Federal Agricultural Mortgage Corporation

Good afternoon, and welcome to the Farmer Mac second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need any assistance today, please send me 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 telephone keypad. To withdraw your question, please press star, then two. Please note that this event is being recorded today. I would now like to turn the conference over to Jalpa Nazareth. Please go ahead.

Good afternoon, and thank you for joining us for our second quarter 2022 earnings conference call. I'm Jalpa Nazareth, Director of Investor Relations and Finance Strategy here at Barmer Mac. 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 Pharmac's 2021 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 and earnings release posted on PharmaMac's website, PharmaMac.com, under the financial information portion of the investor section. Joining us from management this afternoon are our President and Chief Executive Officer, Brad Nordholm, who will discuss second quarter business and financial highlights and strategic objectives, and our Chief Financial Officer, 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 period. At this time, I'll turn the call over to President and CEO Brad Nordholm. Brad?

Thanks, Jalpa, and good afternoon, everyone. I want to thank you for joining us today. We're extremely proud of the accomplishments and the financial results we're going to be sharing with you this afternoon. I think they provide further proof of our continuing commitment successful execution of our strategic plan and also provide further evidence of the value of PharmaMax business model throughout agricultural cycles. The diversity of our revenue streams combined with our credit discipline and strategic balance sheet positioning enable us to deliver a very strong quarter. More specifically, we generated record core earnings, our highest ever, and our portfolio and credit performance remained strong, with 90-day delinquencies ending the quarter at eight basis points across our entire portfolio. That's the lowest level in eight years. Despite ongoing macroeconomic concerns and potential headwinds, such as inflation and rising interest rates, the ongoing COVID pandemic, and the war in Ukraine, FarmerMac delivered strong results. Our financial results in the first half of 2022 reflected a variety of factors. And I'm just going to review some of them with you. First, the resilience of the farm economy. Producers have benefited from healthy farm income and liquidity from relatively high commodity prices that have come about because of heightened demand. And the revenues that these producers have experienced have risen faster than the costs of their inputs. Another factor. an increase in PharmaMac's outstanding business volume at higher spreads. In other words, we had volumetric growth and margin growth, and we did this with improved credit quality. Another factor is PharmaMac's disciplined approach to interest rate risk management that helps us protect earnings from the effects of interest rate volatility, such as we've experienced during the second quarter. And the final factor I think worth noting is PharmaMac's effective funding strategies that resulted in advantageous execution during the first half of 2022. We provided a gross $1.9 billion in liquidity and lending capacity to lenders serving rural America in the second quarter of 2022. This resulted in growth in outstanding business volumes to $24.5 billion as of June 30, 2022. Our rural infrastructure finance line of business grew $193 million during the second quarter, or 3%, and this is primarily due to loan purchase product. The growth in the demand for this product was really to fuel planned maintenance and capital expenditures by rural electric cooperatives across the U.S. Also contributing to growth this quarter in the rural infrastructure finance line of business was the $34 million commitment to a large solar project. Our renewable energy portfolio ended the quarter at about $150 million, compared to about $87 million at year end, and the pipeline looked strong for the second half of the year. As I have said on prior calls, renewable energy is both an important economic development opportunity for rural America and a business opportunity for us. The agricultural finance line of business grew approximately $43 million this quarter, primarily due to strong farm and ranch loan purchase volume. This growth is partially offset by scheduled maturities and an early refinance of a large egg vantage security. Net farm and ranch loan purchase volume was strong during the second quarter as the rising interest rate environment resulted in demand for intermediate and long-term financing solutions. While we anticipate that lower refinances could result in lower levels of new loan purchase in some of our farm and ranch and USDA products, it also could result in lower portfolio prepayment activity. Our pipeline in this line of business remains strong, and we will continue to be flexible as we navigate through this uncertain environment. Let me now turn to our recent securitization transaction. I'm proud to announce that we successfully marketed and priced our second $300 million agriculture mortgage-backed securitization. That happened subsequent to the end of the quarter and is expected to close in just a few days. The successful execution of this transaction reflects our efforts over the last few months to identify and implement effective operational strategies to support a securitization program and closely monitor the changing market dynamics over this period to make sure that we could execute at just the right time. Securitization is a tremendous opportunity for Farmer Mac. Developing this capital flow to agricultural producers really exemplifies PharmaMac's core mission to lower costs for the end borrower and to improve credit availability to rural America while creating a well-received new investment opportunity for leading institutional investors. As we have said after our inaugural transaction in the fall, we remain committed to being a regular issuer in the marketplace with a diverse set of securitized products that align with our borrower investor interests. In the near term, we will slowly increase the number of issuances per year and continue to identify opportunities to improve operational efficiencies and automation in support of the program, make sure that we have a strong foundation for the future. Looking ahead, we'll strive to continue to be a source of stability for our customers by remaining adaptive and flexible to their needs in this changing environment. while remaining vigilant about any indicators of potential market contraction. With that, I'd like to turn over to Aparna Ramesh, our Chief Financial Officer, to discuss our financial results in a bit more detail. Aparna?