Federal Agricultural Mortgage (AGM) - 2023 Q4 - Annual Report

Financial Performance - As of December 31, 2023, Farmer Mac's total outstanding business volume was $28.5 billion, an increase from$25.9 billion in 2022, representing a growth of approximately 6.5%[34] - The Agricultural Finance line of business accounted for $20.5 billion of the total volume, up from$19.3 billion in 2022, reflecting an increase of about 6.1%[35] - The Rural Infrastructure Finance line of business reached $8.0 billion, compared to$6.6 billion in 2022, marking a growth of approximately 21.0%[35] - Farmer Mac's AgVantage Securities, a key product, had an outstanding balance of $5.8 billion as of December 31, 2023, up from$5.6 billion in 2022[35] - Farmer Mac declared dividends of $1.10 per share for each quarter in 2023, with an additional dividend of$1.40 scheduled for March 2024[111] - The quarterly dividend for Q1 2024 is $1.40 per share, representing a 27$145.2 million as of December 31, 2023, which limits cumulative direct credit exposure to any one borrower or group of related borrowers to 10%[38] - As of December 31, 2023, Farmer Mac maintained a reserve against losses of $129.6 million related to its guarantee activities[101] - Farmer Mac's risk-based capital requirement was$186.4 million, with regulatory capital of $1.5 billion exceeding this amount by approximately$1.3 billion[136] - Farmer Mac's Tier 1 capital ratio was 15.4% as of December 31, 2023, significantly above the required minimum of 7.0%[143] - Farmer Mac is required to maintain a liquidity reserve sufficient to fund at least 90 days of maturing obligations[145] - The company has a share repurchase program with a remaining authorization of up to $9.8 million, having repurchased approximately 673,000 shares at a cost of about$19.8 million since 2015[110] Risk Management - Farmer Mac's credit risk may increase due to declines in collateral values securing loans, which could adversely affect financial condition[154] - Concentrations in Farmer Mac's loan portfolio may increase exposure to credit risk, particularly in specific commodities or geographic regions[156] - Farmer Mac's contingent liabilities related to LTSPCs and guaranteed securities amounted to $4.1 billion as of December 31, 2023, representing potential exposure if all underlying loans defaulted[159] - The company has implemented methodologies to assess credit risk for Renewable Energy loans, focusing on projected debt service requirements and collateral analysis[67] - Economic stress from global events, such as geopolitical instability, may adversely affect Farmer Mac's borrowers and their ability to repay loans[149] Workforce and Culture - As of December 31, 2023, Farmer Mac employed 185 people, reflecting a net increase of 27 employees (17%) compared to year-end 2022[84] - Farmer Mac has experienced a 73% increase in geographic diversity in its workforce since early 2020, employing personnel in 27 states across the United States[85] - In 2023, Farmer Mac received a Top Workplaces USA national award and six cultural excellence awards in categories such as innovation and employee appreciation[87] - Farmer Mac's turnover rate decreased to 6.4% in 2023 from 12.3% in 2022, indicating improved employee retention despite a competitive job market[93] - The company is building talent pipelines through partnerships with academic institutions and community organizations as part of its workforce strategy[92] Cybersecurity and Operational Risks - Farmer Mac's existing cybersecurity defenses may not be sufficient to prevent unauthorized access, leading to potential financial and reputational risks[176] - The company has implemented a variety of processes and technologies to manage cybersecurity risks, including regular training for all employees and specialized training for those with elevated privileges[211] - Farmer Mac's cybersecurity program is overseen by a dedicated subcommittee of the board, which meets monthly to discuss cybersecurity risks and initiatives[208] - The company maintains a privacy and security incident response program to prepare for and recover from cybersecurity incidents, including regular tabletop exercises[205] - Farmer Mac's reliance on third-party service providers for data management exposes it to risks of unauthorized access and potential reputational damage[177] Market and Economic Conditions - The Federal Reserve increased the target range for the federal funds rate by 5.25% since 2022, impacting Farmer Mac's interest income and overall financial condition[183] - Changes in interest rates could create cash flow mismatches, adversely affecting Farmer Mac's earnings and financial stability[183] - In 2023, the U.S. experienced 28 separate billion-dollar weather disasters, impacting agricultural producers and rural infrastructure[151] - Approximately 14% of the continental U.S. was classified as being in severe to exceptional drought as of January 2, 2024, affecting agricultural productivity[151] Corporate Governance - Farmer Mac's charter requires compliance with minimum capital, critical capital, and risk-based capital standards, overseen by its board of directors[81] - The company must develop and submit an annual capital plan to OSMO, addressing capital adequacy and stress scenarios[142] - Political risks may materially affect Farmer Mac's operations, as its statutory charter can be amended by Congress at any time[196] - The concentration of voting common stock ownership among a few institutions may lead to conflicts of interest that could affect Farmer Mac's strategic direction[168]