Federal Agricultural Mortgage Corporation's Q2 2025: Unpacking Key Contradictions in Tax Impact, Energy Credits, and Farm Performance

Effective tax rate and tax credit impact, renewable energy tax credit phaseout and project finance, spread outlook and Farm & Ranch segment performance, impact of interest rates on spread outlook, and farm and ranch outstanding volume decline are the key contradictions discussed in Federal Agricultural Mortgage Corporation's latest 2025Q2 earnings call.



Record Financial Performance:
- Federal Agricultural Mortgage Corporation (Farmer Mac) achieved record core earnings of $47.4 million, a 19% year-over-year increase, surpassing $30 billion in total outstanding business volume for the first time.
- The growth was driven by higher average loan balances and a shift to higher spread business, along with the purchase of $35.6 million in renewable energy investment tax credits.

Spread and Business Mix:
- Farmer Mac's net effective spread grew by over 12%, reaching $93.9 million.
- This was due to the strategic diversification of the loan portfolio into new lines of business such as renewable energy, broadband infrastructure, and corporate agribusiness, which carry higher effective spreads.

Credit Quality and Expense Management:
- Despite increased credit expenses, including a $7.8 million net provision to the total allowance for losses, Farmer Mac maintained a strong asset quality profile with a decrease in both 90-day delinquencies and substandard assets.
- The company managed expenses effectively, maintaining an efficiency ratio of 30% and proactively managing operating expenses related to headcount, technology investments, and legal fees.

Capital Management and Share Repurchase Authorization:
- Farmer Mac's core capital increased by $35 million, exceeding its statutory requirement by $602 million.
- The Board of Directors modified the share repurchase program to authorize up to $50 million of repurchases, reflecting the company's strong capital position and stock price opportunities.