Farmer Mac (AGM) Q3 2026 Earnings Call Transcript

DATE

Nov. 5, 2026

CALL PARTICIPANTS

• Director of Capital Markets - Eric Estee
• President and Chief Executive Officer - Zachary N. Carpenter
• Executive Vice President and Chief Financial Officer - Matthew Michael Pullins

TAKEAWAYS

• Total Business Volume -- $38.5 billion, reflecting 24% growth driven by record demand across every business segment.
• Core Earnings -- $52.6 million for the quarter, or $4.82 per diluted share, representing 7% year-over-year growth.
• Net Effective Spread (NES) -- $114 million, a 16% increase from the prior-year period reflecting record volume growth.
• NES Percentage -- 1.16%, representing a 2 basis point sequential decline adjusted for a one-time benefit in the previous quarter due to higher AgVantage balances and seasonal non-accruals.
• Infrastructure Finance Volume -- $14 billion, increasing $920 million sequentially led by record growth in renewable energy.
• Renewable Energy Net Growth -- $586 million, the largest quarterly growth in segment history, surpassing the prior record by over $140 million.
• Renewable Energy Pipeline -- Approaching $1 billion, reflecting significant demand for energy generation and electrification in rural America.
• Power & Utilities Volume -- $8.43 billion, growing $165 million sequentially as providers invest in grid modernization and system upgrades.
• Broadband Infrastructure Volume -- $2.02 billion, a sequential increase of $169 million driven by fiber, broadband, and tower project investments.
• Farm & Ranch Net Growth -- $228 million in loan purchases, outpacing seasonally high repayments due to record third quarter loan approvals.
• Loan Approvals -- $700 million, the highest total for any third quarter in company history, aided by the implementation of the FLEX platform.
• Servicing Rights Acquisition -- $1.4 billion of Farm & Ranch loans, which included $280 million of new loans serviced for third-party owners.
• Corporate AgFinance Volume -- $2.14 billion, reflecting modest growth during a period of muted agribusiness transaction activity.
• Efficiency Ratio -- 27.5%, remaining below the long-term management target of 30% due to disciplined expense management.
• Full-year Compensation Guidance -- 20% to 22% increase from 2025, with management expecting final results at the low end of the range.
• Credit Loss Provision -- $11.1 million, driven by $5 million for new loan volume and $4.4 million for a single broadband sector bankruptcy.
• Allowance for Loan Credit Losses -- $48.3 million, representing 60.8% of non-accrual loans at quarter end.
• Substandard Assets -- 2.1% of the total portfolio, an increase from 1.7% in the prior quarter due to credit migration in fruits and drought-impacted regions.
• Tier 1 Capital Ratio -- 12.9%, a decrease from 13.2% as risk-weighted assets grew faster than capital levels.
• Core Capital Surplus -- $735 million above the statutory minimum requirement, representing 62% excess capital.
• Gross Business Volume -- $10.5 billion for the first nine months of 2026, exceeding any previous full-year total in company history.

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RISKS

• Pullins stated, "The borrower subsequently filed for bankruptcy after liquidity challenges related to an unsuccessful fiber network build out intensified," regarding a $4.4 million credit loss provision for a single broadband exposure.
• Carpenter noted that substandard assets increased to 2.1% of the portfolio, primarily reflecting "negative credit migration within the farm and ranch segment related to certain commodity and region specific factors" such as apples and grapes.
• Pullins stated that 90-day delinquencies rose to 54 basis points, which was "up 17 basis points from the second quarter of 26," though management noted this was in line with historical seasonal patterns.

SUMMARY

Federal Agricultural Mortgage Corporation (NYSE:AGM) reported record outstanding business volume of $38.5 billion for the third quarter of 2026. Management indicated the company is on track to reach its $40 billion annual volume target two years ahead of the timeline originally projected during its 2020 Investor Day. The company reported record results for the first nine months of the year, with total revenues of $358 million and core earnings of $163 million, representing year-over-year increases of 18.3% and 14.1% respectively. Management attributed the growth to record demand across infrastructure segments and elevated loan purchase activity in agricultural finance.

• Strategic demand for infrastructure is being fueled by large-scale technology investments. CEO Carpenter stated, "We continue to see strong opportunities across our entire infrastructure finance portfolio, driven by a once in a generation investment in data center infrastructure, cloud storage, and enterprise digitization."
• The company is preparing to launch new risk transfer capabilities to enhance capital efficiency. CFO Pullins stated the company is advancing a "Credit-Linked Note transaction, which we believe can serve as a flexible tool to support growth, manage credit risk, and improve capital efficiency."
• The FLEX platform has increased origination efficiency. Carpenter noted the system "makes it significantly easier for originators to submit loans to our ecosystem," contributing to record loan approvals for a third quarter.
• Corporate AgFinance transaction sizes are increasing as companies seek scale. Carpenter reported that transactions are getting larger as agribusinesses look to "enhance scale and navigate macro volatility," requiring higher levels of liquidity.
• Management is refining underwriting criteria for large digital infrastructure projects following a telecommunications bankruptcy. Carpenter noted a focus on management "capabilities to support large fiber build outs" and flexibility regarding cost overruns.
• Electrification demand remains a long-term tailwind for the Power & Utilities segment. Management noted steady demand as borrowers invest in grid modernization to support increased energy needs in rural America.

INDUSTRY GLOSSARY

• AgVantage: Debt securities issued by lenders and guaranteed by Farmer Mac that are secured by pools of agricultural or rural infrastructure loans.
• Credit-Linked Note: A security that allows the company to transfer a portion of its credit risk to private investors to manage capital capacity.
• FLEX: The Farmer Mac Loan Exchange, a digital platform designed to streamline loan submissions from originators.
• Hyperscaler: Large cloud service providers and technology companies that require significant data center and energy infrastructure.
• NES: Net Effective Spread, a non-GAAP metric representing the difference between interest earned on assets and the cost of related funding and hedging.

Full Conference Call Transcript

Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Farmer Mac Third Quarter 26 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. To ask a question, press *1 on your touch tone phone. It is now my pleasure to turn the call over to Eric Director of Capital Markets. Please go ahead.

Jalpa Nazareth: Good afternoon. And thank you for joining us for our third quarter 26 earnings conference call. I am Eric Estee, Director of Capital Markets here at Farmer Mac. As we begin, please note that the information provided during this call may contain forward-looking statements about the company's business, strategies and prospects. These statements are based on management's current expectations and assumptions. And are subject to risks and uncertainties that could cause our actual results to differ materially from those projected.

All forward-looking statements, are based on information available to Farmer Mac, as of today's date, and Farmer Mac assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. Please refer to Farmer Mac's 2025 annual report on Form 10-K and subsequent SEC filings for a full discussion of the company's risk factors. On today's call, we will also be discussing certain non-GAAP financial measures. Disclosures and reconciliations of these non GAAP measures can be found in the company's most recent earnings press release, posted on Farmer Mac's website. Joining me today are our president and chief executive officer, Zachary N.

Carpenter and our Executive Vice President and Chief Financial Officer, Matthew Pullens. At this time, I will turn the call over to our Chief Executive Officer, Zachary N. Carpenter. Zachary?

Zachary N. Carpenter: Thank you, Jalpa, and good afternoon, everyone. Thank you for joining us today. I am pleased to report that Farmer Mac delivered another extremely strong quarter. Total business volume achieved another record, reaching $38.5 billion as of the end of the third quarter of 26. In addition, our third quarter financial results were record performance for the first 9 months of 26, with $358 million in revenues, and $163 million in core earnings. Which is an increase of 18.3%, 14.1%, respectively. From the same period of 2025.

These record results were powered by broad based business volume growth and reflect the strength of our mission driven franchise, diversified business segments, and the disciplined execution of our strategy across every part of the business. Notably, this performance was achieved against the backdrop of an increasingly dynamic uncertain, and in many cases, challenging environment. Farmer Mac's ability to successfully navigate these cross currents is a testament to our team and the strength of our market position. Farmer Mac continues to be a critical part of the financial through providing liquidity in support of agriculture and rural infrastructure.

As we execute our strategy, we outlined at our 2026 investor day, we are on track to achieve $40 billion in business volume this year. Reaching a key milestone 2 years ahead of the timeline outlined during our 2020 Investor Day. We continue to expect business volume growth to average approximately 8% to 11% annually through 2030, reflecting balanced expansion across our mission focused businesses. Our strong performance to date has us tracking ahead of the pace required to achieve our 2030 guidance and positions us favorably relative to our previously communicated targets.

While business volume growth remains important measure of mission fulfillment and a key strategic priority, our ultimate objective is to generate sustainable earnings growth that strengthens our ability to support rural America deliver long term value for our stakeholders. Accordingly, we remain focused on expense management achieving operating leverage while making targeted investments to support efficient execution. This quarter, we continue to execute on those priorities. Delivering strong growth, maintaining a ratio below our 30% target, and providing 2.7 billion of liquidity to critical sectors of the American economy. Outstanding business volume increased $1.3 billion in the third quarter of 26 after taking into account all new business volume as well as maturities, sales and paydowns on existing assets.

This third quarter business volume increase was powered by broad based growth led by our infrastructure finance line of business, where net outstanding business volume grew $920 million This was driven by record quarterly net business volume growth in our renewable energy segment, where loan purchases and unfunded commitments grew 19.5% and contributed to over 45% of the increase in total net outstanding business volume in the quarter. We continue to see strong opportunities across our entire infrastructure finance portfolio, driven by a once in a generation investment in data center infrastructure, cloud storage, and enterprise digitization, as well as increased onshore manufacturing leading to significant energy generation capacity demand in addition to ongoing grid modernization and upgrades.

The scale and velocity of capital needed to support these demands are driving infrastructure growth tailwinds. We see comparable tailwinds in agricultural finance, as financial institutions adapt to changing market conditions. Balance sheet priorities, and risk management objectives leading to a shifting competitive landscape. We believe these evolving dynamics reinforce the value of Farmer Mac's role in serving as a secondary market to rural America and position us for continued growth. Turning to our agricultural finance line of business. Loan purchase activity in our Farm and Ranch segment had a strong quarter in what is typically a seasonally slower quarter for volume growth.

Sustaining the elevated pace that began in the fourth quarter of 25 and continued through the first 3 quarters of 26. This growth was aided by the first full quarter of Farmer Mac Loan Exchange, or FLEX, which makes it significantly easier for originators to submit loans to our ecosystem. We approved almost $700 million in loans during the third quarter of 26, a record in loan approvals for any third quarter in our history. We saw net growth in loan purchases of $228 million during the quarter, outpacing the seasonally large number of loan repayments we typically see in the third quarter due to the July 1 payment date.

We continue to operate at an elevated pace for new business volume, and expect loan purchase growth to continue as lenders seek liquidity, driven by the need to diversify from high cost deposits amid strong loan growth, a focus on capital efficiency and returns, and ongoing volatility that many of the agricultural economy are experiencing. This quarter's growth in farm and ranch also benefited from an acquisition of field servicing rights associated with $1.4 billion of loans completed in July. Corporate AgFinance segment grew modestly again this quarter to $2.14 billion in outstanding business volume.

While deal flow activity in the broader agribusiness market was relatively muted during the first 9 months of 2026, we have seen a sizable pickup in transactions heading into the fourth quarter of 26. 2 key themes have emerged driving this increase. First, transaction sizes are getting larger as agro businesses look to enhance scale and navigate macro volatility. Requiring incremental liquidity. Second, financial institutions continue to evaluate concentration levels and return on capital dynamics within the broader agribusiness sectors. In certain instances, this evaluation has resulted in decisions to reduce exposure or exit transactions entirely. The combination of these factors results in the need for incremental liquidity to support critical agri businesses.

And more financial institutions are turning to Farmer Mac for reliable and consistent liquidity needed to support their borrowers. Turning to our infrastructure finance line of business, outstanding business volume increased $920 million sequentially to over $14 billion as of quarter end. With all 3 segments contributing to net growth. This is a continuation of similar themes we have seen over the last year. Specifically, the strong interest and investment in data center construction, broadband expansion, and the construction and completion of renewable energy projects. Reflecting the overall need for significant energy generation and transmission in rural America.

Net business volume growth in our power and Utilities segment this quarter was $165 million driven by strong net loan purchases of $208 million or an increase of 5.2% from the prior quarter. Excluding the $197 million pool purchase in the second quarter of 26, net growth in power and utilities loan purchases accelerated to over 70% compared to net growth last quarter. We continue to see a steady demand for capital in this segment as borrowers invest in system upgrades and grid modernization to support the significant increase electrification demand as well as lenders managing their balance sheets. During the quarter, we provided over $1 billion in renewable energy loan purchases and unfunded commitments.

And after scheduled maturities and repayments, grew $586 million. This was the largest quarterly growth in net business volume in our history for this segment, surpassing the prior record by over $140 million We expect a substantial need for new power generation to continue to drive renewable energy project demand. More than offsetting the natural runoff from maturing portfolio. Current deal flow remains robust, with our pipeline approaching $1 billion. I am just-- going strength of our reputation and role in the market and allowing us to selectively deploy capital focused on appropriate returns and structures with strong counterparties.

While the industry continues to adjust to the HR1 phase out of tax credits beyond 2027, as well as supply chain dynamics, we expect increased demand for energy generation to position the industry for continued growth. Even excluding tax incentives, the underlying economics of these renewable energy projects remain highly competitive particularly with speed to market as renewable energy project development timelines are often shorter compared to traditional power sources. Broadband infrastructure also posted another strong quarter with net growth of $169 million ending the period at just over $2 billion in business volume. While data center project investments continue to see strong demand, we have also focused on diversified business volume growth.

Providing liquidity to appropriately structure transactions supporting fiber, broadband, and tower projects that enhance critical digital infrastructure for rural communities. While the segment's growth has been substantial, our approach remains grounded in a close reading of market dynamics, and that discipline informs every decision we make. As the portfolio matures, we have intensified our portfolio management efforts deliberately diversifying by geography, subsegment, sponsor, and tenant and pursuing a mix of funded financing structures so that the portfolio remains diversified and resilient should market contingents become less favorable. Through the first 9 months of 2026, we generated $10.5 billion in gross business volumes, supporting lenders and borrowers across rural America.

Exceeding the gross business volume generated in any annual period, in Farmer Mac's history. That number best captures our mission in action. Broadening access to competitive financing for American agriculture in rural communities. Backed by our robust pipeline across all segments, and a strong capital position, we enter the final quarter of this year and look to 2027 with a disciplined execution that produces durable, high quality earnings and the runway to continue to growing. We continue to remain mindful of the macroeconomic backdrop. Including uncertainty around interest rates, trade and government policy, regulatory change, and geopolitical dynamics.

Our diversified portfolio that supports critical sectors of The US economy strong capital and liquidity position, disciplined underwriting, and a focus on expense management, all taken together, give us great confidence that we can keep delivering consistent and durable results. However, these backdrop dynamics play out, we believe Farmer Mac is uniquely well positioned to navigate the environment and continue to deliver on our mission. With that, I would like to turn it over to Matthew Pullins, our Executive Vice President and Chief Financial Officer, to review our financial results in more detail. Matthew?

Matthew Michael Pullins: Thank you, Zachary. As Zach noted, we delivered another outstanding quarter. Highlighted by achieving $38.5 billion in outstanding business volume. Revenue for the quarter was $123 million which we converted into $52.6 million of core earnings. or $4.82 per diluted share. With that overview, I will now walk through our quarterly results in more and discuss the key drivers of our performance. Net effective spread was $114 million in the third quarter of 26, 16% increase over the prior year period. After adjusting second quarter 26 net effective spread for the 1 time collection of $7.4 million of interest, from a large delinquent permanent planting loan third quarter net effective spread increased 3.5% sequentially.

The year over year growth was driven by achieving record business volume across all segments. On a percentage basis, net effective spread for the third quarter 26 was 116 basis points. This compares to 120 basis points in the year ago period and an adjusted 118 basis points sequentially. Which excludes the previously mentioned 1 time benefit from the collection of interest. The 2 basis point sequential decline as adjusted primarily reflects the impact of seasonally higher non accruing loans in the farm and ranch segment as well as business volume mix with higher AgVantage average balances during the quarter.

This quarter's results also benefited from the previously mentioned acquisition of mortgage servicing rights associated with $1.4 billion of farm and ranch loans, which included $280 million in new loans serviced for others. Our net effective spread performance continues to demonstrate the strength of our funding strategy and balance sheet. As market volatility and credit spreads increase, our reliable capital markets access, strong liquidity, and limited interest rate sensitivity become increasingly differentiated. Historically, these volatile environments have had a less pronounced impact on Farmer Mac compared to many other market participants. As funding becomes more expensive or less available elsewhere, our ability to consistently provide liquidity further enhances the value we deliver to the market.

Creating opportunities to deepen customer relationships, capture attractive new business, and achieve favorable economics on new transactions while maintaining our risk standards. While we remain well positioned on funding costs and liquidity, providing significant flexibility to support our customers, capitalize on opportunities, drive long term growth, and enhance profitability. Operating expenses declined $1.5 million or 4.2% on a sequential basis, as expected, due to lower incentive compensation expenses this quarter, as the second quarter results included a onetime $4 million true up of performance based incentive compensation. We expect full year compensation expense to be at the low end of our previously guided range of 20% to 22% year over year increase from 2025.

Our strong operating performance resulted in an efficiency ratio of 27.5% for the quarter, below our long term target of 30%. We continue to anticipate full year operating efficiency ratio in the 27% to 29% range. During the third quarter of 2020, we were minimally active in the tax credit market. We continue to view tax credits as an attractive source of risk adjusted returns, a mission aligned investment that supports renewable energy infrastructure development, and job creation in rural communities. With nearly all of our carryback capacity utilized, we have greater flexibility to monetize tax capacity on a current year basis and remain engaged with a strong pipeline of opportunities.

We expect future purchases to be selective and executed at opportune times reflecting a disciplined assessment of tax capacity, capital priorities, valuation, and market conditions. Turning to third quarter credit and asset quality results, the $11.1 million provision for credit losses was driven primarily by 3 factors. Approximately $5 million or 45% of the total provision related to reserves established on new loan purchase volume during the quarter. Reflecting robust growth in our infrastructure finance line of business. In addition, we recorded a $4.4 million provision on a sector exposure within our broadband infrastructure segment.

Credit had been deteriorating over time and was previously placed on non accrual status with approximately $5.2 million of credit loss provisions previously recognized primarily in the fourth quarter of 25. The borrower subsequently filed for bankruptcy after liquidity challenges related to an unsuccessful fiber network build out intensified. Remaining provision primarily reflected the impact of modest credit migration within the broader portfolio. We continue to actively manage our portfolios through a disciplined risk management framework that incorporates ongoing monitoring of borrower performance collateral values, industry conditions and broader economic developments. As conditions evolve, we regularly reassess expected credit outcomes and adjust reserves as appropriate to reflect our current view of risk view of risk.

This approach has been a longstanding component of our portfolio management strategy and supports the overall quality, resilience and diversification of the portfolio across market cycles. The allowance for loan credit losses was $48.3 million as of September 30, 2026. Reflecting a $1.2 million increase from the second quarter of 26 and a $13 million increase from the same year ago period. The sequential modest increase primarily reflects the cumulative impact of portfolio growth which was the largest component of the increase along with select credit migration, partially offset by an $8.2 million charge off on the previously mentioned single exposure within the telecommunications sector.

As of quarter end, the allowance for loan credit losses represented 60.8% of nonaccrual loans compared with 19.6% as of June 30 and 13.9% as of the year ago period. 90 day delinquencies were 54 basis points at quarter end up 17 basis points from the second quarter of 26 and down 3 basis points from the year ago period. The quarter over quarter increase was generally in line with historical seasonal patterns, particularly within our farm and ranch portfolio, following the July 1 payment date. While delinquency levels can fluctuate during the annual payment cycle, overall portfolio performance remains stable. With delinquency metrics continuing to compare favorably to the prior year.

Total substandard assets as a percentage of our entire portfolio were 2.1% this quarter, a deterioration from 1.7% as of June 30, 2026. Primarily reflecting negative credit migration within the farm and ranch segment related to certain commodity and region specific factors. Turning to capital, Farmer Mac's core capital increased by $38 million during the third quarter of 26 to over $1.9 billion driven by continued earnings generation net of $17 million in dividends to common shareholders. As a result, Core Capital exceeded our statutory minimum requirement by $735 million or 62% at quarter end. An increase from the prior quarter.

While strong business volume growth is increasing the need for capital, we remain committed to returning capital through our dividend to common shareholders. Our Tier 1 capital ratio was 12.9% as of September 30, 2026, compared to 13.2% at 06/30/2026. The quarter over quarter decline primarily reflected strong business volume growth, as risk weighted assets increased faster than capital. Driven by robust customer demand and our ability to effectively deploy capital in support of our mission. Importantly, retained earnings growth contributed approximately 25 basis points to the Tier 1 capital ratio during the quarter.

We believe our capital position remains a key strategic advantage providing flexibility to support increasing customer demand for liquidity while maintaining a disciplined approach to capital allocation and risk management. Last quarter, I discussed our plans to incorporate risk transfer solutions as a complementary source of capital capacity at Farmer Mac. Which we view as a natural extension of the successful farm securitization initiatives we developed over the past several years. Building on that foundation, we continue to view risk transfer as a strategic and increasingly important component of our capital and credit risk management framework.

We are actively advancing multiple risk transfer initiatives, including a Credit-Linked Note transaction, which we believe can serve as a flexible tool to support growth, manage credit risk, and improve capital efficiency. More broadly, these tools can strengthen our ability to create secondary market liquidity, expand our support of Rural America, and potentially enhance shareholder returns over time. While reinforcing Farmer Mac's role as a critical link between investor capital and the agricultural and rural infrastructure markets we serve. We believe we may have the opportunity to execute the first in the next generation of Farmer Mac's risk transfer solutions as early as this quarter.

This would mark an important milestone in expanding our risk transfer capabilities and further integrating these tools into our capital and risk management strategy. Over time, we believe these risk transfer solutions can enhance our ability to support customer growth, manage risk, and deploy capital efficiently across market cycles. We will remain disciplined, pursuing opportunities only where transaction economics risk management objectives, and strategic priorities are aligned. In closing, this quarter's strong performance highlights the strength of our franchise and the successful execution of our strategy. As we continue to grow, we remain focused on expanding our mission, prudently deploying capital and delivering sustainable earnings growth. And long term value for shareholders.

As always, you can read more about our performance and strategy in our latest earnings release and in our Form 10-Q for the quarter, which we expect to file by November 9. Now, I would like to turn the call back over to Zachary.

Zachary N. Carpenter: Thank you, Matthew. We are extremely proud of our continued focus on providing liquidity to support American agriculture and rural communities. We are also excited about the opportunities ahead as we finish 2026. And look forward to 2027. As our leadership team completes its first full quarter together, we remain focused on our mission, delivering on the strategy we outlined at our Investor Day earlier this year, and the opportunities ahead. We are focused on innovation and investing in our people and technology so we can deliver the capital and services our customers need to strengthen rural America. The strong growth across our portfolios reinforces our confidence in the opportunities ahead.

We will continue to pursue those opportunities thoughtfully and responsibly. Before we turn to Q&A, I do want to thank our employees for their dedication to our mission, our customers for their partnership, and our shareholders for their continued confidence in Farmer Mac. And now, operator, I would like to see if we have any questions from anyone on the line today.

Operator: At this time, I would like to remind everyone, in order to ask a question, press 1 on your telephone keypad. Your first question comes from the line of Bose George with KBW. Please go ahead.

Bose George: Hey, everyone. Good afternoon. The first question is just on your expectation for spreads. Is the 3Q number sort of a good run rate to look at as we look out into 2027? Going--

Zachary N. Carpenter: Going line of business by line of business, here, Bose, I would say broadband, renewable energy and corporate ag, the historical guidance we have given is relative and maintainable. As we look at farm and ranch, as we have talked about in the past, clearly mix plays a component here. We had sizable advantage transactions in the fourth quarter and the second quarter of 26. And clearly, those are extremely strong returning transactions, but also have a lower NES percentage So that weight in the portfolio will drive that down. And, again, as Matthew noted, this quarter was impacted by, you know, seasonal nonaccrual activity in farm and ranch.

So I would not necessarily use this quarter as a consistent, bellwether for NES percentage going forward. Again, we target around that 15 to 120%. But overall, our focus is on double digit revenue growth. We think that is the appropriate metric as we look out into the future on how we can drive higher revenue to drive shareholder value.

Bose George: Okay. Great. Thanks. And then actually, on the, you know, the new. The risk sharing transactions that you will start potentially later this year, Can you. Just like if you roll forward a couple of years, I mean, could that be, you know, a reasonably meaningful part of how you fund your port. Of your balance sheet? And, I mean, looking at some other industries, They also get capital relief, you know, for that from, you know, from. In terms of regulatory capital? Is that, you know, part of the mix as well?

Matthew Michael Pullins: Yeah, Bose, this is Matthew. Thanks for the question. So as we look out into the future, we look at having. Our objective is to have a broad array of tools available to support and capitalize our business. And a critical component of that tool set are actually multiple risk transfer options that we are currently evaluating. With respect to your question about how we foresee the future, yes, we definitely see risk transfer playing a more prominent role in our capitalization of the business or using those tools to create capital capacity, which enables us to scale up the business and, increase the amount of liquidity we are able to offer to the agricultural and rural infrastructure markets.

Our strategy and plan is to make a programmatic. Take a programmatic approach to issuing risk transfer transactions, and ideally, over time, get into that being somewhat serial in nature.

Bose George: So where we are commonly coming to market with tools like the Credit-Linked Notes. Okay. Great. Thanks. And actually, just on the regulatory, like, discussion with regulators on capital relief related to that. Is that part of the mix as well?

Matthew Michael Pullins: Yeah. So there is a 2 pronged objective for our risk transfer strategy. The first is maybe a little more directly evident, and that is to aid in our credit risk management framework. The second objective is very much in terms of capital relief and capital capacity, and that would relate to the regulatory capital framework and how it treats the risk that remains on the balance sheet after the credit risk transfer transaction. And so we are actively engaged with our regulator, the Credit Administration, in discussions about the specific regulatory capital framework and regulatory capital relief that would be received through these risk transfer transactions.

And that is something that I would anticipate that we would have more information to share in the coming quarters as to the specifics of how these transactions come to bear. How they are impacting our regulatory capital levels.

Bose George: Okay. Great. Thanks.

Operator: Your next question is from the line of Bill Ryan with Seaport Research Partners. Please go ahead.

William Ryan: Thanks, and good afternoon. First question is on broadband and more specifically, obviously, the data center exposure given what is going on in the market today. Broadband in total, at least, about 5% of outstanding, and I believe data center is probably about 3, 3.5 percent of the total. So you are kind of a small fish in a very big pond, but a unfortunately, the stock does tend to trade with the exposure at times. You know, if you could maybe go through for investors maybe the 4 or 5 attributes of the loans in the portfolio that do minimize the risk? Have you seen any major project delays?

And what kind of risks do you see as these credits move from construction which I believe most of them are in right now into. You know, out of the construction phase, if you will?

Zachary N. Carpenter: Yeah. Hi, Bill. it is definitely something in the news post the election results. Just to take a step back, we think about our data center portfolio, I think it really comes down to how we frame the risk component of these transactions. And as we talked about, many quarters now, we have been very methodical and very specific in terms of the risk that we look at, specifically power in place, permitting completed, appropriate developers, appropriate sponsors, investment grade hyperscaler tenants, We do not consider underwriting transactions unless all of that is in place. And, frankly, that is, our focus on being at the lower end of the risk spectrum in terms of this entire ecosystem.

So we feel very good about what we are underwriting, the transactions that we are participating, in. And if anything deviates from our credit quality, it is not something we need to participate just given the general growth we have across our portfolios. As it pertains to our overall portfolio, they are all in construction at this point. We are actively monitoring them approximately 3 quarters of the entire portfolio are on track or near completion. There is a portion that, you know, clearly we are monitoring, and these are just typical delays. there is nothing significant that we have noticed that, will give us concern in terms of what is transpired in the market or, a lack of completion.

You know, going forward, I actually think what is transpiring is, frankly, credit positive for our portfolio. The data center is completed or nearing completion or will be completed or could be more valuable. Clearly, you are going to see capital divert to more friendly states where data centers can be built. that is just probably more of a 2028 dynamic. But as we look out to 2027, we will see the significant amount of our unfunded commitments start funding as these near completion. But overall, we are gonna continue to monitor the developments and focus on the potentially right transactions that support rural communities, and most importantly, fit our credit risk standards.

William Ryan: Okay. Thanks, for the detailed answer on that. And just a follow-up looking at the operating leverage, you had very good performance for, you know, several quarters. This quarter, you had, like, 17% revenue growth and the OpEx was up about 16%. Looks like there was a step up in G&A, which kind of drove that disparity, if you will. If you can maybe talk, is there anything specific at the G&A this quarter? And then how are you viewing operating leverage in the long term?

Matthew Michael Pullins: Yes. So thank you for the question, Bill. In regard to G&A expense this quarter, there is 2 things that are driving the sequential increase in that particular line item. 1 is, as we see deal volume pick up, that does result in elevated legal expenses and other transaction costs. And that is especially evident in our infrastructure finance space. So the big growth that we saw this quarter in renewable energy, that ties back to deal costs and ultimately, G&A expenses that, you are noting. On the income statement.

The other factor is that our second quarter results actually benefited from about 1 half of $1 million of legal expenses being recaptured on the same permanent plant, delinquent permanent planting loan that we discussed increased the interest income in the second quarter. So that actually is a bit of the component of what is driving the increase versus the prior quarter. In terms of going forward, our objective as a management team and as operating the business is to continue to drive operating leverage.

And, that is something that we are very intently focused on is-- that is a key metric in our view of the effectiveness of our ability to monetize the investment in the underlying platform here at Farmer Mac. Okay.

Analyst: Thank you very much.

Operator: Your next question comes from the line of Brendan Michael McCarthy with Sidoti. Please go ahead.

Brendan McCarthy: Great. Good afternoon. Appreciate you taking my questions here. I just wanted to start off on farm and ranch volume. I know you mentioned you acquired about $280 million of third party loans. Connected to the larger MSR acquisition I guess outside of that 280 million it looks like Farm and Ranch volume was a little bit more modest. On a sequential basis. Was that primarily seasonality there at play or repayment activity? Or I guess what would impact that growth?

Zachary N. Carpenter: Yes. Brendan. Yes, typically, the third quarter is seasonally lower than any other quarters in a calendar year. You start to see lower applications as you know, the farmers are out in the field planting and waiting for harvest and that. We saw that transpired in the May, June time frame. So when you think about how the timing works, you know, loans typically close 60 days we get that application in the door. And so, we generally expect the third quarter, especially given the July 1 payment date, to be seasonally lower.

But on the positive end of the spectrum, as I mentioned in my prepared remarks, we had almost $700 million of approvals in the third quarter, alone, which was by buy far a record. So we have seen the pickup in applications into our ecosystem. And we are seeing the pickup in loan purchases as we head into the back half of the year. Typically, the fourth quarter is extremely strong, and we anticipate it to be strong in 2026 as we look to close out the year. So I would highlight it as frankly seasonal, but if I go back in time and compare it to prior years, it was still a pretty strong quarter, for this quarter.

Brendan McCarthy: Got it. That makes sense. I appreciate the detail. And then more broadly on volume growth, you mentioned you are on track to hit that $40 billion target this year. I mean, well ahead of the target that we laid out at the Investor Day. I guess, on a broad perspective, and I know there is some lumpy wholesale farm and ranch volume in there that helped, but what areas have really outpaced your expectations?

Zachary N. Carpenter: it is really been, you know, broad based. I think as we have gone through the first 3 quarters of this year, we have been extremely pleased with you know, the growth across all platforms. I mean, you know, Farm and Ranch is operating at a significantly elevated and, frankly, a record level. We continue to see very, very strong growth in renewable energies and broadband, and we have talked a lot about the whys there. what is been also exciting to see is the elevated, opportunities we have seen in power and utilities. Especially given the needs for the electricity generation demand and So that is been that is been great.

You know, I also noted, corporate ag finance, which has seen a relatively muted year, has a significantly strong pipeline. So I think as we conclude this year, it is gonna be very broad based growth. And as we noted, as we head into 2027, you have you know, frankly, significant interest in electrification demand across this country that we think is a strong tailwind for the entire infrastructure finance line of business, coupled with our focus in the ag space and farm and ranch, we feel very optimistic that we are going to see the upper end of the range we laid out in the 2030 targets into. In the year of 2027.

Brendan McCarthy: Got it. That. that is great. And last question for me. Just on the credit side. You mentioned total substandard assets as a percentage of the portfolio. Ticked up to about 2.1% this quarter. I know that is up from that, you know, 1.5% to 1.7% range. I guess, is this more of a. Do see this more of a structural increase? Or is this more temporary and I guess, what range are you comfortable with?

Zachary N. Carpenter: I will just talk a little bit about what kind of drove that, and turn it over to Matthew to talk maybe a little about the range. By far, the majority of what drove that sub standard increase was in farm and ranch. And as we noted, it was really broad based by commodity and region specific. And to get a little bit more detail, it is predominantly the Northwest region of the country and the Southwest. And clearly, as you look at fruits, specifically apples and grapes, We have talked about kind of the impacts in the vineyards and the grape space just given lower interest in alcohol consumption.

That was kind of a theme that we have seen in terms of increasing that substandard rate. In the Southwest, clearly, many of these areas are dealing with drought conditions. So that is also contributing to that increase Now what I would say is as we look at these loans transitioning to the substandard, the LTVs are very strong. In fact, they are all about, you know, around an average of 50%. So we are gonna see some migration in the ag space based on what sectors are dealing with more difficult times, but we feel very comfortable that the underlying collateral is very strong and has limited risk of loss.

But Matt, maybe talk a little bit about our thought process on metrics.

Matthew Michael Pullins: Yeah. On metrics. So Brendan, thanks for the question. You may have noticed in my comments a reference that the farm and ranch segment is really driving the increase in the substandard assets We think about this in terms of the broader portfolio There are areas of the farm and ranch portfolio where we have seen some stress. Zachary talked about that. But in terms of translating that to the economics of our business and specifically providing for credit losses. As of today, we do not see this being a significant driver there, largely because of the value of the collateral supporting these loans.

In terms of the overall metrics or range of percentage of loans that are substandard, We do not provide guidance on that particular metric. However, I would say that what we are focused on is managing the portfolio to our overall risk framework and ensuring that we are not overly exposed to any 1 geography or any 1 commodity sector that is an important part of managing our overall exposure to substandard assets. Additionally, that substandard asset is just 1 of many factors or data points that we evaluate in terms of managing our credit risk and our overall loan portfolio. Substanders did spike this quarter.

But we do not see any indications in terms of that same type of stress, or it is not bleeding through in terms of increases in delinquencies. At least relative to historical seasonal trends, particularly in the farm and ranch space.

Brendan McCarthy: Understood. Thanks, Zachary. Thanks, Matthew. that is all for me.

Operator: Your next question is from Gary Gordon a private investor. Please go ahead.

Gary Gordon: Okay. Thanks for taking my questions. Actually, most of my questions have answered, so just 1 quick 1 maybe. The $10 million write-off on the telecom loan, Did anything in that loan generate a learning experience for the underwriters to change your approach to maybe even that category's lending?

Zachary N. Carpenter: Yeah. Hi, Gary. it is Zachary. You know, clearly, talked a little bit about this in the fourth quarter, as we noted, where we took a provision at point in time. As we take a step back, and we always kind of want to look at retrospective and see if there is anything we could have done differently. And, frankly, as we talked to the team and looking at the underwriting and structure at the outset, we feel very comfortable that the underwriting was sound, and we made the right decision in providing liquidity to this syndicated transaction.

Some of the themes that as we think about in retrospect, that we wanna monitor going forward as well as take into consideration if the initial underwrite is you know, the focus on management and their capabilities to support large fiber build outs, cost flexibility. In this scenario, there is significant cost inflation that drove the need for increased liquidity. So really understanding more how a large project can be built in terms of management capabilities cost overruns, expertise, available labor, etcetera. So again, we thought the underwriting was solid.

Can we think about more monitoring the project, at the initial underwrite to see if there is flexibility for deviations, I think that is a nice a nice area that we can enhance going forward.

Gary Gordon: Okay. Thanks. Appreciate it.

Operator: And with no further questions in queue, I would like to hand turn the call back over to CEO, Zachary N. Carpenter, for closing remarks.

Zachary N. Carpenter: Well, I just want to conclude by thanking everyone for listening and participating in the call this afternoon. We will look to have our next regularly scheduled call in February to report our full year 2026 results. And we look forward to sharing more information with you at that time. And as always, the case, if you have any questions or want to discuss anything with us, please do not hesitate to reach out. With that, thank you very much, and have a great night.

Operator: Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.

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