Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Q2 2021 Earnings Presentation
28 slides from Federal Agricultural Mortgage's earnings presentation, Aug 5, 2021
Slide 1: Equity Investor Presentation Second Quarter 2021
Equity Investor Presentation Second Quarter 2021
Slide 2: Forward-Looking Statements
FARM ER M AC 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 in
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 only as of June 30, 2021 and should be read in conjunction with Farmer Mac’s Quarterly Report on Form 10-Q filed with the SEC on August 5, 2021. In the accompanying analysis of it
Slide 4: Investment Highlights
FARM ER M AC Investment Highlights •90-Day delinquencies of only 0.28% across all lines of business •Cumulative Farm & Ranch lifetime losses of only 0.12%Quality Assets •Issue at narrow, Government Sponsored Spreads (GSE) spreads to U.S. Treasuries •E.g., 10-year U.S. Treasury +0.16% as of June 30,
Slide 5: A Mission-Driven, For-Profit Company
FARM ER M AC 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 re
Slide 6: Executive Leadership
FARM ER M AC Aparna Ramesh Executive Vice President – Chief Financial Officer & Treasurer • 20+ years of experience in mission-oriented finance roles • Joined Farmer Mac in 2020 from Federal Reserve Bank of Boston, where she previously served as Senior Vice President and Chief Financial Officer • Pr
Slide 7: U.S. Agricultural Balance Sheet
FARM ER M AC U.S. Agricultural Balance Sheet 07 Investments, $87,479,909 Inventories, $162,685,210 Real Estate $2,545,995,513 Machinery & Vehicles, $278,991,092 $3,075,151,724 Real Estate, $266,840,441 Nonreal Estate, $151,754,403 $418,594,844 $16,537,985 $0 $500,000,000 $1,000,000,000 $1,500,000,00
Slide 8: Central to a Large Addressable Ag Mortgage Market
FARM ER M AC (FCS Secondary Market GSE) $16.5 Billion (6.2% Market Share) Loan Purchase Wholesale Funding Credit Protection Farm Credit System (FCS) (Cooperative GSE) • Four FCS Banks • 68 Retail Agricultural Credit Associations Central to a Large Addressable Ag Mortgage Market 08 Addressable Agricu
Slide 9: Farmer Mac's Operating Model
FARM ER M AC 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
Slide 10: Growth Opportunities Deepen Farmer Mac's Market
FARM ER M AC Growth Opportunities 10 Deepen Farmer Mac’s Market Br oa de n Fa rm er M ac ’s M ar ke t Loan Process Efficiency Rural Broadband Borrower Retention Renewable Energy, Project Finance Timber Securitization = Relative Size of Volume Opportunity = Broaden = Deepen = Both Syndications Broade
Slide 11: Lines of Business and Products
FARM ER M AC 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 $6.6 30% $2.7 12% $2.2 10% -- $11.6 52% WH
Slide 12: Farm & Ranch Loan Portfolio Diversification
FARM ER M AC Northwest 12% Southwest 34% Mid-North 28% Mid-South 14% Northeast 4% Southeast 8% By Geographic Region Crops 51% Permanent Plantings 24% Livestock 18% Part-time Farm 5% Ag. Storage and Processing 2% By Commodity Type Farm & Ranch Loan Portfolio Diversification 12 AS OF JUNE 30, 2021 Agr
Slide 13: Net Effective Spread & Core Earnings
FARM ER M AC $123.1 $141.3 $151.2 $168.6 $197.0 $110.4$53.5 $65.6 $84.0 $93.7 $100.6 $55.9 $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 Q2 2021 C O R E EAR N IN G S $ IN M ILLIO N S N ET E FF EC TI VE S PR EA D $ IN M IL LI O N S Net Effecti
Slide 14: Quality Earnings Drives Strong Dividends
FARM ER M AC 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 $ PE R S H AR E Quarterly Dividend per Common Share 14 Init
Slide 15: Proven, Rigorous Underwriting
FARM ER M AC Losses less likely even in default – Average LTV of 46% as of June 30, 2021 – Land values need to decline >54% to generate material losses – “Stress scenario” losses of 17% to 48% – 1980s crisis saw land value declines of ~23% Proven, Rigorous Underwriting Industry-leading credit requir
Slide 16: Credit Consistently Outperforms
FARM ER M AC Credit Consistently Outperforms 16 1.22% 0.70% 0.28% 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 2Q21 90-Day Delinquencies Industry 90-Day Delinquencies Farmer Mac 90-Day Delinquencies (Farm & Ra
Slide 17: Historical Credit Losses
FARM ER M AC 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 $31 billion of cumulative F&R historical business volume Farmer Mac’s Rural Utilities, USDA Guarantees, and Institutional
Slide 18: Allowance for Losses – Quarterly
FARM ER M AC Allowance for Losses – Quarterly 18 Improving economic conditions resulted in a net release from the total allowance for losses of $1.0 million. • Improving expectations for unemployment • Improvements in the Housing Price Index (HPI) • Improvements in agricultural commodity prices
Slide 19: Strong and Growing Equity Capital Base
FARM ER M AC $520 $545 $619 $681 $681 $137 $183 $197 $325 $483 $657 $728 $815 $1,006 $1,164 12.6% 13.4% 12.9% 14.1% 15.3% 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 Q2 2021 TI ER 1 C AP IT AL R AT IO (% ) C O R E C AP IT AL $ IN M IL LI O N S Sta
Slide 20: Investment Highlights
FARM ER M AC Investment Highlights •90-Day delinquencies of only 0.28% across all lines of business •Cumulative Farm & Ranch lifetime losses of only 0.12%Quality Assets •Issue at narrow, Government Sponsored Spreads (GSE) spreads to U.S. Treasuries •E.g., 10-year U.S. Treasury +0.16% as of June 30,
Slide 21: Appendix
Appendix Financing Rural America
Slide 22: Key Company Metrics
FARM ER M AC • 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 sh
Slide 23: Equity Capital Structure
FARM ER M AC Equity Capital Structure 23 NYSE Ticker Dividend Yield Shares Outstanding C O M M O N ST O C K CLASS A VOTING COMMON STOCK • Ownership restricted to non-Farm Credit System financial institutions AGM.A 3.89% 1.0 million CLASS B VOTING COMMON STOCK • Ownership restricted to Farm Credit Sy
Slide 24: 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 25: "Demand Pull" Provides Sustained Growth Opportunity
FARM ER M AC 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 pro
Slide 26: Reconciliation of Net Income to Core Earnings
FARM ER M AC Reconciliation of Net Income to Core Earnings 26 (in thousands) 2Q21 YTD 2020 2019 2018 2017 Net income attributable to common stockholders 53,402$ 89,176$ 93,650$ 94,898$ 71,300$ Less reconciling items: (Losses)/gains on undesignated financial derivatives due to fair value changes (2,0
Slide 27: Reconciliation of Net Interest Income to Net Effective Spread
FARM ER M AC Reconciliation of Net Interest Income to Net Effective Spread 27 $ in thousands Dollars Yield Dollars Yield Dollars Yield Dollars Yield Net interest income/yield 108,380$ 0.93% 190,588$ 0.85% 173,135$ 0.87% 174,436$ 0.96% Net effects of consolidated trusts (2,547) 0.02% (6,601) 0.02% (7
Slide 28: 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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