10-Q: Farmer Mac Reports Strong Q3 Earnings, Boosts Capital

Farmer Mac announced a significant increase in net income and business volume for Q3 2025, alongside a new preferred stock issuance, despite rising credit loss provisions.

Summary

• Net income attributable to common stockholders increased by $6.4 million, or 15.1%, to $48.7 million for Q3 2025 compared to $42.3 million for Q3 2024.
• Basic earnings per common share rose to $4.45 in Q3 2025 from $3.89 in Q3 2024, an increase of 14.4%.
• Core earnings, a non-GAAP measure, grew by $4.7 million, or 10.5%, to $49.6 million for Q3 2025.
• Net interest income increased by $11.7 million, or 13.5%, to $98.5 million for Q3 2025.
• Net effective spread, a non-GAAP measure, increased by $12.4 million, or 14.5%, to $97.8 million for Q3 2025.
• Total assets grew by $2.05 billion, or 6.5%, to $33.38 billion as of September 30, 2025, from $31.32 billion at December 31, 2024.
• Total equity increased by $198.1 million, or 13.3%, to $1.69 billion as of September 30, 2025, from $1.49 billion at December 31, 2024.
• Outstanding business volume reached $31.1 billion as of September 30, 2025, a net increase of $0.5 billion from June 30, 2025, primarily driven by the Infrastructure Finance line of business.
• Issued 4.0 million shares of 6.500% Non-Cumulative Preferred Stock, Series H, adding $96.9 million in equity.
• The share repurchase program was increased from $9.8 million to $50 million and extended to August 5, 2027; $5.0 million in Class C common stock was repurchased in Q4 2025 to date.
• Purchased $59.8 million in renewable energy investment tax credits year-to-date 2025, resulting in a $4.7 million tax benefit.

Sentiment

Score: 7

Explanation: Farmer Mac demonstrated strong growth in net income, EPS, and business volume, and successfully raised capital through preferred stock issuance. However, the significant increase in provision for losses and rising delinquencies and substandard assets, while within historical ranges, present a notable concern for credit quality. The outlook is balanced with growth opportunities and economic/policy uncertainties.

Positives

• Net income attributable to common stockholders increased by 15.1% year-over-year to $48.7 million for Q3 2025.
• Basic EPS rose by 14.4% to $4.45 in Q3 2025.
• Core earnings increased by 10.5% year-over-year to $49.6 million for Q3 2025.
• Net interest income and net effective spread saw strong year-over-year increases of 13.5% and 14.5% respectively for Q3 2025.
• Total assets grew by $2.05 billion (6.5%) and total equity increased by $198.1 million (13.3%) since December 31, 2024.
• The issuance of 4.0 million shares of Series H preferred stock added $96.9 million in equity, strengthening the capital base.
• Maintained strong liquidity with 317 days of liquidity as of September 30, 2025, well above the 90-day regulatory minimum.
• Core capital of $1.7 billion was $723.4 million above the minimum capital requirement, indicating a robust capital position.
• Maintained uninterrupted access to debt capital markets.
• The share repurchase program was expanded to $50 million and extended to August 5, 2027, signaling confidence in future cash flows.
• Provided $2.5 billion in liquidity and lending capacity to rural America in Q3 2025.
• Experienced strong Farm & Ranch loan purchase portfolio growth in Q3 2025.
• Closed a new AgVantage facility with a maximum borrowing capacity of $4.3 billion, demonstrating continued interest in wholesale finance products.
• Continued strong interest in data centers, broadband expansion, and renewable energy projects provides significant growth opportunities for Infrastructure Finance.
• Expanded loan servicing capabilities enhance the loan portfolio purchase value proposition.
• Purchased $59.8 million in renewable energy investment tax credits year-to-date 2025, generating a $4.7 million tax benefit.
• USDA forecasts a 29% increase in net cash farm income for 2025, potentially reaching one of the highest inflation-adjusted levels in history, supported by over $40 billion in government payments.
• Tree nut prices continued to rise throughout 2025, benefiting producers.
• The livestock and animal protein sector benefited from lower feed costs and robust export demand in the first three quarters of 2025.
• Electricity sales and revenue advanced by 2.1% and 5.9% respectively in the last 12 months through July 2025.
• Renewable energy net generation grew by 70% in the last five years, indicating a strong market trend.

Negatives

• A sequential decrease of $0.5 million in net income attributable to common stockholders from Q2 2025 to Q3 2025.
• Provision for losses significantly increased by 118.1% year-over-year to $7.48 million in Q3 2025.
• Operating expenses increased by 21.1% year-over-year to $29.8 million for Q3 2025, driven by increased headcount and IT infrastructure costs.
• 90-day delinquencies in Agricultural Finance direct credit exposure increased by 23.1% year-over-year to $177.8 million (1.35% of the portfolio), exceeding the historical average of approximately 1%.
• Substandard assets in Agricultural Finance direct credit exposure increased by 30.8% since December 31, 2024, reaching $521.1 million (4.0% of the portfolio).
• Charged off $4.4 million in Q3 2025 related to three specific borrower relationships.
• Wholesale finance volume decreased in Q3 2025 due to slower market loan growth and tightening credit spreads.
• Agricultural Finance portfolio volume decreased by $61.4 million in Q3 2025, mainly due to maturing AgVantage securities not being re-issued.
• USDA projects U.S. agriculture exports to drop to $173 billion in 2025, a 1% decrease from 2024 and 12% down from the 2022 peak.
• Drought conditions increased in intensity and prevalence in Q3 2025, affecting nearly one-quarter of California and 50% of Illinois.
• Ongoing groundwater management regulation, particularly in California, negatively influences land values in affected regions.
• H.R. 1's phase-out of renewable energy tax credits may increase marginal costs and slow market growth velocity for new power projects.
• The emergence of 'leapfrog' technology advances in broadband, such as low orbit satellite communication systems, could pressure the profitability of providers using older digital technologies.
• Delays in grid hookups or electricity capacity could impede data center capital or infrastructure deployment.

Risks

• Uncertainty regarding the availability of debt and equity financing and the reasonableness of rates and terms.
• Potential impacts from legislative, regulatory, or current/future political developments on Farmer Mac, its business sources, or the agricultural/infrastructure industries.
• Fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries.
• The level of lender interest in Farmer Mac's products and the secondary market provided by Farmer Mac.
• The general rate of growth in agricultural mortgage and infrastructure indebtedness.
• The effect of economic conditions (inflation, interest rates, trade policies, export demand, currency exchange rates, supply chain disruptions, input costs, labor availability, commodity prices) on lending, borrower repayment capacity, or collateral values.
• Exposure to interest rate risk resulting from fluctuations in borrowing costs relative to market indexes.
• Developments in financial markets, including investor, analyst, and rating agency reactions to events involving government-sponsored enterprises.
• The effects of the Federal Reserve's efforts to achieve monetary policy normalization.
• Factors hindering agricultural mortgage lending or borrower repayment capacity, such as severe weather, flooding, drought, or fluctuations in agricultural real estate values.
• Persistently elevated market interest rates could continue to slow portfolio loan prepayments.
• A tightening agricultural economy may increase the need for additional liquidity and working capital for borrowers.
• Increased policy uncertainty and higher cost structures due to H.R. 1's tax credit phase-outs could decrease the overall renewable power investment market growth velocity.
• New 'leapfrog' technology advances in broadband infrastructure could put pressure on the profitability of providers of older digital technologies.
• Delays in grid hookups or electricity capacity could delay some capital or infrastructure deployment for new data centers.
• Tariffs and trade restrictions may lead to higher domestic inventory levels of agricultural commodities, resulting in lower prices and impacting farm input costs.
• Expiration of farm bill programs not reauthorized by H.R. 1 on September 30, 2025, could lead to a reversion to outdated permanent law, creating market disruption.
• Anticipated ongoing increases in operating expenses over the next several years due to planned investments in technology, business infrastructure, and human capital.
• Loan delinquencies could continue to rise above historical averages, particularly in commodities experiencing negative market conditions.
• A sustained increase in the substandard asset rate would likely lead to increased provisions to the allowance for loan losses and the reserve for losses.
• Re-funding and repricing risk on floating rate assets not funded to contractual maturity.
• Re-funding and repricing risk on fixed rate assets that are effectively converted to floating rate through interest rate swaps.

Future Outlook

Farmer Mac anticipates ongoing increases in operating expenses over the next several years due to planned investments in technology, business infrastructure, and human capital to support market growth and long-term strategic objectives. The growth trajectory is tied to the capital and liquidity needs of lending institutions and the financial health of borrowers in agriculture and infrastructure. While elevated interest rates have slowed loan prepayments, a tightening agricultural economy is increasing demand for liquidity. Future wholesale finance growth will be influenced by market interest rates, credit spreads, and overall economic conditions. Strong interest in data centers, broadband expansion, and renewable energy projects is expected to provide significant opportunities for Infrastructure Finance. The USDA forecasts a 29% increase in net cash farm income for 2025, driven by government support. However, trade policy uncertainty, changing environmental regulations, and immigration laws could impact the agricultural sector. H.R. 1's phase-out of renewable energy tax credits may increase marginal costs and slow market growth velocity for new power projects, though demand for new power generation remains strong. 'Leapfrog' technology in broadband could pressure older digital technologies. Farmer Mac expects to continue leveraging technology and servicing standardization for scalability and consistency.

Management Comments

• Our secondary market provides liquidity to our nation's agricultural and infrastructure businesses, supporting a vibrant and strong rural America.
• We are uniquely positioned to facilitate competitive access to financing that fuels growth, innovation, and prosperity in America's rural and agricultural communities.
• The net effect of these forces contributed to strong Farm & Ranch loan purchase portfolio growth in third quarter 2025.
• During third quarter 2025, we closed a new AgVantage facility with a maximum borrowing capacity of $4.3 billion with a counterparty, demonstrating the continued interest in this unique wholesale finance product.
• We believe that our portfolio and market strategy is sufficiently diversified by borrower, industry, and region to maintain robust portfolio performance through the current cycle to be positioned to support any expansion of the farm mortgage market that may arise in the coming quarters.
• Although some credit losses are inherent to the business of agricultural lending, we believe that losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its Agricultural Finance portfolio, which we believe is adequately collateralized.

Industry Context

The agricultural sector faces a mixed outlook, with USDA forecasting a significant 29% increase in net cash farm income for 2025, largely due to government support, but also grappling with elevated volatility in commodity prices, evolving U.S. trade policies, and increasing drought conditions in key agricultural regions. Land values have shown regional bifurcation, with some areas seeing moderation due to higher interest rates and lower profitability. The infrastructure finance sector, particularly broadband and renewable energy, continues to see strong demand driven by digital technology growth, federal funding programs (BEAD, RDOF, ReConnect), and the need for increased energy capacity. However, changes in tax policy (H.R. 1 phasing out tax credits) and potential 'leapfrog' technologies pose challenges to the renewable energy and broadband sectors, respectively. Overall, Farmer Mac's performance reflects its role in providing stability and liquidity amidst these evolving industry dynamics.

Comparison to Industry Standards

• The 90-day delinquency rate of 1.35% as of September 30, 2025, is above Farmer Mac's historical average of approximately 1% over the last 15 years, but below the peak of approximately 2% observed in 2009.
• The percentage of Agricultural Finance substandard assets within the portfolio, at 4.0% as of September 30, 2025, is in line with Farmer Mac's historical average of approximately 4% over the last 15 years, and below the highest rate of approximately 8% observed in 2010.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Benefit from increased net income, EPS, and an expanded share repurchase program, but face potential risks from rising credit losses and economic uncertainties.
• Preferred Stockholders: Benefit from the issuance of new Series H preferred stock with a 6.500% non-cumulative dividend rate.
• Lenders (customers): Farmer Mac provided $2.5 billion in liquidity and lending capacity, supporting their operations in rural America.
• Employees: Increased compensation and employee benefits expenses due to increased headcount, indicating growth in employment.
• Rural Communities: Farmer Mac's mission to increase financing accessibility supports agriculture and infrastructure businesses in rural America.
• U.S. Treasury: Farmer Mac has statutory authority to borrow up to $1.5 billion from the U.S. Treasury to fulfill guarantee obligations, though this authority has not been used.

Next Steps

• Congress is expected to consider options to address the suspension of permanent law and remaining sections of the farm bill later this year.
• Farmer Mac will continue to monitor and assess the impacts of H.R. 1 on its operations and the industries it serves in the coming quarters.
• Farmer Mac anticipates ongoing increases in operating expenses over the next several years, aligned with planned expansion of investments in technology, business infrastructure, and human capital.
• Farmer Mac expects to continue to leverage technology enhancements and servicing standardization efforts to drive scalability and consistency.
• Technology enhancements and process re-engineering are planned for the next several years to incorporate all loan portfolios onto its servicing platform and provide flexibility in accessing loan portfolio information.

Key Dates

Recommendation

Farmer Mac's Q3 2025 results demonstrate robust financial performance with significant year-over-year increases in net income, EPS, and business volume. The company's capital position is strong, well above regulatory requirements, further bolstered by the recent Series H preferred stock issuance. While there's an uptick in provision for losses and delinquencies, these are within historical averages and management expresses confidence in portfolio diversification and collateralization. Strategic investments in infrastructure and technology, coupled with growth opportunities in renewable energy and broadband, position Farmer Mac for continued expansion. The expanded share repurchase program also signals management's confidence. Despite some industry headwinds and increased operating expenses, the overall growth trajectory and solid capital base make Farmer Mac an attractive investment.

Keywords

Farmer Mac, SEC Filing, Quarterly Report, Financial Results, Agricultural Finance, Infrastructure Finance, Preferred Stock, Capital Raise, Net Income, EPS, Business Volume, Credit Quality, Delinquencies, Substandard Assets, Interest Rate Risk, Renewable Energy, Broadband Infrastructure, Farm Income, Land Values, Trade Policy, Drought, Financial Derivatives, Liquidity, Capital Requirements