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

Good day, and welcome to the Farmer Mac's 2021 Annual Meeting of Stockholders. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to LaJuana Wilcher. Please go ahead.

Good morning, ladies and gentlemen. I'm LaJuana Wilcher, the Board Chair of Farmer Mac. I'm pleased to welcome all of you to Farmer Mac's 2021 Annual Meeting. In accordance with the notice of the meeting, I call this Annual Meeting of Stockholders of Farmer Mac to order. We understand that 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're 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 at this time to [email protected]. We intend to follow the meeting agenda that's been posted to Farmer Mac's website. We will provide a general question-and-answer session for stockholders after the formal business of the meeting is concluded. I would like to begin by introducing our director nominees and the directors appointed by the President of the United States, all of whom are participating in this meeting by teleconference or in person. Farmer Mac has 2 classes of voting stockholders, each of which elects 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. Farmer Mac's proxy statement dated April 7, 2021, contains a complete biographical sketch of each nominee and presidential appointee on Pages 15 through to 20. Copies of the 2021 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, Mitchell Johnson, Eric McKissack 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 Roy Tiarks. The Board members appointed by the President of the United States and confirmed by the U.S. Senate are Sara Faivre, Lowell Junkins, Charles Stones, Myles Watts and myself. I would also like to introduce the executive officers of Farmer Mac, all of whom are either physically present at this meeting location at Farmer Mac's offices in Washington, D.C., or are participating by teleconference. Pages 27 to 28 of the proxy statement contain more information about the background and experience of each of these 7 officers. Brad Nordholm is the President and CEO; Zach Carpenter, Executive Vice President and Chief Business Officer; Aparna Ramesh, Executive Vice President and Chief Financial Officer; Steve Mullery, Executive Vice President, General Counsel and Secretary; Brian Brinch, Senior Vice President and Enterprise Risk Officer; Marc Crady, Senior Vice President and Chief Credit Officer; Robert Maines, Senior Vice President, Operations. Subject to the votes of the stockholders present or represented by proxy at this meeting, Farmer Mac's independent auditing firm for 2021 will be PricewaterhouseCoopers LLP, also referred to as PwC. PwC is represented today by Chris Morgan, who is participating via teleconference. I would like to ask Steve Mullery, our Corporate Secretary, to report on the mailing of the meeting notice and the presence of a quorum.

Madam Chair, this meeting is held pursuant to a printed notice mailed on April 7, 2021, to each stockholder of record as of March 10, 2021. Farmer Mac's transfer agent, Continental Stock Transfer & 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 represented by proxy at this meeting. For those stockholders present today 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 proxies. Would you please contact the call operator if you plan to vote at this meeting. Being none, we'll move on.

Thank you, Steve. We have a quorum, so I declare Farmer Mac's 2021 Annual Meeting of Stockholders to be officially convened. On behalf of all of the Board of Directors, I would like to express my appreciation to all stockholders participating today by teleconference and those who returned their proxies. At the beginning of the election phase of this meeting, I would like to ask Steve Mullery to advise those present about some of the statements that may be made at the meeting.

During this meeting, representatives of Farmer Mac may make forward-looking statements that reflect current expectations for Farmer Mac's future and financial results. Our expectations for Farmer Mac's future performance will necessarily involve assumptions, estimates and 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 2020 and Farmer Mac's quarterly report on Form 10-Q filed last week. 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. It's a privilege to be part of the Farmer Mac's team and serve as Board Chair. Our Board is passionate about Farmer Mac's mission to improve economic opportunity in rural America and to support our vital agricultural communities. We do this by providing a wide range of loan products and financial solutions, coupled with excellent service to our lender customers to help them increase the availability of credit at favorable rates and terms. Last year was exceptional in many ways. The rapid spread of the pandemic and the associated uncertainty demanded a swift and comprehensive response. Farmer Mac rose to the occasion, quickly rolling out new initiatives to support our employees. We have continued to operate seamlessly in an all virtual environment while delivering excellent financial results and maintaining strong access to the capital markets, robust capital and liquidity position and healthy credit metrics. We see our performance as a reflection of our resilience, our business model, the innovation and implementation of our strategies, and the talent and diligence of our employees, leadership and Board. We also never lost sight of our mission to support rural communities when they needed it the most. We believe that delivering on our mission is even more important in times of uncertainty and stress. We are proud of the way that we have stepped up to continue to help deliver the capital needed by rural America to address the disruptions caused by the pandemic. We are committed to help bring increased financial security, improved economic conditions and new opportunities to rural communities, and we have been pleased to see that great resilience exhibited recently by the rural economy. Farmer Mac's dedication to our mission is one way we try to be a conscientious company and look to ensure that we're not just good at what we do but purposeful in how we do it. Another way we are looking to bolster our commitment to conducting our business sustainably and responsibly is by identifying and integrating Environmental, Social and Governance objectives. The Board approved Farmer Mac's first ESG policy statement in November, which is intended to build toward enhanced communication of our ESG practices. We look forward to being able to share more about our progress in this initiative in the coming year. Our Board has grown more diverse, and the directors have brought their varied perspectives into our boardroom to encourage and support our employee initiatives with the same passion and support that they share for farmers, ranchers and those living in rural America. Our Board and leadership team renewed and continued their focus on diversity, equity and inclusion during the past year and have formed a D, E and I council to advise on how to strengthen the company's policies and practices. One of our primary objectives is for Farmer Mac to continue to understand, protect and highlight the value of our employees' diverse backgrounds by fostering an inclusive work environment that encourages collaboration, vision and the highest standards of excellence. We believe that talent, diversity and inclusion are sources of pride for our employees and contribute to our strong financial performance for our shareholders and to the achievement of our mission in serving rural America. Farmer Mac's Board has been very actively engaged in its oversight role during the past year to carefully monitor and address developing issues in changing circumstances. The Board met 22 times and held many more committee meetings during 2020, and we continue to meet regularly, although less frequently in 2021. This level of commitment by the Board has helped guide our exceptional management team to remain nimble and resilient in the face of extraordinary circumstances to position the company to continue to thrive while fulfilling our mission. In addition to supporting the ESG and DEI initiatives I already mentioned, during the last year, the Board created a crisis management team, supported the issuance of a company's statement on racial equity, continued to enhance its oversight of risk management issues and spent many hours conducting interviews for key positions that have now been filled in the company. We remain committed to the continued development of innovative products for rural borrowers and for enhancement of our infrastructure as we seek to broaden and deepen our customer relationships in providing mission-critical capital to new and developing markets. We are excited about the future and remain resolved in our conviction to continue serving as a valuable and vital partner to rural America. Now I would like to turn to the election phase of this meeting. The first matter to be voted on is the election of directors to serve until the next annual meeting or until the respective successors are duly elected and qualified. To facilitate the election of directors, the Board of Directors uses the 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 those recommendations. Mr. Mullery, please place before the meeting 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 the meeting as follows: Dennis L. Brack, James R. Engebretsen, Mitchell A. Johnson, Eric T. McKissack, and Todd P. Ware.

Mr. Mullery, please place before the meeting the Board's nominations 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 the meeting as follows: Richard H. Davidson, Everett M. Dobrinski, Amy H. Gales, Robert G. Sexton and Roy H. Tiarks.

Only persons who are eligible holders of Class A or Class B voting common stock as of March 10, 2021, 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 6, 2021. So the nominations for directors are now closed. Is there any discussion on the nominations? Thank you. We will now 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 2021 as prescribed on Page 58 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 2021, subject to stockholder ratification. This selection is now submitted to the holders of voting common stock for the ratification.

Are there any questions or discussion on the ratification of PwC to serve as Farmer Mac's independent auditors for 2021? Thank you. Let's continue. The next matter being submitted for action is an advisory vote on Farmer Mac's executive compensation as described on Page 59 of the proxy statement, which is also known as a Say on Pay vote. This advisory vote is a nonbinding vote on compensation of Farmer Mac's named executive officers as presented on Pages 29 to 53 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 it's made a practice of holding the vote on an annual basis. Only persons entitled to vote Class A or Class B stock may vote on Farmer Mac's executive compensation practice. Mr. Mullery, please place before the meeting this proposal.

The 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 2021 proxy statement.

Are there any questions or discussion on the advisory vote on Farmer Mac's executive compensation? Thank you. Now let's continue. Now will the secretary, please, report the preliminary results of 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, Mitchell A. Johnson, Eric T. McKissack 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 Roy H. Tiarks. 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 2021. 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; Mitchell A. Johnson, Eric T. McKissack; and Todd P. Ware, as the 5 directors elected by the holders of Class A common stock. Richard H. Davidson, Everett M. Dobrinski, Amy H. Gales, Robert G. Sexton; and Roy H. Tiarks 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 2021 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 newest board member, Roy Tiarks, on behalf of the full Board. We all look very forward to working with him. Roy brings a wealth of relevant experience and expertise to our Board. We're very fortunate to have him on our team and are confident that he 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 delighted and honored to have you. This concludes the formal business portion of our meeting. There will be a general question-and-answer period for stockholders after adjournment of the meeting. I will now entertain a motion for adjournment. Mr. Nordholm?

My name is Bradford Nordholm. I'm a member of the proxy committee. On behalf of the proxies held by that committee, I move for adjournment.

Mr. Mullery?

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

Any oppose? 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 2021 Annual Meeting is now adjourned. Before I open the floor to stockholder questions, I would like to remind you about Mr. Mullery's earlier cautionary statements about forward-looking statements that may be made. We're now ready to open the floor for stockholders' questions and discussions. So I will turn the microphone over to Mr. Nordholm.

Good. Thank you. The management team and I commented on Farmer Mac's financial performance last week during our conference call that was set up to discuss first quarter 2021 earnings. That call concluded with an open forum for questions, and we had some, but I would, again, be very happy to entertain other questions from anyone participating on the conference call or webcast of this meeting. I will recognize you for participation one person at a time. Please contact or call the operator if you have a question. We don't have any questions. So thank you, again, for participating in our Annual Meeting of the Stockholders of Farmer Mac.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.