What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-05 compared with 2024-05-06 · 399 added, 259 removed, 1088 unchanged (38% of the section changed)

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

of operations for the quarter ended March 31, 2024.

of operations for the quarter ended June 30, 2024.

Financial information included in this report is

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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:

During second quarter 2024:

• we provided $1.5 billion in liquidity and lending capacity to lenders serving rural America;

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• 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 an elevated interest rate environment in the current period;

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

• we closed our fourth structured securitization transaction involving approximately $300 million of agricultural mortgage loans.

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

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

June 30, 2024 March 31, 2024 June 30, 2023

(in thousands)

1 unchanged sentence

Core earnings 39,777 43,392 42,162

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 $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.

The $6.6 million sequential decrease in net income attributable to common stockholders was due to a $6.4 million after-tax increase in our provision for credit losses and a $3.1 million after-tax decrease in the fair value of undesignated financial derivatives.

These factors were partially offset by a $2.2 million after-tax decrease in operating expenses.

The $0.1 million year-over-year decrease in net income attributable to common stockholders was due to a $4.0 million after-tax increase in our provision for credit losses, a $2.8 million after-tax decrease in the fair value of undesignated financial derivatives, and a $0.2 million increase in operating expenses.

These factors were partially offset by a $6.8 million after-tax increase in net interest income.

The $3.6 million sequential decrease in core earnings was due to a $6.4 million after-tax increase in our provision for credit losses.

This factor was partially offset by a $2.2 million after-tax decrease in operating expenses.

The $2.4 million year-over-year decrease in core earnings was due to a $4.0 million after-tax increase in our provision for credit losses.

This factor was partially offset by a $1.4 million after-tax increase in net effective spread.

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

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

June 30, 2024 March 31, 2024 June 30, 2023

(in thousands)

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Net effective spread % 1.14 % 1.14 % 1.20 %

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).

The $1.0 million sequential increase in net interest income was primarily due to a $1.3 million increase from a shift in the composition of new business volume towards higher-yielding loans and an increase of $0.9 million in cash-basis interest income.

These factors were partially offset by an increase of $1.2 million in funding costs, which was primarily attributable to opportunistic issuance of debt at advantageous rates in advance of the funding needs of our business.

In addition, during fourth quarter 2023, debt spreads widened, and we have continued to experience the effects of that along with other issuers in the market.

We also lengthened the tenor of our liquidity investment portfolio as part of our overall balance sheet management strategy and to mitigate volatility from decreases in the rate environment.

In percentage terms, net interest income remained consistent.

The $8.7 million year-over-year increase in net interest income was primarily attributable to a $7.5 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives) and a $4.1 million increase from a shift in the composition of new business volume towards higher-yielding loans.

These factors were partially offset by an increase of $1.8 million in funding costs, which was primarily attributable to opportunistic issuance of debt at advantageous rates in advance of the funding needs of our business, and there was a decrease of $1.2 million in cash-basis interest income.

In addition, during fourth quarter 2023, debt spreads widened, and we have continued to experience the effects of that along with other issuers in the market.

We also lengthened the tenor of our liquidity investment portfolio as part of our overall balance sheet management strategy and to mitigate volatility from decreases in the rate environment.

In percentage terms, the year-over-year 0.03% 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.

The $0.6 million sequential increase in net effective spread was primarily due to a $1.3 million increase from a shift in the composition of new business volume towards higher-yielding loans and an increase of $0.9 million in cash-basis interest income.

These factors were partially offset by an increase of $1.8 million in our non-GAAP funding costs, which was primarily attributable to opportunistic issuance of debt at advantageous rates in advance of the funding needs of our business in addition to the debt spread and liquidity portfolio factors described above.

In percentage terms, net effective spread remained consistent compared to first quarter 2024.

The $1.8 million year-over-year increase in net effective spread was primarily due to a $4.2 million increase from a shift in the composition of new business volume towards higher-yielding loans.

This factor was partially offset by an increase of $2.1 million of non-GAAP funding costs, which was primarily attributable to opportunistic issuance of debt at advantageous rates in advance of the funding needs of our business in addition to the debt spread and liquidity portfolio factors described above.

In percentage terms, the year-over-year decrease of 0.06% was primarily attributable to a decrease of 0.03% on net business volume changes and a decrease of 0.02% related to the increases 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 $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.

Our outstanding business volume was $28.8 billion as of June 30, 2024, a net decrease of $88.9 million from March 31, 2024 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The net decrease was primarily attributable to a net decrease of $345.8 million in the Agricultural Finance line of business, partially offset by a net increase of $256.9 million in the Rural Infrastructure 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."

March 31, 2024 December 31, 2023

June 30, 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 March 31, 2024 and December 31, 2023:

During second quarter 2024, we recorded a charge-off of $3.9 million on a single permanent planting loan that is in bankruptcy to reflect the amount of the loan that was deemed uncollectible.

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 June 30, 2024, March 31, 2024, and December 31, 2023:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

June 30, 2024 $ 219,679 2.7 % $ 28,323 0.9 %

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 $ (6,216) (0.2) % $ (996) — %

Increase/(decrease) from prior year-ending 66,814 0.7 % (4,763) (0.1) %

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.

The decrease of $6.2 million in on-balance sheet substandard assets during second quarter was primarily driven by credit upgrades in permanent plantings, and was partially offset by downgrades in agricultural storage and processing, part-time farms, crops, and livestock.

The $1.0 million decrease in substandard assets in our off-balance sheet portfolios during second quarter was primarily due to credit upgrades in crops, part-time farms, and permanent plantings, and was partially offset by downgrades in livestock.

There were no substandard assets in the Rural Infrastructure Finance portfolio as of June 30, 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 March 31, 2024 and December 31, 2023:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

June 30, 2024 $ 57,791 0.71 % $ 4,272 0.13 %

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 $ (9,465) (0.14) % $ (5,297) (0.16) %

Increase/(decrease) from prior year-ending 24,898 0.29 % 2,488 0.08 %

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.

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 March 31, 2024.

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.

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

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

As of both June 30, 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.

Farmer Mac redeemed all outstanding shares of its Series C Preferred Stock on July 18, 2024 and plans to exclude any losses on retirement of preferred stock from core earnings and core earnings per share in the presentation of its core earnings for third quarter 2024.

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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The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income.

For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains on financial derivatives" on the consolidated statements of operations.

For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "(Losses)/gains on financial derivatives" on the consolidated statements of operations.

However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread.

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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

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

(in thousands, except per share amounts)

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Less reconciling items:

(Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 13)

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

2,604 (4,901)

Unrealized losses on trading securities

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 26 29

Net effects of terminations or net settlements on financial derivatives (1,505) 583

Income tax effect related to reconciling items (143) 464

Sub-total 536 (1,741)

Core earnings $ 39,777 $ 42,162

Composition of Core Earnings:

Net effective spread (1)

$ 83,596 $ 81,832

Guarantee and commitment fees (2)

Gain on sale of investment securities (GAAP)

Loss on sale of mortgage loan (GAAP)

Total revenues 89,238 86,822

Credit related expense (GAAP):

Provision for losses

Total credit related expense 6,230 1,142

Operating expenses (GAAP):

Compensation and employee benefits 14,840 13,937

General and administrative 8,904 9,420

Regulatory fees 725 831

Total operating expenses 24,469 24,188

Net earnings 58,539 61,492

Income tax expense (4)

11,970 12,539

Preferred stock dividends (GAAP) 6,792 6,791

Core earnings $ 39,777 $ 42,162

Core earnings per share:

Basic $ 3.66 $ 3.89

Diluted $ 3.63 $ 3.86

Weighted-average shares:

Basic 10,879 10,833

Diluted 10,956 10,916

(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 Net Income Attributable to Common Stockholders to Core Earnings

For the Six Months Ended

June 30, 2024 June 30, 2023

(in thousands, except per share amounts)

Net income attributable to common stockholders $ 87,268 $ 80,665

Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 13)

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

5,606 (5,006)

Unrealized (losses)/gains on trading securities

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Guarantee and commitment fees (2)

Gain on sale of investment securities (GAAP)

Loss on sale of mortgage loan (GAAP)

Total revenues 178,341 169,716

Credit related expense (GAAP):

(Release of)/provision for losses

Provision for losses

Total credit related expense 4,360 1,892

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

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands, except per share amounts)

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Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 13)

(Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 13)

(0.03) 0.20 0.12 0.28

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

0.24 (0.45) 0.52 (0.46)

Unrealized (losses)/gains on trading securities

(0.01) — (0.01) 0.03

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — — 0.01 0.01

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

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands, except per share amounts)

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Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 13)

(Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 13)

(0.03) 0.20 0.12 0.28

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

0.24 (0.45) 0.51 (0.46)

Unrealized (losses)/gains on trading securities

(0.01) — (0.01) 0.03

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — — 0.01 0.01

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

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;

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

(a) (Losses)/gains on undesignated financial derivatives due to fair value changes;

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

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Net Interest Income .

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

The following table provides information about interest-earning assets and funding for the three and six months ended June 30, 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.

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For the Three Months Ended

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

Balance Income/

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Net interest income/yield $ 30,366,870 $ 87,340 1.15 % $ 28,151,960 $ 78,677 1.12 %

(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).

(1) Excludes interest income of $9.9 million and $8.6 million in second 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 $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).

(3) Excludes interest expense of $8.5 million and $7.5 million in second 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).

For the Six Months Ended

June 30, 2024 June 30, 2023

Balance Income/

Expense Average

Balance Income/

Expense Average

(dollars in thousands)

Interest-earning assets:

Cash and investments $ 6,237,051 $ 169,462 5.43 % $ 5,763,409 $ 129,482 4.49 %

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

23,035,820 611,679 5.31 % 21,347,914 512,544 4.80 %

Total interest-earning assets 29,272,871 781,141 5.34 % 27,111,323 642,026 4.74 %

Notes payable due within one year 2,810,466 73,280 5.21 % 3,589,110 76,853 4.28 %

Notes payable due after one year (2)

24,488,791 536,576 4.38 % 21,971,243 409,537 3.73 %

Total interest-bearing liabilities (3)

27,299,257 609,856 4.47 % 25,560,353 486,390 3.81 %

Net non-interest-bearing funding 1,973,614 — 1,550,970 —

Total funding 29,272,871 609,856 4.17 % 27,111,323 486,390 3.59 %

Net interest income/yield prior to consolidation of certain trusts 29,272,871 171,285 1.17 % 27,111,323 155,636 1.15 %

Net effect of consolidated trusts (4)

880,196 2,423 0.55 % 889,235 2,099 0.47 %

Net interest income/yield $ 30,153,067 $ 173,708 1.15 % $ 28,000,558 $ 157,735 1.13 %

(1) Excludes interest income of $18.9 million and $17.1 million in the first half of 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 $16.5 million and $15.0 million in the first half of 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 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

For the Six Months Ended June 30, 2024

Compared to Same Period in 2023

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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

March 31, 2024 March 31, 2023

Dollars Yield Dollars Yield

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Dollars Yield Dollars Yield Dollars Yield Dollars Yield

(dollars in thousands)

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Net effective spread $ 83,596 1.14 % $ 81,832 1.20 % $ 166,640 1.14 % $ 159,005 1.17 %

The $7.6 million year-over-year increase in net effective spread was primarily due to a $7.7 million increase from a shift in the composition of new business volume towards higher-yielding loans, partially offset by a $0.4 million increase in non-GAAP funding costs, which was primarily attributable to opportunistic issuance of debt at advantageous rates in advance of the funding needs of our business.

In addition, during fourth quarter 2023, debt spreads widened, and we've continued to experience the effects

of that along with other issuers in the market.

Further, we lengthened the tenor of our liquidity investment portfolio as part of our overall balance sheet management strategy and to mitigate volatility from decreases in the rate environment.

In percentage terms, the year-over-year decrease of 0.03% was primarily attributable to a decrease of 0.03% on net business volume changes.

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 month period ended March 31, 2024 and 2023:

For the Three Months Ended

March 31, 2024 March 31, 2023

The following table summarizes the components of Farmer Mac's total allowance for losses for the three month period ended June 30, 2024 and 2023:

As of June 30, 2024 As of June 30, 2023

Losses Reserve

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

(Release of)/provision for losses

Provision for losses

6,179 51 6,230 1,073 69 1,142

Charge-offs (4,043) — (4,043) — — —

Ending Balance $ 16,924 $ 1,693 $ 18,617 $ 17,351 $ 1,705 $ 19,056

For the Six Months Ended

Beginning Balance $ 16,589 $ 1,711 $ 18,300 $ 15,731 $ 1,433 $ 17,164

Provision for/(release of) losses 4,378 (18) 4,360 1,620 272 1,892

Charge-offs (4,043) — (4,043) — — —

Ending Balance $ 16,924 $ 1,693 $ 18,617 $ 17,351 $ 1,705 $ 19,056

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 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.

During second quarter 2024, we recorded a $6.2 million net provision to the total allowance for losses primarily as a result of a single permanent planting loan that is in bankruptcy, which resulted in a $3.9 million charge-off to reflect the amount that we have deemed uncollectible.

The remaining $2.2 million provision was the result of 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 months ended March 31, 2024 and 2023:

For the Three Months Ended

March 31, 2024 March 31, 2023 $ %

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2024 June 30, 2023 $ % June 30, 2024 June 30, 2023 $ %

(dollars in thousands)

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Guarantee and commitment fee income $ 3,797 $ 3,489 $ 308 9 % $ 7,714 $ 7,422 $ 292 4 %

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.

Guarantee and commitment fees increased for the three and six months ended June 30, 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 $5.3 million and $10.2 million for the three and six months ended June 30, 2024, respectively, compared to $4.6 million and $9.2 million for the three and six months ended June 30, 2023, respectively.

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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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 Table 6 in "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."

Gains on financial derivatives .

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 $ %

(Losses)/gains on financial derivatives .

The components of gains and losses on financial derivatives for the three and six months ended June 30, 2024 and 2023 are summarized in the following table:

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2024 June 30, 2023 $ % June 30, 2024 June 30, 2023 $ %

(dollars in thousands)

Gains due to fair value changes

(Losses)/gains due to fair value changes

$ (359) $ 2,141 $ (2,500) (117) % $ 1,324 $ 3,057 $ (1,733) (57) %

Accrual of contractual payments (486) (1,568) 1,082 (69) % (521) (3,194) 2,673 (84) %

Gains due to terminations or net settlements

(Losses)/gains due to terminations or net settlements

(954) 1,120 (2,074) (185) % (523) 2,229 (2,752) (123) %

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

(Losses)/gains on financial derivatives

$ (1,799) $ 1,693 $ (3,492) (206) % $ 280 $ 2,092 $ (1,812) (87) %

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

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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 due to terminations or net settlements" in the table above.

Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "(Losses)/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 $ %

Losses on sale of mortgage loans.

During second quarter 2024, Farmer Mac sold a portion of a Corporate AgFinance agricultural storage and processing loan at a loss of $1.1 million to reduce the overall exposure to the borrower.

Farmer Mac sold $7.0 million of the overall $14.4 million loan leaving a remaining exposure of $7.4 million as of June 30, 2024.

After that sale, the borrower restructured its credit facilities to address short-term headwinds resulting from an imbalance in supply and demand that occurred in 2023 and from internal adverse events, such as a fire and other equipment failures, all of which the borrower resolved in the first half of 2024.

Gains on sale of available-for-sale investment securities.

During second quarter 2024, Farmer Mac sold available-for-sale investment securities at a gain of $1.1 million.

Those sales were done to rebalance the liquidity investment portfolio given the lower level of business volume activity while demonstrating that the portfolio provides strong contingent liquidity.

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2024 June 30, 2023 $ % June 30, 2024 June 30, 2023 $ %

(dollars in thousands)

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Compensation and Employee Benefits .

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.

The increase in compensation and employee benefits expenses for the three and six months ended June 30, 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 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.

The increase in G&A expenses for the six months ended June 30, 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.

The decrease in G&A expenses for the three months ended June 30, 2024 compared to 2023 was primarily due to a decrease in consulting costs related to technology strategic initiatives because more of the costs were capitalized during the current year than in the prior-year period.

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.

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Income Tax Expense .

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 $ %

The following table presents income tax expense and the effective income tax rate for the three and six months ended June 30, 2024 and 2023:

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2024 June 30, 2023 $ % June 30, 2024 June 30, 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 months ended March 31, 2024 and 2023:

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the three and six months ended June 30, 2024 and 2023:

Net New Business Volume

For the Three Months Ended

March 31, 2024 March 31, 2023

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

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

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

(in thousands)

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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 $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.

Farmer Mac's outstanding business volume was $28.8 billion as of June 30, 2024, a net decrease of $0.1 billion from March 31, 2024 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The $0.4 billion net decrease in Farm & Ranch during second quarter 2024 resulted from $1.1 billion of scheduled maturities and repayments, partially offset by $0.7 billion of new purchases, commitments, and guarantees.

Included in the $0.7 billion is the purchase of $390.2 million of Farm & Ranch loans.

Scheduled loan maturities and repayments in the aggregate amount of $133.1 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 $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.

During second quarter 2024, a total of $0.8 billion in Farm & Ranch AgVantage Securities matured without refinancing, which primarily reflected slower loan growth resulting in less liquidity needs from Farmer Mac's AgVantage counterparties.

The $0.8 billion in maturities and repayments were partially offset by $0.2 billion in new purchases.

The $0.1 billion net increase in Corporate AgFinance during second 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, sales, and paydowns on revolving commitments.

Included in the $0.3 billion is $243.7 million of purchases of Corporate AgFinance loans and unfunded commitments, which was partially offset by $172.4 million of scheduled repayments.

The net increase in Corporate AgFinance loan purchases and unfunded commitments primarily reflected a more active market for agribusiness transactions during the quarter.

The $0.1 billion net increase in Rural Utilities during second quarter 2024 resulted from $241.4 million of new purchases, unfunded loan commitments, and guarantees, which was partially offset by $117.7 million of scheduled maturities and repayments.

The $0.1 billion net increase in Renewable Energy during second quarter 2024 primarily reflects $271.9 million in loan purchases and unfunded commitments, partially offset by $138.7 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

counterparties seeking to add longer-term AgVantage securities to manage their asset-liability maturity

profile given recent increases in credit spreads and interest rates.

The $0.2 billion in gross purchases was

partially offset by $0.1 billion in scheduled maturities.

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 $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

Farmer Mac's outstanding business volume was $26.7 billion as of June 30, 2023, a net increase of $0.3 billion from March 31, 2023 after taking into account all new business, servicing rights acquisitions,

maturities, sales, and paydowns on existing assets.

The $0.4 billion increase in Farm & Ranch during second quarter 2023 resulted from $1.6 billion of new

purchases, commitments, guarantees, and loans serviced for others, partially offset by $1.1 billion of

scheduled maturities and repayments.

Included in the $1.6 billion of new volume is newly purchased

servicing rights on $0.6 billion of loans (i.e., loans serviced for others).

These new servicing rights were

acquired to further leverage our loan servicing function.

Loans serviced for others earn servicing fee

income rather than interest income and are a component of outstanding business volume because they are

assets under our management.

Farmer Mac purchased a total of $0.2 billion in Farm & Ranch loans during second quarter 2023, partially offset by $0.1 billion in repayments.

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

Farmer Mac also purchased a total of $0.7 billion in Farm & Ranch AgVantage Securities during second

quarter 2023, which primarily reflected the refinancing of maturing securities.

The $0.7 billion in gross

purchases was more than offset by $0.9 billion in scheduled maturities.

The $0.1 billion net increase in Corporate AgFinance during second quarter 2023 resulted from $0.2

billion of new purchases and commitments, which was partially offset by $0.1 billion of scheduled

maturities, repayments, and sales.

Farmer Mac purchased a total of $105.3 million in loans, which was

partially offset by $90.3 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 $0.3 billion net decrease in Rural Utilities during second quarter 2023 resulted from $0.3 billion of

new purchases, commitments, and guarantees, which was more than offset by $0.6 billion of scheduled

maturities and repayments.

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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 $19.4 million net increase in Renewable Energy during second quarter 2023 primarily reflects

$71.6 million in loan purchases and unfunded commitments, partially offset by $52.2 million in

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

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(dollars in thousands)

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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 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.

During second quarter 2024, Farmer Mac executed its fourth structured securitization transaction, whereby it sold and securitized agricultural mortgage loans resulting in $305.6 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 six months ended June 30, 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 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.

During the three and six months ended June 30, 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 March 31, 2024 As of December 31, 2023

Balance Sheet As of June 30, 2024 As of December 31, 2023

(in thousands)

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(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 March 31, 2024:

Schedule of Principal Amortization as of March 31, 2024

Schedule of Principal Amortization as of June 30, 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 $ 12,165,579 $ 3,820,746 $ 2,551,642 $ 18,537,967

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.

Of Farmer Mac's $28.8 billion outstanding principal balance of business volume as of June 30, 2024, $9.7 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 March 31, 2024:

Changes in quarterly AgVantage securities volume are primarily driven by the generally larger transaction sizes for that product, scheduled maturity amounts for a particular quarter, the liquidity needs of Farmer Mac’s AgVantage counterparties, and changes in the pricing and availability of wholesale funding.

Based on these factors, Farmer Mac expects its business volumes in AgVantage securities to continue to be volatile.

The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of June 30, 2024:

AgVantage Balances by Year of Maturity

March 31, 2024

June 30, 2024

(in thousands)

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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 4.0 years as of March 31, 2024.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.1 years as of June 30, 2024.

Business Outlook

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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.

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 by 7.6% in second quarter 2024 versus second quarter 2023 and increase net effective spread by 4.8% year-to-date 2024 versus the same year-to-date period 2023.

This year-over-year increase in outstanding business volume and net effective spread primarily reflects 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.

The net effect of these forces contributed to positive Farm & Ranch loan purchase portfolio growth in second 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.

Farmer Mac experienced a decrease in wholesale finance volume during second quarter 2024, driven by slower market loan growth and a tightening of market credit spreads resulting in less 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.

Corporate AgFinance loan purchases and unfunded commitments increased 11.0% in second quarter 2024 versus second quarter 2023.

The Rural Infrastructure Finance segments showed significant business volume growth in second quarter 2024, increasing 21.6% to $8.4 billion in second quarter 2024 versus second quarter 2023.

Business volume in Rural Infrastructure Finance was strong across all products and segments year-over-year, primarily driven by increased wholesale finance volume as well as 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, capital, and return-on-equity capital challenges faced by agricultural and rural infrastructure lenders.

The suite of Farmer Mac's offerings encompasses loan and loan 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.

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.

And 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.

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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.

The increase in short-term rates in 2022 and 2023 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.

Towards the end of second quarter 2024, Farmer Mac’s funding costs versus SOFR increased due to market factors, including on-going liquidity draining from the Federal Reserve’s quantitative tightening.

Farmer Mac proactively extended its liability profile in early 2024 when issuance spreads were more favorable to mitigate market risk on floating rate funding costs due to anticipated market conditions.

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.

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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.

Although these natural business dynamics may not be perfect offsets, they tend to provide some 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.

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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.

Annual crop prices in particular moved broadly lower in second quarter 2024.

annual crops have benefited from favorable growing conditions across much of the U.S.

Midwest this summer, raising the likelihood of above trend-line yields this year.

Tree nut prices have faced similar pressure in recent years from rising production, including almonds and walnuts.

Tree nut producers have reduced new plantings as a result, which, combined with robust exports this marketing year, has provided moderate support for prices.

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

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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.

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.

The Federal Reserve Bank of Chicago AgLetter reported a 4% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between April 2023 and April 2024.

This was down from a 6% increase over the previous 12-month period and was the smallest increase in over three years.

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

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.

Nationally, however, 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.

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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.

Through May 2024, agricultural export values were down approximately 3% in 2024 compared to 2023.

One challenge for U.S.

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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.

Slower global growth could also be a headwind for consumer-oriented products like animal proteins, dairy, fruits, and nuts.

Ukrainian corn and wheat export shipments continue to rebound and have approached pre-2022 levels in recent months.

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.

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Precipitation this winter helped alleviate this challenge, though.

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

As of July 18, 2024, only 7% of the continental U.S.

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

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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.

The production of food, feed, fiber, and biofuels has been economically viable in the past few years, but some factors have been changing in 2024 and could continue to change into 2025.

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.

consumer prices in 2023 and 2024 increased the volume of consumer spending but also limited the profit expansion of food and fiber businesses.

Biofuels have gained 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 provide support for raw materials such as corn and soybeans, but markets for these fuels are nascent and are expected to evolve rapidly in the coming quarters.

A strong U.S.

dollar, trade issues, and a high risk of global economic turmoil could pose challenges for these sectors in the second half of 2024 and into 2025.

Nonetheless, consumer spending held steady in second quarter 2024, providing stable 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.

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According to data from the U.S.

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.

Energy Information Administration, sales and the revenue from the sale of electricity to customers have slowed, with an annual decrease in sales of 0.4% and an increase in revenue of 0.4%, respectively, in the last 12 months through April 2024 compared to April 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.

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

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

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

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

Through June 30, 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.

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

These growth opportunities may be affected by the demand for electric power in rural areas, increased power demand from regional data centers, 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.

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

Renewable Energy

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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.

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.

Rural telecommunication and data 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.

The rapid 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.

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.

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, wireless broadband, and data processing centers increasingly important to rural economic opportunity and precision agriculture.

Legislative and Regulatory Outlook

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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 in this farm bill reauthorization to enhance its partnerships and services in support of lenders serving farmers, ranchers, agribusinesses, and rural infrastructure.

• Farmer Mac continues to seek changes to its charter in the 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.

• On May 23, 2024, the House Agriculture Committee released its version of the farm bill through the committee process.

The path toward final passage of a new farm bill remains uncertain.

With the current extension set to expire on September 30, 2024, there is growing consensus that Congress will likely need to pass another short-term extension to complete its work on a new farm bill.

• The FCA's proposed 2024 regulatory agenda includes a proposed rulemaking to review Farmer Mac's regulatory capital framework.

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

These board members will continue to serve in their roles until replacements are nominated by the President and confirmed by the U.S.

These board members will continue to serve in their roles until replacements

are nominated by the President and confirmed by the U.S.

On May 2, 2024, the President sent to the Senate the nomination of Marcus D.

Graham of Tennessee to be a member of the FCA board.

His nomination requires confirmation by the U.S.

Balance Sheet Review

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

March 31, 2024 December 31, 2023 $ %

June 30, 2024 December 31, 2023 $ %

(in thousands)

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Total liabilities and equity $ 30,194,314 $ 29,524,382 $ 669,932 2 %

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

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

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

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 March 31, 2024 was $11.2 billion across 48 states.

Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of June 30, 2024 was $11.4 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 2023 Annual Report.

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 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 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.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of June 30, 2024, were $62.1 million (0.54% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $76.8 million (0.69% of the Agricultural Finance mortgage loan portfolio) as of March 31, 2024 and $34.7 million (0.31% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2023.

Those 90-day delinquencies consisted of 34 delinquent loans as of June 30, 2024, compared to 41 delinquent loans as of March 31, 2024 and 23 delinquent loans as of December 31, 2023.

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

The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of June 30, 2024.

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

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

Farmer Mac's 90-day delinquency rate as of June 30, 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)

June 30, 2024 $ 11,409,396 $ 62,063 0.54 %

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

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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

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.22% of total outstanding business volume as of June 30, 2024, compared to 0.12% as of December 31, 2023 and 0.17% as of June 30, 2023.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of June 30, 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 June 30, 2024

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

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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 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.

As of June 30, 2024, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $248.0 million (2.2% of the portfolio), compared to $255.2 million (2.3% of the portfolio) as of March 31, 2024 , and $186.0 million (1.7% of the portfolio) as of December 31, 2023.

Those substandard assets comprised 238 loans as of June 30, 2024, 245 loans as of March 31, 2024, and 206 loans as of December 31, 2023.

The decrease of $7.2 million in Agricultural Finance substandard assets during second quarter 2024 was primarily driven by credit upgrades in permanent plantings and crops, and was partially offset by downgrades in agricultural storage and processing, part-time farms, and livestock.

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

The percentage of Agricultural Finance substandard assets within the portfolio as of June 30, 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%.

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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 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.

As of June 30, 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 $802,000 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 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 weighted-average original loan-to-value ratio for Farm & Ranch mortgage loans purchased during second quarter 2024 was 49%, compared to 51% for loans purchased during second quarter 2023.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 50% and 56% as of June 30, 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 March 31, 2024

Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of June 30, 2024

Acceptable Special Mention Substandard Total

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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.

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 following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of June 30, 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 March 31, 2024

Original Loans, Guarantees, and LTSPCs as of June 30, 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 March 31, 2024

As of June 30, 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 March 31, 2024

As of June 30, 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 March 31, 2024 was $4.3 billion across 45 states.

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of June 30, 2024 was $4.6 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 March 31, 2024, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

As of June 30, 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.

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

As of March 31, 2024

As of June 30, 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 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.

As of June 30, 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 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.

During the previous three years ended June 30, 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 March 31, 2024, Farmer Mac had not exercised any remedies or taken any formal action against any servicers.

During the previous three years ended June 30, 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 March 31, 2024, Farmer Mac had not experienced any credit losses on any AgVantage securities over the life of the program.

As of June 30, 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 $6.4 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

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $5.8 billion as of June 30, 2024 and $6.1 billion as of December 31, 2023.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of June 30, 2024 and December 31, 2023:

As of June 30, 2024 As of December 31, 2023

Counterparty Balance Required Collateralization Balance Required Collateralization

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Total outstanding $ 9,654,641 $ 10,022,347

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

(1) Consists of AgVantage securities issued by 8 different issuers as of both June 30, 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 March 31, 2024, Farmer Mac had $0.7 billion of cash and cash equivalents and $5.1 billion of investment securities.

As of June 30, 2024, Farmer Mac had $0.9 billion of cash and cash equivalents and $5.3 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.

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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 ($150.1 million as of March 31, 2024).

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).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($76.4 million as of June 30, 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 $0.7 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 $0.9 billion of cash and cash equivalents held as of June 30, 2024 mature within three months.

As of June 30, 2024, $2.7 billion of the $5.3 billion of investment securities (52%) 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 March 31, 2024 and December 31, 2023 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 June 30, 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 March 31, 2024 As of December 31, 2023

Interest Rate Scenario As of June 30, 2024 As of December 31, 2023

+100 basis points (3.7) % (3.6) %

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Percentage Change in NES from Base Case

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

Interest Rate Scenario As of June 30, 2024 As of December 31, 2023

+100 basis points 0.4 % — %

-100 basis points 1.4 % 0.8 %

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.

As of June 30, 2024, Farmer Mac's duration gap was positive 3.5 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.

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Treasury securities.

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.

As of June 30, 2024, Farmer Mac had $25.6 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $10.0 billion were pay-fixed interest rate swaps, $14.9 billion were receive-fixed interest rate swaps, and $0.7 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.

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As discussed in Note 4 to the consolidated financial statements, all financial derivatives are recorded on the balance sheet at fair value as derivative assets or as derivative liabilities.

Changes in the fair values of undesignated financial derivatives are reported in "Gains on financial derivatives" in the consolidated statements of operations.

Changes in the fair values of undesignated financial derivatives are reported in "(Losses)/gains on financial derivatives" in the consolidated statements of operations.

For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items related to the risk being hedged are reported in "Net interest income" in the consolidated statements of operations.

3 unchanged sentences

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 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.

As of both June 30, 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

15 unchanged sentences

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 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 June 30, 2024, Farmer Mac held $7.8 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 $10.0 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily SOFR.

3 unchanged sentences

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 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.

As of June 30, 2024, Farmer Mac had outstanding discount notes of $2.3 billion, medium-term notes that mature within one year of $6.8 billion, and medium-term notes that mature after one year of $17.8 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.

1 unchanged sentence

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.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 291 days of liquidity throughout second quarter 2024 and had 283 days of liquidity as of June 30, 2024.

Farmer Mac maintains cash, cash equivalents (including U.S.

11 unchanged sentences

• mortgage-backed securities.

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

The following table presents these assets as of June 30, 2024 and December 31, 2023:

As of June 30, 2024 As of December 31, 2023

(in thousands)

6 unchanged sentences

Total $ 6,180,946 $ 5,861,394

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.

The objectives of the investment portfolio as of June 30, 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 .

1 unchanged sentence

Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement.

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).

As of June 30, 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 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.

As of June 30, 2024 and December 31, 2023, Farmer Mac's Tier 1 capital ratio was 15.3% and 15.4%, respectively.

As of June 30, 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.

8 unchanged sentences

For the quarter ended:

June 30, 2024 $ 698,787 $ 293,345 $ 241,422 $ 271,890 $ 1,505,444

March 31, 2024 665,916 290,894 116,165 347,898 1,420,873

6 unchanged sentences

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 342,594 89,576 32,984 — 465,154

June 30, 2024 $ 1,095,067 $ 235,747 $ 117,672 $ 138,725 $ 1,587,211

Scheduled $ 402,088 $ 119,254 $ 126,684 $ 93,112 $ 741,138

Unscheduled 150,903 99,325 32,481 — 282,709

March 31, 2024 $ 552,991 $ 218,579 $ 159,165 $ 93,112 $ 1,023,847

20 unchanged sentences

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)

June 30, 2024 $ 18,504,501 $ 1,816,893 $ 7,561,473 $ 875,472 $ 28,758,339

March 31, 2024 18,900,906 1,766,294 7,437,723 742,307 28,847,230

6 unchanged sentences

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)

June 30, 2024 $ 14,064,831 $ 3,273,764 $ 6,850,137 $ 24,188,732

March 31, 2024 14,166,500 3,194,246 6,849,237 24,209,983

6 unchanged sentences

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:

March 31, 2024 (2)

June 30, 2024 (2)

$ 34,156 0.98 % $ 7,866 1.91 % $ 7,646 0.44 % $ 2,999 1.86 % $ 30,268 0.41 % $ 661 0.04 % $ 83,596 1.14 %

March 31, 2024 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 %

3 unchanged sentences

March 31, 2023 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 %

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 %

1 unchanged sentence

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 %

(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 March 31, 2024 and 2023.

(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 June 30, 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

March 2024 December 2023 September 2023 June 2023 March 2023 December 2022 September 2022 June

2022 March 2022

June 2024 March 2024 December 2023 September 2023 June 2023 March 2023 December 2022 September 2022 June

(in thousands)

1 unchanged sentence

Guarantee and commitment fees 5,256 4,982 4,865 4,828 4,581 4,654 4,677 4,201 4,709

Gain on sale of investment securities 1,052 — — — — — — — —

Loss on sale of mortgage loan (1,147) — — — — — — — —

Other 481 1,077 767 1,056 409 1,067 390 473 307

1 unchanged sentence

Credit related expense/(income):

(Release of)/provision for losses (1,870) (575) (181) 1,142 750 1,945 450 (1,535) (54)

Provision for/(release of) losses 6,230 (1,870) (575) (181) 1,142 750 1,945 450 (1,535)

REO operating expenses — — — — — — 819 — —

10 unchanged sentences

Reconciling items:

Gains/(losses) on undesignated financial derivatives due to fair value changes $ 1,683 $ (836) $ 2,921 $ 2,141 $ 916 $ 1,596 $ 6,441 $ 2,846 $ 2,612

(Losses)/gains on undesignated financial derivatives due to fair value changes $ (359) $ 1,683 $ (836) $ 2,921 $ 2,141 $ 916 $ 1,596 $ 6,441 $ 2,846

Gains/(losses) on hedging activities due to fair value changes 2,604 3,002 (3,598) 3,210 (4,901) (105) (148) (624) 428

5 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