Q1 2025 Federal Agricultural Mortgage Corp Earnings Cal

May 9, 2025

Yeah.

Operator: Good morning, ladies and gentlemen, and welcome to the Farmer Mac 2025 earnings results conference call. At this time, all lines are in listen only mode.

Speaker Change: Good morning, ladies and gentlemen, and welcome to the farmer Mac at 2025 earnings results Conference call.

At this time all lines are in listen only mode.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you're requiring me to assistance, please press star zero for the operator.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: If at any time during this call youre acquiring needed the assistance. Please press star zero for the operator.

Operator: This call is being recorded in Thursday, May 8th, 2025.

Speaker Change: This call is being recorded in first day Mace 2025, I would now like to turn the conference over to Xiaoping Nazareth. Please go ahead.

Jalpa Nazareth: I would now like to turn the conference over to Jalpa Nazareth. Please go ahead.

Jalpa Nazareth: Good morning and thank you for joining us for our first quarter 2025 earnings conference call. I'm Jalpa Nazareth, Senior Director of Investor Relations and Finance Strategy 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, which are based on management's current expectations and assumptions. These statements are not a guarantee of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected.

Speaker Change: Good morning, and thank you for joining us for our first quarter 2025 earnings Conference call I'm felt the NASA senior director of Investor Relations and finance strategy 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 been.

Speaker Change: And its strategies and prospects, which are based on management's current expectations and assumptions.

Speaker Change: These statements are not a guarantee of future performance and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected please refer to farmer Mac's 2024 annual report and subsequent SEC filings for a full discussion of the company's risk factors.

Jalpa Nazareth: Please refer to Farmer Mac's 2024 annual report 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.

Speaker Change: 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 our most recent Form 10-Q and earnings release posted on farmer Mac's website farmer Mac Dot com under the financial information portion of the investors section.

Jalpa Nazareth: Disclosures and reconciliations of these non-GAAP measures can be found in the most recent Form 10-Q and earnings release posted on Farmer Mac's website, farmermac.com, under the financial information portion of the investor section.

Jalpa Nazareth: Joining us for management this morning is our President and Chief Executive Officer, Brad Nordholm, who will discuss first quarter business and financial highlights and strategic objectives, and Chief Financial Officer, Aparna Ramesh, who will provide greater detail on our financial performance.

Ramesh Parnell: Joining us from management. This morning is our president and Chief Executive Officer, Brad nor at home, who will discuss first quarter business and financial highlights and strategic objectives, and Chief Financial Officer of Parnell, Ramesh, who will provide greater detail on our financial performance select members of our management team will also be joining us for the question and answer.

Jalpa Nazareth: Select members of our management team will also be joining us for the question and answer period.

Ramesh Parnell: For a period at this time I'll turn the call over to President and CEO, Brad nor at home Bret.

Brad Nordholm: At this time, I'll turn the call over to President and CEO, Brad Nordholm. Brad? Thanks, Jalpa. Good morning, everyone, and thank you for joining us. I'm very pleased to share that we've achieved another outstanding quarter with record quarterly revenue, net effective spread, and core earnings. Our capital base remains strong, bolstered by strong earnings, disciplined asset liability management, and consistent access to the capital market. These strengths support our long-term strategic growth objectives and provide a buffer against market volatility and shifting credit conditions. These results underscore the robustness of our business model and the effectiveness of our strategic initiatives of mission based profitable growth.

Ramesh Parnell: Thanks, Joe Good morning, everyone and thank you for joining us.

Ramesh Parnell: I'm very pleased to share that we've achieved another outstanding quarter with record quarterly revenue net effective spread.

Ramesh Parnell: Our earnings.

Ramesh Parnell: Our capital base remained strong bolstered by strong earnings disciplined asset liability management.

Ramesh Parnell: System access the capital markets.

Ramesh Parnell: These strikes support our long term strategic growth objectives, and provide a buffer against market volatility and shifting credit conditions.

Ramesh Parnell: These results underscore the robustness of our business model and the effectiveness of our strategic initiatives of mission based profitable growth.

Brad Nordholm: We continue to fulfill our mission to rule America, even as we navigate broader market uncertainty. stemming from interest rates, regulatory shifts, policy changes, and government action.

Ramesh Parnell: We continue to fulfill our mission to rural America, even as we navigate broader market uncertainties stemming from interest rates regulatory shifts policy changes and government action.

Brad Nordholm: In the first quarter 2025, we achieved high single-digit growth in total revenue, net effective spread, and core earnings. We achieved $1.8 billion in gross new business volume during the first quarter, reflecting growth across the infrastructure finance line of business and healthy loan purchase volume in the farm and ranch and corporate egg finance segment. After repayments and maturities, our outstanding business volume grew by $232 million, ending the quarter at $29.8 billion. This growth highlights the benefits of our proactive strategy. Diversifier Portfolio, and great opportunities in all interest rate environments. The infrastructure finance line of business grew by approximately $750 million in the first quarter of 2025, continuing the strong growth momentum from 2024.

Ramesh Parnell: In the first quarter 2025, we achieved high single digit growth in total revenue net effective spread in core earnings.

Ramesh Parnell: We achieved $1 $8 billion in gross new business volumes during the first quarter.

Ramesh Parnell: Selecting growth across the infrastructure finance line of business and healthy loan purchase volume in the farm and ranch and corporate finance segments.

Ramesh Parnell: After repayments and maturities our outstanding business volume grew by $232 million ending the quarter at $29 $8 billion.

Ramesh Parnell: This growth highlights the benefits of our proactive strategy.

Ramesh Parnell: First fire portfolio.

Ramesh Parnell: Great opportunities in all interest rate environments.

Ramesh Parnell: The infrastructure finance line of business grew by approximately $750 million in the first quarter 2025, continuing the strong growth momentum from 2024.

Brad Nordholm: During the quarter, we successfully closed a $300 million egg vantage security in the power and utility segment with a long-standing counterparty, and we added $134 million in net new loan purchases. Our broadband infrastructure segment grew 22% since year-end, reaching nearly $1 billion as of the end of the first quarter, 2025. We anticipate increased financing opportunities for rural telecommunication providers driven by fiber line expansion, wireless broadband deployment, data processing center build-out, industry consolidation, and mergers and acquisitions. These developments are crucial for rural economic growth and the connectivity needs for rural America. Our renewable energy segment grew by nearly $200 million in first quarter 2025, a 14% increase since year end.

Ramesh Parnell: During the quarter, we successfully closed a $300 million advantaged security in the power and utilities segment with a long standing counterparty and we added $134 million.

Ramesh Parnell: New loan purchases.

Ramesh Parnell: Reaching nearly $1 billion as at the end of the first quarter, 2025.

Ramesh Parnell: We anticipate increased financing opportunities for rural telecommunication providers, driven by fiber line expansion, wireless broadband deployment, data processing center build-out, industry consolidation, and mergers and acquisitions.

Ramesh Parnell: These developments are crucial for real economic growth and the connectivity needs for real America.

Ramesh Parnell: A renewable energy segment grew by nearly $200 million in first quarter 2025, a 14% increase since

Brad Nordholm: Over the past five years, we've seen strong growth in this segment and believe that the near-term pipeline remains strong. Growing business volume in our infrastructure finance segments remains an opportunity and we will continue to focus on strategic investments and talent acquisition in these areas to build our expertise and capacity as market opportunities arise. Despite the seasonally large number of scheduled repayments we typically see in the January 1st payment date on the majority of farm and ranch loans, we saw a net increase of $86 million in farm and ranch loan purchases in the first quarter of 2025.

Ramesh Parnell: Over the past five years, we've seen strong growth in the segment and believe that the near-term pipeline remains strong.

Ramesh Parnell: Growing business volume in our infrastructure finance segments remains an opportunity and we will continue to focus on strategic investments and talent acquisition in these areas to build our expertise and capacity as market opportunities arise.

Ramesh Parnell: Despite the seasonally large number of scheduled repayments, we typically see in the January 1st payment date on the majority of farm and ranch loans.

Ramesh Parnell: We saw a net increase of $86 million in Farmer and Ranch loan purchases in the first quarter

Brad Nordholm: We believe that we will see continued growth in the foreseeable future due to continuing agricultural economic tightening. of Potential for Increased Tariffs and Trade Policy Changes. and ongoing inflationary Offsetting farm and ranch loan purchase growth this quarter was a $500 million in scheduled maturities with two large egg vantage counterparties. As previously noted, Advantage security volume can be lumpy, it can be volatile due to the large transaction sizes and the scheduled maturities aligned with our counterparty's specific financing needs. During the first quarter, we closed a new $900 million dollar facility with a large agricultural finance counterparty, supporting future Advantage funding opportunities and demonstrating the continued interest in this product.

Ramesh Parnell: We believe that we will see continued growth in the foreseeable future due to continuing agricultural economic tightening, a potential for increased tariffs and trade policy changes, and ongoing inflationary inputs.

Ramesh Parnell: Offsetting farm and ranch loan purchase growth this quarter was a $500 million in scheduled maturities with two large egg vantage counterparties.

Ramesh Parnell: During the first quarter, we closed a new $900 million facility with a large agricultural finance counterparty, supporting future Advantage funding opportunities and demonstrating the continued interest in this product.

Brad Nordholm: I would note that that $900 million facility is not yet drawn. We are looking ahead to partnering with this new counterparty for their future funding needs. Looking ahead, we believe that we will continue to be a key partner for refinancing and incremental borrowing for all of our ag managed counterparts. as they navigate a volatile interest rate and economic environment.

Ramesh Parnell: I would note that that $900 million facility is not yet drawn.

Ramesh Parnell: We are looking ahead to partnering with this new counterparty for their future funding needs.

Ramesh Parnell: Looking ahead, we believe that we will continue to be a key partner for refinancing and incremental borrowing for all of our AgVantage counterparties as they navigate a volatile interest rate and economic environment.

Brad Nordholm: The Farm and Ranch segment is core to our mission. And we remain committed to bringing our customers products and solutions that provide capital and risk management solutions. as well as support their borrower's financial needs. Our Corporate Ag Finance segment was approximately $2 billion at quarter end, relatively flat compared to year-end 2024, as $200 million in new volume this quarter was offset by scheduled payments and maturity. Although quarterly volume can be unpredictable, opportunities in this segment are generally more creative to net effective spread. We're continuing our efforts to build relationships and modernize our internal infrastructure. Anticipating increased credit demand to support larger, more complex agribusiness.

Ramesh Parnell: The farm and ranch segment is core to our mission and we remain committed to bringing our customers products and solutions that provide capital and risk management solutions as well as support their borrowers financial needs.

Ramesh Parnell: Our Corporate Ag Finance segment was approximately $2 billion at quarter end, relatively flat compared to year-end 2024, as $200 million in new volume this quarter was offset by scheduled payments and maturities.

Ramesh Parnell: Although quarterly volume can be unpredictable, opportunities in this segment are generally more creative to net effective spread.

Ramesh Parnell: We're continuing our efforts to build relationships and modernize our internal infrastructure, anticipating increased credit demand to support larger, more complex agribusinesses in the coming quarters.

Brad Nordholm: in the coming quarter. Our overall credit profile remained strong through the first quarter of 2025. despite heightened volatility and market uncertainty. Our prudent underwriting approach, emphasizing loan-to-value and cash-flow metrics, positions us well to withstand market cycles. We have not seen any impacts on our portfolio related to government actions or changes in policy and will continue to closely monitor industry credit conditions as new government policies are implemented, including, specifically, pending tariffs. While some credit losses are inherent in our lending, we believe that any losses in the current cycle will be moderated by the strength and diversity of our diversified portfolio.

Ramesh Parnell: Our overall credit profile remained strong through the first quarter of 2025. Despite heightened volatility and market uncertainty, our prudent underwriting approach, emphasizing loan-to-value and cash-flow metrics, positions us well to withstand market cycles.

Ramesh Parnell: We have not seen any impacts on our portfolio related to government actions or changes in policy and will continue to closely monitor industry credit conditions as new government policies are implemented, including, specifically, pending tariffs.

Ramesh Parnell: While some credit losses are inherent in our lending, we believe that any losses in the current cycle will be moderated by the strength and diversity of our diversified portfolio.

Brad Nordholm: I'm pleased with our progress since the start of the year. We have strong momentum with our customers and a focused approach to fulfilling our mission efficiently and innovatively, despite broader market uncertainties related to interest rates, regulation, policy changes, tariffs, and other government action. A resilient business model supported by diversified revenue streams and a strong capital position is a key differentiator. but it is our ability to access the markets coupled with our disciplined asset liability management. that truly sets us apart.

Ramesh Parnell: I'm pleased with our progress since the start of the year. We have strong momentum with our customers and a focused approach to fulfilling our mission efficiently and innovatively despite broader market uncertainties related to interest rates, regulation, policy changes, tariffs, and other government actions.

Ramesh Parnell: A resilient business model supported by diversified revenue streams and a strong capital position is a key differentiator.

Speaker Change: But it is our ability to access the markets, coupled with our disciplined asset liability management, that truly sets us apart. And with that, now I'd like to turn it over to Aparna Ramesh, our Chief Financial Officer, to discuss our financial results in more detail. Aparna.

Aparna Ramesh: And with that, now I'd like to turn it over to Aparna Ramesh, our Chief Financial Officer, to discuss our financial results in more detail. Thank you, Brad, and good morning, everyone. Our first quarter 2025 results once again underscore a consistent financial and operational execution, proactive balance sheet management, strong credit quality and resilience across market cycles. Our diversified revenue streams and disciplined asset liability management enable us to fulfill our mission and generate consistent shareholder returns aligned with our long-term strategic initiative. This consistency is a real differentiator for us as we navigate a volatile macroclimate. We achieved $1.8 billion of gross business volume this quarter, primarily driven by new volume in our renewable energy, broadband infrastructure, and power and utility segments, as well as new farm and ranch loan purchases.

Aparna Ramesh: Thank you Brad, and good morning everyone. Our first quarter 2025 results once again underscore a consistent financial and operational execution, proactive balance sheet management, strong credit quality, and resilience across market cycles.

Aparna Ramesh: Our diversified revenue streams and disciplined asset liability management enable us to fulfill our mission and generate consistent shareholder returns aligned with our long-term strategic initiatives.

Aparna Ramesh: This consistency is a real differentiator for us as we navigate a volatile macroclimate.

Aparna Ramesh: We achieved 1.8 billion dollars of gross business volume this quarter, primarily driven by new volume in our renewable energy, broadband infrastructure, and power and utility segments, as well as new farm and ranch loan purchases.

Aparna Ramesh: After repayments and maturities, we grew $232 million during the first quarter in our outstanding business volume, which speaks to the benefit of our strategic decisions to diversify our portfolio and create opportunities in all interest rate environments. Core earnings increased by 6% both sequentially and year-over-year to $46 million in the first quarter of 2025, setting a record for Farmer Mac. Net effective spread also reached a record 90 million or 117 basis points with sequential and year-over-year improvements of 2.5 million and 6.9 million respectively. This sequential improvement was driven by higher average loan balances, a decline in non-accrual loans, and modest improvements in floating rate funding levels relative to so far.

Aparna Ramesh: Core earnings increased by 6%, both sequentially and year-over-year, to $46 million in the first quarter of 2025, setting a record for Pharmamax.

Aparna Ramesh: Net effective spread also reached a record 90 million, or 117 basis points, with sequential and year-over-year improvements of 2.5 million and 6.9 million, respectively.

Aparna Ramesh: This sequential improvement was driven by higher average loan balances, a decline in non-accrual loans, and modest improvements in floating rate funding levels relative to SOFR.

Aparna Ramesh: The shift to higher spread business has been a key driver of the increase in net effective spread over the past several years, and we believe our pipeline and business composition will continue to position us well for the remainder of the year. Operating expenses increased 8% year over year, as we continued to proactively invest in our infrastructure technology to support continued growth across our portfolios, including broadband infrastructure and renewable energy, as well as higher licensing fees and servicing advance. Operating efficiency was 29% for first quarter 2025, a modest improvement over fourth quarter 2024 and in line with the same period last year.

Aparna Ramesh: The shift to higher spread business has been a key driver of the increase in net effective spread over the past several years and we believe our pipeline and business composition will continue to position us well for the remainder of the year.

Aparna Ramesh: Operating efficiency was 29% for first quarter 2025, a modest improvement over fourth quarter 2024 and in line with the same period last year.

Aparna Ramesh: Our efficiency ratios remain in line with our long-term strategic plan target and reflect our disciplined approach to expense management as we monitor and manage expense growth proactively against incoming revenue streams. We take pride in our focus on effective expense management as we continue to invest in people and continue to modernize our technology to support and enable our future growth. It enables our ability to innovate and also drive profitability. We remain committed to bringing cutting-edge technology to our secondary market. With the completion of a major infrastructure platform upgrade that we told you about, we now plan to turn our attention to new capabilities for our customers and are exploring options to build innovative systems that will accelerate growth by supporting the rollout of these new products.

Aparna Ramesh: We take pride in our focus on effective expense management as we continue to invest in people and continue to modernize our technology to support and enable our future growth. It enables our ability to innovate and also drive profitability.

Aparna Ramesh: We remain committed to bringing cutting-edge technology to our secondary market.

Aparna Ramesh: With the completion of a major infrastructure platform upgrade that we've told you about, we now plan to turn our attention to new capabilities for our customers and are exploring options to build innovative systems that will accelerate growth by supporting the rollout of these new products.

Aparna Ramesh: We are committed to closely monitoring our efficiency ratio and managing it such that we expect to remain at or below a long-run average of 30% and also be disciplined in keeping our efficiency ratios in line with our group expectations. Turning now to credit, our overall credit profile remains strong, which reflects our underwriting and credit disciplines that are both extremely consistent. We believe that our total portfolio is well-diversified, both by commodity and geography, and that we are well-positioned given our strong levels of capital. The fundamentals of our underwriting guidelines and credit policies enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle.

Aparna Ramesh: Turning now to credit, our overall credit profile remains strong, which reflects our underwriting and credit disciplines that are both extremely consistent.

Aparna Ramesh: We believe that our total portfolio is well diversified, both by commodity and geography, and that we are well positioned given our strong levels of capital.

Aparna Ramesh: The fundamentals of our underwriting guidelines and credit policies enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle.

Aparna Ramesh: Our total allowance for losses was $27 million as of March 31st, 2025, reflecting a $1.7 million increase from year-end 2024. The increase was primarily attributable to new volume in the renewable energy, foreign utilities and farm and ranch segment. 90-day delinquencies were 54 basis points across our entire portfolio as of March 31, 2025, compared to 37 basis points at the end of December. The sequential increase reflects a seasonal pattern of Farmer Mac's 90-day 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 quarters of the year.

Aparna Ramesh: Our total allowance for losses was $27 million as of March 31st, 2025, reflecting a $1.7 million increase from year-end 2024.

Aparna Ramesh: The increase was primarily attributable to new volumes in the renewable energy, foreign utilities, and farm and ranch segments.

Aparna Ramesh: Ninety-day delinquencies were 54 basis points across our entire portfolio as of March 31st, 2025, compared to 37 basis points at the end of December.

Aparna Ramesh: The sequential increase reflects a seasonal pattern of PharmaNet's 90-day 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 quarters of each year.

Aparna Ramesh: This seasonal pattern is due to the annual and semi-annual payment dates on the majority of farm and ranch.

Aparna Ramesh: This seasonal pattern is due to the annual and semi-annual payment dates on the majority of farm and ranch loans.

Aparna Ramesh: Turning to Capital. Farmer Mac's core capital of $1.5 billion exceeded our statutory requirement by $601 million, or 65%, as of March 31, 2025. The increase in court capital from the end of 2024 was primarily due to higher retained earnings. Our Tier 1 capital ratio was 13.9% as of March 31, 2025, compared to 14.2% at year-end 2024. The modest decline reflects growth in risk-weighted assets. Our strong capital position has enabled us to grow and diversify revenue streams while remaining resilient in volatile credit environments, and we continue to offer low-cost liquidity to our customers and borrowers, even in challenging Our capital buffer is a source of strength and also allows us to be opportunistic.

Turning to Capital

Aparna Ramesh: Kalmanach's court capital of $1.5 billion exceeded our statutory requirement by $601 million, or 65%, as of March 31, 2025.

Aparna Ramesh: The increase in core capital from the end of 2024 was primarily due to higher retained earnings.

Aparna Ramesh: Our Tier 1 Capital Ratio was 13.9% as of March 31, 2025, compared to 14.2% at year-end 2024.

Aparna Ramesh: The modest decline reflects growth in risk-weighted assets. Our strong capital position has enabled us to grow and diversify revenue streams while remaining resilient in volatile credit environments, and we continue to offer low-cost liquidity to our customers and borrowers, even in challenging times.

Aparna Ramesh: We expect to be in the market soon with another farm securitization transaction. The securitization program remains an important strategic initiative for Farmer Mac, as it allows us to enhance and optimize the balance sheet by the efficient deployment of capital, and it also enables our growth strategy by targeting new asset opportunities. We are very pleased with the tremendous support we've seen from our stakeholders for this program and we remain committed to being a regular issuer in the market. As noted previously, we are exploring new structures that will allow us to expand our securitization offerings, and this will serve as another source of funding and capital.

Aparna Ramesh: We expect to be in the market soon with another farm securitization transaction. The securitization program remains an important strategic initiative for Farm and Mark.

Aparna Ramesh: as it allows us to enhance and optimize the balance sheet by the efficient deployment of capital, and it also enables our growth strategy by targeting new asset opportunities.

Aparna Ramesh: We are very pleased with the tremendous support we've seen from our stakeholders for this program and we remain committed to being a regular issuer in the market.

Aparna Ramesh: As noted previously, we are exploring new structures that will allow us to expand our securitization offerings, and this will serve as another source of funding and capital management.

Aparna Ramesh: Our liquidity and capital positions remain well in excess of all regulatory requirements. Our projections show minimal change in our profitability with limited exposure to movements and interest rates where the market rates go up or down. As of March 31st, 2025, Farmer Mac had 289 days of liquidity, and we held approximately $1 billion in cash and other short-term instruments in our investment portfolio. We expect to be well-positioned in the medium term as we navigate potential interest rate volatility, and we are confident in our resilience against potential short- and medium-term market disruptions.

Aparna Ramesh: Our liquidity and capital positions remain well in excess of all regulatory requirements.

Aparna Ramesh: Our projections show minimal change in our profitability, with limited exposure to movements and interest rates, where the market rates go up or down.

Aparna Ramesh: As of March 31, 2025, PharmaMac had 289 days of liquidity, and we held approximately $1 billion in cash and other short-term instruments in our investment portfolio.

Aparna Ramesh: We expect to be well-positioned in the medium term as we navigate potential interest rate volatility, and we are confident in our resilience against potential short- and medium-term market disruptions.

Aparna Ramesh: So to summarize, our team once again delivered strong, consistent quarterly results, maintaining key metrics while adhering to our credit framework. During the first quarter, we achieved a 17% return on equity and an efficiency ratio of 29%. It is important in these uncertain times that we emphasize some of the safeguards that prepare us for macro uncertainty. Our balance sheet is strong. We've cultivated robust demand for farm and ranch assets in the securitization market. Even when bond markets were turbulent recently, we were able to access funding at all points on the curve. We also have enough liquidity to last nearly a year, and our portfolio is diversified by commodity and geography, making us less susceptible to uncontrollable headwinds.

Aparna Ramesh: So to summarize, our team once again delivered strong, consistent quarterly results, maintaining key metrics while adhering to our credit framework.

Aparna Ramesh: During the first quarter, we achieved a 17% return on equity and an efficiency ratio of 29%.

Aparna Ramesh: It is important, in these uncertain times, that we emphasize some of the safeguards that prepare us for macro uncertainty.

Aparna Ramesh: Our balance sheet is strong. We've cultivated robust demand for farm and ranch assets in the securitization market.

Aparna Ramesh: This stability allows us to consistently deliver strong financial performance and maintain or exceed our key metrics.

Brad Nordholm: And with that, Brad, let me turn it back to you. Thanks, Aparna. We are very pleased with our first quarter 2025 results. We believe that we're well positioned to deliver on our multi year strategy with strong liquidity and capital levels, a diversified business mix, highly effective risk management practices, and most importantly, a dedicated team of professionals here at Farmer Mac. As I've mentioned on prior calls, as a publicly traded, federally chartered financial services company, our mission is to increase the accessibility of financing to provide vital liquidity for American agriculture and rural infrastructure. Our initiatives strengthen the economic framework that supports rural America and enable families, businesses, and entire communities to thrive.

Aparna Ramesh: And with that, Brad, let me turn it back to you.

Brad Nor: Thanks Aparna. We are very pleased with our first quarter 2025 results.

Brad Nor: We believe that we're well positioned to deliver on our multi-year strategy with strong liquidity and capital levels, a diversified business mix, highly effective risk management practices, and most importantly, a dedicated team of professionals here at PharmaMac.

Brad Nor: As I've mentioned on prior calls, as a publicly traded, federally chartered financial services company, our mission is to increase the accessibility of financing to provide vital liquidity for American agriculture and rural infrastructure.

Brad Nor: Our initiatives strengthen the economic framework that supports rural America and enable families, businesses, and entire communities to thrive.

Brad Nordholm: We strive to deliver on our mission throughout agriculture and macroeconomic cycles, and our loan pipeline and capital base are strong and growing. Our revenue is well diversified, providing capacity for further growth and creating more opportunities for us to enhance shareholder value. We're optimistic about the future, and we'll maintain our singular focus on fulfilling our mission efficiently and innovatively as we navigate the backdrop of a broader market uncertainty attributable to interest rates, regulation, and inflation.

Brad Nor: We strive to deliver on our mission throughout agriculture and macroeconomic cycles, and our loan pipeline and capital base are strong and growing.

Brad Nor: Our revenue is well diversified, providing capacity for further growth and creating more opportunities for us to enhance shareholder value.

Brad Nor: We're optimistic about the future, and we'll maintain our singular focus on fulfilling our mission efficiently and innovatively as we navigate the backdrop of a broader market uncertainty attributable to interest rates,

Regulation, Policy Changes, Tariffs, and Other Government Actions.

Brad Nordholm: Policy Changes, CARES, and other government This is how we believe we can continue to differentiate ourselves and to deliver to our customers and end-borrowers in rural America.

Brad Nor: This is how we believe we can continue to differentiate ourselves and to deliver to our customers and end-borrowers in rural America.

Operator: And now, operator, I'd like to see if we have any questions from anyone on the line today. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any key.

Speaker Change: And now, operator, I'd like to see if we have any questions from anyone on the line today.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys.

William Ryan: Your first question comes from the line of Bill Ryan from Seaport Research Partners. Please ask your question. Good morning and nice results for the quarter. I'll start off with a macro question and then also another micro question, but the macro question, just kind of looking at the tariffs, I mean, there's obviously been some disruption in the month of April and into early with Ag Shipments, particularly to China.

Speaker Change: Your first question comes from the line of Bill Ryan from Seaport Research Partners. Please ask your question.

and nice results for the quarter.

Bill Ryan: Start off with a macro question and then also another micro question, but the macro question, just kind of looking at the tariffs, I mean, there's obviously been some disruption in the month of April and into early May with ag shipments, particularly to China. Could you maybe give us some indication of, you know, what happened, what the administration did last time in terms of supporting the ag community and sort of, you know, what exactly happened in 2017, 2018?

Brad Nordholm: Could you maybe give us some indication of, you know, what happened, what the administration did last time in terms of supporting the ag community and sort of, you know, what exactly happened in 2017? Yeah, good morning, Bill, and thank you very much for joining us. Certainly, let's go back to the first Trump administration when there were tariffs and other trade restrictions imposed on China and what happened in American agriculture. At that time, there were programs for voluntary payments to U.S. farmers who were deemed to be impacted by that. You may recall they were called market facilitation payments, and they had the effect of kind of closing a significant part of the net income gap attributable to that.

Speaker Change: Yeah, good morning, Bill, and thank you very much for joining us.

Speaker Change: Certainly, let's go back to the first Trump administration when there were tariffs and other trade restrictions imposed on China and what happened to American agriculture. At that time, there were programs for voluntary payments to U.S. farmers.

Speaker Change: who were deemed to be impacted by that. You may recall they were called market facilitation payments and they had the effect of kind of closing a significant part of the net income gap attributable to that. We're actually seeing a bit of a repeat of that right now. While

Brad Nordholm: We're actually seeing a bit of a repeat of that right now. Certainly, the 145% tariffs that are currently imposed upon China are resulting in a shift of trade, particularly to Mexico right now. You know, ultimately a lot of these agricultural commodities are fungible. They can transfer across the world with relatively little friction, but we're seeing a shift to Mexico. Mexico and Canada are positively protected by reference to the prior trade agreements. You saw yesterday the announcement of an agreement, at least in principle, with the UK, and notably that included a call-out on specific targets for American agriculture products including ethanol.

Speaker Change: Certainly, the 145% tariffs that are currently imposed upon China are resulting in a shift

Speaker Change: of trade, particularly to Mexico right now. Ultimately, a lot of these agricultural commodities are fungible. They can transfer across the world with relatively little friction, but we're seeing a shift to Mexico.

Speaker Change: Mexico and Canada are positively protected by reference to the prior trade agreements. You saw yesterday the announcement of an agreement at least in principle with the UK and notably that included a call-out on specific

targets for American agriculture products including ethanol.

Brad Nordholm: But what's underway right now, about a month and a half ago, the Secretary of Agriculture announced a ten billion dollar program. The applications were open for that. I think there have been about six, seven billion of applications so far I believe, something like that. And then there is considerable discussion about an additional voluntary subsidy program to American producers in consideration of these tariff actions that might be in the 20 to 25 billion dollar range. That's, you know, looking out the next couple of months. USDA has kind of banked that into their net income projections for the year and remarkably the current projection for net farm income for this year is projected to be about the third highest.

Speaker Change: But, what's underway right now, about a month and a half ago, the Secretary of Agriculture announced a $10 billion program.

Speaker Change: The applications were open for that. I think there have been about six, seven billion of applications so far, I believe, something like that. And then there is considerable discussion about an additional voluntary subsidy program to American producers in consideration of these tariff actions.

Speaker Change: that might be in the 20 to 25 billion dollar range.

Speaker Change: That's, you know, looking out the next couple of months. USDA has kind of banked that into their net income projections for the year and remarkably the current projection for net farm income for this year is projected to be about the third highest.

Brad Nordholm: So this is something in which we're taking, keeping a very, very close eye. because high sustained tariffs will have the damaging effect of prices that will negatively impact many producers. We're also looking at how any kind of subsidy programs as well as tariffs are applied and impact different crops, different producers. So, for example, we're seeing reasonably strong focus on negative impacts to row crop producers, corn and soybeans, for example, right now. We're keenly interested in any programs that would benefit permanent crop producers in California, almonds, pistachios, for example, where we are seeing some of our credit stress.

Speaker Change: So, this is something in which we're keeping a very, very close eye.

Speaker Change: because high sustained tariffs will have the damaging effect of prices that will negatively impact many producers. We're also looking at how any kind of subsidy programs as well as tariffs are applied and impact different crops, different producers.

reasonably strong focus on negative impacts to

Speaker Change: row crop producers, corn and soybeans, for example, right now. We're keenly interested in any programs that would benefit permanent crop producers in California, almonds, pistachios, for example, where we are seeing

William Ryan: That's really the pocket word is today. Okay, thanks for that, Brad, very helpful.

Speaker Change: Some of our credit stress that's really the pocket where it is today

Okay, thanks for that, Brad. Very helpful.

William Ryan: Second question, a little bit more micro, but, you know, obviously the net effective spread moved up the basis point in the quarter.

Speaker Change: Second question, a little bit more micro, but you know obviously the net effective spread moved up the basis point in the quarter, continuing to the trend line that's been on for quite a while, but there was some movement among the various business lines, farm and ranch being up, corporate ag being up, broadband and renewable energy down. Could you maybe talk a little bit about the micro dynamics of the NES for the business lines?

William Ryan: There was some movement among the various business lines, farm and ranch being up, corporate ag being up, broadband and renewable. Could you maybe talk a little bit about the micro...

Brad Nordholm: Absolutely, and I'm going to I'm going to turn to Zach Carpenter to provide additional details on that. But let me just make the point at the outset that at Farmer Mac, we are not allocators to business segments as we see margin opportunity. We are opportunistic and responsive to the market opportunity. And that's really how we fulfill our mission. So what you see is really a reflection of where are we seeing demand where we can also satisfy our credit and earnings objectives.

Speaker Change: Absolutely, and I'm going to I'm going to turn to Zach Carpenter to provide additional details on that. But let me just make the point at the outset that at PharmaMac we are not allocators.

business segments as we see

Speaker Change: margin opportunity. We are opportunistic and responsive to the market opportunity, and that's really how we fulfill our mission. So what you see is really a reflection of

Speaker Change: Where are we seeing demand where we can also satisfy our credit and earnings objectives? But Zach, can you provide some additional color on that?

Zach Carpenter: But Zach, can you provide some additional color on that? Yeah, happy to. I mean, starting with Farmer and Ranch, I think this is heavily volume driven. We had a very strong fourth quarter last year, and continued strong on activity in the first quarter, you know, clearly given the tightness of the ag economy, but also with liquidity and capital relief needs at banks, they're definitely looking to utilize the secondary market to enhance their capital and liquidity needs. So a lot of the Farmer and Ranch is heavily volume driven. And we see a very strong pipeline heading into the second quarter.

Speaker Change: Yeah, happy to. Starting with Farmer to Ranch, I think this is heavily volume driven. We had a very strong fourth quarter last year and continued strong on activity in the first quarter, clearly given the tightness of the ag economy, but also with liquidity and capital relief needs at banks, they're definitely looking to utilize the secondary market to enhance

Speaker Change: their capital and liquidity needs. So, a lot of the farming ranches is heavily volume-driven, and we see a very strong pipeline heading into the second quarter. In fact,

Zach Carpenter: In fact, we're looking at, you know, loan approvals, which significantly convert to purchases typically in a similar range to 2021 and 2022, when we had, you know, record levels. Corporate ag is a very similar story, a very strong fourth quarter. And what we saw in the fourth quarter was fairly high credit spreads for these loans we purchased. And so now you're seeing kind of the impact of that in the first quarter, where we had record net effective spread and record net effective spread percentage. We had a strong first quarter, and we see some near term pipelines that are relatively strong.

Speaker Change: We're looking at loan approvals, which significantly convert to purchases, typically.

Speaker Change: a similar range to 2021 and 2022 when we had, you know, record levels.

Speaker Change: Corporate Ag is a very similar story, a very strong fourth quarter.

Speaker Change: And what we saw in the fourth quarter was fairly high credit spreads for these loans we purchased. And so now you're seeing kind of the impact of that in the first quarter where we had record net effective spread and record net effective spread percentage.

Speaker Change: We had a strong first quarter and we see some near-term pipelines that are relatively strong but I think you know the borrowers and the later rangers are kind of navigating the market in terms of what Brad highlighted earlier. Broadband infrastructure you noted that effective spread was slightly down from a percentage perspective. The one thing I would note in this space is

Zach Carpenter: But I think, you know, the borrowers and the later rangers are kind of navigating the market in terms of what Brad highlighted earlier. You know, broadband infrastructure, you noted, net effective spread was slightly down from a percentage perspective. You know, the one thing I would note in this space is the significant amount of loan purchases that we saw during the first quarter were data center related, and those are construction loans. So a lot of those commitments are unfunded commitments. And as those convert, as these centers are being constructed, you'll see that funded volume increase and accrete more net effective spread perspective.

Speaker Change: The significant amount of loan purchases that we saw during their first quarter Were data center related and those are construction loans So a lot of those commitments are in unfunded commitments and as those convert as these centers are being Constructed you'll see that funded volume increase and accrete more than that effective spread perspective

Zach Carpenter: You know, similar to renewable energy, there's construction component there, but it's definitely a market dynamic. We look to try to find strong transactions in the market with very strongly rated off takers with strong power purchase agreements. And given the strength of those counterparties, you'll see credit spreads, you know, be somewhat volatile. But given their, you know, investment grade rated performance, they're going to be a little bit tighter in certain times. But this will ebb and flow based on market dynamics. But the one thing I would note with renewable energy is more than double the net effective spread dollars year over year.

Speaker Change: Strong Power Purchase Agreements. And given the strength of those counterparties, you'll see credit spreads, you know, be somewhat volatile. But given their, you know, investment grade rated performance.

Speaker Change: They're going to be a little bit tighter in certain times, but this will ebb and flow based on market dynamics. But the one thing I would note with renewable energy is more than double the net effect of spread dollars year over year. So we're excited to see this portfolio grow and, you know, at least for the second quarter still see a strong market, especially related to solar and battery storage.

Zach Carpenter: So we're excited to see this portfolio grow. And, you know, at least for the second quarter, still see a strong market, especially related to solar and battery stores.

Zach Carpenter: Thanks, Zach, and thanks, everybody.

Okay, thanks Zach, and thanks everybody for taking my questions.

Thank you. Bye-bye.

Bose George: Your next question is from the line of Bose George from KVW. Please go ahead. Everyone Good morning, just wanted to follow up on the spread question. When I look at the on page 10, where you have that breakout, so your spread on farm and ranch went up a couple of basis points, but the ROE was up 5%. It was so is there some other piece in there like credit or lower capital allocation or because it seemed like a relatively big move in ROE relative to the spread. Yeah, Aparna, can you shed some light on that?

Speaker Change: Hey everyone, good morning. Just wanted to follow up on the spread question. When I look at the on page 10 where you have that breakout, so your spread on farm and ranch went up a couple of basis points, but the ROE was up 5%. So is there some other piece in there like credit or lower capital allocation? Because it seemed like a relatively big move in ROE relative to the spread.

Aparna, can you shed some light on that?

Aparna Ramesh: I'm going to talk about what we have to do with the fact that we have My apologies, I think there was a little bit of noise there. Can you hear me up here right now? I can hear you now. Yes. Okay, terrific. So a big part of the driver of what you're seeing in terms of shift in ROE within that ag segment has to do with the fact that we had a reduction in non-accrual activity quarter over quarter, so that was really the big driver of it. A lot of the hit that we took in terms of non-accruals happened in the prior quarter and didn't have that happening now, and so you see a little bit of a denominator pop right there.

Speaker Change: So these components are going to have to do with the fact that we have

Speaker Change: My apologies, I think there was a little bit of noise there. Can you hear me okay right now? I can hear you now, yes.

Speaker Change: Okay, terrific. So a big part of the driver of what you're seeing in terms of shift in ROE within that ag segment has to do with the fact that we had a reduction in non-accrual activity quarter over quarter. So that was really the big driver of it. A lot of the hit that we took in terms of non-accruals happened in the prior quarter and didn't have that happening now. And so you see a little bit of a denominator pop right there.

Bose George: Okay, perfect. That makes sense. Thanks.

Aparna Ramesh: And then, yeah, Aparna, you talked about the market volatility and the compute access, etc. But has there been anything in terms of the funding cost side that is worth highlighting? And you noted the securitization you guys are going to come to market with. The economics there, do you anticipate it'll be similar to what you did on the last slide? Yeah, it's hard to sort of predict, you know, what will happen. And we do intend to come forward with another transaction, hopefully, before the second quarter is up. And I'll just touch upon that in a minute.

Speaker Change: is worth highlighting and you noted the securitization you guys are going to come to market with. The economics there, do you anticipate it'll be similar to what you did on the last transaction?

Speaker Change: Yeah, it's hard to sort of predict what will happen and we do intend to come forward with another transaction hopefully before the second quarter is up and I'll just touch upon that in a minute. But to your first question just around funding dynamics, I do want to note that funding actually improved quite dramatically from Q4 to Q1. This again sort of highlights our very opportunistic strategy when we see an opportunity in the

Aparna Ramesh: But to your first question, just around funding dynamics, I do want to note that funding actually improved quite dramatically from Q4 to Q1. This, again, sort of highlights our very opportunistic strategy. When we see an opportunity in the market where credit spreads are narrower, we try to take advantage of that. And that's exactly what our treasury team did in the first quarter. We saw an opportunity to really buy into narrowing SOFR spreads. I'm really glad that we did that. What does that mean for us both is that we can actually stay very comfortably out of the market as needed, because we've loaded up on funding costs when it was much narrower in the first quarter.

Speaker Change: a spread in basis points, but when you look at the second quarter,

Speaker Change: and with all of the activity and volatility as a result of the bond markets reacting to the tariffs being announced on Liberation Day, we did see a sofa widening. What does that mean for us both is that we can actually stay very comfortably out of the market as needed because we've loaded up on funding costs when it was much narrower in the first quarter.

Aparna Ramesh: So that is a dynamic and it plays very favorably for us in the first quarter. So very, very encouraged. So, okay, great, thank you.

and Aparna Ramesh.

Speaker Change: The second part of your question, just in terms of securitization, let's wait and see.

Speaker Change: I think we're going to time, you can never really sort of time these things perfectly, but we're seeing a little bit of settling down. We're not going to go into the market when we think that there isn't receptivity, but there's a lot of cash sitting on the sidelines. I think we're very well positioned to take advantage of that. And just based on our recent investor outreach in the first quarter, we see continued strong appetite and demand for this particular asset class. So it's very, very encouraging.

Brandon McCarthy: Your next question is from the line of Brandon McCarthy from Sidoti. Please ask your question. Great. Good morning, everybody. Thanks for taking my questions here. I just want to start off in the renewable energy line of business. I think last quarter, you know, we had talked about there were certain tax credits that you purchased during the year, during 2024, that is, that ultimately benefited the fourth quarter. Was there any similar activity in the first quarter of 2025? And maybe you could talk about your outlook there for the rest of the year. Yeah, no, no, there wasn't activity in the first quarter.

Brandon McCarthy: Your next question is from the line of Brandon McCarthy from Sidoti. Please ask your question.

Great. Good morning, everybody. Thanks for taking my questions here.

I just want to start off.

Brandon McCarthy: in the renewable energy line of business. I think last quarter, you know, we had talked about there were certain tax credits that

Brandon McCarthy: you purchased during the year, during 2024 that is, that ultimately benefited the fourth quarter. Was there any similar activity in the first quarter of 2025? And maybe you could talk about your outlook there for the rest of the year.

Brandon McCarthy: Yeah, no there wasn't activity in the first quarter. It probably remains an opportunity later this year and we're monitoring the markets, but no activity in the first quarter.

Brad Nordholm: It probably remains an opportunity later this year and we're monitoring the markets, but no activity in the first quarter. Understood. Thanks, Brad.

Understood. Thanks, Brad.

Brandon McCarthy: I'll just add, Brandon, we did actually see a benefit quarter over quarter in operating expenses because we have some legal fees that were associated with the tax credits in the fourth quarter. So we saw a fairly material decline in legal fees. So you saw an improvement in our office as a result of that. Understood. Thanks for the clarification there. And then looking at farm and ranch, I know, looks like you mentioned there was a sequential decline in volume there. But on a sequential basis, it looks like farm and ranch really drove the bulk of the increase in net effective spread revenue.

Speaker Change: I'll just add, Brandon, we did actually see a benefit quarter over quarter in operating expenses because we had some legal fees that were associated with the tax credits in the fourth quarter. So we saw a fairly material decline in legal fees, so you saw an improvement in our OPEX as a result of that.

Understood. Thanks for the clarification there.

Zach Carpenter: If I'm looking at that correctly, just wondering if you can dissect that change there and how we can kind of think about that trend. Yeah, I think, well, Aparna mentioned, you know, the non accruals going accrued, and that is a scrape back of additional interest, which you would see showing up there. But Zach, maybe you can talk about kind of the forward expectations on farm and ranch and especially the seasonality that we experienced in the first quarter. Yeah, happy to do it. About 550 million of new business volume in farm and ranch and the significant majority of that, you know, Brendan, as you noticed, was loan purchase volume.

Speaker Change: Aparna mentioned the non-accruals going accrued and that is a scrapeback of additional interest which you would see showing up there, but Zac maybe you can talk about the forward expectations on farm and ranch.

especially the seasonality that we experienced in the first quarter.

Speaker Change: Yeah, happy to do it. About 550 million of new business volume in farmer and ranching, a significant majority of that, you know, Brendan, as you noticed, was loan purchase volume. This is a continued trend we've seen that really picked up in the fourth quarter of last year and again very similar to the themes that we saw in 2024 with continued tightening of the ag economy, a continued focus on liquidity and working capital needs for the farmers and

Zach Carpenter: This is a continued trend we've seen that really picked up in the fourth quarter of last year. And again, very similar to the themes that we saw in 2024 with continued tightening of the ag economy, a continued focus on liquidity and working capital needs for the farmers and ranchers and, you know, capital efficiency at the banking community, just given everything that's going on. Looking forward, as I noted, our pipeline for farm and ranch loan purchases in the second quarter appears very strong. You know, like I mentioned, loan approvals, which typically convert to a purchase are at almost record highs, continue to see a significant amount of loan submissions from sellers across the country.

the banking community, just given everything that's going on.

Speaker Change: Looking forward, as I noted, our pipeline for farm and ranch loan purchases in the second quarter appears very strong. You know, like I mentioned, loan approvals, which typically convert to a purchase, are at almost record highs.

continue to see a significant amount of loan submissions.

Speaker Change: from sellers across the country. And, you know, just given everything going on, I mean, we already had an ag economy that was tightening. There's a lot of volatility out there, as Brad mentioned, pertaining to tariffs and what the impact may be. So as these farmers and ranchers need to support the liquidity and working capital needs through the cycle, we anticipate this to continue, especially into the second quarter now.

Zach Carpenter: And, you know, just given everything going on, I mean, we already had an ag economy that was tightening. There's a lot of volatility out there, as Brad mentioned, pertaining to tariffs and what the impact may be. So as these farmers and ranchers need to support the liquidity and working capital needs through the cycle, we anticipate this to continue, especially into the second quarter. Now, I think government payments will be a critical component to further aid and support the farmers and ranchers through the near term, at least, but we don't anticipate at least heading into the second and possibly a third quarter, this momentum to slow down just given the environment that we're seeing.

Speaker Change: I think government payments will be a critical component to further aid and support the farmers and ranchers through the near term, at least, but we don't anticipate, at least heading into the second and possibly the third quarter, this momentum to slow down, just given the environment that we're seeing.

Brandon McCarthy: Got it. That's helpful. Thanks, Zach. I appreciate the insight. One more question for me, just on the treasury segment, looking at net effective spread revenue there, it seems like it's been, you know, maybe regaining steam and increasing from the back half of 2024 with funding, net effective spread revenue increasing, and then, you know, investment side, you know, up a little bit from late 2024 as well. Can you walk us through the dynamics there? And I know the funding strategies is, you know, match funding, but can you walk us through the dynamics there on what's kind of driving that momentum?

Speaker Change: Got it. That's helpful. Thanks, Zach. I appreciate the insight. One more question from me just on the treasury segment. I'm looking at net effective spread revenue there.

Speaker Change: It seems like it's been, you know, maybe regaining steam and increasing from the back half of 2024, with funding, net effective spread revenue increasing, and then, you know, investment side, you know, up a little bit from

Speaker Change: late 2024 as well. Can you walk us through the dynamics there? And I know the funding strategy is, you know, match funding, but can you walk us through the dynamics there on what's kind of driving that momentum?

Aparna Ramesh: Yeah, sure. You know, as I mentioned, we try to take, you know, a lot of pride in being very opportunistic. So when rates are trending in or credit spreads are coming in within a particular segment, we try to opportunistically issue into that. So we saw a narrowing of our SOFA spreads quarter over quarter, so that really created a fairly nice benefit overall. In fact, you know, substantially down quarter over quarter. We've also taken advantage, you know, as we see, you know, the yield curve sort of steepening, we will start to call issuances. And we started to do that in the back half of the year.

Speaker Change: Yeah, sure. You know, as I mentioned, we try to take a lot of pride in being very opportunistic. So when rates are trending in or credit spreads are coming in within a particular segment, we try to opportunistically issue into that. So we saw a narrowing of our SOFR spreads quarter over quarter, so that really created a fairly nice benefit overall. In fact, substantially

Speaker Change: taking advantage, you know, as we see, you know, the yield curve sort of

Speaker Change: Steepening, we will start to call issuances and we started to do that in the back half of the year and you start to see some of those benefits come into play as well in terms of just our overall hedging strategy when we think about you know where rates are headed but those were the the primary dynamics the SOFR funding being definitely the larger of the two.

Brandon McCarthy: And you start to see some of those benefits come into play as well in terms of just our overall hedging strategy when we think about, you know, where rates are headed. But those were the primary dynamics, the SOFA funding being definitely the larger one. Great. Thanks, Aparna. That's all for me. Thanks, everybody.

Great. Thanks, Aparna. That's all for me. Thanks, everybody.

Gary Gordon: Your last question is from the line of Gary Gordon, Private Investor. Please ask your question. Thank you.

Speaker Change: Your last question is from the line of Gary Gordon, Private Investor. Please ask your question.

Gary Gordon: Okay, thank you. Two things in our changing world. There's also just a number of discussions about the changing energy policy, anything going on that you think would, or you're anticipating could have an impact on your rural infrastructure business.

Gary Gordon: Two things in our changing world. There's also just a number of discussions about the changing energy policy, anything going on that you think would, or you're anticipating A.I.

And again, I'm both in now in other changes, AI.

What are your thoughts?

at the moment about applications of AI for PharmaMac.

Brad Nordholm: Yeah, hey Gary, thank you for being on with us today. As it relates to our renewable energy projects, the, you know, investment tax credit is really embedded in the Inflation Reduction Act. It's been very interesting to watch the debate in Washington because continuation of those credits enjoys some pretty good bipartisan support. We don't take that for granted, however, and we are very, I think, satisfied with our position because when we commit to a project financing for a renewable energy project, solar, solar plus battery, wind, renewable natural gas, for example, when we commit to that project, really the entire network of web of contracts associated with that project, the construction contract, the offtake power purchase or fuels purchase contract, the operating and maintenance contracts, the land leases, and the commitment for the tax credits, those are really all in place at the time of the on the projects as they're currently structured.

Yeah, hey Gary

Speaker Change: Thank you for being on with us today. As it relates to renewable energy projects, the investment tax credit is really embedded in the Inflation Reduction Act.

Speaker Change: It's been very interesting to watch the debate in Washington because

continuation of those credits, enjoys some pretty good bipartisan support.

Speaker Change: We don't take that for granted, however, and we are very

I think, satisfied with our position because

Speaker Change: When we commit to a project financing for a renewable energy project

solar, solar plus battery, wind.

Speaker Change: Renewable Natural Gas, for example. When we commit to that project, really the entire

Network of Web of Contracts associated with that project.

Speaker Change: construction contract, the offtake power purchase or fuels purchase contract, the operating and maintenance contracts, the land leases, and the commitment for the tax credits. Those are really all in place at the time of the funding.

Brad Nordholm: So we're keeping a close eye on it. We're cautiously optimistic that they'll continue. Keep in mind that the economic viability of many of these projects is extremely high and that some of them would continue if there was a reduction in investment tax credits. So we're keeping a close eye on it. We do not see any immediate adverse threats from changes in tax legislation, but we will be monitoring closely.

Speaker Change: So we're keeping a close eye on it. We're cautiously optimistic that they'll continue. Keep in mind that the economic viability

of many of these projects is extremely high.

Speaker Change: and that some of them would continue if there was a reduction in investment tax credits. So we're keeping a close eye on it. We do not see any immediate adverse threats from changes in tax legislation, but we will be monitoring closely.

Gary Gordon: Thank you. And Gary, the second part of your question was focused on what again? Could you remind me?

Speaker Change: Gary, the second part of your question was focused on what again, could you remind me?

Brad Nordholm: and yes, it was related to AI. Yeah. Applications. Yeah. Yeah, right now the internal focus is very much on process. How can we utilize AI to improve processes within Farmer Mac? Scraping of literally thousands of loan documents is an example for all the pertinent information that goes into a loan file when those documents vary one to another because of differences in segments and seller-servicers and other factors. How can we use that to improve efficiency, to reduce the labor? So the focus really for the time being is on process. There'll be a time in the future when it may shift or be expanded to include decisioning, but right now it's a very, very fertile field for us to apply to process.

Gary Gordon: Yes, it was related to AI. What sort of applications did you see?

for saying.

Gary Gordon: Yeah, right now the internal focus is very much on process.

Gary Gordon: How can we utilize AI to improve processes within PharmaMac? Scraping of literally thousands of loan documents is an example for all the pertinent information.

that goes into a loan file when those documents.

Gary Gordon: So the focus really for the time being is on process. There'll be a time in the future when it may shift or be expanded to include decisioning, but right now it's a very very fertile field for us to apply to process.

Gary Gordon: Okay, thank you.

Operator: There are no further questions at this time.

Gary Gordon: There are no further questions at this time. I'd like to turn the call over to Brad Nordholm for closing comments. Sir, please go ahead.

Brad Nordholm: I'd like to turn the call over to Brad Nordholm for closing comments. Sir, please go ahead. Thank you, Operator. Thank you, everyone, for being on this call with us today. These are times when it's relatively easy to get distracted by changes and potential changes in policy and economic conditions. Here at Farmer Mac, we're heads down. We are focused on mission and what is a very, very sustainable, resilient and well-established business model that we have. We have a terrific team here at Farmer Mac. They share this commitment to focus on mission and deliver results. And that's exactly what we have done during this record quarter and what we expect to do going forward.

Brad Nordholm: Thank you, Operator. Thank you, everyone, for being on this call with us today.

These are times when it's relatively easy to get distracted.

Brad Nordholm: by changes and potential changes in policy and economic conditions. Here at Farmer Mac, we're heads down. We are focused on mission and what is a very, very sustainable, resilient, and well-established business model that we have.

Speaker Change: We have a terrific team here at PharmaMac. They share this commitment to focus on mission and deliver results.

Brad Nordholm: So thank you very much for participating. If you have questions, follow up with Jalpa. Otherwise, we look forward to speaking again in this formal call in following this end of the second quarter. Thanks very much.

following this end of the second quarter. Thanks very much.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.

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