Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q2 2024 Earnings Presentation
34 slides from Federal Agricultural Mortgage's earnings presentation, Aug 5, 2024
Slide 1: Equity Investor Presentation Second Quarter 2024
Equity Investor Presentation Second Quarter 2024
Slide 2: Forward-Looking Statements
Forward-Looking Statements In addition to historical information, this presentation includes forward-looking statements that reflect management’s current expectations for Farmer Mac’s future financial results, business prospects, and business developments. Forward-looking statements include, without
Slide 3: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures This presentation is for general informational purposes only, is current only as of June 30, 2024 and should be read in conjunction with Farmer Mac’s Quarterly Report on Form 10-Q filed with the SEC on August 5, 2024. In the accompanying analysis of its financial i
Slide 4: Why Invest in Farmer Mac?
WHY INVEST IN FARMER MAC? A New York Stock Exchange Listed Government Sponsored Enterprise Uniquely Positioned (GSE) that provides investors the unique opportunity to invest in American agriculture and rural infrastructure. Well-positioned to benefit from the growing agricultural mortgage Focused on
Slide 5: Mission Focused
MISSION FOCUSED Strengthen Lower Increase Our Corporate Rural America Financing Costs Access to Credit Culture is Rooted in Our Values • Farmer Mac is a publicly • Farmer Mac increases the • Farmer Mac provides a • Innovation traded company driven by accessibility of financing secondary market to a
Slide 6: A Mission-Driven, For-Profit Company
A MISSION-DRIVEN, FOR-PROFIT COMPANY 1988 1996 2008 Farmer Mac initially chartered as an Second expansion of authority: Third expansion of authority: instrumentality of the United States direct loan purchases rural utilities loans 1990 1999 TODAY First expansion of authority: Listed on NYSE With out
Slide 7: Executive Leadership
EXECUTIVE LEADERSHIP Bradford T. Nordholm Aparna Ramesh Zachary N. Carpenter President & Executive Vice President – Chief Executive Vice President – Chief Chief Executive Officer Financial Officer & Treasurer Business Officer • 40+ years of agricultural and energy finance • 20+ years of experience i
Slide 8: Central to a Large Agricultural Mortgage Market
CENTRAL TO A LARGE AGRICULTURAL MORTGAGE MARKET (1) $4,089,950,684 $4,000,000,000 Machinery & Vehicles, $362,280,165 $3,500,000,000 $3,000,000,000 Ag Real Estate Debt-to-Asset Ratio: $2,500,000,000 10.4% $ IN THOUSANDS Real Estate $2,000,000,000 $3,419,530,718 $1,500,000,000 $1,000,000,000 $520,628,
Slide 9: Competitive Landscape
COMPETITIVE LANDSCAPE Mortgage Financing Mortgage Financing $355 Farm Credit System (FCS) BILLION Non-FCS (Cooperative GSE) Ag Lenders Agricultural • Four FCS Banks Mortgage Market • Insurance Companies • 56 Retail Agricultural Credit (Farmers & Ranchers) • Ag Banks Associations • Non-Bank Lenders (
Slide 10: Farmer Mac's Operating Model
FARMER MAC’S OPERATING MODEL Farmer Mac’s Regulatory/Congressional Oversight • Regulated by the Farm Credit Administration (FCA) through its Office of Secondary Market Oversight (OSMO) • Congressional oversight through Senate and House Agricultural Committees Operating model excludes issued agricult
Slide 11: Segment Profitability
SEGMENT PROFITABILITY Volume 2Q24 Net Risk-Adjusted Each operating segment is comprised Line of Gross Return on of both spread-based and fee-income Segment ($ IN BILLIONS Effective Business AS OF Allocated Capital 6/30/2024) Spread (%) (%) products • Loan purchases (spread) • Wholesale Funding (spre
Slide 12: Agricultural Finance Loan Portfolio Diversification
AGRICULTURAL FINANCE LOAN PORTFOLIO DIVERSIFICATION By Commodity Type By Geographic Region Part-time Farm Northeast Southeast 4% Ag. Storage and 4% 9% Processing 6% Northwest 12% Livestock Mid-South 19% 17% Mid-North Permanent 27% Plantings Crops Southwest 22% 49% 31% As of June 30, 2024 Agricultura
Slide 13: Treasury/Investments Segment
TREASURY/INVESTMENTS SEGMENT Includes the financial results of the company’s Liquidity Portfolio funding, liquidity, and capital allocation strategies and operations Guaranteed By GSEs and U.S. Cash & Equiv. Liquidity & Investment Portfolio 14.9% Gov't Agencies 84.8% • Maintain investment portfolio
Slide 14: Growing, Recurring, High-Quality Earnings
GROWING, RECURRING, HIGH-QUALITY EARNINGS Consistent historical financial performance highlights the diversification and resiliency of Farmer Mac’s business model Disciplined asset liability management and uninterrupted access to the capital markets have provided buffer against market volatility and
Slide 15: Growth Opportunities to Increase Assets Under Management
GROWTH OPPORTUNITIES TO INCREASE ASSETS UNDER MANAGEMENT Agricultural Pool Rural Infrastructure Finance Purchases Finance Securitization Renewable Energy & Project Finance Growing Wholesale Electricity Funding Demand Syndications Loan Rural Servicing Broadband Collateral Value Efficiencies Core Farm
Slide 16: Agricultural Mortgage-Backed Securities Opportunity
AGRICULTURAL MORTGAGE-BACKED SECURITIES OPPORTUNITY FARM securitization program exemplifies Farmer Mac’s core mission to lower costs for the end borrower and improve credit availability in rural America, while transforming the agricultural mortgage market industry with new efficiencies Building upon
Slide 17: Positioning for Growth with Securitization
POSITIONING FOR GROWTH WITH SECURITIZATION As Farmer Mac grows its business, securitization is available as a tool to achieve capital relief • Securitization is expected to stimulate growth by increasing Farmer Mac’s brand awareness in the capital markets Securitization provides an alternative optio
Slide 18: Farmer Mac Uses Proven, Rigorous Underwriting
FARMER MAC USES PROVEN, RIGOROUS UNDERWRITING Industry-leading credit Credits are less likely to Losses less likely even in requirements default default • Total debt coverage ratio • Focus on repayment • Average portfolio LTV of of at least 1.25x capacity through stressed 46% as of June 30, 2024 • L
Slide 19: Credit Consistently Outperforms
CREDIT CONSISTENTLY OUTPERFORMS 90-Day Delinquencies 3.00% 2.00% 1.00% 0.51% 0.54% 0.22% 0.00% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 2Q24 Industry 90-Day Delinquencies (4) Farmer Mac 90-Day Delinquencies (Agricultural Finan
Slide 20: Historical Credit Losses
HISTORICAL CREDIT LOSSES $12 Ag Storage & Processing Crops Permanent Plantings Livestock Part-Time Farm / Rural Housing $10 $8 NET LOSS / (GAIN) $ IN MILLIONS $6 $4 $2 $0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 21: Allowance for Losses—Quarterly
ALLOWANCE FOR LOSSES —QUARTERLY The total allowance for losses increased $2.2 million to $18.6 million in second quarter 2024. • The $0.6 million net provision to the allowance for the Rural Infrastructure Finance portfolio during the quarter ended June 30, 2024 was primarily attributable to volume
Slide 22: Strong, Growing Capital Base
STRONG, GROWING $1,600 $1,510 33.0% CAPITAL BASE $1,400 $1,323 $1,452 28.0% Consistent, strong earnings growth has $1,210 supported capital base and allowed for $1,200 $626 consistent returns to shareholders $589 23.0% $1,012 $517 TIER 1 CAPITAL RATIO (%) CORE CAPITAL$ IN MILLIONS $1,000 $497 Opport
Slide 23: Key Metrics
KEY METRICS Operating Efficiency Return on Common Equity 31% 25% Maintain Efficiency Ratio Below 30% Return on Common Equity greater than 14% 30% 20% 29% 28% 15% 27% 26% 10% 19% 29% 29% 17% 16% 16% 16% 25% 27% 27% 5% 24% 26% 23% 0% 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 • 185 employees ma
Slide 24: Quality Earnings Drive Strong Dividends
QUALITY EARNINGS DRIVE STRONG DIVIDENDS Strong earnings and consistent capital position $1.60 27% year-over-year increase in 2024 support continued dividend growth for $1.40 Farmer Mac. $1.40 • Farmer Mac’s dividend growth rate over the past 13 Increased quarterly dividend $1.20 payments for 13 cons
Slide 25: Why Invest in Farmer Mac?
WHY INVEST IN FARMER MAC? A New York Stock Exchange Listed Government Sponsored Enterprise Uniquely Positioned (GSE) that provides investors the unique opportunity to invest in American agriculture and rural infrastructure. Well-positioned to benefit from the growing agricultural mortgage Focused on
Slide 26: Appendix
APPENDIX
Slide 27: Key Company Metrics
KEY COMPANY METRICS ($ in thousands, except per share amounts) 2024 YTD 2023 2022 2021 2020 Core Earnings $83,169 $171,156 $124,314 $113,570 $100,612 Core Earnings per Diluted Share $7.59 $15.65 $11.42 $10.47 $9.33 Net Effective Spread ($) $166,640 $326,980 $255,529 $220,668 $196,956 Net Effective S
Slide 28: Why Invest in Farmer Mac?
WHY INVEST IN FARMER MAC? A New York Stock Exchange Listed Government Sponsored Enterprise Uniquely Positioned (GSE) that provides investors the unique opportunity to invest in American agriculture and rural infrastructure. Well-positioned to benefit from the growing agricultural mortgage Focused on
Slide 29: Equity Capital Structure
EQUITY CAPITAL STRUCTURE Summary Stratifications NYSE Ticker Dividend Yield Shares Outstanding CLASS A VOTING COMMON STOCK AGM.A 4.42% 1.0 million • Ownership restricted to non-Farm Credit System financial institutions COMMON CLASS B VOTING COMMON STOCK – – 0.5 million STOCK • Ownership restricted t
Slide 30: Funding
FUNDING Finance asset purchases with proceeds of debt issuances: • 30 dealers • Match-funding provides for stable net effective spread and immaterial interest rate risk Farmer Mac’s debt securities carry privileges for certain holders: • 20% capital risk weighting • Eligible collateral for Fed advan
Slide 31: Reconciliation of Net Income to Core Earnings
RECONCILIATION OF NET INCOME TO CORE EARNINGS Core Earnings by Period Ended (in thousands) 2024 YTD 2023 2022 2021 2020 Net income attributable to common stockholders $ 87,268 $ 172,838 $ 150,979 $ 111,413 $ 94,904 Less reconciling items: (Losses)/gains on undesignated financial derivatives due to f
Slide 32: Reconciliation of Net Interest Income to Net Effective Spread
RECONCILIATION OF NET INTEREST INCOME TO NET EFFECTIVE SPREAD For the Year Ended June 30, 2024 2024 YTD 2023 2022 2021 2020 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield $ 173,708 1.15% $ 327,547 1.15% $ 270,940 1.04% $ 221,951 0.94% $
Slide 33: Resources
RESOURCES Footnote 1: USDA Economic Research Service year end 2023 balance sheet (https://data.ers.usda.gov/reports.aspx?ID=17835). Farm Sector Assets and Farm Sector Debt values are values for 2023 from USDA Economic Research Service. Footnote 2: USDA, Economic Research Service U.S. and State-Level
Slide 34: Farmer Mac
FARMER MAC
Federal Agricultural Mortgage — Q2 2024 Earnings Presentation on 6ix