Farmer Mac Reports First Quarter 2024 Results - Outstanding Business Volume of $28.8 Billion - WASHINGTON, D.C., May 6, 2024 — The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A), the nation's secondary market provider that increases the accessibility of financing for American agriculture and rural infrastructure, today announced its results for the fiscal quarter ended March 31, 2024. "Farmer Mac delivered another quarter of strong earnings resulting from our well-disciplined as ...

These companies should be able to continue capitalizing on elevated inflation.Higher inflation has been sticking around a lot longer than many expected. Instead of continuing to fall toward the Federal Reserve's 2% target, the latest inflation reading (as measured by the Consumer Price Index, or CPI) showed prices rising 3.5% year over year. That accelerated from the previous pace and exceeded market expectations. While sticky inflation is bad for consumers and other parts of the economy, there are some ben ...

Core Viewpoint - Federal Agricultural Mortgage Corporation (AGM) has demonstrated strong financial performance and significant dividend growth, leading to a potential upside in share price and continued investment appeal [2][18]. Dividend Growth - AGM raised its dividend by 27.3% to $1.40 per share, resulting in a starting yield of slightly over 3% [3][5]. - The company has a history of 12 consecutive years of dividend increases, with a compound annual growth rate (CAGR) of 25.12% over the last decade, totaling a 900% increase [5]. - The current payout ratio is only 30%, which is lower than the sector median of 37%, indicating a strong capacity for future dividend growth [5][18]. Financial Performance - AGM reported Q4 2023 revenue of $90 million, an 18.4% year-over-year increase, with earnings per share (EPS) of $4.10 [9]. - Net interest income grew by 21% year-over-year, totaling $327.5 million for Q4 2023, driven by increased business volume [9][10]. - Total business volume for 2023 was $2.55 billion, up from $2.3 billion in 2022 [9]. Business Segments - AGM operates in two main segments: Agricultural Financing, which includes farm and ranch operations, and Rural Infrastructure Finance, focusing on rural utilities and renewable energy [2][12]. - The agricultural finance segment grew by 6% year-over-year to $20.5 billion, while the rural infrastructure segment saw a 21% increase to $8 billion [12][13]. Valuation Metrics - AGM currently trades at a P/E ratio of 11.33, compared to a five-year average of 10.20, with an average Wall Street price target of $227 per share, indicating a potential upside of 26.87% [6][8]. - A dividend discount model estimates a fair share price of $224, representing over 25% upside from current levels [8][18]. Risk Profile - AGM maintains a low delinquency rate of 0.12%, reflecting effective borrower assessment and risk management practices [10][15]. - The company has $376 million in cash from operations and a net income margin of 57%, positioning it well to navigate current market conditions [17].

Core Insights - Farmer Mac has completed a $308.1 million securitization of agricultural mortgage loans, marking its fourth transaction in the FARM series since 2021 [1] - The transaction, FARM 2024-1, consists of 443 agricultural mortgage loans with an aggregate outstanding principal balance of approximately $308.1 million [1] - The deal includes a $285.0 million senior tranche guaranteed by Farmer Mac and a $23.1 million unguaranteed subordinate tranche, with the senior tranche offering notes in three classes to provide diverse investment options [1] Market Demand and Investor Engagement - There was more than three times the demand for this offering, indicating strong institutional investor interest and market appetite for agricultural assets [2] - The successful expansion of the investor base and introduction of new classes of senior notes were aimed at addressing the cashflow demands of capital markets [2] Company Overview - Farmer Mac operates as a Government Sponsored Enterprise, enhancing access to credit for American agriculture and rural infrastructure [3] - The company provides innovative financial products that enable lenders to offer flexible financing to farmers, ranchers, agribusinesses, and rural infrastructure providers [3] - Farmer Mac's advantages include long-term financing, low cost of funds, low overhead costs, and high operational efficiency [3]

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Financial Data and Key Metrics Changes - In 2023, the company achieved a 28% growth in net effective spread to $327 million and a 38% growth in core earnings to $171 million, alongside a 10% growth in outstanding business volume to $28.5 billion [7][19][25] - The quarterly common stock dividend was increased by 27% to $1.40 per share, marking the 13th consecutive year of dividend increases [8][25] Business Line Data and Key Metrics Changes - The rural infrastructure line of business grew by $1.4 billion or 21% year-over-year to $8 billion, driven by new AgVantage facilities and growth in renewable energy and telecommunications portfolios [9] - The agricultural finance line of business increased by $1.2 billion or 6% year-over-year to $20.5 billion, primarily due to the acquisition of mortgage servicing rights and loan purchase growth [10] Market Data and Key Metrics Changes - The company provided $8.3 billion in liquidity and lending capacity to lenders serving rural America, reflecting a net year-over-year outstanding business volume growth of over $2.5 billion [9] - The telecommunications portfolio grew nearly 60% year-over-year, while the renewable energy segment more than doubled in size during the year [11] Company Strategy and Development Direction - The company aims to diversify its loan portfolio and serve more clearly defined market segments, which has proven beneficial through changing market cycles [9] - There is a focus on strategic talent acquisition in renewable energy and telecommunications to build expertise and capacity as market opportunities arise [11][16] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the increase in Farm & Ranch loan purchases in 2024, despite expectations of declining farm incomes due to elevated input costs and receding commodity prices [12][66] - The company is well-positioned to navigate ongoing market uncertainties and aims to be a reliable source of capital for stakeholders [15][29] Other Important Information - Operating expenses increased by 19% year-over-year due to headcount growth and technology investments, yet the efficiency ratio remained below the target of 30% at 27% [22][23] - The company maintained a strong credit profile with 90-day delinquencies at $35 million, reflecting a decrease both sequentially and year-over-year [24] Q&A Session Summary Question: What were the drivers of the margin in renewable energy and utilities? - Management indicated that improved pricing strategies and a growing reputation in the market contributed to the margin improvements in these segments [31][32] Question: What is the outlook for generating volumes from other farm credit system banks? - The company is actively engaging with various banks and associations within the farm credit system, expecting to find new business opportunities in the coming years [43][45] Question: What is the outlook for loan growth in the Farm & Ranch segment? - Management expressed optimism for enhanced growth in 2024 compared to 2023, driven by market dynamics and increased borrowing activity [70] Question: How does the company manage prepayment risk across different segments? - The company noted that prepayment risk is low across most segments, with a focus on maintaining a well-hedged balance sheet to mitigate any potential impacts [62] Question: What is the outlook for the farm economy and its impact on Farmer Mac? - Management anticipates a slight positive impact on Farmer Mac from the farm economy, despite expected declines in farm incomes, as it may stimulate additional borrowing activity [66]

Fourth Quarter 2023 Equity Investor FARMER MAC Forward-Looking Statements In addition to historical information, this presentation includes forward- NO OFFEROR 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 Farmer Mac’s future financial results, business prospects, and business an offer to buy any Farmer Mac security. Farmer Mac securities are developments. Forward-looking statements ...

Farmer Mac Reports 2023 Results WASHINGTON, D.C., February 23, 2024 — The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A), the nation's secondary market provider that increases the accessibility of financing for American agriculture and rural infrastructure, today announced its results for the fiscal quarter and year ended December 31, 2023. "In 2023, Farmer Mac recorded another year of remarkable success, marked by double-digit earnings growth, record net effective spread, and o ...

Financial Performance - As of December 31, 2023, Farmer Mac's total outstanding business volume was $28.5 billion, an increase from $25.9 billion in 2022, representing a growth of approximately 6.5%[34] - The Agricultural Finance line of business accounted for $20.5 billion of the total volume, up from $19.3 billion in 2022, reflecting an increase of about 6.1%[35] - The Rural Infrastructure Finance line of business reached $8.0 billion, compared to $6.6 billion in 2022, marking a growth of approximately 21.0%[35] - Farmer Mac's AgVantage Securities, a key product, had an outstanding balance of $5.8 billion as of December 31, 2023, up from $5.6 billion in 2022[35] - Farmer Mac declared dividends of $1.10 per share for each quarter in 2023, with an additional dividend of $1.40 scheduled for March 2024[111] - The quarterly dividend for Q1 2024 is $1.40 per share, representing a 27% increase from the 2023 quarterly dividend payout[222] - The increase in dividend payout was influenced by Farmer Mac's strong capital position and consistent earnings outlook[222] Capital and Liquidity - Farmer Mac's Tier 1 capital was reported at $145.2 million as of December 31, 2023, which limits cumulative direct credit exposure to any one borrower or group of related borrowers to 10%[38] - As of December 31, 2023, Farmer Mac maintained a reserve against losses of $129.6 million related to its guarantee activities[101] - Farmer Mac's risk-based capital requirement was $186.4 million, with regulatory capital of $1.5 billion exceeding this amount by approximately $1.3 billion[136] - Farmer Mac's Tier 1 capital ratio was 15.4% as of December 31, 2023, significantly above the required minimum of 7.0%[143] - Farmer Mac is required to maintain a liquidity reserve sufficient to fund at least 90 days of maturing obligations[145] - The company has a share repurchase program with a remaining authorization of up to $9.8 million, having repurchased approximately 673,000 shares at a cost of about $19.8 million since 2015[110] Risk Management - Farmer Mac's credit risk may increase due to declines in collateral values securing loans, which could adversely affect financial condition[154] - Concentrations in Farmer Mac's loan portfolio may increase exposure to credit risk, particularly in specific commodities or geographic regions[156] - Farmer Mac's contingent liabilities related to LTSPCs and guaranteed securities amounted to $4.1 billion as of December 31, 2023, representing potential exposure if all underlying loans defaulted[159] - The company has implemented methodologies to assess credit risk for Renewable Energy loans, focusing on projected debt service requirements and collateral analysis[67] - Economic stress from global events, such as geopolitical instability, may adversely affect Farmer Mac's borrowers and their ability to repay loans[149] Workforce and Culture - As of December 31, 2023, Farmer Mac employed 185 people, reflecting a net increase of 27 employees (17%) compared to year-end 2022[84] - Farmer Mac has experienced a 73% increase in geographic diversity in its workforce since early 2020, employing personnel in 27 states across the United States[85] - In 2023, Farmer Mac received a Top Workplaces USA national award and six cultural excellence awards in categories such as innovation and employee appreciation[87] - Farmer Mac's turnover rate decreased to 6.4% in 2023 from 12.3% in 2022, indicating improved employee retention despite a competitive job market[93] - The company is building talent pipelines through partnerships with academic institutions and community organizations as part of its workforce strategy[92] Cybersecurity and Operational Risks - Farmer Mac's existing cybersecurity defenses may not be sufficient to prevent unauthorized access, leading to potential financial and reputational risks[176] - The company has implemented a variety of processes and technologies to manage cybersecurity risks, including regular training for all employees and specialized training for those with elevated privileges[211] - Farmer Mac's cybersecurity program is overseen by a dedicated subcommittee of the board, which meets monthly to discuss cybersecurity risks and initiatives[208] - The company maintains a privacy and security incident response program to prepare for and recover from cybersecurity incidents, including regular tabletop exercises[205] - Farmer Mac's reliance on third-party service providers for data management exposes it to risks of unauthorized access and potential reputational damage[177] Market and Economic Conditions - The Federal Reserve increased the target range for the federal funds rate by 5.25% since 2022, impacting Farmer Mac's interest income and overall financial condition[183] - Changes in interest rates could create cash flow mismatches, adversely affecting Farmer Mac's earnings and financial stability[183] - In 2023, the U.S. experienced 28 separate billion-dollar weather disasters, impacting agricultural producers and rural infrastructure[151] - Approximately 14% of the continental U.S. was classified as being in severe to exceptional drought as of January 2, 2024, affecting agricultural productivity[151] Corporate Governance - Farmer Mac's charter requires compliance with minimum capital, critical capital, and risk-based capital standards, overseen by its board of directors[81] - The company must develop and submit an annual capital plan to OSMO, addressing capital adequacy and stress scenarios[142] - Political risks may materially affect Farmer Mac's operations, as its statutory charter can be amended by Congress at any time[196] - The concentration of voting common stock ownership among a few institutions may lead to conflicts of interest that could affect Farmer Mac's strategic direction[168]

Agriculture is a huge part of the American economy. Today, there are more than two million farms across the U.S. that contribute $1.26 trillion to U.S. gross domestic product (GDP), a 5.4% share. Additionally, 10% of American workers are employed directly or indirectly in the agriculture sector, with more than 2.5 million people working directly on farms. The top three U.S. farm products are cattle, corn and soybeans. And America is one of the biggest exporters of agriculture products in the world, sending ...