Good afternoon, and thank you for joining us for our Second Quarter 2021 Earnings Conference Call. I'm Jalpa Nazareth, Director of Investor Relations and Finance Strategy here at Farmer Mac. As we begin, please note, that the information provided during this call may contain forward-looking statements about the company's business, strategies and prospects which are based on management's current expectations and assumptions. These statements are not a guarantee of future performance and are subject to the risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Farmer Mac's 2020 annual report and subsequent SEC filings for a full discussion of the company's risk factors. On today's call, we will also be discussing certain non-GAAP financial measures. Disclosures and reconciliations of these non-GAAP measures can be found in the most recent Form 10-Q and earnings release posted on Farmer Mac's website farmermac.com under the financial information portion of the Investors section. Joining us from management this afternoon are our President and Chief Executive Officer, Brad Nordholm who will discuss second quarter business and financial highlights and strategic objectives; and our Chief Financial Officer, Aparna Ramesh who will provide greater detail on our financial performance. Select members of our management team will also be joining us for the question-and-answer period. At this time, I'll turn the call over to our President and CEO, Brad Nordholm. Brad?

Jalpa, thanks very much. Good afternoon, everyone and thank you for joining us today. I'm pleased to report that Farmer Mac produced record core earnings this quarter. We did that while expanding our net effective spread, maintaining strong credit quality and further rationalizing our portfolio in ways that are very consistent with our strategic plan. These results largely reflect the continuation of the trends that have developed over the course of the last few years including excellent funding execution in the debt capital markets, disciplined asset liability management and ongoing shift in the composition of our portfolio towards higher spread loan purchase products. We achieved record core earnings of $30 million during the second quarter and net effect of spread above 1% for the first time in a number of years. Our asset quality metrics remained strong with 90-day delinquencies and substandard asset ratios moving favorably. In other words, moving lower quarter-over-quarter. And we're pleased with the overall performance of the portfolio. As you've probably read in the news, while the persistent of drought conditions in the certain parts of the American West are causing real pain, real hardship for a number of farmers and ranchers in the America West, particularly in California, we really have not seen any evidence of this in our portfolio. For loans in areas that commonly experience exceptional drought conditions or do not always have access to underground water as a primary or supplemental source, Farmer Mac's underwriting process provides for the assessment of anticipated long-term water availability for the property and includes analysis of how that impacts the collateral value in the borrowers' cash flow. While we pay close attention to what is going on in American agriculture and empathize strongly with people who are experiencing drought conditions, we must state emphatically that the…

Thank you, Brad and good afternoon everyone. I'm pleased to share with you Farmer Mac's record second quarter results. This reflects focused execution throughout the organization as Brad just noted. Farmer Mac's second quarter 2021 earnings growth, was driven by higher spread business volume and substantially lower funding costs given our strong access to debt capital markets. Our return on equity to a common stockholder was 18% year-to-date and this is well in line with our historical averages and this is despite the continued investments we're making to support our strategic growth initiatives. Notably, we exceeded 100 basis points this quarter for net effective spread and this exceeded our 90 basis points plus or minus five basis points guidance that we have previously provided. Our access to capital markets remain strong. We've issue debt daily. We raised preferred capital of $125 million as historically low rates for us and we've continued to maintain our disciplined asset liability management practices and this includes a methodical transition out of LIBOR-based instruments. The year-to-date average balance of spread earning assets was $22.3 billion, which is comprised of $4.8 billion in cash and investments and $17.5 billion of loans and securities. Farmer Mac's net effective spread for second quarter 2021 was $56.6 million a 22% increase from $46.5 million in second quarter 2020. In percentage terms, this translates to a net effective spread that I mentioned previously, of 1.01% compared highly favorable to 0.89% in the same period last year. The overall composition shift this quarter of $395 million of net new higher spread Farm & Ranch loan purchase products combined with a net decline of $100 million in AgVantage bonds that earn lower spreads combined with our effective funding execution were the primary drivers of our record net effective spread increase during the…

Great. Thanks so much Aparna. The results we generated thus far in 2021 I think are reflective of a business the Farmer Mac business that can expand profitability while successfully serving our mission of increasing access to and reducing the cost of credit for the benefit of agriculture in America's rural communities. We continue to manage our capital prudently, focused on consistently building shareholder value for the long-term. Additionally we continue to develop peer-leading operating efficiency, while making investments to position the company for continued growth as we see over the next few years. Overall I'm very, very pleased with the results so far this year and very, very excited about the future that we have here at Farmer Mac. And now operator, I'd like to see if we have any questions from anyone on the line today. Thank you.

Excellent. Thank you. Ladies and gentlemen, the floor is now open for questions. And our first question comes from Greg Pendy with Sidoti. Please go ahead sir.

Hi, guys. Thanks for taking the question. I guess, I got to ask this because you're at your highest net effective spread here that we've seen in some time. What is the scenario here that brings it down? Because I'm assuming the Farm & Ranch side is rather sticky in terms of you're putting on longer duration loans here. But is the most likely scenario that we see decreased liquidity in the system and mix just hurts you with more institutional credit potentially coming back? In other words total volumes will go up, but your mix will have much lower spread business coming in there. Is that fair to say?

Yes. Greg, it's Brad. And thanks always for your participation. I do appreciate the question. I'm going to ask Zack Carpenter to jump in here with a little different -- a little additional color on our portfolio composition our asset mix. But I just note at the outset that that NES is really driven by the whole portfolio. So when we price an asset that we put in that portfolio, it's staying there for a while. So it moves up and down relatively slowly, obviously, attractive or more attractive execution in the debt capital markets can also have a faster impact on it as we roll over maturities. Frankly in the debt capital markets our spreads are at record lows right now. So it's hard to see that we're going to see much upward movement in NES from rolling over maturities of debt instruments in the debt capital markets. But with that just as a little bit of a prefacing comment, I'll turn to Zack Carpenter to provide a little bit of discussion about how that NES is impacted by, for example, above average growth in Farm & Ranch relative to the rest of the portfolio? Or above-average growth in agribusiness and larger complex credits for example, or maybe below average growth in rural utility and lower margin assets that we have. Zack, are you available to jump in here?

Yeah. Thanks Brad. And Greg, great question. And I think you kind of hit it on the head with the compositional mix. And we've seen since 2020, our balance sheet at least from a volume perspective, shift into these on balance sheet higher earning assets. And we continue to see strong growth in Farm and Ranch. And a component of that Farm & Ranch business is our agribusiness value chain lending portfolio which has significantly higher NES, compared to many of our other business lines. And so as we get further into the year, and put more loans on that business, we're going to see some accretion higher in that space. That being said, at some point in time and we saw some positivity in our rural utilities AgVantage product, those are lumpy and eventual opportunities. And they are much lower NES than some of our other portfolios. So as we see some changes in the capital markets that, warrant us to help our customers in that space. Those are lumpy pieces of volume that will tend to shift the NES lower. And then the other piece of the puzzle is our fee-based and off-balance sheet products, right? Those are more -- we clip a fee to those. And as those decrease and again become less of a component of it. We see that fee business decrease, but the NES increase given the on-balance sheet loan purchase product. So what I would say is, we continue to see strong growth in Farm & Ranch purchase. And that's going to drive it going forward. And some of the mix coming off from AgVantage and rural utilities loans that we would see later on this year would potentially taper that off a bit. But we'll continue to see the strong growth on the agribusiness side and that will continue to help upward on the NES perspective.

That's very helpful. And then, just I guess, some of the -- for the rural utilities, some of that, if there is a bill passed that might be -- I know it will take time if you are a beneficiary. But that's kind of the sweet spot. Is it fair to say, within your divisions, if there is -- from an infrastructure build perspective?

Yeah. Greg, the most likely thing that we would see in an infrastructure build that would, positively impact the real utilities portfolio would be around broadband and renewable energy. And both of those would have -- the renewable energy certainly has higher margins. The broadband it would depend on what any kind of federal program or stimulus how it is structured. And what it meant for credit quality. But I think at this point, we would anticipate that, both broadband and renewable energy overtime over a few years could pickup nicely from the infrastructure bill funding and that both could be further accretive to us. Obviously, we want to see the details of what's really in there. And the feasibility of what is in that federal infrastructure plan, as it would relate to actual loan opportunities before really being confident and projected just how much that could be. But directionally, it's certainly positive.

That's very helpful. Thanks a lot.

And there appear to be no further questions at this time. I'd like to turn the floor back over to Brad.

Well, thank you. You may have noted that, we attempted to make a few changes in our call today. We attempted to make it a little bit shorter, providing more time for questions or just for going home at 5 o'clock, on a very, very nice Thursday afternoon. But we appreciate your attendance very much. We will have our next regularly scheduled call in November, when we will be reporting on our third quarter 2021 results. We look forward to sharing information with you of course, at that time. And as always, if you have questions, you'd like to follow-up with any additional information, any additional questions just get in touch with this. We're always very pleased to speak with you. So with that, thank you very much. And have a good evening.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. And have a great day.