Federal Agricultural Mortgage Corporation

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, November 4th of 2024. I would now like to turn the conference over to our Senior Director of Investor Relations and Finance Strategy, Ms. Chalpa Nazareth. Please go ahead.

Good afternoon, and thank you for joining us for our third quarter 2024 earnings conference call. I'm Jeltha 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 risk and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Pharmac's 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 Pharmac's website, Pharmac.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 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?

Thank you, Jalpa. Good afternoon, everyone, and thank you for joining us. Our third quarter 2024 results demonstrate that PharmaMac remains well positioned to achieve sustainable earnings and profitability. The strength of our capital base positions us well to continue investing in our long-term strategic initiatives power our growth into the future. We continue to successfully navigate industry change and economic cycles while growing earnings, underscoring the strength of our unique business model. Our total revenues year-to-date improved over $10 million to $270 million over the same period last year, primarily due to higher net effective spread. That increase reflects the shift of new business volume towards higher spread business, such as renewable energy, and the proactive management of our balance sheet and funding. Core earnings year-to-date improved $1.8 million to $128 million compared to the prior year period. Excluding credit expense, core earnings has improved nearly $7 million, over 5% year-over-year. As we previously mentioned on prior calls, the nature of our credit events and charge-offs have tended to be idiosyncratic. We believe that our credit profile remains strong overall and that we're well buffered given our strong levels of capital. Operating efficiency has been better than our long-term target of 30% throughout 2024, a reflection of our disciplined approach to expense management. We achieved this while implementing the Securities Treasury Accounting Reporting System, also known internally as STARS. This platform is the largest systems and process implementation project in PharmaMax history. It is a comprehensive transformation of our core infrastructure that facilitates transactions for more than two-thirds of our balance sheet, including some of our largest loan exposures. This is a significant capital investment that will enable us to scale our business over the next decade. This platform was redesigned to support more complexity in our hedging and debt offerings, modernize our $750 billion payment flow and enable new product offerings in alignment with our multi-year growth objectives. The end-to-end streamlining of our legacy systems with the addition of seven commercial off-the-shelf core infrastructure platforms should strengthen our business resiliency, enhance our security, safeguard our data, and increase our efficiency. Thanks to the coordinated execution by teams across the enterprise, working with capable industry partners, STARS went live just this past week. This is a testament to the company's expertise and dedication in bringing complex technology projects to fruition and strengthening our competitive advantage in the marketplace. I mentioned that we have achieved operating efficiency of below our long-term target of 30% throughout the year. It's projects such as STARS that enable a company of our size and our balance sheet with fewer than 200 employees to continue to utilize technology to make us efficient and bring all the other benefits of resiliency, security, and safeguard of data to bear. Turning to business volume, we closed $2 billion of new business volume this quarter. and $4.9 billion year to date, driven largely by loan purchase volume in the renewable energy and farm and ranch segments. We surpassed $1 billion in total renewable energy volume in the third quarter, reflecting the continuing strong demand for renewable power generation and storage, and the dedication and commitment from our organization to grow the segment in alignment with our long-term initiatives. Diversifying our loan portfolio into newer lines of business, such as renewable energy and corporate ag finance, have been key priorities over the last several years. And that diversification is benefiting us through changing market cycles. Our pipeline within the renewable energy segment remains strong, as our robust efforts and investments to grow this portfolio remain one of our top priorities over the foreseeable future. Within our farm and ranch segment, we closed nearly $1 billion of new farm and ranch loan purchase volume year to date, compared to a total of $780 million in the full year, 2023. We believe we'll see this positive momentum continue in the fourth quarter as tightening bank liquidity and an adjustment to a higher rate environment with a near-term expectation of policy easing has taken hold. The forecasted decline in farm income relative to prior years is expected to drive more loan volume, including potential pool purchases similar to those acquired during 2024. We are incredibly pleased to see strong momentum in the farm and ranch segment. It is a segment that is so core to our mission, and growth in this segment continues to propel our securitization program where we have seen strong investor demand. Offsetting volume growth this year has been maturities with several large advantage counterparties. A trend we have seen over the last nine months is the overall slower market for loan growth and a tightening of credit market spreads have resulted in reduced liquidity needs, particularly for one of our larger farm and ranch counterparties. In early October, we acquired a $122 million pool of farm and ranch loans from a single agricultural lender. This acquisition underscores PharmaMac's secondary market track record of providing agricultural lenders solutions for their capital planning, especially as there is uncertainty about how capital regulation will evolve over the next few years. We have consistently presented our product offerings as a capital efficiency and liquidity tool for our customers in both the agricultural finance and rural infrastructure lines of business. We believe that this is because the relative value that PharmaMac brings to our banking and financial services partners, and ultimately the agricultural and rural borrowers, is even greater when credit is a bit tighter. We're working towards our fifth overall farms series securitization transaction later this year, and are continuing to explore the opportunity to introduce a new securitization product for our customers that has the potential to transform the agriculture mortgage market industry with new efficiencies that benefit both the lenders and the borrowers. While we are in the preliminary stages of development and broader market discussion, we are very pleased by 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. a set of securitization products that align with both our borrower and investor interests. As we look ahead, we are confident our underlying business model, strong capital position, and uninterrupted access to the debt capital markets will continue to uniquely position us to partner with our customers to help them grow and manage any capital and liquidity risks they might face in the future. including risks related to ongoing market uncertainty and potential regulatory policy change. Our ability to navigate all environments positions us well to continue to create more opportunities for enhanced shareholder value, while at the same time fulfilling our mission. And now I'd like to turn the call over to Aparna Ramesh, our Chief Financial Officer, to discuss our financial results in more detail. Aparna.