Federal Agricultural Mortgage Corporation (AGM) Q4 2018 Earnings Report, Transcript and Summary

Good day, and welcome to the Farmer Mac Fourth Quarter 2018 Investor Conference Call. All participants will be in listen only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Brad Nordholm, President and CEO. Please go ahead.

Good morning. I'm Brad Nordholm, and I'm very pleased to welcome you to our 2018 fourth quarter and 2018 year-end investor conference call. We posted a slide deck to our website that we'll refer to throughout today's call. This morning's press release includes information about where the slides can be found. We do have a number of positive developments to discuss today, but before I begin to summarize those, I'd like to ask Steve Mullery, our General Counsel, to comment on the forward-looking statements that management may make today as well as Farmer Mac's use of non-GAAP financial measures.

Thanks, Brad. Some of the statements made on this conference call may be forward-looking statements under the securities laws. We make these statements based on our current expectations and assumptions about future events and business performance, and we may not be obligated to update these statements after this call. We caution you that forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from the results expressed or implied by the forward-looking statements. In evaluating Farmer Mac, you should consider these risks and uncertainties, as well as those described in our 2018 annual report on Form 10-K filed with the SEC this morning. In analyzing its financial information, Farmer Mac sometimes uses measures of financial performance that are not presented in accordance with generally accepted accounting principles of the United States, also known as non-GAAP measures. The three non-GAAP measures that Farmer Mac uses are core earnings, core earnings per share and net effective spread. Farmer Mac uses these non-GAAP measures to measure corporate performance and to develop financial plans. In management's view, they are useful alternative measures for understanding Farmer Mac's business. These non-GAAP measures may not be comparable to similarly labeled non-GAAP measures disclosed by other companies. Farmer Mac's disclosure of non-GAAP measures is intended to be supplemental in nature. These measures are not meant to be considered in isolation from, as a substitute for, or as more important than the related financial information prepared in accordance with GAAP. Disclosures and reconciliations of Farmer Mac's non-GAAP measures can be found on the most recent Form 10-K and earnings release posted on Farmer Mac's website, farmermac.com, under the Financial Information portion of the Investors section. A recording of this call will be available on our website for two weeks starting later today.

Thanks, Steve. While I'm happy to report another year of strong earnings growth for 2018. As you saw in our press release this morning, we also made a couple of notable announcements. First, we announced the dividend increase of more than 20% for the first quarter 2019 to $0.70 per share. This highlights that we are confident in our business outlook and in our future earnings prospects. We also announced the significant purchase of seasoned rural utility loan participations from CoBank, a Farm Credit System bank. This reflects the first time we've done any type of business with CoBank. We're very pleased to establish this constructive working relationship with a leading Farm Credit System bank and to book a material accretive portfolio of seasoned loans to rural electric cooperatives and really to highlight our mutual commitments, both CoBank's and ours, to our missions of serving rural America. Regarding the stock dividend, the Board of Directors has authorized an increase to our common stock dividend payout target, which we express as a percentage of our annual core earnings, from 30% for 2018 to 35% for 2019. And the board has declared a quarterly dividend of $0.70 per share on all three classes of our common stock for the first quarter of 2019, reflecting that target. This represents an increase of $0.12 per common share or 21% over the quarterly dividend payout in 2018. In deciding to increase Farmer Mac's common stock dividend and payout target, the Board of Directors considered our strong capital position and the consistency of and outlook for our earnings, and balanced against the need for capital to fund the rather significant growth objectives identified in our strategic plan and to meet all of our regulatory capital requirements and capital metrics established by our Board of Directors. I should add that these actions are also consistent with Farmer Mac's goal of providing a competitive return on its common shareholders' investments through the payment of cash dividend and a payout ratio of core earnings more in line with those of our financial institutional peers within the S&P Financial Index and the NASDAQ Bank Index. And many of those comparable institutions have made significant increases in their common stock dividends during the past two years. The objectives outlined in our long-term strategic plan require our organization to continue to be innovative in acquiring new customers and developing new products that further our mission. A strong example of this is the announcement that I just mentioned that we've entered into a master purchase agreement with CoBank on February 13, 2019, and subsequently purchased $546 million of seasoned rural utility loan participation. As I mentioned, this is our first record participation with CoBank or any Farm Credit System institution. As I mentioned last November on my first investor call as Farmer Mac's President and CEO, I have been spending some time traveling to meet with key customers of the organization to understand their financing needs and how we can better serve them. Over the last four months, I've had an opportunity to engage with many financial institutions and current and prospective institutional customers. These meetings have allowed me to identify the evolving needs of our customers and the borrowers that we serve and to determine the areas in which Farmer Mac can successfully fulfill their changing needs. Our work to find innovative solutions has been the primary driver of the organization's past success. And I believe that a more formalized and scalable approach, which we're really embarking on now, will prove to be critical in driving future growth and achievement of our strategic objectives. I'd like to turn now to our 2018 results. As you saw in our press release this morning, Farmer Mac grew its core earnings per share 28% over the same period last year. Credit quality improved from 2017 year-end and remained favorable. We also saw healthy net growth in certain products within several of our lines of business. More specifically, we grew our outstanding business volume by $717 million to $19.7 billion during 2018. This increase was driven by healthy net growth of $478 million in Institutional Credit line of business, net growth of $366 million in the Farm & Ranch line of business and net growth of $163 million in the USDA, that's United States Department of Agriculture, guaranteed loans by the business. This growth was partially offset by a net decrease in the rural utility line of business of about $290 million. Dale Lynch will describe this and our other financial results in more detail very shortly. But now I'd like to turn to Curt Covington, our Chief Credit Officer, to give you an update on the credit agricultural environment.

Thanks, Brad. For many producers and lenders, the winter months offer an opportunity for reflection, a chance to take stock of the year behind and then plan for the year ahead. They also mark the start of many and varied farm lender conferences across the country, where lenders can hear from industry experts and trade, agricultural economics, commodity marketing and risk management. Perhaps just as valuable though, these conferences afford Farmer Mac's business and credit teams the opportunity to talk with hundreds of boots-on-the-ground lenders, credit officers and CEOs to get their often unfiltered view of the credit conditions at their financial institution and the overall financial health of rural America. Invariably, seasoned lenders weave references to the 1980 farm financial crisis into the discussion. Many of them feel there may be pain to come, but few, if any, expect a repeat of the 1980s for a number of reasons. Number one, while balance sheet liquidity is shrinking, balance sheet solvency remains very healthy. Two, farmers in the Midwest have come to recognize that current commodity price cycle is perhaps the new normal, and have worked very hard to reduce their expenses accordingly. And three, farmers that are in distress see opportunities to sell their land at reasonable prices in a supportive market. Trade also remains a hot topic for many of these in the agricultural industry. Retaliatory tariffs remain in place for many of the United States' top trading partners such as China, Mexico and Canada, but there are signs that trade negotiators are making inroads to better, stronger and more comprehensive agreements. Many lenders also expressed optimism over how their borrowers benefited from a combination of above-average yields in many areas, pulling the trigger on marketing opportunities earlier in the year and much-needed market facilitation program payments in late 2018 and early 2019. Lenders and producers are talking about the improvements and protections offered in the 2018 Farm Bill. President Trump signed the Agricultural Improvement Act of 2018 into law this past December. The new Farm Bill brings a degree of relief because it continues the farm programs created in 2014's Farm Bill and protects the increasingly important federal crop insurance program. The results are notable increases to the farm service agency loan guarantee and direct loan program. The loan guarantee changes are especially impactful to lenders in that the higher limits help them serve borrowers and extend additional credit support for existing borrowers with need. Many lenders were also discussing the health of the agricultural lending industry itself. According to the FDIC Bank Performance Report, commercial and community banks with agricultural concentrations routinely outperformed banks with concentrations in commercial, mortgage and consumer lender, reporting lower charge-off rates, lower loan loss reserves and similar return to capital providers through the first 9 months of 2018. Similarly, Farm Credit Administration data suggests that loans within the Farm Credit institutions continue to exhibit excellent performance with nonaccrual loan rates, loan charge-off rates and loan loss reserves well within historical experience. Institutional customers also see strong demand for wholesale financing, demonstrating the vitality in virtually all corners of the rural credit landscape. Strong loan portfolio performance in the credit markets is an essential element for farm balance sheet solvency and access to debt capital during a prolonged decline in on-farm income. Although the long-run strength and opportunities in the food and farm sector far outweighs the weaknesses and the threats, short-term disruptions are likely. In the age of amplified market volatility, a prudent and pragmatic approach to lending is an important ingredient to long-term success. Farmer Mac continues to maintain a tempered approach to ag lending, a steady hand on the wheel with secondary market for rural credit. Our underwriting standards, tuned with the 1980 farm financial crisis squarely in the rearview mirror, looks through the cycles and are designed to provide a stable but practical baseline for access to the secondary market. Our portfolio maintains exceptional levels of diversity by industry, geography and borrower name, reducing loan performance correlation and yielding a very stable asset base. Whatever phase of agricultural economic cycle we find ourselves in, Farmer Mac's pragmatic approach and solid portfolio foundation will allow us to continue to support the capital needs of rural America for generations to come. And with that, I'll turn it back to Brad.

Well, Curt, thank you very much. And I am going to turn it right back over to Dale, our Chief Financial Officer, to get into the financial results in more detail.

Thanks, Brad. Turning now to our 2018 results. As you can see on Slide 6, outstanding business volume increased $717 million to $19.7 billion as of December 31, 2018, after maturity and principal paydowns on existing business. We achieved net growth of $478 million in our institutional credit line of business during 2018, as $3.3 billion of new business volume was offset in part by $2.8 billion of maturities and repayments. New business volume was comprised of $800 million of new AgVantage securities purchase, $2.2 billion of refinances of maturing AgVantage securities and the renewal of a $300 million revolving AgVantage facility. And maturities and repayments consisted of $2.5 billion of repayments on and maturities of AgVantage securities and the expiration of the $300 million revolving facility I mentioned. Our Farm & Ranch line of business experienced net growth of $366 million during 2018, attributable to $961 million of new loans purchased and $430 million of loans added under purchase commitment. This was offset in part by loan repayments of $571 million and purchase commitment repayments of $435 million. Our net growth in loan purchases did decrease $295 million during 2018 as compared to 2017. This decrease, however, was primarily due to fewer opportunities to purchase large loans in the amounts greater than $15 million this year as compared to last year. We believe this could be due to fewer eligible borrowers that are able to secure financing of that size as well as potentially increased pricing competition for the highest credit quality borrowers of these larger loans. Also increases in interest rates have reduced the demand for refinances in 2018. Nevertheless, we believe that our relative share of the overall agricultural mortgage market during 2018 remained consistent with prior years, and that our net growth of 9.3% in Farm & Ranch loan purchases does compare very favorably to the 4.9% net growth of total agricultural mortgage loan market based on a review of bank and FCS call report data as of September 30, 2018. Net growth in loans added under purchase commitments within the Farm & Ranch line of business decreased by $67 million during 2018. This decrease was primarily due to the absence in 2018 of certain customers who added large pools under purchase commitments in an effort to restructure their credit risk profile which had occurred in 2017. Turning to our USDA Guarantees line of business. The moderate decrease in new business volume in 2018 reflected an increase in competition for these loans, fewer refinances due to higher interest rates and lower loan volume being processed through the USDA. However, we do not believe that this indicates a decline in borrower demand for USDA agricultural loan product. The decrease in our Rural Utilities line of business was primarily due to repayments on loans held and loans underlying purchase commitment. Capital expenditures have declined in the rural utilities industry, which we believe has decreased the overall demand for credit. But as Brad mentioned earlier, we entered into a master participation agreement with CoBank last week, under which we purchased a portfolio of participations and seasoned rural utilities loans in the amount of $546 million. So we will obviously have significant growth in the rural utility loan portfolio for first quarter 2019. Turning now to the financials on Slide 7. Farmer Mac's net effective spread for 2018 was $151 million, a 7% increase from the $141 million in 2017. The improvement was primarily due to growth in outstanding business volume, which increased net effective spread by $10 million, and a $1.5 million increase in the amount of cash basis interest income received on nonaccrual Farm & Ranch loans. In percentage terms, net effective spread was 0.91% for both 2018 and 2017. As you can see on Slide 8, core earnings for full year 2018 were $84 million or $7.82 per diluted common share, a 28% increase from the $65.6 million or $6.08 per diluted common share in 2017. The $18 million year-over-year increase was primarily due to a $17 million decrease in income tax expense resulting from the lower federal corporate income tax rate and a $7.8 million after-tax increase in net effective spread resulting primarily from an increase in outstanding business volume. The increases to core earnings were partially offset by a $3 million after-tax increase in G&A expenses relating to continued investments in technology and business infrastructure and a $2.6 million after-tax increase in comp and benefit expenses. G&A and comp and benefit expenses increased by $7 million or 17.5% in 2018. Farmer Mac had previously disclosed its expectation that these expenses would increase by approximately 15% or $6 million year-over-year. The incremental $1 million increase in these expenses was primarily due to the nonrecurring hiring expenses of $0.6 million primarily related to the search process for Farmer Mac's current President and Chief Executive Officer as well as 2 other key hires. Turning to Farmer Mac's fourth quarter 2018 results now. As you can see on Slide 9, outstanding business volume increased by $184 million after maturities and principal paydown. The increase was driven by net growth of $168 million in Farm & Ranch loan purchases, $44 million in the USDA Securities line of business and $18 million in net new Institutional Credit business from financial fund counterparties. $168 million of net growth in Farm & Ranch loan purchases was primarily due to an increase in borrower demand for long-term real estate financing against the backdrop of fears of a rising rate environment. We also purchased a large loan, over $50 million, and did retain a $38 million portion of that this quarter. Our USDA Guarantees line of business experienced net growth of $44 million during fourth quarter 2018, as $90 million of new business volume was offset in part by $46 million of maturity and repayment. The new business was comprised of $68 million of new USDA Securities purchased and the issuance of $22 million of Farmer Mac Guaranteed USDA Securities. The repayments and maturities consisted of $45 million of repayments on USDA Securities and $1 million of repayments on USDA Securities underlying Farmer Mac Guaranteed USDA Securities. The $18 million of net growth within the Institutional Credit line of business this quarter was attributable to $33 million of new AgVantage securities purchased from financial fund counterparties and $500 million in refinances of maturing AgVantage securities. These purchases were offset in part by $560 million of amortization of existing AgVantage securities and repayments from maturing AgVantage bonds. Outstanding business volume within the Rural Utilities line of business decreased by $40 million during fourth quarter 2018, primarily due to repayments on loans held and loans underlying purchase commitments. As you can see on Slide 10, net effective spread was $39 million for fourth quarter 2018, a $1.4 million increase on the $38 million in the prior year period. The increase was primarily due to growth in outstanding business volume, which increased net effective spread by approximately $2 million. In percentage terms, net effective spread was 0.93% for both fourth quarter 2018 and fourth quarter 2017. Core earnings for fourth quarter 2018, as you can see on Slide 11, was $20.5 million or $1.90 per share, a 14% increase from the $17.9 million or $1.65 per diluted common share for fourth quarter 2017. The $2.6 million year-over-year increase was primarily due to a $5 million decrease in income tax expense resulting from the lower federal corporate income tax rate and a $1 million after-tax increase in net effective spread resulting primarily from existing business volume growth. The increases to core earnings were partially offset by $1 million after-tax increase in G&A, again related to continued investments in technology and business infrastructure, and a $2 million after-tax increase in comp and benefit expense. Notably, significantly contributing to this increase in the comp and benefits expense line is the absence in 2018 of the $1 million recouped by Farmer Mac in December 2017 on the termination of its former CEO. Turning now to credit on Slide 12. Our overall credit quality improved during 2018. Our total provision for losses and our 90-day delinquencies each decreased year-over-year, while our total allowance for losses and substandard assets as a percent of our Farm & Ranch portfolio each remained the same year-over-year. While we expect that over time our 90-day delinquencies and substandard assets rates will revert closer to Farmer Mac's historical norms, our overall credit quality did not deteriorate in 2018 because borrowers had sufficient capacity to meet their financial obligation. Specifically, 90-day delinquencies improved to $27 million or 0.37% of the Farm & Ranch portfolio as of year-end compared to $48 million or 0.71% of Farm & Ranch portfolio in the prior year. The improvement is primarily due to 2 permanent planting loans to one borrower for a total approximately of $15 million that became current during 2018. As of year-end 2018, Farmer Mac's substandard assets were $233 million or 3.2% of the Farm & Ranch portfolio compared to $221 million or 3.2% of the Farm & Ranch portfolio as of year-end 2017. The entire increase in the dollar amount of substandard assets was due to growth in Farmer Mac's total Farm & Ranch portfolio this year. Farmer Mac's 90-day delinquency rate and substandard asset rate during 2018 each remained well below Farmer Mac's historical averages of 1% and 4%, respectively. Turning to capital on Slide 13. Farmer Mac's $728 million core capital as of December 31, 2018 exceeded our statutory requirement of $545 million by $183 million or 34%. This compares to core capital of $657 million, or $137 million of capital above the requirement as of year-end 2017. Our Tier 1 capital ratio was 13.4% as of year-end 2018 compared to 12.6% last year. The increase in core capital is primarily due to an increase in retained earnings. More complete information about Farmer Mac's 2018 performance is in the 10-K we filed today with the SEC. And with that, Brad, I'll turn it back to you.

Dale, thanks very much. I hope you can hear in our voices today that our management team is really proud of the results we've achieved during 2018 as well as the future earnings prospects for this company. Our credit quality remains very favorable. Our capital base is strong. And our earnings support the higher common stock dividend that we discussed earlier during the session today. For me, it's been an incredible time working with our teams as I fully transition into my new role. I've had an opportunity to engage with key stakeholders across the company. And I continue to be impressed by the caliber, energy and commitment of the people that are part of this mission-driven organization. There are big opportunities ahead for Farmer Mac to expand its market share. And I'm confident that our ability to execute will position us to continue to drive strong earnings results. Coming off the first 4 months of my time as President and CEO, I can offer without a doubt, a few observations. First, Farmer Mac is in strong financial condition with excellent credit fundamentals, exceptional access to competitive cost capital, strong earnings, good cost management discipline and a very strong capital position. Second, I can offer that we have an extremely dedicated group of employees, smart, capable, mission-driven and eager, and they're also able and interested and capable to do much more. Third, Farmer Mac's suite of products have inherent competitive advantages attributable to our cost-competitive funding and efficient delivery systems that we have in place. Take note that we have about 100 employees supporting about a $20 billion balance sheet. And all of these suites of products have the potential for further improvement and efficiency. I believe that we have an opportunity to drive organic growth at rates well ahead of the agricultural credit market and to better fulfill our mission of serving rural America. So I'd just like to conclude by saying that I cannot be more excited than to be leading this organization at this time. Expectations are high. And with that, I'd like to turn to the operator to see if we have any questions from you today.

[Operator Instructions] Our first question comes from Scott Valentin with Compass Point. Please go ahead.

Thanks, operator. Good morning, everyone. Thanks for taking my question. Just with regard to CoBank, seems like an interesting opportunity there. You guys did a pretty sizable transaction in the first quarter. I was just wondering are there opportunities for similar sized transactions going forward? Is it just focused on utilities sector? Or is there other opportunities with CoBank? And then also, other opportunities within the Farm Credit System in addition to CoBank? Just trying to get a sense of how big the participation volumes could get if you start expanding into either other participants or if it can expand beyond just the utilities segment.

Yes. Thanks for that, Scott. I mean, it's an obvious question, given the magnitude of this transaction that we just announced. First of all, we've enjoyed wonderful, wonderful business relationship with the National Rural Utilities Cooperative Finance Corp., and through a decade worth of business with them, have developed an expertise in underwriting rural utility electric cooperative loans. And so we approached this opportunity with CoBank with a very, very high degree of confidence. We expect to continue to do significant business with CFC in the future. They're a very important partner for us. But as it relates to CoBank, they're a new partner, and we very much look forward to exploring other opportunities. More specifically, you'll see in the 8-K filing that it was an announcement about a master purchase agreement, MPA. That MPA is written to really contemplate to provide a framework for doing a broad variety of business together. It could include agribusiness loans. It could include new types of emerging rural infrastructure loans, project finance loans. These are all possibilities. As of today, we have no specific discussions under way that would result in a live transaction or imminent announcement. But now that we have this transaction booked, we do anticipate beginning very serious discussions with CoBank about additional ways that we can work together under that master purchase agreement. Our focus really is with CoBank right now. We do, do some business with other farm credit institutions. We've worked hard over the last months to make sure that the Farm Credit System understands who Farmer Mac is and our strong capitalization and our common mission of serving rural America. And I think we're optimistic, although without specific plans, that we will find additional ways to work with Farm Credit System banks, first and foremost with CoBank, but others in the future.

Okay. That's very helpful. And then when I think about just kind of big picture, you mentioned opportunities to do other type loans with CoBank. But looking at the net spread table on Page 18 of the press release, it looks like utility loans are one of the higher-spread products, I guess, second to just the Farm & Ranch. I'm just wondering - 93 basis points I think was the net spread for the quarter. Just wondering if you're adding higher-yielding product or higher-spread product, should we expect the net spread to increase going forward?

So Scott, if you're referring to sort of the purchase we just made yesterday regarding CoBank, given that this is a secondary market purchase, typically the secondary market purchases are going to be spread a bit tighter than you would see perhaps in the primary transaction lines in the market. So I wouldn't necessarily look at that 90 basis points as being representative of what we're going to earn on this current purchase. Having said that, we looked at the purchase price, purchase spread and it easily met our hurdle rates of return. So yes, we look at this as an attractive business, but the spreads will be somewhat less than the 90-ish that you've seen within our disclosures for that line of business.

Okay. So the overall spread, though, I think you guys have in the past kind of thought it stable in the low 90 range for net effective spreads for the entire business. Is that still a fair kind of assumption going forward?

Our spreads have been really stable for going on 2 years now. We haven't changed our primary asset pricing in 2 years. On one-off deals we made, we tightened pricing on an institutional credit deal to win the business, subject to our hurdle rates. But no, we really haven't seen a generic macro change in our pricing. We are looking at things all the time. Our credit team is evaluating how we can price for credit, and we are looking perhaps at more differentiated pricing over time. But we haven't seen any changes like that yet. So as far as you guys are concerned, everything - our spreads still are pretty stable across each line of business and then in total.

Okay, all right. And then in terms of the - you mentioned the excess capital or regulatory capital, the dollar amount of excess capital is up year-over-year. I forget which slide it was in the presentation, maybe Slide 13 in the presentation. Is the plan there to delever that capital through faster growth, given kind of CoBank and maybe opportunities for additional participations? Or is there another plan to return capital in a different fashion?

Well, I think - and it's twofold, Scott. One, we did increase the payout from 30% to 35%, which was a 21% escalator in dividend. That's on top of a roughly 60% increase in the dividend in 2018. So in 2 years, our dividend is up 80%. That's a pretty - compare that to the market, that's off the tail. So we're trying to balance return on capital to our investors, return on capital to investors with our growth opportunities. We do have plenty of retained capital, retaining 65% of our earnings annually to fund our growth. We could fund well over $2 billion of net balance sheet growth a year simply from our one year's retained earnings. So we feel really good about that. If growth would go beyond those kinds of numbers and we had to raise capital to fund the growth, that's kind of a rich man's problem. We'd love to have that at some level. But yes, I think we want to balance our growth with trying to get our dividend payout ratio, perhaps more in line with what you see with the bank index, which has really been in the high 30% range.

And then one final question. For credit, you guys pointed out credit still remains strong. It's better than it has been - or below where it - better than it has been historically. I'm just wondering where we are, or you think we are, in the credit cycle. I mean, you see obviously the news report and a lot of data points to stress in the agricultural sector. But you're not seeing it really in your credit numbers. I was just wondering if you think we're kind of in the early stages, mid-stages. And secondly, what would alleviate your concerns on credit? Would it be agricultural prices being the primary driver?

So this is Curt. I would say when it comes to credit quality, the concerns we have today are the same concerns we had over the past year. I think trade and tariffs is probably on everybody's mind whether you're a producer or whether you're a lender. There's a lot of optimism around that, particularly in the last couple of days in terms of potentially getting a trade deal done with China. I think that, from a psychological standpoint, helps both the markets and also helps the lenders and the producers. In terms of kind of the hard credit numbers, our credit metrics remain incredibly strong. They're still - we still see deals coming through our door today that are very strong deals, decent liquidity, good leverage positions on the balance sheet. So if you were to ask me specifically, I would just say if I were a corn or a soybean or a dairy producer, I would be anxious to see that the trade and tariff deal get dealt with and get dealt with in the next probably 90 days.

Okay, that helps. And then just one last question. If we were - I think the Farm & Ranch reserve to loans is I think 13 basis points. If we return to kind of a more normal let's say 1% delinquency rate, how high would that reserve level have to go? Or I guess historically, where has it been in the past when you've had that 1% type of delinquency rate?

That's a tough call, Scott. I mean, if you look - I mean, you - the data's public. You can look at our long-term average excluding ethanol, it's probably in the mid-teens, 15 to 17 basis points. We're currently at 13. So you might migrate but the stuff is a bit lumpy, right? Just because it's really going to be driven more by substandard assets than it's going to be driven by a 90-day delinquency rate. But really keep your eye on the substandard, as that's what's likely to happen with the allowance. But again the cycle today, as Curt mentioned in his comment, is very different than I think we've ever seen before in agriculture. The health of the farmer coming into the cycle has been so strong relative to previous periods. It's just - it's not playing out like past cycles have, right? I mean, our credit costs this year were $300,000 on a $7.5 billion portfolio. I mean, that's almost unbelievable.

I agree. The credit performance have been better than I would have expected, given the income trends of the farming economy. That's all question I had, thanks very much.

Thanks, Scott.

Our next question comes from Carl Hoffman, private investor. Please go ahead.

Good morning, ladies and gentlemen. I've been trying to get through to you for several times, and I think this is the first time you have cellphone method to get through to you as I haven't been on a landline. But regardless, I'm a private investor. And I would just like to say that I've got all the stock from a low $7 stopped in '99, 0 dividend, to now $0.70 a quarter. And your stock has actually been an unbelievable stock over the years. My biggest problem is an example of today, less than 10,000 shares have traded and the stock is down $2.30. And I assume that there's really nothing that can be done because of the small number of shares outstanding. Is there any possibility of being able to control or have a shareholder just decide to sell, and stock goes down $2? It's very frustrating to see. So with that, thanks again for another dividend increase, and good luck.

Sure. Thank you for the question, and we obviously share your - I mean, the points you make are pretty good points. We're well aware of it. Some of the regulatory changes within the capital markets, specifically related to banking versus research and in MiFID in particular, and some of the migratory changes around passive investing, sort of the black box quantitative and other passive kinds of investors, they're roughly 3/4 to 80% of our top 20 shareholders right now. So the fundamental investors like you are a smaller proportion of what they were, say, even 5 years ago, meaningfully so, maybe 20 percentage points. So we're doing a number of things. We've engaged an IR consulting firm to help leverage that, to try to disintermediate the sell side and go directly to the buy side. We're seeking to schedule 12 non-deal road shows this year directly with the buy side and not being dependent upon the sell side. We're trying to revamp our investor disclosure materials. Our IR slide deck, you'll see in our website shortly. Our press release here was a bit different today. So we're doing a lot of things. We still have our buyback program effective, as you know in our disclosure. I think there's roughly $5 million left in that program. If the stock were to fall below the thresholds for that, obviously we could use that program to support the stock and provide liquidity. But the real answer is to get more long-term fundamental investors back interested in the story. And we can do that. Two years ago, our market cap, we were trading $4 million to $5 million a day. Right now, we're trading something in the order of $1 million to $2.5 million a day. So we can get back there. I think it's a confluence of concerns about the macro ag economy combined with some of the technical you see in the market. If we can get through the concerns with the macro ag economy and continue to do some of the things on the Investor Relations side that Jalpa's working on - but this is job 1 for us. We understand it's an issue, so stay tuned, I guess.

Okay, great. I'd also like to say I really appreciate being able to discuss things with Jalpa, who is the new Investor Relations. I don't think you had that in the past, and just a good person to hold hands with as an individual investor. But I think as the dividend increases, more people have got to start looking at this as a long-term, income-producing stock as well as just a growth stock. So maybe that will help solve some of the volatility. But with that, thank you. You guys have done a great job.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Brad Nordholm for any closing remarks.

Well, thank you all for joining us today. It's been a good call. We sincerely appreciate the questions. And we're here to discuss any other questions you have anytime. So do stay in touch. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.