Federal Agricultural Mortgage Corporation

Good afternoon and welcome to the Farmer Mac first quarter 2023 earnings 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. To withdraw from the question queue, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jalpa Nazareth, Senior Director of Investor Relations. Please go ahead.

Good afternoon. And thank you for joining us for our first quarter 2023 earnings conference call. I'm Delta Nazareth, Senior 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 risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Pharmac's 2022 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 press 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 Chief Executive Officer, Brad Nordholm, who will discuss first quarter business and financial highlights and strategic objectives, and 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. Thanks for joining us today. I'm very pleased to announce we delivered a great quarter with new all-time records for revenue, earnings, and net effective spread, and all-time records in the growth rates of these three metrics. Our results not only highlight the resiliency of our business model, our disciplined approach to asset liability management, and our successful efforts over the last few years to grow and diversify our revenue streams, but also the alignment of our team with our long-term strategic objectives and passion for fulfillment of our mission throughout changing market cycles. For some time, Aparna and I have talked with you about our discipline approach to asset liability management. We've emphasized that our ability to issue long-dated, fixed-rate debt in all rate environments and economic cycles is a core competitive advantage that, when combined with our approach to asset liability management, helps to produce consistent spreads and provides remarkable forward visibility to future earnings. The recent volatility in the capital markets and failures of depository institutions provide a stark contrast between PharmaMac and banks. We're not a bank, and we don't rely upon deposits as a source of funding. The terms governing our debt securities are contractual in nature, and we, not depositors, hold the optionality of when and how to call our debt. We will continue to talk about these differences and why PharmaMax business model is resilient and has the ability to deliver such consistent results. In the first quarter of 2023, we booked core earnings of $38.9 million, a 50% increase over the same period one year ago. We provided a gross $1.7 billion in liquidity and lending capacity to lenders serving rural America, resulting in total outstanding business volume growth of over $500 million from year-end to $26.5 billion as of March 31, 2023, which annualized is about a 7.5% growth rate. The volume growth this quarter was primarily attributable to the efforts we've made over the last few years to diversify our business model across numerous key markets. We achieved $608 million of net new business and rural infrastructure. We acquired nearly $100 million in telecommunication loans in the first quarter of 2023, as there is growing investment in fiber and broadband in rural America. These telco assets are highly accretive in terms of NES and are another reflection of our attempts to diversify our asset portfolio. We remain committed to increase investment in the telecommunication and broadband sectors, which are highly mission-centric, and we look forward to providing additional updates on this new avenue of growth for PharmaMAC. Our renewable energy portfolio also experienced a strong start to the year. with approximately 80 million in net growth from several counterparties. Our participation in broadly syndicated renewable energy transactions has increased the number of potential counterparties to source transactions from in future years. The pipeline remains strong in the near future as we continue to focus on upsizing existing deals and bringing on new renewable energy opportunities with additional resources committed to this area. Outstanding volume in the agricultural finance line of business was relatively flat from year end, largely due to continued economic uncertainty and broader market volatility. We do see opportunities to help our customers with their liquidity needs as they navigate the recent disruptions in the banking industry. Volume in the farm and ranch segment declined sequentially due to two reasons. The first is the seasonally large number of scheduled payments due to the majority of the farm and ranch loan customers, which are annual or semiannual, with payments falling on January 1st of the year. The second is that many of those borrowers during that period of time are focused on the renewal of existing lines of credit ahead of the spring planting season. Outstanding volume in our corporate ag finance portfolio was relatively flat from year end, as persistent volatility and uncertainty in the markets slowed down deal opportunities in the first quarter, with many transactions on pause, waiting for signs of stabilization in the macroeconomic outlook. When we spoke to current and prospective institutional customers during the recent global ag crisis, Investing Conference in New York, we heard a recurring theme that there was a large balance of institutional money ready to be put to work in the agricultural space. In recent weeks, we have also seen more opportunities that continue to be accretive from a net effect of spread standpoint. We remain focused on this sector. It's a key component of our diversification strategy, central to our mission and impactful of earnings and continued growth. We told you about our successful execution of our third securitization in February of this year on our call, and we continue to receive excellent market feedback as well as demand for agricultural-backed securitization products. This program aligns very well with our core mission to lower our costs for our end-powerers and improve credit availability in rural America. We remain committed to being a regular issue in the securitization market. It's now become routine for us with a set of securitization products that align with borrower and investor interests. Looking ahead, our underlying business model, our strong capital position, and our uninterrupted access to debt capital markets throughout the various market disruptions uniquely positions us to partner with our customers to help them manage their business and the risk they face around future capital requirements and liquidity. The foundation of our strategy is our consistent financial and operational execution, coupled with proactive management of our balance sheet and funding sources, which has and we expect will position us well in changing credit environments and create more opportunities to enhance shareholder value and fulfill our mission. Now, I'll turn the call over to Aparna Ramesh, our Chief Financial Officer, to discuss the results in more detail. Aparna.