FEDERAL AGRICULTURAL MORTGAGE CORP

Farmer Mac is driven by its mission to increase the accessibility of financing to provide vital liquidity for American agriculture and infrastructure. Our secondary market provides liquidity to our nation's agricultural and infrastructure businesses, supporting a vibrant and strong rural America. We offer a wide range of solutions to help meet financial institutions’ growth, liquidity, risk management, and capital relief needs across diverse markets, including agriculture, agribusiness, broadband infrastructure, power and utilities, and renewable energy. 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 2024, Farmer Mac:

•provided $7.0 billion in liquidity and lending capacity to lenders serving rural America;

•issued over $0.6 billion in FARM securitization certificates;

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

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

•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 $7.6 million year-over-year increase in net income attributable to common stockholders was primarily attributable to a $20.8 million after-tax increase in net interest income, a $2.6 million federal income tax benefit from the purchase of renewable energy investment tax credits, and a $2.0 million decrease in preferred stock dividends. These factors were partially offset by an $8.2 million after-tax increase in the provision for credit losses, a $6.6 million after-tax increase in operating expenses, and the $1.6 million loss on retirement of the Series C Preferred Stock related to deferred issuance costs.

The $21.9 million year-over-year increase in net income attributable to common stockholders for 2023 compared to 2022 was due to a $44.7 million after-tax increase in net interest income and a $2.9 million after-tax increase in guarantee fees. These factors were partially offset by a $15.6 million after-tax decrease in the fair value of undesignated financial derivatives and a $12.1 million after-tax increase in operating expenses.

The $0.5 million year-over-year increase in core earnings was primarily attributable to a $9.9 million after-tax increase in net effective spread, a $2.6 million federal income tax benefit from the purchase of renewable energy investment tax credits, a $2.0 million decrease in preferred stock dividends, and a $1.1 million after-tax increase in guarantee and commitment fees. These factors were partially offset by an $8.2 million after-tax increase in the provision for credit losses and a $6.6 million after-tax increase in operating expenses.

The $46.8 million year-over-year increase in core earnings for 2023 compared to 2022 was due to a $56.4 million after-tax increase in net effective spread, partially offset by a $12.1 million after-tax increase in operating expenses.

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 $26.3 million year-over-year increase in net interest income was primarily due to an increase of $20.2 million from the shift in the composition of new business volume toward higher yielding loans and a $16.9 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). That increased yield was partially offset by a $6.6 million decrease in cash-basis interest income and a $4.6 million increase in funding costs. In percentage terms, the year-over-year increase was 0.01%.

The $56.6 million year-over-year increase in net interest income for 2023 compared to 2022 was primarily due to a $48.9 million decrease in funding costs and a $19.9 million increase related to net new business volume. The decrease in funding costs was primarily due to our disciplined funding strategies and higher nominal interest rates that have led to an upward repricing of our excess long-term capital that we raised when interest rates were at historical lows and is held in our investment portfolio. The factors that contributed to the increase in net interest income were partially offset by an $11.2 million decrease in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). In percentage terms, the 0.11% increase was primarily attributable to a decrease of 0.16% in funding costs and a decrease of 0.04% in net fair value changes from designated financial derivatives.

The $12.6 million year-over-year increase in net effective spread was primarily due to a $20.2 million increase from a shift in the composition of new business volume towards higher-yielding loans. This factor was partially offset by a $6.6 million decrease in cash-basis interest income and a $1.3 million increase in funding costs. In percentage terms, the year-over-year decrease of 0.03% was primarily attributable to an increase of 0.04% related to the increases in funding costs and a decrease of 0.02% in cash-basis interest income, which were partially offset by an increase of 0.03% on the shift in the composition of new business volume towards higher-yielding loans.

The $71.5 million year-over-year increase in net effective spread for 2023 compared to 2022 was primarily due to a $54.6 million decrease in funding costs, due to the same factors mentioned above that decreased our funding costs, and a $20.6 million increase related to net new business volume. In percentage terms, the year-over-year increase of 0.16% was primarily attributable to a decrease in funding costs.

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 $29.5 billion as of December 31, 2024, a net increase of $1.1 billion from December 31, 2023 after taking into account all new business, maturities, sales, and paydowns on existing assets. The net increase was primarily attributable to a net increase of $1.1 billion in the 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 December 31, 2024 and 2023:

Table 4

The increase of $214.1 million in on-balance sheet substandard assets during 2024 was primarily driven by credit downgrades in permanent plantings, crops, livestock, part-time farms, and agricultural storage and processing.

There were two substandard assets with a cumulative outstanding balance of $42.5 million in the Infrastructure Finance portfolio as of December 31, 2024. There was one substandard asset with an outstanding balance of $29.4 million in the 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 25 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 December 31, 2024 and 2023:

Table 5

On-balance sheet Agricultural Finance assets 90 or more days delinquent increased in permanent plantings, crops, livestock, and part-time farms. Off-balance sheet Agricultural Finance assets 90 days or more delinquent increased in permanent plantings and 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 December 31, 2024.

As of both December 31, 2024 and 2023, there were no 90-day delinquencies in Farmer Mac's portfolio of 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."