Federal Agricultural Mortgage (AGM) - 2022 Q4 - Annual Report

Business Volume and Growth - As of December 31, 2022, the total outstanding business volume in Farmer Mac's two lines of business was $25.9 billion, an increase from$ 23.6 billion in 2021, representing an 9.8% growth[30]. - The Agricultural Finance line of business accounted for $19.3 billion of the total outstanding business volume, up from$ 17.6 billion in 2021, reflecting a 9.4% increase[31]. - Loans in the Farm & Ranch segment reached $5.15 billion, compared to$ 4.78 billion in the previous year, marking a 7.8% growth[31]. - The Rural Infrastructure Finance line of business totaled $6.59 billion, an increase from$ 5.98 billion in 2021, which is an 10.2% rise[31]. - The company anticipates continued growth in agricultural mortgage and rural infrastructure lending, driven by favorable economic conditions and increased lender interest in its products[14]. Financial Performance and Capital - Farmer Mac's interest income is primarily derived from assets held on the balance sheet, net of related funding costs, and guarantee and commitment fees from outstanding guaranteed securities[22]. - As of December 31, 2022, Farmer Mac had $0.6 billion of discount notes and$ 24.4 billion of medium-term notes outstanding, indicating strong access to capital markets[24]. - Farmer Mac's Tier 1 capital was $132.3 million as of December 31, 2022, with a limit of 10% for cumulative direct credit exposure to any one borrower or related borrowers on loans secured by 2,000 acres or less[36]. - Farmer Mac's regulatory capital was$ 1.3 billion, exceeding the risk-based capital requirement of $204.2 million by approximately$ 1.1 billion[146]. - Farmer Mac's Tier 1 capital ratio was 14.9% as of December 31, 2022, significantly above the required minimum of 7.0%[155]. Risk Management - Farmer Mac's financial performance is subject to various risks, including fluctuations in interest rates, economic conditions, and regulatory developments that could impact its operations[15]. - The company is exposed to market risk from changes in interest rates and manages this risk through financial derivatives and monitoring strategies[160]. - The risk-based capital stress test adds an additional 30% to the resulting capital requirement for management and operational risk[145]. Loan and Underwriting Policies - The charter prescribes that no loan with a loan-to-value ratio (LTV) greater than 80% may be eligible for Agricultural Finance mortgage loans[37]. - Farmer Mac applies specific underwriting criteria for Corporate AgFinance loans, which tend to be larger and more complex, generally exceeding $10 million[43]. - The minimum annual receipts for eligible agricultural real estate must be at least$ 5,000[36]. - Loans under AgVantage securities must meet minimum standards set forth in the charter, with a maximum limit of $75.0 million in cumulative exposure to any one borrower or related borrowers from a single issuer[57]. Employee and Workforce Management - As of December 31, 2022, Farmer Mac employed 158 people, reflecting a net increase of 5 employees (3%) compared to year-end 2021[90]. - The company experienced a turnover rate of 12.3% in 2022, up from 7.3% in 2021, attributed to a competitive employment market[98]. - The company launched the "Farmer Mac LEARN" program in 2022 to enhance employee onboarding and leadership development[94]. - Farmer Mac has increased its geographic workforce diversity by 73% since the start of the COVID-19 pandemic, now employing personnel in 26 states[91]. Philanthropy and Community Support - Farmer Mac's philanthropic efforts focus on supporting agriculture and rural communities, which aids in attracting and retaining talent[99]. Capital and Dividend Policies - Farmer Mac's charter requires compliance with minimum capital, critical capital, and risk-based capital standards, with a focus on maintaining sufficient Tier 1 capital[88]. - The Series C Preferred Stock pays an annual dividend rate of 6.000% until July 17, 2024, after which it will float at three-month LIBOR plus 3.260%[123]. - The Series D Preferred Stock pays an annual dividend rate of 5.700%, while Series E, F, and G Preferred Stocks pay 5.750%, 5.250%, and 4.875% respectively[122]. - Dividends declared on Series C Preferred Stock were consistently$ 0.3750 per share for each period in 2022[125]. - Farmer Mac declared dividends of $0.95 per share for four quarters in 2022, with an increase to$ 1.10 per share in February 2023[118]. Regulatory Compliance - Farmer Mac's regulatory oversight is conducted by the FCA, which requires annual examinations and quarterly reports of condition[89]. - The charter requires compliance with SEC periodic reporting requirements, including annual and quarterly financial reports[136]. - Farmer Mac must maintain a capital conservation buffer of more than 2.5% of risk-weighted assets to avoid restrictions on capital distributions[154]. - The policy mandates that if the capital conservation buffer drops below 2.5%, distributions of Tier 1-eligible dividends may be limited to a maximum of 60% of accumulated core earnings[154]. Strategic Initiatives - In 2022, Farmer Mac purchased $231.0 million of loans and loan commitments to telecommunications companies as part of its strategic initiative to support the telecommunications industry[65]. - Farmer Mac also purchased$ 147.3 million of Renewable Energy loans in 2022 to support rural renewable energy projects[67]. - Farmer Mac's issuance of LTSPCs and guaranteed securities is expected to enhance lenders' liquidity and lending capacity, potentially resulting in lower interest rates for borrowers[26]. - The company is focused on expanding its outreach to lenders and maximizing technology to support business development efforts in agricultural communities[27].