Federal Agricultural Mortgage (AGM)

Jalpa Nazareth Director of Investor Relations & Finance Strategy
Brad Nordholm President & Chief Executive Officer
Aparna Ramesh Chief Financial Officer
Zachary Carpenter Executive Vice President & Chief Business Officer
Gary Gordon Private Investor
Call transcript
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Good day, and welcome to the Farmer Mac’s Third Quarter 2021 Earnings Conference Call. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded. I would now like to turn the conference over to Jalpa Nazareth, Director of Investor Relations and Finance Strategy. Please go ahead.

Jalpa Nazareth

you Conference us Call. thank Quarter our and Earnings XXXX afternoon for for joining Third Good I’m and at Finance Nazareth, Strategy Jalpa Director here Farmer of Mac. Investor Relations

these to call the Farmer Investors As business, Disclosures company’s and company’s Mac’s the prospects on report provided we assumptions. risk can note, the based and forward-looking and that and of Mac’s SEC are certain will those subsequent that the today’s current begin, non-GAAP a On These discussing to XX-Q the during Form on the in about filings we please under website call, strategies subject Please performance for and could our release statements farmermac.com cause are recent of this are XXXX from annual management’s section. may factors. which not also a guarantee of measures. the full found differ earnings contain portion statements actual financial to refer results be discussion and projected. be future and uncertainties information most materially posted financial of information Farmer expectations risks measures reconciliations non-GAAP

afternoon who President objectives; business question-and-answer this of Nordholm. Select are At management our CEO, members joining team Brad CFO, and Aparna the Nordholm Brad and to our and will for management call CEO, performance. Brad? our financial from us financial highlights our Joining on provide I’ll period. President turn will will over be us time, the also detail greater this quarter third strategic discuss our and and Ramesh who

Brad Nordholm

you Jalpa and thank for us. joining good Thanks, everyone afternoon, and

of combined significant year with accomplishments the fourth third mortgage-backed afternoon’s expansion newly see we’re quarter the press earnings can quality, These model. management spread, our internal syndicated consistent the reflect and having a business net We core strong credit quarter, our loan durability consistency and many another our from strong continued in thus and quarter liability our the great including discipline release, execution our more with policies securitization. with and of and getting function pricing on effective plan. and our asset our strategic of As another recently structured multi-year performance, financial the and servicing this far, of accomplishments, agriculture alignment structure you reflecting delivered

and Our asset ratios moving delinquencies quality basis. on XX-day remained a favorably sub-standard metrics with strong quarter-by-quarter asset

see opportunity strategic our bring rural servicing key We’re horizon. pleased seller the customers, benefits institutions for no performance our an parts a core the with who network. America loan and to myriad the acquisition lending Mac issues internal reflects Farmer servicer and overall to quarter’s of our of of this through Expanding portfolio on it will continue material are capabilities with

across data visibility we maturity. this governance giving large of inception our efficiencies access portfolio, into timely control create use harness to enhanced and direct opportunity from to security, will more for greater will a servicing us performance, part more our over to and and platforms opportunity this We loan loan oversight better and of

mission the we issuer a believe overall sales credit relationships agricultural marketplace. investment in remain the end seeing of and as Mac’s us higher, capital increasing and estate our I’m the residents. country’s flow loans, support us network of commercial year. producers improve availability more farmers, exemplifies credit the competitive borrowers increased rural of which infrastructure capital closed provide strategic America’s well business a deliver while creating high core benefit exceeding well and $X.X costs enable October. of billion new and America remains enable provided to lender of consistent for upon customers. for This increase as public next mission our we this them, strengthened several the strategy. broaden America opportunities our real equip and long access end. projected ranchers positive. institutional billion Developing The customer quality will will as balance while ahead, quarter, as We to the few pricing investors. better important program Aparna very market eventually opportunities, strategies existing to term a that driver years in business that outstanding million with values are some growth this frequent growth newly support move and ultimately our ranchers. performance, Farmer minutes. will an the $XXX farmers tone to markets rural a Farmland service for the example flat to third capital resilience slightly of more this excited transaction agricultural The in $XX key in values quarter lower well-received rural deepening to of dual it a is to But evidence for opportunity the Farmer we’re in gross larger, the at securitization new complex the talent to to of build also become number auctions of to for and the to effectively of the financial investment also the more in plan transaction in highest will We looking leading provide this with with service credit details to our efficiently are volume success We’re the the on as and to resulted and an over in of strong proud in and sheet, our our is Mac’s mortgage-backed early securitization credit, structured our agricultural of syndicated and

quarter retention which this address was business proactive markets. and our Farm all our as line purchase on continues Our well our customer-centric as that’s products solutions focuses and cycles by existing largely through loan driven to new be consistent approach, Ranch both strategies. success needs that growth agricultural economic Strong providing to attributable outreach and & funding customer of in

actually for $XX designated is This net added quarter this to our new in other to and some short-term Mac economics view funding reversal from largest a our very the sectors a that of million commitment and also business, and and an Regional zone. $XX some of unfunded provide and commitment be acquire the by also limits of the of of bower improve successfully the opportunity for commitment a our opportunity significant transaction Association’s growing institutional also change to $XX grew demand of zones to core from limits, in renewable just seen provided commitment telecommunication of execution million, prior needs customers concentration largest is our credit purchase given growth of finance. driven System being in of to cooperatives Credit Mac’s electric from relief Farm electric broadband farmland while of concentration for generation. growth Despite price, opportunities We largely effective We our develop business Mac can recognizing ability general level project within energy reversing line power -- broadband federally in sectors million purchase one several liquidity quarter. resulted funded also or services competitive $XXX two that interest positive the the loan over in their invest but ample next standby lending the last a & supply to customers counterparties. Farmer key years. quarters, exceeding and over which This healthy years, renewable these Farmer third some might rural commodity greater testament commitment in momentum product being long-term these in lenders deploy to by opportunity of the to energy needs In Ranch’s these for we trends commitments growth, with added customers. million we Farmer this Utilities liquidity lenders. reflects and a from market line exhibited under in meet of sources, Rural flexible in these rapidly. the as date I of Farm we’ve over This add of

build strategic ahead and the many on quarter we see we notable to plan accomplishments to As continue opportunities. this of look and quarter, fourth

underlying will to our throughout position, I’d We’re returns generate across business market Aparna like natural our cycles, to as it that, to to ability confident our and discuss in model, turn historically. and consistent the various our customers support environments commitment strength of results to economic our detail. With we with more over done our continue strong capital have to

Aparna Ramesh

of afternoon, given Thank earnings to to you, consistent earnings share you Brad capital I’m Mac’s us driven organization. throughout focused business quarter funding debt XXXX volume access quarter Farmer and another reflecting the spreads markets. results, higher lower by results execution and good were third with costs, strong everyone. pleased

compared is extending management last based extremely Farmer remains derivatives In to increase from quarters, terms, methodical access retaining our and capital coupled also this collection a including has in net practices, basis $XX.X pricing debt maintain markets, represents last issued a our loan in effectively new asset There activity disciplined and of asset, This uptick to significant result previous sector-based insurance. Year-to-date, adequately continues for the prepare as markets effective to debt By the percentage X.XX% this Our quarter same increased We’ve to out costs. X transition we’ve attractive spread liability and in daily of increase the payments. year in levels. was of of non-accrual of million. derivatives average is liabilities point of environment, $XX.X was aid in this and Farmer balance a spread The XXXX. loans in cash comprised a net able we’re year. the labor the continue to from compared X.XX% the to with seen a billion Mac effective account in market. was period X.XX% X% million strong. effective especially increase cash XXXX $XX.X market, true funding billion rate net should security. while net was third $X.X environment, Mac’s and for transition to our business LIBOR an activity, which investments the decrease $XX.X period low-rate loan same sector the quarter and and in rising billion, potential an spread in assets spread year-to-date and a volume, earning to third

were in our second minimize mentioned third you resulted ensure million interest from was in the that increase talented the and issuance year-over-year the effective that we as we loan mentioned, headcount, offer increase common servicing the our quarter of $XX.X share level due risk in saw as common our we in quarter service was of preferred information us million per spending and despite that to well the same recent function the cost various increases same or licenses in on also of team in interruption The software third primarily servicing period board were decrease matches flat, expertise of strategic by will deserve to headcount duration after and August. the and expect loan we tax Farm diluted to brought million strong analyzing, our increase as event our are We be additional was over diluted to capital quality spreads USDA a were $X.X short compared earnings us period spread initiatives. revenue $XX.X to expansion and Farmer were to servicing tax rise will in looking pipeline not be that Brad or $X.X rate that million before, higher and our a told with and for service and year. in of the for stock results in preferred offset The neutral and us. in net this our a we operating third as dividends losses after the rates. these additional central provision XXXX for XX quarter should at expected in line increased guarantee partially to serve, technology million portfolio in by Their $X.X by welcomed revenue group our customers support tax increased million the to sustained in and whenever Ranch in credit to by paying offset after in consultants party this $X third-party allow Core internal interest loan or of without business, for and expenses service. of that after The initiative with $X.XX be that fees. they our XX% expenses, tax expectations our decrease We’re expenses million a through any existing a the last year-over-year increase & per lines this increase and interact servicing reflected actively earnings accretive loans in convexity I a and $X.X were driven that Operating and multi-year $X.XX about. in core term where now share make Mac’s higher on core members related will our on will the

operating higher support relevant enhance see And this is the we modernize to to add talent expect our across our for expenses invest foreseeable We and strategy, organization. the primarily to platforms the technology revenue infrastructure, as future.

of metric, ratio non-personnel review efforts we these instituted to with and expect and We’ve the disciplined months results we our revenue. monitor in costs such We operating closely as XX quarter. monitor continue the to a over our in innovate business remain growth do very an personnel growth commensurate and controlling rigorous XX our to the to efficiency and that increase this we through expenses next every continue a and they and grow we’ll operating approach

efficiency Our below quarter was in targeted XXXX XX% the are ratio third XX%, a level.

levels our invest remain commitments upgrade in at are to efficiency multi-year we ratios platforms technology historical XX%. stabilize under and projected to and strategically our customer competitive and our As enhance position, service improve

as in capital, our position. capital and capitals, requirement now or regulatory a well-capitalized XX%. of Mac XXX Farmer Mac’s by of billion exceeded to Farmer million, Turning XXXX, $X.X statutory September remains XX strong core

capital review remaining ratio Brad accomplishments two end, X want Tier earlier XX.X% highlighted Our also threshold. at well-above recent I was quarter that on. regulatory our to

servicing transaction. First, the strategic

are & unveil. the portion Ranch our the initiative and from as rights any income This those as additional our earlier. loan partially I expenses team retaining a I mentioned, And on do we invested be sizable rights of in During will in that for a be, servicing increase portfolio. for service a USDA Farm the offset we interest servicing is the this by hired, quarter, tailoring loan fee a third-party there talented the assets. operating we seller mentioned will mentioned, acquired we our of to headcount-related central on and loan servicing not to interest service, income I servicing as increase expected This that that platform

repeated to highlighted mortgage on a investment and transaction a transaction backed community fulfill and unguaranteed The resulted investor total and subordinated This and sources The opportunity of very place agricultural tranche. newly success $XXX.X X.X of that an transaction second in Brad and structured funding to an by the a with oversubscription that tightening billion two XX. million pricing senior levels. has our revenue tranches, in syndicated securitization of with The well demand deal was diversify structured October effectively. tranche its around is up was mission this took guarantee provided Farmer received Mac more

are securitization us securitization, back identifying potentially looking to And We currently details execute frequently make discuss transactions about more I’m inaugural transaction thereby takes forward year earnings SEC. that filed to more as on Farmer to return these we of to market XXXX work An transaction future. during expect we next great effort and it efficiently I’ll conference you another to and you. XX-Q enterprise call, XXXX more third Brad, seek the similar we we our is More in a this with turn to financial our in with a XXXX the with wide, performance more the for in the quarter this programmatic deal that, future. will in full information complete when Mac’s today ways providing

Brad Nordholm

and Farmer the here the strong, and into Mac quarter third summary, in Aparna. at to Thanks, for Well, demonstrate strong foundation results continued visibility our earnings future. growth in were

mission of capital the to our who serving on to reducing access of increasing the economies. are rural people of cost agricultural the and continue the same the agricultural principle and for of really rely benefit in communities, will We and there

manage position making on see We investments efficiency, capital And to any long few anyone on questions while years. and if value see continue line from operating we the for to for have our growth prudently we building shareholder over to delivering continued leading I’d operator, consistently the company like that next the pure today. now run, this focused


first Thank please and you. Instructions] Gordon, comes Gary Private a [Operator from Today’s question ahead. Investor go

Gary Gordon

for my of the in I got third math it hopefully question. the taking that offs One, you charge looks missing year-to-date. Is I that couple says things, my something? don’t A Okay. if no Thanks there actually mind. Am quarter or right for like were correct?

Brad Nordholm

that Gary, is No, correct.

Gary Gordon

terrific. Okay,

are Farmer capital. to and helps how least of excess of I doing access at take costs, securitization, and why asset-backed for capital, local the or plenty and securitization so it had guess funds about -- up free is financing reasons some I’m balance markets you. excellent Mac on off Second understanding risk the the have that lower cost security sheet my curious

Brad Nordholm

capital, we different deepened further And a sure even of by be issuance markets the investor for beginning market we and sources make extraordinarily liquidity. the Mac, pandemic, great but, different have funding. debt tapping access form in we can transfer, always objective to fully of a to I’m as another going for and But that ask here just you the diversifying into of about diversified up we’d come to when realized Aparna be free true, But cost in and more benefits programmatically minute haven’t down. some in may very Gary, a Gary, to systems financing you financing to here, lower of Yeah, jump yet that points. the elaborate we costs, but and granted. Farmer risk our the that mentioned, that expect for of know, by is we think had important never At deepening sources our [ph] these capital us take

on over really significant benefits, time, even us. Aparna to valuable them to me to of some become because turn we kind are these to let and different expect of elaborate just So more they

Aparna Ramesh

Gary. thank Yeah, you,

at see times fully of sources, capital I I especially very that At start we good we’re about. long bit markets only question. us the to think better end leaves end allows of one didn’t end, of diversify that’s especially assets, both capital that on especially very but the curve, on and a long curve debt in pandemic, when markets volatility reliant debt us Brad this a talked on funding want the at of focus source just short the the only to our the little good of Certainly the with but funding. the point maybe

by sources on transaction really to you, funding, And remind I year our the end, for diversifying important especially so to long this of that. to continue think securitization XX the XX to sector, targets have it’s us

one that. reason we So why that’s did

The long-end lower by [ph], is financing, cost a our in be as also that to deeply that also but allow us curve. does second tenner to of especially competitive this are the fulfill add continue offering rates piece to more mission of rise, likely

another institution. are So, point. finally, that’s very And well we capital, about you absolutely, talked a then capitalized

Our really is us a doing sense, to capital transaction is deploy reasons continue like but our that way a efficiency makes reason for lot to diversify capital that as allows more and our said, line. not product this in of this efficient, incredibly we a for capital

I we think, I entered and the those, helps. transaction primary are So this reasons hope that into

Brad Nordholm

you I to that’s Mac, been case think you having leadership if really motivated this, it hasten all, do us capitalized. us when fabulous as add us something, just to at that to not that we the Farmer you’ve look sounds access, But like were really future, over doing concerned us entrusted we’ve stronger, in of looking of look I the about and and Gary, your and resilient even organization the to that we’re When capital investments do proactive ways the want the new your makes with That’s things be always you profitable future. trying to what for even more here. with more in us, to investments. better

Gary Gordon

portfolio get to great. certain and of on, were servicing question is others expectation you two, yourself are then of fees by your third more serviced on Okay, Quick they more you And and bought, that business - benefits one? the the servicing long-term for more business short there’s party? said opposed you that term, as these

Brad Nordholm

here really joined let Carpenter. have give term and and Marc and together team well, Operations, Maines, Counsel, call, sitting But Yeah, Mario of intermediate as for Crady; answer some near in our I’ll business been the and question I Zack much Business General terms Chief put Rob Jalpa, color Gary. intent this strategic good that Officer, Chief and our we’ve Head And Credit Zack transaction Aparna that, by Officer, of Zack, a huge our on of by Steve to along this and been with strategy effort. was you term well the as relationships, Mullery;

Zachary Carpenter

question. Great Gary. Thanks,

in enhancing long-term of calls Brad on indicated, I lines lot we prior say well as the as new You we’ve predominantly see near-term immediate our of As benefits enter we immediate, a And infrastructure, as business. benefits. more talked and about

gives and those do creating evaluate that servicing on efficient us will platform. the expect overall, Brad We new farmers that do plan more and a will that portfolio term we see make increasing central consolidating, data, As benefits, more for partners. more said, ranchers, new able more and central a we And function the infrastructure make really indicated anticipate to what that to need strategically more component to to complex platform support means key Aparna really work the functionality mentioned That and for services market. with a and medium loan our for products we to servicers broad so, benefits customers we say Aparna say, is to in our anticipate with getting a for farmers servicing getting but ranchers we to access central in more lot receive to way. process on their work of I’d we continue really, to and to servicing commented this key solutions capital and products. and that products key ranchers, ability we and we and enhance efficient that our team quicker our an I’d data in customers, the increasing a much customers new that the fairly be and and to execute access fully service with longer being our can farmer

Gary Gordon

Okay, on by in Bill legislation other expert thanks. that’s seen haven’t now that’s to particularly I proposed the -- Mac? this, by new One last no legislation the administration, is anything, any expected Infrastructure there question; but being I’m Farmer or anything relevant

Brad Nordholm

You bet.

agribusinesses about what transportation talk there. you lot transportation are because that very XX%. commodities around shipping, agricultural farmers States, is just the does mean, by infrastructure has but and of Gary, country. well, on this port on cuts dependent might facilities the ranchers to over Let’s what in with United that they varies that a crop many are US portion say, A all the emphasis in lot efficient crop, truck, and of cases and exported a and do I Farmer across Mac? Well, to

win the improve America. rural is infrastructure, to big extent So, that that a transportation for we can

farms goes continue expect great broadband, who about and precision that and it’s what We generally would and to world rural activity but around internet-based positive. in to that for production that an for in and increasing agriculture. There on rural is improving services. young agriculture, very there’s allocated again, today, Frankly, matter call a attract talented businesses rural to portion large economic farms, people do of a businesses access to we for operate competitively you can’t the communities America, economy ability for for positive. a that’s as funds quantify So, in competitive development

these to broadband technology application assess satellite-based the from improved planting, what’s broadband rural We these and benefit for on activities harvesting, for to decision are making, benefit optimize all all for using access. of inputs, fields going in --

wind agriculture financing an That’s it important us. business energy, America, of is aspects solar rural rural rural and We see convergence the at yes, is for other development discussion discussion America. specifically methane fuels, And in COPXX, then in are about all energy, see of we are opportunity with energy renewable of America. even are about These and economic opportunity capture renewable So and renewable all there things proposed even that gas. specifically projects for legislation, important and we biodiesel.

we quantify. of little quite closely to so And very bit these and, frankly, a although very see and downside difficult follow upside,

Gary Gordon

you. time. Thank your terrific. Thanks Okay, for

Brad Nordholm

Thank you. We appreciate it.


Instructions] question Nordholm to turn back gentlemen, [Operator any concludes Ladies to -- for answer and and I’d closing Brad remarks. like conference any session. the our over final

Brad Nordholm

had performance. weeks as wondering your really stock we always, calls Well, over last appreciate number on what’s with of a few interest. going We’ve the

continue business that. going building out here comments, fundamentals just quarters pretty this actually, We’re in for doing couple to we looking focus my Farmer as mentioned next environment on Mac, over earlier the to and of the at I of good see,

today. appreciate joining really your again, for So, interest. Thanks us

If you do in have questions, any thanks follow And again. out Jalpa reach up out particular. to please reach to us;


call. you for Thank presentation. you. all We This today’s concludes today’s conference attending thank

your and disconnect now may You day. a have lines wonderful