Federal Agricultural Mortgage Corporation Q2 FY2024 earnings call

• Second quarter 2024 revenues were $89 million, an increase of $2.4 million from the same quarter last year. • Core earnings were $39.8 million or $3.63 per share in second quarter 2024, affected by a $6.2 million provision to the total allowance for losses due to a single permanent planting loan in bankruptcy. • Strong loan purchase volume in renewable energy and farm and ranch segments, with renewable energy loans aligned with mission and accretive to revenues. • Operating efficiency was 27% in the second quarter of 2024, better than the long-term target of 30%. • Closed the fourth FARM series securitization transaction in the second quarter and is working on the fifth.

Renewable energy segment: Purchased more renewable energy loans in the first half of 2024 than all of last year. Outstanding volume has more than doubled since the second quarter last year, and the pipeline remains strong. Farm and ranch segment: Closed $700 million in new farm and ranch loan purchase volume in the first half of 2024, compared to $780 million in the full year of 2023. Total revenues in second quarter 2024 improved $2.4 million over the same quarter last year to $89 million.

• Anticipate potential loan purchase opportunities in the farm and ranch segment due to projected downward trend in farm income and possible Federal Reserve Bank policy easing. • Expect advantage business volume to be volatile in the short term but see potential for further growth in the AgVantage business over time. • Projections of flat to higher earnings if rates decline in the future due to proactive capital allocation strategy of laddering and layering duration to minimize volatility.

• Macroeconomic level volatility could impact farm income. • Credit risks associated with specific loans, such as the single permanent planting loan in bankruptcy and the corporate ag finance loan sale resulting in a loss. • Volatility in AgVantage Securities volume due to slower market loan growth and tightening credit spreads reducing liquidity needs from counterparties.

Q: About flat to higher earnings as rates go down, what's the outlook for spreads?

A: When heading into a Fed easing cycle, there will be a marginal improvement in net effective spread. Lengthening the investment portfolio will start to show benefits over the medium to long-term. A deceleration in spread was due to funding in advance of volume, but a pick-up is expected as the Fed easing cycle progresses.

Q: Can you talk about the nature of the $3.9 million charge-off loan?

A: The loan was idiosyncratic. The borrower suffered from too much water in a region causing roots to rot, was in bankruptcy with an auction that suppressed buyer interest. We don't think recovery will occur as part of the recent land sale, so we took a charge.

Q: Update on the farm bill?

A: Passage in 2024 is unlikely. It's likely the 2018 version will be extended. Our business doesn't depend on farm bill changes, but we're staying abreast of developments between the election and inauguration.