Federal Agricultural Mortgage Corporation (AGM) Earnings Call Transcript & Summary

Good day. And welcome to the Farmer Mac's Annual Meeting of Stockholders. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to LaJuana Wilcher, Board Chair. Please go ahead.

Good morning. I'm LaJuana Wilcher, the Board Chair of Farmer Mac. I'm pleased to welcome all of you to Farmer Mac's 2020 Annual Meeting. In accordance with the notice of the meeting, I call this Annual Meeting of the stockholders of Farmer Mac to order. We understand that many stockholders who may have wanted to participate in this meeting in person could not travel due to COVID-19 restrictions. So we've made it possible for you to participate by teleconference and webcast. If you are a voting stockholder, participating in the meeting by teleconference, and plan to vote outside of the regular proxy process today and have not yet received a blank proxy card, please e-mail a request right now to [email protected]. We intend to follow the meeting agenda that has been posted to the Farmer Mac website. I would like to begin by introducing our director nominees and the directors appointed by the President of the United States and confirmed by the U.S. Senate, all of whom are participating in this meeting by teleconference. Farmer Mac has 2 classes of voting stockholders, each of which elect 5 directors. Class A stockholders are banks, insurance companies, mortgage banks, investment banks and other financial institutions. Class B stockholders are farm credit system institutions. The other 5 directors are appointed by the President of the United States and confirmed by the U.S. Senate. Farmer Mac's proxy statement dated April 6, 2020 contains a complete biographical sketch of each nominee and presidential Appointee on Pages 11 through 14. Copies of the 2020 proxy statement are available on Farmer Mac's website. The following individuals have been nominated for election as Class A directors. Dennis Brack, James Engebretsen; David Hemingway, Mitchell Johnson and Todd Ware. The nominees for directors to be elected by the Class B stockholders are Richard Davidson, Everett Dobrinski, Amy Gales, Robert Sexton and Daniel Shaw. The Board members appointed by the President of the United States and confirmed by the U.S. Senate are Sara Faivre, Lowell Junkins, Bruce Sherrick, Myles Watts and myself. It is also appropriate for me to recognize current board members, Tom Hill and Clark Maxwell. Tom has served for 8 years and Clark has served for 12 years before deciding not to stand for reelection this year. Thank you both for your distinguished service and significant contributions to Farmer Mac. I would also like to introduce the executive officers of Farmer Mac, all of whom are either physically present at the meeting location at Farmer Mac's office in Washington, D.C. or participating by teleconference. Pages 22 through 23 of the proxy statement contains more information about the background and experience of each of these 5 officers. First is Brad Nordholm, the President and Chief Executive Officer; Second is Aparna Ramesh, Executive Vice President, Chief Financial Officer and Treasurer; Steve Mullery, Executive Vice President, General Counsel and Secretary; Zack Carpenter, Executive Vice President, Chief Business Officer; Brian Brinch, Senior Vice President, Rural Infrastructure. Subject to the vote of stockholders present or represented by proxy at this meeting, Farmer Mac's independent auditing firm for 2020 will be PricewaterhouseCoopers LLP, also referred to as PwC. PwC is represented today by Diana Stoltzfus and Chris Morgan, who are participating via telephone conference. I would like to ask Steve Mullery, our Corporate Secretary, to report on the mailing of the meeting notice and the presence of Quorum.

Madam Chair, this meeting is held pursuant to a printed notice mailed on April 6, 2020, to each stockholder of record as of March 6, 2020, as supplemented by revised notice issued as a press release and filed with the SEC on April 30, 2020. Farmer Mac's transfer agent, Continental Stock Transfer and Trust Company, a representative of whom is present by teleconference today, reports that the holders of a quorum of Farmer Mac's voting common stock are present in person or are represented by proxy at this meeting. For those stockholders present today in person or by teleconference, who returned properly completed and signed proxies, the proxy committee will vote the shares represented in those proxies as directed on all matters coming before the meeting. Unless you want to change your vote, you need not submit ballots on matters already voted by proxy. Would you please raise your hand or contact the call operator if you plan to vote personally at this meeting. It appears there are none.

We have a quorum, so I declare Farmer Mac's 2020 Annual Meeting of Stockholders to be officially convened. On behalf of the Board of Directors, I would like to express my appreciation to all stockholders participating today, either in person or by teleconference and those who returned their proxies. Before beginning the election phase of this meeting, I would like Steve Mullery to advise those present about some of the statements that may be made at this meeting.

During this meeting, representatives of Farmer Mac may make forward-looking statements that reflect current expectations for Farmer Mac's future financial results. Our expectations for Farmer Mac's future performance necessarily involve assumptions, estimates and the evaluation of risks and uncertainties. Various factors could cause Farmer Mac's actual results to differ materially from our current expectations. A detailed discussion of these factors can be found in Farmer Mac's SEC filings, including Farmer Mac's annual report on Form 10-K for 2019 and Farmer Mac's quarterly and current reports on Forms 10-Q and 8-K filed during 2020, including the Form 10-Q filed yesterday. The forward-looking statements you may hear today represent current expectations. We undertake no obligation to update them, except as otherwise required by law.

Thank you, Steve. I just want to say that it is a privilege for me to be a part of the Farmer Mac team and to serve as Board Chair. I'm passionate about Farmer Mac's mission of supporting farmers, ranchers and rural communities by providing the best service to our customers: the lending institutions and entities that offer them credit at affordable rates. Before we go further, we must recognize that we are operating in extraordinary times. Everyone is affected by COVID-19, whether personally or professionally or both. That being said, Farmer Mac has maintained uninterrupted continuity of operations and our liquidity levels remain well above regulatory requirements. The Farmer Mac management team and staff, under CEO Brad Nordholm's leadership has managed to operate seamlessly, professionally and remotely. And we are grateful for their efforts, and we applaud them. Similarly, the Farmer Mac Board has actively engaged in its oversight role during this crisis. The Board has held and intends to continue to hold weekly Board meetings to carefully monitor and address as necessary, any changes in the volatile circumstances of today's world. In addition, we have created a crisis management team to address any matters that are not addressed by the full Board. The challenges of 2020 are being addressed from the base of Farmer Mac's record results in 2019. The entire team is to be congratulated for focusing on fulfilling Farmer Mac's mission, providing value to stakeholders and looking to the future. Toward that end, Brad has led the company's work to broaden business opportunities, deepen existing programs and relationships and invest in infrastructure and technology to become even more efficient and scalable. In the end, all of these efforts are about service. Service breeds success. And we are mindful that our success is critical to rural communities throughout the country. We will continue to support our nation's hard-working farmers and ranchers, and continue to enable rural communities to thrive by serving our many valued customers who lend directly to rural America. In closing, I want to thank Lowell Junkins, long time Board member and Chair for over a decade, whose ongoing service as Vice Chair, has ensured that the Board has continuity and that I have the benefit of his experience and insights. I'm looking forward to continue working with him, the rest of the Board and all of the Farmer Mac family in 2020. Now I would like to turn to the election phase of the meeting. The first matter to be voted on is the election of directors to serve until the next annual meeting or until their respective successors are duly elected and qualified. To facilitate the election of directors, the Board of Directors uses a Corporate Governance Committee consisting of directors from each of the Board's 3 constituent groups. The Corporate Governance Committee has recommended 5 individuals for election as Class A nominees and 5 individuals for election as Class B nominees. The Board approved these recommendations. Mr. Mullery, please place before the meeting of the Board, the Board's nominations for directors representing Class A stockholders.

The Board's nominees for election as directors to be elected by Class A stockholders who are identified in the proxy statement are now formally placed before this meeting as follows: Dennis L. Brack, James R. Engebretsen, W. David Hemingway, Mitchell A. Johnson; and Todd P. Ware.

Mr. Mullery, please place before the meeting, the Board's denominations for directors to be elected by Class B stockholders.

The Board's nominees for election as directors to be elected by Class B stockholders who are identified in the proxy statement are now formally placed before this meeting as follows: Richard H. Davidson, Everett M. Dobrinski, Amy H. Gales, Robert G. Sexton and Daniel L. Shaw.

Only persons who are eligible holders of Class A or Class B voting common stock as of March 6, 2020 are entitled to vote at this meeting. Under Farmer Mac's Bylaws, any Class A or Class B stockholders who wished to make a director nomination for consideration at this annual meeting was required to do so by February 8, 2020. So nominations for directors are now closed. Is there any discussion on the nominations? Okay. Now let's continue. The next matter being submitted for action is the ratification of the selection by the Audit Committee of PwC as the independent auditors of Farmer Mac for 2020 as described on Page 55 of the proxy statement. Farmer Mac's Bylaws provide that the Audit committee shall annually select independent auditors and that the selection shall be submitted to the stockholders for ratification. The Audit Committee and the Board recommend ratification of this selection by the stockholders. Only persons entitled to vote Class A or Class B stock may vote on this proposal. Mr. Mullery, please place before the meeting this proposal.

The Audit Committee unanimously selected PricewaterhouseCoopers LLP to serve as Farmer Mac's independent auditors for 2020 subject to stockholder ratification. This selection is now submitted to the holders of voting common stock for their ratification.

Are there any questions or discussion on the ratification of PwC to serve as Farmer Mac's independent auditors for 2020? Thank you. The next matter being submitted for action is an advisory vote on Farmer Mac's executive compensation as described on Pages 55 to 56 of the proxy statement, which is also known as say-on-pay vote. This advisory vote is a nonbinding vote on the compensation of Farmer Mac's named executive officers as presented on Pages 24 through 51 of the proxy statement. It is not a vote on Farmer Mac's general compensation policies, compensation of the Board of Directors or Farmer Mac's compensation policies as they relate to risk management. Farmer Mac is required to hold the advisory vote on executive compensation at least once every 3 years, but made -- has made a practice of holding the vote on an annual basis. Only persons entitled to vote on Class A or Class B stock may vote on Farmer Mac's executive compensation practices. Mr. Mullery, please place before the meeting, this proposal.

An advisory vote is requested on the motion that Farmer Mac's voting stockholders approve on an advisory basis, the compensation of Farmer Mac's named executive officers as described in the 2020 proxy statement.

Are there any questions or discussion on the advisory vote on Farmer Mac's executive compensation? Thank you. Will the Secretary please report the preliminary results of the voting.

The ballots have been counted and the following candidates received the highest number of votes from holders of Class A voting common stock: Dennis L. Brack, James R. Engebretsen, W. David Hemingway, Mitchell A. Johnson; and Todd P. Ware. The following candidates received the highest number of votes from holders of Class B common stock: Richard H. Davidson, Everett M. Dobrinski, Amy H. Gales, Robert G. Sexton and Daniel L. Shaw. More than a majority of the shares of voting common stock represented at this meeting has been voted in favor of the ratification of the selection of PricewaterhouseCoopers LLP as Farmer Mac's independent auditors for 2020. More than a majority of the shares of voting common stock represented at this meeting has been voted in favor of the advisory vote approving the compensation of Farmer Mac's named executive Officers.

Subject to verification of the ballots, I declare that the following directors have been duly elected: Dennis L. Brack, James R. Engebretsen; W. David Hemingway, Mitchell A. Johnson; and Todd P. Ware as the 5 directors elected by holders of Class A common stock. Richard H. Davidson, Everett M. Dobrinski; Amy H. Gales, Robert G. Sexton and Daniel L. Shaw as the 5 directors elected by holders of Class B common stock. Also, subject to verification of the ballots, I declare that the selection of PricewaterhouseCoopers LLP as Farmer Mac's independent auditors for 2020 has been duly ratified. And the compensation paid to Farmer Mac's named executive officers has been approved on an advisory basis. Farmer Mac's Board of Directors will take into consideration the results of this advisory vote going forward. All of these results are preliminary. Every ballot will be checked against our stockholder records and an exact vote count determined for the record of the meeting. I would like to personally welcome our 2 newest Board members, Amy Gales and David Hemingway, and I look forward to working with them. Amy and David bring a wealth of relevant experience and expertise to our Board. We are very fortunate to have them on our team and are confident that they will make a meaningful and positive impact on our company as we further our mission to increase the availability and affordability of financing to rural America. On behalf of the entire Board and Farmer Mac team, welcome. We are excited and honored to have you. This concludes the formal business portion of our meeting. I will now entertain a motion for adjournment. Mr. Nordholm?

Yes, my name is Bradford Nordholm. I am a member of the proxy committee. On behalf of the proxies held by that committee, I do move for adjournment.

Mr. Mullery?

My name is Stephen Mullery. I'm member of the Proxy Committee. I am voting all of the proxies held by the proxy committee, which represent more than a majority of all outstanding shares of voting common stock in favor of adjournment.

Any opposed? I would again like to express my appreciation to the stockholders who participated in this meeting as well as to those who submitted their proxies but were not able to be present. Farmer Mac's 2020 Annual Meeting is now adjourned.

The conference is now concluded. Thank you for attending today's presentation. And you may now disconnect.