Federal Agricultural Mortgage Corporation

Good afternoon, ladies and gentlemen, and welcome to the FarmerMac second quarter 2024 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, August 5th, 2024. 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 2024 earnings conference call. I'm Jelpa Nazareth, Senior Director of Investor Relations and Finance Strategy here at ArmourMax. 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 risk and uncertainties that could cause our actual results to differ materially from those projected. Please refer to PharmaMax 2023 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 is our President and Chief Executive Officer, Brad Nordholm, who will discuss second 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?

Thank you, Jalpa. Good afternoon, everyone, and thank you very much for joining us. Our focus on stability, profitability, and growth has once again produced consistent results. Our underlying business model, strong capital position, and uninterrupted access to the debt capital markets throughout the full range of market cycles uniquely position us to partner with our customers to help them grow and manage any capital and liquidity risks they might face. The foundation of our strategy is our consistent financial and operational execution, coupled with proactive management of our balance sheet and funding sources. This has positioned us well in all environments and is expected to continue to create more opportunities for enhanced shareholder value through our mission fulfillment. During the quarter, we closed $1.5 billion of new business. Approximately 70% of the new volume consisted of higher spread, longer term loan purchase volume across all of our segments. Our total revenues in second quarter 2024 improved $2.4 million over the same quarter last year to $89 million. As the compositional shift of NUBIS' volume towards higher spread loans resulted in higher net effective spread and our operating efficiency level was 27%, better than our long-term target of 30%, a reflection of our disciplined approach to expense management. Court earnings were lower relative to second quarter 2023, primarily due to the partial charge off of a single permanent planting loan. Excluding the impact of credit expenses, court earnings were $45 million, which is an increase both sequentially and year over year. As we've mentioned on prior calls, the nature of our credit events and the charge-offs have tended to be idiosyncratic. We believe that our credit profile remains strong in the aggregate and that we would be able to withstand significant shocks given our strong levels of capital. Turning to our portfolio, loan purchase volume growth was strong in the renewable energy and farm and ranch segments, reflecting borrower's adjustment to the current interest rate environment. We've purchased more renewable energy loans in the first half of 2024 than in all of last year, reflecting the continuous strong demand for renewable power generation and storage, as well as the continuing expansion of our team. Outstanding volume in the renewable energy segment has more than doubled since the second quarter last year, and our pipeline remains very strong heading into the second half of the year. As previously mentioned, renewable energy loans are aligned with our mission while being accretive to revenues and net effective spreads relative to our other eligible loans. Within our farm and ranch segment, we closed $700 million of new farm and ranch loan purchase volume in the first half of this year. That compares with a total of $780 million in the full year of 2023. We believe we'll see this positive momentum continue for the remainder of the year as tightening bank liquidity and an adjustment to a higher rate environment with a near-term expectation of Federal Reserve Bank policy easing has taken hold. The forecasted decline in farm income relative to prior years is expected to drive more long volume, including potential pool purchases like the one we acquired earlier this year. We are incredibly pleased to see strong momentum in the farm and ranch segment. It is a segment that is core to our mission And growth in this segment continues to propel our securitization program, where we have seen strong investor demand. As we discussed on our last earnings call, we closed our fourth farm series securitization transaction in the second quarter. And we're currently working on our fifth transaction for some time potentially later this year. We are very pleased with the tremendous support we've seen from our customers and investors for this program and remain committed to being a regular issuer in the market with a set of securitization products that align with both our and investor interests. As we look ahead, we are likely entering a period of macroeconomic level volatility. Farm income is projected to trend downward, but that coupled with possible Fed policy easing might create loan purchase opportunities for us in our farm and ranch segment. We continue to serve as an attractive financing alternative for our wholesale counterparties in addressing their liquidity needs. But we have seen and expect to continue to see business volume and advantage securities to be volatile through the slower market loan growth and a tightening of credit spreads resulting in reduced liquidity needs from our counterparties. While volatility is expected in the short term, over time we do anticipate further growth in our advantage business volume given the relative value of this product for our counterparties. I'm very pleased with how we are executing as a company in what continues to be an uncertain economic, credit, and interest rate backdrop. We are maintaining our disciplined asset liability management, uninterrupted access to capital markets, and a strong capital base while producing a double-digit return on equity of 16%. Excluding the credit expense, our return on equity was 18%. The overall earnings story continues to be consistent. The diversification into new revenue streams, particularly renewable energy, and our other newer business portfolios, and the resilience of our business model supports our long-term strategic growth objectives while also providing a buffer against market volatility and a changing credit environment. As we look forward, we're encouraged by the momentum we've seen since the start of the year. We believe that we are well-positioned to make continuous progress on our long-term strategic growth initiatives to further our mission efficiently and innovatively as we navigate this backdrop of broader market uncertainty. And now with that, I'd like to turn the call to Aparna Ramesh, our CFO, to discuss our financial results in more detail. Aparna.