Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q3 2019 Earnings Presentation
25 slides from Federal Agricultural Mortgage's earnings presentation, Nov 6, 2019
Slide 1: Third Quarter Equity Investor Presentation 2019
Third Quarter Equity Investor Presentation 2019
Slide 2: Forward-Looking Statements
FARMER MAC 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 of Fa
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 Core earnings and core earnings per share also differ from net income only as of September 30, 2019, and should be read in conjunction with attributable to common stockholders and e
Slide 4: Investment Highlights
FARMER MAC Investment Highlights •90-Day delinquencies of only 0.29% across all lines of business Quality Assets •Cumulative Farm & Ranch lifetime losses of only 0.13% •Issue at narrow, GSE spreads to U.S. Treasuries Funding Advantage •E.g., 10-year U.S. Treasury +0.51% •Ag productivity must double
Slide 5: A Mission-Driven, For-Profit Company
FARMER MAC A Mission-Driven, For-Profit Company Our Mission Farmer Mac initially chartered Farmer Mac is committed to help build a strong and vital by Congress as an instrumentality rural America by increasing the availability and 1987 of the United States affordability of credit for the benefit of
Slide 6: Executive Leadership
FARMER MAC Executive Leadership Bradford T. Nordholm Zachary N. Carpenter John C. Covington President and Chief Executive Officer Executive Vice President – Chief Business Executive Vice President – Chief Credit Officer Officer • 13+ years of experience in agribusiness • 40+ years of experience in a
Slide 7: U.S. Agricultural Balance Sheet
FARMER MAC U.S. Agricultural Balance Sheet (1) $ IN THOUSANDS $3,020,960,111 $3,000,000,000 Machinery & Vehicles, $265,265,247 $2,500,000,000 $2,000,000,000 Ag Real Estate Debt-to-Asset Ratio: Real Estate 9.8% $1,500,000,000 $2,510,163,458 $ in thousands in $ $1,000,000,000 Farmer Mac Market Share:
Slide 8: Central to a Large Addressable Ag Mortgage Market
FARMER MAC Central to a Large Addressable Ag Mortgage Market (3) (4) (FCS Secondary Market GSE) $15.4 Billion (6.3% Market Share) Loan Purchase Wholesale Funding Credit Protection Farm Credit System Non-FCS Ag (FCS) Lenders (Cooperative GSE) BANKS AG Addressable • Insurance$61B Companies • Four FCS
Slide 9: Growth Opportunities Broaden Farmer Mac's Market
FARMER MAC Growth Opportunities Broaden Farmer Mac’s Market = Relative Size Evaluating opportunities not of Volume Opportunity currently being pursued by Farmer Renewable Mac Energy Project Finance • New lines of business = Broaden • New products Securitization Deepen Farmer Mac’s Market Syndication
Slide 10: Lines of Business and Products
FARMER MAC Lines of Business and Products AS OF SEPTEMBER 30, 2019 Product Type Target Customers Lines of Business $ IN BILLIONS AND PERCENTAGE OF TOTAL VOLUME LOAN PURCHASES • Ag Banks F & R USDA RU IC Total • FCS Institutions $4.8 $2.6 $1.6 -- $9.0 • Insurance Companies 23% 12% 8% 43% • Rural Util
Slide 11: Growing, Recurring, High-Quality Earnings
FARMER MAC Growing, Recurring, High-Quality Earnings Outstanding Business Volume $20.0 7.5% CAGR (2015-2018) $15.0 $10.0 $ IN IN $ BILLIONS $5.0 $15.9 $17.4 $19.0 $19.7 $20.9 $0.0 2015 2016 2017 2018 3Q19 Outstanding Business Volume Net Effective Spread & Core Earnings $160.0 8.8% CAGR 21.4% CAGR $1
Slide 12: Proven, Rigorous Underwriting
FARMER MAC Proven, Rigorous Underwriting Industry-leading Credits are less Losses less likely credit requirements likely to default even in default – Total debt coverage ratio – Focus on repayment – Average LTV of 44% as of at least 1.25x capacity through of September 30, 2019 stressed inputs – LTVs
Slide 13: Credit Consistently Outperforms
FARMER MAC Credit Consistently Outperforms 90-Day Delinquencies 2.50% 2.33% 2.21% 2.00% 2.00% 1.59% 1.63% 1.56% 1.50% 1.16% 1.13% 1.14% 1.35% 1.16% 1.04%1.10%1.12% 1.25% 1.00% 1.21% 0.59% 1.00% 0.75% 0.54%0.59% 0.71% 0.93% 0.87% 0.79% 0.81% 0.50% 0.70% 0.60%0.55%0.58% 0.55% 0.56% 0.41% 0.35% 0.34% 0
Slide 14: Historical Credit Losses
FARMER MAC Historical Credit Losses Ag Storage & Processing Crops Permanent Plantings Livestock Part-Time Farm / Rural Housing $12 $10 $8 $6 $ IN IN $ MILLIONS NET NET LOSS (GAIN) / $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
Slide 15: Strong and Growing Equity Capital Base
FARMER MAC Strong and Growing Equity Capital Base $793 $800 25.0% $728 $657 $185 $610 $183 20.0% $600 $564 $137 $143 $102 15.0% 13.4% 13.2% 12.7% 12.6% $400 10.5% $ IN IN $ MILLIONS CORE CORE CAPITAL 10.0% TIER TIER CAPITAL 1 RATIO (%) $200 5.0% $462 $467 $520 $545 $608 $0 0.0% 2015 2016 2017 2018 3
Slide 16: Quality Earnings Drives Strong Dividends
FARMER MAC Quality Earnings Drives Strong Dividends Increased Target Payout Ratio of Core Earnings to ~35% $0.80 $0.70 $0.70 $0.60 $0.58 $0.50 Initiated New Dividend Policy: Target ~30% Payout Ratio of Core Earnings $0.40 $0.36 $ PER $ SHARE $0.30 $0.26 $0.20 $0.16 $0.14 $0.12 $0.10 $0.10 $0.05 $0.0
Slide 17: Investment Highlights
FARMER MAC Investment Highlights •90-Day delinquencies of only 0.29% across all lines of business Quality Assets •Cumulative Farm & Ranch lifetime losses of only 0.13% •Issue at narrow, GSE spreads to U.S. Treasuries Funding Advantage •E.g., 10-year U.S. Treasury +0.51% •Ag productivity must double
Slide 18: Appendix
Appendix
Slide 19: Key Company Metrics
FARMER MAC Key Company Metrics ($ in thousands, except per share amounts) 3Q19 YTD 2018 2017 2016 2015 Core Earnings $69,258 $84,047 $65,631 $53,481 $47,035 Core Earnings per Diluted Share $6.43 $7.82 $6.08 $4.98 $4.16 Net Effective Spread ($) $122,617 $151,195 $141,303 $123,072 $117,428 Net Effecti
Slide 20: Equity Capital Structure
FARMER MAC Equity Capital Structure NYSE Dividend Shares Ticker Yield Outstanding CLASS A VOTING COMMON STOCK AGM.A 3.81% 1.0 million • Ownership restricted to non-Farm Credit System financial institutions STOCK CLASS B VOTING COMMON STOCK -- -- 0.5 million • Ownership restricted to Farm Credit Syst
Slide 21: Funding
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 22: "Demand Pull" Provides Sustained Growth Opportunity
FARMER MAC “Demand Pull” Provides Sustained Growth Opportunity(12) (13) 12.0 0.50 0.43 0.45 CAPITA PER LAND ARABLE 10.0 0.40 person) per use in (hectare 8.0 0.35 0.30 6.0 0.25 0.18 (in billions) (in 0.20 4.0 0.15 WORLD WORLD POPULATION 2.0 0.10 3.0 9.8 0.05 0.0 0.00 1960 1970 1980 1990 2000 2010 202
Slide 23: Reconciliation of Net Income to Core Earnings
FARMER MAC Reconciliation of Net Income to Core Earnings Core Earnings by Period Ended (in thousands) 3Q19 YTD 2018 2017 2016 2015 Net income attributable to common stockholders $ 64,584 $ 94,898 $ 71,300 $ 64,152 $ 47,371 Less reconciling items: Gains on undesignated financial derivatives due to fa
Slide 24: Reconciliation of Net Interest Income to Net Effective Spread
FARMER MAC Reconciliation of Net Interest Income to Net Effective Spread For the Year Ended December 31, 3Q19 YTD 2018 2017 2016 2015 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield $ 123,765 0.84% $ 174,436 0.96% $ 157,647 0.94% $ 140,2
Slide 25: Resources
FARMER MAC Resources Footnote 1: USDA Economic Research Service year end 2018 balance sheet as of September 9, 2019. Footnote 2: Farmer’s Mac’s total excludes loan purchases, LTSPCs, and AgVantage business with rural utilities customers. Market share represents Farmer Mac’s percentage of only Farm S
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