FEDERAL AGRICULTURAL MORTGAGE CORP

Net Interest Income. The following tables provide information about interest-earning assets and funding, composition of changes in NII due to rate and volume, and a reconciliation of NII to NES for the three and six months ended June 30, 2026 and 2025. See MD&A—Use of Non-GAAP Measures—Net Effective Spread for more information about differences between NII and NES. Our interest-earning assets include:

•"Liquidity investments", which are defined as cash, cash equivalents (including U.S. Treasury securities, operational deposits, and other short-term money market instruments), and other investment securities (including securities guaranteed by the U.S. Government and its agencies or by GSEs and asset-backed securities) that can be drawn upon for liquidity needs. For additional details regarding our liquidity investments, see MD&A—Liquidity and Capital Resources.

•"Program Assets" are those assets that fulfill our mission to increase the accessibility of financing to provide vital liquidity for American agriculture and rural infrastructure. Program Assets include but are not limited to Eligible Loans, Farmer Mac Guaranteed Securities, AgVantage Securities, USDA Securities, and other asset‑backed securities.

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The $21.3 million and $23.5 million year-over-year increase in NII and NES, respectively, for the second quarter 2026 compared to the second quarter 2025 were largely driven by net new business volume in Renewable Energy and Farm & Ranch, in addition to the impact of collecting $7.4 million of default interest recognized in second quarter 2026.

The $31.7 million and $35.6 million year-over-year increase in NII and NES, respectively, for the six months ended June 30, 2026 compared to the same period in the prior year, were largely driven by net new business volume in Renewable Energy and Farm & Ranch, in addition to the impact of collecting $7.4 million of default interest recognized in second quarter 2026

See Note 9—Business Segments to the consolidated financial statements for more information about NII and NES from our business segments. See MD&A—Supplemental Information for quarterly NES by line of business.

Provision for Allowance for Losses. The following table summarizes the components of our total allowance for losses for the three and six months ended June 30, 2026 and 2025:

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During the second quarter 2026, we recorded a $7.0 million net provision to the allowance, which is attributable to new volume growth and portfolio credit migration. For additional information, see Note 4—Loans to the consolidated financial statements and MD&A—Risk Management—Credit Risk—Loans and Guarantees.

Gains/(losses) on financial derivatives. The components of gains and losses on financial derivatives for the three and six months ended June 30, 2026 and 2025 are summarized in the following table:

Table 11

These changes in fair value are primarily the result of fluctuations in interest rates. 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 3—Financial Derivatives to the consolidated financial statements for more information about our financial derivatives.

Operating Expenses. The following table summarizes components of operating expenses for the three and six months ended June 30, 2026 and 2025:

Table 12

The year-over-year increase in compensation and employee benefits expenses for the three and six months ended June 30, 2026 was driven by increased head count, higher bonus accruals associated with strong financial performance, and the timing of compensation expense recognition within 2026.

The year-over-year increase in general and administrative expenses for the three and six months ended June 30, 2026 was primarily attributable to higher consulting and licensing costs.

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, 2026 and 2025:

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The year-over-year increase in income tax expense for the three and six months ended June 30, 2026 was primarily attributable to increased taxable income in 2026. The changes in our effective tax rate are impacted by the volume of purchases of renewable energy investment tax credits. During the three and six months ended June 30, 2026, we purchased $21.4 million and $66.4 million, respectively, of tax credits at prices ranging from approximately $0.91 to $0.93 per $1.00 of credit, resulting in a benefit of $2.0 million and $6.3 million, respectively. During both the three and six months ended June 30, 2025, we purchased $35.6 million in renewable energy investment tax credits at prices of approximately $0.91 per $1.00 of credit. All of the renewable energy investment tax credits purchased are with projects that have been placed into service. As a result of these purchases, we recognized a tax benefit of $3.2 million for both the three and six months ended June 30, 2025.