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FEDERAL AGRICULTURAL MORTGAGE CORP (AGM)·Q2 2025 Earnings Summary

Executive Summary

  • Record quarter: core earnings $47.4M ($4.32 diluted Core EPS), net effective spread $93.9M, and net interest income $96.8M; total outstanding business volume surpassed $30.6B .
  • EPS beat and revenue slight miss vs S&P consensus: EPS $4.32* vs $4.29* (+0.7%); revenue $93.98M* vs $96.54M* (-2.7%) — driven by mix shift into higher-spread segments and modest hedge impacts; management highlighted sustained spread strength and segment diversification .
  • Credit costs rose: $7.8M provision, including two charge-offs ($2.8M) with $1.7M recovered post-quarter; downgrades in one solar and one broadband loan; overall asset quality metrics improved QoQ (90+ day delinquencies and substandard assets down) .
  • Capital actions: share repurchase authorization increased to $50.0M through Aug-2027 and later priced $100M Series H preferred (6.5%), supporting capital optimization and growth .

Values retrieved from S&P Global for items marked with an asterisk.

What Went Well and What Went Wrong

What Went Well

  • Record performance: “we delivered record results across the board… core earnings and net effective spread up 19% and 12% YoY” .
  • Segment diversification paying off: renewable energy and broadband growth driving higher net effective spread; management emphasized shift to higher-spread business and robust infrastructure pipeline .
  • Capital and liquidity strong: core capital $1.6B (+63% above statutory), Tier 1 13.6%, 310 days liquidity; repurchase authorization raised to $50.0M .

What Went Wrong

  • Higher credit expense: $7.8M provision due to two charge-offs, infrastructure downgrades, and CECL allowance growth tied to newer segments’ different risk rates .
  • Operating expense pressure: increased headcount, technology investments, and transaction-related legal fees (including renewable energy tax credits) weighed on efficiency, though still near ~30% target .
  • Slight revenue miss vs S&P: reported revenue $93.98M* vs $96.54M* consensus amid hedge valuation dynamics and segment mix *.

Values retrieved from S&P Global for items marked with an asterisk.

Financial Results

Core P&L, Spreads, EPS vs prior periods

MetricQ2 2024Q1 2025Q2 2025
Net Interest Income ($USD Millions)$87.34 $90.94 $96.80
Net Effective Spread ($USD Millions)$83.60 $89.99 $93.89
Net Interest Yield (%)1.15% 1.15% 1.20%
Net Effective Spread Yield (%)1.14% 1.17% 1.19%
Diluted EPS (GAAP) ($)$3.68 $4.01 $4.48
Diluted Core EPS (Non-GAAP) ($)$3.63 $4.19 $4.32
Provision for Losses ($USD Millions)$6.23 $1.58 $7.81

Actual vs S&P Global Consensus (Q2 2025)

MetricQ2 2025 ActualQ2 2025 ConsensusSurprise
Primary EPS (S&P) ($)4.32*4.29*+0.03 (+0.7%)*
Revenue (S&P) ($USD Millions)93.98*96.54*-2.56 (-2.7%)*

Values retrieved from S&P Global for items marked with an asterisk.

Segment Breakdown (Q2 2025)

SegmentNet Effective Spread ($k)Segment Core Earnings ($k)
Farm & Ranch35,710 22,959
Corporate AgFinance8,609 4,886
Power & Utilities5,636 3,652
Broadband Infrastructure3,932 2,019
Renewable Energy6,227 2,394
Treasury – Funding31,668 22,645
Treasury – Investments2,111 976
Total93,893 59,531

KPIs and Balance Sheet Highlights

KPIQ1 2025Q2 2025
Net Change in Business Volume ($USD Thousands)$232,313 $831,916
Total Outstanding Business Volume ($USD Thousands)$29,755,343 $30,587,259
Core Capital ($USD Billions)$1.5 $1.6
Tier 1 Capital Ratio (%)13.9% 13.6%
Days of Liquidity (days)289 310
Share Repurchase Authorization ($USD Millions)$9.8 $50.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Share Repurchase AuthorizationThrough Aug 2027$9.8M authorization $50.0M authorization; extended to Aug 2027 Raised
Securitization Activity (FARM)2H 2025Regular issuer; target ~$300M deals; strong demand “Working towards a second transaction later this year”; explore alternative structures Maintained activity; expanding structures
Dividend (Common)Q3 2025Raised to $1.50 starting Q1 2025 $1.50 declared for Q3 payable Sep 30, 2025 Maintained
Effective Tax RateQ2 2025 onwardN/ALower than statutory due to renewable energy ITCs purchased ($35.6M credits; ~$3.2M benefit this quarter) New item (lower ETR driver)
Spread Outlook2H 2025NES could drift lower amid AgVantage draw expectations Expect NES around current levels near term; balance between higher-spread segment growth and potential AgVantage paydowns Maintained/stable

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Net Effective Spread (NES) outlookSustained high-teens yields; mix shift to higher-spread segments; funding opportunism NES reached record $93.9M, yield 1.19%; management expects around current levels Stable to slightly positive
Renewable Energy tax credits (ITC)2024 ITCs recognized; monitoring 2025 opportunities Purchased $35.6M ITCs; ~$3.2M tax benefit; ETR below statutory; more opportunities likely Positive
Tariffs & macro impactsMonitoring tariff uncertainty; government support programs; idiosyncratic credit effects Mixed commodity impacts; government payments (ARA, ARC/PLC) supportive; assessing HR1 impacts Mixed, manageable
SecuritizationsTwo FARM deals in 2024; plan to be regular issuer; ~$300M typical size Sixth farm securitization closed in June; aim for another in 2025; exploring new structures Positive momentum
AI/TechnologyTreasury/cash platform completed; exploring customer tech upgrades Focused on internal process automation (document scraping); future decisioning possible Ongoing investment
Credit qualitySeasonal delinquency patterns; idiosyncratic infra/renewable downgrades $7.8M provision; 2 charge-offs with post-quarter recovery; overall 90+ and substandard improved QoQ Mixed but improving QoQ

Management Commentary

  • “We grew core earnings and net effective spread by 19% and 12% year-over-year, respectively, and surpassed $30 billion in total outstanding business volume” — Brad Nordholm, CEO .
  • “The growth in spreads was driven by higher average loan balances and the continued shift to higher spread business” .
  • “After quarter end, our Board… increased the total authorized amount of repurchases from $9.8 million to $50.0 million… and extended the term… to August 2027” .
  • “Our effective tax rate this quarter [was] below the statutory rate… a result of those tax credits” — Greg Ramsey, CAO .
  • “Downgrades of two loans in the infrastructure finance line of business and higher allowances related [to] new volume growth in broadband infrastructure and renewable energy” .

Q&A Highlights

  • Spread trajectory: Management expects NES to remain around current levels near term, balancing higher-spread segment growth against potential AgVantage paydowns; Farm & Ranch NES improved on mix shift toward loan purchases .
  • Tax credits and tax rate: ~$3.2M benefit from renewable energy ITCs reduced effective tax rate below statutory; legal/admin costs flow through OpEx .
  • Tariffs: Commodity-specific impacts (soybeans exports down; corn demand via ethanol up); government relief supporting net farm income; HR1 provisions likely supportive for agriculture .
  • Credit provisions: $2.8M charge-offs (permanent planting and crop loans) with $1.7M recovery post-quarter; two downgrades (solar; rural broadband) under active remediation .
  • Capital allocation: Share repurchases opportunistic alongside steady dividend policy, preferred issuance optionality, and securitizations for capital efficiency .

Estimates Context

  • Q2 2025: EPS $4.32* beat $4.29* consensus; revenue $93.98M* missed $96.54M* consensus. Core EPS (non-GAAP) was $4.32, diluted GAAP EPS $4.48 .
  • Next quarter (directional context): Q3 2025 EPS consensus ~$4.47*, revenue ~$101.03M*; Q4 2025 EPS ~$4.53*, revenue ~$107.45M* — estimate trajectory consistent with sustained spread strength and segment growth [functions.GetEstimates].
  • Implication: Modest upward EPS revisions plausible given spread resilience and lower effective tax rate; revenue models should reflect NES dynamics and segment mix; credit cost assumptions need to incorporate CECL allowances for newer segments .

Values retrieved from S&P Global for items marked with an asterisk.

Key Takeaways for Investors

  • Spreads resilient; mix shift toward higher-spread segments (renewable, broadband, corporate ag) supports sustained NES and EPS momentum despite AgVantage volatility .
  • Credit costs elevated but idiosyncratic; QoQ improvements in delinquency/substandard suggest contained risk; post-quarter recovery reduces net charge-off impact .
  • Capital flexibility enhanced: $50M buyback authorization and subsequent $100M Series H preferred (6.5%) provide levers for ROE optimization and growth funding .
  • Lower effective tax rate from ITCs a near-term EPS tailwind; management expects further opportunistic credits as market allows .
  • Securitization program a strategic enabler: further deals expected in 2H 2025 with potential new structures to broaden investor base and improve capital efficiency .
  • Macro/tariff volatility manageable; government support programs and HR1 provisions likely supportive for farm incomes and loan demand in core segments .
  • Near-term trading: modest EPS beat, buyback authorization, and capital actions are positive catalysts; watch updates on infra/broadband credit cases and pace of AgVantage activity for spread trajectory .