Farmer Mac Reports 2023 Results

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in

– 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)

Full story available on Benzinga.com


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