Investor Conference Call

Transcription

1 Investor Conference Call Fiscal Year 2017 Second Quarter November 30, 2016 January 25, 2017 at 11 am ET

2 Forward-Looking Statements This presentation contains forward-looking statements within the Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended. Forward looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identified by our use of words such as intend, plan, may, should, will, project, estimate, anticipate, believe, expect, continue, potential, opportunity and similar expressions, whether in the negative or affirmative. All statements about future expectations or projections are forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, actual results and performance may differ materially from our forward-looking statements. Factors that could cause future results to vary from forward-looking statements about our current expectations are included in our annual and quarterly periodic reports previously filed with the U.S. Securities and Exchange Commission. Except as required by law, we undertake no obligation to update or publicly release any revisions to forwardlooking statements to reflect events, circumstances or changes in expectations after the date on which the statement is made. 2

3 Non-GAAP Financial Measures During our discussion today, we will review certain non- GAAP adjusted financial measures. Please refer to our Form 10-Q for the fiscal quarter ended November 30, 2016 as filed with the SEC and as posted on the CFC website, for a discussion of why we believe our adjusted measures provide useful information in analyzing CFC s financial performance and the reconciliation to the most comparable GAAP measures. 3

4 Operating Results Three Months Ended November 30, Six Months Ended November 30, $ % $ % (dollar amounts in thousands) Change Change Change Change Interest Income $256,325 $257,156 $831 0% $502,441 $513,991 $11,550 2% Interest Expense (167,124) (183,654) (16,530) 10% (332,824) (364,734) (31,910) 10% Derivative Cash Settlements (22,573) (21,587) 986-4% (42,729) (44,977) (2,248) 5% Adjusted Net Interest Income 66,628 51,915 (14,713) -22% 126, ,280 (22,608) -18% Provision for Loan Losses (1,240) (738) % (5,802) (2,666) 3,136-54% Other Non-Interest Income (Loss) 9,085 4,548 (4,537) -50% 11,865 7,966 (3,899) -33% Non-Interest Expense (20,240) (21,149) (909) 4% (43,432) (42,451) 981-2% Income Tax Expense (110) (1,519) (1,409) 1281% (440) (1,430) (990) 225% Adjusted Net Income 54,123 33,057 (21,066) -39% 89,079 65,699 (23,380) -26% Derivative Forward Value (78,611) 362, , % (70,472) 197, , % Net Income (Loss) ($24,488) $395,304 $419, % $18,607 $263,043 $244, % Adjusted TIER (1) % % (1) Adjusted TIER = [(Interest Expense + Derivative Cash Settlements) + (Net Income +/- Derivative Forward Value Losses/Gains)] (Interest Expense + Derivative Cash Settlements) 4

5 Balance Sheet Summary (dollar amounts in thousands) 05/31/16 11/30/16 Change % Change Cash and Cash Equivalents $209,168 $212,368 $3,200 2% Time Deposits $340,000 $640, ,000 88% Investments 87,940 86,168 (1,772) -2% Gross Loans to Members 23,162,696 23,850, ,016 3% Less: Allowance for Loan Losses )33,258( )33,911( (653) 2% Loans to Members, Net $23,129,438 $23,816,801 $687,363 3% Foreclosed Assets 102,967 0 (102,967) -100% Derivative Assets 80,095 66,235 (13,860) -17% Other Assets 320, ,149 5,557 2% Total Assets $24,270,200 $25,147,721 $877,521 4% Short-term Debt 2,938,848 3,663, ,112 25% Long-term Debt 17,473,603 17,617, ,624 1% Subordinated Deferrable Debt 742, ,208 (4) 0% Members' Subordinated Certificates 1,443,810 1,442,453 (1,357) 0% Total Debt Outstanding $22,598,473 $23,465,848 $867,375 4% Derivative Liabilities 594, ,876 (210,944) -35% Other Liabilities 259, ,920 (7,609) -3% Total Equity 817,378 1,046, ,699 28% Total Liabilities & Equity $24,270,200 $25,147,721 $877,521 4% Members' Equity $1,298,138 $1,322,378 24,240 2% Key Financial Metrics Adjusted Liabilities¹ $20,498,466 $21,362,604 $864,138 4% Adjusted Total Equity² $3,519,270 3,549,660 $30,390 1% Adjusted Debt-to-Equity Ratio % 1 - Adjusted Liabilities = Total Liabilities - (Derivative Liabilities + Debt used to fund loans guaranteed by RUS + Subordinated Deferrable Debt + Subordinated 2 - Adjusted Equity = Total Equity - (Prior Year Cumulative Derivative Forward Value and Foreign Currency Adjustments + Year to Date Derivative Forward Value, net + Accumulated Other Comprehensive Income) + (Subordinated Deferrable Debt + Subordinated Certificates) 5

6 Loan Portfolio Overview CFC s Electric Cooperative Borrowers/Members: Provide an essential service Experience limited competition Generally serve exclusive territories with majority of customers being residential Demonstrate stable operating & strong financial performance Are not rate regulated in the majority of states 6

7 Credit Performance During CFC s 48-year history, there have only been 16 defaults and 6 losses in the electric utility portfolio; net write-offs for the electric portfolio totaled $86 million. At Q2FY17, CFC had 0.00% nonperforming loans. Net charge-offs to average loans outstanding totaled 0.01% at Q2FY17. 7

8 Debt Funding Sources 50% from Capital Markets 21% from Guaranteed Underwriter Program 19% from Member- Owners 10% from Farmer Mac Debt Instrument Maturity Range 5/31/2016 Amount ($000s) % 11/30/2016 Amount ($000s) % Change from 5/31/16 Daily liquidity fund Demand note $525, % $675, % $149,233 Member commercial paper 1 to 270 days $848, % $1,066, % $218,922 Member select notes 30 to 270 days $701, % $732, % $30,198 Member medium-term notes Up to 30 years $654, % $608, % ($45,924) Member capital securities Up to 35 years $220, % $221, % $1,001 Membership Certificates Up to 100 years $630, % $630, % $170 Loan and Guarantee Certificates Up to 100 years $593, % $591, % ($2,528) Total - Members $4,173, % $4,524, % $351,072 Guaranteed Underwriter Program Up to 20 years $4,777, % $4,857, % $80,661 Notes payable (Farmer Mac) Up to 30 years $2,303, % $2,283, % ($19,194) Other Up to 30 years $40, % $41, % $122 Total - Other $7,121, % $7,182, % $61,589 Non-member commercial paper 1 to 270 days $659, % $994, % $334,851 Non-member medium-term notes Up to 30 years $2,648, % $2,765, % $117,148 Collateral trust bonds Up to 30 years $7,253, % $7,255, % $2,719 Subordinated deferrable debt Up to 30 years $742, % $742, % ($4) Total - Capital Markets $11,303, % $11,758, % $454,714 Total Debt Outstanding $22,598, % $23,465, % $867,375 8

9 Monthly Debt Maturity Schedule Data as of 12/31/2016 $570 million CTB; Coupon: 5.45%, CUSIP: HT5 $500 million Dealer MTN; Coupon: 0.95%, CUSIP: 63743HEM0 $300 million CTB; Coupon: 1.10%, CUSIP: MW2 $275 million Dealer MTN; Coupon: 3ML + 25, CUSIP: 63743HEK4 Note: Our members traditionally roll over their MTN investments at maturity 9

10 Liquidity Management At November 30, 2016, CFC had the following projected liquidity sources available: CFC is a well-known seasoned issuer and believes it has adequate access to both long-term and short-term funding options. Total Liquidity Total Short-Term Debt Maturities = 1.5x Total Liquidity Total Nonmember Related Short-Term Debt Maturities = 3.0x (1) Subject to market conditions for debt issued by Farmer Mac. (2) Scheduled LT loan amortization and other repayments over the next 12 months (3) Short-term debt maturities include long-term debt maturities over the next 12 months 10

11 Liquidity Position at 11/30/2016 Projected Sources of Liquidity Projected Uses of Liquidity ($ in Mils.) Commerical Paper Debt Issuance/ Repayments LT Debt Issuance LT Loan Scheduled Amortization Payments Other Loan Repayments Total Projected Sources of Liquidity LT Debt Maturities (2) LT Loan Advances Total Projected Uses of Liquidity Net Loan Growth (1) 11/30/16 2/28/17 $255 $605 $336 $25 $1,221 $464 $739 $1,203 $378 5/31/17 0 1, $1,303 1, $1, /31/17 (50) $ $444 (24) 11/30/17 (140) $ $324 (111) 2/28/ $1, $1, /31/ $ $ Totals $255 $3,315 $1,812 $25 $5,407 $3,174 $2,723 $5,897 $886 (1) Cumulativ e LT Loan Adv ances minus Scheduled LT Loan Amortization Payments and Other Loan Repayments (2) Long-term debt maturities includes medium-term notes with an original maturity of less than one year 11

12 FY17 Major Financing Activities Revolvers November 2016 Amended and extended maturities of the credit facilities by one year to November 2019 and November 2021 MTNs November 2016 Issued $300 million 3-year fixed rate 1.50% InterNotes FY17 - $164 million InterNotes issued with a weighted-average life of years and weighted-average rate of 2.939% GUP August 2016 Advanced $100 with a 20-year final maturity September 2016 Received an approval for an additional $375 million funding under the GUP December 2016 Closed on the previously approved $375 million funding under the GUP 12

13 Key Takeaways Credit Ratings Fitch: F1(Short-Term); A+ (Senior Secured); A (Senior Unsecured); Stable Outlook (Affirmed on 5/19/16) Moody s: P-1 (Short-Term); A1 (Senior Secured); A2 (Senior Unsecured); Stable Outlook (Affirmed on 11/30/16) S&P: A-1 (Short-Term); A (Senior Secured); A (Senior Unsecured); Stable Outlook (Affirmed on 4/12/16) Management s long-term incentives are tied to CFC credit ratings High-Quality Portfolio 98% of loans are to rural electric systems 92% of loans are on a senior secured basis No loans in the portfolio are classified as nonperforming as of 11/30/16 Stable Member Investment & Strong Member Support 19% of funding is from member-owners Historically low reinvestment risk on member investments Total members equity at $1,322 million at 11/30/2016, a 98% increase from $669 million at 5/31/2010 Liquidity and Funding Diversity Maintain dealer commercial paper balance at the $1 $1.25 billion level 1.5 times liquidity coverage ratio over the next 12 months 3.0 times liquidity coverage ratio over the next 12 months, excluding short-term debt maturities related to member investments 13

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