• Total Revenue: $362 million in 2024, up from $349 million in 2023.
• Core Earnings: $172 million for 2024, slightly exceeding the prior year record.
• Net Effective Spread: Improved by $12.6 million year-over-year, with a compression of 3 basis points to 115 basis points.
• Loan Purchase Volume: $7 billion in gross volume for 2024, with significant growth in farm and ranch and renewable energy loans.
• Renewable Energy Volume: Nearly $1.5 billion by year-end 2024, doubling annually since 2020.
• Broadband Infrastructure Growth: Increased by over $300 million or 60% year-over-year.
• Core Earnings Per Share: $15.64 per diluted share for 2024.
• Operating Expenses: Increased by 18% sequentially in Q4 2024.
• Efficiency Ratio: 30% for Q4 2024 and 28% for full year 2024.
• Return on Equity: 16% for the quarter.
• Dividend Increase: Quarterly common stock dividend increased by $0.10 to $1.50 per share, a 7% increase.
• Capital Position: $1.5 billion in capital, exceeding statutory requirements by $583 million or 64%.
• Tier One Capital Ratio: 14.2% as of December 30, 2024.
• Liquidity: 264 days of liquidity with approximately $1 billion in cash and short-term instruments.

• Warning! GuruFocus has detected 6 Warning Signs with AGM.

Release Date: February 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Federal Agricultural Mortgage Corp (NYSE:AGM) reported record net effective spread and core earnings for 2024, driven by consistent loan growth and effective asset liability management.
• The company successfully closed two $300 million farm securitization transactions in 2024, marking the first time it completed two issuances in one year.
• AGM announced its 14th consecutive annual dividend increase, with a 7% rise in the quarterly common stock dividend starting in the first quarter of 2025.
• The company saw significant growth in its renewable energy and broadband infrastructure segments, with renewable energy volume nearly doubling each year since 2020.
• AGM maintained a strong capital position, exceeding statutory requirements by $583 million, and reported a 16% return on equity for the quarter.

Negative Points

• Operating expenses increased by 18% sequentially, largely due to higher licensing fees, infrastructure technology costs, and legal fees associated with new business segments.
• The net effective spread compressed by 3 basis points year-over-year to 115 basis points due to loans moving into non-accrual status and a volatile funding environment.
• Credit expenses were above historical levels, with an aggregate economic loss of $2.5 million related to a single agricultural storage and processing borrower.
• Substandard asset volume increased to $440.7 million, representing 1.5% of the total portfolio, up from 0.8% at the end of 2023.
• The allowance for losses increased by $3.4 million in the fourth quarter, primarily due to new volume in the infrastructure finance line of business and a downgraded renewable energy loan.

Q & A Highlights

Q: Could you provide an update on the potential new securitization product and its market interest? A: Bradford Nordholm, President and CEO, explained that they are exploring securitizing loans similar to their farm and ranch loans, possibly originated by others, and are also considering securitizing renewable energy loans. The focus is on assessing profitability and return on equity before making any decisions, with no immediate announcements planned.

Q: What caused the elevated general and administrative expenses this quarter, and is this a new baseline? A: Aparna Ramesh, CFO, noted that the increase was due to legal fees related to new business lines like telecom and renewable energy, and one-time expenses from completing their Treasury infrastructure project. These are not expected to be ongoing, and expenses should stabilize.

Q: What is the outlook for spreads in 2025, considering the current interest rate environment? A: Bradford Nordholm and Zachary Carpenter, Chief Business Officer, indicated that while spreads have held up well, they expect them to remain stable or slightly decrease. Growth in higher-spread segments like renewable energy is expected to balance out lower spreads in farm and ranch products.

Q: How do you anticipate credit quality to evolve with the shift to higher spread products? A: Bradford Nordholm stated that credit issues remain idiosyncratic and not systemic. While substandard assets have increased, they are related to specific situations rather than broader trends. The company maintains a conservative credit outlook.

Q: Is there any potential impact on renewable energy projects from changes in government support? A: Bradford Nordholm clarified that their projects rely on investment tax credits rather than grants, which are less likely to be affected by political changes. The company is prepared to adjust its origination strategy if necessary, but current projects are secure.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.