Federal Agricultural Mortgage Corporation

Thank you for standing by. At this time, I would like to welcome everyone to the FarmerMac second 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 Jalpa Nazareth, Senior Director of Investor Relations. The floor is yours.

Good afternoon, and thank you for joining us for our second quarter 2026 earnings conference call. I'm Jalpa Nazareth, Senior Director of Investor Relations and Finance Strategy here at Farmer Max. 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 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, 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 Pharmac'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 10-Q and earnings release posted on Pharmac's website. Joining me today are our President and Chief Executive Officer, Zach Carpenter, and our Chief Financial Officer and Treasurer, Matt Pullins. At this time, I'll turn the call over to our CEO, Zach Carpenter.

Thanks, Jalpa, and good afternoon, everyone. Thank you for joining us today. I'm pleased to report that PharmaMac delivered record results in the second quarter, with volume, revenue, and core earnings reaching all-time highs, supported by the strength of our mission-driven franchise and the disciplined execution of our strategy across every aspect of our business. These results were powered by broad-based business volume growth, as we continue to be a critical part of the financial ecosystem through providing liquidity in support of agriculture and rural infrastructure. We surpassed $37 billion in outstanding business volume and strengthened our already robust capital base for a very successful preferred stock issuance, further supporting our long-term growth objectives. A focus on expense management while simultaneously making strategic investments for growth resulted in our expense efficiency ratio remaining below our 30% strategic target, as we also provided over $4 billion of liquidity to critical sectors of the American economy in the second quarter. Outstanding business volume ended June at a record $37.2 billion, an increase of $2.4 billion in the second quarter after taking into account all new business volume, maturities, sales, and paydowns on existing assets. Our agricultural finance outstanding business volume grew $1.8 billion in the second quarter, primarily due to a $1.1 billion increase in our farm and ranch advantage wholesale finance securities portfolio. That growth was driven by new business volume from several counterparties, reflecting the strength of our growing relationships, including a $750 million issuance from a new counterparty. We continue to see strong interest in wholesale finance reflecting the competitiveness of our product versus other funding alternatives and believe we are on track to see incremental net growth in the second half of the year due to minimal scheduled maturities as well as the relative value of this product provides our customers. Farm and ranch loan purchase activity remained at elevated levels during the second quarter, building on the strong momentum that began in the fourth quarter of 2025 and continued throughout the first half of 2026. Specifically, We saw net growth of $867 million for the first half of the year, almost double the farm and ranch loan purchase net growth in the same period last year. We are operating at an elevated pace for new volume and expect loan purchase growth to continue as lenders seek liquidity driven by the need to diversify from high-cost deposits amid strong loan growth, a focus on capital efficiency and returns, and ongoing volatility that many sectors of the agricultural economy are experiencing. Our growth this quarter was also supported by the improvements that were made to our AgExpress product in 2025, reflecting our continued investment in improving our products, processes, and platforms. The product improvements resulted in wider engagement with a variety of lending institutions that serve all facets of the agricultural mortgage financing market. We remain proactive in discussions with our customers to ensure we find the right solutions to support their funding and capital needs, as well as understanding their borrower's liquidity needs in a challenging operating environment that is characterized by ongoing uncertainty and broader market volatility. I'm also pleased to announce the launch of PharmaMac Loan Exchange, or FLEX, our new farm and ranch loan platform this past week. FLEX introduces a unified digital platform for farm and ranch loans across all of our loan purchase products. The platform improves process efficiency, documentation management, and operational flexibility. Flex is a significant technology modernization initiative that creates a more efficient, scalable, and user-friendly experience across PharmaMax farm and ranch business, which we believe will serve as the foundational platform to launch future innovative products and customer solutions. Flex is the latest example of our commitment to incorporate innovation and technology modernization which we expect will continue to differentiate PharmaMac and transform the agricultural mortgage market, allowing us to provide liquidity in a more efficient and scalable way. The corporate act finance statement grew modestly during the quarter to $2.1 billion in outstanding business volume. Deal flow activity in the broader agribusiness market has remained relatively muted during 2026, predominantly reflecting less mergers and acquisitions activity as companies continue to navigate a volatile market coupled with global tensions impacting trade and inflation. Looking ahead, we continue to expect modest growth in this segment and will remain disciplined in pursuing opportunities that meet our underwriting standards and support the food, fuel, and fiber supply chain. Turning to our infrastructure finance line of business, outstanding business volume increased $573 million sequentially to $13.1 billion as of quarter end, with all three segments contributing to net growth. This is a continuation of 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 and utilities segment this quarter was $291 million, largely attributable to strong loan purchase activity which included the purchase of $197 million pool of loans from a single customer. This transaction underscores our secondary market track record of providing liquidity and product solutions to support our customers' balance sheet management initiatives. We continue to see a steady demand for capital in this segment as borrowers invest in system upgrades and modernization to support the significant increase in electrification demand. During the quarter, we provided $565 million in renewable energy loan purchases and commitments, reflecting the strength of our deal pipeline and accelerated project construction to meet deadlines included in H.R. 1. After scheduled maturities and repayments, which were elevated this quarter as this portfolio seasons, as well as construction and tax equity loans mature, the overall segment grew $120 million to $3 billion as of quarter end. Looking ahead, we expect growth in this segment to continue well into next year as the substantial need for new power generation drives continued demand more than offsetting the natural runoff from a seasoning portfolio. Currently, deal flow remains robust with our pipeline approaching $1 billion, which allows us to be selective with our capital deployment in the sector to pursue deals that are appropriately structured with strong counterparties that underscores the strength of our reputation in the market. While the industry is adjusting to the phase out of tax credit incentives and navigating supply chain dynamics, we project the growth demand for energy generation to position the industry for continued growth as the underlying economics of these projects remain highly competitive. Alternative generation capacity takes years to develop, and we have seen renewable energy projects, capital structures, and power purchase agreement pricing adjust as tax credit incentives phase out. Accordingly, we expect to continue participating in renewable energy transactions for both new projects and refinancing of existing projects. Beyond 2027, we anticipate continued growth in the segment that is more market-driven rather than policy-driven, as the underlying driver remains an increasing surge in power demand, requiring significant new power generation capacity. Broadband infrastructure also posted another strong quarter with net growth of $162 million, ending the period at $1.9 billion. Given the robust demand for data center investments, 70% of new volume this quarter was data center related business volume, a reflection of the ongoing expansion of artificial intelligence, cloud storage, and enterprise digitization. As of June 30th, our total data center related business volume was approximately $1 billion. are roughly half of our total broadband infrastructure segment. While our data center exposure has grown substantially, we are highly attuned to market dynamics and take a disciplined, deliberate approach to how we manage the portfolio. Specifically, as this portfolio seasons, we have enhanced our focus on portfolio management, maintaining deliberate geographic and sponsor diversification, prioritizing well-capitalized investment-grade hyperscaler tenants, and pursuing a mix of funded products to keep our portfolio well diversified and resilient against potential market headwinds that may arise. In total, we have provided $7.5 billion of liquidity and lending capacity to lenders serving rural America through the first half of this year, exceeding our previous first half gross volume record in 2022 by more than 50%. That figure is the clearest expression of our company supporting our mission. expanding access to competitive liquidity for American agriculture and rural communities. With a robust pipeline and strong capital position heading into the third quarter, we enter into the second half of 2026 focused on disciplined execution that drives durable, high quality earnings in the runway to keep growing. While we are mindful of the macro backdrop and uncertainty 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 spikes in global energy prices, which has pushed fuel and fertilizer costs higher. Regardless of how these dynamics unfold, we believe PharmaMac is well positioned to navigate the environment. With that, I'll turn it over to Matt Pullins, our Chief Financial Officer, to review our financial results in more detail. Matt?

Thank you, Zach. As Zach noted, second quarter results were record setting by every measure. Over $37 billion in outstanding business volume, $125 million in revenue, and $59 million in core earnings, or $5.40 per diluted share. These record results generated a return on equity of 18.9% among the strongest in our history. 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 $117.4 million in second quarter 2026, a 25% increase over the prior year period and a 15% increase from first quarter 2026, our prior quarterly record. The year-over-year and sequential growth was driven by record business volume and the collection of $7.4 million of interest recognized in second quarter 2026 related to the recovery of interest on a large delinquent permanent planting exposure that has been non-accrual for an extended period of time. On a percentage basis, net effective spread was 126 basis points. This compares to 119 basis points in the year-ago period and 116 basis points in first quarter 2026. Excluding the one-time benefit from the collection of $7.4 million of interest, net effective spread in percentage terms was 118 basis points, which is relatively in line with prior periods and, as we have consistently discussed, is impacted by the mix of new business volume in our lines of business. While incremental business volume is the primary driver of net effective spread growth, our net effective spread performance is further enhanced by the two core pillars of our funding strategy, a differentiated ability to access funding through the capital markets at highly attractive levels, and a deliberate balance sheet structure designed to be minimally sensitive to interest rate changes. This combination enables us to generate highly efficient and consistent net effective spread across market cycles and conditions. The foundation of our approach is a largely rate agnostic balance sheet supported by a very short duration profile and a robust interest rate risk management framework. At the same time, our funding advantage provides reliable access to liquidity at competitive levels, which enhances earnings efficiency and resilience. Within this discipline framework, we remain strategic and nimble, actively capturing opportunities to improve long-term economics when conditions are favorable. Together with our ongoing use of innovative hedging strategies, these actions underscore our ability to effectively manage risk while consistently delivering strong net effective spread performance through changing market conditions. Partially offsetting strong revenue growth this quarter was an increase in compensation and benefits expense driven by increased headcount, higher incentive compensation accruals associated with strong financial performance, and the timing of compensation expense recognition within the year. Included in second quarter results was a $4 million true-up of performance-based incentive compensation reflecting our updated expectations for full-year performance. This expense was recognized in the quarter and is not expected to repeat in future quarters. As a result, compensation expense growth in the quarter was elevated relative to our expected full-year trend. Looking ahead, we anticipate compensation expense growth to moderate in the second half of 2026, with full-year compensation expense projected to be consistent with our underlying operating trajectory and approximately 20 to 22 percent higher than 2025. To provide additional perspective on our underlying operating performance, excluding the $7.4 million interest recovery benefit and the $4 million true-up of performance-based incentive compensation, core earnings for the quarter would have been approximately $56 million, or $5.15 per diluted share. We believe this normalized view more closely reflects the underlying earnings power of the franchise, which continues to benefit from record business volume Strong Net Effective Spread Generation, Effective Favorable Credit Performance, and Disciplined Expense Management. Our strong operating performance resulted in an operating efficiency ratio of 28% for the quarter, below our long-term target of 30%. We anticipate full-year operating efficiency ratio in the 27 to 29% range. Operating at this level of efficiency provides us with the flexibility to invest strategically in the continued growth and scalability of our franchise while delivering strong returns for shareholders. Looking ahead, we will remain focused on making targeted investments in talent, business development, operations, and technology while preserving our disciplined approach to expense management and operating within our long-term efficiency ratio target. Also contributing to our second quarter 2026 core earnings was a $2 million income tax benefit from the purchase of $21.4 million of renewable energy investment tax credits, which was fully recognized in the quarter. These investments support our mission by providing capital to renewable energy projects, electric facilities, and biofuel sectors, while also generating attractive financial returns. As of quarter end, we substantially utilized our remaining carryback capacity. Going forward, we will evaluate tax credit purchase opportunities on a current year basis. We remain active in the tax credit market and will selectively pursue opportunities where pricing and economics are attractive and expected to enhance overall financial performance. Turning to credit and asset quality results, the $7 million provision for credit loss expense in the quarter in the second quarter of 2026 reflects $3.6 million attributed to new business volume growth across all our segments with the balance related to credit migration trends. The primary driver of credit migration this quarter was the deterioration of two collateral dependent farm and ranch loans that accounted for approximately $3 million of provision expense. Upon initiating foreclosure proceedings related to these two loans, updated appraisals identified property-specific factors that reduced collateral values and resulted in valuation shortfalls that required incremental credit reserves. Allowance for losses was $47.4 million as of June 30, 2026, reflecting a $7.2 million increase from first quarter 2026 and $17.2 million increase from the same year ago period. The sequential increase primarily reflects the cumulative impact of portfolio growth and select credit migration. As of quarter end, the total allowance represented 19.7% of total non-accrual assets compared to 15.4% as of March 31, 2026 and 16.9% as of the year ago period. reflecting the increase in allowance for losses and the decrease in non-accrual assets due to the resolution of the previously mentioned delinquent permanent planting exposure. 90-day delinquencies were 37 basis points at quarter end, a 15 basis point improvement from first quarter 2026, and four basis point improvement from the year-ago period. The sequential improvement 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 semi-annual payment dates on the majority of farm and ranch loans. Total substandard assets as a percentage of our entire portfolio were 1.71% this quarter, an improvement from 1.87% as of March 31, 2026 due to positive credit migrations across both lines of business and the resolution of the delinquent permanent planting exposure in the quarter. Turning to capital, FarmerMac's core capital increased by $141 million during the second quarter of 2026 to $1.9 billion. Driven by the successful issuance of $100 million of Series I preferred stock, continued earnings generation and the retention of approximately $42 million of retained net income after returning $25 million to shareholders through dividends. As a result, core capital exceeded our statutory minimum requirement by $731 million or 64% at quarter end. Our tier one capital ratio was 13.2% as of June 30th, 2026, compared to 13.0% at March 31, 2026, positioning us comfortably within our target range of 12 to 14%. The increase reflects the benefit of the preferred stock issuance and retained earnings partially offset by higher risk-weighted assets, which primarily resulted from record volume growth across our mission-focused businesses. The successful preferred stock issuance demonstrates our ability to efficiently access capital to support our growing customer demand for liquidity across the agricultural and rural infrastructure sectors. Our ability to secure capital on attractive terms reflects investor confidence in our business model, credit profile, and long-term growth strategy. This expanded capital position strengthens our ability to meet growing demand for liquidity and support rural America through market and credit cycles. We remain committed to maintaining a balanced and disciplined capital management strategy. We expect to return capital to shareholders primarily through our dividend program while simultaneously supporting our mission and customer needs by redeploying capital into high-quality assets across our agricultural finance and infrastructure finance lines of business. Our objective remains consistent, prudently allocate capital in ways that advance our mission, generate attractive risk-adjusted returns, and create long-term shareholder value. Looking ahead, customer demand for mission-related liquidity is expected to drive portfolio expansion. To meet this demand, we plan to incorporate risk transfer solutions as a complementary source of capital capacity, which reflects the evolution of our successful farm securitization initiative. Risk transfer leverages third-party capital to enhance capital efficiency, increase balance sheet flexibility, and support sustainable growth while strengthening our ability to deliver on our mission. We continue to make progress on the development of a new credit risk transfer program that we expect to bring to market in 2026. We believe PharmaMac's underwriting expertise, portfolio management capabilities, and demonstrated credit performance combined with strong investor interest in gaining exposure to agriculture and infrastructure asset classes position us well for successful market reception. Over time, we expect these transactions will enhance our ability to support customer demand and broaden market participation in sectors critical to rural America while maintaining prudent capital levels. In closing, this quarter's strong performance underscores both the effective execution of our strategy and the enduring strength of our franchise. By expanding our capacity to support growing liquidity needs across a dynamic rural economy, we are advancing our mission Deepening our impact in the markets we serve while driving sustainable earnings growth and long-term shareholder value. Now I would like to turn the call back over to Zach. Thanks, Matt.

Our results were exceptional this quarter. We are extremely proud of our continued focus on providing liquidity to support American agriculture and rural communities and excited about what lies ahead for the balance of 2026. 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. We will continue to invest thoughtfully in our people, technology, and infrastructure to efficiently scale our business and ultimately capitalize on the significant opportunities in front of us. Lastly, I want to thank our PharmaMac employees for all their dedication and effort in support of our mission to achieve these exceptional results. We have an extremely talented team here at PharmaMac and these results are a testament to their focus, execution, and the strength of the relationships they have all developed with our customers and stakeholders. And now operator, I'd like to see if you have any questions from anyone on the line 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 one again. Your first question comes from Bose George with KBW. Your line is open.

Hey, everyone. Actually, first just a question on spreads. In the broadband segment, you know, there's the data Does the data centers have a higher spread than the other assets in there? And then secondly, on the corporate ag finance, that was obviously higher, but is that purely just that reversal of that one credit you discussed?

Yeah, hi, Boaz. As it pertains to spreads and broadband infrastructure, I think the majority of the spreads you see in the quarter reflect the growth in the data center portfolio. Those credit spreads are relatively in line with the other assets in that portfolio. I would note, again, we look at risk-adjusted returns and make sure that regardless of credit spreads that the return is appropriate for our capital deployment. But there's not a significant amount of volatility between spreads across the different sectors in that portfolio. In corporate ag, yes, the biggest impact that quarter as it pertains to net effective spread is the collection of that interest from the non-accrual loan. If you back that out, you would see net effective spread percentage be relatively flat quarter over quarter.

Okay, thanks, great. And then the risk transfer solution that you discussed, is that going to be beneficial to ROEs or is it really just a way to broaden your access to capital and the structures, are they going to look similar to sort of like the Fannie Freddie risk sharing structures?

This is Matt. So in terms of the use of risk transfer tools, we are very much looking at those as a form of capital. And to that end, the risk transfer tools are attractive to us because they are a more efficient, more flexible, and generally speaking, a cheaper form of capital than other tools that we have available to us, including issuing capital. And so, playing that forward and directly responding to your question about return on equity, the short answer is yes. We do expect the use of credit risk transfer tools to benefit return on equity over the course of time.

Okay, great.

Thanks.

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

Thanks and good afternoon and I have to say congratulations. I think I was the high on the street. You managed to exceed my numbers quite handily. So first question, just following up on Boze's question about the NES margin, you know, going across the various segments, you did have expansion. I think even if I did my calculations right, corporate ag finances up about five basis points, even taking out the $7.4 million adjustment. You've been reluctant to kind of give some outlook on the margin, and I understand that's kind of reflecting of unsure about the product mix going forward, specifically in Farm and Ranch. But maybe if you could talk about, you know, how you see it playing out in the next couple of quarters, perhaps into 2027, you know, both in Farm and Ranch and also the other businesses. And then I do have one follow-up question as well.

Yeah, thanks, Bill. This is Zach. As it pertains to margin, I think if you look over the last four quarters, especially across corporate ag broadband and renewable energy and kind of look at a trailing 12-month NES percentage, they're relatively consistent. Broadband is typically in the 225% to 235% range. Renewable energy, 165% to 175%. And corporate ag, a little bit north of 2%. What we see in the market, I don't envision much delta outside of those ranges. The transactions we're seeing in the credit profiles that we focus on within our underwriting criteria seem to fall within that range. So as we look out over at least the pipeline that we see as well as the transactions that we look at in the market, I would say they're probably going to fall within those ranges. Clearly, that's market dependent and anything pertaining to volatility that could impact the market may shift those. But from what we see today, I would say they're probably relatively consistent. You know, on farm and ranch, I think the biggest potential change there is really product mix. And so we saw a little bit of compression this quarter, given the significant growth we saw on Advantage. So depending on those opportunities, which are quite lumpy, could move that farm and ranch NES percentage up and down a few basis points here or there. We feel pretty good on the farm and ranch loan purchase side in terms of the stability of our NES percentage given the volume that's coming in the door, but I would say the mix and advantage and the size of any issuances that we have in the future could cause a little bit of compression in the farm and ranch space.

Bill, if I can add on to the points that Zach offered, I would like to note the fact that in a quarter where we had exceptionally strong growth of new business volume, $2.4 billion net of incremental business volume in the quarter. We're able to maintain the spreads in our business, and that's indicative of the fact that while business is robust and new volume coming in is robust, we are not conceding spread to generate that new volume. And that manifests itself in two ways in terms of our financial performance. So first is being able to have consistent net effective spread over the course of time, notwithstanding the impact of mix, but then also to be able to have consistent risk-adjusted returns and returns on equity because we're not conceding margin to drive volume.

Okay, thanks for the follow-up explanation on that. And the second question was just on operating leverage. I was trying to quickly back out the one-time revenues and the one-time expenses, and it looks like Revenues, excluding the $7.4 million, were up about 17%. Expenses up about 9%, 10%. Maybe if you could talk about how you're thinking about operating leverage potential going forward at this point, given your acceleration of volume. I mean, do you have the infrastructure really kind of built out at this point to handle everything that's coming on?

So the short answer is yes, and we do expect to generate positive operating leverage going forward. We expect to see the growth rate on the expense side moderate relative to the performance in the second quarter. And because of the strong volume in new business in the second quarter, that is going to further enhance top-line benefit in the third quarter and beyond. That's your question about a build out of infrastructure. Yes, we're very confident that we can continue to scale the business based on the infrastructure of the platform that we have today. But as I mentioned in my prepared remarks, one of the luxuries of our business and being able to operate at the level of efficiency that we do and to experience the growth that we have experienced and anticipate continue to experience in the future is that does give us the flexibility to continue to invest in enhancements of our platform. And that's people, technology, process, et cetera. And so you can expect to see continued investments, but we do anticipate maintaining positive operating leverage going forward and actually expanding that operating leverage in the back half of the year on account of slower expense growth.

And Bill, the only thing I would add on to that is we announced in our prepared remarks the launch of Pharma Mac loan exchange. That's, as we've talked about, our focus on creating a more efficient and scalable platform. That's a major first step. And this allows us to really think about technology and solutions going forward that can bolt onto a very advantageous infrastructure platform and create a more scalable opportunity set going forward for our customers. The last thing I would mention is that as we think about investment in technology and people, we're going to be very methodical in terms of the timing and the return that we have based on our investment.

Okay. Thanks for taking my questions. I'll jump back in queue.

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

Great. Good afternoon, everybody. Congratulations on the results, and thanks for taking my questions here. I just want to start off on the farm and ranch sector. The pace of volume growth there has really accelerated this year. And I know there's some lumpy wholesale volume in there that's benefited volume in Q2 and Q1. But do you primarily attribute growth to just borrower demand? Are lenders becoming more capital constrained? I'm just curious as what the key demand drivers are there.

Hi, Brendan. This is Zach. I'd say we think about it in three different prongs. I mean, there's a component there that there are certain sectors of the ag economy that are experiencing stress and, you know, the under levered component of their land allows them to tap into that equity to potentially support working capital and liquidity to kind of get through the volatility that they're experiencing in the agricultural economy. The other component I think that's important is, you know, we are a secondary market and our customers are financial institutions that originate these loans. And as we've seen, they see tremendous loan growth in their markets and they need to balance, you know, capital return and other sources of funding, such as deposits, which are exceedingly high in this environment. So as they navigate this environment, they're leveraging the secondary market to balance their balance sheet management initiatives, which is further driving more growth to FarmerMac. And lastly, and we've been talking about this for some time, is borrowers want liquidity quick. And the more we can make our platform efficient and scalable and get the dollars out the door, they're going to benefit and leverage the secondary market in a more scalable fashion. And we've seen that over the last Thank you, Zach. And for the benefit of those of you on the call, one market factor that we're watching very closely and impacts farm and ranch volume is credit spreads.

and it really impacts us in a couple of different ways. But the dynamic is that our funding costs, our ability to access liquidity in the market tends to be less sensitive to credit spreads than the banks or other sources of liquidity that are available to borrowers. And that potentially benefits us in two ways. One is that at the margin, it makes our advantage securities product More attractive as a source of funding, source of wholesale funding for banks or other institutions that are holding mortgages. And additionally, that also makes the cost of a bank or another institution to hold the mortgage on balance sheet incrementally higher relative to what we can offer. And so that can incentivize more loan purchase activity in the farm and ranch space for our business. So while credit spreads are still relatively benign, they have moved up here in recent weeks. There's something that we're monitoring very closely, and that is a factor that could be meaningful in terms of driving farm and ranch purchase volume as well as advantage volume in the future.

That's great. I appreciate the detail there. And as you look out for the remainder of the year, Are you a little bit more bullish on the wholesale volume or is it more purchase volume that you're more bullish on?

Yeah, I think when we see the tailwinds of the sectors that we serve, clearly we feel there's a lot of tailwinds in our loan purchase products. We've talked a lot about infrastructure and the need for electrification and data centers and We just talked about farm and ranch, so we see continued growth and velocity in our loan purchase. We talked in last year that we felt the fourth quarter of 2025 was kind of the bottom of what we saw in the AgVantage or wholesale runoff, and we've experienced two back-to-back quarters of strong growth. It's a little bit more lumpy, so I think there's a component of those counterparties and the need for liquidity. What's transpiring, as Matt said, in the credit spread market in terms of our products relative value versus other funding alternatives, a little bit harder to predict in terms of what the future growth is. I would highlight we have pretty minimal scheduled maturities in our farm and ranch advantage portfolio in the second half of this year, which if we do see some more interest in utilization of of the wholesale product in the farm and ranch side would be pretty much increase in that growth there versus refinancing maturing to securities. We still see tremendous interest from new counterparties in this product. So we're continuing to market and have those conversations and look forward to getting new counterparties set up with that product, but a little lumpy and hard to predict.

Got it. Thanks, Zach. Appreciate the color there. On the FarmerMac loan exchange platform, what early adoption are you seeing from this exchange platform? And it sounds like it's really aimed at driving scale or volume scale, but this also flowed through to perhaps a lower efficiency ratio for you guys?

A little too early to tell on the utilization. We did launch it Monday, so we're right in the thick of it. But for all intents and purposes, it's been very well received in the market, and we'll continue to monitor that going forward. And yes, I think our ultimate goal here is linking back to our Investor Day presentation, create a faster, easier, and competitive platform where borrowers can access liquidity as quickly as possible. And this is the first big step. So as we think about different innovative technologies and bolting it onto the Flex platform, we do anticipate increasing scale, which ultimately will help with operating leverage and efficiency ratio.

Got it. And one last question for me. I know we're a little bit more than halfway through the year. What at this point would cause year-end results to kind of come in maybe out of line of your expectations?

From a market perspective, again, we see positive tailwinds across all sectors. You know, I think we're clearly continuing to monitor the agriculture environment and see what... potential headwinds that could arise in the future pertaining to global conflicts and higher input costs, etc. That is going to be more visible as we head into the back part of this year. So remains to be seen. That could be positive in terms of increased loan demand, but just uncertainty at this point as things continue to move forward. As we noted in our prepared remarks, we continue to monitor kind of data centers and the tremendous growth that we've seen there. Again, we're focused Very specifically on the top investment grade hyperscalers with very appropriately structured projects. And we haven't really seen a slowdown in that. And the capital markets are really eating up all the opportunities that are in the market. You know, I think things that could really come up as we think about us being a financial organization is, you know, credit headwinds. And so we continue to monitor all our sectors and we've seen some positive movement in substandards and 90-day delinquencies, but If things evolve in the markets that can cause those to increase and see additional provisions, that could alter kind of our forecast that we see.

Great. Thanks, Zach. Thanks, everybody.

That's all from me. Your next question comes from Gary Gordon, a private investor. Your line is open.

Hi. Thanks for taking my questions. And yeah, thanks for the detail on normalized earnings. Just a follow-up on securitization. You've described that the cost of capital for securitization is lower. What are sort of your limitations on volume? Presumably you'd like to issue a lot if it's a cheaper funding source.

Yes, and maybe just one, Gary, this is Matt. Just one clarification is historically we've relied upon what's known in the marketplace as senior subordinate securitization structures as a form of credit risk transfer. We're evolving our product mix and approach to credit risk transfer to include other avenues of risk transfer, including synthetic securitization. That's one of the and other tools that we are looking at and are fairly commonly used by some of the other GSEs in the markets. In terms of capacity, the factors that we'll be most closely monitoring there are really twofold. So one is the assets in portfolio where we can get effective execution in terms of risk transfer and specifically looking at as an example, we have a fairly robust history and market awareness and frankly level of comfort in the farm and ranch space. The market is comfortable with our underwriting standards and historical credit performance. And that's generally viewed to attractively align with a risk transfer type of transaction. And so we'll be looking at specific components of our balance sheet, specific components of the of the portfolio where risk transfer will make sense from an execution standpoint. The second factor that will be needed to monitor would be the market appetite or market capacity for agricultural finance and rural infrastructure finance risk transfer. We don't believe at the moment that there are notable limitations in terms of the market capacity for that risk, but that is certainly a factor over the long run that we'll have to monitor and if the market capacity is tapped out, then we would have to look at other forms of capital as alternative ways of managing the balance sheet.

Would it be a goal or a potential that securitization could be materially higher two years from now?

In short, yes.

Are infrastructure finance loans, you think, have an opportunity for securitization?

What I would say there is the market, in our experience, has a demonstrated appetite and interest in the farm and ranch credits, and that's in part related to the historical experience that the market has with our asset credit performance as demonstrated through the historical farm securitization transactions. That said, over the long run, we will absolutely be evaluating risk transfer opportunities in the infrastructure space, but that is not necessarily the priority in the early stages of these alternative risk transfer transactions that we're contemplating.

Okay, thanks a lot.

That concludes our Q&A session. I will now turn the conference back over to Zach Carpenter for any closing remarks.

Yeah, I'd like to conclude by thanking everyone for joining us here today. We appreciate your continued interest in PharmaMac and look forward to sharing our third quarter of 2026 results with you in the fall. As always is the case, if you have questions that you'd like to discuss with us, don't hesitate to reach out. And with that, thank you very much and have a great day.

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