Federal Agricultural Mortgage Corporation

Good day, and welcome to the Farmer Mac third quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I'd now like to turn the conference over to Jalpa Nazareth, Director of Investor Relations and Finance Strategy. Please go ahead.

Good afternoon, and thank you for joining us for our third quarter 2021 earnings conference call. I'm Jalpa Nazareth, Director of Investor Relations and Finance Strategy here at FarmerMac. As we begin, please note that the information provided during this call may contain forward-looking statements about the company's business strategies and prospects, which are based on management's current expectations and assumptions. These statements are not a guarantee of future performance and are subject to the risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to PharmaMac's 2020 Annual Report and subsequent SEC filings for a full discussion of the company's risk factors. On today's call, we will also be discussing certain non-GAAP financial measures. Disclosures and reconciliations of these non-GAAP measures can be found in the most recent Form 10-Q an earnings release posted on PharmaMac's website, pharmaMac.com, under the financial information portion of the investor section. Joining us for management this afternoon are our president and CEO, Brad Nordholm, who will discuss third quarter business and financial highlights and strategic objectives, and our CFO, Aparna Ramesh, who will provide greater detail on our financial performance. Select members of our management team will also be joining us for the question and answer periods. At this time, I'll turn the call over to President and CEO Brad Nordholm. Brad?

Thanks, Joppa, and good afternoon, everyone, and thank you for joining us. As you can see from this afternoon's press release, we're having another great year thus far, with many significant accomplishments, including the expansion of our internal loan servicing function in the third quarter, and more recently, at the beginning of the fourth quarter, a newly structured syndicated agriculture mortgage-backed securitization. These accomplishments, combined with our consistent financial performance and continued strong credit quality, reflect our alignment with and our execution on our multi-year strategic plan. We delivered another quarter of strong core earnings and net effective spread, reflecting the disciplined structure of our asset liability management and pricing policies, and the consistency and durability of our business model. Our asset quality metrics remain strong with 90-day delinquencies and substandard asset ratios moving favorably on a quarter-by-quarter basis. We're pleased with the overall portfolio performance and continue to see no material issues on the horizon. Expanding our internal loan servicing capabilities through this quarter's strategic acquisition reflects an opportunity for PharmaMac and will bring with it a myriad of benefits to our core customers, the lending institutions of rural America who are key parts of our seller servicer network. We will use this opportunity to create greater efficiencies across our loan servicing platforms and we will harness this opportunity for more direct oversight and governance of a large part of our portfolio giving us enhanced security, more control over and timely access to data, and better visibility into loan performance from inception to maturity. We're also excited for the growth opportunities this strategic investment will enable, as it will equip us with the talent and infrastructure to more effectively and efficiently service larger, more complex commercial loans. a key driver in our long-term growth strategy. This move is an important example of our dual strategies to broaden our business opportunities while also deepening relationships with our existing customers. We believe that will ultimately enable us to provide increased capital to support rural America and to deliver better customer service to our lender network in support of our mission of increasing the access and competitive pricing for credit for the benefit of the country's farmers, ranchers, and rural residents. I'm very proud of the $302 million newly structured and syndicated agriculture mortgage-backed securitization that we closed in early October. The success of this transaction is evidence that PharmaVac's high-quality credit, our strong balance sheet, and our consistent financial performance, as well as the resilience of America's farmers and ranchers. Developing this capital flow to agricultural producers straight from the capital markets to them exemplifies PharmaMac's core mission to lower costs for end-browers and improve credit availability, while creating a well-received and new investment opportunity for leading institutional investors. A partner will provide more details on this transaction in a few minutes. But looking ahead, we plan to build upon the securitization program over the next several years and eventually become a frequent issuer in the marketplace. The overall tone of the agriculture real estate market remains positive. Farmland values are projected to remain flat to slightly higher is we're seeing an increase in the number of public auctions and sales with some of the highest values of the year. We've provided a gross $2.5 billion in new credit to Real America in the third quarter, which results in outstanding business volume exceeded $23 billion at quarter end. Our success continues to be driven by our consistent customer-centric approach, which focuses on providing products, and solutions that address funding needs through all agricultural economic cycles, and that's to both existing as well as new markets. Strong loan purchase growth in our farm and ranch line of business this quarter was largely attributable to our proactive customer outreach and retention strategies. We also added a net new $50 million commitment this quarter for a borrower to acquire and improve the economics of farmland in a federally designated Opportunity Zone. This is our largest commitment to Opportunity Zones to date, and we funded $21 million of this commitment in the third quarter. Farm and Ranch's long-term standby purchase commitment product also exhibited healthy growth, reversing some of the general trends over the last years. Regional Farm Credit System Association's growth within their core sectors resulted in some of these lenders exceeding commodity concentration limits, which provided an opportunity for PharmaMac to issue purchase commitments that provide relief from lending and concentration limits for these lenders. Despite the ample supply of liquidity in the market from other sources, our institutional credit line of business grew over, or just under actually, $500 million, a reversal from prior quarters, largely driven by demand for short-term liquidity funding by two of our largest counterparties. This growth is a testament to PharmaMax's ability to be competitive in price, while also being effective in execution to meet the needs of these customers. And I might add, while also being flexible in recognizing that needs of customers can change very rapidly. In our rural utilities line of business, we successfully added $50 million of unfunded telecommunication loan commitments with one of our key customers. This transaction reflects some of the positive momentum we've seen in broadband and renewable energy project finance. We view these growing sectors as significant opportunities for PharmaMac over the next several years, given the greater level of interest from rural electric cooperatives to develop and deploy broadband services and invest in renewable energy electric power generation. As we look ahead to the fourth quarter and build on the strategic plan and notable accomplishments of this quarter, we continue to see many opportunities. We are confident that the strength of our underlying business model, our strong capital position, and our commitment to our customers will continue support our ability to generate consistent returns throughout various market environments and across economic cycles, as we have done historically. With that, I'd like to turn it over to Aparna to discuss our financial results in more detail.