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Farmer Mac Reports 2023 Results

AGM

- 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 and AGM.A), the nation's secondary market provider that increases the accessibility of financing for American agriculture and rural infrastructure, today announced its results for the fiscal quarter and year ended December 31, 2023.

Farmer Mac Logo (PRNewsFoto/Farmer Mac) (PRNewsfoto/Farmer Mac)

"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.A), 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.PR.C), $0.35625 per share of 5.700% Non-Cumulative Preferred Stock, Series D (NYSE: AGM.PR.D), $0.359375 per share of 5.750% Non-Cumulative Preferred Stock, Series E (NYSE: AGM.PR.E), $0.328125 per share of 5.250% Non-Cumulative Preferred Stock, Series F (NYSE: AGM.PR.F), 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)


(181)


2,764







Operating expenses (GAAP):






Compensation and employee benefits

15,523


14,103


12,105

General and administrative

8,916


9,100


8,055

Regulatory fees

725


831


832

Total operating expenses

25,164


24,034


20,992







Net earnings

65,594


65,455


52,414

Income tax expense(4)

13,881


13,475


11,210

Preferred stock dividends (GAAP)

6,791


6,792


6,791

Core earnings

$ 44,922


$ 45,188


$ 34,413







Core earnings per share:






Basic

$ 4.14


$ 4.17


$ 3.19

Diluted

$ 4.10


$ 4.13


$ 3.16



(1)

Net effective spread is a non-GAAP measure. See "Use of Non-GAAP Measures" above for an explanation of net effective spread. See below for a reconciliation of net interest income to net effective spread.

(2)

Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3)

Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4)

Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings


For the Years Ended


December 31, 2023


December 31, 2022


(in thousands, except per share amounts)

Net income attributable to common stockholders

$ 172,838


$ 150,979

Less reconciling items:




Gains on undesignated financial derivatives due to fair value changes

5,142


13,495

(Losses)/gains on hedging activities due to fair value changes

(5,394)


5,343

Unrealized gains/(losses) on trading assets

1,979


(917)

Net effects of amortization of premiums/discounts and deferred gains on assets

consolidated at fair value

175


39

Net effects of terminations or net settlements on financial derivatives

227


15,794

Income tax effect related to reconciling items

(447)


(7,089)

Sub-total

1,682


26,665

Core earnings

$ 171,156


$ 124,314





Composition of Core Earnings:




Revenues:




Net effective spread(1)

$ 326,980


$ 255,529

Guarantee and commitment fees(2)

18,928


18,144

Other(3)

3,299


1,684

Total revenues

349,207


275,357





Credit related expense (GAAP):




Provision for losses

1,136


806

REO operating expenses


819

Total credit related expense

1,136


1,625





Operating expenses (GAAP):




Compensation and employee benefits

58,914


48,766

General and administrative

34,963


29,772

Regulatory fees

3,222


3,269

Total operating expenses

97,099


81,807





Net earnings

250,972


191,925

Income tax expense(4)

52,651


40,446

Preferred stock dividends (GAAP)

27,165


27,165

Core earnings

$ 171,156


$ 124,314





Core earnings per share:




Basic

$ 15.80


$ 11.52

Diluted

$ 15.65


$ 11.42



(1)

Net effective spread is a non-GAAP measure. See "Use of Non-GAAP Measures" above for an explanation of net effective spread. See below for a reconciliation of net interest income to net effective spread.

(2)

Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3)

Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4)

Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Reconciliation of GAAP Basic Earnings Per Share to Core Earnings Basic Earnings Per Share


For the Three Months Ended


For the Years Ended


December 31, 2023


September 30, 2023


December 31, 2022


December 31, 2023


December 31, 2022


(in thousands, except per share amounts)

GAAP - Basic EPS

$ 3.77


$ 4.74


$ 3.39


$ 15.97


$ 14.00

Less reconciling items:










(Losses)/gains on undesignated financial derivatives

due to fair value changes

(0.08)


0.27


0.15


0.49


1.25

(Losses)/gains on hedging activities due to fair value

changes

(0.33)


0.30


(0.01)


(0.50)


0.50

Unrealized gains/(losses) on trading securities


0.16


0.01


0.18


(0.08)

Net effects of amortization of premiums/discounts and

deferred gains on assets consolidated at fair value

0.01



0.01


0.02


Net effects of terminations or net settlements on

financial derivatives

(0.07)


(0.01)


0.11


0.02


1.47

Income tax effect related to reconciling items

0.10


(0.15)


(0.07)


(0.04)


(0.66)

Sub-total

(0.37)


0.57


0.20


0.17


2.48

Core Earnings - Basic EPS

$ 4.14


$ 4.17


$ 3.19


$ 15.80


$ 11.52











Shares used in per share calculation (GAAP and Core

Earnings)

10,841


10,839


10,801


10,829


10,791



Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings Diluted Earnings Per Share


For the Three Months Ended


For the Years Ended


December 31, 2023


September 30, 2023


December 31, 2022


December 31, 2023


December 31, 2022


(in thousands, except per share amounts)

GAAP - Diluted EPS

$ 3.73


$ 4.69


$ 3.36


$ 15.81


$ 13.87

Less reconciling items:










(Losses)/gains on undesignated financial derivatives

due to fair value changes

(0.08)


0.27


0.15


0.47


1.24

(Losses)/gains on hedging activities due to fair value

changes

(0.33)


0.29


(0.01)


(0.49)


0.49

Unrealized gains/(losses) on trading securities


0.16


0.01


0.18


(0.08)

Net effects of amortization of premiums/discounts and

deferred gains on assets consolidated at fair value

0.01



0.01


0.02


Net effects of terminations or net settlements on financial

derivatives

(0.07)


(0.01)


0.11


0.02


1.45

Income tax effect related to reconciling items

0.10


(0.15)


(0.07)


(0.04)


(0.65)

Sub-total

(0.37)


0.56


0.20


0.16


2.45

Core Earnings - Diluted EPS

$ 4.10


$ 4.13


$ 3.16


$ 15.65


$ 11.42











Shares used in per share calculation (GAAP and Core

Earnings)

10,952


10,938


10,894


10,937


10,883

The following table presents a reconciliation of net interest income and net yield to net effective spread for the periods indicated:

Reconciliation of GAAP Net Interest Income/Yield to Net Effective Spread


For the Three Months Ended


For the Years Ended


December 31, 2023


September 30, 2023


December 31, 2022


December 31, 2023


December 31, 2022


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


(dollars in thousands)

Net interest income/yield

$ 82,169


1.12 %


$ 87,643


1.22 %


$ 73,635


1.08 %


$ 327,547


1.15 %


$ 270,940


1.04 %

Net effects of consolidated

trusts

(1,048)


0.02 %


(1,024)


0.02 %


(1,195)


0.02 %


(4,171)


0.02 %


(4,239)


0.02 %

Expense related to

undesignated financial

derivatives

(846)


(0.01) %


(805)


(0.01) %


(2,122)


(0.03) %


(4,845)


(0.02) %


(7,756)


(0.03) %

Amortization of

premiums/discounts on

assets consolidated at fair

value

(104)


— %


(24)


— %


(53)


— %


(175)


— %


(24)


— %

Amortization of losses due

to terminations or net

settlements on financial

derivatives

782


0.01 %


844


0.01 %


688


— %


3,230


0.01 %


2,413


0.01 %

Fair value changes on fair

value hedge relationships

3,598


0.05 %


(3,210)


(0.04) %


150


— %


5,394


0.02 %


(5,805)


(0.02) %

Net effective spread

$ 84,551


1.19 %


$ 83,424


1.20 %


$ 71,103


1.07 %


$ 326,980


1.18 %


$ 255,529


1.02 %

The following table presents core earnings for Farmer Mac's reportable operating segments and a reconciliation to consolidated net income for the three months ended December 31, 2023:

Core Earnings by Business Segment

For the Three Months Ended December 31, 2023


Agricultural Finance


Rural Infrastructure


Treasury


Corporate






Farm &
Ranch


Corporate
AgFinance


Rural

Utilities


Renewable
Energy


Funding


Investments



Reconciling

Adjustments


Consolidated
Net Income


(in thousands)

Net interest income

$ 34,408


$ 8,382


$ 7,415


$ 1,540


$ 29,827


$ 597


$ —


$ —


$ 82,169

Less: reconciling

adjustments(1)(2)(3)

(1,079)



(73)



3,534




(2,382)


Net effective spread

33,329


8,382


7,342


1,540


33,361


597



(2,382)


Guarantee and

commitment fees

4,455


90


292


28





(1,095)


3,770

Other

income/(expense)(3)

736


23





12


(4)


(1,706)


(939)

Total revenues

38,520


8,495


7,634


1,568


33,361


609


(4)


(5,183)


85,000



















Release of/(provision

for) losses

9


727


71


(181)






626



















(Provision for)/release

of reserve for losses

(58)



7







(51)

Operating expenses







(25,164)



(25,164)

Total non-interest

expense

(58)



7





(25,164)



(25,215)

Core earnings before

income taxes

38,471


9,222


7,712


1,387


33,361


609


(25,168)


(5,183)

(4)

60,411

Income tax

(expense)/benefit

(8,078)


(1,937)


(1,620)


(292)


(7,005)


(128)


5,179


1,089


(12,792)

Core earnings before

preferred stock

dividends

30,393


7,285


6,092


1,095


26,356


481


(19,989)


(4,094)

(4)

47,619

Preferred stock

dividends







(6,791)



(6,791)

Segment core

earnings/(losses)

$ 30,393


$ 7,285


$ 6,092


$ 1,095


$ 26,356


$ 481


$ (26,780)


$ (4,094)

(4)

$ 40,828



















Total Assets

$ 15,052,606


$ 1,566,906


$ 7,002,620


$ 443,772


$ —


$ 5,342,089


$ 116,389


$ —


$ 29,524,382

Total on- and off-

balance sheet program

assets at principal

balance

$ 18,808,801


$ 1,693,979


$ 7,480,723


$ 487,521


$ —


$ —


$ —


$ —


$ 28,471,024



(1)

Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

(2)

Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee.

(3)

Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.

(4)

Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.

Supplemental Information

The following table sets forth information about outstanding volume in each of Farmer Mac's lines of business as of the dates indicated:

Outstanding Business Volume



On or Off

Balance Sheet


As of December 31,




2023


2022





(in thousands)

Agricultural Finance:







Farm & Ranch:







Loans


On-balance sheet


$ 5,133,450


$ 5,150,750

Loans held in consolidated trusts:







Beneficial interests owned by third-party investors

(Pass-Through)(1)


On-balance sheet


870,912


914,918

Beneficial interests owned by third-party investors

(Structured)(1)


On-balance sheet


561,349


296,658

IO-FMGS(2)


On-balance sheet


9,409


10,622

USDA Securities


On-balance sheet


2,368,872


2,407,302

AgVantage Securities(1)


On-balance sheet


5,835,000


5,605,000

LTSPCs and unfunded loan commitments


Off-balance sheet


2,999,943


2,822,309

Other Farmer Mac Guaranteed Securities(3)


Off-balance sheet


452,602


500,953

Loans serviced for others


Off-balance sheet


577,264


20,280

Total Farm & Ranch




$ 18,808,801


$ 17,728,792

Corporate AgFinance:







Loans


On-balance sheet


$ 1,259,723


$ 1,166,253

AgVantage Securities(1)


On-balance sheet


288,879


359,600

Unfunded loan commitments


Off-balance sheet


145,377


77,654

Total Corporate AgFinance




$ 1,693,979


$ 1,603,507

Total Agricultural Finance




$ 20,502,780


$ 19,332,299

Rural Infrastructure Finance:







Rural Utilities:







Loans


On-balance sheet


$ 3,094,477


$ 2,801,696

AgVantage Securities(1)


On-balance sheet


3,898,468


3,044,156

LTSPCs and unfunded loan commitments


Off-balance sheet


487,778


512,592

Other Farmer Mac Guaranteed Securities(3)


Off-balance sheet



1,169

Total Rural Utilities




$ 7,480,723


$ 6,359,613

Renewable Energy:







Loans


On-balance sheet


$ 440,286


$ 219,570

Unfunded loan commitments


Off-balance sheet


47,235


10,600

Total Renewable Energy




$ 487,521


$ 230,170

Total Rural Infrastructure Finance




$ 7,968,244


$ 6,589,783

Total




$ 28,471,024


$ 25,922,082



(1)

A type of Farmer Mac Guaranteed Security.

(2)

An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

(3)

Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties.

The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:


Net Effective Spread(1)


Agricultural Finance


Rural Infrastructure Finance


Treasury






Farm & Ranch


Corporate
AgFinance


Rural Utilities


Renewable
Energy


Funding


Investments


Net Effective
Spread


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


(dollars in thousands)

For the quarter ended:




























December 31, 2023(2)

$ 33,329


0.98 %


$ 8,382


2.06 %


$ 7,342


0.43 %


$ 1,540


1.69 %


$ 33,361


0.47 %


$ 597


0.04 %


$ 84,551


1.19 %

September 30, 2023

32,718


0.97 %


8,250


2.05 %


6,362


0.39 %


1,150


1.46 %


34,412


0.49 %


532


0.04 %


83,424


1.20 %

June 30, 2023

34,388


1.03 %


7,444


1.92 %


5,808


0.38 %


1,100


1.47 %


32,498


0.48 %


594


0.04 %


81,832


1.20 %

March 31, 2023

32,465


0.97 %


7,148


1.94 %


5,507


0.36 %


858


1.53 %


31,738


0.47 %


(543)


(0.04) %


77,173


1.15 %

December 31, 2022

32,770


0.98 %


7,471


1.94 %


4,960


0.34 %


935


1.76 %


27,656


0.42 %


(2,689)


(0.19) %


71,103


1.07 %

September 30, 2022

33,343


1.04 %


7,600


1.99 %


4,220


0.30 %


705


1.97 %


22,564


0.36 %


(2,791)


(0.21) %


65,641


1.03 %

June 30, 2022

32,590


1.05 %


6,929


1.87 %


3,733


0.27 %


468


1.78 %


18,508


0.30 %


(1,282)


(0.10) %


60,946


0.99 %

March 31, 2022

30,354


1.02 %


7,209


1.96 %


3,159


0.23 %


375


1.69 %


16,738


0.28 %


4


— %


57,839


0.97 %

December 31, 2021

28,998


0.99 %


6,321


1.84 %


2,521


0.19 %


356


1.53 %


15,979


0.28 %


158


0.01 %


54,333


0.94 %



(1)

Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets.

(2)

See above for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended December 31, 2023.

The following table presents quarterly core earnings reconciled to net income attributable to common stockholders:

Core Earnings by Quarter Ended


December 2023


September 2023


June 2023


March 2023


December 2022


September 2022


June 2022


March 2022


December 2021










(in thousands)

Revenues:


















Net effective spread

$ 84,551


$ 83,424


$ 81,832


$ 77,173


$ 71,103


$ 65,641


$ 60,946


$ 57,839


$ 54,333

Guarantee and commitment fees

4,865


4,828


4,581


4,654


4,677


4,201


4,709


4,557


4,637

Gains on sale of mortgage loans









6,539

Other

767


1,056


409


1,067


390


473


307


514


241

Total revenues

90,183


89,308


86,822


82,894


76,170


70,315


65,962


62,910


65,750



















Credit related expense/(income):


















(Release of)/provision for losses

(575)


(181)


1,142


750


1,945


450


(1,535)


(54)


(1,428)

REO operating expenses





819





Total credit related expense/(income)

(575)


(181)


1,142


750


2,764


450


(1,535)


(54)


(1,428)



















Operating expenses:


















Compensation and employee benefits

15,523


14,103


13,937


15,351


12,105


11,648


11,715


13,298


11,246

General and administrative

8,916


9,100


9,420


7,527


8,055


6,919


7,520


7,278


8,492

Regulatory fees

725


831


831


835


832


812


813


812


812

Total operating expenses

25,164


24,034


24,188


23,713


20,992


19,379


20,048


21,388


20,550



















Net earnings

65,594


65,455


61,492


58,431


52,414


50,486


47,449


41,576


46,628

Income tax expense

13,881


13,475


12,539


12,756


11,210


10,303


9,909


9,024


9,809

Preferred stock dividends

6,791


6,792


6,791


6,791


6,791


6,791


6,792


6,791


6,792

Core earnings

$ 44,922


$ 45,188


$ 42,162


$ 38,884


$ 34,413


$ 33,392


$ 30,748


$ 25,761


$ 30,027



















Reconciling items:


















(Losses)/gains on undesignated

financial derivatives due to fair value

changes

$ (836)


$ 2,921


$ 2,141


$ 916


$ 1,596


$ 6,441


$ 2,846


$ 2,612


$ (1,242)

(Losses)/gains on hedging activities

due to fair value changes

(3,598)


3,210


(4,901)


(105)


(148)


(624)


428


5,687


(2,079)

Unrealized (losses)/gains on trading

assets

(37)


1,714


(57)


359


31


(757)


(285)


94


(76)

Net effects of amortization of

premiums/discounts and deferred gains

on assets consolidated at fair value

88


29


29


29


57


24


(62)


20


71

Net effects of terminations or net

settlements on financial derivatives

(800)


(79)


583


523


1,268


(3,522)


2,536


15,512


(429)

Income tax effect related to reconciling

items

1,089


(1,638)


464


(362)


(590)


(327)


(1,148)


(5,024)


789

Net income attributable to common

stockholders

$ 40,828


$ 51,345


$ 40,421


$ 40,244


$ 36,627


$ 34,627


$ 35,063


$ 44,662


$ 27,061

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SOURCE Farmer Mac

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