Federal Agricultural Mortgage Corporation

Good afternoon and welcome to the Farmer Mac third quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jalpa Nazareth, Senior Director, investor relations, and finance strategy. Please go ahead.

Good afternoon, and thank you for joining us for our third quarter 2023 earnings conference call. I'm Jelfa 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 the risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to PharmaMax 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 release posted on FarmerMac's website, FarmerMac.com, under the financial information portion of the investor section. Joining us for management this afternoon is our President and Chief Executive Officer, Brad Nordholm, who will discuss third 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. Good afternoon, everyone, and thank you for joining us. I'm very pleased to report another record quarter for earnings, our sixth consecutive quarterly record. Our capital base remains strong. which along with our disciplined asset liability management and uninterrupted access to the capital markets, enables our long-term strategic growth objectives while also providing a buffer against market volatility and changing credit market conditions. These results once again demonstrated the resiliency of our business model and the success of the strategic initiatives designed to grow our company profitably while, and this is very important to us, while fulfilling our mission to rule America and also generating shareholder returns across changing market cycles. In the third quarter, we recorded core earnings of $45.2 million, reflecting a 35% increase over the same period last year. We achieved gross new business volume of $2.3 billion during the quarter. resulting in total outstanding business volume of $27.7 billion as of September 30, 2023. Volume growth this quarter was driven by new advantage securities with existing counterparties in the wholesale financing space. Specifically, we added a $500 million advantage security in rural utility segment, and several advantage securities in the farm and ranch segment, which more than offset maturing securities by a net $225 million. The overall growth in wholesale financing over the last six months primarily reflects many of our institutional counterparties utilizing our wholesale financing facilities that offer their counterparties a competitive cost of funds. Also, these counterparties are layering in longer-term non-payable advantage securities to manage their asset liability maturity profile given the current level of interest rates and the pricing of these securities as competitive instruments given their other market options. We entered the fourth quarter with a strong pipeline of existing and new large financial institution counterparties, and we believe this renewed interest and wholesale financing, which drives the egg vanity product, will continue well into 2024. Also contributing to our overall volume growth this quarter is an effective business development activity across more diverse business segment platforms. The agricultural finance line of business grew over $400 million in the third quarter, predominantly due to the previously mentioned egg vanity securities growth increases in longer-term standby purchase commitments, and incremental loan purchase volume in corporate egg finance. Activity has been picking up in the corporate egg finance segment, reflecting our commitment to build a strong reputation in the marketplace with really a first-class team of people. While volume tends to be lumpy on a quarter-to-quarter basis, opportunities in this segment are generally more accretive from a net effective spread standpoint. We remain focused on this segment, which is a key component of our diversification strategy, central to our mission, and impactful for earnings and continued growth. Activity in our farm and ranch segment continues to be moderate to flat as a result of higher interest rate environment, but prepayment rates also remain at historically low levels. The number of loan applications and approvals during the third quarter was relatively steady, reflecting borrower's adjustment to the new rate environment. The agriculture mortgage market has seen a shift to primarily variable rate product, as borrower sentiment generally expects rates to decrease over the next five to 10 years. Turning to our rural infrastructure line of business, we saw healthy loan purchase volume growth in our rural utilities and renewable energy segments. New rural utility loan purchase volume this quarter was the result of our normal course Apple expenditures related to maintaining and upgrading utilities infrastructure, as well as investments in broadband infrastructure and our continued focus on telecommunication investment in rural America. Our renewable energy portfolio grew over $100 million during the first nine months of the year, reflecting our robust efforts and investments to grow this portfolio and our pipeline is strong heading into year end. Renewable energy is both an important economic development opportunity for rural America and a business opportunity for us at Farmer Mac. As I've discussed in previous calls, we plan to invest additional resources that will help us further penetrate the renewable energy market as opportunities arise. In recent months, as the market stabilized following the regional banking crisis, earlier this year, we've consistently presented our product offerings as a potential capital efficiency and liquidity conduit for our customers in agricultural finance and rural infrastructure lines of business. We believe that this is because of the relative value of PharmaMac and what we bring to the agricultural and rural credit markets. We believe that it's even greater when credit is a bit tighter, allowing us to further deliver upon our mission to build a trusted secondary market for credit to rural America. For example, we have helped customers in the FARM, F-A-R-M, the FARM Securitization Program to achieve their return objectives by utilizing the content that we have created to free up capital and manage their balance sheets more optimally. As we've said on previous calls, securitization is a tremendous opportunity for PharmaMAC, is highly central to our mission, and we are committed to being a regular issue in the market for the set of securitization products that align with both our borrower and investor interests. The momentum and excitement that you heard today about our record results would not have been possible without our team's continuing dedication and commitment to our long-term strategic plan and to the alignment across our organization and with our customers to bring even greater efficiencies the agriculture and rural infrastructure sectors. Our business approach, combined with a high caliber of talent across the organization, is really paramount to continuing delivering consistent, positive results. That is why we expanded our long-term incentive compensation program to all of our employees in the organization during the third quarter. This new incentive plan is intended to align all of our employees to the company's long-term performance and significant achievements. and also position each of our employees for their long-term financial success. Our underlying business model, strong capital position, and uninterrupted access to the debt capital markets throughout the various market disruptions uniquely positions us to partner with our customers to help them achieve the growth of their businesses and manage the risks 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 a balance sheet and funding sources. This has positioned us well in changing credit environment and is expected to continue to create more opportunity to enhance shareholder value and fulfill our mission. And so with that, I'd like to turn the call over to a partner, Ramesh, our Chief Financial Officer, to discuss our financial results in more detail. Aparna.