Federal Agricultural Mortgage (AGM) 28 Feb 212020 Q4 Earnings call transcript

Good day, and welcome to the Farmer Mac Fourth Quarter and Full Year 2020 Earnings results. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Brad Nordholm. Please go ahead, sir.

Good afternoon. I’m Quarter to Call. and and our you Nordholm, Fourth XXXX Year-end Brad very welcome pleased to I’m Investor Conference

have measures. on before well use and to report Steve today Mullery, first a as of Counsel, ask Steve? that We developments to of management General positive make comment need a to Mac’s present statements begin, non-GAAP as I number But Farmer our financial I forward-looking will today. great may

Thanks, Brad.

forward-looking of A this weeks today. and will release website, under SEC also portion our Farmer known In presented as non-GAAP on made of under farmermac.com, States, this Mac, starting performance, statements Mac’s can with risks about Some on its the Investors caution of these Disclosures call. conference financial should information We call be these may with the analyzing Mac’s Farmer on two generally obligated expressed recording statements the of statements and Actual results the to reconciliations Farmer on annual XXXX and Farmer for call information, assumptions materially measures by posted forward-looking be risks or described this non-GAAP the uncertainties not implied this accordance be in well Form are filed report evaluating performance We on uncertainties. you expectations Form subject differ In that of XX-K in in later to available the make recent business principles Mac United as the may may future and events the section. from and laws. those results earnings update found measures securities as we be uses not in after sometimes consider afternoon. our financial website our these most financial statements and XX-K based are accepted current the statements. and statements you accounting measures. forward-looking that

thank and you you, XX-year and that was Mac challenging Thank seating and prices, I’ve disciplined growth the to sustainability report our unlike any administration commodity of the certainly to and business many business pandemic single Steve, in any and demonstrated of my the the volatility in it interest recent to and XXXX social again to proud and uncertainty once us. our joining more ways Farmer strong political afternoon, that rates presented I’m the for many and of for has than resiliency been business. memory, low new period everyone, model year has unrest and in of so rallies record career, agriculture XXXX good in experienced From people.

of you, As employees commitments we the plan and to of are extraordinarily Mac didn’t all include a serve, mission able business we miss that shareholders, plan whom purpose-driven that aware to acutely continuity executing stakeholders, Farmer at has our those the especially our team rural debt customers, for our on of and been and beat. to always company being our our investors, our proud strategic our ambitious trigger proud so a I’m and Americans, for

grace. with this and did hard work, commitment flexibility, employees Our

over recognizing new significant in that family-owned interest, we of agri in of $XXX.X debt the $X.X infrastructure greater it’s did reflected that million XX% line farmers top businesses by spread more was in another uninterrupted enjoying way, borrowing & Ranch million have pockets minus the that on which year business our And an outstanding by operated rural plan. we and and by we employees can’t period all A volume billion. of March portion treasury So for you trending as business did farms. effective for all an and Net their while loans basis borrowers effective that than a increase purchase in of points we XXX base break the who customized onboarded means also by – this It of firms quite remarkably, Core have of our Promoter That’s they measures we for proud the grateful $XXX do opportunities XX% Score. also increase and support XX since capital we the tight some rural the work-from-home what which, of market competitiveness, X%, and towards how did Net And made increase debt leading that of of their secondary five important was Farm a tell this Especially, investors almost now. our more are that XXX% during viability this new financial represents was provided ago we when Ranch than appreciation did record. loan those while or measured well network money of refinancing done to over our the amazingly loans. that Farm rates reciprocated are that’s That’s greater and us. market line of possible put X%. keep while rates that wanted. and for in They families. they originate XXXX basis We this and the lower XX this the investors, Total have Farmer been year, during And were Mac plus satisfaction those they us, providing were basis the our projects the provided remote or continuity with our it’s mind purchases under spreads to strong the And these were I apart. increased up at & of guidance. basis, get of source upwards. score new let’s last at ranchers the XX, they XX% that this earnings was productive. benefits That done to and business trying our circumstances. and of employees, our time, the than That’s tax for numbers year, record about essential role a for XX to of of We who interest. point structures year. last and and very services and points, support their highly appreciating America.

earnings, Farmer or our year earlier target $X.XX As our maintain In Mac quarterly the increased now, of the approximately also common and and afternoon, stock business common stock dividend support liquidity, XXth financial $X.XX that per the of to press very you Mac our sheet with balance release saw capital has position, quarter, at priority and the well-capitalized and of share a increase of consistency this our succeed its our institution dividend our regulatory be in considered Farmer Directors strong It we our per our Farmer share. represents outlook consecutive capital quality. a to year. will a increase prior deciding requirements. strong announced in payout XX% for dividend. solid quarterly from This this remains XX%, for credit strong Mac’s to Board

for to the Texas of X.X our the standards underwriting add, closely consistent recently, Freeze portfolio. I might approvals, in the and impact Arctic on are COVID-XX, weeks, credit monitor our very maintained have and We we continuing last

adversely consequences, were Farmer payment the borrowers our of in to quickly Mac and by stepped relief. affected COVID-XX economic and provide Some

X% deferrals January our and about XXXX, total of million As COVID-XX. payment total $XXX approved principal of have executed of and about Those represent XX, we XXX business related have outstanding volume. to balance

who Ranch have deferral As of the date, million full January of million and is this been integrity need are or of applied deferments their for This of delinquent. to during ended a repaid none strength flexibility loans and testament economic have the the deferments in the conditions & for of the and received of periods and same XX, and strong accommodation. another those adverse Farm to deferred $XXX.X both $XX.X borrowers XX%

we’ve different originally many initiatives strategic in what projected. stay achieve of to environment a and from we been focused XXXX results, reflected As business much our able plan in our

rural mission Mac’s our Farmer rural channels America, communities. and around betterment cooperative, for business centers need. family consistently renewable it a our to through loan a of attain a economic financing large we the or ways pursued to all project and ranchers the inevitable energy agricultural a aspects Our of system to a new of loan, business a demonstrate the electric agribusiness model inherently innovative culture rural farm helping and farmers Whether across resilience or opportunities continue of agriculture small has American and and finance, the is new mission they Farmer Mac rural financing cycles. diversification throughout financed model provide The businesses and and of mission further core low-cost broadband

directors are expertise We vision strongly Board history upon mission-driven strong that qualifications. organization. and to to as strategic with our composed backgrounds, long-term have fortunate of with a diverse aligned is They’re build a our management’s independent

of Our towards with governance governance to key performance. to with inherent performance-pointed as policy Board, new to long-term shareholders Mac. Farmer a that creation and fosters our value and practices we culture aligns social have on award Board recognized our our developed government result, Class contributors to executives nonvoting management – and uniquely the that the consistent are interest build members and sustainable and mission. our practices these underway a at characteristics ESG the a we our Board allowing and and And maximizing intended Management aspire and associated designed are stock. environmental, focus reporting This C our all have us enhanced have of to

Board and Farmer mission and and our in Officer, the heights with Zack? update believe turn Zack of on talented that, in will give employee base Mac Farmer Chief Carpenter, new committed of to to like ahead. to conjunction developments. the Directors, to us our we our market to Business these to years take unified enable customer support the With With you efforts commitment Mac’s organization’s the I’d an

Thanks, Brad.

continue being XXXX our efficient of performance efforts relationship-oriented a providing Mac’s reflects as affordable thank these, value during mission customers times extraordinary Farmer to seasoned $XXX our our include in our as and we loans this from to utility the of billion. well This volatile like this everyone portfolio as of to the and truly loan I’d & by Farm business our Mac rural team sheet billion, our borrowers $XXX In begin, like environment. guarantees purchase And USDA to loan mission agricultural driven I XXXX, and communities infrastructure volume XXXX volume fill their to million rural CoBank purchase solution demonstrate $X.X net Before we net which continued of our in year to In dedication strength approximately billion, institution. grew grew and our Ranch, $X.X to compares commitment growth credit or the primarily $XX.X loan who purchase on-balance and XX% outstanding customers, challenging their products. our franchise volume did serve. to of rural purchase Farmer at million.

purchase in purchase double our $XXX strategic our of of a our reflects consistent volume portfolio retention focus X.Xx the & XXXX the in process. that growth approval very same growth purchase, our challenging XXXX rural loan Farm to in growth initiatives; and in execution on acquisition Ranch seen our entire net billion and purchase competitive XXXX. customer purchase rates environment. $X.X more across success during supporting the to communities was year, compared The than loan increase volume product Gross and greater XXXX, loan in business net of set; net agriculture was loan million. and provide volume line than our XX% This growth billion, Excluding interest $X.X Ranch loan reflecting the Farm continued volume and efficient ability our we’ve period volume almost in effective of an & the in resulted

our we As is our but line Farm our deployment deepen customers new on penetration Ranch focus business broaden to calls, of capital prior also within noted existing to our in & have to markets. our

at XXXX. lender inactive showing Notably, to the Farmer lenders, of previously both transacted lenders, XX% loan attributable that in increase billion to with that that’s rate. our and to capital attributable was ability we lenders however, origination new or a provide XX% XXXX XXXX, expanding active to was increasing mission-critical $X.X Mac has volume new During an are and in gross

versus increase with We deepened loans selling our also of million XX% evidenced $X lenders, lenders more number successfully or us an by relationship as totaling in XXXX. our

lender As of our satisfaction Score a with XXXX strong network Promoter reached our Farmer Net with in all-time Brad results the highs. Mac mentioned, highlight their as relationship working

as complex component loan agricultural to key $XX loan volume strong Another generally and growth in purchase more Farmer million relationships. & chain borrower our well agricultural our Farm growth new yields processing and and accretive exposures, of This Ranch we loan excess in agribusinesses sector other define Mac to of larger, which as and strategic that pursue is producers a initiative supply fiber as area food relatively provides is production. support diversity, production, agriculture that new for of

loan During XXXX, of gross we purchases growth executed approximately in initiative. this new $XXX million emerging

loan resources initiative appropriate as larger loans, which strategic parameters to transaction risk have Farm other and from and credit based complexity. additional & exposures, these assess For and other well on different Ranch help obtained as that we construct implemented have the profile methodologies support the may sector, borrower risks

and at remains continue we pipeline new a healthy relationship lending this as the spectrum. to Our our in territory level broaden across agricultural

growth outpace broader Ranch the markets. to continues Our credit agricultural Farm &

during the over & XXXX. the XXXX the XXXX continued increasingly the recorded relationships limits mortgage environment, an growth focus our structure of interest the loan XX X% of our in competitive we record was in of as to partners we our through in the customer $XXX a XX% guarantees Our approximately increased a market with the $XXX Cooperative as USDA net rate million by single volume, portfolio gross which counterparties, in The growth reflects adjustments purchase financing agricultural key lines well positive from increased of business rate also agricultural USDA our the Ranch Corporation $XXX on business, mortgage year. our utilities of our September two line last for effect loan volume CoBank. loan business purchases of compared utilities by loan as ever grew Farm loan authorized year-over-year highest made million year product line steady reflects million National the Finance Bill. demand volume added Net year, months primary rural purchase Rural of purchases total net loan for loan Utilities and rural of Farm

the $XX foundation player our sector rural million that initiatives Partially growth as line infrastructure an in our in record volume our utilities support has in rural utilities As and outstanding business. market. key institutional its to renewable as of job strategic is our in repayments growth enhancing The loan energy the new been renewable – build energy the were purchases purchase a the credit $X.X plan. of reputation doing offsetting also strong maturities loan net rural in team and our included billion energy in pipeline scheduled of remains

primarily Our liquidity our institutional incremental of line credit net the due a for customers. of business larger decrease to need experienced some of $XXX million from AgVantage in XXXX, reduced

to support of is result Federal the functioning markets. facilitate the a Reserve’s continued in We direct market, continue see capital actions the to which significant liquidity to the of

sectors directly support rural serve. levels. we investment-grade such, continue liquidity remain financial provides and the large ranchers low spreads our and do to for in look to As credit institutions for ways at support new financial to innovative communities historically customers We farmers, as these

of However, liquidity these and is to in securities must And like for when we times there also price we current maturing significant capital. must the market on available determine dynamics. our return tactically be these, where customers, based appropriate refinance stewards

with the the As over given institutions broaden market to pandemic. XXXX, important conditions capital credit we continue and associated we did time, to relationships with serve our impact customers. spreads financial deployment expect to the In sectors some moderate pause these

which lenders and However, causing many rural structure pressure the terms compete is competitive execution for utilities of and core closing. agricultural in continue transactions, and to price, in cases

transform way our responsive led mission. new continue retention, has satisfaction, and improved will the to model upon markets deliver customer business and more volume in build work base and customer our we existing to growing dynamic and penetration alongside upon We our that

technology infrastructure processes to the invested we in upgrading XXXX, and During experience. product our offerings by platforms, improve customer

execution size in of increased network million. provide XXXX, scorecard process to customers. For positive volume from loan $X.X increased and borrowers quarter our faster their our for products the yielded to example, and our has Express from lender we fourth has eligible feedback the thus This $XXX,XXX enhancement Ag for allowed

incorporating first of fourth Ag full well excuse size, per month, larger four the above approximately applications quarter the we averaged – eligible Express XXXX quarter XX applications. loan quarter first during fact, me, overall loan average the In XXX XXXX, of the loan

commercial application XX% quarter plan In solution are loans this Ag the online, track to business, redesigned broaden deepen approximately online platform submitting enhanced loan for a our Express underwriting about and to upon popular addition, pathway and this to we fully using spring. our more Ag provide in Ag and deliver XXXX By efficient which strategic this and of part for total the $XXX farms will on XXXX. of a bringing fourth origination many to major portal the of product new Farmer small provide to this to platform loan the was farm Ag an one Express a us of volume This the customers on entire Express is year are Ag fully is online family challenging processes. is entirely helping and for loans Express support we our and of ultimately provide we path Mac million, total mission. new offerings newly Growing technology sell the application Express volume environment. becoming

line is defined total purchased approximately of $XXX,XXX less annual than of generate farms, that agricultural XX% in the & were number farms small XXXX, of of in loans the products. as sales to Ranch During loans gross business Farm which

and family challenging solutions in lenders offerings innovate allow to our and farms, We farmers especially this continue small financing environment. to product to support

innovative our their financing our also to ability find As consistently multiple XXXX to excited needs. a We listen challenging to opportunities, beyond, ways energized continue and and meet am to such support in and extremely I we customers support our to but customers environment. growth look our and about

We customer-oriented Brad. long-term we it stakeholders, turn more a back our are to will and strategy but focused importantly, now, believe executing for more mission of of value all holistic continued growth, to I’ll on profitability strategy, way. you execution our straightforward, creating fulfill us enable and in this a allow

to forward you economy. I with good mention much. credit along our includes the done you has of we I’d do in Farmer business. of very bench consistent our on couple an on that Danny of I that and really give like the But anticipate to consistent there will out have do, Farmer am to our with a to stepped underwriting Officer, going provide Mike to Thanks here Chief what’s at to Juergens, to on that like meantime, before team, Enterprise Risk agricultural to possible. Del Takach to just turn an they to standards agricultural Credit Jackson, got we overview in Gustafson, in going as our at economy. Jackson to that moment soon I’d here Rob Chief a help. we wonderful as and Mac Chief to update Mac, new Credit and going Odom, a And in look have the starting the underwriting Officer new turn Officer introducing We’ve next application Economist, I weeks. that you Maines, in Jackson? strength commend who assure that, what’s like to I’d give in But job

middle forcing of COVID-XX core a the more with detrimental Census and of for and year entirely food poultry chain. and XXX XXXX. both May and year, output in to these demand beverage mid-XXXX stiff the or export for down loan food economies of dropped demand all soybeans compared competition XXXX food parts in agricultural Brad. third driven earlier. putting grains Plant demonstrates XX% from supply U.S. the U.S. the processing decreases a an early in research U.S. increases in stress prices rebound conditions miles prices, driving the and than economies. deferrals considerably. occurred food and places national Food sales shows facilities, XX% to COVID-XX-related second production these of farmers dollars CBC local and margin sales to like of closures experienced food during restrict and in year, Thank The in period rural food in and economic approved compared spent USDA the early home to at the heightened a Brazil many XXXX. a hitting industries, conditions. XXXX unpredictable food time Demand fewer pandemic home. rose and and considerable with meat higher short net Mac volatility XXXX. According due on were pressures agricultural data, the for report consumption led XX% by quarters Despite census fell end food in take in April to close sectors endured processors beverage to showed soybeans. to corn to Farmer fuel outbreaks and XXXX. with Like livestock most reshaped that and ethanol and you, in at at increase of payment data in stores

payments could the levels ranchers pushing offset food of at from the sales support midyear Paycheck year, Program, for Consumer Assistance home helped government combination demand a $XX to schools. or from at payments Coronavirus spending shift the in of to second half farm ethanol of the Program all rounds the losses December. program disruptions. increased restaurants from XXXX, Program, Market Protection The by mobility So, to and production or total of XX% fuel farmers MFP, and payments, offset restoring steadily programs, Record-setting farmers over and XXXX of to or forgivable billion and USDA typical trade-oriented two CFAP. PPP, loans the estimates or payments Facilitation the farm back consumer some to of Food

of only push prices, the cash and combined payments, and Finally, grain net above in combined support did with seven-year since to began. world levels grains closed for prices export and profitability cattle net increased year projections indices USDA Of respectively. farm not corn levels, and farm commodity XX% $XXX.X income Higher XXXX income in and price prices the highest lifted to commodities, elevated and cash respectively. year when higher reduced demand XX% agricultural soybean billion $XXX.X income end dairy billion, are major USDA XXXX. global grains supply at for highs. XXXX farm than and the government it XXXX the

for As income. a year $XXX average benchmark, farm billion is an

farm well income metrics reduction farm averages. high payments agricultural outlook year government In a cash in for historical billion XXXX net USDA the terms, The both XXXX So peak of USDA’s payments in super set sizable in XXXX. income $XXX.X above nominal net the XXXX, $XXX.X farm to cash government estimates will in it billion for net out due if but stable Early for are increase a cycle. holds, new income cash USDA estimate projects support the of offsetting more a typical income program beating in grain XXXX show and receipts. a an

in the outlook, default estimates increases substandard quarter. lower half in which government trended in farmland land An third quarter were values positive all values & the upgrades the were rates alone. percentage the the The had Mac into steady the payments in loans driving trend conditions rural the February market in XX, elevated by less does provide Historically, adverse increasing residential with XXXX. low delinquent quarters the by past approximately or below commercial, permanent and XX two economy. increases in of with agricultural livestock loans markets commercial increase unemployment real third effect led public producers and XX, The could X.XX% real the XXXX represented to improvement. Farm associated Ranch by additional than energy an and lead plantings, a of rising Chicago of and estate low in Loans typically historical and the economy. rating sales risk much inflation of estate increasing risk, a of of However, net farm adverse as loans increase crops energy XXXX or XXXX, drops in fourth industrial reduced or the off the credit for of primary real and and of credit but driving outside the quarter conditions of the to a and project higher as most quarter the of at Farmland facility XX% X% Fed cured of economic fourth a fell much & distress top to cyclicality in ratings quarter. after from as market interest rates, caused specialized due as food of booked charge-off demand but and the fourth and average, of held industrial of and industrial sector could estimated levels loan transacts. increases are in lift individual in for borrower pandemic as exposures Farmer combined books specialized levels the exposure In in the conditions XXXX. X% in of XXXX. December charge-off days loan regions, the pandemic to more values paid years. lower for The land to million they year, with picked combination seriously up XXXX, down one the Higher well activity The XXXX. but and X.XX% in debt, unemployment default volume, disadvantaged provide within fourth same values rate to profitability in demand values has throughout half these transactions not show rates this values seriously resulted bank in more from programs, Portfolio the USDA the agricultural flat Midwestern profitability, rates systemic portfolio large ratings single continued last land a the remains rated development improved the loans sectors. or USDA slightly as rising improved, than the auctions guarantees. There COVID-XX energy the of December to first December in The $X.X such delinquent for concentration loan. represent in support exposure has the facility Data of demand, XX, delinquent historic XXXX. delinquencies overall interest in values slowed significant fourth values largest is of from and higher Farm on secured One in general estate XX and farm the the quarter processing with industry a Ranch remains XXXX, rates X.X% conditions as fourth specific during evidenced XX-day substandard levels. of downgrades. poultry credit back carbon COVID-XX farm

residential markets were time portfolio. residents at up Texas, freeze sales XXXX not Economic aware weather commercial However, rural but industrial as are of quarantines. degradation but in would financial February damage more for power observed self-imposed compared markets to the through material during Farmer event Mac recent of not credit a electric state, we any same and performance disrupted highly material remain than has typically loss. Residential home profitable are the the utilities sales result power more its rural the local in those during elevated, consumers. XX, across from stress X% the that in period arctic and spent The

positioned Farmer position economic from with related turn strength, you, back energy sectors, to to uncertainty it to further to And and relative a rural they and enter I’ll COVID-XX food, that, the While add all is Brad. conditions Mac and that continue agricultural of stability. XXXX volatility and

have end Thank individual was unique each many with historically that certainly each Credit case rural events cases, took took borrower. we at allowance – the of you, and we the we Jackson. Farmer the the XXXX, at been business the write-down which, way, of was same in really Mac the took And the which credit, XXXX. additional at to that by end to that credit

to linked that really is We in for the high provision or the increase As case fourth our due primarily in all historically allowance macroeconomic was to overall see factor. total do committed systemic to economy. in the specific don’t to factors with of borrower losses we standards I And a hasten this quarter, add agricultural quality. at our the remain credit the

to for underwriting as different rural We we ways some be circumstances But to look there on and mission our our have of historical not better execute may I’ll credit outcome comparable what basis, any over at so that results expected call do provide risk America, that, that these current business. additional further an more or parts take changed even we on that on have to Officer, in we led conditions different Farmer is our Aparna, to assessed than our the flex Mac’s price turn with accommodate diligence risk When which risk-adjusted Aparna? to we be Chief with our standards. they financial of strong care discuss that’s to to situations, results, agricultural will And tolerance overall the in Financial a evaluate will book have or of detail. and borrowers. needs to we we

you, Brad. Thank

Mac with financial to started I January comment with results, get first as I marks wanted CFO. my Before Farmer our year that XXXX

performed all Mac faced challenges a Farmer we as well exceptionally year, despite the nation. Over the enormous

incredibly and stems the during and vision our to most XXXX. and America. why exciting credit of Farmer strategic team to from compelled of I’m in XXXX proud I reasons execute low-cost team, results to our strong look a to the forward our join vision, team, rural to this Mac Our which providing collectively part performance importantly, the be dedication, I the mission reinforced caliber our continuing to on of was

quarter in into $XX.X Core I’d results. fourth $XX.X the million annual like were as or to our highlights a compared Before XXXX. per I third delve earnings few million quarter share $X.XX to provide results, around

spread million, line and from billion, maturities institutional sequentially September to in primarily to due XX, and $XX.X XXXX, business million decreased our X% $XX.X outstanding to repayments volume net credit of $XX.X our increased Our effective business.

As Zack and cheaper funding Fed’s intervention conditions mentioned, the resulted market our in in alternative counterparties. of for other sources stabilizing

saw higher and our built investor we to the Earnings XXXX relationships given and by substantially year full results. volumes, growth Turning debt strong disciplined our that and lower strong we access G&A, maintained strong and business markets funding or costs, base. driven capital have and administrative, to were expense in continued spread with control, general our

as improved continue This basis for $XXX non-GAAP increase due issued net in policies asset XXXX. net business disciplined a million. consistent was to points to was Farmer effective effective million $XX.X Mac’s markets funding spread unprecedented maintain we XX compared in higher percentage XX% remains spread resulted costs. throughout to in basis from XXXX our that strong volume a In decrease million new liability and year. this effective year. The daily, in access $XXX.X represents to a XX debt spread capital and terms, as to Our points practices management last NES well year-over-year increase the spread. have We net

callable Our a proven widen Callable has for rate we have downside us for attractive interest bonds from that substantial debt tool in a hedging prepayment and risk the to of either mitigate low interest rate paying our in be overall very price our to environment effective us XXXX. spread use instruments risk, allowed optionality. to aren’t

a sheet of steepening are both end In analyzing rate our interest especially as our balance against cushioned carefully curve, rise. rising the well we long spread of very general, at convexity ensure the for matches prepare net we our risk to As the sides and on minimize is rates that yield effective curve, we rates. duration

the curve strong pricing also of long end and which the our us We’re at in success demand as curve funding, the should help yield debt steepens. seeing

And or compared tenors XXXX. as a saw greater demand especially. give you debt the added to year $X these to we tenors, our Just perspective, billion for XXXX, additional throughout in more six than we little pricing favorable and very in XXXX in

if a As rates good be and against rise, effective environment have approach consistent remains This prepayments I a remained the if to of or us And mentioned disciplined for option hedge will previously, it net us convexity callable in managing decreases. duration portfolio attractive. the has our on flat our allowed our issuances even spread. rate performance

Turning now. to core earnings

are for in that common increases to to earnings increase diluted in per and core X%, mentioned, share a benefits. was investments grew continued operating in mentioned which million offset and NES These $X.XX Brad common partially per to as compensation primarily in I earnings record $X.XX the $XXX.X employee related increase a million this core due by or after-tax to earnings was XXXX year-over-year increase compared share expenses. $XX.X core in diluted million, is $X.X Our in XXXX. The previously,

primarily in in million preferred loan onetime stock also the an losses. a to for that headcount, XX% due did dividends after-tax issuances $X.X $X.X to expenses during quarter increased increase higher We we by this saw million the payment a a who XXXX to expenses two increase in Operating in XXXX and executive first is XXXX. and separation resigned XXXX, increased the and bonus to compared due of provision

on these to that once continue outlined, expect We the future, strategies organization. resumes. due Our fees, last should year such the and foreseeable technology licenses expenses related post by add expenses talent technologies, lower support and investments such to enhance conferences. I consulting increased the G&A levels to to year this increased to normal and note modestly infrastructure, normalize will Brad spending pandemic platforms were reduction for our software temporary, we’ll to expenses plan these and of across continue modernize offset that is we in that travel to revenue and activity primarily relevant relative our our

point as monitor increase XX%, business, While we one which continue XXXX. continue closely efforts efficiency months to to our we year we expect XX over continue will at which was higher our next to to XX the ratio, the and these grow in and percentage than innovate ended

increase range level. expect performance, a we operating to forward, But we stay stay intend efficiency our revenue with to expenses below historical operating with is a that XX% within to commensurately Going consistent growth.

as is that in more that levels. business our likely we stabilize we ratios execution our efficiency will using to We get also of it our the historical foresee very that technology, start time will at over scale even and efficient business, and

total of XX, December and December allowance $XX.X of $X XX, million from million, was an for XXXX, increase this As the represents XXXX. losses

half mentioned implemented remained the of increases of as mainly our year, we had reserve loans X, strong. CECL on we the due we’ve pandemic-related you previously, is January and to the related XXXX. significant forecast As first a this to Those conditions macroeconomic forecast. adopted to of started fairly year the in parameters and deterioration and And slow half second economic improved the in as of and

losses of standard, However, impact to in to growth a the net Mac that loan the the million, just specialized new the direct current the assets has as XX-day historical or loan point well, poultry the increase outstanding no specialized time. true December note XXXX, poultry mentioned to Ranch specialized actual significant losses. billion Mac’s Farmer this delinquencies. described. that low. loan as the have utilities substandard and in uncollectible long-term utilities deemed very our is same for related XX, a of very due our to generation Farmer accounting recorded the portfolio important transmission loan, facility. purchases Farm in loan of this nature probability single of and that and though portfolio to highly default in results drive charge-off levels, continues and our delinquencies estimates historic power Under commitments allowance that assumptions. previously standby is also in given remained model of even volume overall Jackson rural And the primarily contributed $X.X the $X.X to rural This utilities really And nature is it’s CECL Farmer portion perform & below the purchase and Likewise, Mac default be at of Mac Farmer

well This F additional two successful tranches on of in earnings detail and stock Series we of August. levels to $XX retained X as provide did Series remain issuances, preferred of these issuances or favorable issuance Both E of the two an our separate December Tier well these capital a This to prior issuances. XX.X% We strong capital. yielded were as capitalized statutory liquidity capital oversubscribed million issuance and X.X% be $XXX strong sheet. in can the $XXX million preferred stock. to ratio Turning from an robust our a of represents Mac’s exceeds To financial as with $X prior core and and of XXXX, preferred balance institution of to increase Farmer extremely relative XX, million May year. from XX.X%, brings pricing credited requirement by this an stock XX%. billion

based that, on on our Series Series August. we issuance stock our A the also received we favorable Given pricing that redeemed in F preferred

exceeds us we’ve market and and liquidity shocks continuing to, deferments lower throughout as ample the Our of remains higher-than-required flow Heading adequately weather cash we regulatory cash our level will it to levels our given in to It done to unexpected it any needs, maintain maintain bolster allow as to but change. and requirements. should liquidity will XXXX, conditions our customers’ far help and as will we of meet this into also uncertainties. economic retain fund liquidity, need I us flexibility mentioned, should continue us XXXX, to allow strong, a

XX% As dividend. we $X.XX and that on earnings. the Brad earnings look announce of conclusion, our you. mentioned, on will volume the it from we note to supports of strong record with quarter position uninterrupted and access core In finished business of year average year XX% common stock increase C demand Class increase markets. strong are to earnings, and $X.XX capital approximately a price. forward and a our a debt and long-term ago navigate an share, target dividend stock payout closing an effectively. We share on X% firm a that, based We capital growth annualized to with enable times And per This this back a increase will believe us represents our our turn with capital near-term yield uncertain a common Brad, belief it our very pleased result to I’ll in and total first per opportunities in strong position and to liquidity that long-term of dividend very

to our much. very know to I you we’re your comments eager a you thank turn questions. today, bit detail Aparna, on more given and We’ve

my you So is really, with Farmer Mac that thought, and and purpose-driven that closing mission leave to a like I’d is just really company.

increasing I for consistent allows conditions economic the agri continuing discipline on America, the rural businesses Mac We shareholders confidence our level place rural and to communities the and extent shareholder to ranches, the the this that with can reducing returns availability strengthening that of to here cost are a by have improve across for executing whom can possible. supports do predictable strong serve. of the do and and in take team Farmer produce that and infrastructure America we to We them. to utmost have the determined the the value, fullest customers farmers, that for rural to this that results, next we we financial strong while so we continue while right credit

you. that, with in so And Thank to response now to operator, I’d have if questions we any like these see comments.

our first question Please Sidoti. And come Instructions] [Operator today Greg ahead. will from with go Pendy

questions. for my guys. Hey, Thanks taking

of a questions Just had. I couple

that higher I guys color mentioned groups and don’t trend I all, general from talked – got you’ve not then want Is underlying oversimplify you fair about prices? the some relief storage the commodity gave groups there? of commodity to in commodity it is it’s First know XX-day to the release. say delinquency you press trend, the But when processing you and facility, the

for our Brad much today. XX-day have and here, thanks Yes, trended on down. Greg, coming delinquencies very

Our credit down. trended classified has

that the trend group positive really commodity seeing We directions. that. of is that any we’re So can’t in to point result one

portfolio. continues the be we infrastructure our credit, In As rural have had any really to historically have That case. in not know, institutional our you we delinquencies don’t it.

diversified also It’s different crop know, So Farm you over And XX%, very by we’re delinquencies, it’s portfolios. Farmer different when we financed the Mac. talk Midwest; about Upper well talking as California. these by & types, that, about like types XXX diversified, Ranch something crop well XX%

being associated to to that record of being XXXX, a last imposition transfer at attributable payments for least and of programs, one see those did we record including tariffs different a record of So, at at issues under to commodity I COVID-XX. And tariffs, add the financial contributed federal cycle. intended couple level to with level would transfer during that from also payments address income work. ended But say really a try level, and is to – help those any through up doesn’t farm a

we close look to XXXX year. XXXX, last have had we to this we’d back to anything think what I saw before

levels. forecast, in So those And net last very attributable greater continuation as of not of over in to looking quite Jackson ahead strong very, part strong very for same we mentioned, the commodity many this year, we the a rally farm do although some payments, prices XXXX, income agricultural see have at an in quarter. expectation

up health fundamentals the the are American course, of and want, in And to see. what like of showing agriculture. that’s So farmers really we that’s economic what

solar just solar. million that Great. I about year, will XXXX about had looks kind about we That’s thinking area? that? – You mentioned outlook should a is the how you and And be and majority earlier wind, just guess, should we the for the thinking helpful. in team of in – moving it in like in the how just be that of then How $XX over, outlook place

solar. business. we line But was is close on the wind that emphasis Sure. going majority Biden Certainly, renewable energy transaction. in We our Yes, a the great expectation time, that did expect an is the forward it’s actually the administration, majority that one primarily that, and Over solar finance new the administration decarbonization of opportunities. will economy. putting be growing of of

tone yet that is the proposals very I policy – specific political think climate seen the makes bullish for haven’t of energy. that. general us But might renewable We drive

future to course in into when generating we in years, agreements the earlier We that growth in know, fully our XXXX place some continued over see start you XXXX that our was and expect it will business. as really systems business. had So of of and that we master

become a line the of that to years business Looking needle. very begins it important more, move think or I out five Farmer Mac at will

So the XXXX. million with $XX we’re in happy

does far too go? how – out long deal how it to... early the And Or is typical solar

No, no, not at all.

classic So finances large-scale to underwritten metrics or that. much finance for do, are S&P report that underwriting Moody’s project the very loans with these metrics are our line typical solar are we credit on that a our you loans, in solar if project pull down that finance, project guidelines

are life contract of the of the is that one power amortizing generally, of over price purchase it that, the principles So facility. the loans fixed on

that’s it’s that’s sometimes XX even Sometimes XX XX years, years, sometimes years.

flow cash bit solar environments a Obviously, climates, facility. against most facility amortization in less the winter of variable a typically, the is it’s so against to than in projected most going quarter-to-quarter the the in And the produce – summer. is

So fully and the amortization coverage over is contract. the maintain sculpted fixed constant the anticipated ratio an amortized life of to

years XX, is right, and protection loan is These expired, very So contract on are by fully loans the time retired. XX, prepayment power them. amortized out, our purchase fixed typically have strong and that XX we

some nonprepayment So predictable of these from loans actually most a in portfolio. the performers the become standpoint

to one the helpful. And on expenses. more, more with just operating XX growth from just next in that correctly expense Did maybe standpoint? normalizing then expenses outsized then in That’s Great. expected an months sense revenue I for hear the are to XX line and be the

Yes.

that Aparna’s comment that. think basically I on was

think, I ratio bit in for did push that gravitated we spend that think a of new your year. money of manage now, a part and efficiency towards, our some to ability of project we XXXX. understanding were investment better to it This the expenses, two IT was of in spending actual our getting we And we going of have money management. hiring about and be those I of in XX% a years and expectations people, our platform, frankly, tried lot technology. year, – we’re was And in particularly to bit. form start in them ahead more our expenditures, primarily investing a did And that up comments

is they would also under that mentioned, gradually said, XX% ratio she from should And – an on kick expect as should next standpoint. keep But then in the efficiency And on think, efficiency to making. the that for we’re these ratio start assets, were what I you investments XX%, going it we’re about expenses we’re maybe Aparna – standpoint, see. year. As is last XX% to XX%, that to trending even year, greater down efficiencies

Thanks a helpful. That’s lot.

will Our Gorman Instructions] Investment. from Harry next with question [Operator come Harry Gorman

spread, obviously, again interest out then your in widen and QX. saw QX in I

Looking portfolio. USDA at and from looked lot utilities business, a like of the portfolio came lines of the it it

those two spread. maybe on you widen a talk what little portfolios in to could was the going about So

into you more – give Zack a Yes. jump on one give and turn so portfolios. he color I’ll Carpenter you to this the little bit to can

good of of also As Aparna funding. we particularly execution had some mentioned, our

we there pricing of execution a so capital debt portfolios maybe institutional small But is and in of what improved going it. part And in parts on are some the markets. shifts business a and market-based deemphasis some of our and from the more call that other of

please through how taking place? that And so Zack, can seeing you’re portfolio you take – shifting carry

Yes, sure, Brad. Great Harry. question,

funding have line key one quite aside mentioned, counterparties. we think think from from large sizable at the of in are this those is institutional that favorable market. And I to a dynamics especially some in did current the really business about, of Aparna our maturities tight pieces spreads,

while So portfolio. spread off, much volume that shifted was at it overall than NES lower the

In addition, & business. growth, $X.X higher growth Farm net the billion Ranch spreading of in one is our the

of beneficial while came down, costs. market in So more lines rates business those had funding we

loans I’d initiatives. some So these new we to Those historically agribusiness-type And are, about had I’d we just prepared of that bills say, that shorter note in We’ve things say, able clip Those we then accretive of $XXX then about than million spreads. renewable continues. also and were a energy. in higher And NES are bit the a talked loans. we couple more larger of duration. booked commercial mentioned, remarks, in little to, lastly,

you some funding our at with it more Brad our helps from pricing, mentioned. market-based are secondary they of portfolio When we So pricing businesses, as generally look a wholesale and diversify a perspective, shop.

a executing a that taking These of deals that really part so at comes we’re at more wholesale be and market And were rate. rates.

to yields more get there. able been attractive we’ve So

lower of second of year. I that half some agribusiness larger the the over the and in really institutional yields higher funding, the have of and these favorable the helping think, that of So in NES transactions pursuit renewable credit our the attribute volumes are growth then combination,

Okay.

So reason back traditional? that, forward or there’s to the more a is something to that portfolio persists go shifts, that going

our As we these I forward, mean, initiatives focus areas on of growth. think of look some new going I

we NES lot our about. rate existing Farm and we costs products, three area and I those another that’s initiatives can to continue our scale funding our manage then We’ve portfolios. And on price agribusiness renewable able execute but we amply side core one, of continue & is As businesses years, at talked Brad mentioned, think also a foundational an resources to over put if our focus tremendously the to from that energy, but and the shift a larger up initiative like a strong strategic The get growth. be two, to of next in also of improvements and will USDA. happen well, market-based Ranch have as portfolio lot

Sorry, they? collateral are These I’m one What loans, of with familiar really them, you not what last thing. agribusiness sort have?

charter it’s terms is within broad a real agricultural estate. production. It’s of This – Yes. so in array agricultural first our of all lien on

of to pistachios So Farm loans in Ranch and almonds & exposure. or that have type just normal California, a there exposures maybe much large much are larger loan larger significantly parcels

value bit from so the in price really and the the a we those chain the And rancher. look commodity drive ag to at little differently. But new space, farmer also up initiatives

takes sugar next the or level the that really beats, of through the manufacturing pull or So it pulp chain. facilities timber to improves and commodity, it

more these instances with many done again, market-based that So are loans with institutions. numerous are are And financial structures pricing.

so institutions new financial And those been and looking support to initiatives. we’ve with those partner

And remarks. this closing will conclude over to conference question-and-answer for our like I’d the session. turn to any back Brad

questions appreciate understand comments, more the that. as getting indicated, little and a bit We detail much. very We We it’s provided late. in – we

look any and in So speaking interest follow-up much. please call, do you Jalpa to to you happy additional And Thank forward your you. have appreciate questions another We quarter. that. we’re with or reach always to if very out with

for today’s presentation. now you is Thank attending conference The concluded.

You may at this your time. lines disconnect now