Federal Agricultural Mortgage Corporation

Good afternoon, ladies and gentlemen, and welcome to the Farmer Mac third quarter 2025 earnings result conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on November 3rd, 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 third quarter 2025 earnings conference call. I'm Jelpa 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 risks and uncertainties that could cause our actual results to differ materially from those. Please refer to PharmaMac's 2024 Annual Report on Form 10-K and subsequent SEC filings posted on PharmaMac's website, PharmaMac.com, under the Financial Information portion of the Investors section 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 10-Q and earnings release posted on Pharmac's website. Today, I'm joined by our Chief Executive Officer, Brad Nordholm, who will lead our discussion on third quarter 2025 results, and our President and Chief Operating Officer, Zach Carpenter, who will discuss customer and market developments. 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 CEO Brad Northam. Brad?

Thank you, Jalpa. good afternoon everyone and thank you for joining us we delivered exceptional third quarter 2025 results achieving yet another quarter of record net effective spread and core earnings we surpassed 31 billion dollars in outstanding business volume and strengthened our already robust capital base through a very successful preferred stock issuance further supporting our long-term growth objectives and providing a buffer against market volatility. 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, and I might add our day-in, day-out market information we receive from being active in every commodity in every region of the United States. It's a real advantage. It is the consistency of our growth in financial results over the last few years and my expectations that that will continue that has given me the confidence to announce my anticipated retirement in March two thousand twenty seven. and for the board of FarmerMac to name Zach as President and Chief Operating Officer and as my successor upon my retirement. Zach has been instrumental in diversifying our loan portfolio into newer lines of business while extending our reach to more corners of rural America by developing strong strategic partnerships and relationships with both existing and new customers. I will continue to support Zach as he builds on FarmerMac's trajectory of mission-focused growth, operational resilience, and delivery of consistent financial results. So, turning to those results, we ended the quarter with a record net effective spread of $97.8 million and core earnings of $49.6 million. Year-to-date net effective spread and core earnings are $281 million, and $143 million respectively, reflecting double digit year over year growth. The growth in spreads was driven by higher average loan balances and the continuing shift to higher spread business, which has been a key driver of the net effective spread increase over the past several years. Our strategy driven decision to diversify our loan portfolio into newer lines of business that play to our competitive advantages in intermediate and long-term match-funded and securitized funding, such as renewable energy, broadband infrastructure, and corporate aid finance have been a key priority, and that diversification is benefiting us through changing market cycles. Also contributing to our net effect of spread growth is our effective asset liability management and funding execution. The strengthening of our balance sheet through retained earnings growth and preferred stock issuance supports our balance sheet management strategies, which are fundamental to the resilience of our business model, as these strategies enable us to be thoughtful and responsive to changing market conditions. Also reflected in our core earning results this quarter is the purchase of $24.2 million of renewable energy investment tax credits, resulting in a $1.5 million benefit. We will continue to actively evaluate these types of renewable energy credit opportunities in the next few quarters as we have consistent top marginal corporate tax liability and remain a significant participant in the renewable energy project finance market, again, giving us unique insights and some competitive advantages. Partially offsetting the growth and net effect of spread in the third quarter was an increase in operating expenses related to headcount, technology investment, and higher transaction related legal expenses. The majority of additions to headcounts were related to resources needed to support increased business volumes, especially in higher spread businesses, as well as new technology and operational efficient project implementation. We maintain our disciplined approach to expense management by proactively monitoring and manage expense growth against income revenue streams. Another way of putting it is our efficiency ratio. We'll continue to assess appropriate investments in our operational and technology platforms, resources to support future growth and scalability, our ability to innovate and drive profitability, while maintaining a disciplined efficiency ratio within our long-term target average of 30%. In terms of credit expense, several factors contributed to the $7.4 million net provision to the total allowance for the quarter. Specifically, the provision expense this quarter reflects, first, an increased loss estimate on certain ag storage and processing broadband substandard assets. Second, a handful of specific properties affected by groundwater regulation in California. And third, volume growth in both agricultural finance and infrastructure finance lines of business. Offsetting credit expense this quarter was the recovery of $2.2 million, primarily related to a single permanent planting loan that was previously charged off in the second quarter of 2025. We also recorded during the quarter a $4.4 million charge-off related to three different loans. As we've mentioned on prior calls, our newer segments, which have grown significantly over the last several years, carry different risk weights. hence requiring increased provision expense during this period of growth, while generating a significantly higher net effect of spread. Our provision expense reflects model-based CECL changes, or charges rather, and are part of our normal and ordinary course of business. We will continue to see quarterly adjustments, additions, and releases as our portfolios grow and mature. As of September 30th, the total allowance for losses was $37.2 million, or 12 basis points, of our total outstanding business volume. We believe that our total portfolio is well diversified by industry, geography, and segments, and that we're well positioned given our strong levels of capital. The fundamentals of our underwriting and risk analytics enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle. While credit losses are inherent in lending, we believe that any losses in the current credit cycle will be moderated by the strength and diversity of our overall portfolio and our allowances. From a credit perspective, portfolio quality remains stable during the third quarter despite a modest uptick in 90-day delinquencies, which reflects the seasonal impact of the July 1st payment date on almost all of our loans in the farm and ranch segment and not any identifiable trend. Despite heightening volatility and market uncertainty, Our prudent underwriting approach, emphasizing a dual assessment of 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 political developments, government actions, including the current shutdown or changes in policy. We'll continue to closely monitor industry and credit conditions as new government policies are implemented. Barmer Mac's core capital increased by $131 million to $1.7 billion as of September 30th, exceeding our statutory requirement by $723 million, or 75%. The sequential increase reflects the successful issuance of $100 million of Series H preferred stock in August. The addition of preferred capital together with our strong earnings improved our Tier 1 capital ratio to 13.9% this quarter from 13.6% last quarter, despite the strong growth in assets. The issuance effectively allowed us to strengthen our Tier 1 capital position and also allowed us to demonstrate strong access to low-cost preferred stock capital. Looking ahead, we will continue to evaluate all the capital management tools we have available to achieve our goal of optimizing our overall capital position through organic capital generation and securitization opportunities, especially as we continue to grow our book of business in more creative segments that will require an incrementally greater amount of capital. Our 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. We're working toward a second farm transaction in the fourth quarter 2025, which will be similar to the deal earlier this year. Securitization program remains an important strategic initiative for FarmerMac 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 we look forward to exploring alternatives to risk transfer structures that will allow us to expand our offerings while serving as another source of capital management. Lastly, I'm pleased to share that subsequent to quarter end, Farmer Mac has repurchased approximately 30,000 shares of Class C common stock, a total amount of about $5 million. We have several tools we leverage to return capital to shareholders, include dividends and buybacks, ensuring any action taken is both sustainable and value accretive. This balanced approach allows us to invest in growth, maintain financial resilience, and deliver returns, all while remaining agile in a dynamic market environment. So this time I'd like to turn it over to Zach Carpenter, our President and Chief Operating Officer, to discuss our customers and market development in more detail. Zach?