Sign in
FA

FEDERAL AGRICULTURAL MORTGAGE CORP (AGM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong GAAP results: Net interest income rose 14% YoY to $93.4M, GAAP diluted EPS increased 24% YoY to $4.63, and net effective spread (NES) reached $87.5M; core diluted EPS was $3.97 .
  • Sequentially, NES increased to $87.5M (flat at 1.16% NES %) on higher spread loan growth (renewable energy, broadband) and opportunistic funding/hedging; core earnings declined modestly on higher OpEx and credit expense .
  • Dividend raised 7% to $1.50 per common share for Q1 2025, the 14th consecutive annual increase—an immediate capital return catalyst supported by strong earnings and capital (Tier 1 14.2%, core capital ~$1.5B) .
  • Credit metrics remained well-managed but elevated vs 2023: substandard assets rose to $440.7M (1.5% of volume); 90-day delinquencies fell seasonally to 37 bps in Q4; aggregate 2024 economic loss of ~$2.5M was idiosyncratic .
  • Wall Street consensus (S&P Global) for Q4 EPS/revenue was unavailable at time of analysis; beat/miss vs estimates cannot be assessed—focus shifts to NES stability, segment mix, and dividend trajectory (Values retrieved from S&P Global*).

What Went Well and What Went Wrong

What Went Well

  • Record NES and durable spread: “We delivered another year of strong financial results, highlighted by record net effective spread and core earnings,” driven by higher-spread segments and effective ALM/funding .
  • Strategic growth in Renewable Energy and Broadband Infrastructure: Infrastructure finance volume +$1B YoY, Renewable Energy nearly $1.5B, Broadband +$300M (+60% YoY), with robust 2025 pipeline .
  • Capital return and resilient balance sheet: Dividend increased to $1.50 (+7%); 264 days of liquidity, Tier 1 capital ratio at 14.2% supports ongoing growth and returns .

What Went Wrong

  • Core earnings down sequentially on OpEx/credit expense: Core diluted EPS slipped to $3.97 (from $4.10 in Q3) as licensing/technology fees and transactional legal costs rose with segment expansion; efficiency ratio was 30% in Q4 (28% for FY) .
  • Credit costs above historical average: Allowance increased to $25.3M at year-end (+$3.4M QoQ), including downgrades and one renewable energy exposure moved to substandard; management emphasized idiosyncratic nature .
  • AgVantage volatility and maturities: Several large Farm & Ranch AgVantage maturities offset purchase growth; tight investment-grade spreads limit volume, contributing to quarterly volume swings .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Interest Income ($USD Millions)$351.4 $407.7 $395.8
Net Interest Income ($USD Millions)$82.2 $86.8 $93.4
Net Effective Spread ($USD Millions)$84.6 $85.4 $87.5
Net Effective Spread (%)1.19% 1.16% 1.16%
Net Income Attributable to Common ($USD Millions)$40.8 $42.3 $50.8
GAAP Diluted EPS ($)$3.73 $3.86 $4.63
Core Diluted EPS ($, Non-GAAP)$4.10 $4.10 $3.97

Segment Net Effective Spread (Q4 2024)

SegmentNES ($USD Thousands)NES (%)
Agricultural Finance – Farm & Ranch$32,556 0.96%
Agricultural Finance – Corporate AgFinance$7,891 1.95%
Infrastructure Finance – Power & Utilities$5,059 0.32%
Infrastructure Finance – Broadband$3,414 2.34%
Infrastructure Finance – Renewable Energy$4,859 1.76%
Treasury – Funding$31,242 0.42%
Treasury – Investments$2,507 0.15%

Key KPIs

KPIQ4 2023Q3 2024Q4 2024
Outstanding Business Volume ($USD Billions)$28.47 $28.47 $29.52
Liquidity (Days)—309 264
Tier 1 Capital Ratio (%)15.4 14.2 14.2
Core Capital ($USD Billions)—~$1.5 ~$1.5
Efficiency Ratio (%)—26 30 (Q4); 28 (FY)
Return on Equity (%)—17 16
90-Day Delinquencies (bps, total portfolio)12 51 37
Substandard Assets ($USD Millions; % of volume)—$402; 1.4% $440.7; 1.5%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Common Dividend ($/share)Q1 2025$1.40 (2024 run-rate) $1.50 Raised
Efficiency Ratio Target (%)OngoingAt/below ~30% At/below ~30% (Q4 30%; FY 28%) Maintained
Net Effective Spread Outlook (%)2025Prior caution to 1.12–1.13 possible Flat near ~1.15–1.16; asymmetric benefit if easing cycle Maintained
FARM Securitization Target Size2025~$300M per deal cadence Continue ~$300M per deal; exploring new asset classes incl. renewable energy Maintained/Expanded scope
Preferred Stock Dividends (Series D/E/F/G)Q1–Q2 2025 pay periodPrior quarterly ratesSeries D $0.35625; E $0.359375; F $0.328125; G $0.3046875—payable Apr 17, 2025 Maintained (declared)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Securitization program (FARM)Closed ~$300M deal in Q2; working toward fifth issuance; exploring conduit/product pivot Two ~$300M issuances in 2024; continuing cadence; evaluating securitization of renewable energy loans; transformative conduit concept under exploration Scaling; broadening scope
Segment mix shift to higher-spread assetsNES up YoY on composition shift; Renewable Energy volume >$1B (Q3) Renewable Energy near $1.5B; Broadband +60% YoY; Corporate AgFinance +$200M net growth Accretive mix intensifying
AgVantage volatilityMaturities and tight IG spreads drive quarterly swings Expect continued volatility; spreads remain tight; selective refinancing Persistent volatility
Funding/ALM executionCalled/repriced high-rate callable debt; hedging drove NES stability Laddering/layering duration; potential asymmetric NES benefit in easing cycle; NES flat sequentially at 1.16% Stable with optionality
Technology investments (STARS)STARS completion near-term; OpEx managed Completion drove lumpy G&A in Q4; efficiency 30% in Q4; long-run target at/below 30% Investment completed; OpEx normalizing
Credit idiosyncrasyAllowance build tied to specific loans; seasonal delinquency pattern Allowance up to $25.3M; substandard assets 1.5%; issues idiosyncratic; potential reversal on specific renewable energy project Elevated but contained
Macro/regulatoryMonitoring election outcomes; tariff uncertainties; strong-dollar effects No anticipated material changes from administration change; IRA tax credits locked-in on financed projects Steady policy stance

Management Commentary

  • “We delivered another year of strong financial results, highlighted by record net effective spread and core earnings…consistent loan growth, effective asset liability management, and funding execution” — CEO Brad Nordholm .
  • “Core earnings…modestly exceeding prior year record…NES improved $12.6M YoY, though % compressed 3 bps to 1.15% due to nonaccruals and volatile funding; offset by diversified revenue streams and callable funding strategy” — CFO Aparna Ramesh .
  • “We are increasing our quarterly common stock dividend by $0.10 per share to $1.50…balancing earnings growth with capital requirements” — CEO Brad Nordholm .
  • “Our pipeline in Renewable Energy remains strong…we’ve doubled volume annually since 2020; Broadband Infrastructure grew over 60% YoY” — CEO Brad Nordholm .

Q&A Highlights

  • New securitization product/conduit: Management continues feasibility work on securitizing farm & ranch loans originated by others and exploring renewable energy securitization; decisions will weigh profitability and ROAE; announcements TBD in 2025 .
  • Q4 OpEx elevation: G&A rose on telecom/renewables transactional legal fees and onetime contractor costs tied to STARS completion; not expected to be endemic; efficiency target remains ~30% long run .
  • Spread outlook: NES sustained near 1.15–1.16% as higher margin segments grow; callable debt strategy provides asymmetric benefit if rates ease; flat NES projection if rates stay high .
  • Credit/reserves: Reserve build reflects specific exposures and volume growth in higher-yielding segments; issues remain idiosyncratic; no systemic sector problem identified .
  • Policy/IRA: Projects financed rely on tax credits (not grants); credits on-book are locked; bipartisan support in many districts suggests stability; origination will adjust if law changes .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at time of request due to data access limitations; therefore, we cannot assess beat/miss versus Wall Street expectations (Values retrieved from S&P Global*).
  • Given stronger-than-expected NES dollar growth and dividend raise, analysts may revisit OpEx trajectories (post-STARS normalization), credit expense assumptions (allowance build, substandard assets at 1.5%), and segment growth contributions (renewables, broadband) .

Key Takeaways for Investors

  • Spread durability with accretive mix: NES dollars rose sequentially to $87.5M with flat 1.16% NES %—higher-spread segment growth and proactive callable debt/hedging underpin margin resilience into 2025 .
  • Dividend growth signal: +7% to $1.50 reflects confidence in earnings power and capital; supports total return and may re-rate yield-sensitive investors .
  • Growth vectors: Renewable Energy and Broadband Infrastructure are scaling rapidly, diversifying income and supporting NES; 2025 pipelines appear robust .
  • Credit watchlist but contained: Elevated substandard assets and allowance growth are borrower-specific; seasonal delinquency drop to 37 bps and strong collateral/LTV discipline indicate manageable risk .
  • Securitization optionality: Continued FARM deals (~$300M) plus potential conduit/product pivot could convert spread to fee income, enhance capital efficiency, and expand addressable market .
  • Operating efficiency: Q4’s 30% ratio (FY 28%) reflects near-term investment costs; management targets ~30% long-run, implying scalability without undue OpEx drag .
  • Macro positioning: Liquidity (264 days) and Tier 1 (14.2%) provide buffers against rate/policy volatility; management anticipates minimal profit sensitivity to rate moves and potential upside in easing cycle .

Additional Q4 2024 Press Releases

  • Declared quarterly dividends on common and preferred stock (Nov 6, 2024) .
  • Closed $318.8M securitization of agricultural mortgage loans (Nov 26, 2024) .
  • Announced timing of Q4 and FY 2024 results (Feb 6, 2025) .

Notes:

  • All GAAP/non-GAAP figures cross-checked against Farmer Mac’s Q4 press release and 8-K exhibits .
  • S&P Global consensus was unavailable; beat/miss versus estimates cannot be determined (Values retrieved from S&P Global*).