Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q2 2022 Earnings Presentation
29 slides from Federal Agricultural Mortgage's earnings presentation, Aug 12, 2022
Slide 1: Second Quarter 2022 Equity Investor Presentation
Second Quarter 2022 Equi t y I nvest or Present at i on
Slide 2: Forward-Looking Statements
F AR M E R M AC Forward-Looking Statements In addition to historical information, this presentation includes forward- NO OFFER OR SOLICITATION OF SECURITIES looking statements that reflect management’s current expectations for This presentation does not constitute an offer to sell or a solicitation
Slide 3: Use of Non-GAAP Financial Measures
F AR M E R M AC Use of Non-GAAP Financial Measures This presentation is for general informational purposes only, is current Core earnings and core earnings per share also differ from net income only as of June 30, 2022 and should be read in conjunction with attributable to common stockholders and ea
Slide 4: Investment Highlights
F AR M E R M AC Investment Highlights •90-Day delinquencies of only 0.08% across all lines of business Quality Assets •Cumulative Agricultural Finance Mortgage Loans lifetime losses of only 0.11% •Issue at narrow, Government Sponsored Enterprise (GSE) spreads to U.S. Treasuries Funding Advantage •E.
Slide 5: A Mission-Driven, For-Profit Company
F AR M E R M AC A Mission-Driven, For-Profit Company Our Mission Farmer Mac is committed to help build a strong and vital rural Farmer Mac initially chartered America by increasing the availability and affordability of by Congress as an instrumentality credit for the benefit of American agricultural
Slide 6: Executive Leadership
F AR M E R M AC Executive Leadership Bradford T. Nordholm Aparna Ramesh Zachary N. Carpenter President & Chief Executive Officer Executive Vice President – Chief Financial Executive Vice President – Chief Business Officer & Treasurer Officer • 20+ years of experience in mission-oriented • 15+ years
Slide 7: U.S. Agricultural Balance Sheet
F AR M E R M AC U.S. Agricultural Balance Sheet (1) $3,270,333,169 Machinery & Vehicles, $289,097,805 $3,000,000,000 $2,500,000,000 $2,000,000,000 Ag Real Estate $ in thousands Real Estate Debt-to-Asset Ratio: $2,693,379,619 11.2% $1,500,000,000 $1,000,000,000 Farmer Mac Market Share: $454,320,552 6
Slide 8: Central to a Large Addressable Ag Mortgage Market
F AR M E R M AC Central to a Large Addressable Ag Mortgage Market (3) (FCS Secondary Market GSE) $18.2 Billion (6.0% Market Share) Agricultural Finance Line of Business (Farm & Ranch and Corporate AgFinance) Farm Credit System Non-FCS Ag (FCS) Lenders (Cooperative GSE) AG BANKS Addressable • Insuran
Slide 9: Farmer Mac's Operating Model
F AR M E R M AC Farmer Mac’s Operating Model Farmer Mac’s Regulatory/Congressional Oversight • Regulated by the Farm Credit Administration (FCA) through its Office of Secondary Market Oversight (OSMO) • Congressional oversight through Senate and House Agricultural Committees Operating model excludes
Slide 10: Growth Opportunities
F AR M E R M AC Growth Opportunities Broaden Farmer Mac’s Market Evaluating opportunities not currently = Relative Size being pursued by Farmer Mac of Volume • New lines of business Opportunity Renewable • New products Energy, Project Finance Deepen Farmer Mac’s Market Broaden Farmer Mac’s Market =
Slide 11: Lines of Business
F AR M E R M AC Lines of Business AS OF JUNE 30, 2022 Spread Income Fee Income Volume Q2 Net Effective Line of Business Segment Products Products ($ IN BILLIONS) Spread (%) • Loans • LTSPCs • AgVantage • Guaranteed Securities Securities Farm & Ranch $16.6 1.05% • Guaranteed • Loans Agricultural Fina
Slide 12: Agricultural Finance Loan Portfolio Diversification
F AR M E R M AC Agricultural Finance Loan Portfolio Diversification AS OF JUNE 30, 2022 By Commodity Type By Geographic Region Ag. Storage and Part-time Farm Processing 5% 4% Northeast 4% Southeast Northwest 9% 13% Livestock Mid-South 19% Crops 16% 50% Southwest 31% Permanent Plantings 22% Mid-North
Slide 13: Treasury/Investments Segment
F AR M E R M AC Treasury/Investments Segment AS OF JUNE 30, 2022 Treasury segment includes the financial Liquidity Portfolio results of the company’s funding, liquidity, and capital allocation strategies and Asset-Backed Securities operations. 0.4% Liquidity & Investment Portfolio Maintain investmen
Slide 14: Growing, Recurring, High-Quality Earnings
F AR M E R M AC Growing, Recurring, High-Quality Earnings Outstanding Business Volume $30.0 6.2% CAGR $25.0 (2018-2021) $20.0 $ IN BILLIONS $15.0 $10.0 $5.0 $19.7 $21.1 $21.9 $23.6 $24.5 $0.0 2018 2019 2020 2021 Q2 2022 Outstanding Business Volume Net Effective Spread & Core Earnings 13.4% CAGR 10.6
Slide 15: Quality Earnings Drives Strong Dividends
F AR M E R M AC Quality Earnings Drives Strong Dividends $1.00 $0.95 $0.90 $0.88 Increased quarterly dividend payments for 11 consecutive years $0.80 $0.80 $0.70 $0.70 $0.60 $0.58 $ PER SHARE $0.50 $0.40 $0.36 $0.30 $0.26 $0.20 $0.14 $0.16 $0.10 $0.12 $0.10 $0.05 $0.00 2011 2012 2013 2014 2015 2016
Slide 16: Farmer Mac Uses Proven, Rigorous Underwriting
F AR M E R M AC Farmer Mac Uses Proven, Rigorous Underwriting Industry-leading Credits are less Losses less likely credit requirements likely to default even in default – Average portfolio LTV – Total debt coverage ratio – Focus on repayment of 46% as of June 30, of at least 1.25x capacity through 2
Slide 17: Credit Consistently Outperforms
F AR M E R M AC Credit Consistently Outperforms 90-Day Delinquencies 2.50% 2.00% 1.50% 1.00% 0.74% 0.50% 0.20% 0.08% 0.00% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 2Q22 Industry 90-Day Delinquencies (6) Farmer Mac 90-Day Delinquencies (
Slide 18: Historical Credit Losses
F AR M E R M AC Historical Credit Losses Ag Storage & Processing Crops Permanent Plantings Livestock Part-Time Farm / Rural Housing $12 $10 NET LOSS / (GAIN) $ IN MILLIONS $8 $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 201
Slide 19: Allowance for Losses – Quarterly
F AR M E R M AC Allowance for Losses – Quarterly Farmer Mac recorded a $1.5 million release in its total allowance for losses in second quarter 2022. • $1.2 million release from the allowance for the Rural Infrastructure Finance portfolio was primarily due to forecast model parameter updates. • $0.3
Slide 20: Strong and Growing Equity Capital Base
F AR M E R M AC Strong and Growing Equity Capital Base 35.0% $1,262 $1,201 $1,200 30.0% $1,006 $1,000 $506 $487 25.0% TIER 1 CAPITAL RATIO (%) $815 $325 $800 CORE CAPITAL $ IN MILLIONS $728 20.0% $197 $183 $600 15.0% 14.1% 14.7% 14.7% 13.4% 12.9% $400 10.0% $200 5.0% $545 $619 $681 $714 $756 $0 0.0%
Slide 21: Investment Highlights
F AR M E R M AC Investment Highlights •90-Day delinquencies of only 0.08% across all lines of business Quality Assets •Cumulative Agricultural Finance Mortgage Loans lifetime losses of only 0.11% •Issue at narrow, Government Sponsored Enterprise (GSE) spreads to U.S. Treasuries Funding Advantage •E.
Slide 22: Appendix
Appendix Financing Rural America’
Slide 23: Key Company Metrics
F AR M E R M AC Key Company Metrics ($ in thousands, except per share amounts) YTD 2022 2021 2020 2019 2018 Core Earnings $56,509 $113,570 $100,612 $93,742 $84,047 Core Earnings per Diluted Share $5.20 $10.47 $9.33 $8.70 $7.82 Net Effective Spread ($) $118,785 $220,668 $196,956 $168,608 $151,195 Net
Slide 24: Equity Capital Structure
F AR M E R M AC Equity Capital Structure NYSE Dividend Shares Ticker Yield Outstanding COMMON STOCK CLASS A VOTING COMMON STOCK AGM.A 4.09% 1.0 million • Ownership restricted to non-Farm Credit System financial institutions CLASS B VOTING COMMON STOCK -- -- 0.5 million • Ownership restricted to Farm
Slide 25: Funding
F AR M E R M AC 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
Slide 26: "Demand Pull" Provides Sustained Growth Opportunity
F AR M E R M AC “Demand Pull” Provides Sustained Growth Opportunity (12) (13) 12.0 0.50 0.43 0.45 10.0 ARABLE LAND PER CAPITA (hectare in use per person) 0.40 WORLD POPULATION 8.0 0.35 (in billions) 0.30 6.0 0.25 0.18 0.20 4.0 0.15 2.0 0.10 3.0 9.8 0.05 0.0 0.00 1960 1970 1980 1990 2000 2010 2020 20
Slide 27: Reconciliation of Net Income to Core Earnings
F AR M E R M AC Reconciliation of Net Income to Core Earnings Core Earnings by Period Ended (in thousands) YTD 2022 2021 2020 2019 2018 Net income attributable to common stockholders $ 80,150 $ 107,583 $ 89,176 $ 93,650 $ 94,898 Less reconciling items: Gains/(losses) on undesignated financial deriva
Slide 28: Reconciliation of Net Interest Income to Net Effective Spread
F AR M E R M AC Reconciliation of Net Interest Income to Net Effective Spread For the Year Ended December 31, YTD 2022 2021 2020 2019 2018 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield $ 131,277 1.04% $ 220,775 0.94% $ 190,588 0.85% $
Slide 29: Resources
F AR M E R M AC Resources Footnote 1: USDA Economic Research Service year end 2021F balance sheet (https://data.ers.usda.gov/reports.aspx?ID=17835). Farm Sector Assets and Farm Sector Debt values are forecasted values for 2021 from USDA Economic Research Service. Footnote 2: Farmer’s Mac’s total inc
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