AGM - Earnings call transcript Q2 2021 | Federal Agricultural Mortgage Corp.

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Jalpa Nazareth

Good afternoon, and thank you for joining us for our Second Quarter 2021 Earnings Conference Call. I'm Jalpa Nazareth, Director of Investor Relations and Finance Strategy here at Farmer Mac.

As we begin, please note, that the information provided during this call may contain forward-looking statements about the company's business, strategies and prospects which are based on management's current expectations and assumptions. These statements are not a guarantee of future performance and are subject to the risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Farmer Mac's 2020 annual report and subsequent SEC filings for a full discussion of the company's risk factors. will discussing we measures. non-GAAP call, today's also certain be financial On posted website and measures portion Form most release non-GAAP of of XX-Q Farmer be earnings Disclosures these the the can Investors reconciliations financial under farmermac.com the found section. in and on information Mac's recent

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

Brad Nordholm

our the million number X% few loan towards quarter developed record for spread while asset net debt largely of funding $XX effective capital a results time in with everyone earnings These earnings in quality higher plan. net Jalpa, during first in I'm today. produced to joining of second achieved have effect rationalizing spread, very trends Good purchase over liability shift of thanks years our strategic quarter. that products. much. this markets, thank very further spread management the credit We that We our record and you of for the are Farmer the us the years. ways and that maintaining the report of above core expanding portfolio course consistent execution of Mac core continuation strong reflect that composition pleased last the disciplined our excellent including in afternoon, the and did ongoing portfolio and

substandard Our the we're metrics XX-day overall lower words, other strong with moving asset and pleased ratios of portfolio. quarter-over-quarter. delinquencies And remained favorably. asset moving the In with quality performance

in of and the in really drought certain of while causing our in America real number particularly American the As have West are in the pain, parts the real seen farmers read persistent the ranchers news, portfolio. in we not this a you've evidence any of conditions California, of West, probably for hardship

that always access in conditions that exceptional in to for a drought anticipated underground as commonly have the Mac's provides assessment the experience and supplemental primary of source, do long-term borrowers' how not for availability areas of water or analysis includes collateral loans water For underwriting process flow. value the property the Farmer impacts cash or

we're attention who numerous are American close strongly going a overall slightly agriculture drought that agricultural them with few or as prices. in of in values to the Commodity must conditions, state auctions high empathize prices to is are stable positive. While higher sale be what on evidence farm market and today that of even emphatically have we is tone very And estate sales. and public people of strong pay projected and are line seeing real in experiencing fact, record we

rural to provided in During billion $X.X volume $XX This America. billion our exceeding end. credit last quarter of quarter, we business gross new expanding this a resulted at

in see cycles markets. This success continue Strong low of providing competition, stronger, seeing if the existing purchase prices. high exceeding acquiring health quarter strong of resulted Ranch a Mac's and due capital market. growth, interest product also competition and of coupon Bank's provided to exhibited and resulted concentration the standby purchase of higher customers. on the from that through is they purchase support line lower we're relief words, our for in by some focuses we rate commitment off our commodity was solutions lines in increase business Regional our approach, address has loans additional Farm to driven our environment System & structure Farmer Credit and financial in to to Ranch agricultural funded need for limits all growth our of new customer-centric Our In increased historically increased product levels business, terms this the primarily because XXXX. in and regions demand Farm other in proactive outreach continues & consistent attributable by in within program Farm products we're prior guaranteed Federal sectors which reversal compared Across that economic needs is a to quarters. commitment largely be farmers and loan commodity our our and growth other both long-term execution, associations guarantee Reserve increase the to line to business, lenders certain product. the our need due addition continued to less. USDA to paying in of also In lending USDA core price

of institutional we AgVantage rural four counterparty successfully line seen we've amount our aggregate our $XXX business, in new of did with million. maturities an Although fund infrastructure bonds credit for

$XX effective significant business their growth bond and Farmer successful and more with customers find The funding its ourselves potential. to a holdings we and new execution to of agricultural efficient a with is that million testament assist our on challenging institutional and relationships focus and funded need. also We a Mac's these ways counterparty AgVantage believe expanding counterparties flexibility provide borrowers the customer to offer

margins too that in AgVantage when are won't have We past the do we thin. stated the

find situations wasn't a This case. were to the that quarter where able number we of

competitive we commercial steps and it I three this Mac making and invest see Farmer opportunity for institution ago, how objectives and acquire with couple next and nearly well them joined customers how Farmer several energy responding up electric in meaningful delivery business of utility years, and had finance counterparties, federal years given This When products a broadband level of as While to we do pipeline. and and renewable from project and team the We Farmer the greater renewed develop and attached activity significant a simple interest energy from generation deploy do a policy sure we at and that growing loan develop Mac as coming new systems. responsive perspective a things needs our the listening rural Farmer energy. required took in interest had vision of and cooperatives deliver develop as to volume purchase broadband services are renewable renewable in our more view really I approaches to sector to limited momentum over by the our Mac broadband that customers from more products. closed to innovative Mac positive that among making retain we rural to we

our lending appropriate We also years and direct effective rural there's liquidity long-term abundance are to dedication competitive support execution and deepening consideration come a to result that's mission infrastructure to took highly all benefit the broadening the to business of products America. team's consistent plans. developing delivering into that an about in I of more us our proud that required This really am listen a our financial learning successfully performance last our, the to in people meet environment say of of credit ultimately and over and three by our customers' to helps and investments to needs. is the where today, respond

agriculture audience, campaign on our part is to a reach a identify available coauthored marketing to opportunity business in their promote shine our multi-week Farmer mortgage we Farmer engaged joint customers in a the we to the Mac's agriculture lenders that Banker a demonstrate intended exciting ultimately in larger audience campaign relationship and opportunities This to light marketplace. to our website. is States white role with Association. recently been efforts The helping of American Mac to United It's grow As paper has wider on promotional benefit of and rural an all the in agriculture tangible to helping benefits in America. create how mission those for with market

we trends the expect So the half we quarter very seen in second with to we've pleased summary, and generally XXXX results positive of in continue. first are the

navigate some the well the near-term the us our during ability execute to of of call the to Financial turn from we're is our year. to whatever resilience of commitment for while going level like variant strong customers and bit quarter. I'd the comes into confident on Officer, Aparna? as position little and uncertainty remainder the that our over demonstrated you working Chief the way additional that a While And help capital financial to to home our results current insight plans give our now our Aparna, with as to emergence creates infrastructure, of employees delta

Aparna Ramesh

just higher results. execution noted. Mac's access This earnings substantially I'm good capital to pleased throughout volume growth, spread share organization Thank Mac's as and the driven costs Brad and our second by you, quarter debt Brad record second everyone. business focused markets. to given was reflects quarter XXXX with you Farmer Farmer lower funding strong afternoon

on Notably, or guidance continued this quarter basis strategic XXX the this making growth net in return year-to-date investments a exceeded support minus for common exceeded we initiatives. basis we're historical is is five points despite effective with stockholder points that basis to Our provided. well and have line points XX% previously plus we XX this our and spread and was averages equity this to our our

portfolio period increase for billion continued XXXX. in cash We net raised million historically and a The a $XXX quarter $XX.X management billion, strong. in with spread billion long-term composition were & effective of comprised net five and in assets to terms, million for includes low sectors Farm debt our quarter compared Ranch drivers this the net combined Farmer execution to the funding we of spreads of practices both a new rise Our year-to-date previously, duration net pipeline decline spread funding quarter instruments. and quarter. year. in interest this rate our of markets was minimize of primary our with we spread the effective average debt combined in our in purchase to shift $XX.X million across matches that $X.X mentioned a The and daily. spread X.XX% XX% million balance on we've disciplined this of capital Mac's convexity interest percentage maturity our rates. rates By as ensure XXXX to spread I which liability extending and Year-to-date bonds securities. issued X-year of is transition and to that actively $XXX same a analyzing sectors. of loan a environment levels of the maintain of asset pricing our access effective for billion loans potential increases the our products earning $XXX also highly are increase rate we out have record at from LIBOR-based greater with We're successfully remain were during able $XX.X AgVantage us to very XX-year second last $X.X $XX.X X.XX% attractive. earn our second than liabilities, investments sustained We've prepare net issue the preferred and that rising In that lower higher million capital methodical was risk translates of and existing in to event in adequately favorable effective overall

Turning to core earnings.

XXXX diluted second a in XX% increase to Our in and or dividends series year-over-year G common common or $X.XX year. our increase compared issuance. per million this potentially offset share due quarter $X.XX increase after-tax core The million operating recent $XX last grew net the in effective spread core preferred and after-tax in $X.X million by an share was million diluted increase preferred expenses same per in period was stock to earnings $XX.X to from earnings, $X million $X.X primarily for

due were lower information by and software and primarily XX% is related These by to spending that consulting levels expenses conferences. IT increases and Our initiatives. high technology on increased consultants support operating and strategic various headcount travel of were year-over-year consultants, to to expenses fees, and this increased licenses core offset

these However, normalize once temporary are resumes. post-pandemic as decreases expected we've mentioned very previously activity and to normal likely be to

revenue platform technology see infrastructure the for foreseeable sales higher support organization our to our primarily expect we add strategy across to to modernize relevant enhance and We future continue will to as our investments the to grow.

our and have these efforts business, next in over tapering expense a expect to expect do growth. We instituted XX we and expenses. approach both Moreover operating While innovate ratios, quarter personnel review as XX to do increase the our we our monitor of a we off team. management a expense to as disciplined we non-personnel to very controlling thorough we grow and each months our see rigorous results a

target our is ended Our XX% efficiency ratio at quarter below second XX% and XXXX level. this

benefited strategically invest efficiency customer upgrade position, to we our our levels million losses and We ratios multiyear to million hope our and under projected XX, allowance macro bringing and total for XX environment as historical remain $XX.X are of As we improve improving continue in will technology credit stabilize to platforms $X at competitive XX%. commitments by our that from release evidenced us service XXXX. at March June an XXXX, from

Turning robust to $XXX this issuance preferred ratio XX, position. XXXX, in capital our in quarter now opportunistically XXXX. this through $X.X million as XX.X% and as from requirement XX% June us of with our strengthened May. XX Farmer to June billion XX, The capital together or we stock putting Series levels XX% of very addition G as of of in March successful X statutory strong by exceeds increased a earnings Mac's core capital happened capital, million Tier $XXX of of a our capital our Preferred

of which has its program plan repurchase was a of Additionally, suspended and XXXX. the March previous our an $X.X XXXX. million XXXX, up the terms quarter in our March since authorization and of program, extended Board of share date to reinstated expiration has been first reinstated Directors The on remaining

when We the Farmer with half Brad quality Mac's by in adequacy. and accretive turn XXXX that quarter are note must and the And and XX-Q performance conclusion, today and back consistency only consistent filed about in complete our this SEC. objectives. we have of both and Overall we with we our in consistent not in that to with repurchase profitability me very quarter More we both XXXX this information the reflected any strategic in you. is results is with second as shares capital our our pleased credit intend and view our is it bolstered first let we to repurchases repurchased stock

Brad Nordholm

profitability are of much access America's mission successfully increasing reducing Aparna. business thus for the reflective benefit we a and to credit in Farmer communities. so in of that agriculture expand XXXX while Thanks far think Mac serving business our Great. the results generated The I can of cost of the rural

to shareholder manage building focused prudently, capital value the continue We long-term. consistently our for on

peer-leading for over with position efficiency, continued few far continue see company investments while as we Additionally develop I'm we at to very next making the pleased the growth years. to the so very, operating Overall we results if And on have very, I'd Farmer anyone about the very you. today. like excited questions operator, and future this year that the any line from see have Mac. Thank here we now to

Operator

[Operator Ladies comes you. questions. floor open And the gentlemen, Please question Excellent. Thank Pendy and is now ahead sir. Greg first for Sidoti. go from our Instructions] with

Greg Pendy

on is with side for is here to Ranch at the that some the highest Hi, volumes liquidity assuming you're seen it institutional this But and terms question. but back? I have we've got is here up, Farm Thanks mix spread system likely In scenario more words you're there. mix guess, What your sticky I'm to guys. will time. & lower in you of in because I in the Because much ask potentially see just loans the other decreased net effective most putting that in we that down? coming brings the coming longer hurts go rather here. taking will Is say? spread fair total duration credit business scenario that your

Brad Nordholm

composition question. portfolio. our always by -- I'm Yes. in little that really is it's a mix. note Carpenter the NES I Greg, participation. driven on appreciate I at our asset that going jump portfolio different Brad. Zack little here your the But additional whole a to do for outset And thanks ask color with the just to

price it's we that an portfolio, put staying for when that asset there we while. in a So

moves attractive at faster and right record it slowly, as capital capital the a it down So up the we on obviously, in lows Frankly more markets over roll spreads are debt relatively can our or maturities. debt attractive have now. execution in markets impact also

to just see discussion NES So markets. hard of we how upward agribusiness little instruments provide in a are the bit relative much available in from NES as have. prefacing & about the you average of to that Carpenter example, movement a Farm rolling example, and in in in by, rural is above-average bit to jump maturities little assets with to capital credits and growth going the comment, Ranch that larger turn to impacted average below of for portfolio? for that here? that margin see to rest it's growth Zack maybe I'll above Or growth in complex lower of But Zack, over or debt we're a utility debt

Zack Carpenter

we great Yeah. perspective, hit head sheet Thanks kind seen it the compositional on of and Farm volume think our And on agribusiness question. has of a at from assets. continue earning lines. compared our Greg, higher growth is lending since our many which least significantly these XXXX, in that And chain balance value a & we've balance of portfolio And Ranch to business into see I with business shift And Farm you sheet NES, Brad. Ranch. the strong And other mix. to component higher

our going point on those being the put at positivity said, space. further as are and business, we NES of rural are see in to get eventual in we're our saw some lower some And so and in AgVantage other accretion And some some and portfolios. lumpy more time opportunities. than That into loans they utilities higher that much year, that product, we

as lower. piece and are is a given NES again Those of in business puzzle product. of a shift those the And to some the right? our our lumpy volume that, to see NES And then other component fee-based it. sheet us that decrease of increase we loan pieces We customers become will space. are products, as markets So fee of changes help Those we to but capital tend fee the warrant more -- sheet the in see that that less off-balance those. decrease, the clip and purchase on-balance the

continue Ranch And is, purchase. see would it that's So growth & what strong I to to say forward. in Farm we going drive going

year to from bit. continue that taper the on off growth later the strong utilities agribusiness we'll see upward perspective. and of see that mix NES on loans will coming and some potentially continue would this that to a rural But And side we help off AgVantage the on would the

Greg Pendy

And for some time if of the you are that's guess, that a I there take will if passed to Is your spot. utilities, But kind That's that, -- a -- the divisions, perspective? very there be from then, some fair helpful. an know say, beneficiary. rural might if of it it is just is bill -- the build of infrastructure sweet within I

Brad Nordholm

the around we infrastructure funding could would would to what opportunities really likely real renewable really that kind see an and just infrastructure higher loan relate think of much I would, those structured. it's in But and both being feasibility years would Obviously, for And the margins. that certainly Greg, details credit stimulus pickup or and as energy that that meant want program be we positively certainly plan, broadband actual in projected the be. portfolio few would directionally, in that how what -- before of have this there. But The accretive confident infrastructure is renewable broadband the it to a nicely depend most how federal Yeah. see utilities what's positive. we it And could us. be to at of thing broadband federal further quality. bill and from would renewable what both it any the could of overtime And over the that, both energy. would anticipate impact build is has it on point, energy

Greg Pendy

very Thanks lot. That's helpful. a

Operator

be back Instructions] further Brad. And this like questions I'd time. [Operator no there to turn appear the floor at to to over

Brad Nordholm

you. thank Well,

But on We changes very more time home attempted in a very, X may to we that, providing or to o'clock, just a our Thursday afternoon. You bit make make shorter, at call appreciate for nice your very attempted for much. attendance today. noted few it have little a questions we going

touch We information will on you to we regularly have November, We of like sharing be our with And to call any additional in always get our to with XXXX always, reporting have results. you. time. pleased We're speak look information, you'd follow-up with scheduled this. if forward questions that when third next very course, as at with additional you questions, will quarter any just in

have And with So evening. that, much. thank a you very good

Operator

today's your Ladies you. gentlemen, thank conclude We and does Thank participation. for you this teleconference.

at time. have great You a may And this your disconnect lines day.

Federal Agricultural Mortgage (AGM) 8 Aug 212021 Q2 Earnings call transcript