Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Federal Agricultural Mortgage Corp (AGM, Financial) reported a significant increase in total revenues year-to-date, improving over $10 million to $270 million compared to the same period last year.
- The company achieved a core earnings improvement of $1.8 million to $128 million year-to-date, excluding credit expense, marking a 5% year-over-year increase.
- AGM successfully launched the Securities Treasury accounting reporting system (STARS), a major infrastructure project aimed at enhancing transaction processing and business scalability.
- The company closed $2 billion of new business volume in the third quarter, with a strong focus on renewable energy and farm and ranch segments, surpassing $1 billion in total renewable energy volume.
- AGM maintained an operating efficiency ratio below its long-term target of 30% throughout 2024, reflecting disciplined expense management.
Negative Points
- AGM experienced a net decrease of $290 million in outstanding business volume as of September 30th, 2024, primarily due to scheduled maturities and repayments.
- The company faced a $3.3 million provision to the allowance for losses in the third quarter, attributed to volume growth in telecommunications and renewable energy, and a delinquent permanent planting loan.
- 90-day delinquencies increased to 51 basis points across the portfolio, up from 22 basis points at the end of June 2024, driven by a single delinquent loan.
- The tier one capital ratio decreased from 15.3% to 14.2% due to the redemption of series C preferred stock and increased risk-based assets in renewable energy and telecom sectors.
- AGM's business volume in the farm and ranch segment was impacted by a slower market for loan growth and tightening credit market spreads, leading to reduced liquidity needs.
Q & A Highlights
Q: What drove the increase in the farm and ranch yield, and was the decline in corporate finance due to a specific loan?
A: Zachary Carpenter, EVP & Chief Business Officer, explained that the increase in farm and ranch yield was due to purchasing a pool of loans with strong spreads. The decline in corporate finance was related to a single permanent planting loan mentioned earlier.
Q: Do you expect a similar earnings profile if rates remain range-bound?
A: Aparna Ramesh, EVP & CFO, confirmed that if rates remain range-bound, they expect a similar earnings profile. The company has been able to call higher-rate bonds and reissue them at lower rates, which has helped expand margins.
Q: How might tariffs impact Farmer Mac, considering past experiences like in 2018?
A: Bradford Nordholm, CEO, noted that while tariffs in 2018 were offset by supplemental support programs, the current strong dollar also affects trade. It's difficult to predict the exact impact of potential tariffs, but they are monitoring the situation closely.
Q: Can you provide more details on the new securitization program?
A: Aparna Ramesh explained that the securitization program is at an inflection point, having completed four successful transactions. The program aims to offer capital efficiency and liquidity, potentially transforming it from a financing strategy to a product strategy.
Q: What is the expected growth pace for the renewable energy loan portfolio?
A: Zachary Carpenter stated that the renewable energy segment has strong growth prospects, with significant investment in the pipeline. They are optimistic about continued strong growth into the next year, supported by infrastructure and resource investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
