Federal Agricultural Mortgage Corporation

Good morning, ladies and gentlemen, and welcome to the PharmaMac fourth quarter 2024 earnings results conference call. At this time, all lines are in a 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 Friday, February 21st, 2025. I would now like to turn the conference over to Jalpa Nazareth. Please go ahead.

Good morning, and thank you for joining us for our fourth quarter and full year 2024 earnings conference call. I'm Jelpa 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 2024 Annual Report on Form 10-K filed with the SEC today for 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 2024 Form 10-K and Earnings Release posted on PharmaMac's website, PharmaMac.com, under the Financial Information portion of the Investors section. Joining us for management this morning is our President and CEO, Brad Nordholm, who will discuss 2024 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 morning, everyone, and thank you for joining us. We delivered another year of strong financial results, building upon our record performance over the last few years. Our 2024 performance was highlighted by record net effective spread and core earnings driven by consistent loan growth, effective asset liability management, and funding execution, and coupled with well-managed operating expense control. We also successfully closed two $300 million farm securitization transactions, supporting our commitment to being a regular issuer in the market. This is the first time we have completed two issuances in one year. All these factors have allowed us to execute in a manner that is consistent with our long-term strategic growth objectives, and it showcases the resiliency of our business model against market volatility and a changing credit environment. This morning, we also announced our 14th consecutive annual dividend increase. Beginning in the first quarter of 2025, we will be increasing our quarterly common stock dividend by 10 cents per share to $1.50, which represents a 7% increase from the quarterly common stock dividends paid in 2024. This increase is a tangible indication to our shareholders of our ongoing commitment to provide a dividend payout that balances previous and expected future earnings growth while maintaining an adequate level of capital to exceed regulatory and market requirements and support our expectations for future business volume growth. Our total revenues in 2024 improved to $362 million compared to $349 million in 2023, primarily due to higher net effective spread. This reflects the compositional shift of new business volume towards higher spread businesses that we have seen over the last few years, and the continuing effectiveness of our proactive management of our balance sheet and funding levels. Core earnings year-to-date improved to $172 million, modestly exceeding our prior year record. Reflected in 2024 results is the recognition of renewable energy investment tax credits of $2.6 million as a benefit to income taxes from two dairy renewable natural gas projects. We are actively looking at these types of renewable energy credit opportunities in 2025 as we continue to be a significant participant in the renewable energy project finance market, which gives us unique insights into the value of these credits. Turning to volume, In fourth quarter 2024, we introduced a new segment reporting construct that provides for clear insight into the various contributing components of our portfolio's net effective spread and our overall bottom line profitability. Aparna will cover this in more detail, but we're now showing you more granular information on each segment's direct allocation to operating expense. We've also rebranded our rural utility segment to power and utilities and introduced a new broadband infrastructure segment to more crisply communicate the core areas of focus. The power and utility segment includes loans to rural electric generation and transmission cooperatives and distribution cooperatives, as well as advantage securities secured by those types of loans. The broadband infrastructure segment includes loans to rural fiber, cable broadband, power, wireless, local exchange carriers, and data center projects, which were previously held in the former rural utility segment. Rural telecommunication and data connectivity has proven to be of vital economic importance in the last decade, especially in rural America, as more households and agricultural enterprises require more data and connectivity to thrive. We have strategically expanded our footprint in this market over the last several years, positioning us well for the expected growth in digital technologies that is expected to require significant more computing and storage capabilities, as well as investment in additional fiber network capacity. This new segment reporting construct aligns better with how we actually manage our business and provides better transparency into the economics of our portfolio and the overall value creation of our operations. In 2024, we purchased $7 billion in gross volume with farm and ranch and renewable energy loan purchases significantly outpacing the prior year. After repayments and several large maturities in farm and ranch and power utilities advantage volume, we grew $1.1 billion, ending the year at $29.5 billion. Our infrastructure finance line of business grew over $1 billion in 2024, largely driven by loan purchase volume within the renewable energy segment. As of year end, we have nearly $1.5 billion in total renewable energy volume, reflecting the continuous strong demand for renewable energy power generation and storage and the dedication and commitment from our organization to grow this segment in alignment with our long-term initiatives. We introduced this segment in 2020 and have successfully doubled our volume in this segment every year since then. We believe that the growth in renewable energy generation and deployment of energy storage technologies has the potential to continue to deepen PharmaMax relationships with existing customers through new business opportunities. Our 2025 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. The broadband infrastructure segment grew over $300 million, or 60%, year over year. We expect to continue to see an increase in financing opportunities for other telecommunication providers in rural areas, with fiber line expansion, wireless broadband deployment, industry consolidation, and efficiency through mergers and acquisitions. And data processing center build-outs, all increasingly important to rural economic opportunity and the constant connectivity required by the food and agricultural businesses. Within the agricultural finance line of business, corporate ag finance saw net growth of about $200 million during 2024, reflecting our continued efforts to support larger, more complex agribusiness focused on businesses that span the food supply chain. While volume tends to be lumpy on a quarter-by-quarter basis, opportunities in this segment are generally more accretive than farm and ranch loans. is evident in our new segment construct. We closed over $1.5 billion of new farm and ranch loan purchases in 2024, compared to a total of 780 million in 2023. That loan growth included $179 million of two pools of loans purchased from single agricultural lender, underscoring our secondary market track record of providing agricultural under solutions for their capital planning and our expansive product set to support customers of all sizes throughout market cycles. We expect to see this positive momentum continue in 2025 as tightening bank liquidity and an adjustment to higher rate environment takes hold. While the USDA expects an increase in cash farm income in 2025 due to potential increases in government support payments for the American Relief Act, the ongoing uncertainty and forecasted volatility in commodity prices is expected to drive more loan volume as producers navigate current market dynamics. Farm and ranch segment is core to our mission, and we remain committed to bring our customers products and solutions that fit their profiles as they continue to navigate industry change and the economic cycle. Offsetting farm and ranch purchase growth in 2024 was over $2 billion in scheduled maturities with several large farm and ranch advantage counterparties driven by slower market loan growth for them and tightened market credit spreads that resulted in less liquidity and diversification needs for these counterparties. We successfully closed two ARM securities transactions in 2024, the second of which closed in November and was structured similarly to our earlier deal in April 2024. Since our initial farm securitization in 2021, our execution has significantly improved, leading to better financial results due to better spreads and reduced transaction and administrative costs. Looking ahead to 2025, we're planning to continue our target deal sizes of approximately $300 million, consistent with the size of our prior deals. As we are continuing to explore the opportunity to introduce new securitization products and asset classes, including renewable energy for our customers, while continuing to build liquidity in the farm securitization program. As we look ahead, we are confident that our underlying business model from 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 industry changes and economic cycles while growing earnings positions us well to continue to create more opportunities for enhanced shareholder value through mission fulfillment. 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.