Company: AGM-PH
Filing Date: 2025-05-09
Form Type: 10-Q
Source: 0000845877-25-000152
Chunk: 272

Company: FEDERAL AGRICULTURAL MORTGAGE CORP
Filing Date: 2025-05-09
Form: 10-Q
Item: Part I, Item 2
Chunk 272
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 mortgages) of the borrower and the value of the borrowing entity depends on its ability to generate recurring positive cash flow. Enterprise Value is the estimated value of the borrower as a going concern, which is estimated using one or more valuation techniques such as discounted cash flow, cash flow multiples, asset liquidation, or other valuation techniques. 

(5)Includes aggregated loans to single borrowers or borrower-related entities.

Another indicator that Farmer Mac considers in analyzing the credit quality of its Agricultural Finance mortgage loans is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding portfolio. Assets categorized as "substandard" have a well-defined weakness or weaknesses, and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. As of March 31, 2025, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $466.0 million (3.8% of the portfolio), compared to $398.3 million (3.2% of the portfolio) as of December 31, 2024. Those substandard assets comprised 380 loans as of March 31, 2025 and 336 loans as of December 31, 2024.  

The increase of $67.7 million in Agricultural Finance substandard assets during first quarter 2025 was primarily attributable to credit risk rating downgrades in agricultural storage and processing and crop loans. Credit performance within the crops and livestock commodities have begun to revert toward historical averages after those commodities were supported by higher commodity prices and federal government support payments in previous years.

The percentage of Agricultural Finance substandard assets within the portfolio as of March 31, 2025 was below the historical average. Farmer Mac's average Agricultural Finance substandard assets as a percentage of its Agricultural Finance mortgage loans over the last 15 years is approximately 4%. The highest substandard asset rate observed during the last 15 years occurred in 2010 at approximately 8%, which coincided with an increase in substandard loans within Farmer Mac's ethanol portfolio. If Farmer Mac's substandard asset rate increases from current levels on a sustained basis, it is likely that Farmer Mac's provision to the allowance for loan losses and the reserve for losses would also increase.  

Although some credit losses are inherent to the business of agricultural lending, Farmer Mac believes that losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its Agricultural Finance portfolio, which Farmer Mac believes is adequately collateralized