Federal Agricultural Mortgage Corporation

Good afternoon, ladies and gentlemen, and welcome to the PharmaMAC second quarter 2025 earnings results conference call. At this time, all participant lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on August 7, 2025. I would now like to turn the conference over to Jalpa Nazareth. Please go ahead.

Good afternoon, and thank you for joining us for our second quarter 2025 earnings conference call. I'm Shelfa Nazareth, Senior Director of Investor Relations and Finance Strategy here at FarmerMac. As we begin, please note that the information provided during this call may contain forward-looking statements about the company's business, strategies, and prospects, which are based on management's current expectations and assumptions. These statements are not a guarantee of future performance and are subject to the risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Pharmac's 2024 Annual Report and subsequent SEC filings for a full discussion of the company's risk factors. On today's call, we will also be discussing certain non-GAAP financial measures. Disclosures and reconciliations of these non-GAAP measures can be found in the most recent form 10Q and earnings release posted on PharmaMac's website, pharma.com, under the financial information portion of the investor section. Today, I'm joined by President and Chief Executive Officer Brad Nordholm, who will lead our discussion on second quarter 2025 results, and our Chief Business Officer, Zach Carpenter, who will discuss customer and market development. Select members of our management team will also be joining us for the question and answer period. At this time, I'll turn the call over to President and CEO, Brad Nordholm. Brad?

Thanks, Jalpa. Good afternoon, everyone, and thank you for joining us. I'm very pleased to announce that we've achieved record results across the board during the second quarter, 2025. More specifically, we grew core earnings 19% year over year. We grew net effective spread over 12% compared to the same period last year, and we surpassed 30 billion in total outstanding business volume for the first time. Our total portfolio is well diversified by both commodity and geography, and we remain confident in the overall health of our portfolio as evidenced by our continued strong asset quality metrics. We ended the quarter with a record $47.4 million in core earnings and a record net effective spread of $93.9 million. The growth in spreads was driven by higher average loan balances and the continued shift to higher spread business, which has been a key driver of the increase in net effective spread over the past several years. Our strategic decision to diversify our loan portfolio into newer lines of business such as renewable energy, broadband infrastructure, and corporate agribusiness has been a key priority, and that diversification is benefiting us through changing market cycles, and it is benefiting rural America. Also reflected in our core earnings results this quarter is the purchase of $35.6 million of renewable energy investment tax credits. That resulted in a benefit of about $3.2 million. We continue to actively evaluate these types of renewable energy credits during 2025 as we continue to be a significant participant in the project finance market, which gives us unique insights into the value of these credits. Partially offsetting the growth in net effective spread in second quarter was an increase in operating expenses related to headcount, technology investments, and higher transaction related legal fees. The higher legal fees during the quarter were related to the new renewable energy tax credit purchases I mentioned and business transactions in our new segments of business. Our efficiency ratio remains in line with the long-term strategic target of 30% and reflects our disciplined approach to expense management as we monitor and manage expense growth proactively against our incoming revenue streams. We take pride in our focus on effective expense management as we scale our business and we'll continue to assess appropriate investments in our operational platforms and resources to support our future growth, our ability to innovate, and our ability to drive profitability. In terms of credit expense, several factors contributed to the $7.8 million net provision to the total allowance for losses this quarter. First, we recorded a $2.8 million charge off related to two specific borrower relationships, one a permanent planting loan and the other a crop loan, for a portion of each loan deemed uncollectible as of June 30th. However, after quarter end, we recovered approximately $1.7 million related to the permanent planting loan, which we expect to be reflected as a recovery in our third quarter results. Other factors contributing to the provision in the second quarter were downgrades of two loans in the infrastructure finance line of business, and higher allowances related new volume growth in broadband, infrastructure, and renewable energy segments. Finally, a declining economic forecast that flows as does the volume growth in broadband and infrastructure through our CECL models. These new segments carry different risks and different risk rate resulting in larger CECL derived allowances. but they are also generally businesses with higher effective spreads. We believe that our total portfolio is well diversified both by industries and segments and that we're well positioned given our strong levels of capital. The fundamentals of our underwriting guidelines and credit policies enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle. While some credit losses are inherent in lending, we believe that any losses in our current credit cycle will be moderated by the strength and diversity of our overall portfolio. And in fact, our overall credit profile remains strong as both 90-day delinquencies and substandard assets decreased quarter over quarter. Despite heightened volatility and market uncertainty, our prudent underwriting approach, emphasizing loan-to-value and cash flow metrics positions us well to withstand market cycles. To date, we have not seen any significant effects on our portfolio related to government actions or changes in policy. We will continue to closely monitor industry and credit conditions as new government policies are implemented. I'm also pleased to share that after quarter end, our board of directors modified the terms of PharmaMax share repurchase program to increase the total authorized amount of repurchases from $9.8 million to $50 million of PharmaMac's outstanding C-class common stock. The Board also extended the term of that program to August 2027. PharmaMac intends to repurchase shares when it views repurchases as accretive and consistent with our strategic objectives. We successfully closed on our sixth farm securitization transaction in June in some challenging and volatile market conditions, which is a testament to the strength and demand of the farm program. We're working towards a second transaction later this year and also continue to explore alternative securitization structures that will allow us to expand our offerings while serving as another source of capital management. The securitization program remains an important strategic initiative for PharmaMac as it allows us to enhance and optimize the balance sheet by efficient deployment of capital and also enable our growth strategy by targeting new asset opportunities. We're very pleased with the tremendous support we've seen from our stakeholders for this program and expect to be in the market before the end of the year with another securitization transaction. Farmer Mac's core capital increased by $35 million to $1.6 billion as of June 30, 2025, exceeding our statutory requirement by $602 million, or 63%. The sequential increase reflects higher retained earnings, partially offset by capital impact due to growth in total assets. Our Tier 1 capital ratio modestly declined to 13.6% this quarter, from 13.9% last quarter, primarily due to growth in assets in our newer segments. As mentioned on prior calls, this dynamic is expected as we continue to grow our book of business in more accretive segments that require an incrementally higher amount of capital. Looking ahead, we'll continue to evaluate all the capital management tools we have available to achieve our goal of optimizing our overall capital position and maintaining an opportunistic approach to add to our capital buffer. A strong capital position has enabled us to grow and diversify revenue streams, remain resilient in volatile credit environments, and continue to offer competitively priced liquidity to our customers and their borrowers, even in challenging times. I also want to comment on the passage of the One Big Beautiful Bill, also known as H.R. 1, which contains many provisions that have the potential to impact Farmer Mac and its stakeholders, including farmers, ranchers, and the renewable energy industry. This legislation includes updates to the federal crop insurance and revenue protection programs, as well as tax benefits on the interest income earned on qualified rural or agricultural real estate loans. These are potentially positive for Farmer Mac. We're actively monitoring and assessing the impacts of this new law on us and the industries we serve. We believe our inclusion in the legislation reflects the importance of our mission to increase the accessibility of financing to provide vital liquidity for American agriculture and rural infrastructure. And now I'd like to turn the call over to Zach Carpenter, our Chief Business Officer, to discuss our customer and market developments in more detail. Zach?

Thanks, Brad. We had another solid quarter of outstanding business volume growth. We achieved $800 million of net new business volume with new volume increases across all segments in our portfolio, resulting in total outstanding business volume of $30.6 billion as of quarter end. The growth in our portfolio this quarter once again demonstrates our successful efforts over the last few years to strategically grow and diversify our business segments and revenue streams throughout changing market cycles. The shift to higher spread business has been a key driver of our record results, and we believe our pipeline and business composition will continue to position us well for the remainder of the year. The infrastructure finance line of business grew by $644 million in the second quarter to $10.4 billion as of quarter end, reflecting the continued strong demand for electric power, the continued investment in renewable energy generation and storage, and the significant demand for liquidity for data center investments. Our renewable energy segment grew $332 million in the second quarter of 2025, a 122% increase year over year. and in the quarter at nearly $2 billion. Our near-term pipeline does remain strong. Despite the increase in policy uncertainty around the overall renewable power investment market following the passage of HR1, we expect to continue to participate in renewable energy power transactions for both new projects and refinancing opportunities of existing projects. In addition to the substantial increase in need for new power generation, the tax credit phase outs for renewable energy generation projects in HR1 will likely result in a flurry of activity over the next 12 months for projects to start construction to meet required milestones to maintain tax incentives. Our broadband infrastructure segment grew $200 million this quarter to $1.2 billion as of quarter end. We anticipate increased financing opportunities for rural telecommunications providers driven by fiber line expansion, wireless broadband deployment, data center buildouts, industry consolidation, and mergers and acquisitions. These developments are crucial for rural economic growth and the connectivity needs for rural America. Our power and utility segment grew $112 million this quarter, largely due to strong loan purchase activity supporting investment needs of rural electric generation, transmission, and distribution cooperatives. Growing business volume in our infrastructure finance line of business remains a top priority, and we will continue to focus on strategic investments in these areas to build out our expertise and capacity as market opportunities arise. Turning to the agricultural finance line of business, volume increased by $188 million in the second quarter to $20.2 billion as of quarter end. Growth in the second quarter consisted largely of strong loan purchase volume in both the farm and ranch and corporate accident segments. Our farm and ranch segment business volume increased by a net $123 million in the second quarter to $18.2 billion as of quarter end. As our farm and ranch loan purchases portfolio grew by $429 million, outpacing scheduled maturities. We believe that we will see loan purchase growth continue into the foreseeable future due to the continuing agricultural economic tightening, the potential for increased tariffs and trade policy changes, and continued inflationary dynamics for agricultural inputs. As Brad mentioned, we are actively assessing the provisions in H.R. 1 that have a direct impact on farmer MAC related to enhanced tax benefits for qualifying agricultural real estate loans. We do believe our inclusion in the new law will provide Farmer Mac with an opportunity to further our mission of finding innovative ways to increase access to capital and reduce the cost of credit for farmers and ranchers. The farm and ranch segment is core to our mission, and we remain committed to bringing our customers products that provide capital and risk management solutions, as well as supporting their borrowers' financial needs. Our corporate act finance segment grew $64 million in the second quarter to $2 billion at quarter rent. Although quarterly volume can be unpredictable, opportunities in this segment are more creative to net effective spread compared to the farm and ranch segment. We are continuing our efforts to further our relationships and modernize our internal infrastructure and anticipate increased credit demand to support larger, more complex agribusinesses in the coming quarters. We continue to be excited about the strategic direction of the company and remain focused on our mission to provide capital through the agricultural and economic cycles. We believe we are well positioned to make continuous progress on our long-term strategic growth initiatives as we navigate this backdrop of broader market uncertainties stemming from factors such as interest rates, regulatory shifts, and policy changes that could have a potential impact on the industries we serve. And with that, Brad, I'll turn it back to you.

Good. Well, thank you very much, Zach. Our team delivered record financial results in the second quarter while fulfilling several important strategic and revenue objectives. We delivered core earnings that were a record. We maintained a strong credit profile. We reported a core return on equity of 17% while holding our efficiency ratio below our strategic target of 30%. We're optimistic about the future and we believe that we continue to be well positioned to deliver on our multi-year strategy with strong liquidity and capital levels, a diversified business mix, highly effective risk management practices, and most importantly, a talented team of dedicated professionals here at Farmer Mac. And before I turn to the Q&A period, I'd like to take a moment to thank Aparna Ramesh for her contributions to Farmer Mac over the last six years. Her leadership contributed to a very strong, creative, disciplined, and resilient finance team that continues to execute on our strategic initiatives without missing a beat. While we are sad to see a partner leave us, we are proud when Farmer Mac is a springboard to exceptional opportunities for talented leaders. As we noted previously, we have launched a nationwide search for a new CFO, and we'll provide updates as appropriate. And now, Operator, I'd like to see if we have any questions from anyone who's on the line with us today.

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by 1 on your touch-tone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by 2. And if you're using your speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star 1 now if you have any questions. And your first question will be from Boze George at KBW. Please go ahead.

Hey, everyone. Good afternoon. Actually, I wanted to ask first about the spread outlook. I mean, I think the last, you know, couple of quarters, we've talked about spreads, you know, potentially sort of moving down a little bit. They've held up well and actually gone up further. So, you know, how should we think about the outlook there? Also, this quarter, like, you know, looking at the farm and ranch, especially the spreads in there, within the segment itself went up, I think it was six basis points. So, can you just Talk about the drivers of that as well.

Zach, go ahead, please.

Yeah, happy to. You know, I'll stick with Farm and Ranch first. This is your second question. I think this is a strong mixed question that we saw in the second quarter. We had a very strong growth rate of loan purchase in our core Farm and Ranch loan purchase product. um that outpaced significant maturities in advantage so the the delta of that mix having stronger creative nes and the loan purchase side resulted in higher increase in the overall segment and effective spread percentage as the advantage balance decreased we typically see much tighter uh credit spreads and advantage and so the delta there is really the driver of that growth um Can you talk about spread outlook? I think this, you know, contemplates the diversity of our portfolio. As we've seen over the last few years, we've seen a lot faster growth in these newer segments, and those newer segments do carry more accretive credit spreads than, I'd say, our historical segments. So as we've seen the mix shift more towards higher growth in these newer segments, we're going to see that accretion in our overall net effective spread percentage. And again, I'll highlight that. As we've seen advantaged product growth decline over the last 18 months, that is also supporting that higher net effective spread growth. So as we look to the second half of the year, as we noted, we do see pipeline activity that's fairly strong in our newer lines of business. And we'll see to ascertain those more accretive spreads as it grows our business platform.

Okay. So spreads, you know, staying around these levels at least for the next couple of quarters is reasonable?

Yeah, Bose, I think what we have here is a little bit of a contest going on between the, frankly, above expected growth rate of some of these new segments, including broadband, renewable energy, project finance, and corporate ag business, which are all doing really, really well this year. So between that, which is putting a little bit of upward, a little bit of a lift on spreads, and then the question of the timing and or pay down of egg vantage bonds. And I think, you know, you referenced past years where maybe we thought we were going to have a little bit of downward pressure. That, in part, was because of the expectation of more closing and draws on egg vantage bonds that have just been slow to materialize. We still have some ones that could materialize in the later half of the year, and that's where this contest comes down. Will they materialize enough to drag down what will be otherwise a continuing accretion driven by these higher segments of business or not. But I think, you know, starting with a place that, you know, the expectation is about where we are today is a good place to start.

Okay, great. That's very helpful. Thanks. And then the $3.5 million, you know, the tax credit that you mentioned, does that flow through as a lower tax rate? Is that where we see that?

Yeah, I'm going to ask Greg Ramsey, who's our principal accounting officer who's with us today, to give you the details. It's a good technical question, Boze.

Yeah, hi, Boze. This is Greg Ramsey. Thanks for the question. Yeah, the benefit that we receive from those tax credits, it flows right through and reduces our tax expenses. So you would see our effective tax rate this quarter actually below the statutory rate, and that's why the first time that we've seen that, and that's a result of those tax credits that have accumulated since we started buying them in the fourth quarter of last year.

Okay. And then actually one sort of related question. I think, Brad, you mentioned there was some legal cost related to that. Is that in OPEX or does that net out kind of through that number and through the tax number?

Yeah. This is Greg again. You're right. There are some administrative expenses dealing with those transactions, and those expenses do flow through our general administrative expenses or operated expenses.

That's right. Okay. Great. Thanks a lot.

Thank you. And our next question will be from Bill Ryan at Seaport Research Partners. Please go ahead.

Thanks and good afternoon. I'd like to start off with a couple of questions about HR1. You mentioned that there was some potential tax benefit. I was wondering if you could maybe elaborate on that a little bit more and how it might stimulate some incremental farm and ranch loan demand and then along the same lines of HR1. And I guess this is a little bit more qualitative. There's been a lot of questions about whether, you know, I guess going back to 2024, it's like 93%, 94% of new energy production that came online was renewable. Is this something that you think Congress might have to revisit? I mean, is fossil fuels ramping up enough to kind of offset the expected decline that might take place in 2027 and beyond? Again, it's a little bit more qualitative question, but I was curious as to your thoughts on that.

Sure. As it relates to H.R. 1 and tax savings, specifically, there's a provision in there that we mentioned that's referred to as ACRE, and it provides a partial exclusion from taxation for interest income on new, not refinancing, first mortgage loans on production agriculture. This is something that is not baked into an accretive line in our pro forma. From our standpoint, we expect it to be fairly neutral. But at the end of the day, if it can result in savings to Americans, farmers, and ranchers, it's a good thing. And that's why it was important to us to be a part of it. So it's not something that will drive significant changes in any pro forma for our farm and ranch business, at least from an earning standpoint. As it relates to new energy production, it's a fascinating question. I think, as you know, Bill, I spent almost 20 years in the electric power industry before coming to PharmaMac. And so what's going on is of not just keen interest to me, but I can kind of understand some of the issues. absolutely you're correct over the last couple years incremental capacity in the united states has been dominated by investment in new capacity and in solar and wind and we now have a phase out of of credits and we also um probably something that we're keeping even closer eye on over the last week or so is that we have um an executive order uh which uh is designed It's a very clearly stated objective designed to make it more difficult to complete permitting for renewable energy projects that otherwise might be done before credits expire or even after credits expire. So we're keeping a very close eye on that. But I think when you look at the fundamentals in the United States and your question about whether it will need to be revisited, I think most are well aware that data centers are driving a significant high single-digit CAGR increase in electric power demand in the United States. That projection for electric power demand is really broken from GDP, and it's much higher. And there's the question, where are these electrons going to come from? And it takes 10 to 15 years to permit and build a nuclear power plant, which we haven't done, by the way, for 30, 40 years, and there are no contractors who will guarantee completion and cost of that. So there's the question of risk allocation. And there's a significant backlog for gas turbines now for new simple cycle or combined cycle natural gas-fired electric power plants. And the permitting time for that is at least two to three years, plus construction timetable of a couple of years, maybe five years best case. What's going to be happening, as you point out, you know, 2027, 2028, 2029, the fact is that solar and wind are the fastest response of new capacity, and also when combined with batteries are the fastest response to that. And despite the changes in policy, some of the big drivers of this market now, and they include Google and Amazon and Facebook and Microsoft, They're out very, very actively looking for anyone who can provide electrons, preferably green electrons, but any kind of electrons right now to support their demand. And we believe that it will result in new renewable projects being built even without tax credits post the wind down of the existing ones. But a lot is in flux, and we are taking the approach as we always have. We're debt, not equity in these projects, and so we're responsive to real projects that are getting built, and our risks are well mitigated. But we're taking a wait-and-see approach for exactly how the future growth and future demand does adjust.

Okay. Thanks for the color on that, Brad. Just one kind of follow-up as just an update. Curious about any additional impact on tariffs. I know they kind of just started the last time you did your conference call. You know, if you can maybe talk about any update there and how are the market, I think they were called market facilitation payments to farmers, how that's progressing to kind of keep, you know, farmers in check financially.

Jack, can you provide some color on that one?

Yeah, hi, Bill. It's definitely something we've been watching constantly. And clearly, I think there's just a lot of uncertainty as it pertains to the tariff and especially the whiplash. I mean, recently, the tariffs for many countries were set in place after some of the delays. And I also think it's really hard to paint a broad brush in terms of where we're going to see the impacts. For example, you know, there's a significant amount of U.S. soybeans that are exported to China. And so we've seen a decline in exports there but in many cases cases there's other markets that have opened up and so we're assessing what the pricing impact to the soybean is to the farmers and ranchers for these changes in exports on the other side of the spectrum you've got corn and there's a very little export or it's not nearly as much as soybeans and we're going to see significant increase in ethanol the uk trade structured agreement has increased demand for x ethanol from u.s producers, and feed is a significant component of corn, and we've seen that significantly grow. So, it's really hard to assess currently what the overall impact is going to be as some of these structured agreements become put in place, as well as what other potential retaliation or other agreements are made. You know, the one thing I would say is that, you know, the American Relief Act in December 2024 gave allocated $33 billion of disaster relief to farmers and ranchers, and we're starting to see that trickle out there. The USDA does indicate that 2025 will be a fairly high year of net cash farm income for farmers and ranchers, heavily driven by government payments. Farmers and ranchers don't necessarily want to show positive income from government payments, but it is a support for the farmers and ranchers during this volatile time. And I think also with H.R. 1 and the passage of Price loss coverage and agricultural risk coverage programs and increase in reference prices is another safety net that we're supportive of to help the farmers manage through this potential volatility time of tariffs.

Okay. Thanks for that, Dan. Thanks for taking my questions.

Thank you. Next question will be from Brandon McCarthy at Sudoti. Please go ahead.

Great. Thanks. Good afternoon, everyone. Thanks for taking my questions here. I just wanted to follow up on the renewable energy tax credits. Just given those credits are due to phase out, I'm curious on what the timing of that phase out looks like. And Zach, I think you alluded to there may be a ramp up in new projects to kind of get ahead of that deadline. I'm wondering if we can maybe expect a similar quarterly run rate in renewable energy tax credits going forward.

Well, yeah.

As it relates to tax credits distinct from project finance opportunities and renewable energy projects, we do those opportunistically because they're structured to be very, very low risk and be a very nice kind of discounted arbitrage that results in net income for us. We will continue to monitor the opportunity to purchase those as long as they remain low risk, but it's not a fundamental part of our P&L strategy. It is something around which we are just being opportunistic. As it relates to project finance, though, a lot of the credits are scheduled to phase out next year. some of the ones, retail credits for EVs, some of the home solar, some of the home improvement, those are facing out later this year. But for the commercial projects next year, you then get into a very complicated discussion about commencement of construction and requirements that have to be satisfied in order to lock in those credits. And so when you cut all the way through that, it means that Large projects may be in construction next year and not be finished for a year or two after that. So, again, we're going to continue to be very disciplined, as we always have been, in underwriting these project financial loans. Again, we're not equity. We're debt. We're responding to mature opportunities of these projects where the tax credits and the power purchase agreements and the engineering engineering procurement construction contracts and operating agreements and permitting are all locked in and continue to pursue those. And it's a huge addressable market. So even if it contracts by some, there's still a huge opportunity for us going forward. And then we'll see what happens in back years. As I mentioned earlier, I do believe that we will see some of these projects move ahead even without credits in the future.

Great. Thanks, Brad. I appreciate that detail.

I wanted to turn to the $7.8 million credit provision in the quarter. You mentioned there's a $2.8 million charge-off from two loans.

Can you go into detail on those two loans?

Yeah, I think we generically described them as a permanent planning loan. And a crop loan. We're certainly not going to discuss individual borrowers, but Mark, could you give maybe a little bit more of a generic explanation generally where they are and kind of some of the circumstances surrounding them?

Yeah. Yeah. So two loans, the charge, the charge in the quarter.

Sorry, this is Mark Grady, our chief credit officer is here.

Yeah.

Thank you.

Yeah. You mentioned the provision, but we took $2.8 million in charges in the quarter. on two different loans. One, the first is a permanent crop loan based in the Southwest region. We took a $1.7 million charge on that loan as we deemed it uncollectible at the end of the quarter. But after we closed our books for the quarter, we received that $1.7 million. We received a $1.7 million payment on that loan. And so at this point, we think we're well secured on that loan. The second loan is a crop loan also based in the Southwest region. that became delinquent in the second quarter due to weak operating performance. A receiver has been appointed to liquidate our collateral. And as we assess the value of our collateral as part of that process, we deemed $1.2 million to be uncollectible and record a charge.

Got it. Thanks. I appreciate the detail there.

And then you also mentioned, I think, two loans in the infrastructure finance segment.

I'm just curious as what, what line of business does that come from? Yeah, I think just the 2.7 million provision.

Sorry. Yep. That's right. Yep. Um, we, we downgraded two loans in our infrastructure, uh, finance portfolio. The first is a solar project that's based in the Southeast, um, about $17 million of exposure. Um, the project became operational in mid last year and, has, uh, It's had weak performance since becoming operational, but the company is still current on payments. The second is in our broadband infrastructure portfolio. It's a rural provider of communication services in the southeast. The company had engaged in a kind of high-growth strategy to build out its network. That resulted in cost overruns and other operational challenges, and as a result, the borrower became over-levered and tight on liquidity. The company right now is out looking for additional capital And so we should have more information on how that goes over the next couple months.

Got it. Thank you.

And last question for me just on the share repurchase authorization. How does that kind of fit into your capital allocation priorities? Do you think you'll be more active buying back shares?

Yeah, we have a number of tools here at Farmer Mac for being adequately capitalized from an equity standpoint. You know, that includes the rate, the pace of our dividends. I think you have seen us be incredibly consistent in how we think about that. And it's resulted in 14 consecutive years of dividend increases here at Farmer Mac. We have share repurchase as a tool when it is accretive, when stock price is very low. We have the opportunity to put new preferred capital on our balance sheet, which is something you've seen us do numerous times, and that's an option that we have today. And you've seen us use securitization strategically for diversifying our funding and transferring funding risk away from PharmaMac, but also for more capital efficiency because from regulatory allocated capital to securitizations is less than if we're holding all the risk on our balance sheet. So we have all these tools. We are pursuing securitizations basically as we have the right pools of assets to do those securitizations and remain committed in the future. We're constantly evaluating the use of preferreds and potential other securitization, asset pool securitization techniques for managing the aggregate amount or relative amount through a percentage. of capital relative to assets. And then we have share repurchase. So there's never a time when one of those is the answer. We are going to be extremely cautious and steady about how we manage dividend declarations here at PharmaMac. And then the others we're going to use routinely in the case of pharma ranch securitizations and the others opportunistically, depending on what is basically the best, the cheapest, most enduring form of capital, depending on what our objectives are for us at that given time.

Understood. Thanks, Brad. Thanks, everybody. That's all from me.

Thank you. Once again, ladies and gentlemen, a reminder to please press star 1 should you have any questions. Next will be Gary Gordon. Please go ahead.

Okay. Thank you. Actually, most of my questions have been answered. Just one sort of technical one on the share repurchase. Should we think of the capital that could be used for share repurchase as part of what historically you talked about as your 35% payout ratio or Are those separate issues and that would be in addition to the 35% in any given year?

Yeah, as I attempted to just communicate, you know, we are committed to being very, very consistent and disciplined about how we declare our dividends. So, you know, you mentioned a target ratio and we've been somewhere in that vicinity for a number of years now. We really don't want to change that. So this share repurchase should be seen as, again, something that is opportunistic and that is there as a tool and attractive as a tool when our market stock price gets too cheap.

Okay. And on maybe that you just answered this one, but why now? Why the Sherry personal authorization now versus a year or two ago?

Yeah, a couple of things. We hadn't looked at it in a while. We are a larger organization. It is appropriate that we size it at a larger level than the last time we really focused on this. And, you know, it's no secret in the last few weeks we've had some softness, you know, I think really unwarranted, but some softness in our stock price. And so it's a combination of factors.

Okay. Thank you.

Thank you. And at this time, it appears we have no other questions registered. I will turn the call back over to Mr. Nordholm.

Good well, thank you very much operator and thank you all for participating in this call, we have we're really proud of the results from this last quarter, we feel very confident about the remainder of the year and look forward to giving you another update in a quarter as always. If you have follow-up questions or just want to generally get a little bit more clarification on some of the things we've discussed today or other things that you see as you go through our release, please get in touch with Jalpa, and we will be as responsive as we possibly can. And with that, thank you all again. And I hope you have a really terrific and maybe a bit restful August.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.