FEDERAL AGRICULTURAL MORTGAGE CORP

Farmer Mac is driven by its mission to increase the accessibility of financing for American agriculture and rural infrastructure. As a secondary market provider for our nation's agricultural and rural infrastructure credit, we provide financial solutions to a broad spectrum of customers supporting rural America, including agricultural lenders, agribusinesses, and rural electric cooperatives. We are uniquely positioned to facilitate competitive access to financing that fuels growth, innovation, and prosperity in America's rural and agricultural communities. Farmer Mac also serves as a critical investment tool for a number of entities – such as states, counties, municipalities, pension funds, banks, public trust funds, and credit unions – by offering investment opportunities that may diversify their investment portfolios and provide possibilities to earn a competitive return on their investment dollars.

During third quarter 2024:

•we provided $2.0 billion in liquidity and lending capacity to lenders serving rural America;

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

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

•we redeemed all $75.0 million of our Series C Preferred Stock.

The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are measures of financial performance not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). 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."

Net Income and Core Earnings

The following table shows our net income attributable to common stockholders and core earnings for the periods presented. Core earnings and core earnings per share are non-GAAP measures that differ from net income attributable to common stockholders and earnings per common share, respectively, by excluding the effects of fair value fluctuations and specified infrequent or unusual transactions.

Table 1

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.

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.

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.

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.

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 "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."

Net Interest Income and Net Effective Spread

The following table shows our net interest income and net effective spread in both dollars and percentage yield or spread for the periods presented. Farmer Mac uses net effective spread, a non-GAAP measure, as an alternative to net interest income because management believes it is a useful metric that reflects the economics of the net spread between all the assets owned by Farmer Mac and all related funding, including any associated derivatives, some of which may not be included in net interest income.

Table 2

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.

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.

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.

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.

For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 10 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

Business Volume

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.

For more information about Farmer Mac's business volume, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

Capital

Table 3

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.

Credit Quality

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:

Table 4

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.

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.

For an analysis of current loan-to-value ratios across substandard and other internally assigned risk ratings, see Table 24 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

The following table presents 90-day delinquencies for the on- and off-balance sheet Agricultural Finance portfolios in dollars and as a percentage of the respective balance sheet category as of September 30, 2024, June 30, 2024, and December 31, 2023:

Table 5

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.

As of both September 30, 2024 and December 31, 2023, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.

For more information about Farmer Mac's credit metrics, including 90-day delinquencies, the total allowance for losses, and substandard assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."