Federal Agricultural Mortgage Corporation

Thank you for standing by. At this time, I would like to welcome everyone to the FarmerMac first quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. I would now like to turn the conference over to Chalpa Nazareth, Senior Director of Investor Relations. The floor is yours.

Good afternoon, and thank you for joining us for our first quarter 2026 earnings conference call. I'm Jelta 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. These statements are based on management's current expectations and assumptions and and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. All forward-looking statements are based on information available to PharmaMac as of today's date, and PharmaMac assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Please refer to PharmaMac's 2025 Annual Report on Form 10-K 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 company's most recent Form 10Q and earnings release posted on our website. Joining me today are Chief Executive Officer Brad Northam, our President and Chief Operating Officer Zach Carpenter, and our Chief Financial Officer and Treasurer Matt Pullens. At this time, I'll turn the call over to our CEO, Brad Northam. Brad?

Thanks, Jalpa. Good afternoon, everyone, and thank you for joining us. I also want to thank everyone who joined our investor of the event in New York City. We really appreciate the strong engagement and the opportunity to spend more time discussing our strategy, our performance, and our outlook. And as always, it's great to hear your feedback. Our first quarter of 2026 was outstanding, a reflection of the continuation of the acceleration of in business volumes we saw in the fourth quarter of 2025. We delivered a record-setting quarter with business volume, quarterly revenue, and quarterly core earnings all reaching all-time highs, underscoring the strength of our business model and the disciplined execution across our organization. Outstanding business volume approached $35 billion. Revenue totaled approximately $110 million. and core earnings totaled approximately $52 million. Our diversified business model, strong capital position, and disciplined risk management position allow us to provide vital liquidity to American agriculture and rural infrastructure sectors during all and through all economic cycles. Demand for our products remains robust, Our customer relationships continue to deepen and expand, and our mission-driven approach continues to resonate across rural America and is motivation for our talented employees. And with that, I'll turn the call over to our President and Chief Operating Officer, Zach Carpenter, to walk us through our operating results in more detail.

Thank you, Brad, and good afternoon, everyone. First quarter was an excellent start to the year. with strong results and meaningful momentum across every aspect of our business. Total revenues increased 14% year over year, with strong contributions from outstanding business volume growth, paired with disciplined funding execution and stable asset credit quality across all of our platforms. We delivered $1.5 billion in net new business volume in the first quarter, bringing total outstanding volume to a record $34.8 billion as of quarter end. Broad-based growth this quarter was supported by a strong pipeline, particularly in the farm and ranch segment, where we approved loans for the first quarter of 2026, approaching $1 billion, almost 30% above the fourth quarter of 2025, our previous record. Sustained customer demand across our products continues to be underpinned by disciplined underwriting and risk management. Now let me walk through the portfolio in more detail. Our agricultural finance outstanding business volume grew $777 million in the first quarter, with the farm and ranch segment accounting for $675 million of the net growth this quarter. Loan purchase activity in farm and ranch accelerated in the fourth quarter of 2025 and has continued throughout the first quarter of 2026. Specifically, we saw net growth of $384 million for the first three months of this year, compared to only $54 million of farm and ranch loan purchase net growth in the same period last year, significantly outpacing the seasonally large number of loaner payments we typically see in the first quarter due to the January 1 payment date. We are operating at elevated pace for new volume and expect loan purchase growth to continue as lenders seek liquidity, primarily driven by the balance between diversifying from high-cost deposit needs due to continued strong loan growth and a focus on capital efficiency. In addition, agricultural borrowers continue to face tighter agricultural conditions driven by higher input costs, trade and tariff concerns, and low commodity prices. We remain proactive in discussions with our customers to ensure we find the right solutions to support their liquidity and capital needs, as well as understanding their borrowers' liquidity needs in a challenging and volatile operating environment. Our Farm and Ranch Advantage Securities Portfolio grew $325 million in the first quarter of 2026. As we discussed on our prior call, this increase reflects the additional fundings we anticipated after closing a new $4.3 billion facility with a large agricultural counterparty in late 2025. We believe we are on track to return to sustained net growth in this product set as we work closely with our counterparties to determine the right structure for providing incremental liquidity based on current market conditions. The Corporate Act Finance segment delivers solid results, ending the quarter with over $2 billion in outstanding business volume, up approximately 5% sequentially and 9% year over year. Deal flow activity in the broader agribusiness market was relatively muted during the first quarter of 2026 as companies continue to navigate a volatile market coupled with global tensions impacting trade and inflation. Looking ahead, however, we have seen a modest pickup in the second quarter deal flow activity, primarily reflecting refinancing transactions. We are also starting to see more indications of potential mergers and acquisition activity which could result in an increase in volume opportunities as we support the food, fuel, and fiber supply chain. Turning to our infrastructure finance line of business, outstanding business volume increased $717 million sequentially, or 6%, to $12.6 billion as of quarter end, with all three segments contributing to net growth. This is a continuation of the similar themes we saw in 2025. Specifically, the strong interest and investment in data center construction broadband expansion, and the construction and completion of renewable energy projects, reflecting the overall need for significant energy generation and transmission capacity in rural America. Net growth in our power utility segment this quarter was $115 million, largely due to strong loan purchase activity, supporting investment needs of rural electric generation, transmission, and distribution cooperatives. We continue to see a steady demand for capital in this segment as borrowers invest in system upgrades and modernizations to support the significant increase in electrification demand. Our renewable energy segment grew $445 million, or 18%, to $2.9 billion as of quarter end. Growth primarily reflected transactions approved in late 2025 that subsequently closed in the first quarter of 2026. in addition to strong deal pipeline and accelerated construction deadlines. Looking ahead, while we anticipate the continuation of the construction-related rush in the first half of this year tied to the July 4th construction start timeframe described in H.R. 1, we believe growth in this segment will continue well into next year as a substantial need for new power generation will continue to drive growth in this segment. Currently, deal flow remains robust, allowing us to be selective with our capital employment in this sector to pursue deals that are appropriately structured with strong counterparties and underscoring the strength of our reputation in the market. While the industry is facing potential evolution in the near future as tax and other incentives are set to expire, we do project the growing demand for energy to position the industry for continued growth as the underlying economics of these projects remain highly competitive even without tax incentives. Alternative generation capacity takes years to develop and we expect capital structures and power purchase agreement pricing to adjust as HR1 incentives are phased out. Accordingly, we expect to continue to participate in renewable energy transactions for both new projects and refinancing of existing projects. Beyond 2027, we anticipate stable growth in this space as more market-driven rather than policy-driven, as the underlying driver remains a massive surge in power demand, requiring significant new power supply. Broadband infrastructure also posted strong quarterly results, with net growth of $158 million, hitting the period at $1.7 billion outstanding, with nearly 70% of the volume growth tied to data center-related demand. We are seeing robust demand for data centers quarter to date, as 87% of new deals approved in our broadband infrastructure pipeline are data center-related, a reflection of the ongoing expansion of artificial intelligence, cloud storage, and enterprise digitization. While this segment has grown substantially, we remain disciplined in maintaining geographic and sponsor diversification with a continued focus on well-capitalized investment-grade hyperscaler tenants. We are mindful of the back row backdrop with uncertainties stemming from interest rates, trade policy, and regulatory shifts. Our diversified portfolio, strong capital position, and disciplined underwriting give us confidence in our ability to continue delivering consistent results. We are also closely monitoring the recent spike in global energy prices, which has pushed fuel and fertilizer costs higher ahead of the growing season. While higher energy prices have historically been supportive of higher commodity prices, the net impact on producer margins will depend on the duration of the disruption, the degree to which growers lock in input costs in advance, and whether commodity prices adjust to offset higher production costs. Regardless of how these dynamics unfold, we believe FireMAC is very well positioned to navigate the environment. We are extremely proud of the results this quarter and excited about what lies ahead for the balance of 2026 and beyond. The momentum from 2025 has not only continued, but in several areas accelerated, reinforcing our confidence in the outlook and durability of our business model. We are dedicated to broadening the pursuit of our mission in response to the evolving economic landscape in rural America. And this proactive business diversification continues to deliver meaningful benefits to the communities and industries we serve as evidenced by the strong growth across all our portfolios. With that, I'll turn it over to Matt Pullens, our Chief Financial Officer, to review our financial results in more detail. Matt?

Thank you, Zach. Before turning to our results, I'd like to share a few reflections from my early experience at FarmerMac. What has stood out most to me is the tangible positive impact our organization has on rural America. Something that resonates deeply with me given my own personal connection to agriculture. I've also been struck by the dedication, focus and execution of our team whose commitment to our mission is evident every day. It's exciting to be part of an organization that operates from such a position of strength supported by excellent credit fundamentals, disciplined cost management exceptional access to the capital markets, along with the unique strategic funding advantages that come with being a government-sponsored enterprise. Looking ahead, the opportunities for growth are exciting, and it's energizing to be part of the momentum we're building. Turning to our results, we had an exceptional start to 2026. First quarter results were record-setting by every measure. Nearly $35 billion in outstanding business volume, $110 million in revenue, and $52 million in core earnings, or $4.74 per diluted share. This quarter's record results were driven by several distinct financial performance factors, which I will walk through in more detail. Net effective spread reached a record $102 million in the first quarter of 2026, an increase of $12 million year over year, and $0.6 million from the fourth quarter of 2025, our prior quarterly record. The year-over-year growth was driven by record business volume and continued disciplined funding execution. On a percentage basis, net effective spread was 116 basis points, modestly below 117 basis points in the year-ago period, and 122 basis points in the fourth quarter. Quarter over quarter spread compression was driven primarily by fewer days in the period, which disproportionately impacts revenue from our fastest growing, highest spread segments. In addition, we saw a mixed shift towards growth in our lower spread farm and ranch advantage securities and somewhat lower contribution from the investment portfolio. Even with that dynamic, net effective spread dollars grew again this quarter, reinforcing the durability and earnings power of our expanding, increasingly diversified portfolio. Our net effective spread performance reflects disciplined, proactive, and purposeful balance sheet management. The foundation of our approach is positioning the balance sheet to be largely rate agnostic, underpinned by a very short duration profile and a strong interest rate risk management framework. our differentiated funding advantage remains a key strength, allowing us to access liquidity at highly competitive levels. Within this rate-neutral posture, we remain strategic and nimble, actively evaluating and capturing opportunities to enhance long-term economics when market conditions are favorable. Together with our ongoing use of innovative hedging strategies, these actions demonstrate our ability to manage risk effectively while consistently supporting financial performance. Partially offsetting strong earnings growth this quarter was an increase in compensation and benefits, primarily driven by increased headcount factors. We maintain our deliberate and balanced approach to expense management, and accordingly, we'll continue making targeted investments in business development and our operational and technology platforms to support future growth and scalability while managing expenses within our long-term efficiency ratio target of 30%. Moreover, I'm proud to say that this quarter our revenue growth outpaced expense growth by nearly four percentage points compared to the prior year period. This outcome reflects our team's sound execution along with the strength and scalability of our operating platform. Also contributing to our first quarter 2026 core earnings was a $4.2 million income tax benefit from the purchase of $45 million of renewable energy investment tax credits, which was fully recognized in the quarter. As of quarter end, we had approximately $30 million of remaining capacity to utilize additional credits through carrybacks to prior year federal income tax liabilities. Subject to market conditions, we expect to largely utilize that remaining carryback capacity in the second quarter and we'll continue to evaluate additional tax credit purchase opportunities on a current year basis going forward. As discussed at length last quarter, PharmaMac operates a comprehensive credit framework that aligns with our risk appetite while accounting for their unique risks present within each of our five operating segments. While credit risk is inherent in our business, we believe our disciplined credit framework and proactive risk management enable consistent execution of our mission to deliver liquidity to the agriculture and rural infrastructure markets. Turning to first quarter credit and asset quality results, we experienced $4.3 million of provision for credit loss expense in the first quarter of 2026. The provision expense reflects $3.4 million attributable to new volume growth across all our segments, particularly in the renewable energy segment. and $0.9 million related to credit migration across the portfolio. Credit migration this quarter reflects the ongoing discipline of our portfolio management process. As we do each quarter, we conducted a comprehensive review of our portfolios. Certain credits experienced deterioration, specifically in agricultural storage and processing and select permanent plantings exposures and required additional reserves. Others, on the other hand, demonstrated meaningful improvement through collateral sales and improved borrower performance, and therefore resulted in reserve releases. The net effect was a largely offsetting outcome. Allowance for losses was $40.1 million as of March 31, 2026, reflecting a $2.1 million increase from year-end 2025 and $14.7 million increase from the same period a year ago. The sequential increase primarily reflects the cumulative impact of portfolio growth and select credit migration partially offset by charge-offs recorded during the quarter. On a year-over-year basis, the increase is consistent with significant growth and outstanding business volume over the past 12 months. As of quarter end, the total allowance represented 15.4% of non-accrual assets compared to 16% as of December 31st, 2025, and 12.9% as of the year-ago period. As we've discussed previously, non-accrual assets as a percentage of total allowance is a useful gauge of reserve adequacy relative to loans where full collection is unlikely. We remain comfortable with our allowance levels given the strength of the underlying collateral. 90-day delinquencies were 52 basis points at quarter end, up from 40 basis points in the fourth quarter 2025, and an improvement from 54 basis points from the year-ago period. The sequential increase is consistent with the seasonal pattern we have historically observed in our portfolio, where delinquency levels tend to be higher at the end of the first and third quarters, reflecting the annual and semiannual payment dates on the majority of farm and ranch loans. Total substandard assets as a percentage of our entire portfolio were 1.87% this quarter, up from 1.71% at year end, with the increase concentrated to credit downgrades in the agricultural finance line of business. Infrastructure finance substandard assets, however, declined sequentially this quarter due to improvement in the renewable energy segment. FarmerMac's core capital increased by $27 million in the first quarter of 2026 to $1.7 billion, which exceeded our statutory requirement by $663 million, or 62%. Our Tier 1 capital ratio was 13% as of March 31, 2026, compared to 13.3% as of year-end 2025. Our capital levels remain well in excess of regulatory thresholds following an active quarter where our outstanding business volume grew by $1.5 billion, and we returned $32 million of capital through a combination of common and preferred dividends, along with modest share repurchases. Our strong capital position has enabled us to grow and diversify our revenue streams, remain resilient through volatile credit environments, and continue providing competitively priced liquidity to our customers and their borrowers. Looking ahead, we will maintain a thoughtful and balanced approach to managing our overall capital position. Organic capital generation, selective capital issuance, and the use of risk transfer tools will help ensure we have sufficient capital to support future growth, particularly in more accretive segments, which are generally more capital consumptive. In closing, we are very pleased with our first quarter results and confident in our outlook for the remainder of the year. We remain committed to thoughtful capital deployment, strong asset quality, and creating long-term value for our shareholders. With that, I'll turn the call back over to Brad.

Thanks very much, Matt. In summary, this was an exceptional quarter and a powerful start to 2026. The strength of our results reflects the discipline execution and strategic positioning that defined PharmaMac today. A number of you have asked about CEO succession, and I'm pleased to report that the process is progressing very well, and in fact, a bit ahead of schedule. I can say with great confidence that PharmaMac has never been in a stronger position than it is today. The depth of talent across our leadership team, The clarity of our strategy and the momentum in our business give me tremendous optimism and I would say confidence in the future of this organization. And now, operator, I'd like to see if we have any questions from anyone online today.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from Bose George with KBW. Your line is open.

Hey, everyone. Good afternoon. I wanted to ask first just about return on equity expectations. Obviously, you guys had a very strong quarter at 17% ROE. Just with the pipeline and what you're seeing out there, where do you think that trend's And I wanted to ask about spread as well, but that, you know, moves around obviously with the mix. So, is it better really to focus on the ROE outlook?

Well, good afternoon, Bose. Thank you very much for the question. This is Matt, and glad to touch actually on both topics that you asked there. So, in terms of return on equity, as you noted, we printed 17% return on equity for the quarter. And that is a metric that we're very focused on in terms of deploying capital and purchasing assets within our business and 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, which you also asked about, 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 advantage 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.

Okay, great. That's helpful. Thanks. And then just, you know, you noted the potential impact on the farm economy from geopolitical volatility. And if this persists, is the bigger focus on what it could do to loan activity or are the areas from a credit standpoint that you're looking at as well?

Hi, Boaz. This is Zach Carpenter. Yeah, we're keenly aware of the impacts to the ag economy. Clearly, they've been you know, struggling for some time, and the conflict in the Middle East has created some more volatility there. I think the question has a couple-pronged approach. The first mean the duration of the conflict, which has, you know, exasperated 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 by ready to support those borrowers as they need to work through certain stress times. As it pertains to our portfolio, we feel fairly confident with the strengths of what we're seeing with new loan applications and new loan purchases today. In fact, all the loan purchases in the first quarter have very strong credit scores, very, very solid loan-to-values. The use of proceeds were typically for refinancings or new purchases of either land or equipment. So 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, you know, helps support us to be there in good times and bad times.

Okay, great. Thank you.

Your next question comes from Bill Ryan with Seaport Research Partners. Your line is open.

Good afternoon, and thanks for taking my questions, and great to see the volume increase that you guys talked about at the investor day. First question, I want to follow up on what Bo's asked about the margin outlook. I mean, obviously, there's a little bit of seasonal factor in the dip from 122 to 116 in Q1. So that will be a good guy going into Q2. But if you kind of look at your mix of business in the pipeline that you're seeing right now going into Q2, do you expect a little bit more net pressure on the margin? Or do you expect to kind of start to stabilize maybe in the next couple quarters? That's the first question.

Hi, Bill. This is Zach. A couple comments as it pertains to net effective spread percentage. You know, as we noted in the call, two primary factors, and I'd say both relatively positive. I mean, the first and foremost being in the fourth quarter of last year, we put on almost $700 million of advantage volume. That dramatically increased the average daily balance of our portfolio heading into the first quarter. You know, as we've talked about, advantage is one of our highest returning products leveraging our capital, although the NES percentages is lowest across our portfolio. And as Matt indicated, we're 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 NA's percentage this quarter. And 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. So the combination of those two dynamics was predominant to the lower net effect spread percentage. What I would highlight as we look going forward – You know, 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. You know, clearly, the lumpiness of AgVantage could alter that mix going forward. But as we look right now, all operating segments see very strong pipelines. And the one thing I would note as the broadband infrastructure and renewable energy segments have significant loan commitments, as those constructions take place and those commitments are funded, you'll see a much higher net effective spread in those businesses. I'll turn it over to Matt to talk a little bit about the liquidity and funding mix dynamics.

Hello, Bill. This is Matt. So I mentioned in my prepared remarks some points around our balance sheet management and liquidity positioning in the quarter. One thing that also impacted spread this quarter is we did have the opportunity to call about a half a billion dollars of callable debt when rates dipped in the middle part of the quarter. That is ultimately accretive to our spread going forward, but did weigh on spread in the quarter about one basis point as we had to accelerate the amortization of original issue discount attributed to those bonds that were called. And on net going forward, the pickup in spread from being able to roll down the rate paid on the bonds that were called is annualized at a little over $3 million a year. So that incremental spread will be able to pick up or we expect to pick up beginning in the second quarter. In addition to that, we continuously look at ways to strategically evaluate market opportunities within the funding segment to fund our balance sheet in a way that is accretive to returns, but not taking incremental funding risk. It's something that we're very diligent about managing it that way. Portfolio layer method hedging is something that we were introducing into the balance sheet management process this quarter. And the impact of that is going to grow over time. It'll be somewhat muted here initially, but we believe that the impact of that hedging strategy will ultimately over time, again, be accretive to net effective spread. That's just an example of the types of strategies that we're deploying as we manage the balance sheet and interest rate risk.

Okay. Thanks for the detailed response on that. And one other question on the data centers. It probably gets a bit more attention than it really needs. But, you know, there are some headlines, obviously, in the last few weeks about some delays in data center construction coming online. Maybe you can give us a little bit more detail in terms of what you're seeing specifically in your own portfolio.

Hi, Bill. Zach again. You know, As we've mentioned in Investor Day, we're very thorough and very methodical in the types of data center transactions we look at. We won't pick up a pencil to assess or underwrite a transaction unless we're working with top counterparties, and we're talking about developers, sponsors, tenants that have significant experience in constructing and operating these data centers. We want to make sure that there's a power purchase agreement signed and in place, and over 80% of our tenants in our data center portfolio is to the four top investment grade hyperscalers. So we have the opportunity given the market to focus on the best structures and the highest rated data center opportunities. We do not deviate. We don't feel the need to deviate, to stretch given the growth that we see available to us. And the point being focusing on these counterparties and these tenants, we have seen very little issues in terms of delays in construction, delays in operations. We're not speculating, right? So everything needs to be signed up in place, including water, et cetera, before we enter into a transaction. That limits and reduces a lot of risk as you go through the process, where maybe in a speculative opportunity, something's not in place and now delays the projects and further delays the construction and completion of the data center. So we feel very good about the counterparties and the transactions we're looking at, and we do not feel the need to look at any different or stretch in any way, shape, or form.

Okay, and thanks. And one clarification question for Matt, just to make sure I heard it right, is that you have $30 million of investment tax credits remaining. You expected most of that to be recognized in the second quarter?

So our capacity for carrybacks to prior year income tax credits is $30 million as of March 31st, 2026. And our expectation is that we will fully utilize that carryback capacity in the current quarter, in the second quarter. And then going forward, we'll be operating on a current year basis and we'll be monitoring market opportunities to potentially monetize additional tax credit purchases, but it would be on a current year basis from that point forward.

Okay. Thank you.

Your next question comes from Brendan McCarthy with Sedati. Your line is open.

Great. Good afternoon, everybody. Appreciate you taking my questions here.

I just wanted to start off on the net loan purchase volume growth in Farm and Ranch. I think you mentioned $384 million, which well exceeded last year's number of $54 million. And that's obviously net of repayments, I believe you mentioned. Can you dissect that a little bit further? What ultimately drove that gap relative to last year's number?

Hi, Brendan. Zach Carpenter. We continue to see an acceleration of loan velocity and applications in farm and ranch falling up from a very strong fourth quarter. As I noted, we had a record quarter of loan applications approaching $1 billion, which is about 30%. above the prior record, which is the fourth quarter of 2025. And the pipeline continues to be robust, and the team does a fantastic job working with our customers to convert those loan applications to loan closing. You know, some reasons why we're seeing this accelerated growth, I mean, clearly there's a component of the ag economy whereby liquidity and working capital is necessary to bridge maybe timing gaps between the receipt of government payments or the selling of crops. That is one component. I think the other component is really working and understanding our customers, the financial institutions lending to these borrowers. You know, they need to manage deposits, which in this environment end up being a very high cost component of funding. And so in that scenario, they're looking for other liquidity sources to help continue the stronger loan growth they see with their customers and leveraging the secondary market in a broader fashion. And I'd say we've spent a lot more time really broadening our relationships across the financial institutions landscape. We had a record number of sellers or financial institutions that sold us a loan in the first quarter. We continue to deepen our relationship with existing sellers to find new and unique ways to support liquidity for their borrowers and really having a much more focused relationship orientation with the market. We've put a new head of our farm and ranch segment in there to really drive growth and we continue to see this as we work with our customers and support their borrowers in this economic time.

Thanks, Zach. I appreciate the detail there.

And I know you touched on some of the headline risks, mainly around fuel and fertilizer costs spiking ahead of the planting season. I know we're about a month into Q2. Do you have any insight on the potential impact looking ahead to to loan loss provisioning for Q2?

I think we're too early in the environment to assess any future impacts to, I say, the credit portfolio. And a couple of reasons why there's competing factors here. Clearly, you know, the spike in most notably nitrogen prices can further stress margins. And it's unknown how many growers or farmers and ranchers pre-locked fertilizer before the growing season or need to purchase in this higher rate environment. I think the other unique dynamic here is, you know, as fuel prices rise, typically you see the increase in ethanol prices, which we have seen. It's gone from $1.80 a gallon up to over $2 a gallon since the crisis started. Higher ethanol prices typically lead to higher commodity prices, especially corn. And we have seen that. So there's numerous dynamics here that are at play. I think the duration of the conflict in the Middle East will determine the impact, either positive or negative, from either higher inputs or margin pressure or commodity prices increasing. It's just too early to tell at this point.

That makes sense. And last question for me, just on the credit side, the – or the –

The allowance of, I'm sorry, the allowance for loss as a percentage of non-accrual assets has remained pretty stable. I think it's ranged from, you know, 13% to 16, 17%.

Do you have a long-term target there for that ratio?

We do not have, hi, Brendan, this is Matt. We do not have a long-term target for that particular ratio. We do, though, view the allowance, the level of the allowance and our confidence in covering the risk in the portfolio through that metric. But it's important to also take into account that we're looking at the allowance against non-accrual assets. Those non-accrual assets are supported by, in nearly all cases, very high-quality collateral. And so that's something that just in terms of how that metric lines up with, say, a similar metric at other financial institutions would certainly need to be taken into account, the type of collateral that we have backing our loans. But in terms of a target operating range like we have for our efficiency ratio, we do not have such a metric for allowance as a percentage of non-accrual assets.

Got it. I appreciate the detail. That's all for me, and congrats on a strong quarter. Thank you.

Your next question comes from Gary Gordon, a private investor. Your line is open.

Okay. Thank you for taking my questions. Two questions. One, looks like you're charging us for about $2 million. Any color on what was charged off during the quarter?

Hi, Gary. Zach Harperter. No new issues with transactions or borrowers. This incremental charge does reflect a transaction we spoke about in the fourth quarter. Clearly, in these situations, the process is very fluid as we work with the bank group and the leader ranger to assess restructuring and other options to either support the business going forward or potential look at asset sales and liquidations. We continue to monitor this, you know, on a weekly basis with the lender group. Clearly in this situation, we're dealing with the owners of the assets and, you know, working with them, timing delays can persist. And that's what we saw. So we felt the need to further right down to the value we feel is appropriate and charge that off. We feel the remaining exposure is very manageable, frankly immaterial from the overall portfolio perspective, but we'll continue to assess this transaction in terms of options going forward, but we feel good with where we are from an exposure perspective.

Okay, thanks. The other question is on the loan growth. Clearly, you're making clear you made a much bigger marketing effort It doesn't sound like you've changing your underwriting standards. Other contributors, is there any noticeable change in the amount of competition for the type of loans you're looking for? Are there more willing sellers for some macro reason?

Gary, Zach, again, I think it differs by business segment. You know, Clearly Advantage, we saw it bottoming out in 2025, and we've been more focused on broadening our counterparties and closing new facilities, and that has contributed to growth in the fourth quarter and the first quarter, and we feel optimistic that that will continue, just given outreach and the relationships we've developed. I'd say in our newer lines of business, specifically renewable energy and broadband infrastructure, this pipeline and this growth reflects our investment in the teams, the expertise you know, across business development, but also in credit and operations to support an increasing velocity of loan opportunities. There's plenty of counterparties out there that are looking for a strong and respectable secondary market to provide liquidity to their transactions. And as we've invested in the people and the processes, we're able to be able to step up to more transactions and put more through the pipeline. And I think farm and ranch really just reflects kind of the ag environment, plus our focus on broadening our relationships with a greater number of sellers, trying to find unique structure, engaging in process product and platform enhancements. The combination of all of that and the bank's focus on capital efficiency is really driving incremental share to the secondary market.

Okay, thanks a lot.

That concludes our Q&A session. I will now turn the conference back over to Jeff Mather, Senior Director of Investor Relations, for closing.

Thank you, everyone, for listening and participating in our call this afternoon. We'll be having our next regularly scheduled call in August to report our second quarter 2026 results and look forward to sharing more information with you at that time. As is always the case, if you have any questions that you'd like to discuss with us, please don't hesitate to reach out. With that, thank you very much and have a good day.

That concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.