Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q1 2020 Earnings Presentation
25 slides from Federal Agricultural Mortgage's earnings presentation, May 12, 2020
Slide 1: First Quarter 2020 Equity Investor Presentation
First 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 March 31, 2020, and should be read in conjunction with attributable to common stockholders and ear
Slide 4: Investment Highlights
FARM ER M AC Investment Highlights •90-Day delinquencies of only 0.37% across all lines of business Quality Assets •Cumulative Farm & Ranch lifetime losses of only 0.12% •Issue at narrow, GSE spreads to U.S. Treasuries Funding Advantage •E.g., 10-year U.S. Treasury +1.02% •Ag productivity must doubl
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 by Congress as an instrumentality rural America by increasing the availability and 1987 of the United States affordability of 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 • 13+ years of
Slide 7: U.S. Agricultural Balance Sheet
FARM ER M AC U.S. Agricultural Balance Sheet (1) $ IN THOUSANDS $3,026,678,330 $3,000,000,000 Machinery & Vehicles, $270,982,438 $2,500,000,000 $2,000,000,000 Ag Real Estate $ in thousands Debt-to-Asset Ratio: Real Estate 9.8% $1,500,000,000 $2,510,163,458 $1,000,000,000 Farmer Mac Market Share: 6.5
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) $16.1 Billion (6.5% 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: 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 F
Slide 10: Lines of Business and Products
FARM ER M AC Lines of Business and Products AS OF MARCH 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 $5.4 $2.6 $1.8 -- $9.8 • Insurance Companies 25% 12% 8% 45% • Rural Utilitie
Slide 11: Growing, Recurring, High-Quality Earnings
FARM ER M AC Growing, Recurring, High-Quality Earnings Outstanding Business Volume $20.0 $15.0 $ IN BILLIONS 6.7% CAGR (2016-2019) $10.0 $5.0 $17.4 $19.0 $19.7 $21.1 $21.5 $0.0 2016 2017 2018 2019 1Q20 Outstanding Business Volume Net Effective Spread & Core Earnings 11.1% CAGR 20.6% CAGR $180.0 (201
Slide 12: 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 March 31, 2020 stressed inputs – LTVs a
Slide 13: Credit Consistently Outperforms
FARM ER M AC Credit Consistently Outperforms 90-Day Delinquencies 2.50% 2.00% 1.50% 1.12% 1.02% 1.00% 0.50% 0.37% 0.00% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 1Q20 Industry 90-Day Delinquencies (6) Farmer Mac 90-Day Delinquencies (Farm & Ranch
Slide 14: 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 15: Strong and Growing Equity Capital Base
FARM ER M AC Strong and Growing Equity Capital Base $815 $815 25.0% $800 $728 $197 $166 $657 20.0% $610 $183 $600 $137 TIER 1 CAPITAL RATIO (%) $143 15.0% CORE CAPITAL 13.4% $ IN MILLIONS 12.9% 12.6% $400 12.7% 12.6% 10.0% $200 5.0% $467 $520 $545 $619 $649 $0 0.0% 2016 2017 2018 2019 1Q20 Statutory
Slide 16: Quality Earnings Drives Strong Dividends
FARM ER M AC Quality Earnings Drives Strong Dividends Increased Target Payout Ratio of $0.90 Core Earnings to ~35% $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 $0.16 $0.14 $0.12 $0.10 $0.1
Slide 17: Investment Highlights
FARM ER M AC Investment Highlights •90-Day delinquencies of only 0.37% across all lines of business Quality Assets •Cumulative Farm & Ranch lifetime losses of only 0.12% •Issue at narrow, GSE spreads to U.S. Treasuries Funding Advantage •E.g., 10-year U.S. Treasury +1.02% as of March 31, 2020 •Ag pr
Slide 18: Appendix
Appendix Financing Rural America’
Slide 19: Key Company Metrics
FARM ER M AC Key Company Metrics ($ in thousands, except per share amounts) 1Q20 2019 2018 2017 2016 Core Earnings $20,143 $93,742 $84,047 $65,631 $53,481 Core Earnings per Diluted Share $1.87 $8.70 $7.82 $6.08 $4.98 Net Effective Spread ($) $44,163 $168,608 $151,195 $141,303 $123,072 Net Effective
Slide 20: Equity Capital Structure
FARM ER M AC Equity Capital Structure NYSE Dividend Shares Ticker Yield Outstanding CLASS A VOTING COMMON STOCK AGM.A 6.67% 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 21: 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 22: "Demand Pull" Provides Sustained Growth Opportunity
FARM ER M AC “Demand Pull” Provides Sustained Growth Opportunity (12) (13) 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 23: 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) 1Q20 2019 2018 2017 2016 Net income attributable to common stockholders $ 9,399 $ 93,650 $ 94,898 $ 71,300 $ 64,152 Less reconciling items: (Losses)/gains on undesignated financial derivatives due
Slide 24: 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, 1Q20 2019 2018 2017 2016 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield $ 41,312 0.78% $ 173,135 0.87% $ 174,436 0.96% $ 157,647
Slide 25: Resources
FARM ER M AC 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
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