Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q4 2020 Earnings Presentation
29 slides from Federal Agricultural Mortgage's earnings presentation, Feb 27, 2021
Slide 1: Fourth Quarter 2020 Equity Investor Presentation
Fourth Quarter 2020 E q u i t y I n v e sto r P r e se n tat io n
Slide 2: Forward-Looking Statements
FARM ER 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 of
Slide 3: Use of Non-GAAP Financial Measures
FARM ER 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 December 31, 2020, and should be read in conjunction with attributable to common stockholders and
Slide 4: Investment Highlights
FARM ER M AC Investment Highlights •90-Day delinquencies of only 0.21% 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 +0.30% as of December 31, 2020 •Ag
Slide 5: A Mission-Driven, For-Profit Company
FARM ER M AC A Mission-Driven, For-Profit Company Our Mission Farmer Mac initially chartered Farmer Mac is committed to help build a strong and vital rural by Congress as an instrumentality America by increasing the availability and affordability of 1987 of the United States credit for the benefit o
Slide 6: Executive Leadership
FARM ER 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 • 14+ years of
Slide 7: U.S. Agricultural Balance Sheet
FARM ER M AC U.S. Agricultural Balance Sheet (1) $ IN THOUSANDS $3,075,151,724 $3,000,000,000 Machinery & Vehicles, $278,991,092 $2,500,000,000 $2,000,000,000 Ag Real Estate $ in thousands Debt-to-Asset Ratio: Real Estate 10.5% $1,500,000,000 $2,545,995,513 $1,000,000,000 Farmer Mac Market Share: 6.
Slide 8: Central to a Large Addressable Ag Mortgage Market
FARM ER M AC Central to a Large Addressable Ag Mortgage Market (3) (4) (FCS Secondary Market GSE) $16.5 Billion (6.2% Market Share) Loan Purchase Wholesale Funding Credit Protection Farm Credit System Non-FCS Ag (FCS) Lenders (Cooperative GSE) AG BANKS Addressable • Insurance Companies $61B • Four F
Slide 9: Farmer Mac's Operating Model
FARM ER 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 09
Slide 10: Growth Opportunities
FARM ER M AC Growth Opportunities Broaden Farmer Mac’s Market = Relative Size Evaluating opportunities not of Volume Renewable Opportunity currently being pursued by Farmer Mac Energy, Project Finance Broaden Farmer Mac’s Market • New lines of business = Broaden • New products Securitization Deepen
Slide 11: Lines of Business and Products
FARM ER M AC Lines of Business and Products AS OF DECEMBER 31, 2020 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 $6.2 $2.8 $2.3 -- $11.3 • Insurance Companies 28% 13% 10% 51% • Rural Uti
Slide 12: Farm & Ranch Loan Portfolio Diversification
FARM ER M AC Farm & Ranch Loan Portfolio Diversification AS OF DECEMBER 31, 2020 By Commodity Type By Geographic Region Ag. Storage and Southeast Part-time Farm Processing 8% Northeast 6% 2% 4% Northwest 12% Livestock Mid-South 18% 12% Crops 50% Southwest Permanent 35% Plantings Mid-North 24% 29% Ag
Slide 13: Growing, Recurring, High-Quality Earnings
FARM ER M AC Growing, Recurring, High-Quality Earnings Outstanding Business Volume $20.0 $15.0 $ IN BILLIONS 6.0% CAGR (2016-2020) $10.0 $5.0 $17.4 $19.0 $19.7 $21.1 $21.9 $0.0 2016 2017 2018 2019 2020 Outstanding Business Volume Net Effective Spread & Core Earnings 12.5% CAGR 17.1% CAGR $250.0 $100
Slide 14: Proven, Rigorous Underwriting
FARM ER M AC 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 45% as of at least 1.25x capacity through of December 31, 2020 stressed inputs – LTV
Slide 15: Credit Consistently Outperforms
FARM ER M AC Credit Consistently Outperforms 90-Day Delinquencies 2.50% 2.00% 1.50% 1.22% 1.00% 0.54% 0.50% 0.21% 0.00% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Industry 90-Day Delinquencies (7) Farmer Mac 90-Day Delinquencies (Farm & Ranch
Slide 16: Historical Credit Losses
FARM ER 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 2017 2
Slide 17: Allowance for Losses – Quarterly
FARM ER M AC Allowance for Losses – Quarterly Total allowance decreased $2.4 million sequentially • $3.6 million provision in Farm & Ranch portfolio related to specialized poultry loan – Recorded a direct charge-off of $5.4 million related to the same poultry loan that Farmer Mac deemed a portion to
Slide 18: Allowance for Losses – Annual
FARM ER M AC Allowance for Losses – Annual 2020 forecasts included the effects of COVID-19 on economic factors such as land values, GDP, credit spreads, and unemployment expectations • Unemployment expectations had the most significant impact on 2020 provision, particularly on the Rural Utilities po
Slide 19: Strong and Growing Equity Capital Base
FARM ER M AC Strong and Growing Equity Capital Base 30.0% $1,006 $1,000 25.0% $815 $325 $800 $728 20.0% TIER 1 CAPITAL RATIO (%) $657 $197 $610 CORE CAPITAL $ IN MILLIONS $183 $600 $137 14.1% 15.0% $143 12.9% 13.4% $400 12.7% 12.6% 10.0% $200 5.0% $467 $520 $545 $619 $681 $0 0.0% 2016 2017 2018 2019
Slide 20: Quality Earnings Drives Strong Dividends
FARM ER M AC Quality Earnings Drives Strong Dividends $1.00 Increased Target Payout Ratio of Core Earnings to ~35% $0.88 $0.90 $0.80 $0.80 $0.70 $0.70 $0.60 $0.58 $ PER SHARE Initiated New Dividend Policy: $0.50 Target ~30% Payout Ratio of Core Earnings $0.40 $0.36 $0.30 $0.26 $0.20 $0.14 $0.16 $0.1
Slide 21: Investment Highlights
FARM ER M AC Investment Highlights •90-Day delinquencies of only 0.21% across all lines of business Quality Assets •Cumulative Farm & Ranch lifetime losses of only 0.13% •Issue at narrow, GSE spreads to U.S. Treasuries Funding Advantage •E.g., 10-year U.S. Treasury +0.30% as of December 31, 2020 •Ag
Slide 22: Appendix
Appendix Financing Rural America’
Slide 23: Key Company Metrics
FARM ER M AC Key Company Metrics ($ in thousands, except per share amounts) 2020 2019 2018 2017 2016 Core Earnings $100,612 $93,742 $84,047 $65,631 $53,481 Core Earnings per Diluted Share $9.33 $8.70 $7.82 $6.08 $4.98 Net Effective Spread ($) $196,956 $168,608 $151,195 $141,303 $123,072 Net Effectiv
Slide 24: Equity Capital Structure
FARM ER M AC Equity Capital Structure NYSE Dividend Shares Ticker Yield Outstanding CLASS A VOTING COMMON STOCK AGM.A 4.90% 1.0 million COMMON STOCK • Ownership restricted to non-Farm Credit System financial institutions CLASS B VOTING COMMON STOCK -- -- 0.5 million • Ownership restricted to Farm Cr
Slide 25: Funding
FARM ER M AC 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 f
Slide 26: "Demand Pull" Provides Sustained Growth Opportunity
FARM ER M AC “Demand Pull” Provides Sustained Growth Opportunity (13) (14) 12.0 0.50 0.43 0.45 10.0 ARABLE LAND PER CAPITA 0.40 (hectare in use per person) 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 2030
Slide 27: Reconciliation of Net Income to Core Earnings
FARM ER M AC Reconciliation of Net Income to Core Earnings Core Earnings by Period Ended (in thousands) 2020 2019 2018 2017 2016 Net income attributable to common stockholders $ 89,176 $ 93,650 $ 94,898 $ 71,300 $ 64,152 Less reconciling items: (Losses)/gains on undesignated financial derivatives du
Slide 28: Reconciliation of Net Interest Income to Net Effective Spread
FARM ER M AC Reconciliation of Net Interest Income to Net Effective Spread For the Year Ended December 31, 2020 2019 2018 2017 2016 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield $ 190,588 0.85% $ 173,135 0.87% $ 174,436 0.96% $ 157,647
Slide 29: Resources
FARM ER M AC Resources Footnote 1: USDA Economic Research Service year end 2019 balance sheet (https://data.ers.usda.gov/reports.aspx?ID=17835). Footnote 2: Farmer’s Mac’s total excludes loan purchases, LTSPCs, and AgVantage business with rural utilities customers. Market share represents Farmer Mac
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