Company: AGM-PH
Filing Date: 2025-11-03
Form Type: 10-Q
Source: 0000845877-25-000252
Chunk: 296

Company: FEDERAL AGRICULTURAL MORTGAGE CORP
Filing Date: 2025-11-03
Form: 10-Q
Item: Part I, Item 2
Chunk 296
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 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 September 30, 2025, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $521.1 million (4.0% of the portfolio), compared to $453.0 million (3.5% of the portfolio) as of June 30, 2025, and $398.3 million (3.2% of the portfolio) as of December 31, 2024. Those substandard assets comprised 409 loans as of September 30, 2025, 367 loans as of June 30, 2025, and 336 loans as of December 31, 2024.  

The increase of $68.1 million in Agricultural Finance substandard assets during third quarter 2025 was primarily attributable to credit risk rating downgrades in crops and permanent plantings. Credit performance within the crops and livestock commodities continues 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 of 4.0% as of September 30, 2025 is in line with the historical average of approximately 4% calculated based on substandard assets as a percentage of Agricultural Finance loans over the last 15 years. 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.

Within Agricultural Finance