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Farmer Mac Reports Second Quarter 2023 Results

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Farmer Mac announces record revenue and earnings for Q2 2023
Positive
  • Record revenue, core earnings, and net effective spread in Q2 2023
  • Net interest income grew 23% YoY to $78.7 million
  • Net effective spread increased 34% YoY to a record $81.8 million
  • Record core earnings of $42.2 million, reflecting 37% growth YoY
  • Maintained strong capital position with total core capital of $1.4 billion
  • 90-day delinquencies were 0.17% across the entire $26.7 billion portfolio
Negative
  • None.

 - Outstanding Business Volume of $26.7 Billion -

WASHINGTON, Aug. 7, 2023 /PRNewswire/ -- The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A), the nation's secondary market provider that increases the accessibility of financing for American agriculture and rural infrastructure, today announced its results for the fiscal quarter ended June 30, 2023.

"I'm pleased to report that Farmer Mac once again posted record revenue, core earnings, and net effective spread in the second quarter, building on our consistent performance over the past several years," said President and Chief Executive Officer Brad Nordholm. "Our capital base remains strong, which along with our disciplined asset-liability management and uninterrupted access to the capital markets, supports our long-term strategic growth objectives, and also serves as a buffer against unexpected market developments and changing credit market conditions. We remain focused on our mission to support American agriculture and rural infrastructure."

Second Quarter 2023 Highlights

  • Provided $1.6 billion in liquidity and lending capacity to lenders serving rural America
  • Added $0.6 billion of new business volume in the form of servicing rights on a pool of loans serviced for others acquired during the quarter
  • Net interest income grew 23% year-over-year to $78.7 million
  • Net effective spread1 increased 34% from the prior-year period to a record $81.8 million
  • Net income attributable to common stockholders was $40.4 million, compared to $35.1 million in the same period last year
  • Record core earnings1 of $42.2 million, or $3.86 per diluted common share, reflecting 37% growth year-over-year
  • 90-day delinquencies were 0.17% across the entire $26.7 billion portfolio as of June 30, 2023
  • Maintained strong capital position with total core capital of $1.4 billion, exceeding statutory requirement by 70% and a Tier 1 Capital Ratio of 15.9% as of June 30, 2023


1 Non-GAAP Measure

 

$ in thousands, except per
share amounts

Quarter Ended

Jun. 30,
2023

Mar. 31,
2023

Jun. 30,
2022

Sequential

% Change

YoY

% Change

Net Change in

Business Volume

$252,934

$562,036

$235,981

N/A

N/A

Net Interest Income (GAAP)

$78,677

$79,058

$63,914

— %

23 %

Net Effective Spread

(Non-GAAP)

$81,832

$77,173

$60,946

6 %

34 %

Diluted EPS (GAAP)

$3.70

$3.69

$3.23

— %

15 %

Core EPS (Non-GAAP)

$3.86

$3.56

$2.83

8 %

36 %

Earnings Conference Call Information

The conference call to discuss Farmer Mac's second quarter 2023 financial results will be held beginning at 8:30 a.m. eastern time on Monday, August 7, 2023, and can be accessed by telephone or live webcast as follows:

Telephone (Domestic): (888) 346-2616
Telephone (International): (412) 902-4254
Webcast: https://www.farmermac.com/investors/events-presentations/  

When dialing in to the call, please ask for the "Farmer Mac Earnings Conference Call." The call can be heard live and will also be available for replay on Farmer Mac's website for two weeks following the conclusion of the call.

More complete information about Farmer Mac's performance for second quarter 2023 is in Farmer Mac's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed today with the SEC.

Use of Non-GAAP Measures

In the accompanying analysis of its financial information, Farmer Mac uses the following non-GAAP measures: "core earnings," "core earnings per share," and "net effective spread." Farmer Mac uses these non-GAAP measures to measure corporate economic performance and develop financial plans because, in management's view, they are useful alternative measures in understanding Farmer Mac's economic performance, transaction economics, and business trends. The non-GAAP financial measures that Farmer Mac uses may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of these non-GAAP measures is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP.

The main difference between core earnings and core earnings per share (non-GAAP measures) and net income attributable to common stockholders and earnings per common share (GAAP measures) is that those non-GAAP measures exclude the effects of fair value fluctuations. These fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected. Another difference is that these two non-GAAP measures exclude specified infrequent or unusual transactions that we believe are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business.

Farmer Mac uses net effective spread to measure the net spread Farmer Mac earns between its interest-earning assets and the related net funding costs of these assets. As further explained below, net effective spread differs from net interest income and net interest yield by excluding certain items from net interest income and net interest yield and including certain other items that net interest income and net interest yield do not contain.

Farmer Mac excludes from net effective spread the interest income and interest expense associated with the consolidated trusts and the average balance of the loans underlying these trusts to reflect management's view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee. Accordingly, the excluded interest income and interest expense associated with consolidated trusts is reclassified to guarantee and commitment fees in determining Farmer Mac's core earnings. Farmer Mac also excludes from net effective spread the fair value changes of financial derivatives and the corresponding assets or liabilities designated in fair value hedge accounting relationships because they are not expected to have an economic effect on Farmer Mac's financial performance, as we expect to hold the financial derivatives and corresponding hedged items to maturity.

Net effective spread also differs from net interest income and net interest yield because it includes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships ("undesignated financial derivatives"). Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities. The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income. For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains on financial derivatives" on the consolidated statements of operations. However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread.

Net effective spread also differs from net interest income and net interest yield because it includes the net effects of terminations or net settlements on financial derivatives, which consist of: (1) the net effects of cash settlements on agency forward contracts on the debt of other GSEs and U.S. Treasury security futures that we use as short-term economic hedges on the issuance of debt; and (2) the net effects of initial cash payments that Farmer Mac receives upon the inception of certain swaps. The inclusion of these items in net effective spread is intended to reflect our view of the complete net spread between an asset and all of its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship.

More information about Farmer Mac's use of non-GAAP measures is available in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" in Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2022, filed February 24, 2023 with the SEC.  For a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, and net interest income and net interest yield to net effective spread, see "Reconciliations" below.

Forward-Looking Statements

Management's expectations for Farmer Mac's future necessarily involve assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements in this release, including uncertainties about:

  • the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms;
  • legislative or regulatory developments that could affect Farmer Mac, its sources of business, or agricultural or rural infrastructure industries;
  • fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries;
  • the level of lender interest in Farmer Mac's products and the secondary market provided by Farmer Mac;
  • the general rate of growth in agricultural mortgage and rural infrastructure indebtedness;
  • the effect of economic conditions stemming from disruptive global events or otherwise on agricultural mortgage or rural infrastructure lending, borrower repayment capacity, or collateral values, including rapid inflation, fluctuations in interest rates, changes in U.S. trade policies, fluctuations in export demand for U.S. agricultural products and foreign currency exchange rates, supply chain disruptions, increases in input costs, labor availability, volatility from the recent commercial banking failures, and volatility in commodity prices;
  • the degree to which Farmer Mac is exposed to interest rate risk resulting from fluctuations in Farmer Mac's borrowing costs relative to market indexes;
  • developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac;
  • the effects of the Federal Reserve's efforts to achieve monetary policy normalization and slow inflation; and
  • other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather, flooding and drought, climate change, or fluctuations in agricultural real estate values.

Other risk factors are discussed in "Risk Factors" in Part I, Item 1A in Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 24, 2023. Considering these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this release. The forward-looking statements contained in this release represent management's expectations as of the date of this release. Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements included in this release to reflect new information or any future events or circumstances, except as otherwise required by applicable law. The information in this release is not necessarily indicative of future results.

About Farmer Mac

Farmer Mac is a vital part of the agricultural credit markets and was created to increase access to and reduce the cost of credit for the benefit of American agricultural and rural communities. As the nation's secondary market for agricultural credit, we provide financial solutions to a broad spectrum of the agricultural community, including agricultural lenders, agribusinesses, and other institutions that can benefit from access to flexible, low-cost financing and risk management tools. Farmer Mac's customers benefit from our low cost of funds, low overhead costs, and high operational efficiency. More information about Farmer Mac (including the Annual Report on Form 10-K referenced above) is available on Farmer Mac's website at www.farmermac.com.

 

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)



As of


June 30, 2023


December 31, 2022


(in thousands)

Assets:




Cash and cash equivalents

$                     874,090


$                     861,002

Investment securities:




Available-for-sale, at fair value (amortized cost of $4,894,715 and $4,769,426, respectively)

4,717,619


4,579,564

Held-to-maturity, at amortized cost

45,032


45,032

Other investments

5,164


3,672

Total Investment Securities

4,767,815


4,628,268

Farmer Mac Guaranteed Securities:




Available-for-sale, at fair value (amortized cost of $8,159,474 and $8,019,495, respectively)

7,745,415


7,607,226

Held-to-maturity, at amortized cost

849,828


1,021,154

Total Farmer Mac Guaranteed Securities

8,595,243


8,628,380

USDA Securities:




Trading, at fair value

1,348


1,767

Held-to-maturity, at amortized cost

2,336,212


2,409,834

Total USDA Securities

2,337,560


2,411,601

Loans:




Loans held for investment, at amortized cost

9,129,176


9,008,979

Loans held for investment in consolidated trusts, at amortized cost

1,448,180


1,211,576

Allowance for losses

(16,748)


(15,089)

Total loans, net of allowance

10,560,608


10,205,466

Financial derivatives, at fair value

26,824


37,409

Accrued interest receivable (includes $15,737 and $12,514, respectively, related to consolidated trusts)

233,529


229,061

Guarantee and commitment fees receivable

46,181


47,151

Deferred tax asset, net

3,302


18,004

Prepaid expenses and other assets

214,413


266,768

Total Assets

$                 27,659,565


$                27,333,110





Liabilities and Equity:




Liabilities:




Notes payable

$                 24,510,004


$                24,469,113

Debt securities of consolidated trusts held by third parties

1,357,763


1,181,948

Financial derivatives, at fair value

188,652


175,326

Accrued interest payable (includes $8,556 and $8,081, respectively, related to consolidated trusts)

143,977


117,887

Guarantee and commitment obligation

45,873


46,582

Accounts payable and accrued expenses

65,036


68,863

Reserve for losses

1,705


1,433

Total Liabilities

26,313,010


26,061,152

Commitments and Contingencies




Equity:




Preferred stock:




      Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding

73,382


73,382

   Series D, par value $25 per share, 4,000,000 shares authorized, issued and outstanding

96,659


96,659

   Series E, par value $25 per share, 3,180,000 shares authorized, issued and outstanding

77,003


77,003

   Series F, par value $25 per share, 4,800,000 shares authorized, issued and outstanding

116,160


116,160

   Series G, par value $25 per share, 5,000,000 shares authorized, issued and outstanding

121,327


121,327

Common stock:




   Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding

1,031


1,031

   Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding

500


500

   Class C Non-Voting, $1 par value, no maximum authorization, 9,305,477 shares and 9,270,265
   shares outstanding, respectively

9,305


9,270

Additional paid-in capital

130,147


128,939

Accumulated other comprehensive loss, net of tax

(34,351)


(50,843)

Retained earnings

755,392


698,530

Total Equity

1,346,555


1,271,958

Total Liabilities and Equity

$                 27,659,565


$                27,333,110

 

FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



For the Three Months Ended


For the Six Months Ended


June 30, 2023


June 30, 2022


June 30, 2023


June 30, 2022


(in thousands, except per share amounts)

Interest income:








Investments and cash equivalents

$             69,779


$             11,200


$           129,482


$             16,916

Farmer Mac Guaranteed Securities and USDA Securities

144,761


51,616


281,298


94,536

Loans

129,292


76,632


248,324


143,879

   Total interest income

343,832


139,448


659,104


255,331

Total interest expense

265,155


75,534


501,369


125,879

   Net interest income

78,677


63,914


157,735


129,452

(Provision for)/release of losses

(1,073)


1,372


(1,620)


1,316

   Net interest income after (provision for)/release of losses

77,604


65,286


156,115


130,768

Non-interest income/(expense):








Guarantee and commitment fees

3,489


3,213


7,422


6,908

Gains on financial derivatives

1,693


3,791


2,092


20,779

(Losses)/gains on trading securities

(9)


29


16


(34)

(Provision for)/release of reserve for losses

(69)


163


(272)


273

Other income

767


479


1,968


1,154

   Non-interest income

5,871


7,675


11,226


29,080

Operating expenses:








Compensation and employee benefits

13,937


11,715


29,288


25,013

General and administrative

9,420


7,520


16,947


14,798

Regulatory fees

831


813


1,666


1,625

   Operating expenses

24,188


20,048


47,901


41,436

   Income before income taxes

59,287


52,913


119,440


118,412

Income tax expense

12,075


11,058


25,193


25,104

   Net income

47,212


41,855


94,247


93,308

Preferred stock dividends

(6,791)


(6,792)


(13,582)


(13,583)

   Net income attributable to common stockholders

$             40,421


$             35,063


$             80,665


$             79,725









Earnings per common share:








Basic earnings per common share

$                 3.73


$                 3.25


$                 7.46


$                 7.40

Diluted earnings per common share

$                 3.70


$                 3.23


$                 7.39


$                 7.33


Reconciliations

Reconciliations of Farmer Mac's net income attributable to common stockholders to core earnings and core earnings per share are presented in the following tables along with information about the composition of core earnings for the periods indicated: 

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings


For the Three Months Ended


June 30, 2023


March 31, 2023


June 30, 2022


(in thousands, except per share amounts)

Net income attributable to common stockholders

$                   40,421


$                   40,244


$                   35,063

Less reconciling items:






Gains on undesignated financial derivatives due to fair value changes

2,141


916


2,846

(Losses)/gains on hedging activities due to fair value changes

(4,901)


(105)


428

Unrealized (losses)/gains on trading assets

(57)


359


(285)

Net effects of amortization of premiums/discounts and deferred gains
on assets consolidated at fair value

29


29


(62)

Net effects of terminations or net settlements on financial derivatives

583


523


2,536

Income tax effect related to reconciling items

464


(362)


(1,148)

   Sub-total

(1,741)


1,360


4,315

Core earnings

$                   42,162


$                   38,884


$                   30,748







Composition of Core Earnings:






Revenues:






Net effective spread(1)

$                   81,832


$                   77,173


$                   60,946

Guarantee and commitment fees(2)

4,581


4,654


4,709

Other(3)

409


1,067


307

   Total revenues

86,822


82,894


65,962







Credit related expense (GAAP):






Provision for/(release of) losses

1,142


750


(1,535)

   Total credit related expense

1,142


750


(1,535)







Operating expenses (GAAP):






Compensation and employee benefits

13,937


15,351


11,715

General and administrative

9,420


7,527


7,520

Regulatory fees

831


835


813

   Total operating expenses

24,188


23,713


20,048







   Net earnings

61,492


58,431


47,449

Income tax expense(4)

12,539


12,756


9,909

Preferred stock dividends (GAAP)

6,791


6,791


6,792

   Core earnings

$                   42,162


$                   38,884


$                   30,748







Core earnings per share:






  Basic

$                       3.89


$                       3.60


$                       2.85

  Diluted

$                       3.86


$                       3.56


$                       2.83



(1) 

Net effective spread is a non-GAAP measure.  See "Use of Non-GAAP Measures" above for an explanation of net effective spread.  See below for a reconciliation of net interest income to net effective spread.

(2) 

Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3) 

Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4) 

Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

 

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings


For the Six Months Ended


June 30, 2023


June 30, 2022


(in thousands, except per share amounts)

Net income attributable to common stockholders

$                       80,665


$                       79,725

Less reconciling items:




Gains on undesignated financial derivatives due to fair value changes

3,057


5,458

(Losses)/gains on hedging activities due to fair value changes

(5,006)


6,115

Unrealized gains/(losses) on trading assets

302


(191)

Net effects of amortization of premiums/discounts and deferred gains on assets
consolidated at fair value

58


(42)

Net effects of terminations or net settlements on financial derivatives

1,106


18,048

Income tax effect related to reconciling items

102


(6,172)

   Sub-total

(381)


23,216

Core earnings

$                       81,046


$                       56,509





Composition of Core Earnings:




Revenues:




Net effective spread(1)

$                     159,005


$                     118,785

Guarantee and commitment fees(2)

9,235


9,266

Other(3)

1,476


821

   Total revenues

169,716


128,872





Credit related expense (GAAP):




Provision for/(release of) losses

1,892


(1,589)

   Total credit related expense

1,892


(1,589)





Operating expenses (GAAP):




Compensation and employee benefits

29,288


25,013

General and administrative

16,947


14,798

Regulatory fees

1,666


1,625

   Total operating expenses

47,901


41,436





   Net earnings

119,923


89,025

Income tax expense(4)

25,295


18,933

Preferred stock dividends (GAAP)

13,582


13,583

   Core earnings

$                       81,046


$                       56,509





Core earnings per share:




  Basic

$                           7.49


$                           5.24

  Diluted

$                           7.42


$                           5.20



(1) 

Net effective spread is a non-GAAP measure.  See "Use of Non-GAAP Measures" above for an explanation of net effective spread.  See below for a reconciliation of net interest income to net effective spread.

(2) 

Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3) 

Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4) 

Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

 

Reconciliation of GAAP Basic Earnings Per Share to Core Earnings Basic Earnings Per Share


For the Three Months Ended


For the Six Months Ended


June 30,
2023


March 31,
2023


June 30,
2022


June 30,
2023


June 30,
2022


(in thousands, except per share amounts)

GAAP - Basic EPS

$            3.73


$            3.73


$            3.25


$            7.46


$            7.40

Less reconciling items:










Gains on undesignated financial derivatives due to fair value
changes

0.20


0.09


0.26


0.28


0.51

(Losses)/gains on hedging activities due to fair value
changes

(0.45)


(0.01)


0.04


(0.46)


0.57

Unrealized gains/(losses) on trading securities


0.03


(0.03)


0.03


(0.02)

Net effects of amortization of premiums/discounts and
deferred gains on assets consolidated at fair value



(0.01)


0.01


Net effects of terminations or net settlements on financial
derivatives

0.05


0.05


0.24


0.10


1.67

Income tax effect related to reconciling items

0.04


(0.03)


(0.10)


0.01


(0.57)

   Sub-total

(0.16)


0.13


0.40


(0.03)


2.16

Core Earnings - Basic EPS

$            3.89


$            3.60


$            2.85


$            7.49


$            5.24











Shares used in per share calculation (GAAP and Core
Earnings)

10,833


10,802


10,796


10,817


10,782

 

Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings Diluted Earnings Per Share


For the Three Months Ended


For the Six Months Ended


June 30,
2023


March 31,
2023


June 30,
2022


June 30,
2023


June 30,
2022


(in thousands, except per share amounts)

GAAP - Diluted EPS

$            3.70


$            3.69


$            3.23


$            7.39


$            7.33

Less reconciling items:










Gains on undesignated financial derivatives due to fair
value changes

0.20


0.09


0.26


0.28


0.50

(Losses)/gains on hedging activities due to fair value
changes

(0.45)


(0.01)


0.04


(0.46)


0.56

Unrealized gains/(losses) on trading securities


0.03


(0.03)


0.03


(0.02)

Net effects of amortization of premiums/discounts and
deferred gains on assets consolidated at fair value



(0.01)


0.01


Net effects of terminations or net settlements on financial
derivatives

0.05


0.05


0.23


0.10


1.66

Income tax effect related to reconciling items

0.04


(0.03)


(0.09)


0.01


(0.57)

   Sub-total

(0.16)


0.13


0.40


(0.03)


2.13

Core Earnings - Diluted EPS

$            3.86


$            3.56


$            2.83


$            7.42


$            5.20











Shares used in per share calculation (GAAP and Core
Earnings)

10,916


10,918


10,864


10,917


10,876











The following table presents a reconciliation of net interest income and net yield to net effective spread for the periods indicated:

Reconciliation of GAAP Net Interest Income/Yield to Net Effective Spread


For the Three Months Ended


For the Six Months Ended


June 30, 2023


March 31, 2023


June 30, 2022


June 30, 2023


June 30, 2022


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


(dollars in thousands)

Net interest income/yield

$  78,677


1.12 %


$  79,058


1.14 %


$  63,914


1.00 %


$  157,735


1.13 %


$  129,452


1.03 %

Net effects of consolidated
trusts

(1,044)


0.02 %


(1,055)


0.02 %


(1,183)


0.02 %


(2,099)


0.02 %


(2,201)


0.02 %

Expense related to
undesignated financial
derivatives

(1,568)


(0.02) %


(1,626)


(0.02) %


(2,026)


(0.03) %


(3,193)


(0.02) %


(3,020)


(0.02) %

Amortization of
premiums/discounts on assets
consolidated at fair value

(24)


— %


(23)


— %


65


— %


(48)


— %


49


— %

Amortization of losses due to
terminations or net
settlements on financial
derivatives

890


0.01 %


714


0.01 %


725


0.01 %


1,604


0.01 %


1,083


0.01 %

Fair value changes on fair
value hedge relationships

4,901


0.07 %


105


— %


(549)


(0.01) %


5,006


0.03 %


(6,578)


(0.06) %

Net effective spread

$  81,832


1.20 %


$  77,173


1.15 %


$  60,946


0.99 %


$  159,005


1.17 %


$  118,785


0.98 %


The following table presents core earnings for Farmer Mac's reportable operating segments and a reconciliation to consolidated net income for the three months ended June 30, 2023:

Core Earnings by Business Segment

For the Three Months Ended June 30, 2023


Agricultural Finance


Rural Infrastructure


Treasury


Corporate






Farm &
Ranch


Corporate
AgFinance


Rural 

Utilities


Renewable
Energy


Funding


Investments



Reconciling

Adjustments


Consolidated
Net Income


(in thousands)

Net interest income

$         35,425


$         7,444


$      5,839


$       1,100


$    28,402


$           467


$         —


$              —


$        78,677

Less: reconciling
adjustments(1)(2)(3)

(1,037)



(31)



4,096


127



(3,155)


Net effective spread

34,388


7,444


5,808


1,100


32,498


594



(3,155)


Guarantee and
commitment fees

4,221


62


281


17





(1,092)


3,489

Other
income/(expense)(3)

342


12





11


44


2,042


2,451

Total revenues

38,951


7,518


6,089


1,117


32,498


605


44


(2,205)


84,617



















(Provision for)/release
of losses

(5)


(327)


(632)


(110)



1




(1,073)



















(Provision for)/release
of reserve for losses

(75)



6







(69)

Operating expenses







(24,188)



(24,188)

Total non-interest
expense

(75)



6





(24,188)



(24,257)

Core earnings before
income taxes

38,871


7,191


5,463


1,007


32,498


606


(24,144)


(2,205)

(4)

59,287

Income tax
(expense)/benefit

(8,163)


(1,510)


(1,147)


(211)


(6,825)


(127)


5,444


464


(12,075)

Core earnings before
preferred stock
dividends

30,708


5,681


4,316


796


25,673


479


(18,700)


(1,741)

(4)

47,212

Preferred stock
dividends







(6,791)



(6,791)

Segment core
earnings/(losses)

$         30,708


$         5,681


$        4,316


$         796


$    25,673


$           479


$ (25,491)


$       (1,741)

(4)

$        40,421



















Total Assets

$  14,456,296


$  1,584,841


$  6,169,811


$  314,538


$           —


$ 4,959,243


$ 174,836


$              —


$ 27,659,565

Total on- and off-
balance sheet program
assets at principal
balance

$  18,116,503


$  1,680,756


$  6,611,892


$  327,901


$           —


$             —


$          —


$              —


$ 26,737,052



(1) 

Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

(2) 

Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee. 

(3) 

Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.

(4) 

Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.



Supplemental Information

The following table sets forth information about outstanding volume in each of Farmer Mac's lines of business as of the dates indicated:

Outstanding Business Volume



On or Off

Balance Sheet


As of June 30, 2023


As of December 31, 2022





(in thousands)

Agricultural Finance:







Farm & Ranch:







Loans


On-balance sheet


$                         4,952,272


$                       5,150,750

Loans held in consolidated trusts:







Beneficial interests owned by third-party investors
(Pass-Through)(1)


On-balance sheet


877,063


914,918

Beneficial interests owned by third-party investors
(Structured)(1)


On-balance sheet


571,117


296,658

IO-FMGS(2)


On-balance sheet


9,748


10,622

USDA Securities


On-balance sheet


2,343,286


2,407,302

AgVantage Securities(1)


On-balance sheet


5,460,000


5,605,000

LTSPCs and unfunded commitments


Off-balance sheet


2,835,020


2,822,309

Other Farmer Mac Guaranteed Securities(3)


Off-balance sheet


481,397


500,953

Loans serviced for others


Off-balance sheet


586,600


20,280

Total Farm & Ranch




$                       18,116,503


$                     17,728,792

Corporate AgFinance:







Loans


On-balance sheet


$                         1,187,903


$                       1,166,253

AgVantage Securities(1)


On-balance sheet


368,123


359,600

Unfunded commitments


Off-balance sheet


124,730


77,654

Total Corporate AgFinance




$                         1,680,756


$                       1,603,507

Total Agricultural Finance




$                       19,797,259


$                     19,332,299

Rural Infrastructure Finance:







Rural Utilities:







Loans


On-balance sheet


$                         2,995,470


$                       2,801,696

AgVantage Securities(1)


On-balance sheet


3,141,514


3,044,156

LTSPCs and unfunded commitments


Off-balance sheet


473,810


512,592

Other Farmer Mac Guaranteed Securities(3)


Off-balance sheet


1,098


1,169

Total Rural Utilities




$                         6,611,892


$                       6,359,613

Renewable Energy:







Loans


On-balance sheet


$                            311,297


$                          219,570

Unfunded commitments


Off-balance sheet


16,604


10,600

Total Renewable Energy




$                            327,901


$                          230,170

Total Rural Infrastructure Finance




$                         6,939,793


$                       6,589,783

Total




$                       26,737,052


$                     25,922,082



(1) 

A Farmer Mac Guaranteed Security.

(2) 

An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

(3) 

Other categories of Farmer Mac Guaranteed Securities that were sold by Farmer Mac to third parties



The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:


Net Effective Spread(1)


Agricultural Finance


Rural Infrastructure Finance


Treasury






Farm & Ranch


Corporate
AgFinance


Rural Utilities


Renewable
Energy


Funding


Investments


Net Effective
Spread


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


Dollars


Yield


(dollars in thousands)

For the quarter ended:




























June 30, 2023(2)

$  34,388


1.03 %


$ 7,444


1.92 %


$ 5,808


0.38 %


$ 1,100


1.47 %


$  32,498


0.48 %


$    594


0.04 %


$  81,832


1.20 %

March 31, 2023

32,465


0.97 %


7,148


1.94 %


5,507


0.36 %


858


1.53 %


31,738


0.47 %


(543)


(0.04) %


77,173


1.15 %

December 31, 2022

32,770


0.98 %


7,471


1.94 %


4,960


0.34 %


935


1.76 %


27,656


0.42 %


(2,689)


(0.19) %


71,103


1.07 %

September 30, 2022

33,343


1.04 %


7,600


1.99 %


4,220


0.30 %


705


1.97 %


22,564


0.36 %


(2,791)


(0.21) %


65,641


1.03 %

June 30, 2022

32,590


1.05 %


6,929


1.87 %


3,733


0.27 %


468


1.78 %


18,508


0.30 %


(1,282)


(0.10) %


60,946


0.99 %

March 31, 2022

30,354


1.02 %


7,209


1.96 %


3,159


0.23 %


375


1.69 %


16,738


0.28 %


4


— %


57,839


0.97 %

December 31, 2021

28,998


0.99 %


6,321


1.84 %


2,521


0.19 %


356


1.53 %


15,979


0.28 %


158


0.01 %


54,333


0.94 %

September 30, 2021

28,914


1.06 %


7,163


1.80 %


2,067


0.16 %


236


1.09 %


17,386


0.31 %


159


0.01 %


55,925


0.99 %

June 30, 2021

29,163


1.06 %


6,676


1.65 %


1,759


0.14 %


378


1.80 %


18,449


0.33 %


126


0.01 %


56,551


1.01 %



(1) 

Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets.

(2) 

See above for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended June 30, 2023.



The following table presents quarterly core earnings reconciled to net income attributable to common stockholders:

Core Earnings by Quarter Ended


June
2023


March
2023


December
2022


September
2022


June
2022


March
2022


December
2021


September
2021


June
2021






(in thousands)

Revenues:


















Net effective spread

$  81,832


$   77,173


$   71,103


$   65,641


$  60,946


$  57,839


$   54,333


$   55,925


$  56,551

Guarantee and commitment fees

4,581


4,654


4,677


4,201


4,709


4,557


4,637


4,322


4,334

Gains on sale of mortgage loans







6,539



Other

409


1,067


390


473


307


514


241


687


301

   Total revenues

86,822


82,894


76,170


70,315


65,962


62,910


65,750


60,934


61,186



















Credit related expense/(income):


















Provision for/(release of) losses

1,142


750


1,945


450


(1,535)


(54)


(1,428)


255


(983)

REO operating expenses



819







   Total credit related expense/(income)

1,142


750


2,764


450


(1,535)


(54)


(1,428)


255


(983)



















Operating expenses:


















Compensation and employee benefits

13,937


15,351


12,105


11,648


11,715


13,298


11,246


10,027


9,779

General and administrative

9,420


7,527


8,055


6,919


7,520


7,278


8,492


6,330


6,349

Regulatory fees

831


835


832


812


813


812


812


750


750

   Total operating expenses

24,188


23,713


20,992


19,379


20,048


21,388


20,550


17,107


16,878



















   Net earnings

61,492


58,431


52,414


50,486


47,449


41,576


46,628


43,572


45,291

Income tax expense

12,539


12,756


11,210


10,303


9,909


9,024


9,809


9,152


9,463

Preferred stock dividends

6,791


6,791


6,791


6,791


6,792


6,791


6,792


6,774


5,842

   Core earnings

$  42,162


$   38,884


$   34,413


$   33,392


$  30,748


$  25,761


$   30,027


$   27,646


$  29,986



















Reconciling items:


















Gains/(losses) on undesignated
financial derivatives due to fair value
changes

$    2,141


$        916


$     1,596


$     6,441


$    2,846


$    2,612


$   (1,242)


$      (405)


$  (3,020)

(Losses)/gains on hedging activities
due to fair value changes

(4,901)


(105)


(148)


(624)


428


5,687


(2,079)


1,818


(5,866)

Unrealized (losses)/gains on trading
assets

(57)


359


31


(757)


(285)


94


(76)


36


(61)

Net effects of amortization of
premiums/discounts and deferred gains
on assets consolidated at fair value

29


29


57


24


(62)


20


71


23


20

Net effects of terminations or net
settlements on financial derivatives

583


523


1,268


(3,522)


2,536


15,512


(429)


(351)


109

Income tax effect related to reconciling
items

464


(362)


(590)


(327)


(1,148)


(5,024)


789


(236)


1,852

   Net income attributable to common
   stockholders

$  40,421


$   40,244


$   36,627


$   34,627


$  35,063


$  44,662


$   27,061


$   28,531


$  23,020

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/farmer-mac-reports-second-quarter-2023-results-301893888.html

SOURCE Farmer Mac

FAQ

What were Farmer Mac's financial results for Q2 2023?

Farmer Mac posted record revenue, core earnings, and net effective spread in Q2 2023. Net interest income grew 23% YoY to $78.7 million. Net effective spread increased 34% YoY to a record $81.8 million. Record core earnings of $42.2 million, reflecting 37% growth YoY.

What was the capital position of Farmer Mac in Q2 2023?

Farmer Mac maintained a strong capital position with total core capital of $1.4 billion.

What was the delinquency rate for Farmer Mac's portfolio in Q2 2023?

The 90-day delinquencies were 0.17% across the entire $26.7 billion portfolio.

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