What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-06 compared with 2023-11-06 · 407 added, 502 removed, 940 unchanged (49% of the section changed)

2 unchanged sentences

perspective, of the material information necessary to assess Farmer Mac's financial condition and results

of operations for the quarter ended September 30, 2023.

of operations for the quarter ended March 31, 2024.

Financial information included in this report is

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• the general rate of growth in agricultural mortgage and rural infrastructure indebtedness;

• the effect of economic conditions stemming from disruptive global events or otherwise on agricultural mortgage or rural infrastructure lending, borrower repayment capacity, or collateral values, including rapid inflation, fluctuations in interest rates, changes in U.S.

• the effect of economic conditions stemming from disruptive global events or otherwise on agricultural mortgage or rural infrastructure lending, borrower repayment capacity, or collateral values, including inflation, fluctuations in interest rates, changes in U.S.

trade policies, fluctuations in export demand for U.S.

agricultural products and foreign currency exchange rates, supply chain disruptions, increases in input costs, labor availability, volatility from the recent commercial banking failures, and volatility in commodity prices;

agricultural products and foreign currency exchange rates, supply chain disruptions, increases in input costs, labor availability, and volatility in commodity prices;

• the degree to which Farmer Mac is exposed to interest rate risk resulting from fluctuations in Farmer Mac's borrowing costs relative to market indexes;

• developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac;

• the effects of the Federal Reserve’s efforts to achieve monetary policy normalization and slow inflation;

• the effects of the Federal Reserve’s efforts to achieve monetary policy normalization to respond to inflation and employment levels;

• other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather, flooding and drought, climate change, or fluctuations in agricultural real estate values.

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The information in this report is not necessarily indicative of future results.

Farmer Mac is a mission-focused, purpose-driven company determined to drive economic opportunity and prosperity by increasing the accessibility of financing for American agriculture and rural infrastructure.

As the nation’s secondary market for agricultural and rural infrastructure loans, we help strengthen and connect rural America by providing a broad array of financial solutions to lenders that support flexible low-cost financing to farmers, ranchers, agribusinesses, renewable energy projects, rural utilities, and other related rural businesses and enterprises.

Farmer Mac also serves as a critical investment tool for entities such as states, counties, municipalities, pension funds, banks, public trust funds, and credit unions.

Farmer Mac offers those entities a variety of investment opportunities that may diversify their investment portfolios and provide the opportunity to earn a competitive return on their investment dollars.

During third quarter 2023:

• we continued to increase net income and core earnings;

• we maintained strong liquidity in our investment portfolio well above regulatory requirements;

• we maintained our strong capital position, well above regulatory requirements, and uninterrupted access to the debt capital markets, which historically have not been subject to the same short-term disruptions and liquidity concerns experienced by institutions that rely primarily on deposits to fund their assets;

Farmer Mac is driven by its mission to increase the accessibility of financing for American agriculture and rural infrastructure.

As a secondary market provider for our nation's agricultural and rural infrastructure credit, we provide financial solutions to a broad spectrum of customers supporting rural America, including agricultural lenders, agribusinesses, and rural electric cooperatives.

We are uniquely positioned to facilitate competitive access to financing that fuels growth, innovation, and prosperity in America's rural and agricultural communities.

Farmer Mac also serves as a critical investment tool for a number of entities – such as states, counties, municipalities, pension funds, banks, public trust funds, and credit unions – by offering investment opportunities that may diversify their investment portfolios and provide possibilities to earn a competitive return on their investment dollars.

During first quarter 2024:

• we provided $1.4 billion in liquidity and lending capacity to lenders serving rural America;

Farmer Mac’s performance during third quarter 2023, described in more detail below, reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to increase the accessibility of financing for American agriculture and rural infrastructure.

Despite ongoing macroeconomic concerns such as inflation, failures and liquidity concerns in the banking industry, rising interest rates, and geopolitical conflicts, Farmer Mac continued to deliver solid financial results.

These financial results for third quarter 2023 reflected a variety of factors, including:

• the resilience of the farm economy, as producers have benefited from healthy farm incomes and liquidity from relatively high commodity prices in 2021 and 2022;

• an increase in outstanding business volume at higher spreads while credit quality improved;

• we maintained strong liquidity in our investment portfolio well above regulatory requirements;

• we maintained our strong capital position, well above regulatory requirements, and uninterrupted access to the debt capital markets.

Farmer Mac’s performance during first quarter 2024, described in more detail below, reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to increase the accessibility of financing for American agriculture and rural infrastructure.

Despite recent macroeconomic concerns such as inflation, elevated interest rates, and geopolitical conflicts, Farmer Mac continued to deliver solid financial results.

These financial results for first quarter 2024 reflected a variety of factors, including:

• our disciplined approach to interest rate risk management that helps to protect earnings from the effects of interest rate volatility and has been accretive to Farmer Mac during periods of rising interest rates;

• effective capital strategies that resulted in advantageous funding in a rising interest rate environment in the current period.

• effective capital strategies that resulted in advantageous funding in an elevated interest rate environment in the current period;

• an increase in outstanding business volume at higher spreads while maintaining strong overall credit quality.

The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are measures of financial performance not presented in accordance with generally accepted accounting principles in the United States ("GAAP").

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For the Three Months Ended

September 30, 2023 June 30, 2023 September 30, 2022

March 31, 2024 December 31, 2023 March 31, 2023

(in thousands)

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Core earnings 43,392 44,922 38,884

The $10.9 million sequential increase in net income attributable to common stockholders was due to a $7.1 million after-tax increase in net interest income, a $1.6 million after-tax increase in guarantee fees, a $1.0 million after-tax decrease in our provision for credit losses, and a $0.8 million after-tax increase in the fair value of undesignated financial derivatives.

The $16.7 million year-over-year increase in net income attributable to common stockholders was due to a $15.6 million after-tax increase in net interest income, a $2.3 million after-tax increase in guarantee fees, a $1.5 million after-tax increase in the fair value of undesignated financial derivatives, and a $0.5 million after-tax decrease in our provision for credit losses.

The $6.1 million sequential increase in net income attributable to common stockholders was due to a $3.3 million after-tax increase in net interest income, a $3.1 million after-tax increase in the fair value of undesignated financial derivatives, and a $1.0 million after-tax decrease in our provision for credit losses.

These factors were partially offset by a $1.6 million after-tax increase in operating expenses.

The $3.0 million sequential increase in core earnings was due to a $1.3 million after-tax increase in net effective spread and a $1.0 million after-tax decrease in our provision for credit losses.

The $11.8 million year-over-year increase in core earnings was due to a $14.0 million after-tax increase in net effective spread and a $0.5 million after-tax decrease in our provision for credit losses, partially offset by a $3.7 million after-tax increase in operating expenses.

The $6.7 million year-over-year increase in net income attributable to common stockholders was due to a $5.8 million after-tax increase in net interest income, a $2.1 million after-tax decrease in our provision for credit losses, and a $1.3 million after-tax increase in the fair value of undesignated financial derivatives.

These factors were partially offset by a $2.8 million increase in operating expenses.

The $1.5 million sequential decrease in core earnings was due to a $1.2 million after-tax decrease in net effective spread and a $1.6 million after-tax increase in operating expenses.

These factors were partially offset by a $1.0 million after-tax decrease in our provision for credit losses.

The $4.5 million year-over-year increase in core earnings was due to a $4.6 million after-tax increase in net effective spread and a $2.1 million after-tax decrease in our provision for credit losses.

These factors were partially offset by a $2.8 million increase in operating expenses.

For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

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For the Three Months Ended

September 30, 2023 June 30, 2023 September 30, 2022

March 31, 2024 December 31, 2023 March 31, 2023

(in thousands)

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Net effective spread % 1.14 % 1.19 % 1.15 %

The $9.0 million sequential increase in net interest income was primarily due to a $8.1 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), and an increase of $0.8 million related to net new business volume.

In percentage terms, the sequential 0.10% increase was primarily attributable to the increase in net fair value changes from designated financial derivatives.

The $19.8 million year-over-year increase in net interest income was primarily due to a $10.7 million decrease in funding costs primarily due to our disciplined funding strategies and higher nominal interest rates that have led to an upward repricing of our excess capital that is held in our short-term investment portfolio, a $4.3 million increase related to net new business volume, and a $3.8 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives).

In percentage terms, the 0.18% increase was primarily attributable to a decrease of 0.14% in funding costs and an increase of 0.05% in net fair value changes from designated financial derivatives.

The $1.6 million sequential increase in net effective spread was primarily due to a decrease of $1.2 million in non-GAAP funding costs due to the same factors mentioned above that decreased our funding costs.

In percentage terms, net effective spread remained relatively constant.

The $17.8 million year-over-year increase in net effective spread was primarily due to a $14.8 million decrease in non-GAAP funding costs, due to the same factors mentioned above that decreased our funding costs, and a $3.5 million increase related to net new business volume.

In percentage terms, the year-over-year increase of 0.17% was primarily attributable to a decrease in non-GAAP funding costs.

The $4.2 million sequential increase in net interest income was primarily due to a $6.6 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives) and was partially offset by the reversal of $1.2 million of accrued interest income that was placed on non-accrual during the quarter.

In percentage terms, the 0.03% increase was primarily attributable to net fair value changes from designated financial derivatives.

The $7.3 million year-over-year increase in net interest income for 2024 compared to 2023 was primarily attributable to a $3.7 million increase from net new business volume and a $3.1 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives).

In percentage terms, the year-over-year 0.01% increase was primarily attributable to net fair value changes from designated financial derivatives.

The $1.5 million and the 0.05% sequential decrease in net effective spread was primarily due to the reversal of $1.2 million of accrued interest income on loans placed on non-accrual during the quarter.

The $5.9 million year-over-year increase in net effective spread was primarily due to a $3.4 million increase from net new business volume and a $1.7 million decrease in non-GAAP funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity.

In percentage terms, the year-over-year decrease of 0.01% was primarily attributable to a decrease of 0.02% on net new business volume and was partially offset by a decrease of 0.01% in non-GAAP funding costs.

For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 10 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

Business Volume

Our outstanding business volume was $27.7 billion as of September 30, 2023, a net increase of $0.9 billion from June 30, 2023 after taking into account all new business, maturities, and paydowns on existing assets.

The net increase was primarily attributable to a net increase of $509.1 million in the Rural Infrastructure Finance line of business and a net increase of $405.9 million in the Agricultural Finance line of business.

Our outstanding business volume was $28.8 billion as of March 31, 2024, a net increase of $0.4 billion from December 31, 2023 after taking into account all new business, maturities, and paydowns on existing assets.

The net increase was primarily attributable to a net increase of $0.2 billion in the Rural Infrastructure Finance line of business, primarily driven by net new Renewable Energy loan volume, and a net increase of $0.2 billion in the Agricultural Finance line of business.

For more information about Farmer Mac's business volume, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in thousands)

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Credit Quality

The following table presents Agricultural Finance on- and off-balance sheet substandard assets, in dollars and as a percentage of the respective portfolio as of September 30, 2023, June 30, 2023, and December 31, 2022:

The following table presents Agricultural Finance on- and off-balance sheet substandard assets, in dollars and as a percentage of the respective portfolio as of March 31, 2024 and December 31, 2023:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2023 $ 149,989 2.0 % $ 30,171 0.9 %

June 30, 2023 156,403 2.1 % 38,228 1.2 %

March 31, 2024 $ 225,895 2.9 % $ 29,319 0.9 %

December 31, 2023 152,865 2.0 % 33,086 1.0 %

Increase/(decrease) from prior quarter-ending $ (6,414) (0.1) % $ (8,057) (0.3) %

Increase/(decrease) from prior year-ending $ 73,030 0.9 % $ (3,767) (0.1) %

The decrease of $6.4 million in on-balance sheet substandard assets during the third quarter was primarily driven by the full payoff of a substandard agricultural storage and processing loan.

The $8.1 million decrease in substandard assets in our off-balance sheet portfolios during third quarter was primarily due to credit upgrades in livestock, permanent plantings, crops, and part-time farms.

There was one substandard asset with an outstanding balance of $29.5 million in the Rural Infrastructure Finance portfolio as of September 30, 2023, and there were no substandard assets as of December 31, 2022.

The increase of $73.0 million in on-balance sheet substandard assets during first quarter was primarily driven by credit downgrades in permanent plantings, livestock, crops, part-time farms, and agricultural storage and processing.

The $3.8 million decrease in substandard assets in our off-balance sheet portfolios during first quarter was primarily due to credit upgrades in permanent plantings, crops, and livestock and was partially offset by credit downgrades in part-time farms.

Although substandard Agricultural Finance loans increased during the quarter, there was not a significant provision for loss associated with that increase because of the net realizable value of those loans.

There were no substandard assets in the Rural Infrastructure Finance portfolio as of March 31, 2024.

There was one substandard asset with an outstanding balance of $29.4 million in the Rural Infrastructure Finance portfolio as of December 31, 2023.

For an analysis of current loan-to-value ratios across substandard and other internally assigned risk ratings, see Table 25 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

The following table presents 90-day delinquencies for the on- and off-balance sheet Agricultural Finance portfolios in dollars and as a percentage of the respective balance sheet category as of September 30, 2023, June 30, 2023, and December 31, 2022:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2023 $ 39,602 0.52 % $ 2,840 0.08 %

June 30, 2023 40,798 0.54 % 4,570 0.14 %

March 31, 2024 $ 67,256 0.85 % $ 9,569 0.29 %

December 31, 2023 32,893 0.42 % 1,784 0.05 %

Increase/(decrease) from prior quarter-ending $ (1,196) (0.02) % $ (1,730) (0.06) %

Increase/(decrease) from prior year-ending $ 34,363 0.43 % $ 7,785 0.24 %

On-balance sheet Agricultural Finance assets 90 or more days delinquent decreased in agricultural storage and processing, part-time farms, and livestock, and was partially offset by increases in permanent plantings and crops.

Off-balance sheet Agricultural Finance assets 90 days or more delinquent decreased in livestock and permanent plantings and was partially offset by increases in crops.

The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural Finance portfolio represented over half of the aggregate 90-day delinquencies as of September 30, 2023.

As of both September 30, 2023 and December 31, 2022, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.

On-balance sheet Agricultural Finance assets 90 or more days delinquent increased in permanent plantings, crops, and livestock.

Off-balance sheet Agricultural Finance assets 90 days or more delinquent increased in permanent plantings and was partially offset by decreases in crops and part-time farms.

As of both March 31, 2024 and December 31, 2023, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.

For more information about Farmer Mac's credit metrics, including 90-day delinquencies, the total allowance for losses, and substandard assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

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The main difference between core earnings and core earnings per share (non-GAAP measures) and net income attributable to common stockholders and earnings per common share (GAAP measures) is that those non-GAAP measures exclude the effects of fair value fluctuations.

These fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected.

These fluctuations are not

expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected.

Another difference is that these two non-GAAP measures exclude specified infrequent or unusual transactions that we believe are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business.

For example, in prior periods, we excluded any losses on retirement of preferred stock from core earnings and core earnings per share.

Similar transactions may reoccur in future periods.

For a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."

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(1) the net effects of cash settlements on agency forward contracts on the debt of other GSEs and U.S.

Treasury security futures

that we use as short-term economic hedges on the issuance of debt;

Treasury security futures that we use as short-term economic hedges on the issuance of debt;

and (2) the net effects of initial cash payments that Farmer Mac receives upon the inception of certain swaps.

The inclusion of these items in net effective spread is intended to reflect our view of the complete net spread between an asset and all of its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship.

The inclusion of these items in net effective spread is intended to reflect our view of the complete net spread between an asset and all of

its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship.

For a reconciliation of net interest income and net interest yield to net effective spread, see Table 10 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

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For the Three Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

(in thousands, except per share amounts)

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Gains/(losses) on hedging activities due to fair value changes

Unrealized gains/(losses) on trading securities

Unrealized (losses)/gains on trading securities

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 31 29

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(4) Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings

For the Nine Months Ended

September 30, 2023 September 30, 2022

(in thousands, except per share amounts)

Net income attributable to common stockholders $ 132,010 $ 114,352

Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 13) 5,978 11,899

(Losses)/gains on hedging activities due to fair value changes (1,796) 5,491

Unrealized gains/(losses) on trading securities 2,016 (948)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 87 (18)

Net effects of terminations or net settlements on financial derivatives 1,027 14,526

Income tax effect related to reconciling items (1,536) (6,499)

Sub-total 5,776 24,451

Core earnings $ 126,234 $ 89,901

Composition of Core Earnings:

Net effective spread (1)

$ 242,429 $ 184,426

Guarantee and commitment fees (2)

14,063 13,467

Total revenues 259,024 199,187

Credit related expense (GAAP):

Provision for/(release of) losses 1,711 (1,139)

Total credit related expense 1,711 (1,139)

Operating expenses (GAAP):

Compensation and employee benefits 43,391 36,661

General and administrative 26,047 21,717

Regulatory fees 2,497 2,437

Total operating expenses 71,935 60,815

Net earnings 185,378 139,511

Income tax expense (4)

38,770 29,236

Preferred stock dividends (GAAP) 20,374 20,374

Core earnings $ 126,234 $ 89,901

Core earnings per share:

Basic $ 11.66 $ 8.33

Diluted $ 11.56 $ 8.27

Weighted-average shares:

Basic 10,825 10,787

Diluted 10,924 10,875

(1) Net effective spread is a non-GAAP measure.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread.

See Table 10 for a reconciliation of net interest income to net effective spread.

(2) Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3) Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4) Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Reconciliation of GAAP Basic Earnings Per Share to Core Earnings - Basic Earnings Per Share

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

For the Three Months Ended

March 31, 2024 March 31, 2023

(in thousands, except per share amounts)

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Gains/(losses) on hedging activities due to fair value changes

0.30 (0.06) (0.17) 0.51

Unrealized gains/(losses) on trading securities

0.16 (0.07) 0.19 (0.09)

Unrealized (losses)/gains on trading securities

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — —

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Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

For the Three Months Ended

March 31, 2024 March 31, 2023

(in thousands, except per share amounts)

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Gains/(losses) on hedging activities due to fair value changes

0.29 (0.06) (0.16) 0.50

Unrealized gains/(losses) on trading securities

0.16 (0.07) 0.18 (0.09)

Unrealized (losses)/gains on trading securities

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — —

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The non-GAAP reconciling items between net income attributable to common stockholders and core earnings are:

Gains/(losses) on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above:

Gains on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above:

(a) Gains on undesignated financial derivatives due to fair value changes;

and (b) (Losses)/gains on hedging activities due to fair value changes.

Unrealized gains/(losses) on trading securities.

The unrealized gains/(losses) on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period.

and (b) Gains/(losses) on hedging activities due to fair value changes.

Unrealized (losses)/gains on trading securities.

The unrealized (losses)/gains on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period.

The net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value.

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Net Interest Income .

The following table provides information about interest-earning assets and funding for the three and nine months ended September 30, 2023 and 2022.

The following table provides information about interest-earning assets and funding for the quarters ended March 31, 2024 and 2023.

The average balance of non-accruing loans is included in the average balance of loans, Farmer Mac Guaranteed Securities, and USDA Securities presented, though the related income is accounted for on a cash basis.

Therefore, as the average balance of non-accruing loans and the income received increases or decreases, the net interest income and yield will fluctuate accordingly.

The average balance of loans in consolidated trusts with beneficial interests owned by third parties and for which Farmer Mac guarantees all classes of securities issued is disclosed in the net effect of consolidated trusts and is not included in the average balances of interest-earning assets and interest-bearing liabilities.

The average balance of loans in consolidated trusts with beneficial interests owned by third parties (single-class) and for which Farmer Mac guarantees all classes of securities issued is disclosed in the net effect of consolidated trusts and is not included in the average balances of interest-earning assets and interest-bearing liabilities.

The interest income and expense associated with these trusts are shown in the net effect of consolidated trusts.

For the Three Months Ended

September 30, 2023 September 30, 2022

Balance Income/

Expense Average

Balance Income/

Expense Average

(dollars in thousands)

Interest-earning assets:

Cash and investments $ 5,974,669 $ 79,947 5.35 % $ 5,254,260 $ 21,581 1.64 %

Loans, Farmer Mac Guaranteed Securities and USDA Securities (1)

21,859,457 293,378 5.37 % 20,144,586 164,548 3.27 %

Total interest-earning assets 27,834,126 373,325 5.36 % 25,398,846 186,129 2.93 %

Notes payable due within one year 3,212,217 38,704 4.82 % 2,873,545 15,679 2.18 %

Notes payable due after one year (2)

22,784,190 248,002 4.35 % 21,205,661 103,440 1.95 %

Total interest-bearing liabilities (3)

25,996,407 286,706 4.41 % 24,079,206 119,119 1.98 %

Net non-interest-bearing funding 1,837,719 — 1,319,640 —

Total funding 27,834,126 286,706 4.12 % 25,398,846 119,119 1.88 %

Net interest income/yield prior to consolidation of certain trusts 27,834,126 86,619 1.24 % 25,398,846 67,010 1.06 %

Net effect of consolidated trusts (4)

861,980 1,024 0.48 % 823,793 843 0.41 %

Net interest income/yield $ 28,696,106 $ 87,643 1.22 % $ 26,222,639 $ 67,853 1.04 %

(1) Excludes interest income of $8.5 million and $7.7 million in the third quarter of 2023 and 2022, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(2) Includes current portion of long-term notes.

(3) Excludes interest expense of $7.5 million and $6.8 million in the third quarter of 2023 and 2022, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(4) Includes the effect of consolidated trusts with beneficial interests owned by third parties.

For the Nine Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Balance Income/

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Net interest income/yield $ 29,939,265 $ 86,368 1.15 % $ 27,849,155 $ 79,058 1.14 %

(1) Excludes interest income of $25.6 million and $23.7 million in the first nine months of 2023 and 2022, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(1) Excludes interest income of $9.0 million and $8.5 million in first quarter 2024 and 2023, respectively, related to consolidated trusts with beneficial interests owned by third parties (single-class).

(2) Includes current portion of long-term notes.

(3) Excludes interest expense of $22.4 million and $20.6 million in the first nine months of 2023 and 2022, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(4) Includes the effect of consolidated trusts with beneficial interests owned by third parties.

The $48.1 million year-over-year increase in net interest income was primarily due to a $40.3 million decrease in funding costs primarily due to our disciplined funding strategies and higher nominal interest rates that have led to an upward repricing of our excess capital that is held in our short-term investment portfolio, and a $17.0 million increase related to net new business volume.

These factors were partially offset by a $7.7 million decrease in the fair value of derivatives designated in fair value hedge accounting

relationships (designated financial derivatives) and a $1.1 million decrease in cash-basis interest income.

In percentage terms, the 0.13% increase was primarily attributable to a decrease of 0.18% in funding costs, partially offset by a decrease of 0.04% in net fair value changes from designated financial derivatives.

(3) Excludes interest expense of $7.9 million and $7.5 million in first quarter 2024 and 2023, respectively, related to consolidated trusts with beneficial interests owned by third parties (single-class).

(4) Includes the effect of consolidated trusts with beneficial interests owned by third parties (single-class).

The following table sets forth information about changes in the components of Farmer Mac's net interest income prior to consolidation of certain trusts for the periods indicated.

For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by old rate), and changes in rate (change in rate multiplied by old volume), and then allocated based on the relative size of rate and volume changes from the prior period.

For the Nine Months Ended September 30, 2023 Compared to Same Period in 2022

For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by prior rate), and changes in rate (change in rate multiplied by old volume), and then allocated based on the relative size of rate and volume changes from the prior period.

For the Three Months Ended March 31, 2024

Compared to Same Period in 2023

Increase/(Decrease) Due to

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$ (1,969) $ 9,282 $ 7,313

(1) Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties.

(1) Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties (single-class).

The following table presents a reconciliation of net interest income and net interest yield to net effective spread.

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including (1) expenses related to undesignated financial derivatives, which consists of income or expense related to contractual amounts due on financial derivatives not designated in hedge relationships (the income or expense related to financial derivatives designated in hedge accounting relationships is already included in net interest income), and (2) the amortization of losses due to terminations or net settlements of financial derivatives;

and excluding (1) the amortization of premiums and discounts on assets consolidated at fair value, (2) the net effects of consolidated trusts with beneficial interests owned by third parties, and (3) the fair value changes of financial derivatives and corresponding financial assets or liabilities in fair value hedge relationships.

and excluding (1) the amortization of premiums and discounts on assets consolidated at fair value, (2) the net effects of consolidated trusts with beneficial interests owned by third parties (single-class), and (3) the fair value changes of financial derivatives and corresponding financial assets or liabilities in fair value hedge relationships.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for more information about net effective spread.

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Dollars Yield Dollars Yield Dollars Yield Dollars Yield

For the Three Months Ended

March 31, 2024 March 31, 2023

Dollars Yield Dollars Yield

(dollars in thousands)

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Net effective spread $ 83,044 1.14 % $ 77,173 1.15 %

The $58.0 million year-over-year increase in net effective spread was primarily due to a $45.8 million decrease in non-GAAP funding costs due to the same factors mentioned above that decreased our funding costs, and a $16.4 million increase related to net new business volume.

These factors were partially offset by a $1.1 million decrease in cash-basis interest income.

In percentage terms, the year-over-year increase of 0.18% was primarily attributable to a decrease in non-GAAP funding costs.

See Note 10 to the consolidated financial statements for more information about net interest income and net effective spread from Farmer Mac's individual business segments.

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Provision for and Release of Allowance for Losses and Reserve for Losses .

The following table summarizes the components of Farmer Mac's total allowance for losses for the three and nine month periods ended September 30, 2023 and 2022:

As of September 30, 2023 As of September 30, 2022

The following table summarizes the components of Farmer Mac's total allowance for losses for the three month period ended March 31, 2024 and 2023:

For the Three Months Ended

March 31, 2024 March 31, 2023

Losses Reserve

8 unchanged sentences

(1,801) (69) (1,870) 547 203 750

Charge-offs — — — — — —

Ending Balance $ 14,788 $ 1,642 $ 16,430 $ 16,278 $ 1,636 $ 17,914

For the Nine Months Ended

Beginning Balance $ 15,731 $ 1,433 $ 17,164 $ 17,164 $ 14,492 $ 1,950 $ 16,442

Provision for/(release of) losses 1,484 227 1,711 (699) (440) (1,139)

Charge-offs — — — (84) — (84)

Ending Balance $ 17,215 $ 1,660 $ 18,875 $ 13,709 $ 1,510 $ 15,219

See Notes 5 and 6 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

During the three months ended September 30, 2023, we recorded a $0.2 million release from the allowance for losses primarily as a result of a single collateral dependent agricultural storage and processing loan that fully paid off during the quarter, partially offset by one rural infrastructure loan that was downgraded to substandard during the quarter.

During the nine months ended September 30, 2023, we recorded a $1.7 million provision to the allowance for loan losses as a result of the above-mentioned rural infrastructure loan.

During first quarter 2024, we recorded a $1.9 million net release from the total allowance for losses primarily as a result of a single telecommunications loan that completed a restructuring, which resulted in an improved collateral position and a paydown of approximately 15% of its previously unpaid principal

The improvement on that one loan was partially offset by a provision for losses related to net new business volume.

Guarantee and Commitment Fees .

The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2023 September 30, 2022 $ % September 30, 2023 September 30, 2022 $ %

For the Three Months Ended

March 31, 2024 March 31, 2023 $ %

(dollars in thousands)

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Guarantee and commitment fee income $ 3,917 $ 3,933 $ (16) — %

Guarantee and commitment fees increased for the three and nine months ended September 30, 2023 compared to 2022, which was due to increases in the average outstanding balance of LTSPCs during the period.

As adjusted for the core earnings presentation, guarantee and commitment fees were $4.8 million and $14.1 million for the three and nine months ended September 30, 2023, respectively, compared to $4.2 million and $13.5 million for the three and nine months ended September 30, 2022, respectively.

Guarantee and commitment fees increased for the three months ended March 31, 2024 compared to 2023, which was due to increases in the average outstanding balance of LTSPCs during the period.

As adjusted for the core earnings presentation, guarantee and commitment fees were $5.0 million for the three months ended March 31, 2024, compared to $4.7 million for the three months ended March 31, 2023.

In Farmer Mac's presentation of core earnings, guarantee and commitment fees include interest income and interest expense related to consolidated trusts owned by third parties to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on those consolidated Farmer Mac Guaranteed Securities.

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Gains on financial derivatives .

The components of gains and losses on financial derivatives for the three and nine months ended September 30, 2023 and 2022 are summarized in the following table:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2023 September 30, 2022 $ % September 30, 2023 September 30, 2022 $ %

The components of gains and losses on financial derivatives for the three months ended March 31, 2024 and 2023 are summarized in the following table:

For the Three Months Ended

March 31, 2024 March 31, 2023 $ %

(dollars in thousands)

Gains due to fair value changes

$ 1,683 $ 916 $ 767 84 %

Accrual of contractual payments (34) (1,626) 1,592 (98) %

Gains due to terminations or net settlements

430 1,109 (679) (61) %

Gains on financial derivatives $ 2,079 $ 399 $ 1,680 421 %

These changes in fair value are primarily the result of fluctuations in long-term interest rates.

The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are undesignated financial derivatives is shown as expense related to financial derivatives.

The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are undesignated financial derivatives is shown as income or expense related to financial derivatives.

Payments or receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S.

Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "Gains/(losses) due to terminations or net settlements" in the table above.

Operating Expenses .

The components of operating expenses for the three and nine months ended September 30, 2023 and 2022 are summarized in the following table:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2023 September 30, 2022 $ % September 30, 2023 September 30, 2022 $ %

Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "Gains due to terminations or net settlements" in the table above.

See Note 4 to the consolidated financial statements for more information about Farmer Mac's financial derivatives.

For the Three Months Ended

March 31, 2024 March 31, 2023 $ %

(dollars in thousands)

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Compensation and Employee Benefits .

The increase in compensation and employee benefits expenses for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was largely due to increased headcount.

The increase in compensation and employee benefits expenses for first quarter 2024 compared to 2023 was largely due to increased headcount and increased stock compensation expense.

General and Administrative Expenses (G&A) .

The increase in G&A expenses for the three and nine months ended September 30, 2023 compared to the same periods in 2022 was primarily due to increased spending on software licenses and information technology and other consultants to support growth and strategic initiatives.

The increase in G&A expenses for first quarter 2024 compared to 2023 was primarily due to increased spending on software licenses and information technology and other consultants to support growth and strategic initiatives.

One of those initiatives is a multi-year effort to replace Farmer Mac's platform for securities trades and to implement a treasury management system.

That initiative is expected to be completed during 2024.

Income Tax Expense .

The following table presents income tax expense and the effective income tax rate for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended For the Nine Months Ended

Change Change

September 30, 2023 September 30, 2022 $ % September 30, 2023 September 30, 2022 $ %

The following table presents income tax expense and the effective income tax rate for the three months ended March 31, 2024 and 2023:

For the Three Months Ended

March 31, 2024 March 31, 2023 $ %

(dollars in thousands)

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Business Volume .

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the three and nine months ended September 30, 2023 and 2022:

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the three months ended March 31, 2024 and 2023:

Net New Business Volume

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Balance Sheet Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease)

For the Three Months Ended

March 31, 2024 March 31, 2023

Balance Sheet Net Growth/(Decrease) Net Growth/(Decrease)

(in thousands)

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Loans held in consolidated trusts:

Beneficial interests owned by third-party investors (Pass-Through) (1)

Beneficial interests owned by third-party investors (single-class) (1)

On-balance sheet (13,756) (19,661)

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On-balance sheet 160,000 70,000

LTSPCs and unfunded commitments Off-balance sheet 157,041 189,906 169,752 165,219

LTSPCs and unfunded loan commitments Off-balance sheet (115,568) 7,762

Other Farmer Mac Guaranteed Securities (3)

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On-balance sheet 80,486 (21,915)

Unfunded commitments Off-balance sheet 9,626 20,324 56,702 37,983

Unfunded loan commitments Off-balance sheet (6,954) 11,779

Total Corporate AgFinance $ 72,315 $ (3,525)

5 unchanged sentences

On-balance sheet (19,175) 471,229

LTSPCs and unfunded commitments Off-balance sheet 1,205 (19,946) (37,577) (25,573)

LTSPCs and unfunded loan commitments Off-balance sheet (37,843) (31,011)

Other Farmer Mac Guaranteed Securities (3)

3 unchanged sentences

Loans On-balance sheet $ 137,972 $ 66,916

Unfunded commitments Off-balance sheet (4,102) (11,755) 1,902 9,964

Unfunded loan commitments Off-balance sheet 116,814 11,407

Total Renewable Energy $ 254,786 $ 78,323

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(3) Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.

Farmer Mac's outstanding business volume was $27.7 billion as of September 30, 2023, a net increase of $0.9 billion from June 30, 2023 after taking into account all new business, maturities, and paydowns on existing assets.

The $0.3 billion net increase in Farm & Ranch during third quarter 2023 resulted from $1.4 billion of new purchases, commitments, and guarantees, partially offset by $1.0 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $0.2 billion in Farm & Ranch loans, partially offset by $0.1 billion in repayments.

The $0.1 billion net increase was primarily driven by strong borrower economics despite the continued higher interest rate environment.

Farmer Mac also purchased a total of $1.0 billion in Farm & Ranch AgVantage Securities during third quarter 2023, which primarily reflected the refinancing of maturing securities.

Farmer Mac's outstanding business volume was $28.8 billion as of March 31, 2024, a net increase of $0.4 billion from December 31, 2023 after taking into account all new business, maturities, and paydowns on existing assets.

The $0.1 billion net increase in Farm & Ranch during first quarter 2024 resulted from $0.7 billion of new purchases, commitments, and guarantees, partially offset by $0.6 billion of scheduled maturities and repayments.

Included in the $0.7 billion is the purchase of $308.3 million of Farm & Ranch loans, which included the acquisition of a pool of loans totaling $57.2 million from a single agricultural lender.

That agricultural lender's capital planning provided the opportunity to purchase that pool of loans.

Scheduled loan maturities and repayments in the aggregate amount of $194.2 million partially offset those purchases.

Farmer Mac also purchased a total of $0.3 billion in Farm & Ranch AgVantage Securities during first quarter 2024, which primarily reflected the refinancing of maturing securities and opportunistic new purchases.

The $0.3 billion in gross purchases was partially offset by $0.1 billion in scheduled maturities.

The $0.1 billion net increase in Corporate AgFinance during third quarter 2023 resulted from $0.3 billion of new purchases and commitments, which was partially offset by $0.2 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $195.6 million in loans, which was partially offset by $159.7 million in scheduled maturities and repayments.

The increase in loan purchases was primarily due to Farmer Mac's continued focus to support loans to larger and more complex agribusinesses focused on food and fiber processing and other food supply chain production.

The $0.5 billion net increase in Rural Utilities during third quarter 2023 resulted from $0.6 billion of new purchases, commitments, and guarantees, which was partially offset by $0.1 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $500.0 million in AgVantage Securities, $43.5 million in telecommunications loans, and $47.0 million in electric distribution and generation and transmission loans.

The $90.5 million in loan purchases was partially offset by $61.4 million in scheduled maturities and repayments.

The net increase in loan purchases primarily reflected borrowers' normal-course capital expenditures related to maintaining and upgrading utility infrastructure as well as investments in broadband infrastructure, and Farmer Mac's continued focus to support telecommunications investment in rural America.

The $2.7 million net increase in Renewable Energy during third quarter 2023 primarily reflects $17.4 million in loan purchases and unfunded commitments, partially offset by $14.7 million in repayments.

Farmer Mac's outstanding business volume was $25.3 billion as of September 30, 2022, a net increase of $0.8 billion from June 30, 2022 after taking into account all new business, scheduled maturities, and paydowns on existing assets.

The $607.3 million net increase in Farm & Ranch during third quarter 2022 resulted from $1.9 billion of

new purchases, commitments, and guarantees, mostly offset by $1.3 billion of scheduled maturities and

Farmer Mac purchased a total of $303.9 million in loans, which was primarily driven by

improved borrower economics albeit navigating a substantially higher interest rate environment.

$303.9 million in gross Farm & Ranch loan purchases was partially offset by $166.8 million in scheduled

maturities and repayments.

Farmer Mac also purchased a total of $1.0 billion in Farm & Ranch AgVantage Securities during third

The $72.3 million net increase in Corporate AgFinance during first quarter 2024 resulted from $0.3 billion of new purchases and unfunded loan commitments, which was partially offset by $0.2 billion of scheduled maturities, repayments, and paydowns on revolving commitments.

Included in the $0.3 billion is $131.6 million of purchases of Corporate AgFinance AgVantage Securities, which was partially offset by $51.0 million of scheduled maturities.

The $43.0 million net decrease in Rural Utilities during first quarter 2024 resulted from $116.2 million of new purchases, unfunded loan commitments, and guarantees, which was more than offset by $159.2 million of scheduled maturities and repayments.

The $254.8 million net increase in Renewable Energy during first quarter 2024 primarily reflects $347.9 million in loan purchases and unfunded commitments, partially offset by $93.1 million in repayments.

The net increase in Renewable Energy loan purchases and unfunded commitments primarily reflects the continued strong demand for renewable power generation and storage.

Farmer Mac's outstanding business volume was $26.5 billion as of March 31, 2023, a net increase of $0.6 billion from December 31, 2022 after taking into account all new business, scheduled maturities, and paydowns on existing assets.

The modest decrease in Farm & Ranch during first quarter 2023 resulted from $0.8 billion of new

purchases, commitments, and guarantees, offset by $0.8 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $0.2 billion in loans, which was primarily driven by improved borrower

economics while also navigating a substantially higher interest rate environment.

Farmer Mac also purchased a total of $0.2 billion in Farm & Ranch AgVantage Securities during first

quarter 2023, which primarily reflected the refinancing of maturing securities as well as financial

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partially offset by $0.1 billion in scheduled maturities.

The $67.5 million net increase in Corporate AgFinance during third quarter 2022 resulted from

$169.9 million of new purchases and commitments, which was offset by $102.5 million of scheduled

maturities and repayments.

Farmer Mac purchased a total of $136.0 million in loans, which was offset by

$84.6 million in scheduled maturities and repayments.

This net increase in loans was primarily due to

The modest decrease in Corporate AgFinance during first quarter 2023 resulted from $0.2 billion of new

purchases and commitments, which was offset by $0.2 billion of scheduled maturities, repayments, and

Farmer Mac purchased a total of $145.1 million in loans, which was partially offset by $138.5 million in scheduled maturities and repayments.

The increase in loan purchases was primarily due to

Farmer Mac's continued focus to support loans to larger and more complex agribusinesses focused on food

and fiber processing and other food supply chain production.

The $124.2 million net increase in Rural Utilities during third quarter 2022 resulted from $547.1 million

of new purchases, commitments, and guarantees, which was partially offset by $422.9 million of

The $0.5 billion net increase in Rural Utilities during first quarter 2023 resulted from $0.7 billion of new

purchases, commitments, and guarantees, which was partially offset by $0.2 billion of scheduled

maturities and repayments.

Farmer Mac purchased a total of $500.0 million in AgVantage Securities,

$92.8 million in telecommunications loans, and $90.4 million in electric distribution and generation and

transmission loans.

The $183.2 million in loan purchases was partially offset by $93.3 million in

scheduled maturities and repayments.

Farmer Mac purchased a total of $400.0 million in AgVantage

Securities, $75.8 million in telecommunications loans and $60.0 million in electric distribution and

generation and transmission loans.

The $135.8 million in loan purchases was partially offset by $68.1

million in scheduled maturities and repayments.

The $48.2 million net increase in Renewable Energy during third quarter 2022 primarily reflects

$61.7 million in loan purchases, partially offset by $13.4 million in repayments.

The net increase in loan purchases primarily reflected borrowers'

normal-course capital expenditures related to maintaining and upgrading utility infrastructure as well as

investments in broadband infrastructure, and Farmer Mac's continued focus to support

telecommunications investment in rural America.

The $78.3 million net increase in Renewable Energy during first quarter 2023 primarily reflects $89.7 million in loan purchases and unfunded commitments, partially offset by $11.4 million in repayments.

The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, loan sales, scheduled maturities, and repayments on existing assets from year to year.

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The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the periods indicated:

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

For the Three Months Ended

March 31, 2024 March 31, 2023

(dollars in thousands)

AgVantage securities $ 411,550 $ 695,200

Loans securitized and held in consolidated trusts with beneficial interests owned by third parties 6,399 318,997 291,600 344,925

Structured securitization transactions (not consolidated) — —

Loans securitized and held in consolidated trusts with beneficial interests owned by third parties (structured and single-class)

15,936 285,201

Total Farmer Mac Guaranteed Securities Issuances $ 427,486 $ 980,401

Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those securitized loans.

During first quarter 2023, Farmer Mac executed

its third structured securitization transaction, whereby it sold and securitized agricultural mortgage loans resulting in $281.0 million of Farmer Mac Guaranteed Securities.

In this transaction, Farmer Mac transferred selected loans to a depositor which then deposited the loans into a trust, at which time the loans became assets of the trust.

Farmer Mac concluded that it was the primary beneficiary of the trust because Farmer Mac retained significant interest and has power over the activities most significant to the economic performance of the Variable Interest Entity in its role as Master Servicer.

Therefore, Farmer Mac consolidates the assets and liabilities of the trust for this structured securitization.

Farmer Mac does not consider the assets held by the related securitization trust to be available to satisfy the claims of the creditors of Farmer Mac and/or the depositor.

During the three and nine months ended September 30, 2023 and 2022, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts.

During the three months ended March 31, 2024 and 2023, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts.

Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets.

During the three and nine months ended September 30, 2023 and 2022, Farmer Mac realized no gains or losses from the issuance of Farmer Mac Guaranteed USDA Securities or AgVantage Securities.

During the three months ended March 31, 2024 and 2023, Farmer Mac realized no gains or losses from the

issuance of Farmer Mac Guaranteed USDA Securities or AgVantage Securities.

The following table sets forth information about outstanding volume in each of Farmer Mac's lines of business as of the dates indicated:

Outstanding Business Volume

Balance Sheet As of September 30, 2023

As of December 31, 2022

Balance Sheet As of March 31, 2024 As of December 31, 2023

(in thousands)

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Loans held in consolidated trusts:

Beneficial interests owned by third-party investors (Pass-Through) (1)

Beneficial interests owned by third-party investors (single-class) (1)

On-balance sheet 857,156 870,912

5 unchanged sentences

On-balance sheet 5,995,000 5,835,000

LTSPCs and unfunded commitments Off-balance sheet 2,992,061 2,822,309

LTSPCs and unfunded loan commitments

Off-balance sheet 2,884,375 2,999,943

Other Farmer Mac Guaranteed Securities (3)

6 unchanged sentences

On-balance sheet 369,365 288,879

Unfunded commitments Off-balance sheet 134,356 77,654

Unfunded loan commitments

Off-balance sheet 138,423 145,377

Total Corporate AgFinance $ 1,766,294 $ 1,693,979

5 unchanged sentences

On-balance sheet 3,879,293 3,898,468

LTSPCs and unfunded commitments Off-balance sheet 475,015 512,592

Other Farmer Mac Guaranteed Securities (3)

LTSPCs and unfunded loan commitments

Off-balance sheet 449,935 487,778

2 unchanged sentences

Loans On-balance sheet $ 578,258 $ 440,286

Unfunded commitments Off-balance sheet 12,502 10,600

Unfunded loan commitments

Off-balance sheet 164,049 47,235

Total Renewable Energy $ 742,307 $ 487,521

1 unchanged sentence

Total $ 28,847,230 $ 28,471,024

(1) A Farmer Mac Guaranteed Security.

(1) A type of Farmer Mac Guaranteed Security.

(2) An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

(3) Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.

The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of September 30, 2023:

Schedule of Principal Amortization as of September 30, 2023

Schedule of Principal Amortization as of March 31, 2024

Loans Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs USDA Securities and Farmer Mac Guaranteed USDA Securities Total

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Total $ 11,602,199 $ 3,883,355 $ 2,552,164 $ 18,037,718

Of Farmer Mac's $27.7 billion outstanding principal balance of business volume as of September 30, 2023, $9.7 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines of business.

Of Farmer Mac's $28.8 billion outstanding principal balance of business volume as of March 31, 2024, $10.2 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines of business.

Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due.

The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of September 30, 2023:

The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of March 31, 2024:

AgVantage Balances by Year of Maturity

September 30, 2023

March 31, 2024

(in thousands)

3 unchanged sentences

2027 1,057,248

2027 1,050,698

Thereafter (1)

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(1) Includes various maturities ranging from 2029 to 2044.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.4 years as of September 30, 2023.

Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as a secondary market that helps meet the financing needs of rural America.

The pace and trajectory of Farmer Mac's growth will depend on the capital and liquidity needs of the lending institutions serving agriculture and rural infrastructure businesses and the overall financial health of borrowers in the sectors we serve.

Market interest rates have increased significantly since the lows experienced in 2021, and interest rates on Farmer Mac products during third quarter 2023 continued to be higher than Farmer Mac's 15-year historical averages.

New loan origination volumes tend to correlate inversely with changes in interest rates.

However, prepayment rates also generally correlate inversely with changes in interest rates, with higher interest rates typically slowing the pace of portfolio loan repayments.

Future changes to monetary policy and the overall level, pace, and duration of elevated interest rates could continue to impact the pace and timing of the Agricultural Finance mortgage loan purchase demand and repayments.

Farmer Mac anticipates positive momentum in wholesale volume refinancing activity in fourth quarter 2023, with most of the AgVantage Securities scheduled to mature in fourth quarter 2023 expected to be successfully refinanced through the purchase of new AgVantage Securities.

Farmer Mac foresees opportunities for profitable growth across our lines of business driven by several key factors:

• As agricultural and rural infrastructure lenders seek to manage liquidity, equity capital, and return on equity capital requirements or reduce exposure due to lending or concentration limits, Farmer Mac can provide relief for those institutions through loan and portfolio purchases, participations, guarantees, LTSPCs, wholesale funding, or securitizations.

• As a result of business and product development efforts and continued interest in the agricultural and rural infrastructure asset classes from institutional investors and nontraditional lenders, Farmer Mac's customer base and product set continue to expand and diversify, which may generate more demand for Farmer Mac's products from new sources.

• Farmer Mac's growing relationships with larger regional and national lenders, as well as consolidation within the agricultural and rural infrastructure lending industry, continue to provide opportunities that could influence Farmer Mac's loan and wholesale funding demand and increase the average transaction size within Farmer Mac's lines of business.

• Future growth opportunities in Farmer Mac's Rural Infrastructure Finance line of business may evolve by deepening business relationships with eligible counterparties, financing broadband-related capital expenditures and rural telecommunications facilities, growing opportunities for renewable energy project finance, and exploring new types of loan products.

• Expansion and acquisition opportunities for agricultural producers resulting from high agricultural incomes and rising input costs have increased financing requirements for mergers and acquisitions, consolidation, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac's loan products.

• Investments necessary to support consumer demand could increase the need for financing within the food and agriculture supply chain, which may increase the need for incremental capital support from the secondary market.

• Resilient access to debt capital markets as investors seek government and agency issuances.

In third quarter 2023, elevated interest rates continued to cause fluctuations in bank liquidity due to deposit withdrawals.

Farmer Mac, not being a depository institution, is insulated from similar liquidity concerns.

In fact, certain economic disruptions could potentially have a positive impact on Farmer Mac’s funding costs relative to the market.

Historically, significant economic events have often led investors to seek high-quality fixed income investments, such as Farmer Mac’s debt securities.

As Farmer Mac’s funding strategies do not rely on deposits, it is generally capable of extending funding beyond short-term disruptions, thereby circumventing many potential liquidity concerns.

This funding advantage could present Farmer Mac with increased opportunities in a competitive lending environment.

economy continued to exhibit signs of growing volatility in third quarter 2023.

While consumer spending has retreated modestly from the highs experienced in 2022, the significantly higher interest rate environment continues to create uncertainty for the economic outlook for the U.S.

economy in the remainder of 2023 and into 2024.

And while labor markets continue to remain resilient, slower consumer spending, declines in residential housing investment, and the continued tightening of credit conditions following bank industry stress indicate that the probability of a U.S.

or global recession remains elevated.

Farmer Mac believes that its portfolio is sufficiently balanced to withstand the market volatility that arises with an economic recession, as the agricultural, food, and infrastructure industries tend not to be directly correlated with the general economy.

Farmer Mac believes these sectors are generally well positioned to withstand an economic downturn due to ample consumer demand and government support.

The recent rise in short-term rates has provided an asymmetric benefit to Farmer Mac's earnings, and Farmer Mac projects limited downside to earnings when rates decline due to its proactive equity capital allocation strategies.

This is due to our fundamental asset liability management approach, where Farmer Mac matches the duration and convexity of our assets and liabilities in all rate environments, which enables Farmer Mac to minimize earnings volatility in periods of short-term interest rate volatility.

In addition to active fundamental asset liability management that enables Farmer Mac to mitigate earnings volatility in periods of short-term interest rate volatility, Farmer Mac's business has certain natural business hedges that help to insulate it from interest rate volatility.

This is a key differentiator for Farmer Mac relative to other financial services entities.

For example, when interest rates rise, prepayments also tend to decline - but interest earned on excess cash and capital would likely increase and Farmer Mac would continue to have strong market access, as Farmer Mac does not rely on deposits as a source of funding.

Conversely, when interest rates decline, loan purchase volume often increases but prepayments also tend to increase.

Farmer Mac is able to manage its interest rate risk through exercising callable issuances and maintaining its market-based credit spreads.

Although these natural business dynamics are not perfect offsets, they do counterbalance to mitigate volatility from changes in short-term interest rates.

Operating Expense .

Farmer Mac continues to expand its investments in human capital, technology, and business infrastructure to increase capacity and efficiency as it seeks to accommodate its growth opportunities and achieve its long-term strategic objectives.

Farmer Mac expects continued increases in its operating expenses over the next several years.

We will continue making investments in our infrastructure and funding platforms to support these strategies and scale with our growth.

Agricultural Industry .

The agricultural economy experienced somewhat favorable conditions in third quarter 2023, with mixed commodity prices and continued easing in input price inflation.

In response to Russia's invasion of Ukraine in early 2022, grain commodity prices rose rapidly during first half of 2022

and continued to be elevated during much of the second half of 2022.

Higher commodity prices for grains and many animal proteins substantially increased gross cash receipts for the 2022 marketing year.

Farm expense price levels partially stabilized in third quarter 2023, after falling for several consecutive quarters.

While many expense categories have dropped significantly from their 2022 peak levels, several other categories such as interest, labor, and other inputs remain elevated and could experience additional upward pressure through the remainder of the year and into 2024.

Grain commodity prices moderated again in third quarter 2023 due to stabilizing supply expectations, though uncertainty in Ukraine could increase price volatility in the last quarter of 2023 and into 2024.

Overall farm incomes are expected to trend lower in 2023 after reaching new highs in 2022.

The USDA estimates that net cash farm income climbed another 35% to $202.2 billion in 2022, a new all-time high.

The primary driver of increased profitability was higher cash revenues, contrary to 2019 and 2020 when elevated government support payments lifted farm incomes.

The USDA estimates production expenses rose by 15% in 2022, a level experienced in the 1970s and again in the 2012-2014 agricultural economy expansion.

Looking forward, the USDA expects net cash farm income to fall by 27% to $148.6 billion in 2023 due to lower commodity prices and elevated farm expenses.

However, the 2023 farm income projections are 20% higher than the 10-year average, demonstrating the continued strength in farm profitability.

Rising farm incomes alongside low interest rates in 2020 and 2021 drove a rapid rise in land values and a decrease in farm delinquencies and bankruptcies.

This trend has continued into 2023.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.0 years as of March 31, 2024.

Business Outlook

Products and Portfolio

Farmer Mac serves a vital role in serving rural America by offering liquidity, capital, and risk management tools as a secondary market that help increase the accessibility of financing for American agriculture and rural infrastructure.

The growth trajectory of Farmer Mac is closely tied to the capital and liquidity needs of the lending institutions serving agriculture and rural infrastructure businesses and the overall financial health of borrowers in these sectors.

Despite significant increases in market interest rates over the past two years and global and economic volatility, Farmer Mac was able to increase outstanding business volume and net effective spread by 8.9% and 7.6%, respectively, in first quarter 2024 versus first quarter 2023.

The increase in outstanding business volume and net effective spread primarily reflects Farmer Mac's effective and active asset-liability and capital management strategies, the diversification of Farmer Mac’s business model, and the resiliency of the agriculture and rural infrastructure sectors.

Several factors continue to influence business volume growth dynamics.

The rise in market interest rates that have persisted over the past few years has had a direct impact on Farmer Mac’s Farm & Ranch product interest rates, and there generally exists an inverse correlation between Farm & Ranch new loan purchase volumes and changes in Farm & Ranch product interest rates, with higher product interest rates slowing portfolio loan prepayments.

The net effect of these forces contributed to positive Farm & Ranch loan purchase portfolio growth in first quarter 2024 as new Farm & Ranch loan purchases outpaced loan prepayments.

Future changes in monetary policy, sustained elevated product interest rates, and the financial health of borrowers are anticipated to influence the demand for Agricultural Finance mortgage loans and the pace of repayments.

Another factor contributing to the growth in Farm & Ranch loan purchases in first quarter 2024 was the acquisition of a pool of loans totaling $57.2 million to support an agriculture lender’s capital efficiency needs.

Future opportunities to purchase pools of eligible loans may be prevalent as financial institutions continue to manage their capital efficiency, loan and deposit growth, and liquidity needs.

Farmer Mac continued to experience significant momentum in its wholesale finance product during first quarter 2024, driven by volatile market credit spreads resulting in greater liquidity and diversification needs from our counterparties.

Future growth will be determined by market interest rates and credit spreads, overall economic conditions, and the relative value of Farmer Mac’s products versus the broader market.

Corporate AgFinance loan purchases and unfunded commitments remained relatively flat in first quarter 2024 at $1.4 billion due to large prepayments and volatile transaction velocity due to market and economic uncertainty.

The Rural Infrastructure Finance segments showed strong business volume growth in first quarter 2024, primarily driven by increased investment activity and additional financing for renewable energy projects in response to continued strong demand for renewable power generation and storage.

Opportunities for profitable future growth include Farmer Mac's potential role in alleviating liquidity, equity capital, and return-on-equity capital challenges faced by agricultural and rural infrastructure lenders.

The suite of Farmer Mac's offerings encompasses loan and portfolio purchases, participations, guarantees, LTSPCs, wholesale funding, and securitizations.

Ongoing business and product development efforts continue to attract institutional investors and nontraditional lenders, resulting in the diversification of Farmer Mac's customer base and product set, potentially generating increased product demand from new sources.

Farmer Mac’s improved loan servicing capabilities enhance our loan portfolio purchase value proposition, adding new product offerings to an increasingly diverse customer base.

Growing relationships with larger agriculture lenders, financial industry consolidation, and interest rate and market volatility continue to provide increased opportunities for Farmer Mac, influencing the demand for loan purchases, risk management solutions, and wholesale funding.

This growth may lead to an increase in the average transaction size within Farmer Mac’s lines of business.

The financing needs arising from mergers, acquisitions, consolidation, and vertical integration in the agricultural and rural infrastructure industries present further opportunities for Farmer Mac’s loan purchase products and other financing solutions.

Furthermore, investments supporting consumer and food supply demand may increase financing needs in the food and agriculture supply chain, potentially requiring incremental capital support through the secondary market.

Deepening relationships with eligible rural infrastructure counterparties are expected to continue to create opportunities to support fiber and broadband-related projects, rural telecommunications investments, and renewable energy projects.

During first quarter 2024, Farmer Mac was not affected by the liquidity concerns that continued to affect many regional and national banks due to fluctuations caused by elevated interest rates and deposit withdrawals.

Unlike depository institutions, Farmer Mac's funding strategies do not rely on deposits, allowing us to navigate beyond short-term liquidity disruptions and to take advantage of increased opportunities in a competitive lending environment.

Our funding advantage over regional and national banks is also aided by the fact that our debt has a contractual term to maturity and that only we have the ability to call our callable debt before its original maturity date when market conditions are beneficial to Farmer Mac.

In contrast, depository institutions largely rely on demand deposit accounts in which the depositors hold the right to withdraw at any time.

Because of these differences in funding strategies, certain economic disruptions may have a positive impact on Farmer Mac’s funding costs relative to the overall market.

The increase in short-term rates during the last two years has provided an asymmetric benefit to Farmer Mac's earnings as a result of effective capital allocation and interest rate risk strategies.

Our proactive equity capital allocation strategies can help to limit the possible downside effect to earnings when rates decline.

Farmer Mac's fundamental asset-liability management approach, which effectively matches the duration and convexity of assets and liabilities in all rate environments, also helps to minimize earnings volatility during periods of short-term interest rate fluctuations.

In addition to active asset-liability management, Farmer Mac's business may benefit from natural business hedges that help mitigate vulnerability to effects from interest rate volatility.

When interest rates rise, prepayments tend to decline, but interest earned on excess cash and capital increases, maintaining Farmer Mac's strong market access without relying on deposits.

Conversely, when interest rates decline, loan purchase volume often increases, but prepayments tend to rise as well.

Farmer Mac manages its interest rate risk by issuing callable debt and maintaining market-based credit spreads.

Although these natural business dynamics may not be perfect offsets, they often effectively counterbalance to mitigate volatility from changes in short-term interest rates.

Farmer Mac expects continued increases in its operating expenses over the next several years as we continue to expand our investments in human capital, technology, and business infrastructure to increase capacity and efficiency as we seek to accommodate growth opportunities and achieve our long-term strategic objectives.

Investments in infrastructure and funding platforms to support strategic objectives are expected to allow Farmer Mac to scale more efficiently with future portfolio and earnings growth.

These investments will likely help improve product delivery and funding efficiency, potentially creating additional benefits for future growth.

Another focus of our infrastructure investments will be a continued effort to expand our servicing capabilities and to enhance the efficiency and effectiveness of processes associated with loan onboarding and servicing.

Farmer Mac will continue to leverage technology enhancements and servicing standardization efforts to drive scalability and consistency.

Technology enhancements are planned for 2024 to continue to incorporate all Farmer Mac loan portfolios onto our servicing platform and to provide flexibility in accessing loan portfolio information, as well as streamlining operational workflows.

Agricultural Finance Industry Outlook

Overall farm incomes fell in 2023 and are forecast to fall again in 2024 .

According to the USDA, net cash farm income peaked at $202.2 billion in 2022, a new all-time high.

The primary driver of increased profitability in 2022 was higher cash revenues, in contrast to 2019 and 2020, when elevated government support payments supported farm incomes.

The USDA currently estimates that net cash farm income dropped 21% in 2023 and will decrease another 24% in 2024, due primarily to lower commodity prices and higher farm expenses.

Still, the average farm income in 2023 and 2024 would be 10% higher than the 10-year average if the USDA's projections are realized.

This underscores the continued strength in farm profitability.

Commodity prices may see increased volatility in 2024 due to a rebound in global supply levels.

Rising production in recent years pressured some tree nut prices, including almonds and walnuts.

For tree nuts, lower planted acreage in recent years combined with robust exports this marketing year are providing moderate support for prices.

Within the livestock and animal protein sector, producers could see offsetting benefits from lower feed costs, particularly the cattle sector.

Broadly speaking, farm expenses could also abate somewhat in 2024, with lower expected feed, fertilizer, and fuel costs partially offset by higher expected interest, labor, and rental rates.

Demand for corn and soybean by-products could see a boost later in 2024 as renewable diesel and sustainable aviation fuel markets mature.

Record-setting farm incomes in 2021 and 2022, combined with historically low interest rates in 2020 and 2021, drove a rapid rise in land values and a decrease in farm delinquencies and bankruptcies.

Momentum for farmland values persisted throughout 2023 due to high levels of farm liquidity and a constrained supply of farmland for sale.

Land value survey data from the USDA show a 7.4% increase in average farm real estate values from June 2022 to June 2023.

Annual farm real estate value gains were highest in the Northern Plains (13.7%) and the Southern Plains (9.4%) but also strong in the Lake states (8.2%), the Corn Belt (7.1%), and the Southeast (5.7%).

The Federal Reserve Bank of Chicago AgLetter reported a 9% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between July 2022 and July 2023.

Farmland value growth rates moderated in the second half of 2023 in the face of continued higher market interest rates.

The Federal Reserve Bank of Chicago AgLetter reported a 6% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between January 2023 and January 2024.

This was down from a 12% increase over the previous 12-month period.

Data from the Federal Reserve Bank of Kansas City show a similar rise in land values in the Tenth District (primarily Kansas, Missouri, Nebraska, and Oklahoma) during that same period.

Farmland value growth rates moderated in second quarter 2023 in the face of rapidly rising interest rates.

Growth rates in land values could remain low in 2023 and into 2024 due to compressing farm profitability and an elevated interest rate environment.

While regional averages for farmland values provide a good barometer for the overall movement in U.S.

Growth rates in land values could continue to moderate in 2024 due to compressing farm profitability and the higher interest rate environment, particularly in states like California where there are multiple headwinds.

Acknowledging this, a general low supply of available farmland and strong demand for the asset class across a wide variety of investors could help maintain balance in the farmland transaction markets.

While regional averages for farmland values generally provide a good barometer for the overall changes in U.S.

farmland values, economic forces affecting land markets are highly localized, and some markets may experience greater volatility in farmland values than state or national averages indicate.

Economic conditions are likely to bring mixed effects to credit demand during the remainder of 2023.

Strong asset appreciation in recent years could signal additional demand and capacity for farm debt as financial decision-makers look to lock in long-term economics for their appreciating farm and agribusiness assets.

Farm profitability generally increases asset values and demand for the asset class for multiple years, which also contributes to increasing credit demand.

However, the elevated interest rate environment could adversely impact mortgage portfolio growth, lowering new sales and originations but also potentially slowing portfolio prepayments.

Finally, a changing yield curve coupled with widening market credit spreads could increase opportunities for corporate and institutional lending, as Farmer Mac's programs become more attractive at higher costs of capital.

Combined, these factors are expected to be generally supportive of continued net portfolio growth for Farmer Mac during the last quarter of 2023.

Positive economic conditions in the agricultural economy improved Farmer Mac's agricultural portfolio performance in 2022 and throughout the first three quarters of 2023.

Farmer Mac's 90-day delinquency levels decreased slightly in third quarter 2023 relative to second quarter 2023.

The overall delinquency

rate decreased from 0.42% of the Agricultural Finance line of business as of June 30, 2023 to 0.39% of the Agricultural Finance line of business as of September 30, 2023.

The third quarter 2023 percentage is also slightly lower than the 0.42% delinquency rate as of September 30, 2022.

The year-over-year decrease in the seriously delinquent rate was caused by typical, seasonal portfolio delinquency activity as well as a resolution of a large, agribusiness credit workout.

The top five exposures of seriously delinquent loans as of third quarter 2023 represent over half of all 90-day delinquent loans.

Rising input costs, market volatility, and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural credit sector, which could negatively affect the trajectory of the current agricultural cycle.

Farmer Mac believes that its portfolio continues to be highly diversified, both geographically and by commodity and that its portfolio has been underwritten to high credit quality standards.

Therefore, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility from cyclical and external factors.

For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Agricultural Finance mortgage loans in Farmer Mac's portfolio as of September 30, 2023, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

Based on our robust collateral underwriting standards, we believe that our loan collateral is well-positioned to endure reasonably foreseeable volatility in farmland values that could result from external factors.

Markets and Weather

Exogenous factors facing farm and food producers can create uncertainty and market instability within the sector.

External market conditions that could adversely impact the farm and food sectors in the remainder of 2023 and into 2024 include foreign trade and trade policy, supply chain disruptions, and environmental conditions.

Some of the external market conditions that could adversely affect the farm and food sectors in 2024 include foreign trade and trade policy, supply chain disruptions, and environmental conditions.

agricultural sector has become increasingly dependent on foreign markets as a source of demand, making trade policy an important consideration for farms and food.

The USDA projects U.S.

agriculture exports will drop to $177.5 billion in 2023, a 9% decline relative to last year.

Through August 2023, agricultural export values were down approximately 12% in 2023 compared to 2022.

The value of the U.S.

dollar relative to other major currencies rose 3% in third quarter 2023.

A strong U.S.

dollar could potentially be a headwind for farm, food, fiber, and fuel exports through the last quarter of 2023.

The USDA projects that U.S.

agriculture exports will drop to $170.5 billion in 2024, 5% lower than 2023 and down 13% relative to peak levels in 2022.

Through February 2024, agricultural export values were down approximately 7% in 2024 compared to 2023.

One challenge for U.S.

exports has been the value of the U.S.

dollar relative to competing exporters of agricultural goods.

Slower global growth could also be a headwind for consumer-oriented products like animal proteins, dairy, fruits, and nuts, and Ukrainian corn and wheat production may eventually stabilize.

Because Farmer Mac has significant exposure to crop commodities like corn, soybeans, hay, wheat, and cotton, any increase in agricultural commodity prices is likely to benefit Farmer Mac's overall portfolio credit quality more than degradation from downward pressure on livestock and consumer product profitability.

Looking ahead, economic and geopolitical uncertainties such as conflicts in Eastern Europe and the Middle East could lead to higher volatility for the U.S.

dollar during the year.

Severe weather conditions and long-term environmental change continue to shape agricultural sectors.

experienced 18 separate billion-dollar weather disasters in 2022, as tracked by the National Oceanic and Atmospheric Administration.

Many of those events affected agriculture, including midwestern storms, western wildfires, excessive heat, and drought.

experienced 28 separate billion-dollar weather disasters in 2023, the highest number of billion-dollar weather disasters on record, as tracked by the National Oceanic and Atmospheric Administration.

Many of those events affected agriculture, including midwestern storms, flooding, western wildfires, excessive heat, and drought.

Federal crop insurance provides a strong mitigator against this risk, but farmers and ranchers face increasingly severe weather incidents.

Broadly speaking, drought conditions across much of the U.S.

have abated over the last two years.

Long and persistent heat and drought conditions affected agricultural production regions in the western and midwestern parts of the United States in 2021 and 2022.

There has been a sizable improvement in conditions in 2023 for large portions of the West Coast, especially California, but drought conditions have intensified in other areas of the country.

Approximately 19% of the continental U.S.

was classified as being in severe to extreme drought as of September 30, 2023, according to data from the National Center for Environmental Information.

Much of the U.S.

affected by drought conditions in third quarter 2023 is in the Central and Southern Plains.

Dry weather across a significant portion of the Mississippi River basin this summer has led to sharply lower river levels this fall.

Barge traffic has been reduced as a result, complicating logistics for grain processors across the northern U.S.

Higher transportation costs for barges may ultimately lead to lower farmgate prices,

although the impact will likely vary significantly based on alternative transportation options such as rail.

For loans in other areas that commonly experience exceptional drought (primarily in California), Farmer Mac's underwriting process includes an assessment of anticipated long-term water availability for the related property and how that impacts the collateral value and borrower's cash flow position to mitigate that risk.

Rural Infrastructure Industry .

Economic conditions affecting the rural infrastructure industry typically follow those in the general economy.

There was a sizable improvement in conditions in 2023 for large portions of the West Coast, especially California.

Drought conditions did intensify in other areas of the country throughout 2023, including Texas, Oklahoma, and New Mexico.

Precipitation this winter helped alleviate this challenge, though.

As of April 18, 2024, only 5% of the continental U.S.

was classified as being in severe to exceptional drought according to data from the National Center for Environmental Information.

This is down from 14% at the end of 2023.

For loans in other areas that commonly experience exceptional drought (primarily in California), Farmer Mac's underwriting standards include an assessment of anticipated long-term water availability for the related property and how water availability impacts the collateral value and the borrower's liquidity position to mitigate that risk.

Agricultural Processing and Food Supply Chain

The production of food, feed, fiber, and biofuels has been economically viable in the past few years, but some factors may change in 2024.

Rising consumer inflation boosted the profitability of the food processing and supply chains in 2021 and 2022.

Lower consumer prices increased the volume of consumer spending but also limited the profit expansion of food and fiber businesses.

Biofuels have gained more demand due to low-carbon regulations in several states and incremental tax benefits for the production of renewable diesel and sustainable aviation fuel.

A large amount of planned biofuel projects and new facilities for 2024 and 2025 could raise the prices of raw materials such as corn and soybeans.

dollar, trade issues, and a high risk of global economic turmoil could pose challenges for these sectors throughout 2024.

Nonetheless, consumer spending remained strong in the first quarter of 2024, creating favorable conditions for value-added food, feed, fiber, and biofuel consumption.

Credit demand in these sectors could grow in the next few quarters if interest rate policy moderates, inflation rises again, or economic uncertainty clears up.

Rural Infrastructure Finance Industry Outlook

Power and Energy

Economic conditions affecting rural power and electricity markets typically follow those in the general economy.

According to data from the U.S.

Energy Information Administration, sales and the revenue from the sale of electricity to customers has slowed with an annual decline in sales of 1.2% and an increase in revenue of 7.5%, respectively, in the last 12 months through July 2023 compared to July 2022.

This decline in sales was driven by a drop in the residential and industrial sectors.

The average price of electricity to industrial customers decreased 10.2% in July 2023 relative to last year.

Energy Information Administration, sales and the revenue from the sale of electricity to customers have slowed, with an annual decrease in sales of 0.8% and an increase in revenue of 1.0%, respectively, in the last 12 months through January 2024 compared to January 2023.

This decrease in sales was driven by a drop in the residential electricity sector.

The average price of electricity to industrial customers increased 1.8% in January 2024 relative to 2023.

Higher energy input prices, such as natural gas and coal, became a headwind in 2022.

Natural gas prices rose consistently in 2021 and 2022 because of reduced supply and additional demand for U.S.

liquified natural gas from European countries.

Coal prices also rapidly increased in 2022, driven by higher natural gas prices and additional overseas demand to offset limited Russian coal exports.

Despite higher input costs, power producers are generally able to pass cost increases through higher retail electricity prices, which has contributed to the increase in electricity costs for retail customers throughout 2022.

Oil and natural gas prices were volatile during much of 2022 but have moderated throughout 2023, contributing to modest declines in electricity prices this year as of July.

Through September 30, 2023, Farmer Mac had not observed material degradation in the financial performance of its rural infrastructure portfolio, and that portfolio has never experienced a serious delinquency or default since inception.

Prospects for loan growth within the rural infrastructure segment are varied by industry.

For electric cooperatives, ongoing normal-course capital expenditures related to maintaining and upgrading utility infrastructure are expected to continue at historical levels based on replacement and modernization of existing infrastructure.

After two years of increased prices and heightened volatility, oil and natural gas prices moderated throughout much of 2023 and early 2024.

Geopolitical uncertainty in the Middle East and Eastern Europe could increase energy price volatility, but power producers are generally able to pass higher input costs through to retail electricity prices as evidenced by higher retail electricity prices in 2022 and parts of 2023.

Through March 31, 2024, Farmer Mac had not observed material degradation in the financial performance of its rural utilities portfolio, and that portfolio has never had a serious delinquency or default since its inception.

Credit demand for electric cooperatives will likely be tied to ongoing normal-course capital expenditures related to maintaining and upgrading utility infrastructure.

These growth opportunities may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the changing interest rate environment, increased policy initiatives to support rural connectivity, and competitive dynamics within the rural utilities cooperative finance industry.

Investment in rural telecommunications infrastructure continues to be robust for cooperative and non-cooperative providers due to their access to federally funded programs, such as USDA's Broadband Equity Access and Deployment Program (BEAD), the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF), the USDA’s ReConnect, and the USDA’s Telecommunications Infrastructure Loan and Loan Guarantee program.

In addition to capital projects spurred by these programs, Farmer Mac could see an increase in financing opportunities for other telecommunications providers in rural areas, with fiber line expansion and wireless broadband increasingly important to rural economic opportunity and precision agriculture.

Finally, the growth in renewable energy generation and deployment of energy storage technologies may continue to deepen Farmer Mac's relationships with existing customers through new business opportunities.

Generally, these investments are expected to continue at historical levels based on the replacement and modernization of existing infrastructure.

Renewable Energy

Growth in renewable energy generation and deployment of energy storage technologies has the potential to continue to deepen Farmer Mac's relationships with existing customers through new business opportunities.

According to data from the U.S.

Energy Information Administration, renewable electricity capacity is expected to grow by 48% in the next five years, compared to total electric capacity growth of 10%.

Energy Information Administration, renewable electricity capacity is expected to grow by 167% in the next ten years, compared to total electric capacity growth of 43%.

The rising cost of fossil fuel-based inputs combined with the falling costs of renewable power generation may hasten this increase in capacity along with recently enacted legislation, such as the Inflation Reduction Act of 2022 that incentivizes domestic production in clean energy technologies such as solar and wind.

Because of these policy tailwinds, analytics from Bloomberg New Energy Finance (BNEF) estimate that investors will install nearly 400 gigawatts of renewable energy capacity between

2023 and 2030.

BNEF analysis also anticipates that nearly $2.5 trillion will be invested in renewable projects between 2021 and 2050.

If realized, growth in renewable energy capacity may broaden Farmer Mac's customer base focused on financing renewable energy projects and companies.

In response to this expected growth, Farmer Mac has deployed new financing products tailored to the renewable energy sector, which represents a new and growing market opportunity for Farmer Mac.

Under this initiative, Farmer Mac's total outstanding loans and loan commitments of renewable energy financing transactions was $330.6 million as of September 30, 2023.

Because of these policy tailwinds, analysis from Bloomberg New Energy Finance (BNEF) estimates that investors will put $2.5 trillion into renewable projects between 2021 and 2050.

If realized, growth in renewable energy capacity has the potential to broaden Farmer Mac's customer base focused on financing renewable energy projects and companies.

In response to this expected growth, Farmer Mac has hired industry-specialized staff and deployed new financing products tailored to the renewable energy sector, which represents a new and growing market opportunity for Farmer Mac.

Telecommunications

Rural telecommunication connectivity has proven to be of vital economic importance in the last decade, as more households and agricultural enterprises require more data and connectivity to thrive.

growth in digital technologies, including the ongoing interest and investment in artificial intelligence, advancements in cloud computing, and wireless network densification, will require significantly more computing and storage capabilities as well as investment in additional fiber network capacity.

These industry tailwinds are creating additional investments in rural telecommunications infrastructure by cooperative and non-cooperative providers, which is aided by access to many federally funded programs, such as USDA's Broadband Equity Access and Deployment Program (BEAD), the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF), the USDA’s ReConnect program, and the USDA’s Telecommunications Infrastructure Loan and Loan Guarantee program.

Legislative and Regulatory Outlook

Farmer Mac continues to monitor potential legislative and regulatory changes that could affect Farmer Mac or its stakeholders, including:

• The current farm bill expired on September 30, 2023.

Covering a variety of programs impacting farm profitability, agricultural credit, and rural infrastructure, it is a critical piece of legislation for rural America and the agricultural sector which includes Farmer Mac's customers.

• On November 16, 2023, President Biden signed into law a one-year extension of the 2018 farm bill.

The extension (through September 30, 2024) will give Congress more time to reauthorize and update a variety of programs impacting farm profitability, agricultural credit, and rural infrastructure.

A farm bill is a critical piece of legislation for a variety of Farmer Mac's customers.

Congress has started an extensive process to review programs that are included in the farm bill in preparation for reauthorization.

Farmer Mac is seeking changes to its charter to enhance its partnerships and services in support of farmers, ranchers, agribusinesses, and rural infrastructure in this farm bill reauthorization.

• On October 5, 2023, FCA approved a final rule on cyber risk management.

The rule requires an assessment of internal and external risk factors, identification of potential systems and software vulnerabilities, the establishment of a risk management program for the risks identified, development of a cyber risk training program, policies for managing third-party relationships, and the establishment of board reporting requirements.

The effective date of the final rule is January 1, 2025.

• In the FCA's proposed 2023 regulatory agenda, the agency is targeting a proposed rulemaking on Farmer Mac's regulatory capital framework for May 2024.

This timeline may change, and Farmer Mac's management team will continue to monitor the FCA's process for this potential rulemaking.

Farmer Mac is seeking changes to its charter in this farm bill reauthorization to enhance its partnerships and services in support of lenders serving farmers, ranchers, agribusinesses, and rural infrastructure.

Because the source of Farmer Mac's charter is federal statute, any proposed changes to the text of our charter are subject to approval by Congress and being signed into law by the President of the United States.

• The FCA's proposed 2023 regulatory agenda includes a proposed rulemaking to review Farmer Mac's regulatory capital framework.

The FCA's regulatory agenda estimates that proposed rulemaking in May 2024, although this timeline may change.

Farmer Mac's management team will continue to monitor the FCA's process for this potential rulemaking.

• Two of the three members of the FCA board are currently serving in holdover status because their terms have expired.

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The following table summarizes Farmer Mac's balance sheet as of the periods indicated:

September 30, 2023 December 31, 2022 $ %

March 31, 2024 December 31, 2023 $ %

(in thousands)

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Total liabilities and equity $ 29,772,191 $ 29,524,382 $ 247,809 1 %

The increase in total assets was primarily attributable to new Farmer Mac Guaranteed Securities volume, new loan volume, including those held in consolidated trusts, and a larger investment portfolio.

The increase in total assets was primarily attributable to new loan volume, new Farmer Mac Guaranteed Securities volume, and a larger investment portfolio.

Liabilities .

The increase in total liabilities was primarily due to an increase in total notes payable to fund the acquisition of Farmer Mac Guaranteed Securities and loan volume, including those held in consolidated trusts.

The increase in total liabilities was primarily due to an increase in total notes payable to fund the acquisition of loan volume, Farmer Mac Guaranteed Securities, and investment portfolio assets.

The increase in total equity was primarily due to an increase in retained earnings and an increase in accumulated other comprehensive income.

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Agricultural Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of September 30, 2023 was $11.0 billion across 48 states.

Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of March 31, 2024 was $11.2 billion across 48 states.

Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to loan purchases, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information.

For Corporate AgFinance loans, which are often larger loan exposures to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, and which may have risk profiles that differ from smaller agricultural mortgage loans, Farmer Mac has implemented methodologies and parameters that help assess credit risk based on the appropriate sector, borrower construct, and

transaction complexity.

For more information about Farmer Mac's underwriting and collateral valuation standards for Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance" in Farmer Mac's 2022 Annual Report.

For more information about Farmer Mac's underwriting and collateral valuation

standards for Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance" in Farmer Mac's 2023 Annual Report.

Farmer Mac's 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of September 30, 2023, were $42.4 million (0.39% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $45.4 million (0.42% of the Agricultural Finance mortgage loan portfolio) as of June 30, 2023 and $43.5 million (0.41% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2022.

Those 90-day delinquencies consisted of 23 delinquent loans as of September 30, 2023, compared to 42 delinquent loans as of June 30, 2023 and 37 delinquent loans as of December 31, 2022.

The decrease in the number of 90-day delinquencies was primarily driven by decreased delinquencies in storage and processing, livestock, and part-time farms and was partially offset by increased delinquencies in permanent plantings and crops.

The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of September 30, 2023.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of March 31, 2024, were $76.8 million (0.69% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $34.7 million (0.31% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2023.

Those 90-day delinquencies consisted of 41 delinquent loans as of March 31, 2024, compared to 23 delinquent loans as of December 31, 2023.

The seasonal increase in the number of 90-day delinquencies was primarily driven by increased delinquencies in permanent plantings, crops, and livestock, and was partially offset by decreased delinquencies in part-time farms.

In the first quarter of each year, delinquencies in the Agricultural Finance loan portfolio are usually higher than in the second, third or fourth quarters because of its annual January 1st payment due date.

The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of March 31, 2024.

Farmer Mac believes that it remains adequately collateralized on its delinquent loans.

Farmer Mac's 90-day delinquency rate as of September 30, 2023 was below Farmer Mac's historical average.

Farmer Mac's 90-day delinquency rate as of March 31, 2024 was below Farmer Mac's historical average.

In the near-term, our delinquency rate may exceed our historical average due to changes in the agricultural or general economy or unforeseen and idiosyncratic events like adverse weather events.

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(dollars in thousands)

September 30, 2023 $ 11,014,678 $ 42,443 0.39 %

June 30, 2023 10,826,201 45,368 0.42 %

March 31, 2024 $ 11,184,817 $ 76,825 0.69 %

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September 30, 2022 10,508,549 44,232 0.42 %

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.15% of total outstanding business volume as of September 30, 2023, compared to 0.17% as of December 31, 2022 and 0.17% as of September 30, 2022.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of September 30, 2023 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Agricultural Finance Mortgage Loans 90-Day Delinquencies as of September 30, 2023

June 30, 2022 10,128,083 20,623 0.20 %

March 31, 2022 9,879,978 55,847 0.57 %

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.27% of total outstanding business volume as of March 31, 2024, compared to 0.12% as of December 31, 2023 and 0.27% as of March 31, 2023.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of March 31, 2024 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Agricultural Finance Mortgage Loans 90-Day Delinquencies as of March 31, 2024

Distribution of Agricultural Loans Agricultural Loans 90-Day Delinquencies (1)

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— % 25,575 — — %

Enterprise Value (4)

5 % 561,928 — — %

Total 100 % $ 11,184,817 $ 76,825 0.69 %

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Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance.

(4) "Enterprise Value" loans are generally secured by all business assets and common stock (in addition to first lien mortgages) of the borrower and the value of the borrowing entity depends on its ability to generate recurring positive cash flow.

Enterprise Value is the estimated value of the borrower as a going concern, which is estimated using one or more valuation techniques such as discounted cash flow, cash flow multiples, asset liquidation, or other valuation techniques.

(5) Includes aggregated loans to single borrowers or borrower-related entities.

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Assets categorized as "substandard" have a well-defined weakness or weaknesses, and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

As of September 30, 2023, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $180.2 million (1.6% of the portfolio), compared to $194.6 million (1.8% of the portfolio) as of June 30, 2023, and $209.4 million (2.0% of the portfolio) as of December 31, 2022.

Those substandard assets comprised 210 loans as of September 30, 2023, 239 loans as of June 30, 2023, and 243 loans as of December 31, 2022.

The decrease of $14.4 million in Agricultural Finance substandard assets during third quarter 2023 was primarily driven by a substandard loan payoff in our on-balance sheet portfolios.

Agricultural Finance substandard assets decreased as a percentage of both our on-balance sheet and our off-balance sheet Agricultural Finance portfolios during third quarter 2023.

The percentage of Agricultural Finance substandard assets within the portfolio as of September 30, 2023 was below the historical average.

As of March 31, 2024, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $255.2 million (2.3% of the portfolio), compared to $186.0 million (1.7% of the portfolio) as of December 31, 2023.

Those substandard assets comprised 245 loans as of March 31, 2024 and 206 loans as of December 31, 2023.

The increase of $69.2 million in Agricultural Finance substandard assets during first quarter 2024 was primarily driven by credit downgrades in permanent plantings, livestock, crops, part-time farms, and agricultural storage and processing.

Agricultural Finance substandard assets increased as a percentage of our on-balance sheet Agricultural Finance portfolio and decreased as a percentage of our off-balance sheet Agricultural Finance portfolio during first quarter 2024.

The percentage of Agricultural Finance substandard assets within the portfolio as of March 31, 2024 was below the historical average.

Farmer Mac's average Agricultural Finance substandard assets as a percentage of its Agricultural Finance mortgage loans over the last 15 years is approximately 4%.

The highest substandard asset rate observed during the last 15 years occurred in 2010 at approximately 8%, which coincided with an increase in substandard loans within Farmer Mac's ethanol portfolio.

If Farmer Mac's substandard asset rate increases from current levels, it is likely that Farmer Mac's provision to the allowance for loan losses and the reserve for losses will also increase.

If Farmer Mac's substandard asset rate increases from current levels on a sustained basis, it is likely that Farmer Mac's provision to the allowance for loan losses and the reserve for losses would also increase.

Although some credit losses are inherent to the business of agricultural lending, Farmer Mac believes that losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its Agricultural Finance portfolio, which Farmer Mac believes is adequately collateralized.

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Loan-to-value ratios depend on the market value of a property, as determined in accordance with Farmer Mac's collateral valuation standards.

As of September 30, 2023 and December 31, 2022, the average unpaid principal balances for Farm & Ranch loans outstanding and to which Farmer Mac has direct credit exposure was $800,000 and $806,000, respectively.

As of March 31, 2024 and December 31, 2023, the average unpaid principal balances for Farm & Ranch loans outstanding and to which Farmer Mac has direct credit exposure was $800,000 and $804,000, respectively.

Farmer Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan principal balance by the original appraised property value.

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The original loan-to-value ratio of any cross-collateralized loans is calculated on a combined basis rather than on a loan-by-loan basis.

The weighted-average original loan-to-value ratio for Farm & Ranch mortgage loans purchased during third quarter 2023 was 49%, compared to 47% for loans purchased during third quarter 2022.

The weighted-average original loan-to-value ratio for Farm & Ranch mortgage loans and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs was 50% and 51% as of September 30, 2023 and December 31, 2022, respectively.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 54% and 46% as of September 30, 2023 and December 31, 2022, respectively.

The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Agricultural Finance mortgage loans and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs was 45% and 46% as of September 30, 2023 and December 31, 2022, respectively.

The weighted-average original loan-to-value ratio for Farm & Ranch mortgage loans purchased during first quarter 2024 was 49%, compared to 44% for loans purchased during first quarter 2023.

The weighted-average original loan-to-value ratio for Farm & Ranch mortgage loans and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs was 52% as of both March 31, 2024 and December 31, 2023.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 54% and 56% as of March 31, 2024 and December 31, 2023, respectively.

The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Agricultural Finance mortgage loans and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs was 46% and 47% as of March 31, 2024 and December 31, 2023, respectively.

The following table presents the current loan-to-value ratios for the Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, as disaggregated by internally assigned risk ratings:

Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of September 30, 2023

Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of March 31, 2024

Acceptable Special Mention Substandard Total

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80.01% and greater 16,110 1,482 9,025 26,617

Enterprise Value (2)

530,212 31,716 — 561,928

Total $ 10,546,141 $ 383,462 $ 255,214 $ 11,184,817

(1) The current loan-to-value ratio is based on original appraised value (or most recently obtained valuation, if available) and current outstanding loan amount adjusted to reflect loan amortization.

The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of September 30, 2023 by year of origination, geographic region, and commodity/collateral type.

(2) "Enterprise Value" loans are generally secured by all business assets and common stock (in addition to first lien mortgages) of the borrower and the value of the borrowing entity depends on its ability to generate recurring positive cash flow.

The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of March 31, 2024 by year of origination, geographic region, and commodity/collateral type.

The purpose of this table is to present information about realized losses relative to original Farm & Ranch purchases, guarantees, and commitments.

Agricultural Finance Mortgage Loans Credit Losses Relative to Cumulative

Original Loans, Guarantees, and LTSPCs as of September 30, 2023

Original Loans, Guarantees, and LTSPCs as of March 31, 2024

Cumulative Original Loans, Guarantees and LTSPCs Cumulative Net Credit Losses/(Recoveries) Cumulative Loss Rate

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The following tables present concentrations of Agricultural Finance mortgage loans by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

As of September 30, 2023

As of March 31, 2024

Agricultural Finance Mortgage Loans Concentrations by Commodity Type within Geographic Region

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Southeast (AL, FL, GA, MS, NC, SC, TN).

As of September 30, 2023

As of March 31, 2024

Agricultural Loans Cumulative Credit Losses by Origination Year and Commodity Type

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Rural Infrastructure Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of September 30, 2023 was $3.8 billion across 45 states.

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of March 31, 2024 was $4.3 billion across 45 states.

For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Infrastructure Finance loans, see "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral Standards" in Farmer Mac's 2023 Annual Report.

As of September 30, 2023, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

As of September 30, 2023, there was one telecommunications loan downgraded to substandard, with an unpaid principal balance of $29.5 million.

As of March 31, 2024, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

As of December 31, 2023, there was one telecommunications loan classified as substandard, with an unpaid principal balance of $29.4 million.

Farmer Mac evaluates credit risk of Rural Infrastructure assets by reviewing a variety of borrower credit risk characteristics.

These characteristics can include (but is not limited to) financial metrics, internal risk ratings, ratings assigned by ratings agencies, types of customers served, sources of power supply, and the regulatory environment.

These characteristics can include (but are not limited to) financial metrics, internal risk ratings, ratings assigned by ratings agencies, types of customers served, sources of power supply, and the regulatory environment.

The following table disaggregates Farmer Mac’s portfolio of Rural Infrastructure loans by portfolio segment and by internally assigned risk ratings.

As of September 30, 2023

As of March 31, 2024

Rural Infrastructure Finance portfolio by internally assigned risk rating

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Therefore, Farmer Mac believes that we have little or no credit risk exposure to the USDA Securities in the Agricultural Finance line of business because of the USDA guarantee.

As of September 30, 2023, Farmer Mac had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities and does not expect to incur any such losses in the future.

As of March 31, 2024, Farmer Mac had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities and does not expect to incur any such losses in the future.

Because we do not expect credit losses on this portfolio, Farmer Mac does not provide an allowance for losses on its portfolio of USDA Securities.

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Farmer Mac has the ability to require a seller to cure, replace, or repurchase a loan sold or transferred to Farmer Mac if any breach of a representation or warranty is discovered that was material to Farmer Mac's decision to purchase the loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred by the seller to Farmer Mac.

During the previous three years ended September 30, 2023, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan.

During the previous three years ended March 31, 2024, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan.

In addition to relying on the representations and warranties of sellers, Farmer Mac also underwrites the Agricultural Finance mortgage loans (other than rural housing and part-time farm mortgage loans) and Rural Infrastructure Finance loans on which it has direct credit exposure.

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Farmer Mac also can proceed against the servicer in arbitration or exercise any remedies available to it under law.

During the previous three years ended September 30, 2023, Farmer Mac had not exercised any remedies or taken any formal action against any servicers.

During the previous three years ended March 31, 2024, Farmer Mac had not exercised any remedies or taken any formal action against any servicers.

For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Servicing" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing" in Farmer Mac’s 2023 Annual Report.

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For AgVantage counterparties that are institutional real estate investors or financial funds and other similar entities, Farmer Mac also typically requires that the counterparty (1) maintain a higher collateralization level, through either a higher overcollateralization percentage or lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default.

As of September 30, 2023, Farmer Mac had not experienced any credit losses on any AgVantage securities.

As of March 31, 2024, Farmer Mac had not experienced any credit losses on any AgVantage securities over the life of the program.

For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Other Products – Agricultural Finance—AgVantage Securities" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Other Products – Rural Infrastructure Finance—AgVantage Securities" in Farmer Mac’s 2023 Annual Report.

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $6.1 billion as of September 30, 2023 and $6.0 billion as of December 31, 2022.

The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Infrastructure Finance line of business totaled $3.6 billion as of September 30, 2023 and $3.0 billion as of December 31, 2022.

The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $1.1 million as of September 30, 2023 and $1.2 million as of December 31, 2022.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of September 30, 2023 and December 31, 2022:

As of September 30, 2023 As of December 31, 2022

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $6.4 billion as of March 31, 2024 and $6.1 billion as of December 31, 2023.

The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Infrastructure Finance line of business totaled $3.9 billion as of both March 31, 2024 and December 31, 2023.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of March 31, 2024 and December 31, 2023:

As of March 31, 2024 As of December 31, 2023

Counterparty Balance Required Collateralization Balance Required Collateralization

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Total outstanding $ 10,243,658 $ 10,022,347

(1) Consists of AgVantage securities issued by 10 and 12 different issuers as of September 30, 2023 and December 31, 2022, respectively.

(1) Consists of AgVantage securities issued by 8 different issuers as of both March 31, 2024 and December 31, 2023.

Farmer Mac manages institutional credit risk related to lenders and servicers by requiring those institutions to meet Farmer Mac's standards for creditworthiness.

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Credit Risk – Other Investments .

As of September 30, 2023, Farmer Mac had $0.8 billion of cash and cash equivalents and $4.9 billion of investment securities.

The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as regulations issued by the FCA found at 12 C.F.R.

As of March 31, 2024, Farmer Mac had $0.7 billion of cash and cash equivalents and $5.1 billion of investment securities.

The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as FCA regulations, which can be found at 12 C.F.R.

§§ 652.1-652.45 ("Liquidity and Investment Regulations").

In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment

policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.

In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.

The Liquidity and Investment Regulations and Farmer Mac's internal policies require that investments held in Farmer Mac's investment portfolio meet the following creditworthiness standards:

(1) at a minimum, at least one obligor of the investment must have a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally present a very low risk of default;

(2) if the obligor whose capacity to meet financial commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S.

(2) if the obligor whose capacity to meet financial

commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S.

government agency;

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The Liquidity and Investment Regulations and Farmer Mac's internal policies also establish concentration limits, which are intended to limit exposure to any single entity, issuer, or obligor.

The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single entity, issuer, or obligor of securities to 10% of Farmer Mac's regulatory capital ($144.0 million as of September 30, 2023).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($72.0 million as of September 30, 2023).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($75.0 million as of March 31, 2024).

These exposure limits do not apply to obligations of U.S.

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Treasury securities and other financial derivatives.

Farmer Mac's $0.8 billion of cash and cash equivalents held as of September 30, 2023 mature within three months.

As of September 30, 2023, $3.1 billion of the $4.9 billion of investment securities (63%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year.

Farmer Mac's $0.7 billion of cash and cash equivalents held as of March 31, 2024 mature within three months.

As of March 31, 2024, $2.9 billion of the $5.1 billion of investment securities (57%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year.

Farmer Mac's floating rate investment securities are funded with floating rate debt.

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Actual results may differ to the extent there are material changes to Farmer Mac's financial asset portfolio or changes in funding or hedging strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.

The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of September 30, 2023 and December 31, 2022 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of March 31, 2024 and December 31, 2023 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

Percentage Change in MVE from Base Case

Interest Rate Scenario As of September 30, 2023 As of December 31, 2022

Interest Rate Scenario As of March 31, 2024 As of December 31, 2023

+100 basis points (4.1) % (3.6) %

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Percentage Change in NES from Base Case

Interest Rate Scenario As of September 30, 2023 As of December 31, 2022

Interest Rate Scenario As of March 31, 2024 As of December 31, 2023

+100 basis points 0.4 % — %

-100 basis points 0.3 % 0.8 %

As of September 30, 2023, Farmer Mac's duration gap was positive 3.8 months, compared to positive 3.6 months as of December 31, 2022.

Interest rates within the yield curve increased during the first nine months of 2023, as the 2-year U.S.

Treasury Note yield-to-maturity increased by approximately 62 basis points and the 10-year U.S.

Treasury Note yield-to-maturity decreased by approximately 70 basis points versus year-end 2022.

This rate movement contributed to lengthening the duration of Farmer Mac's funded assets compared to its debt and financial derivatives, thereby widening Farmer Mac's duration gap.

As of March 31, 2024, Farmer Mac's duration gap was positive 3.6 months, a slight increase from the 3.4 months reported as of December 31, 2023.

Interest rates increased since the end of 2023, evidenced by a rise in the yield-to-maturities of 2-year and 10-year U.S.

Treasury Notes by approximately 37 and 32 basis points, respectively.

This shift in rates contributed to an extension in the duration of Farmer Mac's funded assets relative to its liabilities and financial derivatives.

Financial Derivatives Transactions

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Treasury securities.

As of September 30, 2023, Farmer Mac had $24.5 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $9.6 billion were pay-fixed interest rate swaps, $14.0 billion were receive-fixed interest rate swaps, and $0.9 billion were basis swaps.

As of March 31, 2024, Farmer Mac had $26.1 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $9.9 billion were pay-fixed interest rate swaps, $15.3 billion were receive-fixed interest rate swaps, and $0.9 billion were basis swaps.

Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its interest-earning assets with those of its debt.

For example, Farmer Mac transacts pay-fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that approximately matches the duration of the corresponding fixed rate assets being funded.

Farmer Mac evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding

alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across the balance sheet.

Farmer Mac evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across the balance sheet.

Certain financial derivatives are designated as fair value hedges of fixed rate assets classified as available-for-sale or liabilities to protect against fair value changes in the assets or liabilities related to a benchmark interest rate (e.g.

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All of Farmer Mac's interest rate swap transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty.

As of both September 30, 2023 and December 31, 2022, Farmer Mac had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps.

As of both March 31, 2024 and December 31, 2023, Farmer Mac had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps.

Re-funding and repricing risk

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Farmer Mac regularly adjusts its funding strategies to mitigate the effects of interest rate variability and seeks to maintain an effective mixture of funding structures in the context of its overall liability and liquidity management strategies.

As of September 30, 2023, Farmer Mac held $7.9 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as SOFR.

As of March 31, 2024, Farmer Mac held $8.3 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as the Secured Overnight Financing Rate ("SOFR").

As of the same date, Farmer Mac also had $9.9 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily SOFR.

Discontinuation of LIBOR

Farmer Mac has not had, and does not foresee, a material impact on our business due to the replacement of LIBOR with SOFR.

We had no further variable LIBOR exposure as of September 30, 2023.

Liquidity and Capital Resources

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Farmer Mac funds its purchases of eligible loan assets, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets and finances its operations primarily by issuing debt obligations of various maturities in the debt capital markets.

As of September 30, 2023, Farmer Mac had outstanding discount notes of $1.5 billion, medium-term notes that mature within one year of $6.4 billion, and medium-term notes that mature after one year of $17.6 billion.

As of March 31, 2024, Farmer Mac had outstanding discount notes of $1.9 billion, medium-term notes that mature within one year of $7.0 billion, and medium-term notes that mature after one year of $17.9 billion.

Assuming continued access to the debt capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future.

Farmer Mac has a contingency funding plan to manage unanticipated disruptions in its access to the debt capital markets.

Farmer Mac must maintain a minimum of 90 days of liquidity under the Liquidity and

Investment Regulations.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 293 days of liquidity throughout third quarter 2023 and had 297 days of liquidity as of September 30, 2023.

Farmer Mac must maintain a minimum of 90 days of liquidity under the Liquidity and Investment Regulations.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 323 days of liquidity throughout 2024 and had 295 days of liquidity as of March 31, 2024.

Farmer Mac maintains cash, cash equivalents (including U.S.

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• mortgage-backed securities.

The following table presents these assets as of September 30, 2023 and December 31, 2022:

As of September 30, 2023 As of December 31, 2022

The following table presents these assets as of March 31, 2024 and December 31, 2023:

As of March 31, 2024 As of December 31, 2023

(in thousands)

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Total $ 5,806,648 $ 5,861,394

The objectives of the investment portfolio as of September 30, 2023 and December 31, 2022 are to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.

The objectives of the investment portfolio as of March 31, 2024 and December 31, 2023 are to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.

Capital Requirements .

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Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement.

As of September 30, 2023, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

As of March 31, 2024, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

In accordance with the FCA's rule on capital planning, Farmer Mac's board of directors has adopted a policy for maintaining a sufficient level of "Tier 1" capital (consisting of retained earnings, paid-in capital, common stock, and qualifying preferred stock).

That policy restricts Tier 1-eligible dividends and any discretionary bonus payments if Tier 1 capital falls below specified thresholds.

As of September 30, 2023 and 2022, Farmer Mac's Tier 1 capital ratio was 16.0% and 14.9%, respectively.

As of September 30, 2023, Farmer Mac was in compliance with its capital adequacy policy.

As of March 31, 2024 and December 31, 2023, Farmer Mac's Tier 1 capital ratio was 15.5% and 15.4%, respectively.

As of March 31, 2024, Farmer Mac was in compliance with its capital adequacy policy.

Farmer Mac does not expect its compliance on an ongoing basis with the FCA's rule on capital planning, including Farmer Mac's policy on Tier 1 capital, to materially affect Farmer Mac's operations or financial condition.

For more information about the capital requirements applicable to Farmer Mac, its capital adequacy policy, and the FCA's rule on capital planning, see "Business—Government Regulation of Farmer Mac—Capital Standards" in Farmer Mac's 2022 Annual Report.

See Note 8 to the consolidated financial statements for more information about Farmer Mac's capital position.

Other Matters

6 unchanged sentences

For the quarter ended:

September 30, 2023 $ 1,384,273 $ 275,932 $ 607,979 $ 17,390 $ 2,285,574

June 30, 2023 1,574,169 218,136 294,292 71,611 2,158,208

March 31, 2024 $ 665,916 $ 290,894 $ 116,165 $ 347,898 $ 1,420,873

5 unchanged sentences

September 30, 2022 1,927,209 169,932 547,117 61,653 2,705,911

June 30, 2022 1,418,397 107,916 326,899 35,307 1,888,519

March 31, 2022 2,452,539 103,353 377,965 41,636 2,975,493

For the year ended:

8 unchanged sentences

Unscheduled 150,903 99,325 32,481 — 282,709

September 30, 2023 $ 1,031,183 $ 215,382 $ 101,576 $ 14,716 $ 1,362,857

Scheduled $ 1,050,480 $ 81,386 $ 558,944 $ 52,203 $ 1,743,013

Unscheduled 96,507 55,976 13,138 — 165,621

June 30, 2023 $ 1,146,987 $ 137,362 $ 572,082 $ 52,203 $ 1,908,634

Scheduled $ 279,676 $ 78,482 $ 95,809 $ 11,424 $ 465,391

Unscheduled 231,288 128,254 57,354 — 416,896

March 31, 2024 $ 552,991 $ 218,579 $ 159,165 $ 93,112 $ 1,023,847

17 unchanged sentences

September 30, 2022 $ 1,021,343 $ 102,457 $ 422,917 $ 13,429 $ 1,560,146

Scheduled $ 1,114,779 $ 42,162 $ 159,491 $ 7,898 $ 1,324,330

Unscheduled 286,303 30,203 1,791 — 318,297

June 30, 2022 $ 1,401,082 $ 72,365 $ 161,282 $ 7,898 $ 1,642,627

Scheduled $ 1,535,369 $ 39,480 $ 266,349 $ 7,790 $ 1,848,988

Unscheduled 434,794 60,947 397 — 496,138

March 31, 2022 $ 1,970,163 $ 100,427 $ 266,746 $ 7,790 $ 2,345,126

For the year ended:

9 unchanged sentences

(in thousands)

September 30, 2023 $ 18,461,835 $ 1,741,306 $ 7,118,295 $ 330,575 $ 27,652,011

June 30, 2023 18,116,503 1,680,756 6,611,892 327,901 26,737,052

March 31, 2024 $ 18,900,906 $ 1,766,294 $ 7,437,723 $ 742,307 $ 28,847,230

5 unchanged sentences

September 30, 2022 17,199,347 1,634,786 6,296,263 196,242 25,326,638

June 30, 2022 16,591,999 1,567,311 6,172,063 148,018 24,479,391

March 31, 2022 16,575,595 1,540,760 6,006,446 120,609 24,243,410

On-Balance Sheet Outstanding Business Volume

1 unchanged sentence

(in thousands)

September 30, 2023 $ 13,727,280 $ 3,019,317 $ 6,255,690 $ 23,002,287

June 30, 2023 13,721,129 3,003,560 5,493,104 22,217,793

March 31, 2024 $ 14,166,500 $ 3,194,246 $ 6,849,237 $ 24,209,983

5 unchanged sentences

September 30, 2022 13,810,162 2,960,596 4,644,958 21,415,716

June 30, 2022 13,798,771 2,939,467 3,993,956 20,732,194

March 31, 2022 14,174,611 2,858,521 3,443,816 20,476,948

The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:

5 unchanged sentences

For the quarter ended:

September 30, 2023 (2)

March 31, 2024 (2)

$ 32,843 0.95 % $ 7,971 2.05 % $ 7,232 0.42 % $ 2,049 1.75 % $ 32,474 0.45 % $ 475 0.03 % $ 83,044 1.14 %

December 31, 2023 33,329 0.98 % 8,382 2.06 % 7,342 0.43 % 1,540 1.69 % 33,361 0.47 % 597 0.04 % 84,551 1.19 %

September 30, 2023 32,718 0.97 % 8,250 2.05 % 6,362 0.39 % 1,150 1.46 % 34,412 0.49 % 532 0.04 % 83,424 1.20 %

June 30, 2023 34,388

1 unchanged sentence

March 31, 2023 (2)

32,465 0.97 % 7,148 1.94 % 5,507 0.36 % 858 1.53 % 31,738 0.47 % (543) (0.04) % 77,173 1.15 %

December 31, 2022 32,770 0.98 % 7,471 1.94 % 4,960 0.34 % 935 1.76 % 27,656 0.42 % (2,689) (0.19) % 71,103 1.07 %

September 30, 2022 33,343 1.04 % 7,600 1.99 % 4,220 0.30 % 705 1.97 % 22,564 0.36 % (2,791) (0.21) % 65,641 1.03 %

33,343 1.04 % 7,600 1.99 % 4,220 0.30 % 705 1.97 % 22,564 0.36 % (2,791) (0.21) % 65,641 1.03 %

June 30, 2022 32,590 1.05 % 6,929 1.87 % 3,733 0.27 % 468 1.78 % 18,508 0.30 % (1,282) (0.10) % 60,946 0.99 %

March 31, 2022 30,354 1.02 % 7,209 1.96 % 3,159 0.23 % 375 1.69 % 16,738 0.28 % 4 — % 57,839 0.97 %

December 31, 2021 28,998 0.99 % 6,321 1.84 % 2,521 0.19 % 356 1.53 % 15,979 0.28 % 158 0.01 % 54,333 0.94 %

September 30, 2021 28,914 1.06 % 7,163 1.80 % 2,067 0.16 % 236 1.09 % 17,386 0.31 % 159 0.01 % 55,925 0.99 %

(1) Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets.

(2) See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for the three months ended September 30, 2023 and 2022.

(2) See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for the three months ended March 31, 2024 and 2023.

The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income attributable to common stockholders:

Core Earnings by Quarter End

September 2023 June 2023 March 2023 December 2022 September 2022 June

2022 March 2022 December 2021 September 2021

March 2024 December 2023 September 2023 June 2023 March 2023 December 2022 September 2022 June

2022 March 2022

(in thousands)

1 unchanged sentence

Guarantee and commitment fees 4,982 4,865 4,828 4,581 4,654 4,677 4,201 4,709 4,557

Gains on sale of mortgage loans — — — — — — — 6,539 —

Other 1,077 767 1,056 409 1,067 390 473 307 514

16 unchanged sentences

Gains/(losses) on hedging activities due to fair value changes 3,002 (3,598) 3,210 (4,901) (105) (148) (624) 428 5,687

Unrealized gains/(losses) on trading assets 1,714 (57) 359 31 (757) (285) 94 (76) 36

Unrealized (losses)/gains on trading assets (14) (37) 1,714 (57) 359 31 (757) (285) 94

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 31 88 29 29 29 57 24 (62) 20

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis