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Item 2. Management’s Discussion and Analysis

2024-11-04 compared with 2024-08-05 · 303 added, 341 removed, 1146 unchanged (36% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The objective of this section of the report is to provide a discussion and analysis, from management’s

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

of operations for the quarter ended June 30, 2024.

Financial information included in this report is

consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage

The objective of this section of the report is to provide a discussion and analysis, from management’s perspective, of the material information necessary to assess Farmer Mac's financial condition and results of operations for the quarter ended September 30, 2024.

Financial information included in this report is consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage

Securities Corporation and Farmer Mac II LLC.

This discussion and analysis of financial condition and

results of operations should be read together with:

(1) the interim unaudited consolidated financial

statements and the related notes that appear elsewhere in this report;

and (2) Farmer Mac's Annual Report

on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on February 23, 2024

(the "2023 Annual Report").

This discussion and analysis of financial condition and results of operations should be read together with:

(1) the interim unaudited consolidated financial statements and the related notes that appear elsewhere in this report;

and (2) Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on February 23, 2024 (the "2023 Annual Report").

FORWARD-LOOKING STATEMENTS

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Management's expectations for Farmer Mac's future necessarily involve assumptions, estimates, and the evaluation of risks and uncertainties.

Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the

forward-looking statements, including the factors discussed under "Risk Factors" in Part I, Item 1A of Farmer Mac's 2023 Annual Report, as well as uncertainties about:

Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including the factors discussed under "Risk Factors" in Part I, Item 1A of Farmer Mac's 2023 Annual Report, as well as uncertainties about:

• the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms;

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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 second quarter 2024:

During third quarter 2024:

• we provided $2.0 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;

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

• we redeemed all $75.0 million of our Series C Preferred Stock.

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

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

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

(in thousands)

1 unchanged sentence

Core earnings 44,907 39,777 45,188

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.

The $2.0 million sequential increase in net income attributable to common stockholders was due to a $2.3 million after-tax decrease in our provision for credit losses, a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock, and a $0.6 million after-tax increase in late fee income.

These factors were partially offset by the $1.6 million loss on retirement of the Series C Preferred Stock, related to deferred issuance costs.

The $9.0 million year-over-year decrease in net income attributable to common stockholders was due to a $3.6 million after-tax decrease in the fair value of undesignated financial derivatives, a $2.7 million after-tax increase in our provision for credit losses, the $1.6 million loss on retirement of the Series C Preferred Stock related to deferred issuance costs, and a $1.2 million after-tax decrease in guarantee and commitment fee income.

These factors were partially offset by a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock.

The $5.1 million sequential increase in core earnings was due to a $2.3 million after-tax decrease in our provision for credit losses, a $1.4 million after-tax increase in net effective spread, a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock, and a $0.6 million after-tax increase in late fee income.

The $0.3 million year-over-year decrease in core earnings was due to a $2.7 million after-tax increase in our provision for credit losses partially offset by a $1.5 million after-tax increase in net effective spread and a $0.9 million decrease in preferred stock dividends related to the redemption of the Series C Preferred Stock.

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

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

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

(in thousands)

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Net effective spread % 1.16 % 1.14 % 1.20 %

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 $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 $0.5 million sequential decrease in net interest income was primarily due to a $2.4 million decrease in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), a $0.9 million increase from a shift in the composition of new business volume towards higher-yielding loans, and a decrease of $0.9 million in our funding costs, which was primarily attributable to our proactive asset liability management practices such as calling fixed-rate debt in response to lower nominal interest rates.

In percentage terms, net interest income remained consistent compared to second quarter 2024.

The $0.9 million year-over-year decrease in net interest income was primarily due to an increase of $3.0 million of funding costs, which was primarily attributable to (1) the widening of debt spreads that occurred in fourth quarter 2023, which increased our floating-rate funding costs, and (2) a $2.9 million decrease in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives).

These factors were partially offset by a $5.0 million increase from a shift in the composition of new business volume towards higher-yielding loans.

In percentage terms, the year-over-year decrease of 0.07% was primarily attributable to an increase of 0.07% in funding costs and a decrease in the fair value of our designated financial derivatives of 0.03%, partially offset by an increase of 0.03% related to the shift in the composition of new business volume towards higher-yielding loans.

The $1.8 million sequential increase in net effective spread was primarily due to a $0.9 million increase from a shift in the composition of new business volume towards higher-yielding loans, and a decrease of $0.9 million in our non-GAAP funding costs, which was primarily attributable to our proactive asset liability management practices such as calling fixed-rate debt in response to lower nominal interest rates.

In percentage terms, the sequential increase of 0.02% was primarily attributable to an increase of 0.01% due to the shift in the composition of new business volume towards higher-yielding loans and a decrease of 0.01% in non-GAAP funding costs.

The $2.0 million year-over-year increase in net effective spread was primarily due to a $5.0 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.

This factor was partially offset by an increase of $3.0 million in non-GAAP funding costs, which was primarily attributable to the widening of debt spreads that occurred in fourth quarter 2023 and increased our floating-rate funding costs.

In percentage terms, the year-over-year decrease of 0.04% was primarily attributable to an increase of 0.07% related to the increases in non-GAAP funding costs, and was partially offset by an increase of 0.03% on the shift in the composition of new business volume towards higher-yielding loans.

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 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.

Our outstanding business volume was $28.5 billion as of September 30, 2024, a net decrease of $290.0 million from June 30, 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 $388.2 million in the Agricultural Finance line of business, partially offset by a net increase of $98.2 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."

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands)

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Capital in excess of minimum capital level required 579,877 589,399

The increase in capital in excess of the minimum capital level required was primarily due to an increase in retained earnings.

The decrease in capital in excess of the minimum capital level required was primarily due to the redemption of the Series C Preferred Stock, partially offset by an increase in retained earnings.

Credit Quality

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:

The following table presents Agricultural Finance on- and off-balance sheet substandard assets, in dollars and as a percentage of the respective portfolio as of September 30, 2024, June 30, 2024, and December 31, 2023:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2024 $ 342,058 4.1 % $ 35,827 1.1 %

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 %

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Increase/(decrease) from prior year-ending 189,193 2.1 % 2,741 0.1 %

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.

The increase of $122.4 million in on-balance sheet substandard assets during third quarter was primarily driven by credit downgrades in permanent plantings, crops, livestock, part-time farms, and agricultural storage and processing.

The $7.5 million increase in substandard assets in our off-balance sheet portfolios during third quarter was primarily due to credit downgrades in crops, permanent plantings, and livestock, and was partially offset by credit upgrades in part-time farms.

There was one substandard asset with an outstanding balance of $24.1 million in the Rural Infrastructure Finance portfolio as of September 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 24 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 June 30, 2024, March 31, 2024 , and December 31, 2023:

The following table presents 90-day delinquencies for the on- and off-balance sheet Agricultural Finance portfolios in dollars and as a percentage of the respective balance sheet category as of September 30, 2024, June 30, 2024 , and December 31, 2023:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2024 $ 138,049 1.67 % $ 6,358 0.20 %

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 %

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Increase/(decrease) from prior year-ending 105,156 1.25 % 4,574 0.15 %

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.

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 June 30, 2024.

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.

On-balance sheet Agricultural Finance assets 90 or more days delinquent increased in permanent plantings, crops, livestock, part-time farms, and agricultural storage and processing.

Off-balance sheet Agricultural Finance assets 90 days or more delinquent increased in permanent plantings, crops, and part-time farms.

As of both September 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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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.

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 example, in third quarter 2024, we excluded the loss on the retirement of the Series C Preferred Stock from core earnings and core earnings per share.

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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Net effective spread also differs from net interest income and net interest yield because it includes the net effects of terminations or net settlements on financial derivatives, which consist of:

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

(1) the net effects of

cash settlements on agency forward contracts on the debt of other GSEs and U.S.

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

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For the Three Months Ended

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

(in thousands, except per share amounts)

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

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

(1,064) 2,921

Unrealized losses on trading securities

Gains on hedging activities due to fair value changes

Unrealized gains on trading securities 99 1,714

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 27 29

Net effects of terminations or net settlements on financial derivatives (503) (79)

Issuance costs on the retirement of preferred stock (1,619) —

Income tax effect related to reconciling items 260 (1,638)

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Credit related expense (GAAP):

Provision for losses

Provision for/(release of) losses 3,258 (181)

REO operating expenses 196 —

Total credit related expense 3,454 (181)

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Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings

For the Six Months Ended

June 30, 2024 June 30, 2023

For the Nine Months Ended

September 30, 2024 September 30, 2023

(in thousands, except per share amounts)

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Net effects of terminations or net settlements on financial derivatives (2,200) 1,027

Issuance costs on the retirement of preferred stock (1,619) —

Income tax effect related to reconciling items (830) (1,536)

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Guarantee and commitment fees (2)

15,235 14,063

Gain on sale of investment securities (GAAP)

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Provision for losses

REO operating expenses 196 —

Total credit related expense 7,814 1,711

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

(in thousands, except per share amounts)

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0.02 0.30 0.54 (0.17)

Unrealized (losses)/gains on trading securities

Unrealized gains on trading securities

0.01 0.16 — 0.19

1 unchanged sentence

Net effects of terminations or net settlements on financial derivatives (0.05) (0.01) (0.20) 0.10

Issuance costs on the retirement of preferred stock (0.15) — (0.15) —

Income tax effect related to reconciling items 0.02 (0.15) (0.08) (0.14)

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

(in thousands, except per share amounts)

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0.02 0.29 0.53 (0.16)

Unrealized (losses)/gains on trading securities

Unrealized gains on trading securities

0.01 0.16 — 0.18

1 unchanged sentence

Net effects of terminations or net settlements on financial derivatives (0.05) (0.01) (0.20) 0.09

Issuance costs on the retirement of preferred stock (0.15) — (0.15) —

Income tax effect related to reconciling items 0.02 (0.15) (0.08) (0.14)

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For core earnings purposes, these realized gains or losses are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years.

The recognition of deferred issuance costs on the retirement of the Series C Preferred Stock in July 2024 has been excluded from core earnings because they are not frequently occurring transactions, nor are they indicative of future operating results.

This is consistent with Farmer Mac's previous treatment of deferred issuance costs associated with the retirement of preferred stock.

The following sections provide more detail about specific components of Farmer Mac's results of operations.

Net Interest Income .

The following table provides information about interest-earning assets and funding for the three and six months ended June 30, 2024 and 2023.

The following table provides information about interest-earning assets and funding for the three and nine months ended September 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

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

Balance Income/

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Net interest income/yield $ 30,310,275 $ 86,791 1.15 % $ 28,696,106 $ 87,643 1.22 %

(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).

(1) Excludes interest income of $9.6 million and $8.5 million in third 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 $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).

(3) Excludes interest expense of $8.6 million and $7.5 million in third 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

For the Nine Months Ended

September 30, 2024 September 30, 2023

Balance Income/

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Net interest income/yield $ 30,205,470 $ 260,499 1.15 % $ 28,232,407 $ 245,378 1.16 %

(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).

(1) Excludes interest income of $28.5 million and $25.6 million in the first nine months 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).

(3) Excludes interest expense of $25.0 million and $22.4 million in the first nine months 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).

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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 Six Months Ended June 30, 2024

For the Nine Months Ended September 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 For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Dollars Yield Dollars Yield Dollars Yield Dollars Yield

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Net effective spread $ 85,396 1.16 % $ 83,424 1.20 % $ 252,036 1.15 % $ 242,429 1.18 %

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.

The $9.6 million year-over-year increase in net effective spread was primarily due to a $13.1 million increase from a shift in the composition of new business volume towards higher-yielding loans.

This was partially offset by a $3.5 million increase in non-GAAP funding costs, which was primarily attributable to the widening of debt spreads that occurred in fourth quarter 2023 and increased our floating-rate funding costs.

In percentage terms, the year-over-year decrease of 0.03% was primarily attributable to an increase in non-GAAP funding costs.

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

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

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

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

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

As of September 30, 2024 As of September 30, 2023

Losses Reserve

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

Provision for losses

Provision for/(release of) losses

3,428 (170) 3,258 (136) (45) (181)

1 unchanged sentence

Ending Balance $ 20,352 $ 1,523 $ 21,875 $ 17,215 $ 1,660 $ 18,875

For the Six Months Ended

For the Nine Months Ended

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

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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 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.

During third quarter 2024, we recorded a $3.3 million net provision to the total allowance for losses primarily as a result of one permanent planting borrower relationship, risk rating downgrades in Agricultural Finance, and new loan volume in Rural Infrastructure.

Guarantee and Commitment Fees .

The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three and six months ended June 30, 2024 and 2023:

For the Three Months Ended For the Six Months Ended

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2024 September 30, 2023 $ % September 30, 2024 September 30, 2023 $ %

(dollars in thousands)

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Guarantee and commitment fee income $ 4,015 $ 5,520 $ (1,505) (27) % $ 11,729 $ 12,942 $ (1,213) (9) %

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.

Guarantee and commitment fees decreased for the three and nine months ended September 30, 2024 compared to 2023, which was due to a decrease in the fair value of our retained beneficial interest in our off-balance sheet securitization.

As adjusted for the core earnings presentation, guarantee and commitment fees were $5.0 million and $15.2 million for the three and nine months ended September 30, 2024, respectively, compared to $4.8 million and $14.1 million for the three and nine months ended September 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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(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

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

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2024 September 30, 2023 $ % September 30, 2024 September 30, 2023 $ %

(dollars in thousands)

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

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

Operating Expenses .

The components of operating expenses for the three and nine months ended

September 30, 2024 and 2023 are summarized in the following table:

For the Three Months Ended For the Nine Months Ended

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

September 30, 2024 September 30, 2023 $ % September 30, 2024 September 30, 2023 $ %

(dollars in thousands)

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Compensation and Employee Benefits .

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.

The increase in compensation and employee benefits expenses for the three and nine months ended September 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 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.

That initiative is expected to be completed during 2024.

The decrease in G&A expenses for the three months and nine months ended September 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.

That initiative was substantially completed during fourth quarter 2024.

Income Tax Expense .

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

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

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2024 September 30, 2023 $ % September 30, 2024 September 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 and six months ended June 30, 2024 and 2023:

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

Net New Business Volume

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

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

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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 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.

Farmer Mac's outstanding business volume was $28.5 billion as of September 30, 2024, a net decrease of $0.3 billion from June 30, 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 third quarter 2024 resulted from $1.2 billion of scheduled maturities and repayments, partially offset by $0.8 billion of new purchases, commitments, and guarantees.

Included in the $0.8 billion is the purchase of $271.9 million of Farm & Ranch loans.

Scheduled loan maturities and repayments in the aggregate amount of $157.4 million partially offset those purchases.

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.

Not included in these Farm & Ranch loan purchase results for third quarter 2024 is Farmer Mac's October 2024 purchase of a $122.1 million pool of loans from a single agricultural lender, which will be reflected in Farmer Mac's results for fourth quarter 2024.

During third quarter 2024, a total of $0.5 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 $25.9 million net increase in Corporate AgFinance during third quarter 2024 resulted from $307.3 million of new purchases and unfunded loan commitments, which was partially offset by $281.4 million of scheduled maturities, repayments, sales, and paydowns on revolving commitments.

The $0.1 billion net decrease in Rural Utilities during third quarter 2024 resulted from $701.2 million of scheduled maturities and repayments, partially offset by $579.9 million of new purchases, unfunded loan commitments, and guarantees.

The $0.2 billion net increase in Renewable Energy during third quarter 2024 primarily reflects $325.7 million in loan purchases and unfunded commitments, partially offset by $106.2 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 $26.7 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.

Farmer Mac purchased a total of $150.0 million in AgVantage Securities,

$80.1 million in telecommunications loans, and $55.2 million in electric distribution and generation and

transmission loans.

The $135.3 million in loan purchases was partially offset by $31.4 million in

scheduled maturities and repayments.

The net increase in loan purchases primarily reflected borrowers'

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

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

telecommunications investment in rural America.

The $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.

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

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

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

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

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

The $1.0 billion in gross purchases was partially offset by $0.8 billion in scheduled maturities.

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

Farmer Mac purchased a total of $195.6 million in loans, which was partially offset by $159.7

million in scheduled maturities and repayments.

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

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

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

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

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

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

This relationship in turn depends on a variety of factors both internal and external to Farmer Mac.

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

(dollars in thousands)

AgVantage securities $ 663,145 $ 1,519,715 $ 1,349,345 $ 3,093,370

Structured securitization transactions (not consolidated) — — — —

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

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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 does

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

During the three and nine months ended September 30, 2024 and 2023, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts.

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

During the three and 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.

During the three and nine months ended September 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 June 30, 2024 As of December 31, 2023

Balance Sheet As of September 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 June 30, 2024:

Schedule of Principal Amortization as of June 30, 2024

Schedule of Principal Amortization as of September 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 $ 12,652,618 $ 3,808,570 $ 2,564,355 $ 19,025,543

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.

Of Farmer Mac's $28.5 billion outstanding principal balance of business volume as of September 30, 2024, $8.9 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.

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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:

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

AgVantage Balances by Year of Maturity

June 30, 2024

September 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 4.1 years as of June 30, 2024.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.7 years as of September 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 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.

Given significant increases in market interest rates over the past two years and global and economic volatility, Farmer Mac's outstanding business volume was flat in third quarter 2024 versus third quarter 2023, but net effective spread increased by 4.0% year-to-date 2024 versus the same year-to-date period 2023.

This year-over-year increase in 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 second quarter 2024 as new Farm & Ranch loan purchases outpaced loan prepayments.

In addition, a tightening agricultural economy is creating the need for additional liquidity and working capital needs for borrowers managing through this agricultural cycle.

The net effect of these forces contributed to positive Farm & Ranch loan purchase portfolio growth in third quarter 2024.

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.

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 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.

Farmer Mac experienced a decrease in wholesale finance volume during third 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 influenced by market interest rates and credit spreads, overall economic conditions and loan growth opportunities, and the relative value of Farmer Mac’s products versus the broader market.

Corporate AgFinance loan purchases and unfunded commitments increased 9.6% in third quarter 2024 versus third quarter 2023.

The Rural Infrastructure Finance segments showed significant business volume growth in third quarter 2024, increasing 14.6% to $8.5 billion in third quarter 2024 versus third quarter 2023.

Business volume in Rural Infrastructure Finance was strong across most products and segments year-over-year, 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, 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.

In October 2024, Farmer Mac purchased from a single agricultural lender a pool of Farm & Ranch loans with an aggregate outstanding principal balance of $122.1 million.

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.

Growing relationships with larger agriculture lenders, financial industry consolidation, interest rates and market volatility, as well as financial institutions' focus on capital efficiency and liquidity continue to provide increased opportunities for Farmer Mac, influencing the demand for loan purchases, risk management solutions, and wholesale funding.

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

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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.

Deepening relationships with eligible rural infrastructure counterparties are expected to continue to create opportunities to support fiber and broadband-related transactions, including significant market activity and investments in wholesale data centers as well as renewable energy projects.

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

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

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

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

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

The increase in short-term rates 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 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.

During third quarter 2024, we began to see some benefit from calling fixed-rate debt and may continue to see this benefit throughout the rest of 2024.

Farmer Mac's business may benefit from natural business hedges that help mitigate vulnerability to effects from interest rate volatility.

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

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

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

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

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

In September 2024, the Farm Credit Administration notified us that the amount of Farmer Mac's annual assessment for regulatory fees for the period October 1, 2024 through September 30, 2025 was $4.0 million.

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

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

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

Technology enhancements are planned for the remainder of 2024 and into 2025 to continue to incorporate all Farmer Mac loan portfolios onto our

servicing platform and to provide flexibility in accessing loan portfolio information, as well as streamlining operational workflows.

During fourth quarter 2024, Farmer Mac substantially completed its multi-year effort to replace its platform for securities trades and to implement a treasury management system.

Agricultural Finance Industry Outlook

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

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

According to the USDA, net cash farm income peaked at $210.1 billion in 2022, a new all-time high.

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

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

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

This underscores the continued strength in farm profitability.

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

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

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

The USDA currently estimates that net cash farm income dropped 21% in 2023 and will decrease another 7% in 2024.

Declines in crop producer revenues are being partially offset by lower expenses for protein producers in 2024 as sectors rotate through agricultural cycles.

Still, the overall average farm income in 2024 would be 1% higher than the 10-year inflation-adjusted average if the USDA's projections are realized.

Commodity prices may see increased volatility in 2024 and 2025 due to a rebound in global supply levels.

Annual grain crop prices remained under pressure in third quarter 2024.

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

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

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

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

Broadly speaking, farm expenses could also abate somewhat in 2024 and into 2025, with lower expected feed, fertilizer, and fuel costs partially offset by higher expected interest, labor, and rental rates.

Demand for corn and soybean by-products could see a boost in late 2024 and into 2025 as renewable diesel and sustainable aviation fuel markets continue to mature.

Declining farm incomes can have multiple competing effects on loan performance and agricultural credit demand.

Constraints on cash flow can cause loan delinquency rates to rise back to and surpass historical averages.

This reversion is most likely in commodities experiencing negative market conditions like some grain and nut crops.

Simultaneously, cash flow constraints can increase demand for debt capital to reorganize balance sheets and replace lost incomes.

Farmer Mac believes its portfolio and market strategy to be sufficiently diversified by borrower, industry, and region to maintain robust portfolio performance through the current cycle and be positioned to support any expansion of the farm mortgage market that may arise in the coming quarters.

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

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

Land values have slowed in some markets in 2024 due to higher interest rates and lower profitability in many agricultural sectors.

Land value survey data from the USDA show a 5% increase in average farm real estate values from June 2023 to June 2024.

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

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 4% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between April 2023 and April 2024.

Annual farm real estate value gains were highest in the Southeast (9.4%) and the Southern Plains (7.5%) and still strong but slowing in the Lake states (4.3%), the Corn Belt (3.7%), and the Southeast (2.4%).

Farmland value growth rates moderated in the first half of 2024 in the face of continued higher market interest rates.

The Federal Reserve Bank of Chicago AgLetter reported a 2% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between July 2023 and July 2024.

This was down from a 9% 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.

Growth rates in land values could continue to moderate into 2025 due to compressing farm profitability and an elevated interest rate environment, particularly in states like California where there are multiple headwinds.

Nationally, however, a general low supply of available farmland and persistent 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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Exogenous factors facing farm and food producers can create uncertainty and market instability within the sector.

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

Some of the external market conditions that could adversely affect the farm and food sectors into 2025 include foreign trade and trade policy, supply chain disruptions, and weather and environmental conditions.

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

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agriculture exports will drop to $169.5 billion in 2025, 2% lower than 2024 and down 14% relative to peak levels in 2022.

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

Through August 2024, agricultural export values were roughly even in 2024 compared to 2023.

One challenge for U.S.

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

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

Through September 10, 2024, the U.S.

had experienced 20 separate billion-dollar weather disasters in 2024, as tracked by the National Oceanic and Atmospheric Administration.

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

Hurricanes Helene and Milton disrupted agricultural production in the Southeast, but Farmer Mac's portfolio had not experienced any material performance degradation as a result of those storms as of September 30, 2024.

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

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

have abated over the last two years.

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

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

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

Precipitation this winter helped alleviate this challenge, though.

As of 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.

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

Drought conditions, which were relatively sparse to start the year, increased modestly in intensity and prevalence in third quarter 2024.

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

However, there was a sizable improvement in conditions in 2023 for large portions of the West Coast.

Notably, drought conditions in California remain largely absent in 2024 and reservoirs have returned to historical averages.

As of October 15, 2024, 18% of the continental U.S.

was classified as being in moderate to

exceptional drought according to data from the National Center for Environmental Information, which is virtually unchanged from 17% at the end of 2023.

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

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

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

Moderating 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 large number 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.

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

Nonetheless, consumer spending held steady in third 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 continues to moderate, inflation rises again, or economic uncertainty clears up.

Rural Infrastructure Finance Industry Outlook

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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 0.4% 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 April 2024 relative to 2023.

Energy Information Administration, sales and the revenue from the sale of electricity to customers have picked up again in 2024, with an annual increase in sales of 1.9% and an increase in revenue of 3.4%, respectively, in the last 12 months through July 2024 compared to July 2023.

This increase was the result of higher residential and commercial electricity sales combined with slightly higher average prices paid for electricity relative to 2023.

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

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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 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.

Through September 30, 2024, Farmer Mac had not observed material degradation in the financial performance of its rural electric 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.

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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

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

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

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

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

• 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.

The FCA's regulatory agenda estimates that proposed rulemaking in May 2025, although this timeline may change.

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

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

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.

• On November 16, 2023, President Biden signed a one-year extension of the 2018 farm bill, which lapsed on September 30, 2024.

Avoiding a reversion to 1930s-era policy, which provides no price support for many key commodities that have enjoyed support for many years, would require Congress to enact another extension or a new farm bill by the end of the year.

The farm bill is crucial for Farmer Mac's customers, supporting farmers' profitability, rural community vitality, and infrastructure modernization.

Farmer Mac is seeking changes to its charter in the farm bill reauthorization to better support lenders serving rural areas.

Any changes would require Congressional approval and the President's signature.

• The FCA's proposed 2024 regulatory agenda includes a proposed rulemaking to review Farmer Mac's regulatory capital framework, with rulemaking expected in May 2025.

Farmer Mac's management team will continue to monitor and engage with this regulatory process as it develops.

• Two of the three members of the FCA board remain in holdover status, meaning their terms have expired.

These board members will continue to serve in their roles until the President nominates and the Senate confirms their replacements.

On May 2, 2024, President Biden nominated Marcus D.

Graham to the FCA board to replace Glen Smith.

Graham's nomination will require Senate confirmation by year-end, or the nomination will be returned to the President.

• Farmer Mac will monitor the effects of the fall elections on policies affecting Farmer Mac's business, including the expiration of key provisions of the Tax Cuts and Jobs Act at the end of 2025 and the suspension of the debt ceiling, which expires on January 1, 2025.

Balance Sheet Review

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

June 30, 2024 December 31, 2023 $ %

September 30, 2024 December 31, 2023 $ %

(in thousands)

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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.

The increase in total equity was primarily due to an increase in retained earnings and an increase in accumulated other comprehensive income, and was partially offset by the redemption of the Series C Preferred Stock.

Risk Management

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Agricultural Finance - Direct Credit Exposure

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's direct credit exposure to Agricultural Finance mortgage loans as of September 30, 2024 was $11.5 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 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 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.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of September 30, 2024, were $144.4 million (1.26% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $62.1 million (0.54% of the Agricultural Finance mortgage loan portfolio) as of June 30, 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 84 delinquent loans as of September 30, 2024, compared to 34 delinquent loans as of June 30, 2024 and 23 delinquent loans as of December 31, 2023.

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

The increase in loans 90 days or more delinquent as of September 30, 2024 compared to June 30, 2024 is consistent with the seasonal pattern of delinquencies with higher levels generally observed at the end of the first and third quarters and lower levels generally observed at the end of the second and fourth quarter of each year.

This seasonal pattern results from the annual (January 1st) and semi-annual (January 1st and July 1st) payment dates on most Farm & Ranch loans.

$37.6 million of the increase in 90-day delinquent loans was related to a single permanent planting borrower relationship.

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

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

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.

Farmer Mac's 90-day delinquency rate as of September 30, 2024 was higher than Farmer Mac's historical average.

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

Farmer Mac's average 90-day delinquency rate as a percentage of its Agricultural Finance mortgage loan portfolio over the last 15 years is approximately 1%.

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(dollars in thousands)

September 30, 2024 $ 11,466,670 $ 144,407 1.26 %

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

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

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

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

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.51% of total outstanding business volume as of September 30, 2024, compared to 0.12% as of December 31, 2023 and 0.15% as of September 30, 2023.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of September 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 September 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 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.

As of September 30, 2024, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $377.9 million (3.3% of the portfolio), compared to $248.0 million (2.2% of the portfolio) as of June 30, 2024 , and $186.0 million (1.7% of the portfolio) as of December 31, 2023.

Those substandard assets comprised 302 loans as of September 30, 2024, 238 loans as of June 30, 2024, and 206 loans as of December 31, 2023.

The increase of $129.9 million in Agricultural Finance substandard assets during third quarter 2024 was primarily driven by credit downgrades in permanent plantings, crops, livestock, part-time farms and agricultural storage and processing.

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

The percentage of Agricultural Finance substandard assets within the portfolio as of September 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 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.

As of September 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 $801,000 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 second quarter 2024 was 49%, compared to 51% for loans purchased during second 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 June 30, 2024 and December 31, 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 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 June 30, 2024 and December 31, 2023, respectively.

The weighted-average original loan-to-value ratio for Farm & Ranch mortgage loans purchased during third quarter 2024 was 52%, compared to 47% for loans purchased during third quarter 2023.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 54% and 56% as of September 30, 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 45% and 47% as of September 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 June 30, 2024

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

Original Loans, Guarantees, and LTSPCs as of September 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 June 30, 2024

As of September 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 June 30, 2024

As of September 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 June 30, 2024 was $4.6 billion across 45 states.

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of September 30, 2024 was $5.0 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 June 30, 2024, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

As of September 30, 2024, there was one telecommunications loan classified as substandard, with an unpaid principal balance of $24.1 million.

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 June 30, 2024

As of September 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 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.

As of September 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 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.

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

In September 2024, Farmer Mac notified a field servicer of a breach of its servicing duties and the termination of the servicing relationship for two large borrower relationships effective October 1, 2024.

That was Farmer Mac's only exercise of remedies or taking of formal action against any servicers during the previous three years ended September 30, 2024.

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 June 30, 2024, Farmer Mac had not experienced any credit losses on any AgVantage securities over the life of the program.

As of September 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 $5.8 billion as of June 30, 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 June 30, 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 June 30, 2024 and December 31, 2023:

As of June 30, 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 $5.3 billion as of September 30, 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 $3.5 billion as of September 30, 2024 and $3.9 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 September 30, 2024 and December 31, 2023:

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

Counterparty Balance Required Collateralization Balance Required Collateralization

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Total outstanding $ 8,870,507 $ 10,022,347

(1) Consists of AgVantage securities issued by 8 different issuers as of both June 30, 2024 and December 31, 2023.

(1) Consists of AgVantage securities issued by 9 and 8 different issuers as of September 30, 2024 and December 31, 2023, respectively.

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

As of September 30, 2024, Farmer Mac had $0.8 billion of cash and cash equivalents and $5.9 billion of investment securities.

The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as 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 require that investments held in Farmer Mac's investment portfolio meet the following creditworthiness standards:

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

(2) if the obligor whose capacity to meet financial

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

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

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

government agency;

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

The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single entity, issuer, or obligor of securities to 10% of Farmer Mac's regulatory capital ($152.9 million as of June 30, 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).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($74.3 million as of September 30, 2024).

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

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Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt that together with financial derivatives have similar duration and convexity characteristics and help mitigate impacts from interest rate changes across the yield curve.

As part of this strategy, Farmer Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

As part of this strategy, Farmer Mac seeks to

issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities to execute its debt issuance strategy.

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Treasury securities and other financial derivatives.

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 $0.8 billion of cash and cash equivalents held as of September 30, 2024 mature within three months.

As of September 30, 2024, $2.8 billion of the $5.9 billion of investment securities (47%) 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 June 30, 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 September 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 June 30, 2024 As of December 31, 2023

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

+100 basis points (3.8) % (3.6) %

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Percentage Change in NES from Base Case

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

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

+100 basis points (1.3) % — %

-100 basis points 1.2 % 0.8 %

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.

Treasury Notes by approximately 50 and 52 basis points, respectively.

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

As of September 30, 2024, Farmer Mac maintained a positive effective duration gap of 3.4 months, remaining consistent with the 3.4 months reported as of December 31, 2023.

Since the end of 2023, the yield curve has steepened, with the yield-to-maturities of 2-year and 10-year U.S.

Treasury Notes decreasing by approximately 61 and 10 basis points, respectively.

This shift in rates shortened the duration of Farmer Mac's funded assets and liabilities, resulting in Farmer Mac's duration gap being stable.

Financial Derivatives Transactions

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Treasury securities.

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.

As of September 30, 2024, Farmer Mac had $25.4 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $10.4 billion were pay-fixed interest rate swaps, $14.4 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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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 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.

As of both September 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

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

As of 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 September 30, 2024, Farmer Mac held $7.3 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as the Secured Overnight Financing Rate ("SOFR").

As of the same date, Farmer Mac also had $10.4 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily SOFR.

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Farmer Mac funds its purchases of eligible loan assets, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets and finances its operations primarily by issuing debt obligations of various maturities in the debt capital markets.

As of 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.

As of September 30, 2024, Farmer Mac had outstanding discount notes of $2.2 billion, medium-term notes that mature within one year of $7.7 billion, and medium-term notes that mature after one year of $17.2 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.

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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 291 days of liquidity throughout second quarter 2024 and had 283 days of liquidity as of June 30, 2024.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 308 days of liquidity throughout third quarter 2024 and had 309 days of liquidity as of September 30, 2024.

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

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• mortgage-backed securities.

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

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

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

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

(in thousands)

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Total $ 6,729,262 $ 5,861,394

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.

The objectives of the investment portfolio as of September 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 .

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

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).

As of September 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 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.

As of September 30, 2024 and December 31, 2023, Farmer Mac's Tier 1 capital ratio was 14.2% and 15.4%, respectively.

As of September 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.

For more information about the capital requirements applicable to Farmer Mac, its capital adequacy policy, and the FCA's rule on capital planning, see "Business—Government Regulation of Farmer Mac—Capital Standards." See Note 8 to the consolidated financial statements for more information about Farmer Mac's capital position.

Capital Standards." See Note 8 to the consolidated financial statements for more information about Farmer Mac's capital position.

Other Matters

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For the quarter ended:

September 30, 2024 $ 776,023 $ 307,325 $ 579,887 $ 325,743 $ 1,988,978

June 30, 2024 698,787 288,740 235,033 271,890 1,494,450

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September 30, 2022 1,629,496 169,932 547,117 61,653 2,408,198

June 30, 2022 1,418,397 107,916 326,899 35,307 1,888,519

For the year ended:

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Unscheduled 117,538 41,842 26,629 — 186,009

September 30, 2024 $ 1,196,674 $ 281,438 $ 701,219 $ 106,207 $ 2,285,538

Scheduled $ 752,473 $ 141,565 $ 78,299 $ 138,725 $ 1,111,062

Unscheduled 342,594 89,576 32,984 — 465,154

June 30, 2024 $ 1,095,067 $ 231,141 $ 111,283 $ 138,725 $ 1,576,216

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September 30, 2022 $ 1,021,343 $ 102,457 $ 422,917 $ 13,429 $ 1,560,146

Scheduled $ 1,114,779 $ 42,162 $ 159,491 $ 7,898 $ 1,324,330

Unscheduled 286,303 30,203 1,791 — 318,297

June 30, 2022 $ 1,401,082 $ 72,365 $ 161,282 $ 7,898 $ 1,642,627

For the year ended:

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(in thousands)

September 30, 2024 $ 18,090,374 $ 1,842,780 $ 7,440,141 $ 1,095,008 $ 28,468,303

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

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September 30, 2022 17,199,347 1,634,786 6,296,263 196,242 25,326,638

June 30, 2022 16,591,999 1,567,311 6,172,063 148,018 24,479,391

On-Balance Sheet Outstanding Business Volume

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(in thousands)

September 30, 2024 $ 14,328,691 $ 3,311,001 $ 6,265,792 $ 23,905,484

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

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September 30, 2022 13,810,162 2,960,596 4,644,958 21,415,716

June 30, 2022 13,798,771 2,939,467 3,993,956 20,732,194

The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:

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For the quarter ended:

June 30, 2024 (2)

September 30, 2024 (2)

$ 35,755 1.05 % $ 6,397 1.56 % $ 7,579 0.44 % $ 3,810 1.78 % $ 30,912 0.42 % $ 943 0.05 % $ 85,396 1.16 %

June 30, 2024 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 %

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September 30, 2023 (2)

32,718 0.97 % 8,250 2.05 % 6,362 0.39 % 1,150 1.46 % 34,412 0.49 % 532 0.04 % 83,424 1.20 %

June 30, 2023 34,388

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September 30, 2022 33,343 1.04 % 7,600 1.99 % 4,220 0.30 % 705 1.97 % 22,564 0.36 % (2,791) (0.21) % 65,641 1.03 %

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 %

(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 June 30, 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 September 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

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

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

(in thousands)

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Gains/(losses) on hedging activities due to fair value changes 205 2,604 3,002 (3,598) 3,210 (4,901) (105) (148) (624)

Unrealized (losses)/gains on trading assets (87) (14) (37) 1,714 (57) 359 31 (757) (285)

Unrealized gains/(losses) on trading assets 99 (87) (14) (37) 1,714 (57) 359 31 (757)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 27 26 31 88 29 29 29 57 24

Net effects of terminations or net settlements on financial derivatives (503) (1,505) (192) (800) (79) 583 523 1,268 (3,522)

Issuance costs on the retirement of preferred stock (1,619) — — — — — — — —

Income tax effect related to reconciling items 260 (143) (947) 1,089 (1,638) 464 (362) (590) (327)

1 unchanged sentence

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