– Announces 27% Dividend Increase –
– Outstanding Business Volume of $28.5 Billion –
WASHINGTON, Feb. 23, 2024 /PRNewswire/ — The Federal Agricultural Mortgage Corporation ((Farmer Mac, NYSE:AGM), 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 outstanding business volume,” said President and Chief Executive Officer, Brad Nordholm. “This achievement builds on our consistent performance over the past several years, with a dedication to strategic initiatives and organizational alignment. Our team’s disciplined execution of our strategy, effective asset-liability management decisions, and successful business development efforts have driven our success. The health and resilience of our business model combined with our recent efforts to expand our marketing and branding approach positions us well in 2024 to highlight our distinctive position as a secondary market partner that fuels growth, innovation, and prosperity in America’s rural and agricultural communities.”
Full Year 2023 and Recent Highlights
Net interest income grew 21% year-over-year to $327.5 million
Net effective spread1 increased 28% from the prior-year period to a record $327.0 million
Net income attributable to common stockholders was $172.8 million, compared to $151.0 million in the same period last year
Record core earnings1 of $171.2 million, or $15.65 per diluted common share, reflecting 38% growth year-over-year
Total core capital of $1.5 billion and a Tier 1 Capital Ratio of 15% as of December 31, 2023
On February 21, 2024, Farmer Mac’s Board of Directors raised the quarterly common stock dividend by 27% to $1.40 per share, the thirteenth consecutive annual increase
$ in thousands, except per
share amounts
Quarter Ended
Year Ended
Dec. 31,
2023
Dec. 31,
2022
YoY
% Change
Dec. 31,
2023
Dec. 31,
2022
% Change
Net Change in
Business Volume
$819,013
$595,444
N/A
$2,548,942
$2,307,619
N/A
Net Interest Income (GAAP)
$82,169
$73,635
12 %
$327,547
$270,940
21 %
Net Effective Spread
(Non-GAAP)
$84,551
$71,103
19 %
$326,980
$255,529
28 %
Diluted EPS (GAAP)
$3.73
$3.36
11 %
$15.81
$13.87
14 %
Core EPS (Non-GAAP)
$4.10
$3.16
30 %
$15.65
$11.42
37 %
1 Non-GAAP Measure
Dividends
On February 21, 2024, Farmer Mac’s Board of Directors declared a quarterly dividend of $1.40 per share on all three classes of common stock – Class A voting common stock (NYSE:AGM), Class B voting common stock (not listed on any exchange), and Class C non-voting common stock (NYSE:AGM). This quarterly dividend, which represents an increase of 27% in Farmer Mac’s quarterly dividend rate on a year-over-year basis, will be payable on March 28, 2024 to holders of record of common stock as of March 15, 2024. This is the thirteenth consecutive year that Farmer Mac has increased its quarterly common stock dividend, and this increase is supported by Farmer Mac’s earnings potential and overall capital position.
Farmer Mac’s Board of Directors also declared a dividend on each of Farmer Mac’s five classes of preferred stock. The quarterly dividend of $0.375 per share of 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (NYSE:AGM), $0.35625 per share of 5.700% Non-Cumulative Preferred Stock, Series D (NYSE:AGM), $0.359375 per share of 5.750% Non-Cumulative Preferred Stock, Series E (NYSE:AGM), $0.328125 per share of 5.250% Non-Cumulative Preferred Stock, Series F (NYSE:AGM), and $0.3046875 per share of 4.875% Non-Cumulative Preferred Stock, Series G (AGM.PR.G), is for the period from but not including January 17, 2024 to and including April 17, 2024. The preferred dividends will be payable on April 17, 2024 to holders of record as of April 1, 2024.
Earnings Conference Call Information
The conference call to discuss Farmer Mac’s fourth quarter and full year 2023 financial results will be held beginning at 8:30 a.m. eastern time on Friday, February 23, 2024, and can be accessed by telephone or live webcast as follows:
Telephone (Domestic): (800) 836-8184
Telephone (International): (646) 357-8785
Webcast: https://www.farmermac.com/investors/events-presentations/
When dialing in to the call, please ask for the “Farmer Mac Earnings Conference Call.” The call can be heard live and will also be available for replay on Farmer Mac’s website for two weeks following the conclusion of the call.
More complete information about Farmer Mac’s performance for 2023 is in Farmer Mac’s Annual Report on Form 10-K for the year ended December 31, 2023, filed today with the SEC.
Use of Non-GAAP Measures
In the accompanying analysis of its financial information, Farmer Mac uses “non-GAAP measures,” which are measures of financial performance that are not presented in accordance with GAAP. Specifically, Farmer Mac uses the following non-GAAP measures: “core earnings,” “core earnings per share,” and “net effective spread.” Farmer Mac uses these non-GAAP measures to measure corporate economic performance and develop financial plans because, in management’s view, they are useful alternative measures in understanding Farmer Mac’s economic performance, transaction economics, and business trends. The non-GAAP financial measures that Farmer Mac uses may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac’s disclosure of these non-GAAP measures is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP.
Core Earnings and Core Earnings Per Share
The main difference between core earnings and core earnings per share (non-GAAP measures) and net income attributable to common stockholders and earnings per common share (GAAP measures) is that those non-GAAP measures exclude the effects of fair value fluctuations. These fluctuations are not expected to have a cumulative net impact on Farmer Mac’s financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected. Another difference is that these two non-GAAP measures exclude specified infrequent or unusual transactions that we believe are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac’s core business.
Net Effective Spread
Farmer Mac uses net effective spread to measure the net spread Farmer Mac earns between its interest-earning assets and the related net funding costs of these assets. As further explained below, net effective spread differs from net interest income and net interest yield by excluding certain items from net interest income and net interest yield and including certain other items that net interest income and net interest yield do not contain.
Farmer Mac excludes from net effective spread the interest income and interest expense associated with the consolidated trusts and the average balance of the loans underlying these trusts to reflect management’s view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee. Accordingly, the excluded interest income and interest expense associated with consolidated trusts is reclassified to guarantee and commitment fees in determining Farmer Mac’s core earnings. Farmer Mac also excludes from net effective spread the fair value changes of financial derivatives and the corresponding assets or liabilities designated in fair value hedge accounting relationships because they are not expected to have an economic effect on Farmer Mac’s financial performance, as we expect to hold the financial derivatives and corresponding hedged items to maturity.
Net effective spread also differs from net interest income and net interest yield because it includes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships (“undesignated financial derivatives”). Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities. The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income. For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in “Gains on financial derivatives” on the consolidated statements of operations. However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac’s calculation of net effective spread.
Net effective spread also differs from net interest income and net interest yield because it includes the net effects of terminations or net settlements on financial derivatives, which consist of: (1) the net effects of cash settlements on agency forward contracts on the debt of other GSEs and U.S. Treasury security futures that we use as short-term economic hedges on the issuance of debt; and (2) the net effects of initial cash payments that Farmer Mac receives upon the inception of certain swaps. The inclusion of these items in net effective spread is intended to reflect our view of the complete net spread between an asset and all of its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship.
More information about Farmer Mac’s use of non-GAAP measures is available in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in Farmer Mac’s Annual Report on Form 10-K for the year ended December 31, 2023, filed today with the SEC. For a reconciliation of Farmer Mac’s net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, and net interest income and net interest yield to net effective spread, see “Reconciliations” below.
Forward-Looking Statements
Management’s expectations for Farmer Mac’s future necessarily involve assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events, both known and unknown, could cause Farmer Mac’s actual results to differ materially from the expectations as expressed or implied by the forward-looking statements in this release, including uncertainties about:
the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms;
legislative or regulatory developments that could affect Farmer Mac, its sources of business, or agricultural or rural infrastructure industries;
fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries;
the level of lender interest in Farmer Mac’s products and the secondary market provided by Farmer Mac;
the general rate of growth in agricultural mortgage and rural infrastructure indebtedness;
the effect of economic conditions stemming from disruptive global events or otherwise on agricultural mortgage or rural infrastructure lending, borrower repayment capacity, or collateral values, including inflation, fluctuations in interest rates, changes in U.S. trade policies, fluctuations in export demand for U.S. agricultural products and foreign currency exchange rates, supply chain disruptions, increases in input costs, labor availability, and volatility in commodity prices;
the degree to which Farmer Mac is exposed to interest rate risk resulting from fluctuations in Farmer Mac’s borrowing costs relative to market indexes;
developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac;
the effects of the Federal Reserve’s efforts to achieve monetary policy normalization to respond to inflation and employment levels; and
other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather, flooding and drought, climate change, or fluctuations in agricultural real estate values.
Other risk factors are discussed in “Risk Factors” in Part I, Item 1A in Farmer Mac’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC today. Considering these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this release. The forward-looking statements contained in this release represent management’s expectations as of the date of this release. Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements included in this release to reflect new information or any future events or circumstances, except as otherwise required by applicable law. The information in this release is not necessarily indicative of future results.
About Farmer Mac
Farmer Mac is a vital part of the agricultural credit markets and was created to increase access to and reduce the cost of credit for the benefit of American agricultural and rural communities. As the nation’s secondary market for agricultural credit, we provide financial solutions to a broad spectrum of the agricultural community, including agricultural lenders, agribusinesses, and other institutions that can benefit from access to flexible, low-cost financing and risk management tools. Farmer Mac’s customers benefit from its low cost of funds, low overhead costs, and high operational efficiency. More information about Farmer Mac (including the Annual Report on Form 10-K referenced above) is available on Farmer Mac’s website at www.farmermac.com.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
As of
December 31, 2023
December 31, 2022
(in thousands)
Assets:
Cash and cash equivalents
$ 888,707
$ 861,002
Investment securities:
Available-for-sale, at fair value (amortized cost of $5,060,135 and $4,769,426, respectively)
4,918,931
4,579,564
Held-to-maturity, at amortized cost
53,756
45,032
Other investments
6,817
3,672
Total Investment Securities
4,979,504
4,628,268
Farmer Mac Guaranteed Securities:
Available-for-sale, at fair value (amortized cost of $5,825,433 and $8,019,495, respectively)
5,532,479
7,607,226
Held-to-maturity, at amortized cost
4,213,069
1,021,154
Total Farmer Mac Guaranteed Securities
9,745,548
8,628,380
USDA Securities:
Trading, at fair value
1,241
1,767
Held-to-maturity, at amortized cost
2,354,171
2,409,834
Total USDA Securities
2,355,412
2,411,601
Loans:
Loans held for investment, at amortized cost
9,623,119
9,008,979
Loans held for investment in consolidated trusts, at amortized cost
1,432,261
1,211,576
Allowance for losses
(16,031)
(15,089)
Total loans, net of allowance
11,039,349
10,205,466
Financial derivatives, at fair value
37,478
37,409
Accrued interest receivable (includes $16,764 and $12,514, respectively, related to consolidated trusts)
287,128
229,061
Guarantee and commitment fees receivable
49,832
47,151
Deferred tax asset, net
8,470
18,004
Prepaid expenses and other assets
132,954
266,768
Total Assets
$ 29,524,382
$ 27,333,110
Liabilities and Equity:
Liabilities:
Notes payable
$ 26,336,542
$ 24,469,113
Debt securities of consolidated trusts held by third parties
1,351,069
1,181,948
Financial derivatives, at fair value
117,131
175,326
Accrued interest payable (includes $9,407 and $8,081, respectively, related to consolidated trusts)
181,841
117,887
Guarantee and commitment obligation
47,563
46,582
Accounts payable and accrued expenses
76,662
68,863
Reserve for losses
1,711
1,433
Total Liabilities
28,112,519
26,061,152
Commitments and Contingencies
Equity:
Preferred stock:
Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding
73,382
73,382
Series D, par value $25 per share, 4,000,000 shares authorized, issued and outstanding
96,659
96,659
Series E, par value $25 per share, 3,180,000 shares authorized, issued and outstanding
77,003
77,003
Series F, par value $25 per share, 4,800,000 shares authorized, issued and outstanding
116,160
116,160
Series G, par value $25 per share, 5,000,000 shares authorized, issued and outstanding
121,327
121,327
Common stock:
Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding
1,031
1,031
Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding
500
500
Class C Non-Voting, $1 par value, no maximum authorization, 9,310,872 shares and 9,270,265
shares outstanding, respectively
9,311
9,270
Additional paid-in capital
132,919
128,939
Accumulated other comprehensive loss, net of tax
(40,145)
(50,843)
Retained earnings
823,716
698,530
Total Equity
1,411,863
1,271,958
Total Liabilities and Equity
$ 29,524,382
$ 27,333,110
FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended
For the Years Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
(in thousands, except per share amounts)
Interest income:
Investments and cash equivalents
$ 77,715
$ 44,162
$ 287,144
$ 82,659
Farmer Mac Guaranteed Securities and USDA Securities
147,601
114,538
590,250
283,769
Loans
126,057
109,027
514,894
350,420
Total interest income
351,373
267,727
1,392,288
716,848
Total interest expense
269,204
194,092
1,064,741
445,908
Net interest income
82,169
73,635
327,547
270,940
Release of/(provision for) losses
626
(2,022)
(858)
(1,323)
Net interest income after release of/(provision for) losses
82,795
71,613
326,689
269,617
Non-interest income/(expense):
Guarantee and commitment fees
3,770
3,489
16,712
13,040
(Losses)/gains on financial derivatives
(1,881)
1,080
2,882
22,631
Gains/(losses) on trading securities
10
24
24
(51)
(Provision for)/release of reserve for losses
(51)
77
(278)
517
Other income
932
746
4,171
2,551
Non-interest income
2,780
5,416
23,511
38,688
Operating expenses:
Compensation and employee benefits
15,523
12,105
58,914
48,766
General and administrative
8,916
8,055
34,963
29,772
Regulatory fees
725
832
3,222
3,269
Real estate owned operating costs, net
—
819
—
819
Operating expenses
25,164
21,811
97,099
82,626
Income before income taxes
60,411
55,218
253,101
225,679
Income tax expense
12,792
11,800
53,098
47,535
Net income
47,619
43,418
200,003
178,144
Preferred stock dividends
(6,791)
(6,791)
(27,165)
(27,165)
Net income attributable to common stockholders
$ 40,828
$ 36,627
$ 172,838
$ 150,979
Earnings per common share:
Basic earnings per common share
$ 3.77
$ 3.39
$ 15.97
$ 14.00
Diluted earnings per common share
$ 3.73
$ 3.36
$ 15.81
$ 13.87
Reconciliations
Reconciliations of Farmer Mac’s net income attributable to common stockholders to core earnings and core earnings per share are presented in the following tables along with information about the composition of core earnings for the periods indicated:
Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
For the Three Months Ended
December 31, 2023
September 30, 2023
December 31, 2022
(in thousands, except per share amounts)
Net income attributable to common stockholders
$ 40,828
$ 51,345
$ 36,627
Less reconciling items:
(Losses)/gains on undesignated financial derivatives due to fair value
changes
(836)
2,921
1,596
(Losses)/gains on hedging activities due to fair value changes
(3,598)
3,210
(148)
Unrealized (losses)/gains on trading assets
(37)
1,714
31
Net effects of amortization of premiums/discounts and deferred gains
on assets consolidated at fair value
88
29
57
Net effects of terminations or net settlements on financial derivatives
(800)
(79)
1,268
Income tax effect related to reconciling items
1,089
(1,638)
(590)
Sub-total
(4,094)
6,157
2,214
Core earnings
$ 44,922
$ 45,188
$ 34,413
Composition of Core Earnings:
Revenues:
Net effective spread(1)
$ 84,551
$ 83,424
$ 71,103
Guarantee and commitment fees(2)
4,865
4,828
4,677
Other(3)
767
1,056
390
Total revenues
90,183
89,308
76,170
Credit related expense (GAAP):
(Release of)/provision for losses
(575)
(181)
1,945
REO operating expenses
—
—
819
Total credit related expense
(575)