Q4 2025 Federal Agricultural Mortgage Corp Earnings Call

Speaker #3: Some of the ad hoc and disaster aids—about $24 billion—some of this was a carryover from 2025 as those start going out. So we have seen some of those being dispersed.

Speaker #3: They are supporting the tight ag economy cycle right now, especially in the row crop space. So those will be a benefit going forward, just given the substantial amount of government payments going out in 2026.

Speaker #5: Okay. And, just one last question. I'll try and get one more in here. On the expense outlook, obviously, a bump up in expenses, some of the things that you highlighted over the course of the year transaction expenses, personnel, investments.

Speaker #5: You know, fourth quarter numbers looked like they came back down quite a bit year over year. You know, how should we be thinking about expense growth in 2026?

Speaker #2: Hi, Bill. This is Matt. Good afternoon. To give you a little bit of insight into expense growth, a couple things to keep in mind.

Speaker #2: there is some, modest seasonality. the factored into the, the slowing of expense growth in the fourth quarter. the first quarter tends to have higher personnel, expenses.

Speaker #2: As we look at, resetting things like payroll taxes and the like. that-that's one, factor to keep in mind. More broadly for the business, as we look to 2026, there will be a, a level of expense growth that will be incurred as we continue to grow outstanding business volume.

Speaker #2: There are transaction-related expenses, operational expenses, and the need for incremental personnel to support the growing business. We will also be looking for strategic investments, particularly in the technology platform as well as selective investments in business development to further enhance the growth and take care, advantage of the market opportunities that are present at this point in time.

Speaker #1: Good day, ladies and gentlemen, and thank you all for joining us for today's Farmer Mac 2025 earnings results conference call. As a reminder, all phone lines are in listen-only mode to prevent background noise. If you would like to ask a question during today's question-and-answer session, simply press star then 1 on your telephone keypad.

Speaker #2: It's with that being said, we are being very mindful of making sure that, we continue to operate within, the target efficiency ratio of 30%.

Speaker #2: And you'll see that we were over 2% below that here in the quarter. And we would continue to balance making investments while operating very efficiently in the future.

Speaker #1: Pressing star and 1 will place your line into a queue, and we will take your questions later in today's presentation. It is now my pleasure to turn the floor over to Senior Director of Investor Relations, Jalpa Nazareth.

Speaker #5: Okay. again, thanks for taking my questions.

Speaker #1: Welcome, Jalpa.

Speaker #2: Good afternoon, and thank you for joining us for our fourth quarter and full year 2025 earnings conference call. I'm Jalpa Nazareth, Senior Director of Investor Relations and Finance Strategy here at FarmerMac.

Speaker #1: We'll move forward to Brendan McCarthy at Sadoti.

Speaker #6: Great. Good afternoon, everybody. Appreciate you taking questions here. Just want to start off on your outlook for the volume mix heading into 2026. I know you mentioned your pretty positive outlook for broad gains across the portfolio.

Speaker #2: As we begin, please note that the information provided during this call may contain forward-looking statements about the company's business, strategies, and prospects. These statements are based on management's current expectations and assumptions and are subject to risk and uncertainties that could cause our actual results to differ materially from those projected.

Speaker #6: Are you able to kind of dis-dissect that outlook a little bit more, as to which, you know, specific segments or lines of business you're more bullish on relative to others?

Speaker #3: Yeah. Hi, Brendan. It's Zach Carpenter here. Yeah. I think it's a very con it's a very consistent theme. with one notable exce exception that we experienced in 2025.

Speaker #2: Please refer to Farmer Mac's 2025 annual report on Form 10-K and subsequent SEC filings for a full discussion of the company's risk factors. On today's call, we will also be discussing certain non-GAAP financial measures.

Speaker #3: So, so first and foremost, the pipelines across our infrastructure finance line of business continue to ma remain at very strong and elevated levels. we talked about that a little in the script.

Speaker #2: Disclosures and reconciliations of these non-GAAP measures can be found in the most recent Form 10-K and earnings release posted on our website. Joining me today are Chief Executive Officer Brad Nordholm, our President and Chief Operating Officer, Zach Carpenter, and Chief Financial Officer and Treasurer, Matt Pulling.

Speaker #3: It's just a function of the need for energy that's coming from all sources, of our segments, as well as the strong growth in data centers.

Speaker #3: So, for the foreseeable future, at least the next couple quarters, we see very, very strong pipelines, across all three of those segments, which is just a continuation of what we saw in 2025.

Speaker #2: At this time, I'll turn the call over to our CEO, Brad Nordholm. Brad?

Speaker #3: Thanks very much, Jalpa. Good afternoon, everyone, and thank you very much for joining us. 2025 was another strong year for FarmerMac. We surpassed $33 billion in outstanding business volume, achieved record revenue of $410 million, a 13% increase relative to the prior year, and produced $183 million in core earnings.

Speaker #3: Looking over on the agricultural finance line of business, as I noted, you know, farm and ranch continues to perform at a very, very elevated level.

Speaker #3: loan submissions approvals were, record in January. So a lot of the momentum we saw in the second half of 2025 continues to roll over, just given the dynamics in the agricultural environment, as well as, you know, our customers' financial institutions managing capital liquidity, etc.

Speaker #3: Our 10th consecutive year of record annual core earnings. We thoughtfully balanced returning capital to our shareholders with investing for future growth while continuing to execute on our mission of providing vital liquidity to agriculture and rural America.

Speaker #3: So continue to expect to see strong growth in farm and ranch. And I think the one notable exception, from 2025 is really, farm and ranch AgVantage.

Speaker #3: we had a, a very strong fourth quarter. we're having very strong conversations right now with our counterparties plus new counterparties. So we anticipate that growth trend increasing in, in 2026.

Speaker #3: As you saw in this afternoon's earnings release, we announced a $0.10 per share increase in our quarterly dividend to $1.60 per share. This is our 15th consecutive annual increase, reflecting our confidence in the durability of our earnings profile and our long-term cash flow generation.

Speaker #3: starting very early. And so I think from a mixed perspective, it's, it's a little bit all over the board across all segments. with one notable exception being we see some pretty strong growth in farm and ranch AgVantage, which, as you've known, has been in a kind of a decline mode over the last couple years.

Speaker #3: We were active in share repurchase program in the fourth quarter, which was modified last August by a board of directors to approve share repurchases of up to $50 million of FarmerMac's Class C common stock.

Speaker #6: Great. I appreciate that detail. And just as a follow-up there with, with the AgVantage business, I know that's, that's more of kind of like a relative value proposition.

Speaker #6: And, and it sounds like that relative value might be increasing what's, what's really driving that? Is this maybe, you know, lower rates, or is it just what you're able to offer counterparties?

Speaker #3: During the fourth quarter, we completed $12.9 million under the amended program, and we have $37.1 million remaining under the current authorization. In total, we returned $78 million to shareholders through dividends and share repurchases in 2025.

Speaker #3: there's a lot of components to that question. But I think there's, there's a couple key, requirements that I think, are, are driving the, the opportunity set here.

Speaker #3: you know, first is some of these counterparties, these new counterparties that we've been talking about, their facilities all have closed. I mean, the-these are very complex, time-consuming facilities.

Speaker #3: Looking ahead, we remain committed to this balanced capital allocation approach that prioritizes prudent growth, balance sheet strength, and consistent shareholder returns. During the quarter, we also completed our seventh farm securitization transaction.

Speaker #3: And in many instances, require, counterparty regulatory approval. And, that could take months. And so as those approvals have started coming in, there is now a closed facility where these counterparties want to leverage our relative value versus other opportunities.

Speaker #3: Further building liquidity and efficiency in the agricultural mortgage-based securitization market, this risk transfer tool strengthens our ability to optimize capital and enhance the amount of market liquidity we can provide through our businesses.

Speaker #3: and pledge the collateral to support their, their growth and their balance sheet. the second is, as we've modified certain facilities with existing counterparties that have provided more value or more, available capacity, they're seeing more utilization, as they continue to grow, and originate loans.

Speaker #3: By transferring a portion of the underlying credit exposure to investors, we free up capital which is then available to be redeployed into new mission-aligned lending activities.

Speaker #3: So I, I guess what I would say is fourth quarter was kind of the inflection point where a lot of these, components that we've been talking about over the last, you know, 12 to 18 months, have, have come to fruition and concluded.

Speaker #3: We are very pleased with the tremendous support we've seen for this program, and we look forward to exploring other credit risk transfer opportunities in order to grow our platform while continuing to deliver high-quality opportunities to our various classes of investors.

Speaker #3: And now we're seeing the benefits of that, just given the relative value of this product set versus other liquidity sources in the market.

Speaker #6: Understood. Than-thanks on that, Zach. And, one more question for me. you know, just really looking at the, the credit side, I, I believe that, Brad, I believe you mentioned there may be a, a recovery in the outlook there.

Speaker #3: We anticipate introducing a new product in the market this year that will support the strong investor demand for agricultural assets, while also remaining in alignment with our mission fulfillment.

Speaker #6: Did I hear that correctly?

Speaker #3: The Agricultural Real Estate Market remains very active. The USDA expects demand for real estate mortgages will remain robust in 2026, with a total volume of transactions projected to increase by 5% this year relative to 2025 levels.

Speaker #3: Yeah, Brendan. This is Zach again. Yeah, that's correct. You know, as we've disclosed in our financials and talked about over the last couple years, you know, clearly the permanent planting, specifically almonds in California, experienced a stressed, stressed environment.

Speaker #3: on the positive side, in 2025, we've seen some improvement in pricing. and as, as Brad noted in the call, you know, a borrower that had experienced stress in our portfolio, we were seeing some resolve, in, in that, transaction.

Speaker #3: As it relates to our portfolio, we were pleased to see a very positive outcome from recent property sales for our distressed borrower which we expect will result in a recognizing previously unaccrued fees and interest, and meaningfully reducing our 90-plus day delinquencies during the first half of 2026.

Speaker #3: Which we believe in the first half of this year will result in a meaningful reduction in our 90-plus-day delinquencies, as well as some recoupment of fees and interest income that we've been holding back, given the status of that loan.

Speaker #3: Despite the volatility and uncertainty in today's environment, whether from interest rate movement, commodity price fluctuation, supply chain disruptions, consumer behavior changes, or broader geopolitical and policy dynamics, FarmerMac continues to be resilient.

Speaker #2: And, Brendan, this is Matt. If I could just, add one additional point there is, the, the specific, borrower, that, that was referenced in, in, Brad's comments and, and that Zach just touched on, that is actually not going to meaningfully impact, credit costs or recoveries as, we have not charged any of that, borrower's assets off at this point.

Speaker #3: Our diversified business model, strong capital position, and disciplined risk management position allows us to provide vital liquidity to agriculture and rural infrastructure sectors, in all economic environments.

Speaker #2: The, positive financial impact for that particular borrower will be of, recognized through an increase in net effective spread. As, that asset has been on non-accrual for some period of time.

Speaker #3: Matt Pullings, who joined us as our new Chief Financial Officer in mid-December, will review our financial results in more detail. But I want to hasten to add that we are thrilled to have Matt join the team.

Speaker #6: Understood. I appreciate the color there. Thanks, thanks, Zach. Thanks, Matt. That's all from me.

Speaker #3: He brings more than two decades of experience in corporate finance, capital markets, and strategic planning, paired with a personal connection to American agriculture. His combination of deep financial expertise and authentic understanding of rural America makes him an exceptional addition to FarmerMac, and we're excited for the impact he will have on our organization.

Speaker #3: And we'll take a question from the line of Gary Gordon.

Speaker #7: hi. Thank you. a couple of things. One, the dividend increase is 7%. I think historically it's on the low side. I mean, some of your thinking that you're laying out the strong business growth and also the, the repurchase opportunity that so the assumption that more of your capital than normal would be used to fund the balance sheet growth and potentially share repurchase?

Speaker #3: Now, I'll turn the call over to Zach, our President and Chief Operating Officer, to discuss our customers and market developments in more detail. Zach?

Speaker #2: Yeah. G-Gary, obviously, we have a, a number of tools for managing, capital growth, including, you know, earnings, dividends from that, preferred stock issuances. securitizations, which can change the relative requirements relative rather than, notional requirements.

Speaker #4: Thanks, Brad, and good afternoon, everyone. Our results continue to demonstrate the benefits of the strategy we have been executing for several years now: diversifying our portfolio into higher spread, mission-aligned businesses, while maintaining strong underwriting standards and disciplined risk management.

Speaker #4: Serving agricultural businesses and providing liquidity to enhance and enable rural infrastructure are both critical to our mission of driving economic opportunity to rural America.

Speaker #2: And so, you know, we look at all the tools that we have available to us. And probably the most, the most significant factor in kind of looking at what's the appropriate amount of dividend increase this year is the fact that our growth has been very, very strong.

Speaker #4: FarmerMac is broadening the pursuit of its mission in response to the evolving economic landscape in rural America and is proactive business diversification continues to deliver meaningful benefits to the communities we serve.

Speaker #2: And our growth has been very, very strong in segments of business that consume a bit more capital. And so you see that reflected. For the long-term financial strength and performance of Farmer Mac, that's a very, very positive thing.

Speaker #4: Our team delivered another outstanding year of business volume activity, with broad-based net volume growth in every segment, reflecting strong customer demand and the continued relevance of our secondary market solutions.

Speaker #7: Mm-hmm. Okay. Thank you. two, on the, the problem loans, you said they were from '21 to '23. You said they were one-offs, but, were there lessons learned there that, affected your underwriting?

Speaker #4: We achieved a record $3.8 billion of net new business volume in 2025, resulting in total outstanding business volume of $33.4 billion as of year-end.

Speaker #7: today?

Speaker #4: The net volume increase highlights quality asset growth across all our product sets, which, in turn, drove significant growth in net effective spread. Our agricultural finance outstanding business volume grew $1 billion last year, with our farm and ranch segment accounting for nearly all of that net growth.

Speaker #3: Yeah, Gary. Weakened constantly evolve in, in monitor markets. And adjust our, our philosophy and underwriting data. We don't change our standards, but we, we update our thought process based on what we've seen in the markets.

Speaker #3: You know, for, for a couple of these, especially the one, you know, originated in 2021, is dramatically different times in COVID and out of COVID.

Speaker #4: Activity in farm and ranch accelerated meaningfully in the fourth quarter and has carried over into 2026, which reinforces the momentum we're seeing in this business.

Speaker #3: And certain markets reacted differently and, and certain, supply and demand, dynamics, changed. And I think, a couple of these, individual borrowers experienced some of those, market changes, consumer behavior changes.

Speaker #4: We expect loan purchase growth to continue as tighter agricultural conditions, driven by higher input costs, trade and tariff concerns, and low commodity prices, increase producers' need for liquidity.

Speaker #3: And just frankly, some operational issues that, management struggled working through. I, I think when you take a step back from an underwriting standpoint, our primary focus is, is first and foremost having the right expertise in-house.

Speaker #4: The farm and ranch segment is core to our mission, and we remain committed to bringing our customers products that provide capital and risk management solutions which support their borrowers' financial needs.

Speaker #3: You've seen our, increase in headcount, a lot of that is to get the right personnel to adjudicate and understand the risk and monitor the risk in these newer segments, which we which we've done.

Speaker #4: Our farm and ranch advantage securities portfolio reached an inflection point in the fourth quarter as the portfolio reversed the runoff trend and grew $500 million.

Speaker #3: and the second is, as, as markets evolve and we see transactions like this, you know, it, it does help, in future adjudication of, of transactions to, take a step back and, and, and see what's transpired in the markets, every market is, is operating differently.

Speaker #4: As we discussed on our prior call, this increase reflects the additional fundings we anticipated after closing a new $4.3 billion facility with a large agricultural counterparty.

Speaker #4: We expect this momentum to continue in 2026 and remain on track to return to sustained net growth in this product as we work closely with new and existing counterparties to determine the right timing for refinancing maturing securities or providing incremental financing based on market conditions and return on capital objectives.

Speaker #3: And we wanna use the most up-to-date information to make, appropriate credit decisions as, as we move forward. So I think the long answer is yes.

Speaker #3: We continue to assess markets and borrow specific issues. And, adjust our thinking in, in risk adjudication when that comes up.

Speaker #7: Okay. Last thing is, the, data center demand. has that had any material and sort of general impact on, farmland prices, and if so, yeah, I can imagine for existing loans that would, be a positive, but it could create a little more risk lending today.

Speaker #4: We remain steadfast in our commitment to deliver a broad spectrum of financial solutions to the agricultural community by working alongside our growing customer base.

Speaker #4: Our corporate ag finance segment saw net growth of $63 million during 2025, reflecting our continued efforts to support larger, more complex agribusinesses that span the food, fuel, and fiber supply chain.

Speaker #2: Yep. Yeah, Gary, the, the opportunities that we've seen in the data center space have been in, in really rural areas, not necessarily in productive farmland areas.

Speaker #4: We anticipate seeing more activity in this segment in the first quarter of 2026 as deal flow activity levels are higher relative to prior years.

Speaker #4: However, ongoing refinancings and maturities will continue to create a headwind going forward. Turning to our infrastructure finance line of business, outstanding business volume increased to $11.8 billion at year-end 2025, up over $2.8 billion from the prior year, with all three segments contributing significantly to net growth.

Speaker #2: I know there's been some out there and some, some articles that have highlighted the, the interaction between arable and productive farmland versus renewable energy projects and data centers.

Speaker #2: We haven't seen that or experienced that in our portfolio. You know, from a farmland value perspective, it's been relatively stable. We've seen some declines just given the overall commodity cycle.

Speaker #4: This is a continuation of the strong interest in investment in data centers, broadband expansion, as well as the construction and completion of renewable energy projects.

Speaker #2: in, in some of the, regions that we have, loans in our portfolio. but we really haven't seen a correlation between data center investments and constructions and changes in or increases in farmland land values.

Speaker #4: Coupled with the overall need for significant energy generation and transmission capacity for rural America. Volume in our power and utilities segment grew by over $1 billion, largely due to strong loan-to-purchase activity and net new advantage security issuances.

Speaker #7: Okay. Thanks very much.

Speaker #3: And thank you to our audience members who had shared your questions. Mr. Nordholm, I'm pleased to turn it back to you, sir, for any additional or closing remarks.

Speaker #4: Supporting investment needs of rural electric generation, transmission, and distribution cooperatives. Our renewable energy segment also grew more than $1 billion last year. Supported by strong deal flow, accelerated construction deadlines, and continued project finance momentum.

Speaker #2: Great. Well, thank you. Thank you all very much for joining us. and thanks for your patience. I, I think we had a couple of situations with background sirens today.

Speaker #2: And our office here at 2100 Pennsylvania Avenue, a couple blocks from the White House, occasionally, especially when, there are a lot of foreign dignitaries in town for events, results in motorcades and ambulances and, thank you for, thank you for bearing with us today.

Speaker #4: Despite increased policy uncertainty across the renewable power investment market, we expect to continue participating in renewable energy transactions for both new projects and refinancings of existing projects utilizing the same strong credit standards.

Speaker #4: Looking ahead, while we anticipate another construction-related rush in the first half of this year, primarily tied to the July 4th deadline included HR1, we believe the substantial need for new power generation will continue to drive growth in this segment.

Speaker #2: but I would like to conclude by thanking everyone for listening, in on the call. we'll, of course, be having our regularly scheduled call again, in May to report our first quarter, results.

Speaker #2: Look forward to sharing information with you at that time. But in the meantime, please do consider joining us for our Investor Day in New York.

Speaker #4: We're seeing strong deal flow, allowing us to be selective with our capital deployment in this sector to pursue deals that are appropriately structured with strong counterparties, which underscores the strength of our reputation in the market.

Speaker #2: And please follow up with Jalpa with any other questions that you may have. with that, thanks again. And operator, we will conclude the call.

Speaker #4: Beyond 2027, we anticipate activity in this space to be more market-driven rather than policy-driven, as the underlying driver remains the same: a massive surge in power demand requiring significant new power supply.

Speaker #3: Ladies and gentlemen, this does conclude today's FarmerMac 2025 earnings results conference call. And we do thank you all for your participation. You may now disconnect your lines.

Speaker #4: Our broadband infrastructure segment grew by $700 million in 2025, more than double the prior year's growth, with nearly 90% of volume growth tied to data center-related demand.

Speaker #4: We anticipate increased financing opportunities in this segment for data center buildouts, given the increasing investment in capacity to support AI, cloud storage, and enterprise digitization, particularly by a large hyperscalers.

Speaker #4: And we will continue to emphasize diversification across geography, sponsors, and tenants. We believe these developments are crucial for rural economic growth and support the historically strong market demand for connectivity needs across rural America.

Speaker #4: Growing business volume in our infrastructure finance segment remains a top priority, and we will continue to focus on strategic investments in resources in these areas to build our expertise and capacity as market opportunities arise.

Speaker #4: Despite this backdrop of broader market uncertainties stemming from factors such as interest rates, regulatory shifts, and trade policy changes, we are confident in our ability to continue to deliver growth and consistent results.

Speaker #4: Our total portfolio is well diversified by both commodity and geography, and we remain confident in the overall health of our portfolio, as evidenced by our continued strong asset quality metrics.

Speaker #4: To summarize, 2025 was a year of strong, broad-based, disciplined volume and net effective spread growth across all of our operating segments, and our pipelines remain strong as we move into 2026.

Speaker #4: We expect continued customer demand for liquidity, capital efficiency, and long-term funding solutions as market conditions evolve. Our robust capital and liquidity along with our strong underwriting criteria position us to capitalize on this opportunity.

Speaker #4: Importantly, we are confident in our ability to continue to deliver consistent results as we support rural America through this economic cycle and beyond. With that, I'll turn it over to Matt Pollins, our new Chief Financial Officer.

Speaker #4: I'm thrilled to welcome him to FarmerMac and to the leadership team as we continue to advance our long-term strategic priorities and position FarmerMac for its next phase of growth.

Speaker #4: Matt?

Speaker #5: Thank you, Zach. I'd like to begin by saying how pleased I am to be here and to help lead this mission-driven organization. Growing up on a family farm in western Ohio, and remaining deeply connected to production agriculture today, makes it especially meaningful and energizing to support an institution whose mission is so closely aligned with my own background and values.

Speaker #5: First, I'd like to touch on our fourth quarter 2025 results. Our net effective spread was $101.4 million. Reflecting a 16% increase over the prior year quarter, and an all-time quarterly record.

Speaker #5: Net effective spread, as a percentage, was 122 basis points, reflecting the portfolio mix shift to more accretive assets and continued disciplined funding execution. Core earnings were $40 million for the fourth quarter, a $3.6 million decline from the prior-year period.

Speaker #5: Fourth quarter core earnings results were negatively impacted by credit provisions related to a small number of loans originated from 2021 to 2023 in the corporate ag finance and broadband infrastructure segments.

Speaker #5: The charges impacting these specific loans, this quarter, were concentrated within a few borrowers facing business-specific obstacles. We do not believe the charges are indicative of a meaningful change in the high credit quality that persists across our portfolios.

Speaker #5: If these charges were not concentrated in the fourth quarter, we estimate core earnings would have reflected a 20% increase over the prior-year period.

Speaker #5: Now, turning to our full-year results, 2025 was another year of strong financial and operational execution for Farmer Mac. We delivered a record net effective spread of $383 million, an increase of $43.5 million, or 13%, from the prior year.

Speaker #5: As Zach mentioned, the company's strategic decision to diversify our loan portfolio into newer lines of business that play to our competitive advantages in intermediate and long-term financing solutions, such as renewable energy, broadband infrastructure, and corporate ag finance, has been a key priority.

Speaker #5: The broadening of our business is benefiting us through changing market cycles. Also contributing to our net effective spread growth is our effective asset-liability management and funding execution.

Speaker #5: The strengthening of our capital positions through retained earnings growth and preferred stock issuance supports our balance sheet management strategies, which are fundamental to the resilience of our business model, as these strategies enable us to be nimble and responsive to changing market conditions.

Speaker #5: Core earnings for the full year were $182.9 million. Up 6.6% compared to the prior year. Reflecting strong revenue, growth, partially offset by elevated credit expenses and higher operating costs.

Speaker #5: Also reflected in our 2025 core earnings results is the purchase of 61.5 million dollars of renewable energy investment tax credits. Resulting in a 4.8 million dollar benefit in 2025.

Speaker #5: As of year-end, we had approximately $80 million of remaining capacity to use renewable energy tax credits. We will continue to evaluate future tax credit purchase opportunities in relation to our tax capacity.

Speaker #5: Partially offsetting strong earnings growth was a 14% increase in operating expenses over the prior year. This increase was largely due to resources and investments needed to support increased business volume, such as transaction-related legal costs, technology investments, and hiring-related expenses.

Speaker #5: We maintain our deliberate approach to expense management by proactively monitoring and managing expense growth against incoming revenue streams. We will continue making targeted investments in business development in our operational and technology platforms to support future growth and scalability while managing expenses within our long-term efficiency ratio target of 30%.

Speaker #5: We experienced $32.9 million of provision for credit loss expense in 2025. The provision expense reflects $19.6 million attributable to certain individually significant credit deteriorations in our corporate ag finance and broadband infrastructure portfolios.

Speaker #5: Outstanding business volume growth across our business segments accounted for an additional 9.6 million dollar provision expense. Corporate ag finance, renewable energy, and broadband infrastructure segments accounted for 84% of the total provision expense attributed to new business.

Speaker #5: It's important to note that when diversifying into these different segments, Farmer Mac developed underwriting standards consistent with industry practices, acquired significant expertise in these newer segments, and implemented a comprehensive framework that appropriately aligns with our risk appetite.

Speaker #5: As these portfolios continue to season, we may see credit costs trend higher than the levels historically observed in our farm and ranch and power and utility segments.

Speaker #5: Importantly, these portfolios earn higher yields commensurate with their underlying risk-return profile. Charge-offs totaled $20.9 million in 2025, the majority of which occurred in the fourth quarter and were primarily related to borrowers facing business-specific headwinds.

Speaker #5: The total allowance for losses as of December 31, 2025, was $39.7 million, or 17% of non-accrual assets as of year-end. This compares with $25.3 million, or 15% of non-accrual assets as of December 31, 2024.

Speaker #5: This metric is useful for evaluating the level of our allowance relative to accounts for which it is probable we will not be able to collect all amounts due under the loan agreement.

Speaker #5: We are comfortable with the level of the allowance given the value of the collateral that is supporting these loans. The fundamentals of our underwriting and risk analytics enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle.

Speaker #5: While credit losses are inherent in lending, we anticipate the strength and diversity of our overall portfolio will moderate the potential impact of a credit cycle on our overall business.

Speaker #5: Farmer Mac's core dollars in 2025 rose to $1.7 billion, which exceeded our statutory requirement by $678 million, or 66%. Core capital increased $13 million in the fourth quarter, largely due to higher retained earnings.

Speaker #5: Our Tier 1 capital ratio was 13.3% as of December 31, 2025, compared to 14.2% as of the prior year period. The change in our Tier 1 capital reflects the effect of strong loan purchase volume growth in our agriculture finance and infrastructure finance portfolios.

Speaker #5: Our strong capital position has enabled us to grow and diversify our revenue streams remain resilient through volatile credit environments and continue providing competitively priced liquidity to our customers and their borrowers.

Speaker #5: Looking ahead, we will maintain a thoughtful and balanced approach to managing our overall capital position. Organic capital generation, selective capital issuance, and the use of risk transfer tools will help ensure we have sufficient capital to support future growth, particularly in more accretive segments which are more capital intensive.

Speaker #5: In conclusion, our strong earnings performance effective balance sheet management, robust capital position, and solid liquidity levels underscore the strength and resilience of FarmerMac's business model.

Speaker #5: The results this year reflect disciplined execution across our enterprise and the continued benefit of a diversified platform that deepens our value to lenders, borrowers, and investors across rural America.

Speaker #5: I am grateful for the opportunity to join this organization at such an important moment, and I look forward to partnering closely with the leadership team as we continue advancing FarmerMac's mission and long-term strategic priorities.

Speaker #5: And with that, I'd like to turn the call back over to Brad.

Speaker #1: Good. Well, thank you very much, Matt. As we look ahead, we are excited about the opportunities in front of us, and confident that the depth and capability of our management team position us well to continue executing on our long-term strategic priorities.

Speaker #1: Before we begin the Q&A period, I'd also like to remind everyone that we will be hosting our investor day on March 18th in New York, at the New York Stock Exchange.

Speaker #1: We look forward to providing a deeper dive into our strategy, growth initiatives, and the future of Farmer Mac, and actually having some formal and informal conversations with you.

Speaker #1: We hope to see many of you there. And now, operator, I'd like to see if we have questions from anyone on the line today.

Speaker #2: Thank you.