Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q2 2023 Earnings Presentation
29 slides from Federal Agricultural Mortgage's earnings presentation, Aug 7, 2023
Slide 1: Second Quarter 2023 Equity Investor Presentation
Second Quarter 2023 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, 2023 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 0.17% 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) $4,000,000,000 $3,848,184,726 Machinery & Vehicles, $322,698,486 $3,500,000,000 $3,000,000,000 $2,500,000,000 $ in thousands $2,000,000,000 Real Estate $3,188,219,412 Ag Real Estate $1,500,000,000 Debt-to-Asset Ratio: 10.9% $1,000,000,000 $503,894,
Slide 8: Central to a Large Agricultural Mortgage Market
F AR M E R M AC Central to a Large Agricultural Mortgage Market (2) (FCS Secondary Market GSE) Agricultural Finance Line of Business (Farm & Ranch and Corporate AgFinance) Farm Credit System Non-FCS Ag (FCS) Lenders (Cooperative GSE) AG BANKS Agricultural • Insurance Companies $61B • Four FCS Banks
Slide 9: Farmer Mac's Operating Model
F AR M E R M AC Farmer Mac’s Operating Model Farmer Mac’s Regulatory/Congressional Oversight • Regulated by the Farm Credit Administration (FCA) through its Office of Secondary Market Oversight (OSMO) • Congressional oversight through Senate and House Agricultural Committees Operating model excludes
Slide 10: Growth Opportunities: Broaden Farmer Mac's Market
F AR M E R M AC Growth Opportunities = Relative Size of Volume Renewable Opportunity Broaden Farmer Mac’s Market Energy, Project Broaden Farmer Mac’s Market Evaluating opportunities not currently Finance = Broaden being pursued by Farmer Mac Securitization • New lines of business = Deepen Syndicatio
Slide 11: Lines of Business
F AR M E R M AC Lines of Business AS OF JUNE 30, 2023 Spread Income Fee Income Volume Q2 Net Effective Line of Business Segment Products Products ($ IN BILLIONS) Spread (%) • Loans • LTSPCs • AgVantage • Guaranteed Securities Securities Farm & Ranch $18.1 1.03% • 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, 2023 By Commodity Type By Geographic Region Ag. Storage and Processing Part-time Farm 5% Northeast 5% 4% Southeast Northwest 9% 13% Livestock Mid-South 18% Crops 17% 50% Southwest 30% Permanent Plantings 22% Mid-North
Slide 13: Treasury/Investments Segment
F AR M E R M AC Treasury/Investments Segment AS OF JUNE 30, 2023 Treasury segment includes the financial Liquidity Portfolio results of the company’s funding, liquidity, and capital allocation strategies and Asset-Backed Securities operations. 0.3% 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 7% CAGR $25.0 (2019-2022) $20.0 $ IN BILLIONS $15.0 $10.0 $5.0 $21.1 $21.9 $23.6 $25.9 $26.7 $0.0 2019 2020 2021 2022 Q2 2023 Outstanding Business Volume Net Effective Spread & Core Earnings 15% CAGR 10% CAGR
Slide 15: Quality Earnings Drives Strong Dividends
F AR M E R M AC Quality Earnings Drives Strong Dividends Strong earnings and consistent capital $1.20 position supports continued dividend $1.10 growth for Farmer Mac. $1.00 $0.95 • Farmer Mac’s dividend growth rate over the Increased quarterly dividend payments for 12 consecutive years $0.88 past 1
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 45% 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 3.00% 2.50% 2.00% 1.50% 1.00% 0.51% 0.50% 0.42% 0.17% 0.00% FY01FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21FY222Q23 Industry 90-Day Delinquencies (5) Farmer Mac 90-Day Delinquencies (Agricultura
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 The total allowance for losses increased $1.1 million to $19.1 million in second quarter 2023 • $0.7 million provision to the allowance for the Rural Infrastructure Finance portfolio was primarily attributable to new telecommunications business volume
Slide 20: Strong and Growing Equity Capital Base
F AR M E R M AC Strong and Growing Equity Capital Base 33.0% $1,381 $1,400 $1,323 $1,210 28.0% $1,200 $566 23.0% $1,012 $517 TIER 1 CAPITAL RATIO (%) $1,000 $497 CORE CAPITAL $ IN MILLIONS $815 $331 18.0% $800 $197 15.9% 14.8% 14.9% 13.0% $600 14.2% 12.9% $400 8.0% $200 3.0% $619 $681 $713 $806 $815
Slide 21: Investment Highlights
F AR M E R M AC Investment Highlights •90-Day delinquencies of only 0.17% across all lines of business Quality Assets •Cumulative Agricultural Finance Mortgage Loans lifetime losses of only 0.11% •Issue at narrow, Government Sponsored Enterprise (GSE) spreads to U.S. Treasuries Funding Advantage •E.
Slide 22: Appendix
Appendix Financing Rural America’
Slide 23: Key Company Metrics
F AR M E R M AC Key Company Metrics ($ in thousands, except per share amounts) 2023 YTD 2022 2021 2020 2019 Core Earnings $81,046 $124,314 $113,570 $100,612 $93,742 Core Earnings per Diluted Share $7.42 $11.42 $10.47 $9.33 $8.70 Net Effective Spread ($) $159,005 $255,529 $220,668 $196,956 $168,608 N
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 3.61% 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 • 32 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 (11) (12) 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) 2023 YTD 2022 2021 2020 2019 Net income attributable to common stockholders $ 80,665 $ 150,979 $ 111,413 $ 94,904 $ 93,650 Less reconciling items: Gains/(losses) on undesignated financial deriv
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, 2023 YTD 2022 2021 2020 2019 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield $ 157,735 1.13% $ 270,940 1.04% $ 221,951 0.94% $
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: Eligible ag real estate
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