Federal Agricultural Mortgage Corporation Q1 FY2026 earnings call

• First quarter 2026 was outstanding with record-setting business volume, revenue, and core earnings. - Total revenues increased 14% year-over-year with strong contributions from business volume growth, funding execution, and stable asset credit quality. - Broad-based growth supported by strong pipeline, especially in farm and ranch segment. - Portfolio details: agricultural finance, farm and ranch AgVantage securities, Corporate Ag Finance, infrastructure finance segments' performance. - Financial results: net effective spread, revenue growth, expense management, tax benefit from renewable energy investment tax credits, credit and asset quality, capital position. - Team's dedication and impact on rural America.

Total revenues increased 14% year-over-year. Agricultural finance outstanding business volume grew $777 million in the first quarter, with farm and ranch segment accounting for $675 million of net growth. Farm and ranch AgVantage securities portfolio grew $325 million. Corporate Ag Finance segment ended the quarter with over $2 billion in outstanding business volume, up ~5% sequentially and 9% year-over-year. Infrastructure finance outstanding business volume increased $717 million sequentially, or 6%, to $12.6 billion as of quarter end, with power and utility segment net growth $115 million, renewable energy segment grew $445 million, or 18%, to $2.9 billion, and broadband infrastructure posted net growth of $158 million, ending the period at $1.7 billion outstanding.

• Expect to maintain return on equity in the range seen in Q1. - Spread can vary due to asset mix, but focus on return on equity. - Look to utilize remaining tax credit carryback capacity in Q2. - Maintain thoughtful and balanced approach to managing capital position, with organic capital generation, selective capital issuance, and risk transfer tools. - Portfolio layer method hedging impact to grow over time and be accretive to net effective spread.

• Geopolitical volatility can impact farm economy, potentially affecting loan activity and credit. - Higher energy prices pushing fuel and fertilizer costs higher, impact on producer margins. - Potential evolution in renewable energy industry as tax and other incentives expire. - Seasonal factors affecting delinquency levels.

Q: Hey, everyone. Good afternoon. I wanted to ask first about return on equity expectations. Obviously, you had a very strong quarter at 17% ROE. Just with the pipeline and what you are seeing out there, where do you think that trends? And I wanted to ask about spread as well, but that moves around with the mix. Is it better really to focus on the ROE outlook?

A: Well, good afternoon, Bose. Thank you very much for the question. In terms of return on equity, as you noted, we printed 17% for the quarter, and that is a metric that we are very focused on in terms of deploying capital and purchasing assets within our business. We are looking to maintain the business in that range of outlook in terms of return on equity going forward. In terms of spread, or net effective spread margin, that is a metric that can vary from quarter to quarter. A variety of factors weighed on that margin this quarter, including asset mix. As we purchase high return-on-equity but, in some cases, lower-spread assets—particularly in our AgVantage portfolios—that can dilute margin but is very much accretive to return on equity, which is our principal focus in terms of managing the business and managing the balance sheet.

Q: And then, you noted the potential impact on the farm economy from geopolitical volatility. If this persists, is the bigger focus on what it could do to loan activity, or are there areas from a credit standpoint that you are looking at as well?

A: Hi, Bose. The conflict in the Middle East has created more volatility. The question has a couple of prongs. First, the duration of the conflict, which has exacerbated the increase in fertilizer prices, could weigh on margins going forward. It clearly depends on if a grower pre-purchased inputs prior to the uptick. While that could stress the ag economy and certain borrowers, it also could lead to the need for additional liquidity and capital, and we stand ready to support those borrowers as they need to work through stress. As it pertains to our portfolio, we feel fairly confident with the strengths we are seeing with new applications and new loan purchases. In fact, all the loan purchases in the first quarter had very strong credit scores and very solid loan-to-values. The use of proceeds was typically for refinancings or new purchases, be it land or equipment. While we recognize there are stresses in certain parts of the ag economy, the diversified model that we have across the country and across commodities helps support us to be there in good times and bad times.

Q: Hi. Good afternoon, and thanks for taking my questions. Great to see the volume increase that you talked about at the Investor Day. First question, I want to follow up on the margin outlook. Obviously, there is a little bit of a seasonal factor, so the fourth quarter will not be a good guide going into Q2, but if you look at your mix of business in the pipeline that you are seeing right now going into Q2, do you expect a little bit more net pressure on the margin, or do you expect it to start to stabilize maybe in the next couple of quarters? That is the first question.

A: Hi, Bill. A couple of comments as it pertains to net effective spread percentage. As we noted, two primary factors, and I would say both relatively positive. First and foremost, in the fourth quarter of last year, we put on almost $700 million of AgVantage volume. That dramatically increased the average daily balance of AgVantage heading into the first quarter. As we have discussed, AgVantage is one of our highest returning products—we are leveraging our capital—although the net effective spread percentage is the lowest across our portfolio. And as Matt indicated, we are really focused on return on equity and return on invested capital. So the impact of that increase in average daily volume weighed down on the net effective spread percentage this quarter. In addition, we had two fewer days in this quarter versus the fourth quarter, and that compressed our fastest-growing segments, which would be renewable energy and broadband infrastructure. The combination of those two dynamics was predominant to the lower net effective spread percentage. What I would highlight as we look forward: about $800 million or more of our volume was put on in the month of March, and that was broadly diversified across all our segments. So we feel very strong about the durability of our net effective spread heading into the second quarter in a broad fashion. Clearly, the lumpiness of AgVantage could alter that mix going forward, but as we look right now, all operating segments have very strong pipelines. One thing I would note is that the broadband infrastructure and renewable energy segments have significant loan commitments. As those constructions take place and those commitments are funded, you will see a much higher net effective spread in those businesses. I will turn it over to Matt to talk a little bit about the liquidity and funding mix dynamics.

Q: Okay. Thanks for the detailed response on that. One other question on data centers—it probably gets a bit more attention than it really needs—but there have been some headlines in the last few weeks about some delays in data center construction coming online. Maybe you could give us a little more detail on what you are seeing specifically in your own portfolio.

A: Hi, Bill. As we mentioned at Investor Day, we are very thorough and methodical in the types of data center transactions we look at. We will not pick up a pencil to assess or underwrite a transaction unless we are working with top counterparties—developers, sponsors, tenants—that have significant experience in constructing and operating these data centers. We want to make sure that there is a power purchase agreement signed and in place, and over 80% of our tenants in our data center portfolio are two to four top investment-grade hyperscalers. We have the opportunity, given the market, to focus on the best structures and the highest-rated data center opportunities. We do not deviate, and we do not feel the need to deviate or stretch given the growth that we see available to us. Focusing on these counterparties and these tenants, we have seen very few issues in terms of delays in construction or delays in operations. We are not speculating; everything needs to be signed up and in place, including water and other key inputs, before we enter into a transaction. That limits and reduces a lot of risk as you go through the process. In speculative opportunities, something not being in place can delay the project and further delay construction and completion. We feel very good about the counterparties and the transactions we are looking at, and we do not feel the need to look at anything different or stretch in any way.

Q: And thanks. One clarification question for Matt. Just to make sure I heard it right, you have $30 million of investment tax credits remaining. Do you expect most of that to be recognized in the second quarter?

A: Our capacity for carrybacks to prior-year income tax credits is $30 million as of 03/31/2026, and our expectation is that we will fully utilize that carryback capacity in the second quarter. Going forward, we will be operating on a current-year basis and will be monitoring market opportunities to potentially monetize additional tax credit purchases, but it would be on a current-year basis from that point forward.

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