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| EX-99.1 - EXHIBIT 99.1 - FEDERAL AGRICULTURAL MORTGAGE CORP | a2017q1pressrelease.htm |
| 8-K - 8-K - FEDERAL AGRICULTURAL MORTGAGE CORP | a2017q1earningsrelease8-k.htm |
2017
Equity Investor
Presentation
First Quarter
FARMER MAC
Forward-Looking Statements
In addition to historical information, this presentation includes forward-
looking statements that reflect management’s current expectations for
Farmer Mac’s future financial results, business prospects, and business
developments. Forward-looking statements include, without limitation,
any statement that may predict, forecast, indicate, or imply future
results, performance, or achievements. Management’s expectations for
Farmer Mac’s future necessarily involve a number of assumptions and
estimates and the evaluation of risks and uncertainties. Various factors
or events, both known and unknown, could cause Farmer Mac’s actual
results to differ materially from the expectations as expressed or implied
by the forward-looking statements. Some of these factors are identified
and discussed in Farmer Mac’s Annual Report on Form 10-K for the
year ended December 31, 2016, filed with the U.S. Securities and
Exchange Commission (“SEC”) on March 9, 2017 and Quarterly Report
on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC
on May 10, 2017, which are also available on Farmer Mac’s website
(www.farmermac.com). In light of these potential risks and uncertainties,
no undue reliance should be placed on any forward-looking statements
expressed in this presentation. Any forward-looking statements made in
this presentation are current only as of March 31, 2017, except as
otherwise indicated. Farmer Mac undertakes no obligation to release
publicly the results of revisions to any such forward-looking statements
that may be made to reflect new information or any future events or
circumstances, except as otherwise mandated by the SEC. The
information contained in this presentation is not necessarily indicative of
future results.
NO OFFER OR SOLICITATION OF SECURITIES
This presentation does not constitute an offer to sell or a solicitation of
an offer to buy any Farmer Mac security. Farmer Mac securities are
offered only in jurisdictions where permissible by offering documents
available through qualified securities dealers. Any investor who is
considering purchasing a Farmer Mac security should consult the
applicable offering documents for the security and their own financial
and legal advisors for information about and analysis of the security, the
risks associated with the security, and the suitability of the investment
for the investor’s particular circumstances.
Copyright © 2017 by Farmer Mac. No part of this document may be
duplicated, reproduced, distributed, or displayed in public in any manner
or by any means without the written permission of Farmer Mac.
EQUITY INVESTOR PRESENTATION
02
FARMER MAC
Use of Non-GAAP Financial Measures
This presentation is for general informational purposes only, is current
only as of March 31, 2017, and should be read in conjunction with
Farmer Mac’s Quarterly Report on Form 10-Q filed with the SEC on
May 10, 2017. In the accompanying analysis of its financial
information, Farmer Mac uses the following non-GAAP financial
measures: core earnings, core earnings per share, and net effective
spread. Farmer Mac uses these non-GAAP measures to measure
corporate economic performance and develop financial plans because,
in management's view, they are useful alternative measures in
understanding Farmer Mac's economic performance, transaction
economics, and business trends. These non-GAAP financial measures
that Farmer Mac uses may not be comparable to similarly labeled non-
GAAP financial measures disclosed by other companies. Farmer Mac's
disclosure of these non-GAAP financial measures is intended to be
supplemental in nature, and is 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.
Core earnings and core earnings per share principally differ from net
income attributable to common stockholders and earnings per
common share, respectively, by excluding the effects of fair value
fluctuations. These fluctuations are not expected to have a cumulative
net impact on Farmer Mac's financial condition or results of operations
reported in accordance with GAAP if the related financial instruments
are held to maturity, as is expected.
Core earnings and core earnings per share also differ from net income
attributable to common stockholders and earnings per common share,
respectively, by excluding specified infrequent or unusual transactions
that Farmer Mac believes are not indicative of future operating results and
that may not reflect the trends and economic financial performance of
Farmer Mac's core business.
Farmer Mac uses net effective spread to measure the net spread Farmer
Mac earns between its interest-earning assets and the related net funding
costs of these assets. Net effective spread differs from net interest
income and net interest yield because it excludes: (1) the amortization of
premiums and discounts on assets consolidated at fair value that are
amortized as adjustments to yield in interest income over the contractual
or estimated remaining lives of the underlying assets; and (2) interest
income and interest expense related to consolidated trusts with beneficial
interests owned by third parties, which are presented on Farmer Mac's
consolidated balance sheets as "Loans held for investment in
consolidated trusts, at amortized cost."
EQUITY INVESTOR PRESENTATION
03
FARMER MAC
Table of Contents
05 Executive Summary
13 Agricultural Industry Highlights
22 Farmer Mac Overview
33 Farmer Mac Financial Performance
39 Appendix
EQUITY INVESTOR PRESENTATION
04
Executive
Summary
FARMER MAC
Farmer Mac Overview
Created in the 1980s to help provide a deeper
credit market for rural America
• Provide wholesale financing, secondary market and
credit enhancements for agricultural and rural utilities
lenders
• Increase access to credit and drive more efficient
credit pricing for rural America
• Reduce rural credit market volatility by increasing
liquidity and lending capacity for rural lenders
Lines of business – focused on customers
• Farm & Ranch
• USDA Guarantees
• Rural Utilities
• Institutional Credit
Diverse product suite provided to customers
• Loan purchases
• Wholesale financing
• Credit protection
EXECUTIVE SUMMARY
06
1987
1996
1998
1999
2008
Farmer Mac initially chartered
by Congress as an instrumentality
of the United States
First major charter revision
and expansion of authority
(direct loan purchases)
Outstanding business volume
reaches $1 billion
First listed
on NYSE (AGM & AGM.A)
Second major charter revision
and expansion of authority
(Rural Utilities)
Outstanding business volume
reaches $10 billion
Outstanding business volume
reaches $15 billion
2015
FARMER MAC
$12.9 Billion
{5.8% Market Share}
Agricultural Real Estate Mortgage Market Structure
EXECUTIVE SUMMARY
07
FINANCIAL INVESTORS (Developing Market) | various institutional investors investing in agricultural assets (and seeking leverage)
FARM CREDIT SYSTEM (GSE)
NON-FCS
AG LENDERS
Secondary Market
CREDIT
PROTECTION
CREDIT
PROTECTION
W HOLESALE
FINANCING
LOAN
SALES
Primary
Agriculture
Mortgage Market
{Farmers & Ranchers}
Mortgage
Financing
Mortgage
Financing
$224 Billion
$
1
0
4
B
il
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$
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8
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$
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IL
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C
A
s
(1) Ag real estate mortgage market structure shown here includes only the forecast for outstanding unpaid principal balance of first lien ag mortgage assets as of December 31, 2016.
(2) Source: USDA, Economic Research Service, nominal dollars forecast for year-end 2016 on a prorated basis (as of February 2017).
(3) Source: Farm Credit Administration, Call Report Data on a prorated basis for year-end 2016 (as of December 2016).
(4) Sum of FCS, non-FCS, and Farmer Mac first lien ag real estate mortgage assets does not add up to the total due to the nature of Farmer Mac’s secondary market business model.
(1)
(2) (3) (2)
(4)
(4)
AS OF DECEMBER 31, 2016
(1)
FARMER MAC
Rural Utilities (RU) Cooperative Mortgage Market
EXECUTIVE SUMMARY
08
FARM CREDIT SYSTEM (GSE)
NON-GSE
RU LENDERS
$
1
3
B
il
li
o
n
$2
3
B
illio
n
C
O
B
A
N
K
(2)
(3)
$4.7 Billion
{13.1% Market Share}
Secondary Market
CREDIT
PROTECTION
W HOLESALE
FINANCING
LOAN
SALES
Rural Utilities
Cooperative
Mortgage Market
{900+ Cooperatives in
Util it ies Distribution,
Generation and
Transmission}
Mortgage
Financing
Mortgage
Financing
(4)
$36 Billion
(4)
N
A
T
IO
N
A
L
R
U
R
A
L
U
T
IL
IT
IE
S
C
O
O
P
E
R
A
T
IV
E
F
IN
A
N
C
E
C
O
R
P
O
R
A
T
IO
N
(“
C
F
C
”
)
Market Opportunity
Industry dynamics may lead to Farmer Mac growth opportunities
• Push toward higher Tier 1 capital and more duration-matched funding
• Opportunities to help CFC refinance debt away from other sources of rural utilities credit
• Needs for longer term capital expenditures in response to regulatory policies
(1) RU cooperative mortgage market structure includes only the outstanding unpaid principal balance of first lien RU cooperative real estate mortgage assets.
(2) Source: CoBank 2016Q4 Financial Information, Electric Distribution and Generation & Transmission nominal dollars as of December 31, 2016.
(3) Source: CFC 10-Q, nominal dollars as of November 30, 2016, Long-term Loans Table 6.
(4) Nominal dollars for 2016; Sum of FCS, non-GSE and Farmer Mac first lien RU cooperative real estate mortgage assets does not add up to the total due to the nature of Farmer Mac’s secondary
market business model.
(5) Source: National Rural Electric Cooperative Association
(1)
(1)
(5)
FARMER MAC
Farmer Mac Business Volume
$ IN BILLIONS
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17
Agricultural
Outstanding
Business
Volume
$3.1 $4.2 $5.5 $5.8 $5.5 $5.3 $7.2 $8.5 $9.0 $8.6 $9.6 $9.6 $10.7 $11.4 $11.9 $12.0 $12.9 $13.1
Total
Outstanding
Volume
$3.1 $4.2 $5.5 $5.8 $5.5 $5.3 $7.2 $8.5 $10.1 $10.7 $12.2 $11.9 $13.0 $14.0 $14.6 $15.9 $17.4 $17.8
Ag Real Estate Mortgage Market and Farmer Mac
$85 $89 $98 $97 $104 $114 $113 $132 $148 $146 $154 $167 $173 $185 $197 $209 $224
3.7%
4.7%
5.6%
6.0%
5.3%
4.7%
6.4% 6.5%
6.1% 5.9%
6.2%
5.7%
6.2% 6.1% 6.0%
5.7% 5.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
$0
$50
$100
$150
$200
$250
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$
I
N
B
IL
L
IO
N
S
Agricultural Real Estate Mortgage Market
Ag Real Estate Mortgage Market AGM – Ag Real Estate Mortgage Market Share
(1) Source: USDA, Economic Research Service, nominal dollars (as of February 2017).
(2) Includes total outstanding balance of loan purchases, guarantees, and Long-Term Standby Purchase Commitments (LTSPCs) in the Farm & Ranch line of business, USDA Guarantees, and
AgVantage securities secured by collateral eligible for the Farm & Ranch line of business; excludes all loan purchases, guarantees, and LTSPCs in the Rural Utilities line of business and
AgVantage securities secured by collateral eligible for the Rural Utilities line of business.
(1) (2)
EXECUTIVE SUMMARY
09
(2)
FARMER MAC
$2,730 $2,950 $3,020 $3,010
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2013 2014 2015 2016
$
P
E
R
A
C
R
E
Land Value
(2)(4)
Agricultural Industry Dashboard
$124 $93 $81 $68
$0
$20
$40
$60
$80
$100
$120
$140
2013 2014 2015 2016F
$
I
N
B
IL
L
IO
N
S
Farm Income
(1)
297 201 182 170 195 240 219 179
0
100
200
300
400
2013 2014 2015 2016
IN
D
E
X
Commodity Index
Feed Grains Prices Received Index Livestock Prices Received Index
(2)(3)
1.23% 0.90% 0.80% 1.08%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
2013 2014 2015 2016
90-Day Delinquencies
(5)
(1) Source: USDA, Economic Research Service, nominal dollars (as of February 2017).
(2) Source: USDA, National Agricultural Statistics Service, nominal dollars (as of March 2017).
(3) Commodity prices indexed according to 1999 base year as 100.
(4) Land values per acre include all farm and pasture land, irrigated and non-irrigated.
(5) Source: Kansas City Federal Reserve, Ag Finance Databook & Farm Credit Funding Corp Annual Information Statements – Non-accrual real estate loans and accruing loans that are 90 days
or more past due made by commercial and Farm Credit System banks (as of May 2017).
EXECUTIVE SUMMARY
10
10-year Average
$84 billion
10-year Average
1.35%
10-year Average
$2,495
FARMER MAC
Farmer Mac Dashboard
$53.0 $47.0 $53.8 $15.6
$0
$10
$20
$30
$40
$50
$60
2014 2015 2016 1Q17 YTD
$
I
N
M
IL
L
IO
N
S
Core Earnings
EXECUTIVE SUMMARY
11
91 87 86 91
83
84
85
86
87
88
89
90
91
92
2014 2015 2016 1Q17 YTD
B
A
S
IS
P
O
IN
T
S
Net Effective Spread
$14.6 $15.9 $17.4 $17.8
$0
$5
$10
$15
$20
FY14 FY15 FY16 1Q17
$
I
N
B
IL
L
IO
N
S
Outstanding Business Volume
35 56 34 81
0
20
40
60
80
100
FY14 FY15 FY16 1Q17
B
A
S
IS
P
O
IN
T
S
90-Day Delinquencies
(Farm & Ranch Line of Business Only)
(1) Core earnings and net effective spread are non-GAAP measures. For a reconciliation of GAAP net income attributable to common stockholders to core
earnings and a reconciliation of GAAP net interest income to net effective spread, please refer to pages 43 and 45 of the Appendix.
(2) Delinquencies include loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in
bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.
(2)
(1) (1)
FARMER MAC
Farmer Mac’s Investment Highlights
•Rigorous underwriting standards
•Low delinquencies
•Low cumulative historical credit losses
Quality Assets
•Finance assets through issuance of low-cost public debt
•Issue at narrow, GSE spreads to U.S. Treasuries
Funding Advantage
•Robust worldwide demand for agricultural products
•Increase market share through business development efforts
•Significant wholesale financing opportunities
Growth Prospects
•Overhead / outstanding business volume ~ 25 bps
•Outstanding business volume ~$200 million per employee Operational Efficiency
•Core earnings growth
•Annual core earnings return on equity ~ 15% to 20%
•Dividend policy targeted at growing payouts of core earnings to ~ 30% over the next
several years
Consistent Returns
EXECUTIVE SUMMARY
12
Agricultural Industry
Highlights
FARMER MAC
Grain prices fell again in 2016 due to record plantings/yields; livestock also under pressure
• Ending stocks increased for most major grains due to another year of bumper production
• Grain exports increased by 1.4% despite a stronger dollar, driven by lower commodity prices
• All livestock and animal products sectors experienced lower prices due to large supplies and stiff foreign competition
Farm income fell nearly 16% in 2016
• This represents a decline in net farm income for the third consecutive year
• Another 9% decline is expected in 2017, driven by an additional year of tight prices
Average inflation-adjusted U.S. agricultural real estate values decreased 1.6% in 2016
• Corn Belt farmland values fell as much as 8% during 2016 as falling grain prices continued to pressure profitability
• Rest of U.S. land values remain stable to modestly increasing, led by demand in Pacific and Southern states
• Continued softening of land values in grain-heavy states likely in 2017
Land sales transactions continue to slow with lower income and declining land values
• However, demographic trend (average age of U.S. farmer >60 years) provides support of primary transaction volume
California drought largely tempered by wet winter storms
• Reservoirs and snow pack well above normal levels; soil moisture returning to normal
• Farmer Mac portfolio in Western states remained strong throughout drought conditions
State of Agriculture – USDA Forecasts
AGRICULTURAL INDUSTRY HIGHLIGHTS
14
(1) Source: USDA, National Agricultural Statistics Service, Nominal (current dollars) (as of February 2017).
(2) Source: USDA, Economic Research Service, Nominal (current dollars) (as of February 2017).
(3) Source: Federal Reserve Bank of Chicago Seventh District, Ag Credit Conditions Survey AgLetter (as of February 2017).
(1) (2) (3)
FARMER MAC
Global Outlook
Demand
• USDA’s Future Agricultural Resources Model (FARM)
projects a 75% increase in total production and
consumption of major field crops between 2005 and
2050
• 43% increase in global population
• Higher protein diets as incomes in developing
countries increase
• Thus significant “demand pull” for agricultural products
Supply
• Very high rate of capacity utilization
• Finite amount of arable farmland
• Estimated that less than 10% of U.S. cropland
is idle
• Thus, productivity would need to nearly double by
2050 to feed the world
AGRICULTURAL INDUSTRY HIGHLIGHTS
15
(1)
(1) Source: USDA, Economic Research Service Global Drivers of Agricultural Demand and Supply, September 2014.
(2) Source: USDA, Census of Agriculture; 2012
(2)
FARMER MAC
Farmer Mac’s Unique Market Position
Farmer Mac enjoys a unique position, sharing in upside opportunity in strong markets and
benefiting from downside protection and increased relative demand in weak markets
Strong Market – Farmer Mac can participate in the upside
• Situation: Credit is healthy, transaction volumes are high, and capital is plentiful
• Impacts on Farmer Mac:
– Farmer Mac can benefit from higher industry volumes and healthy credit
– However, when farm income is high and capital is plentiful, the relative value of access to GSE capital may be
marginally lower
– Earnings can benefit from lower credit costs, but spreads may be tighter
Weak Market – Farmer Mac can benefit from loss protection and increased demand due to tighter
credit conditions
• Situation: Declining farm income, land values and credit quality; less access to capital
• Impacts on Farmer Mac:
– Farmer Mac can benefit from loss protection given its unique diversified geographic/commodity portfolio and its
conservative underwriting standards
– Farmer Mac can also benefit from the greater relative value of GSE capital in tighter credit market conditions
– However, in bear markets, no entity will be immune to declining credit quality, although spreads may be more
favorable
AGRICULTURAL INDUSTRY HIGHLIGHTS
16
FARMER MAC
Farmer Mac’s Downside Protection
Conservative underwriting with significant focus on repayment strength and low LTVs
• Total Debt Coverage (TDC) ratio of at least 1.25x
• Generally maximum LTVs of 60% to 70%, but in practice average 40% to 45% on mortgages purchased
• Require minimum borrower net equity of 50% across all agricultural assets
• Significant scrutiny given to property access and access to water, among other items
Farmer Mac credits less likely to default as compared to the broader industry
• Farmer Mac is generally recognized as having the tightest credit requirements for ag mortgage loans
• Primary focus on repayment capacity through stressed input assumptions during underwriting process
• Farmer Mac is not a “lender of last resort”
• Farm Credit Administration is a strong safety and soundness regulator
Farmer Mac credits less likely to incur losses even when a default occurs
• “Expected losses” of farm asset values range from 0% to 30% for various commodity types in Farmer Mac’s base
case scenario
• Farmer Mac’s “stress scenario losses” of farm asset values range from 17% to 50% for various commodity types
• Given Farmer Mac’s portfolio average LTV of 44% as of March 31, 2017, average farm asset value losses would need
to be in excess of 56% to begin to generate the first dollar of loss to Farmer Mac
– The 1980s agricultural credit crisis saw land values decline approximately 23% from peak to trough
AGRICULTURAL INDUSTRY HIGHLIGHTS
17 (1) Source: USDA, National Agricultural Statistics Service (as of August 2015).
(1)
FARMER MAC
$48 $51 $55 $39 $61 $87 $79 $57 $70 $78 $62 $77 $114 $96 $124 $93 $81 $68
170
179
279
50
100
150
200
250
300
350
$0
$20
$40
$60
$80
$100
$120
$140
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
IN
D
E
X
$
I
N
B
IL
L
IO
N
S
Nominal Farm Income Grain Index Livestock Index Export Change Index
(1) (2) (2) (1)
Farm Income and Related Trends
(1) Source: USDA, Economic Research Service, nominal dollars (as of February 2017).
(2) Source: USDA, National Agricultural Statistics Service; Indexed to 1999 as 100.
AGRICULTURAL INDUSTRY HIGHLIGHTS
18
FARMER MAC
Ag Land Value and Leverage Trends
$1.0 $1.1 $1.2 $1.2 $1.3 $1.3 $1.6 $1.8 $2.0 $2.2 $2.1 $2.2 $2.3 $2.5 $2.7 $3.0 $3.0 $3.0
$48 $51
$55
$39
$61
$87
$79
$57
$70
$78
$62
$77
$114
$96
$124
$93
$81
$68
$0
$20
$40
$60
$80
$100
$120
$140
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
$
IN
B
IL
L
IO
N
S
A
V
E
R
A
GE
L
A
N
D
V
A
L
U
E
$
I
N
T
H
O
U
S
A
N
D
S
/A
C
R
E
Ag Land Values
Land Value Nominal Farm Income
Average
12.7%
9%
10%
11%
12%
13%
14%
15%
16%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
D
E
B
T
TO
A
S
S
E
T
R
A
T
IO
(
%
)
Leverage
Debt to Asset Ratio Average
(1) Source: USDA, National Agricultural Statistics Service, nominals dollars, (as of February 2017); includes all farm and pasture land, irrigated and non-irrigated.
(2) Source: USDA, Economic Research Service, nominal dollars (as of February 2017).
(1) (2)
(2)
AGRICULTURAL INDUSTRY HIGHLIGHTS
19
FARMER MAC
Agricultural Risk Management Tools
Farmers today use a broad array of risk management tools, many of which were not available or
not accepted during the ag credit crisis of the 1980s
• Many now view costs of hedging simply as a cost of doing business
• Have learned from their parents’ experiences in the 1980s
• Risk management includes revenue and cost protection and more sophisticated asset liability management
Revenue Hedging
• Crop insurance – approximately 92% of planted acres to principal crops carry some form of crop insurance
• Crop insurance premiums still federally subsidized and losses shared by the federal government
• Futures/forward sales – many producers use hedging instruments to sell grain crops forward at planting stage
Cost Hedging
• Feed costs hedged with futures/forwards
• Fertilizer and fuel costs can be similarly hedged
• Water availability can be provided via “water banks” and secondary sources of water, e.g. wells
• Water costs can also be hedged with forward purchase agreements
Debt service is better managed with low absolute leverage levels and better rate options
AGRICULTURAL INDUSTRY HIGHLIGHTS
20 (1) Source: USDA, Risk Management Agency 2016 Summary of Business, Net Acres Insured and USDA NASS 2016 Acreage Report.
(1)
FARMER MAC
USDA – Key 2017 Forecasts
Demand for U.S. agricultural products to increase
• Demographic trends and a stabilizing economy contributing to growth
• Lower commodity prices stimulating quantity demanded
• Total U.S. export values to increase 2% to $136 billion led by greater interest in livestock, poultry, and dairy exports
U.S. farm income to decline approximately 9% to $62 billion in 2017
• Grain prices remain range-bound at lower levels and livestock prices down on higher global supplies
• Input costs are stable to modestly declining
– Increasing labor, interest, and fuel costs largely offset by declines in feed, animal, seed, and fertilizer costs
Average U.S. ag land values expected to stay relatively flat to slightly down
• Midwest most impacted with estimates ranging from 5% to 10% declines as compared to 2016 levels
• Rest of U.S. remains stable to modestly increasing – demand steady in non-grain producing regions
Total U.S. agricultural mortgage market to grow 7% to $240 billion in 2017
AGRICULTURAL INDUSTRY HIGHLIGHTS
21
(1) Source: USDA, National Agricultural Statistics Service, nominal dollars (as of March 2017).
(2) Source: USDA, Economic Research Service, nominal dollars (as of February 2017).
(3) Source: USDA, World Agricultural Supply and Demand Estimates Report, nominal dollars (as of February 2017).
(4) Source: USDA, Economic Research Service Trade Outlook (as of February 2017).
(1) (2) (3) (4)
Farmer Mac
Overview
FARMER MAC
Lines of Business and Products
Product Type
Customers
Lines of Business
$ IN BILLIONS AND PERCENTAGE OF TOTAL VOLUME
LOAN PURCHASES • Ag Banks
• Insurance Companies
• Rural Utilities Cooperatives
F & R USDA RU IC Total
$3.6
20%
$2.1
12%
$1.0
5%
-- $6.7
37%
WHOLESALE FINANCING
• AgVantage
• Farm Equity AgVantage
• Ag Banks
• Insurance Companies
• Ag Investment Funds
• Production and Agribusiness
Companies
• Rural Utilities Cooperatives
-- -- -- $7.6
43%
$7.6
43%
CREDIT PROTECTION
• Long-term Standby Purchase
Commitments (LTSPCs)/
AMBS Guarantees
• FCS Institutions
• Ag Banks
• Insurance Companies
• Ag Investment Funds
• Rural Utilities Cooperatives
$2.6
15%
-- $0.9
5%
-- $3.5
20%
Total $6.2 $2.1 $1.9 $7.6 $17.8 = Allowances and provisions recorded on these assets
FARMER MAC OVERVIEW
23
AS OF MARCH 31, 2017
FARMER MAC
Business Development
Product Type Marketing Channel Target Customers
AG LOAN PURCHASES
AND CREDIT
PROTECTION
• Marketing department with 5 relationship
managers
• Geographically dispersed nationwide
• Cover ag banks and non-bank originators
• Seek to add new ag lenders as eligible loan
sellers for Farmer Mac
• Seek to add customers utilizing LTSPCs
• Over 3,200 commercial banks with agricultural
loans on-balance sheet (approximately 600 are
currently sellers)
• Special focus on large-cap ag banks
• Farm Credit System (FCS)
• Insurance company ag lenders
WHOLESALE FINANCING
FOR RURAL LENDERS
• Director of Institutional Business Development
• C-suite outreach to target firms
• Attend industry conferences
• Insurance company ag lenders
• Larger banks with ag mortgage portfolios
• Rural utilities cooperative lenders
WHOLESALE FINANCING
FOR INVESTORS IN AG
ASSETS
• Same as “Wholesale Financing for Rural
Lenders” above
• Paid deal sourcing relationships with industry
contacts
• Leverage capital markets relationships to
identify ag funds and ag companies seeking
low-cost wholesale financing
• Public or private ag investment funds (all
structures)
• Agricultural companies – production ag and
agribusiness (for profit and cooperative)
RURAL UTILITIES LOAN
PURCHASES AND CREDIT
PROTECTION
• C-suite relationships
• Credit department contacts
• Capital markets relationship contacts
• National Rural Utilities Cooperative Finance
Corporation (non-GSE)
• CoBank (FCS GSE)
FARMER MAC OVERVIEW
24
(1)
(1) Source: FDIC Statistics on Depository Institutions datasets (https://www2.fdic.gov/sdi/index.asp).
FARMER MAC
Outstanding Volume - Portfolio Summary
Farm &
Ranch
35%
USDA
Guarantees
12%
Rural
Utilities
10%
Institutiona
l Credit
43%
By Line of Business
AgVantage
43%
On-Balance
Sheet
Loans
25%
LTSPCs
18%
AMBS
2% USDA
12%
By Product Type
FARMER MAC OVERVIEW
25
AS OF MARCH 31, 2017
FARMER MAC
Northwest
11%
Southwest
29%
Mid-North
34%
Mid-South
14%
Northeast
4%
Southeast
8%
By Geographic Region
Crops
55%
Permanent
Plantings
17%
Livestock
21%
Part-time
Farm
6%
Ag. Storage
and
Processing
1%
By Commodity Type
Farm & Ranch Loans Portfolio Diversification
FARMER MAC OVERVIEW
26
(1) Farm & Ranch portfolio includes on-balance sheet loans and LTSPCs.
AS OF MARCH 31, 2017
(1)
FARMER MAC
Core earnings are primarily a direct function of three key factors:
Core Earnings Value Drivers
FARMER MAC OVERVIEW
27
Value Drivers Things to Consider
BUSINESS VOLUME •Macro supply/demand for ag credit
•Farmer Mac business development success
• Impact of potential credit quality shocks
• Impact of potential rate shocks
NET EFFECTIVE SPREAD •Macro supply/demand for ag credit
•Absolute level of interest rates
•Business mix
•Delinquencies
CREDIT QUALITY • Idiosyncratic borrower impacts: death in family, divorce, & disease
•Commodity price volatility
•Acts of nature: droughts, disease, etc.
(1)
(1) Core earnings and net effective spread are non-GAAP measures. For a reconciliation of GAAP net income attributable to common stockholders to core earnings and a reconciliation of
GAAP net interest income to net effective spread, please refer to pages 43-46 of the Appendix.
(1)
FARMER MAC
Farmer Mac Outstanding Business Volume
$17.8
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17
$
I
N
B
IL
L
IO
N
S
FARMER MAC OVERVIEW
28
12.4% CAGR
(1999 to 2016)
FARMER MAC
Farmer Mac Net Effective Spread
FARMER MAC OVERVIEW
29
69 78 106 97 106 106 104 96 91 87 86 91
0.9%
1.2%
3.0%
2.8%
1.6% 1.6%
1.7%
1.3%
1.1%
1.4% 1.4%
1.2%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17
YTD
M
OO
D
Y
’S
C
OR
P
OR
A
TE
S
P
R
E
A
D
IN
D
E
X
N
E
T
E
FF
E
C
T
IV
E
S
P
R
E
A
D
B
A
S
IS
P
O
IN
T
S
Farmer Mac Net Effective Spread US Treasury Department 10-Year High Quality Market Corporate Bond Spread(2)
(1) Net effective spread is a non-GAAP measure. For a reconciliation of GAAP net interest income to net effective spread, please refer to page 45 of the Appendix.
(2) Beginning Jan. 1, 2015, Farmer Mac classified all of the income from Farmer Mac Guaranteed Securities that it holds in its portfolio as interest income. Periods prior to 2011 have not
been restated.
(3) Source: St. Louis Fed, Economic Database: Average 10-Year High Quality Market (HQM) Corporate Bond Par Yield – Average 10-Year Treasury CMT.
(3)
(1)
FARMER MAC
(1) Source: Kansas City Federal Reserve, Ag Finance Databook & Farm Credit Funding Corp Annual Information Statements – Non-accrual real estate loans and accruing loans that are 90
days or more past due made by commercial banks and Farm Credit System institutions; Farm Credit Data as of 2016Q4; Kansas City Fed data as of 2016Q3.
(2) Delinquencies include loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities (excluding AgVantage Securities) and LTSPCs that are 90 days or more
past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.
Farmer Mac Credit vs. Industry
1.25%
1.16%
1.14%
0.75%
0.60%
0.52%
0.55%
0.95%
2.00%
2.37%
2.09%
1.63%
1.23%
0.90%
0.80%
1.08%
1.59%
1.21%
0.60% 0.55% 0.58%
0.41%
0.21%
1.35% 1.13%
1.63%
0.93%
0.70%
0.55%
0.35%
0.56%
0.34%
0.81%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 1Q17
90-Day Delinquencies
Industry 90-Day Delinquencies Farmer Mac 90-Day Delinquencies (Farm & Ranch Portfolio Only)
(1)
FARMER MAC OVERVIEW
30
(2)
Farmer Mac Historical
Average 1.00%
FARMER MAC
Farmer Mac – Historical Credit Losses
Farmer Mac’s Rural Utilities, USDA Guarantees, and Institutional Credit lines of business have not
had any credit losses to date
Farm & Ranch line of business has historical cumulative losses of 0.16%, or less than 1bp per year
• Cumulative losses of $35 million on $22 billion of cumulative historical business volume
FARMER MAC OVERVIEW
31
-$2
$0
$2
$4
$6
$8
$10
$12
1995 &
Prior
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
N
E
T
L
OS
S
/
(
GA
IN
)
$
I
N
M
IL
L
IO
N
S
BY YEAR OF ORIGINATION
Ag Storage & Processing Crops Permanent Plantings Livestock Part-Time Farm / Rural Housing
FARMER MAC
Funding
Finance asset purchases with proceeds of debt issuances
• 20+ dealers
• Match-funding provides for stable net effective spread and immaterial interest rate risk
Farmer Mac’s debt securities carry privileges for certain holders
• 20% capital risk weighting
• Eligible collateral for Fed advances
• Legal investments for federally supervised financial institutions (banks, etc.)
FARMER MAC OVERVIEW
32
Debt Securities Trade at Narrow Spreads to Comparable Maturity Treasuries
MATURITY (YEARS) 1 3 5 10
SPREAD TO TREASURY
(AS OF MARCH 31, 2017)
10 bps 17 bps 20 bps 56 bps
Farmer Mac
Financial Performance
FARMER MAC
$11.0 $9.1
$12.4
$15.6
$23.2
$11.6
$13.0
$9.3
$13.2
$14.4
$9.5
$13.1
$13.9
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
2014 2015 2016 2017
$
I
N
M
IL
L
IO
N
S
1Q 2Q 3Q 4Q
$53.0
$47.0
Core Earnings (Non-GAAP Measure)
FARMER MAC FINANCIAL PERFORMANCE
34
(1) For a reconciliation of GAAP net income attributable to common stockholders to core earnings, a non-GAAP financial measure, please refer to pages 42-43 of the Appendix.
(2) Core earnings for 2014 include the effects of the cash management and liquidity initiative implemented in second quarter 2014, and the capital structure initiative under which Farmer Mac issued $150
million of preferred stock in advance of the planned March 30, 2015 redemption of all outstanding Farmer Mac II Preferred Stock and related Farm Asset-Linked Capital Securities (FALConS). Each
of these initiatives have been described in Farmer Mac’s prior SEC filings, including its Annual Reports on Form 10-K for the years ended December 31, 2014 and December 31, 2015, filed with the
SEC on March 16, 2015 and March 10, 2016, respectively.
(2)
(1)
$53.8
$15.6
FARMER MAC
Business Volume
FARMER MAC FINANCIAL PERFORMANCE
35
$5.4 $5.8 $6.1 $5.7 $6.2
$6.4
$6.7
$7.3
$7.1
$7.6
$1.8
$1.9
$2.1
$1.9
$2.1
$1.0
$1.5
$1.9
$1.5
$1.9
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
2014 2015 2016 1Q16 1Q17
$
I
N
B
IL
L
IO
N
S
Farm & Ranch Institutional Credit USDA Guarantees Rural Utilities
$15.9
AS OF YEAR-END AS OF QUARTER-END
(1) Includes on- and off-balance sheet outstanding business volume.
$14.6
$16.2
$17.8
(1)
$17.4
FARMER MAC
Net Effective Spread (Non-GAAP Measure)
$113.7 $119.4 $125.1 $29.9 $32.9
0.91%
0.87% 0.86%
0.82%
0.91%
0.60%
0.65%
0.70%
0.75%
0.80%
0.85%
0.90%
0.95%
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
2014 2015 2016 1Q16 YTD 1Q17 YTD
$
I
N
M
IL
L
IO
N
S
Net Effective Spread (dollars) Net Effective Spread (percent)
FARMER MAC FINANCIAL PERFORMANCE
36 (1) For a reconciliation of GAAP net interest income to net effective spread, a non-GAAP financial measure, please refer to page 45 of the Appendix.
(1)
AS OF YEAR-END
FARMER MAC
$29.4 $32.1 $34.7 $50.8
0.56% 0.60% 0.61%
0.81%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
1Q14 1Q15 1Q16 1Q17
%
$
I
N
M
IL
L
IO
N
S
90-Day Delinquencies
90-Day Delinquencies % of Farm & Ranch Portfolio
Historical
Average ~1.0%
$182.5 $136.7 $105.7 $171.5
3.4%
2.6%
1.9%
2.7%
-0.5%
0.5%
1.5%
2.5%
3.5%
4.5%
5.5%
$0.0
$50.0
$100.0
$150.0
$200.0
1Q14 1Q15 1Q16 1Q17
%
$
I
N
M
IL
L
IO
N
S
Substandard Assets
Substandard Assets % of Farm & Ranch Portfolio
Credit Metrics
$14.0 $9.4 $6.6 $7.6
0.26%
0.18%
0.12% 0.12%
0.0%
0.1%
0.2%
0.3%
$0.0
$5.0
$10.0
$15.0
1Q14 1Q15 1Q16 1Q17
%
$
I
N
M
IL
L
IO
N
S
Total Allowance for Losses
Total Allowance for Losses % of Farm & Ranch Portfolio
FARMER MAC FINANCIAL PERFORMANCE
37
Historical
Average ~4.0% (1)
(1) Farmer Mac’s historical averages are based on approximately 15 years of historical data for the Farm & Ranch line of business.
(1)
FARMER MAC
$766 $564 $610 $563 $624
$345
$102
$143
$85
$149
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$0
$200
$400
$600
$800
2014 2015 2016 1Q16 1Q17
C
O
R
E
C
A
P
IT
A
L
A
M
O
U
N
T
A
B
OV
E
S
T
A
T
U
TO
R
Y
M
IN
IM
U
M
C
A
P
IT
A
L
$
IN
M
IL
L
IO
N
S
C
O
R
E
C
A
P
IT
A
L
$
I
N
M
IL
L
IO
N
S
Core Capital Core Capital Amount Above Statutory Minimum Capital
AS OF YEAR-END AS OF QUARTER-END
Capital
FARMER MAC FINANCIAL PERFORMANCE
38
(1) Core capital defined as total stockholders’ equity less accumulated other comprehensive income.
(1)
$250m Redemption
of Farmer Mac II
Preferred Stock and
related FALConS
Appendix
FARMER MAC
Key Company Metrics
APPENDIX
40
($ in thousands, except per share amounts) 1Q17 YTD 2016 2015 2014
Core Earnings $15,607 $53,791 $46,975 $53,047
Core Earnings per Diluted Share $1.45 $5.01 $4.15 $4.67
Net Effective Spread ($) $32,866 $125,102 $119,380 $113,693
Net Effective Spread (%) 0.91% 0.86% 0.87% 0.91%
Guarantee & Commitment Fees $5,317 $19,170 $17,155 $16,780
Core Capital Above Statutory Minimum $148,700 $143,200 $102,400 $345,000
Common Stock Dividends per Share $0.36 $1.04 $0.64 $0.56
Outstanding Business Volume $17,844,541 $17,399,475 $15,898,820 $14,597,758
90-Day Delinquencies – Farm & Ranch 0.81% 0.34% 0.56% 0.35%
Charge-Offs $241 $130 $3,772 $86
Book Value per Share $39.59 $38.42 $33.66 $29.76
Core Earnings Return on Equity 15% 14% 14% 17%
(1) Core earnings for 2014 include the effects of the cash management and liquidity initiative implemented in second quarter 2014 and the capital structure initiative under which
Farmer Mac issued $150 million of preferred stock in advance of the planned March 30, 2015 redemption of all outstanding Farmer Mac II Preferred Stock and related
FALConS. Each of these initiatives have been described in Farmer Mac’s prior SEC filings, including its Annual Reports on Form 10-K for the years ended December 31, 2014
and December 31, 2015, filed with the SEC on March 16, 2015 and March 10, 2016, respectively.
(2) Core earnings, core earnings per share, and net effective spread are non-GAAP measures. For a reconciliation of GAAP net income attributable to
common stockholders to core earnings and earnings per common share to core earnings per share, and a reconciliation of GAAP net interest income to net effective spread,
please refer to pages 42-45 of the Appendix.
(3) Book Value per Share excludes accumulated other comprehensive income.
(1) (2)
(3)
(2)
(2)
(2)
FARMER MAC
($ in thousands) Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15 Sep-15 Jun-15 Mar-15
Revenues:
Net effective spread 32,866$ 31,928$ 32,199$ 31,026$ 29,949$ 29,949$ 30,387$ 29,787$ 29,257$
Guarantee and commitment fees 5,317 5,158 4,533 4,810 4,669 4,730 4,328 4,085 4,012
Other 1,061 1,189 (32) (125) (517) (284) (93) (24) (405)
Total revenues 39,244 38,275 36,700 35,711 34,101 34,395 34,622 33,848 32,864
Credit related expense/(income):
Provision for/(release of) losses 444 512 (31) 458 63 (49) (303) 1,256 (696)
REO operating expenses - - - 39 44 48 - (1)
Losses/(gains) on sale of REO 5 - (15) - - - - - 1
Total credit related expense/(income) 449 512 (46) 458 102 (5) (255) 1,256 (696)
Operating expenses:
Compensation and employee benefits 6,317 5,949 5,438 5,611 5,774 5,385 5,236 5,733 5,693
General and administrative 3,800 4,352 3,474 3,757 3,526 3,238 3,676 3,374 2,823
Regulatory fees 625 625 613 612 613 613 600 600 600
Total operating expenses 10,742 10,926 9,525 9,980 9,913 9,236 9,512 9,707 9,116
Net earnings 28,053 26,837 27,221 25,273 24,086 25,164 25,365 22,885 24,444
Income tax expense 9,166 9,581 9,497 8,956 8,444 8,855 8,924 8,091 6,692
Non-controlling interest (15) 28 (18) (16) (28) (60) (36) (119) 5,354
Preferred stock dividends 3,295 3,296 3,295 3,296 3,295 3,296 3,295 3,296 3,295
Core earnings 15,607$ 13,932$ 14,447$ 13,037$ 12,375$ 13,073$ 13,182$ 11,617$ 9,103$
Core Earnings by Quarter Ended
Farmer Mac’s Core Earnings History
APPENDIX
41
(1) Core earnings and net effective spread are non-GAAP measures. For a reconciliation of GAAP net income attributable to common stockholders to core earnings and a reconciliation of
GAAP net interest income to net effective spread, please refer to pages 42 and 45 of the Appendix.
(2) First quarter 2017 includes $0.7 million of tax benefits upon the vesting of restricted stock and the exercise of SARs associated with new accounting guidance for stock-based awards
that became effective in first quarter 2017.
(1)
(1)
(2)
FARMER MAC
Reconciliation of Net Income to Core Earnings
APPENDIX
42
($ in thousands) Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15 Sep-15 Jun-15 Mar-15
Net income attributable to common stockholders 18,615$ 25,465$ 16,364$ 12,006$ 10,317$ 15,032$ 8,359$ 22,162$ 1,818$
Reconciling items:
Gains/(losses) on f inancial derivatives and
hedging activities due to fair value changes 4,805 17,233 1,460 (2,076) (2,989) 2,743 (6,906) 15,982 (895)
Unrealized (losses)/gains on trading assets (82) (474) 1,182 394 358 696 (8) 170 362
Amortization of premiums/discounts and
deferred gains on assets consolidated
at fair value (127) (40) (157) (371) (281) (263) (117) (125) (814)
Net effects of settlements on agency forw ard
contracts 32 1,024 464 466 (255) (162) (390) 197 (252)
Loss on retirement of Farmer Mac II LLC
Preferred Stock - - - - - - - - (8,147)
Income tax effect related to reconciling items (1,620) (6,210) (1,032) 556 1,109 (1,055) 2,598 (5,679) 2,461
Core earnings 15,607$ 13,932$ 14,447$ 13,037$ 12,375$ 13,073$ 13,182$ 11,617$ 9,103$
Core Earnings by Quarter Ended
(1)
(1) The loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings because it is not a frequently occurring
transaction and not indicative of future operating results. This is also consistent with Farmer Mac’s previous treatment of these types of origination costs associated
with securities underwriting that are capitalized and deferred during the life of the security.
FARMER MAC
Reconciliation of Net Income to Core Earnings
APPENDIX
43
(in thousands) 1Q17 YTD 2016 2015 2014
Net income attributable to common stockholders 18,615$ 64,152$ 47,371$ 38,251$
Less reconciling items:
Gains/(losses) on financial derivatives and hedging activities due to fair value
changes 4,805 13,628 10,924 (9,968)
Unrealized gains/(losses) on trading assets (82) 1,460 1,220 1,596
Amortization of premiums/discounts and deferred gains on assets
consolidated at fair value (127) (849) (1,319) (14,549)
Net effects of settlements on agency forward contracts 32 1,699 (607) 159
Loss on retirement of Farmer Mac II LLC Preferred Stock - - (8,147) -
Income tax effect related to reconciling items (1,620) (5,577) (1,675) 7,966
Core earnings 15,607$ 53,791$ 46,975$ 53,047$
Core Earnings by Period Ended
(1)
(1) The loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings because it is not a frequently occurring
transaction and not indicative of future operating results. This is also consistent with Farmer Mac’s previous treatment of these types of origination costs associated
with securities underwriting that are capitalized and deferred during the life of the security.
FARMER MAC
Reconciliation of Earnings per Common Share to Core
Earnings per Share
APPENDIX
44
Mar-17 Mar-16 Dec-16 Dec-15 Dec-14
GAAP - Diluted EPS 1.73$ 0.94$ 5.97$ 4.19$ 3.37$
Less reconciling items:
Gains/(losses) on financial derivatives and hedging
activities due to fair value changes 0.45 (0.26) 1.26 0.97 (0.87)
Unrealized (losses)/gains on trading assets (0.01) 0.03 0.14 0.11 0.14
Amortization of premiums/discounts and deferred
gains on assets consolidated at fair value (0.01) (0.03) (0.08) (0.12) (1.28)
Net effects of settlements on agency forward
contracts - (0.02) 0.16 (0.05) 0.01
Loss on retirement of Farmer Mac II LLC Preferred
Stock - - - (0.72) -
Income tax effect related to reconciling items (0.15) 0.10 (0.52) (0.15) 0.70
Sub-total 0.28 (0.18) 0.96 0.04 (1.30)
Core Earnings - Diluted EPS 1.45$ 1.12$ 5.01$ 4.15$ 4.67$
For the Three Months Ended For the Year Ended
(1) The loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings because it is not a frequently occurring
transaction and not indicative of future operating results. This is also consistent with Farmer Mac’s previous treatment of these types of origination costs associated
with securities underwriting that are capitalized and deferred during the life of the security.
(1)
FARMER MAC
Reconciliation of Net Interest Income to Net Effective
Spread
APPENDIX
45
(in thousands) 1Q17 YTD 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Net interest yield 0.96% 0.90% 0.88% 0.51% 0.89% 1.14% 1.30% 1.30% 1.68% 1.62% 0.85% 0.85%
Net effect of consolidated trusts 0.03% 0.03% 0.01% 0.00% 0.00% 0.02% 0.06% 0.15% 0.00% 0.00% 0.00% 0.00%
Net effect of securities purchased under
agreement to resell and securities sold, not
yet purchased 0.00% 0.00% 0.00% 0.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Expense related to undesignated financial
derivatives -0.08% -0.08% -0.04% -0.07% -0.10% -0.23% -0.41% -0.54% -0.70% -0.49% 0.00% -0.07%
Amortization of premiums/discounts on
assets consolidated at fair value 0.00% 0.01% 0.02% 0.12% 0.17% 0.12% 0.12% 0.19% 0.00% 0.00% 0.00% 0.00%
Yield maintenance payments
(1)
0.00% 0.00% 0.00% 0.00% 0.00% -0.01% -0.01% -0.04% -0.01% -0.07% -0.07% -0.09%
Net Effective Spread 0.91% 0.86% 0.87% 0.91% 0.96% 1.04% 1.06% 1.06% 0.97% 1.06% 0.78% 0.69%
(1) Beginning in 2013, Farmer Mac no longer excluded yield maintenance payments.
Net Effective Spread by Period Ended
FARMER MAC
Farmer Mac’s Net Effective Spread History
APPENDIX
46
($ in thousands) Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield
For the quarter ended:
March 31, 2017 10,684$ 1.80% 4,703$ 0.91% 2,639$ 1.06% 12,581$ 0.82% 2,259$ 0.32% 32,866$ 0.91%
December 31, 2016 10,349 1.78% 5,334 1.08% 2,623 1.05% 11,627 0.78% 1,995 0.26% 31,928 0.89%
September 30, 2016 10,703 1.90% 5,189 1.07% 2,643 1.05% 11,427 0.75% 2,237 0.24% 32,199 0.86%
June 30, 2016 9,875 1.78% 4,588 0.96% 2,562 1.03% 11,407 0.77% 2,594 0.29% 31,026 0.84%
March 31, 2016 9,461 1.71% 4,308 0.91% 2,538 1.02% 11,090 0.80% 2,552 0.26% 29,949 0.82%
December 31, 2015 9,381 1.72% 4,518 0.96% 2,845 1.14% 10,899 0.80% 2,306 0.26% 29,949 0.85%
September 30, 2015 9,628 1.80% 4,630 0.99% 2,907 1.18% 11,271 0.81% 1,951 0.25% 30,387 0.88%
June 30, 2015 9,681 1.82% 4,466 0.98% 2,838 1.18% 10,860 0.78% 1,942 0.25% 29,787 0.88%
March 31, 2015
(2)
10,114 1.97% 4,225 0.95% 2,804 1.15% 10,425 0.77% 1,689 0.20% 29,257 0.86%
(1) Net effective spread is a non-GAAP measure. For a reconciliation of GAAP net interest income to net effective spread, please refer to page 45 of the Appendix.
(2) Beginning in f irst quarter 2015, Farmer Mac revised its methodology for interest expense allocation among the Farm & Ranch, USDA Guarantees, and Rural Utilities lines of business.
As a result of this revision, a greater percentage of interest expense has been allocated to the longer term assets included w ithin the USDA Guarantees and Rural Utilities lines of
business.
Net Effective Spread (1)Institutional Credit
Net Effective Spread by Business Segment
Farm & Ranch USDA Guarantees Rural Utilities Corporate
(1)
FARMER MAC
Liquidity – Investment Portfolio
Farmer Mac maintains an investment portfolio to
provide back-up source of liquidity in excess of
regulatory requirements
• Minimum of 90 days of liquidity required by regulation
$2.8 billion investment portfolio at March 31
• Cash and highly-rated investment securities
• Conservative portfolio goals
− Minimize exposure to market volatility
− Preservation of capital
− Ready access to cash
• Provided 194 days of liquidity as of March 31, 2017
Farmer Mac also has $1.5 billion line of credit
with U.S. Treasury
• Supports Farmer Mac’s guarantee obligations
• Farmer Mac has never used this line of credit
Cash &
Equiv.
11.2%
Guar. by
GSEs and
U.S. Gov't
Agencies
87.1%
Corporate
Debt
Securities
0.4%
Asset-
Backed
Securities
1.3%
Liquidity Portfolio
APPENDIX
47
AS OF MARCH 31, 2017
FARMER MAC
Interest Rate Risk
Match fund asset purchases with liabilities that have similar interest rate characteristics
• Duration and convexity matching
• Coupon type
• Reset frequency
Manage pre-payment risk on mortgages
• Issue a portfolio of callable and bullet debt across spectrum of maturities to obtain the appropriate match
• Can adjust effective asset and debt coupon and duration characteristics through the use of interest rate swaps or
other derivatives
Perform regular stress testing and disclose a variety of sensitivity measures
• Duration Gap
• Market Value of Equity (MVE) Sensitivity
• Net Interest Income (NII) Sensitivity
• Measure these sensitivities’ impact on various capital metrics
APPENDIX
48
FARMER MAC
Three Classes of Common Stock
Number of Shares
CLASS A VOTING COMMON STOCK
• NYSE: AGM.A
• Ownership restricted to non-Farm Credit System financial institutions
1.0 million
CLASS B VOTING COMMON STOCK
• Not publicly traded
• Ownership restricted to Farm Credit System institutions
0.5 million
CLASS C NON-VOTING COMMON STOCK
• NYSE: AGM
• No ownership restrictions
9.1 million
APPENDIX
49
FARMER MAC
Three Classes of Preferred Stock
Number of Shares
SERIES A NON-CUMULATIVE PREFERRED STOCK
• NYSE: AGM.PR.A
• Dividend Yield: 5.875%**
• Option to redeem at any time on or after January 17, 2018
• Redemption Value: $25 per share
2.4 million
SERIES B NON-CUMULATIVE PREFERRED STOCK
• NYSE: AGM.PR.B
• Dividend Yield: 6.875%**
• Option to redeem at any time on or after April 17, 2019
• Redemption Value: $25 per share
3.0 million
SERIES C FIXED-TO-FLOATING NON-CUMULATIVE PREFERRED STOCK
• NYSE: AGM.PR.C
• Dividend Yield: 6.000%**
• Option to redeem at any time on or after July 18, 2024
• Redemption Value: $25 per share
3.0 million
APPENDIX
50
**Par value annual dividend yield