Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q3 2021 Earnings Presentation
29 slides from Federal Agricultural Mortgage's earnings presentation, Nov 8, 2021
Slide 1: Equity Investor Presentation Third Quarter 2021
Equity Investor Presentation Third Quarter 2021
Slide 2: Forward-Looking Statements
FARMER MAC 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 incl
Slide 3: Use of Non-GAAP Financial Measures
FARMER MAC Use of Non-GAAP Financial Measures This presentation is for general informational purposes only, is current only as of September 30, 2021 and should be read in conjunction with Farmer Mac’s Quarterly Report on Form 10-Q filed with the SEC on November 8, 2021. In the accompanying analysis
Slide 4: Investment Highlights
FARMER MAC Investment Highlights •90-Day delinquencies of only 0.24% across all lines of business •Cumulative Farm & Ranch lifetime losses of only 0.12%Quality Assets •Issue at narrow, Government Sponsored Enterprise (GSE) spreads to U.S. Treasuries •E.g., 10-year U.S. Treasury +0.20% as of Septembe
Slide 5: A Mission-Driven, For-Profit Company
FARMER MAC Farmer Mac initially chartered by Congress as an instrumentality of the United States Initial public offering First listed on NASDAQ (FAMCU & FAMCL) First major charter revision and expansion of authority (direct loan purchases) First listed on NYSE (AGM & AGM.A) Second major charter revi
Slide 6: Executive Leadership
FARMER MAC Aparna Ramesh Executive Vice President – Chief Financial Officer & Treasurer • 20+ years of experience in mission-oriented finance roles • Joined Farmer Mac in January 2020 from Federal Reserve Bank of Boston, where she previously served as Senior Vice President and Chief Financial Office
Slide 7: U.S. Agricultural Balance Sheet
FARMER MAC U.S. Agricultural Balance Sheet 07 Investments, $100,557,987 Inventories, $171,673,897 Real Estate $2,692,466,735 Machinery & Vehicles, $288,925,675 $3,253,624,294 Real Estate, $296,066,527 Nonreal Estate, $147,860,739 $443,927,266 $16,945,405 $0 $500,000,000 $1,000,000,000 $1,500,000,000
Slide 8: Central to a Large Addressable Ag Mortgage Market
FARMER MAC (FCS Secondary Market GSE) $16.9 Billion (5.7% Market Share) Loan Purchase Wholesale Funding Credit Protection Farm Credit System (FCS) (Cooperative GSE) • Four FCS Banks • 67 Retail Agricultural Credit Associations Central to a Large Addressable Ag Mortgage Market 08 Addressable Agricult
Slide 9: Farmer Mac's Operating Model
FARMER MAC Farmer Mac’s Operating Model 09 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 i
Slide 10: Growth Opportunities
FARMER MAC Growth Opportunities 10 Deepen Farmer Mac’s Market B ro a d e n F a rm e r M a c ’s M a rk e t Loan Process Efficiency Rural Broadband Borrower Retention Renewable Energy, Project Finance Timber Securitization = Relative Size of Volume Opportunity = Broaden = Deepen = Both Syndications Br
Slide 11: Lines of Business and Products
FARMER MAC Lines of Business and Products Product Type Target Customers Lines of Business $ IN BILLIONS AND PERCENTAGE OF TOTAL VOLUME • LOAN PURCHASES • Ag Banks • FCS Institutions • Insurance Companies • Rural Utilities Cooperatives F & R USDA RU IC Total $6.8 30% $2.7 12% $2.2 10% -- $11.7 52% WH
Slide 12: Farm & Ranch Loan Portfolio Diversification
FARMER MAC Northwest 12% Southwest 33% Mid-North 27% Mid-South 16% Northeast 4% Southeast 8% By Geographic Region Crops 50% Permanent Plantings 23% Livestock 19% Part-time Farm 5% Ag. Storage and Processing 3% By Commodity Type Farm & Ranch Loan Portfolio Diversification 12 AS OF SEPTEMBER 30, 2021
Slide 13: Net Effective Spread & Core Earnings
FARMER MAC $123.1 $141.3 $151.2 $168.6 $197.0 $166.3$53.5 $65.6 $84.0 $93.7 $100.6 $83.5 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $0.0 $50.0 $100.0 $150.0 $200.0 2016 2017 2018 2019 2020 YTD Q3 2021 C O R E E A R N IN G S $ IN M IL L IO N S N E T E F F E C T IV E S P R E A D $ I N M IL L IO N S Ne
Slide 14: Quality Earnings Drives Strong Dividends
FARMER MAC Quality Earnings Drives Strong Dividends $0.05 $0.10 $0.12 $0.14 $0.16 $0.26 $0.36 $0.58 $0.70 $0.80 $0.88 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 $ P E R S H A R E Quarterly Dividend per Common Share 14 Incr
Slide 15: Farmer Mac Uses Proven, Rigorous Underwriting
FARMER MAC Losses less likely even in default – Average portfolio LTV of 48% as of September 30, 2021 – Land values need to decline >52% to generate material losses across F&R portfolio – “Stress scenario” losses of 17% to 48% – 1980s crisis saw land value declines of ~23% Farmer Mac Uses Proven, Ri
Slide 16: Credit Consistently Outperforms
FARMER MAC Credit Consistently Outperforms 16 1.11% 0.58% 0.24% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 3Q21 90-Day Delinquencies Industry 90-Day Delinquencies Farmer Mac 90-Day Delinquencies (Farm & Ranc
Slide 17: Historical Credit Losses
FARMER MAC Historical Credit Losses Farm & Ranch line of business has historical cumulative losses of 0.12%, or less than 1bp per year • Cumulative F&R losses of $39 million on $32 billion of cumulative F&R historical business volume Farmer Mac’s Rural Utilities, USDA Guarantees, and Institutional C
Slide 18: Allowance for Losses – Quarterly
FARMER MAC Allowance for Losses – Quarterly 18 Farmer Mac recorded a $0.2 million provision in its total allowance for losses in the third quarter. • $0.2 million release from the allowance for the Rural Utilities portfolio due to improving economic fact forecasts • $0.4 million provision to the all
Slide 19: Strong and Growing Equity Capital Base
FARMER MAC $520 $545 $619 $681 $700 $137 $183 $197 $325 $480 $657 $728 $815 $1,006 $1,179 12.6% 13.4% 12.9% 14.1% 15.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% $0 $200 $400 $600 $800 $1,000 $1,200 2017 2018 2019 2020 Q3 2021 T IE R 1 C A P IT A L R A T IO ( % ) C O R E C A P IT A L $ I N M IL L IO N
Slide 20: Securitization Transaction & Structure
FARMER MAC Securitization Transaction & Structure On October 14, 2021, Farmer Mac closed a $302.7 million securitization of agricultural mortgage- backed securities • Underlying mortgage pool consisted of 384 loans • Loans underwritten to Farmer Mac’s standards • Acquired by Farmer Mac between July
Slide 21: Investment Highlights
FARMER MAC Investment Highlights •90-Day delinquencies of only 0.24% across all lines of business •Cumulative Farm & Ranch lifetime losses of only 0.12%Quality Assets •Issue at narrow, Government Sponsored Enterprise (GSE) spreads to U.S. Treasuries •E.g., 10-year U.S. Treasury +0.20% as of Septembe
Slide 22: Appendix
Appendix
Slide 23: Key Company Metrics
FARMER MAC • Core earnings, core earnings per share, and net effective spread are non-GAAP measures. For more information on the use of these non- GAAP measures, please see page 3. For a reconciliation of core earnings to GAAP net income attributable to common stockholders and core earnings per shar
Slide 24: Equity Capital Structure
FARMER MAC Equity Capital Structure 24 NYSE Ticker Dividend Yield Shares Outstanding C O M M O N S T O C K CLASS A VOTING COMMON STOCK • Ownership restricted to non-Farm Credit System financial institutions AGM.A 3.35% 1.0 million CLASS B VOTING COMMON STOCK • Ownership restricted to Farm Credit Sys
Slide 25: Debt Securities Trade at Narrow Spreads to Treasuries
FARMER MAC Funding Finance asset purchases with proceeds of debt issuances • 20+ 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
Slide 26: "Demand Pull" Provides Sustained Growth Opportunity
FARMER MAC World population is expected to grow to 9.8 billion by 2050 • Arable land per person is expected to decline over 40% from 2005 to 2050 USDA projects a 75% increase in total production and consumption of major field crops in the same period • 43% increase in world population • Higher prote
Slide 27: Reconciliation of Net Income to Core Earnings
FARMER MAC Reconciliation of Net Income to Core Earnings 27 (in thousands) 3Q21 YTD 2020 2019 2018 2017 Net income attributable to common stockholders 77,691$ 89,176$ 93,650$ 94,898$ 71,300$ Less reconciling items: (Losses)/gains on undesignated financial derivatives due to fair value changes (3,890
Slide 28: Reconciliation of Net Interest Income to Net Effective Spread
FARMER MAC Reconciliation of Net Interest Income to Net Effective Spread 28 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield 163,385$ 0.93% 190,588$ 0.85% 173,135$ 0.87% 174,436$ 0.96% Net effects of consolidated trusts (3,713) 0.02% (6,601) 0.02% (7,6
Slide 29: Resources
FARMER MAC 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 excludes
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