects of that along with other issuers in the market. We also 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, net interest income remained consistent.
Previous report
The $8.7 million year-over-year increase in net interest income was primarily attributable to a $7.5 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives) and a $4.1 million increase from a shift in the composition of new business volume towards higher-yielding loans. These factors were partially offset by an increase of $1.8 million in funding costs, which was primarily attributable to opportunistic issuance of debt at advantageous rates in advance of the funding needs of our business, and there was a decrease of $1.2 million in cash-basis interest income. In addition, during fourth quarter 2023, debt spreads widened, and we have continued to experience the effects of that along with other issuers in the market. We also 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 0.03% increase was primarily attributable to net fair value changes from designated financial derivatives.
Reworded paragraphs (14)
Previous wording
The objective of this section of the report is to provide a discussion and analysis, from management’s
Current wording
The objective of this section of the report is to provide a discussion and analysis, from management’s perspective, of the material information necessary to assess Farmer Mac's financial condition and results of operations for the quarter ended September 30, 2024. Financial information included in this report is consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage
Previous wording
Securities Corporation and Farmer Mac II LLC. This discussion and analysis of financial condition and
Current wording
Securities Corporation and Farmer Mac II LLC. This discussion and analysis of financial condition and results of operations should be read together with: (1) the interim unaudited consolidated financial statements and the related notes that appear elsewhere in this report; and (2) Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on February 23, 2024 (the "2023 Annual Report").
Previous wording
•we provided $1.5 billion in liquidity and lending capacity to lenders serving rural America;
Current wording
•we provided $2.0 billion in liquidity and lending capacity to lenders serving rural America;
Previous 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.
Current wording
The $9.0 million year-over-year decrease in net income attributable to common stockholders was due to a $3.6 million after-tax decrease in the fair value of undesignated financial derivatives, a $2.7 million after-tax increase in our provision for credit losses, the $1.6 million loss on retirement of the Series C Preferred Stock related to deferred issuance costs, and a $1.2 million after-tax decrease in guarantee and commitment fee income. These factors were partially offset by a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock.
Previous 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.
Current wording
The $0.3 million year-over-year decrease in core earnings was due to a $2.7 million after-tax increase in our provision for credit losses partially offset by a $1.5 million after-tax increase in net effective spread and a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock.
Previous wording
The $0.6 million sequential increase in net effective spread was primarily due to a $1.3 million increase from a shift in the composition of new business volume towards higher-yielding loans and an increase of $0.9 million in cash-basis interest income. These factors were partially offset by an increase of $1.8 million in our 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, net effective spread remained consistent compared to first quarter 2024.
Current wording
The $1.8 million sequential increase in net effective spread was primarily due to a $0.9 million increase from a shift in the composition of new business volume towards higher-yielding loans, and a decrease of $0.9 million in our non-GAAP funding costs, which was primarily attributable to our proactive asset liability management practices such as calling fixed-rate debt in response to lower nominal interest rates. In percentage terms, the sequential increase of 0.02% was primarily attributable to an increase of 0.01% due to the shift in the composition of new business volume towards higher-yielding loans and a decrease of 0.01% in non-GAAP funding costs.
Previous 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.
Current wording
The $2.0 million year-over-year increase in net effective spread was primarily due to a $5.0 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 $3.0 million in non-GAAP funding costs, which was primarily attributable to the widening of debt spreads that occurred in fourth quarter 2023 and increased our floating-rate funding costs. In percentage terms, the year-over-year decrease of 0.04% was primarily attributable to an increase of 0.07% related to the increases in non-GAAP funding costs, and was partially offset by an increase of 0.03% on the shift in the composition of new business volume towards higher-yielding loans.
Previous 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.
Current wording
Our outstanding business volume was $28.5 billion as of September 30, 2024, a net decrease of $290.0 million from June 30, 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 $388.2 million in the Agricultural Finance line of business, partially offset by a net increase of $98.2 million in the Rural Infrastructure Finance line of business.
Previous wording
The increase in capital in excess of the minimum capital level required was primarily due to an increase in retained earnings.
Current wording
The decrease in capital in excess of the minimum capital level required was primarily due to the redemption of the Series C Preferred Stock, partially offset by an increase in retained earnings.
Previous 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:
Current 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 September 30, 2024, June 30, 2024, and December 31, 2023:
Previous 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.
Current wording
The increase of $122.4 million in on-balance sheet substandard assets during third quarter was primarily driven by credit downgrades in permanent plantings, crops, livestock, part-time farms, and agricultural storage and processing. The $7.5 million increase in substandard assets in our off-balance sheet portfolios during third quarter was primarily due to credit downgrades in crops, permanent plantings, and livestock, and was partially offset by credit upgrades in part-time farms.
Previous wording
There were no substandard assets in the Rural Infrastructure Finance portfolio as of June 30, 2024. There was one substandard asset with an outstanding balance of $29.4 million in the Rural Infrastructure Finance portfolio as of December 31, 2023.
Current wording
There was one substandard asset with an outstanding balance of $24.1 million in the Rural Infrastructure Finance portfolio as of September 30, 2024. There was one substandard asset with an outstanding balance of $29.4 million in the Rural Infrastructure Finance portfolio as of December 31, 2023.
Previous 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.
Current wording
On-balance sheet Agricultural Finance assets 90 or more days delinquent increased in permanent plantings, crops, livestock, part-time farms, and agricultural storage and processing. Off-balance sheet Agricultural Finance assets 90 days or more delinquent increased in permanent plantings, 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 September 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. 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."
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 third quarter 2024, we excluded the loss on the retirement of the Series C Preferred Stock from core earnings and core earnings per share. 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."
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
perspective, of the material information necessary to assess Farmer Mac's financial condition and results
Previous report — wording carried elsewhere
of operations for the quarter ended June 30, 2024. Financial information included in this report is
Previous report — wording carried elsewhere
consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage
Previous report — wording carried elsewhere
results of operations should be read together with: (1) the interim unaudited consolidated financial
Previous report — wording carried elsewhere
statements and the related notes that appear elsewhere in this report; and (2) Farmer Mac's Annual Report
Previous report — wording carried elsewhere
on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on February 23, 2024