Federal Agricultural Mortgage Corporation (NYSE:AGM) Q3 2025 Earnings Call Transcript

Federal Agricultural Mortgage Corporation (NYSE:AGM) Q3 2025 Earnings Call Transcript November 3, 2025

Federal Agricultural Mortgage Corporation beats earnings expectations. Reported EPS is $4.52, expectations were $4.43.

Operator:

Jalpa Nazareth: Good afternoon, and thank you for joining us for our third 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. Please refer to Farmer Mac’s 2024 annual report on Form 10-K and subsequent SEC filings posted on Farmer Mac’s website, farmermac.com, under the Financial Information portion of the Investors section for a full discussion of the company’s risk factors.

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 the most recent Form 10-Q and earnings release posted on Farmer Mac’s website. Today, I’m joined by our Chief Executive Officer, Brad Nordholm, who will lead our discussion on third-quarter 2025 results, and our President and Chief Operating Officer, Zack Carpenter, who will discuss customer and market developments. Select members of our management team will also be joining us for the question-and-answer period. At this time, I’ll turn the call over to CEO, Brad Nordholm. Brad?

Bradford Nordholm: Thank you, Jalpa. Good afternoon, everyone, and thank you for joining us. We delivered exceptional third-quarter 2025 results, achieving yet another quarter of record net effective spread and core earnings. We surpassed $31 billion in outstanding business volume and strengthened our already robust capital base through a very successful preferred stock issuance, further supporting our long-term growth objectives and providing a buffer against market volatility. 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 and I might add, our day in, day out market information we receive from being active in every commodity in every region of the United States.

It’s a real advantage. It is the consistency of our growth and financial results over the last few years and my expectations that that will continue that has given me the confidence to announce my anticipated retirement in March 2027, and for the Board of Farmer Mac to name Zack as President and Chief Operating Officer and as my successor upon my retirement. Zack has been instrumental in diversifying our loan portfolio into newer lines of business while extending our reach to more corners of rural America by developing strong strategic partnerships and relationships with both existing and new customers. I will continue to support Zack as he builds on Farmer Mac’s trajectory of mission-focused growth, operational resilience, and delivery of consistent financial results.

So, turning to those results. We ended the quarter with a record net effective spread of $97.8 million and core earnings of $49.6 million. Year-to-date, net effective spread and core earnings are $287 million or $281 million and $143 million, respectively, reflecting double-digit year-over-year growth. The growth in spreads was driven by higher average loan balances and the continuing shift to higher spread business, which has been a key driver of the net effective spread increase over the past several years. Our strategy-driven decision to diversify our loan portfolio into newer lines of business that play to our competitive advantages in intermediate and long-term match-funded and securitized funding, such as renewable energy, broadband infrastructure, and corporate Ag finance, has been a key priority, and that diversification is benefiting us through changing market cycles.

Also contributing to our net effective spread growth is our effective asset liability management and funding execution. The strengthening of our balance sheet 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 thoughtful and responsive to changing market conditions. Also reflected in our core earnings results this quarter is the purchase of $24.2 million of renewable energy investment tax credits, resulting in a $1.5 million benefit. We will continue to actively evaluate these types of renewable energy credit opportunities in the next few quarters, as we have a consistent top marginal corporate tax liability and remain a significant participant in the renewable energy project finance market, again, giving us unique insights and some competitive advantages.

Partially offsetting the growth in net effective spread in the third quarter was an increase in operating expenses related to headcount, technology investment, and higher transaction-related legal expenses. The majority of additions to headcount were related to resources needed to support increased business volumes, especially in higher spread businesses, as well as new technology and operational efficiency project implementation. We maintain our disciplined approach to expense management by proactively monitoring and managing expense growth against income revenue streams. Another way of putting it is our efficiency ratio. We’ll continue to assess appropriate investments in our operational and technology platforms, resources to support future growth and scalability, and our ability to innovate and drive profitability while maintaining a disciplined efficiency ratio within our long-term target average of 30%.

In terms of credit expense, several factors contributed to the $7.4 million net provision to the total allowance for the quarter. Specifically, the provision expense this quarter reflects, first, an increased loss estimate on certain Ag storage and processing and broadband substandard assets; second, a handful of specific properties affected by groundwater regulation in California. And third, volume growth in both agricultural finance and infrastructure finance lines of business. Offsetting credit expense this quarter was the recovery of $2.2 million, primarily related to a single permanent planting loan that was previously charged off in the second quarter of 2025. We also recorded during the quarter a $4.4 million charge-off related to 3 different loans.

As we’ve mentioned on prior calls, our newer segments, which have grown significantly over the last several years, carry different risk weights, hence requiring increased provision expense during this period’s growth while generating a significantly higher net effective spread. Our provision expense reflects model-based CECL changes or charges, rather, and is part of our normal and ordinary course of business. We will continue to see quarterly adjustments, additions, and releases as our portfolios grow and mature. As of September 30, the total allowance for losses was $37.2 million, or 12 basis points of our total outstanding business volume. We believe that our total portfolio is well diversified by industry, geography, and segments, and that we’re well positioned given our strong levels of capital.

The fundamentals of our underwriting and risk analytics enable us to continue to effectively navigate the current volatility and uncertainty in the agricultural cycle. While credit losses are inherent in lending, we believe that any losses in the current credit cycle will be moderated by the strength and diversity of our overall portfolio and our allowances. From a credit perspective, portfolio quality remained stable during the third quarter despite a modest uptick in 90-day delinquencies, which reflects the seasonal impact of the July 1 payment date on almost all of our loans in the Farm & Ranch segment and not any identifiable trend. Despite heightened volatility and market uncertainty, our prudent underwriting approach, emphasizing the dual assessment of loan-to-value and cash flow metrics, positions us well to withstand market cycles.

To date, we have not seen any significant effects on our portfolio related to political developments, government actions, including the current shutdown, or changes in policy. We’ll continue to closely monitor industry and credit conditions as new government policies are implemented. Farmer Mac’s core capital increased by $131 million to $1.7 billion as of September 30, exceeding our statutory requirement by $723 million or 75%. The sequential increase reflects the successful issuance of $100 million of Series H preferred stock in August. The addition of preferred capital, together with our strong earnings, improved our Tier 1 capital ratio to 13.9% this quarter from 13.6% last quarter despite the strong growth in assets. The issuance effectively allowed us to strengthen our Tier 1 capital position and also allowed us to demonstrate strong access to low-cost preferred stock capital.

Looking ahead, we will continue to evaluate all the capital management tools we have available to achieve our goal of optimizing our overall capital position through organic capital generation and securitization opportunities, especially as we continue to grow our book of business in more accretive segments that will require an incrementally greater amount of capital. Our strong capital position has enabled us to grow and diversify revenue streams, remain resilient in volatile credit environments, and continue to offer competitively priced liquidity to our customers and their borrowers even in challenging times. We’re working toward a second prime transaction in the fourth quarter of 2025, which will be similar to the deal earlier this year.

The securitization program remains an important strategic initiative for Farmer Mac as it allows us to enhance and optimize the balance sheet by efficient deployment of capital and also enables our growth strategy by targeting new asset opportunities. We’re very pleased with the tremendous support we’ve seen from our stakeholders for this program, and we look forward to exploring alternatives to risk transfer structures that will allow us to expand our offerings while serving as another source of capital management. Lastly, I’m pleased to share that, subsequent to quarter-end, Farmer Mac has repurchased approximately 30,000 shares of Class C common stock for a total amount of about $5 million. We have several tools we leverage to return capital to shareholders, including dividends and buybacks, ensuring any action taken is both sustainable and value accretive.

This balanced approach allows us to invest in growth, maintain financial resilience, and deliver returns, all while remaining agile in a dynamic market environment. So at this time, I’d like to turn over to Zack Carpenter, our President and Chief Operating Officer, to discuss our customers and market developments in more detail. Zack?

Zachary Carpenter: Thanks, Brad. I want to first start by expressing my deep gratitude to you and our Board of Directors for their trust and confidence in appointing me as President and Chief Operating Officer of Farmer Mac. It is truly an honor to step into this role and to build on an incredible foundation that Brad and the team have established. What makes this moment especially meaningful is the opportunity to lead alongside such an extraordinary team here at Farmer Mac. Across the organization, I see a shared drive to innovate, serve with purpose, and never settle for average. This passionate, mission-focused culture at Farmer Mac is what gives me tremendous confidence in our future. Our team delivered another solid quarter of outstanding business volume growth.

We achieved $500 million of net new business volume, resulting in total outstanding business volume of $31.1 billion as of quarter end. The growth in our portfolio was primarily driven by the infrastructure finance line of business, which grew by $600 million this quarter to $11 billion as of quarter end, reflecting continued strong interest in investment in data centers, broadband expansion as well as the construction and completion of renewable energy projects, coupled with the overall need for significant energy generation and transmission capacity for rural America. Serving agriculture businesses and providing liquidity to enhance and enable rural infrastructure are both critical to our mission of driving economic opportunity to rural America.

This proactive business diversification continues to pay dividends, which we expect to continue going forward, and it has also expanded our commitment to rural communities as this liquidity is geographically aligned with our core mission across all our segments. Volume in our Renewable Energy segment more than doubled from the same period last year to $2.3 billion as of quarter end. This segment has doubled every year since its inception, and we believe the strength of our near-term pipeline supports this continued growth over the next 12 months. Despite increased policy uncertainty across the renewable power investment market, we expect to continue participating in renewable energy transactions for both new projects and refinancing of existing projects, utilizing the same disciplined credit standards.

In addition to the substantial increase in need for new power generation, the tax credit phaseouts for renewable energy generation projects in HR1 will continue to drive near-term growth in this segment, and we believe this will continue over the next 12 months for projects to start construction to meet required milestones to maintain crap tax incentives. Our Broadband Infrastructure segment doubled year-over-year to $1.3 billion as of quarter end, compared to $600 million in the same period last year. The growth primarily reflects the continued demand for data centers. We anticipate increased financing opportunities in this segment for data center build-outs, given the increasing investment in capacity to support AI, cloud storage, and enterprise digitization, particularly by large hyperscalers.

We believe these developments are crucial for rural economic growth and support the historically strong demand for connectivity needs across rural America. Our Power and Utilities segment grew $126 million this quarter, largely due to the strong loan purchase activity supporting the investment needs of rural electric generation, transmission, and distribution cooperatives. Growing business volume in our infrastructure finance segment remains a top priority, and we will continue to focus on strategic investments in these areas to build our expertise and capacity as market opportunities arise. Activity this quarter in our $20.1 billion agricultural finance portfolio reflected strong loan purchase growth in our foundational Farm & Ranch segment, offset by scheduled maturities of large AgVantage facilities or bonds.

Our Farm & Ranch loan purchase portfolio grew by $285 million in the third quarter, far outpacing scheduled maturities. We believe loan purchase growth will continue into the foreseeable future due to ongoing agricultural economic tightening in certain sectors, reflecting commodity price volatility and input inflationary dynamics, the potential for increased tariffs and trade policy changes, as well as general balance sheet management of our community and commercial bank customers, including liquidity needed for farmland equipment purchases by the ultimate farmer borrowers. The Farm & 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 supporting their borrowers’ financial needs.

While AgVantage securities in both Farm & Ranch and Corporate Ag Finance segments faced large maturities over the last year due to many of our partners pausing capital deployment to navigate the ongoing market uncertainty, there continues to be strong demand for wholesale finance products and solutions. For example, prior to quarter end, we successfully closed a new facility with $4.3 billion of borrowing capacity with a large agricultural finance counterparty, further demonstrating the strength of our relationships and the relative value of our wholesale finance product. We do expect additional funding for this facility in the fourth quarter. Looking ahead, we will continue to work closely with these counterparties and tactically determine when to refinance maturing securities or provide incremental financing needs based on current market dynamics, as well as the appropriate return on capital thresholds for this product.

We remain steadfast in our commitment to deliver a broad spectrum of financial solutions to the agriculture community by working alongside our growing customer base. Despite this backdrop of broader market uncertainty 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. 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. And with that, Brad, I’ll turn it back to you.

Bradford Nordholm: Well, thank you, Zack. We delivered yet another record financial result this quarter while fulfilling several important strategic and revenue objectives. We delivered record core earnings, maintained a stable credit profile, reported a core return on equity of 17%, a little bit north of that actually, and we did that while holding our efficiency ratio below our strategic target of 30%. We are optimistic about the future, and we believe that we’ll continue to be well-positioned to deliver on our multiyear strategy with strong liquidity and capital levels, a diversified mix of business, a highly effective risk management practice, and, most importantly, a talented team of dedicated professionals here at Farmer Mac.

I’m going to turn to the Q&A period, but just a quick comment before I do an update on our CFO search. We have interviewed a number of outstanding candidates with strong qualifications and expertise to be the next CFO of Farmer Mac. I’ve been gratified that Farmer Mac is seen as a very desirable employer and career opportunity for many of these qualified people. And I think it’s likely that we’re going to get to an announcement within this calendar quarter, the fourth calendar quarter of 2025. And now, operator, I’d like to see if we have any questions from anyone on the line today.

Q&A Session

Operator: [Operator Instructions] Your first question comes from Bose George from KBW.

Bose George: Congrats, Zack, and all the best, Brad, on your retirement. In terms of questions, I just wanted to start with the question on spreads. Can you just talk about the outlook for spreads, just given the expectations for mix and the forward curve, which I guess is the Fed now cutting about 3x by next summer?

Bradford Nordholm: Yes. Thanks, Bose, and nice to have you on today. A couple of comments. I’ll let Zack get into the mix of business that impacts our NES or net effective spread. But I’d just like to begin with a reminder that the way we run our asset liability management and our match funding strategy here at Farmer Mac, a cut in interest rates by the Fed should have no impact on the net effective spread here at Farmer Mac. We structure our portfolio so that we’re neutral to changes in interest rates at the short end or even the long end of the curve. And so if interest rates go down or interest rates go up, as we have demonstrated quarter in, quarter out for a very long period of time, those changes in market interest rates really don’t impact Farmer Mac much at all, a couple of basis points here and there.

But we are not a bank that immediately benefits from sticky asset pricing and a drop in liability pricing. Ours move in tandem and are structured to remain in tandem. We carefully do upward and downward basis point shocks in funding. And today, as is the case virtually every day at Farmer Mac, those upward and downward shocks really don’t result in a change in profitability in our earnings. So Zack, maybe you can add some color to what’s driving NES and how the mix of business might impact that going forward?

Zachary Carpenter: Yes, happy to. I think first and foremost, we really focus on appropriate risk-adjusted return at Farmer Mac. As we’ve evolved and diversified our business model, we are in new lines of business that carry different risks. And as we put capital to work, we want to make sure that we are achieving returns for those new lines of business. A couple of moving parts in this quarter, I think that showed the diversification benefit. We continue to see strong, strong growth in infrastructure finance. Two of the strong growth segments are broadband and renewable energy. We continue to see significant funding in those segments. Those are market-based deals that do, in many instances, carry more accretive spreads than our core Farm & Ranch or agricultural finance line of business.

And in many instances, these transactions are construction financing. So when you think about a data center, a large commitment over that will fund over time. So we have a very strong pipeline of commitments in the broadband space that will fund as constructions take place, and we will take advantage of, I would say, more accretive spreads than our other lines of business. We don’t see as the market evolves in this space, especially over the foreseeable future, significant changes in credit spreads in these sectors, and thus would anticipate that as fundings take place, relatively stable to accretive spreads in this space. In Farm & Ranch, there was a slight decrease in spreads, and this is typical. I mean, this is the seasonal nature of our payment cycle.

We generally have more prepayments in the first and third quarters, and that generally creates some nonaccruals as we go through the quarter. And we had a little drag in Farm & Ranch from nonaccrual loans that over time will cure, and we’ll receive that interest income, but that was the slight decrease in Farm & Ranch. And then the last component I would say is the investment-grade credit spread market out there is extremely, extremely tight. If you follow some of the transactions, there’s tremendous pricing that these organizations are getting. So we’re being prudent, especially in our AgVantage securities space, to refinance and provide incremental financing when the price makes sense for our capital to go to work. So in instances where there’s very tight credit spreads that may not make sense for us to put capital out the door, we’ll look at other segments such as broadband, renewable, and corporate ag that maybe carry a higher credit spread for us for our capital use versus putting capital out the door to AgVantage.

So again, this goes back to our focus of strong risk-adjusted pricing across all of our segments and making sure that as we put capital to work, we’re supporting our mission, but also getting paid for the risk that we’re taking.

Bose George: And then actually switching over to credit. As some of the other business lines continue to grow, should a provision around the current level that you reported this quarter and last quarter seem like a reasonable place? Or is it still going to be kind of sporadic based on what happens to the portfolio?

Bradford Nordholm: First of all, in terms of context, this provision is tiny compared to other financial institutions. So we’re talking about mid-high 7-figure allowance for an organization that had about $50 million of core after-tax earnings for the quarter. So keeping in that context, this is very, very low. You’ve seen it fluctuate at very low levels for many, many quarters. We go to great lengths to make sure that we uncover and appropriately allowance and value any credits that seem like they’re getting in trouble. And what you see reflected in the third quarter reflects everything that we see right now. As I indicated in my comments earlier, we don’t see systemic risks or sector risks where we have a series of loans that are in trouble.

It tends to be a little bit more episodic. The closest that I reported in my comments earlier today were a few loans in California. I’m talking about a handful that were negatively impacted by changes in water policy in California in an effort to manage subsidies, the actual depletion of groundwater, and the lowering of the elevation of land. And that was a very, very comprehensive review. As of today, we don’t see anything else on the horizon that would cause the numbers to increase. But look at, there’s very likely to be continuing episodic events and some numbers here and there. Today, we don’t see anything that would make us think that the number next quarter is going to jump out of that kind of 7-figure range.

Operator: The next question comes from Bill Ryan from Seaport Global.

William Ryan: I’d also like to extend congratulations to both you, Brad, and Zack, for the announcement a couple of months ago. A couple of questions. First, starting off on the big picture of things. Obviously, a lot of headlines over the last quarter that I think have impacted the stock price at least to some degree, specifically tariffs. And the media has portrayed as the end of the farmer, it seems like when you listen to the news. But obviously, you portrayed it very differently on the call today. Could you maybe remind us what the crops are that, I guess, I’d say we know about soybeans, but what are the crops that are being most impacted by tariffs? What are you seeing? And as far as having the market stabilization payments to farmers started? Or is that kind of on the come?

Bradford Nordholm: Yes. Well, thank you, Bill. And we appreciate the recognition that you made that it’s probably some of these headlines and major publications about negative developments in agriculture that have negatively impacted our stock price. We see the same thing. But it’s always a little bit more of a nuanced story. Soybean prices in the last 2.5 weeks are up 10%. Almond prices were a very large portion of the crop, 50% is shipped to Asia, you think we’d be very negative in the last 1.5 years, prices there are up to over $3 a pound from a mid-$1 a pound range 18 months ago. So, yes, there are definitely financial pressures in major crops, soybeans, corn and cotton, also wheat. We pay great attention to that. We are very concerned about the farm families that may be negatively impacted by that.

But we have seen these cycles in American agriculture before. The last time was in 2019, 2020. And we believe that through a combination of better balances in supply/demand globally, more stabilization in tariff and export policies, and farmers making crude decisions based on what they see in front of them. If you asked someone a month ago, “Are we going to be planting as many soybeans in the United States in 2026 as in ’25?” The answer is a resounding no. Farmers are very smart and very adaptive, and they look at market conditions and adjust accordingly. So we look at what actually happens to our portfolio, which is really a second derivative from what’s going on in the countryside. And we haven’t seen the impact that may be suggested by the headlines.

Going to discretionary payments, what we call market facilitation payments during the Trump first administration, I think we’re expecting to see about $10 billion to $12 billion flow in the next couple of weeks. There is a discussion about additional payments towards the end of the year. We’ll see how that materializes. And I would note, when you think about those headlines, that there are advocacy groups for farmers who are interested in telling a story that results in sentiment, greater support for voluntary payments from the federal government. And that has been one factor in what has been motivating and capturing a lot of headlines recently.

Zachary Carpenter: Bill, this is Zack. Just one comment as you think about Farmer Mac and our unique nature as a national secondary market, but we’re not focused on specific regions, and that’s important. I mean, there’s a lot of negativity on the soybean farmers out there. But if you look at dairy, protein, livestock, a significant part of the ag sector is having tremendously strong results, tremendously strong export markets. And when you think about Farmer Mac, I’ve looked at the year-to-date loan purchases in our Farm & Ranch space is over 100 different commodities in practically all 50 states, covering all of these different ag sectors. So I think it’s important when you think about our national diversity that we are diverse.

We are executing across all the different ag commodities, and we’re seeing a lot of the benefits of the strength of many of those ag borrowers that are seeing record years wanting to buy more land, wanting to buy more equipment, and we’re able to support that as well as we have concerns for providing liquidity and solutions for other farmers that may be having a more difficult time.

William Ryan: And just as a follow-up question, you highlighted Farm & Ranch. And if I got my numbers right, the new business volume was up about 38% in the quarter, following a 28% year-over-year increase. Last quarter, I believe the outstanding balance was up for the first time in like 5 or 6 quarters in terms of outstandings. And you also know there’s a higher level of prepayments in the quarter as well. Are we hitting a point that, that business might begin to accelerate a little bit more, just in terms of total outstanding volume? And a part of that has the structure of the loans that you’re offering changed? Is it a fixed rate, a variable rate? Is the mix about the same as it has been in the past?

Zachary Carpenter: I mean, that’s a tremendous question. And I think we’ve been focused on this for some time now in a couple of different areas. First, yes, we are seeing a significant increase in loan applications, loan approvals using the Farmer Mac secondary market across the board. As I mentioned earlier, the number of commodities that we’ve supported this year is over 100. So it’s broad-based. And I think that’s coming from numerous different avenues. First, yes, there are ag sectors out there that are incredibly strong and want to borrow and leverage the opportunities in the market. We are seeing that. Clearly, some sectors need liquidity to support working capital. Many of these borrowers are underlevered. They have significant equity in their land, and it’s a key component of getting liquidity to support maybe a tough 2025 harvest, and we’re seeing that as well.

Interestingly enough, a significant majority of the growth in 2025 has been new money loans, meaning borrowers coming in to find liquidity for a new land purchase, equipment purchase. So again, going back to Brad’s point, we are not seeing that significant stress that people are reading in the environment and the articles in our portfolio, which gives us confidence that we see continued growth going forward. [Technical Difficulty] We anticipate that as rates continue to mostly come lower, that will also increase loan demand. In terms of the structure of our loans, we changed our under. We continue to be very consistent on how we look at risk buffer pricing risk that farmers generally go into more products given the pricing between fixed rate mortgage hasn’t changed over the years consistently [indiscernible] is our bank’s commercial institutions to manage their capital, their loan to deposit that need to potentially secondary market increased tension and/or for the second dynamics.

We look forward to [indiscernible].

Operator: Next question, Brendan Michael McCarthy from Sidoti.

Brendan Michael McCarthy: [ Technical Difficulty] Congratulations, Brad and Zack. I also wanted to just ask how prepayment expectations are looking ahead.

Zachary Carpenter: [Technical Difficulty] Prepayment, I’d say, the drop in rates in 2021, we don’t envision increasing significantly, just given that we don’t think rates are going to drop to accelerated levels. And I think a key component of that is in 2020 and 2021, a significant number of borrowers who just locked in long-term fixed-rate mortgages at historically low rates, those are set for life. There’s no way those are going to be touched or refined. So what we’re seeing now is a much lower environment for prepayments given the bulk of those refinancings took place, coupled with rates may moderate a little bit, but it’s not going to significantly come down to lower levels to entice that refinancing opportunity, which is tending to then lower prepayment speeds as well as farmers are going to take probably shorter maturity variable rate mortgages to manage the volatility that they experience across their different ag sectors.

Brendan Michael McCarthy: I wanted to go to the net effective spread back up to 1.2%, a really strong level. I know, looking back at the past couple of quarters, there might have been the expectation that the net effective spread would stabilize, maybe closer to the mid-teens area. But obviously, there’s some secular growth trends at play there with the infrastructure finance segment. Just curious if there’s anything baked into that net effective spread, 1.2% that might have surprised you, or maybe just previous past quarterly movements upwards, has that come as a surprise at all to you?

Bradford Nordholm: We acknowledge that it’s probably a little bit higher than we have commented on over the last year. But so too has been the pace of growth, particularly in rural infrastructure, which is amongst the most accretive segments that we have. And so that’s really the primary reason. It’s a good news story from our standpoint. And I think Zack provided some good commentary and analysis on that mix going forward, with maybe a little bit of pressure on corporate and AgVantage, but acceleration of the Farm & Ranch opportunity and continuing very, very strong strength and expectations for rural infrastructure.

Zachary Carpenter: Brendan, the only thing I’d comment on as well is mix is important here. We’ve been talking about some of the headwinds we’ve seen in Farm & Ranch AgVantage, that product by itself is a fairly tight net effective spread margin, just given the strength of the counterparties we’re lending to. So when you see a lot of that volume mature, especially in this environment with historically low credit spreads, part of it we’re choosing not to put money out the door because that investment doesn’t make sense for us. So with that headwind in the maturity space and the significant growth elsewhere, the mix is really rebalancing the NIS spread to the higher level of our range than what we’d expect if we saw a lot of AgVantage volume.

Brendan Michael McCarthy: And one quick question on the credit side with the $7.4 million provision in the quarter, specifically as it relates to the $6.8 million provision in Ag Finance. Just looking at the breakdown there, would you say that was more weighted towards just general volume growth or the groundwater regulations in California you mentioned?

Bradford Nordholm: It was actually a mix of growth that comes through our CECL models and the groundwater. And I think we also called out 3 specific credits that had special allowances. So once again, it was a mix. I characterize it as episodic, and that’s really what it was.

Brendan Michael McCarthy: And then the $4.4 million charge-off, the 3 borrowers there, I guess that was probably disclosed previously in a provision. Is that correct?

Bradford Nordholm: No. No, it was just 3 small loans.

Brendan Michael McCarthy: Then lastly, I just wanted to obviously comment on the environment, more negative than what you have disclosed on the earnings call here regarding the diversification of your portfolio. But just considering where the share price is, and really, maybe a misconception among investors, were you active at all in the share repurchasing program that we discussed last quarter?

Bradford Nordholm: We were. We disclosed the purchase of about 30,000 shares at a price of about $5 million. That was the fourth quarter.

Operator: There are no further questions at this time. I will now turn the call over to Brad Nordholm. Please continue.

Bradford Nordholm: Great. Well, thank you. Thank you very much. Once again, we really appreciate you taking time out of your day to join us. We’re proud of our results. I hope that’s very clear. Once again, I think someone once characterized our results as boring. If record NES, 17% ROE, stable credit factors, and an efficiency ratio of 30% or boring, I’ll take that any day, and I hope you appreciate it, too. So thanks for joining us. And again, if you have any questions whatsoever, please take them in with Jalpa. We’ll circle up the right team to have a special call with you, talk you through your questions. Otherwise, we look forward to getting back with you on our regular scheduled call in February to discuss our fourth quarter and fiscal 2025 results. Good day.

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