Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q1 2015 Earnings Presentation
32 slides from Federal Agricultural Mortgage's earnings presentation, May 11, 2015
Slide 1: 2015 First Quarter Equity Investor Presentation
2015 EQUITY INVESTOR PRESENTATION FIRST QUARTER
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: Non-GAAP Financial Measures
FARMER MAC Non-GAAP Financial Measures This presentation is for general informational purposes only, is current only as of March 31, 2015, and should be read in conjunction with Farmer Mac’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2015. Farmer Mac uses core earnings, a non-GAAP f
Slide 4: Table of Contents
FARMER MAC Table of Contents 05 OVERVIEW AND HIGHLIGHTS 12 PORTFOLIO AND LINES OF BUSINESS 16 FINANCIAL PERFORMANCE 20 FUNDING AND RISK MANAGEMENT 24 APPENDIX EQUITY INVESTOR PRESENTATION 2015 04
Slide 5: Overview and Highlights
Overview and Highlights
Slide 6: Farmer Mac Overview
FARMER MAC Farmer Mac Overview CREATED IN THE 1980S TO HELP PREVENT FUTURE AGRICULTURAL CREDIT CRISES • Provides a secondary market for agricultural and rural utilities loans • Broadens access and drives more efficient loan pricing • Reduces agricultural credit market volatility LINES OF BUSINESS •
Slide 7: Farmer Mac Investment Highlights
FARMER MAC Farmer Mac Investment Highlights •Rigorous underwriting standards •Low delinquencies •Low cumulative historical credit losses Quality Assets •Business directly financed through issuance of low-cost debt to capital markets • Issue debt at narrow, GSE spreads to U.S. Treasuries Funding Adva
Slide 8: Core Earnings
FARMER MAC $9.1 $11.7 $11.3 $11.0 $9.1 $10.0 $12.9 $16.5 $23.2 $11.2 $13.4 $11.8 $9.3 $12.6 $11.6 $15.3 $9.5 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 2011 2012 2013 2014 2015 $ I N M IL L IO N S 1Q 2Q 3Q 4Q $42.9 $49.6 $54.9 $53.0 $9.1 Core Earnings OVERVIEW AND HIGHLIGHTS 8 Core earnings for 2014 i
Slide 9: Business Volume
FARMER MAC Business Volume OVERVIEW AND HIGHLIGHTS 9 $4.8 $5.2 $5.4 $5.3 $5.4 $5.6 $6.0 $6.4 $6.1 $6.5 $1.6 $1.7 $1.8 $1.7 $1.8 $1.0 $1.1 $1.0 $1.0 $1.0 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2012 2013 2014 1Q14 1Q15 $ I N B IL L IO N S Farm & Ranch Institutional Credit USDA Guarantees Rur
Slide 10: Credit Quality
FARMER MAC Credit Quality OVERVIEW AND HIGHLIGHTS 10 $53.1 $39.7 $29.4 $32.1 1.21% 0.83% 0.56% 0.60% 0.44% 0.30% 0.21% 0.22% 0.00% 0.50% 1.00% 1.50% $0.0 $20.0 $40.0 $60.0 $80.0 1Q12 1Q13 1Q14 1Q15 $ I N M IL L IO N S 90-Day Delinquencies 90-Day Delinquencies % of Farm & Ranch Portfolio Only % of To
Slide 11: Capital
FARMER MAC $519 $591 $766 $664 $531 $145 $192 $345 $261 $97 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $0 $200 $400 $600 $800 2012 2013 2014 1Q14 1Q15 E X C E S S S T A T U TO R Y C A P IT A L $ IN M IL L IO N S C O R E C A P IT A L $ I N M IL L IO N S Core Capital Excess Statutory Capital AS OF
Slide 12: Portfolio and Lines of Business
Portfolio and Lines of Business
Slide 13: Lines of Business and Products
FARMER MAC Lines of Business and Products Product Type Potential Customers Lines of Business $ IN BILLIONS AND PERCENTAGE OF TOTAL LOAN PURCHASES • Ag Banks • Insurance Companies • Rural Utilities Cooperatives F & R USDA RU IC Total $2.6 17% $1.8 12% $1.0 7% -- $5.4 36% WHOLESALE FUNDING • AgVantage
Slide 14: Portfolio Summary
FARMER MAC Portfolio Summary Farm & Ranch 36% USDA 12% Rural Utilitie s 7% Institut ional Credit 45% Outstanding Business Volume by Line of Business AgVan tage 45% On- Balanc e Sheet Loans 24% Stand bys 15% AMBS 4% USDA Guaran tees 12% Outstanding Business Volume by Product Type Crops 55% Perma nent
Slide 15: Credit Quality
FARMER MAC Credit Quality FARMER MAC’S RURAL UTILITIES, USDA GUARANTEES, AND INSTITUTIONAL CREDIT LINES OF BUSINESS HAVE HISTORICALLY NOT HAD ANY CREDIT LOSSES FARM & RANCH HAS HISTORICAL CUMULATIVE LOSSES OF 0.15%, OR APPROXIMATELY 1BP/YEAR • Cumulative losses of $31 million • On $20 billion of cum
Slide 16: Financial Performance
y Financial Performance Financing Rural America’
Slide 17: First Quarter 2015 Performance
FARMER MAC First Quarter 2015 Performance NET EFFECTIVE SPREAD OF 86 BPS, COMPARED TO 84 BPS LAST YEAR • Increase mostly attributable to lower funding costs (improved spreads on refinanced assets) and higher nonaccrual income in first quarter 2015 compared to first quarter 2014 CORE EARNINGS OF $9.1
Slide 18: Quarterly Core Earnings Results
FARMER MAC ($ in thousands) Mar-15 Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Revenues: Net effective spread 29,257$ 28,443$ 29,765$ 29,049$ 26,436$ 30,022$ 28,693$ 28,891$ 28,976$ Guarantee and commitment fees 4,012 4,096 4,153 4,216 4,315 4,252 4,134 4,126 4,079 Other (405) (1,285) (2
Slide 19: Summary Balance Sheets
FARMER MAC Summary Balance Sheets FINANCIAL PERFORMANCE 19 ($ in millions) March 31, 2015 December 31, 2014 December 31, 2013 December 31, 2012 December 31, 2011 Cash and cash equivalents $ 1,556.2 $ 1,363.4 $ 749.3 $ 785.6 $ 817.0 Investment securities 2,140.2 1,939.2 2,484.1 2,499.6 2,184.5 Farmer
Slide 20: Funding and Risk Management
Funding and Risk Management
Slide 21: Funding
FARMER MAC Funding FINANCE ASSET PURCHASES WITH PROCEEDS OF DEBT ISSUANCES • 20+ dealers • Match-funding effectively locks in net spread FARMER MAC’S DEBT SECURITIES CARRY PRIVILEGES FOR CERTAIN HOLDERS • 20% capital risk weighting • Eligible collateral for Fed advances • Legal investments for feder
Slide 22: Interest Rate Risk
FARMER MAC Interest Rate Risk MATCH FUND ASSET PURCHASES WITH LIABILITIES THAT HAVE SIMILAR INTEREST RATE CHARACTERISTICS • Duration and convexity matching • Coupon type • Reset frequency MANAGE PRE-PAYMENT RISK ON MORTGAGES • Callable debt and bullet issuances across spectrum of maturities • Can ad
Slide 23: Liquidity – Investment Portfolio
FARMER MAC Liquidity – Investment Portfolio FARMER MAC MAINTAINS AN INVESTMENT PORTFOLIO TO PROVIDE BACK-UP SOURCE OF LIQUIDITY IN EXCESS OF REGULATORY REQUIREMENTS • A Minimum of 90 days of liquidity required by regulation $3.7 BILLION INVESTMENT PORTFOLIO AT MARCH 31, 2015 • Cash and highly-rated
Slide 24: Appendix
Appendix
Slide 25: Key Company Metrics
FARMER MAC Key Company Metrics APPENDIX 25 ($ in thousands, except per share amounts) 1Q15* 2014 2013 2012 Core Earnings $9,103 $53,047 $54,892 $49,642 Core Earnings per Diluted Share $0.80 $4.67 $4.90 $4.51 Net Effective Spread ($) $29,257 $113,693 $116,582 $117,190 Net Effective Spread (%) 0.86% 0
Slide 26: Core Earnings (Non-GAAP Measure)
FARMER MAC Core Earnings (Non-GAAP Measure) APPENDIX 26 ($ in millions) 1Q15* 2014 2013 2012 Net effective spread: Interest income $65.1 $ 256.9 $ 267.1 $ 285.5 Interest expense 35.8 143.2 150.5 168.3 Net effective spread 29.3 113.7 116.6 117.2 Non-interest income: Guarantee and commitment fees 4.0
Slide 27: Reconciliation of Net Income to Core Earnings
FARMER MAC ($ in thousands) 1Q15* 2014 2013 2012 Net income attributable to common stockholders 1,818$ 38,251$ 71,833$ 43,894$ Less the after-tax effects of: Unrealized (losses)/gains on financial derivatives and hedging activities (582) (6,480) 29,368 4,325 Unrealized gains/(losses) on trading asse
Slide 28: Reconciliation of Net Income to Core Earnings (Quarterly)
FARMER MAC Reconciliation of Net Income to Core Earnings APPENDIX 28 ($ in thousands) Mar-15 Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Net income attributable to common stockholders 1,818$ 5,647$ 11,586$ 20,205$ 813$ 12,485$ 15,413$ 27,745$ 16,190$ Reconciling items (after-tax effects)
Slide 29: Farmer Mac's Net Effective Spread History
FARMER MAC Farmer Mac’s Net Effective Spread History APPENDIX 29 ($ in thousands) Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield For the quarter ended: March 31, 2015 (2) 10,114$ 1.97% 4,225$ 1.18% 2,804$ 1.15% 10,425$ 0.77% 1,689$ 0.20% 29,257$ 0.86% December 31
Slide 30: Regulatory/Congressional Oversight
FARMER MAC Regulatory/Congressional Oversight SEC REGULATION UNDER FEDERAL SECURITIES LAWS SUBJECT TO NYSE RULES AND REGULATIONS SINCE 1999 REGULATED BY THE FARM CREDIT ADMINISTRATION (FCA) THROUGH ITS OFFICE OF SECONDARY MARKET OVERSIGHT CONGRESSIONAL OVERSIGHT THROUGH SENATE AND HOUSE AG COMMITTEE
Slide 31: Three Classes of Common Stock
FARMER MAC Three Classes of Common Stock NUMBER OF SHARES CLASS A VOTING COMMON STOCK • NYSE: AGM.A • Ownership restricted to financial institutions 1.0 million CLASS B VOTING COMMON STOCK • Not publicly traded • Ownership restricted to Farm Credit System institutions 0.5 million CLASS C NON-VOTING
Slide 32: Three Classes of Preferred Stock
FARMER MAC Three Classes of Preferred Stock NUMBER OF SHARES SERIES A NON-CUMULATIVE PREFERRED STOCK • NYSE: AGM.PR.A • Dividend Yield: 5.875%** • Option to redeem at any time on or after January 17, 2018 • Redemption Value: $25 per share 2.4 million SERIES B NON-CUMULATIVE PREFERRED STOCK • NYSE: A
Federal Agricultural Mortgage — Q1 2015 Earnings Presentation on 6ix