Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - FEDERAL AGRICULTURAL MORTGAGE CORP | a2017q2pressrelease.htm |
| EX-3.1 - EXHIBIT 3.1 - FEDERAL AGRICULTURAL MORTGAGE CORP | amendedandrestatedby-lawsa.htm |
| 8-K - 8-K - FEDERAL AGRICULTURAL MORTGAGE CORP | a2017q2earningsrelease8-k.htm |
2017
Equity Investor
Presentation
Second 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, Quarterly Report on
Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on
May 10, 2017, and Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017, filed with the SEC on August 9, 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 June 30, 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 June 30, 2017, and should be read in conjunction with
Farmer Mac’s Quarterly Report on Form 10-Q filed with the SEC on
August 9, 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 Farmer Mac Overview
26 Farmer Mac Financial Performance
33 Appendix – Farmer Mac
44 Appendix – Agricultural Industry
EQUITY INVESTOR PRESENTATION
04
Executive
Summary
FARMER MAC
Farmer Mac Overview
Farmer Mac was created in response to the
agricultural credit crisis of the 1980s
• Increase access to and reduce the cost of capital for
the benefit of American agricultural and rural
communities
• Provide financial solutions to a broad spectrum of the
agricultural community
Lines of Business
• Farm & Ranch
• USDA Guarantees
• Rural Utilities
• Institutional Credit
Diverse Product Suite
• 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
{9.0% Eligible 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
Addressable
Agriculture
Mortgage Market
{Farmers & Ranchers}
Mortgage
Financing
Mortgage
Financing
$144 Billion
$
6
9
B
il
li
o
n
$
7
6
B
illio
n
F
C
S
F
U
N
D
IN
G
C
O
R
P
O
R
A
T
IO
N
A
G
F
IR
S
T
S
o
u
th
e
a
s
t
$
8
B
A
G
R
IB
A
N
K
M
id
w
e
s
t
$
3
4
B
F
C
B
O
F
T
X
S
o
u
th
w
e
s
t
$
8
B
C
O
B
A
N
K
N
a
ti
o
n
w
id
e
$
1
9
B
IN
S
U
R
A
N
C
E
C
O
M
P
A
N
IE
S
$
8
B
A
G
B
A
N
K
S
$
5
7
B
N
O
N
-B
A
N
K
L
E
N
D
E
R
S
$
1
0
B
7
3
R
E
T
A
IL
A
C
A
s
(1) Eligible ag real estate mortgage market structure shown here includes the forecast for outstanding unpaid principal balance of first lien ag mortgage assets as of December 31, 2016
reduced by forty percent to estimate loans that would not qualify for Farmer Mac’s Farm & Ranch line of business.
(2) Source: FDIC Call Reports (ag banks), Federal Reserve Board of Governors (insurance companies and Farm Service Agency portion of non-bank lenders), and USDA, Economic
Research Service forecast for remaining non-bank lenders adjusted for estimates of Farmer Mac eligibility; nominal dollars forecast for year-end 2016 on a prorated basis (February 2017).
(3) Source: Farm Credit Administration, Call Report data as of December 2016 adjusted for estimates of Farmer Mac eligibility.
(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)
Cooperative
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)
$4.5 Billion
{12.5% 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 2Q17
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 $13.6
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 $18.3
Ag Real Estate Mortgage Market and Farmer Mac
$59 $61 $71 $70 $75 $78 $81 $93 $105 $104 $104 $111 $112 $119 $128 $135 $144
5.3%
6.8%
7.8%
8.2%
7.3%
6.8%
8.8% 9.2% 8.6% 8.3%
9.3%
8.6%
9.6% 9.5% 9.3%
8.9% 8.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
$0
$20
$40
$60
$80
$100
$120
$140
$160
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
Eligible Ag Real Estate Mortgage Market AGM – Ag Real Estate Mortgage Market Share
(1) Source: Farmer Mac calculations using USDA, Economic Research Service, Federal Reserve Board of Governors, FDIC Call Report and FCS Call Report data; nominal dollars
forecast for year-end 2016 on a prorated basis (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 $31.6
$0
$10
$20
$30
$40
$50
$60
2014 2015 2016 2Q17 YTD
$
I
N
M
IL
L
IO
N
S
Core Earnings
EXECUTIVE SUMMARY
11
91 87 86 92
82
84
86
88
90
92
94
2014 2015 2016 2Q17 YTD
B
A
S
IS
P
O
IN
T
S
Net Effective Spread
$14.6 $15.9 $17.4 $18.3
$0
$5
$10
$15
$20
FY14 FY15 FY16 2Q17
$
I
N
B
IL
L
IO
N
S
Outstanding Business Volume
35 56 34 65
0
10
20
30
40
50
60
70
FY14 FY15 FY16 2Q17
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 core earnings to GAAP net income attributable to common stockholders and a reconciliation of net
effective spread to GAAP net interest income, please refer to pages 36 and 38 of the “Appendix – Farmer Mac.”
(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 (81 employees) Operational Efficiency
•Core earnings growth
•Annual core earnings return on equity ~ 15%
•Dividend policy targeted at growing payouts of core earnings to ~ 30% by 2018
Consistent Returns
EXECUTIVE SUMMARY
12
Farmer Mac
Overview
FARMER MAC
World population is expected to grow to 9.8 billion by 2050, while arable land per person is expected
to decline over 40% in the same time period
USDA projects a 75% increase in total production and consumption of major field crops between 2005
and 2050
• 43% increase in world population
• Higher protein diets as incomes in developing countries increase
Productivity would need to nearly double by 2050 to feed the world
• Thus, extremely high capacity utilization
• Creating significant “demand pull” over time
Global Outlook – “Demand Pull”
3.0 9.8
0.43
0.18
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
A
R
A
B
L
E
L
A
N
D
P
E
R
C
A
P
IT
A
(h
e
c
ta
re
in
u
s
e
p
e
r p
e
rs
o
n
)
W
O
R
L
D
P
OPU
L
A
T
IO
N
(in
b
ill
io
n
s
)
Population Arable Land per capita
FARMER MAC OVERVIEW
14
(1) (2)
(1) Source: USDA, Economic Research Service Global Drivers of Agricultural Demand and Supply, September 2014
(2) Source: Food and Agriculture Organization of the United Nations, “World Agriculture Towards 2030/2050”, June 2012
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
FARMER MAC OVERVIEW
15
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
• Given Farmer Mac’s portfolio average LTV of 44% as of June 30, 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
– “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
– The 1980s agricultural credit crisis saw farm asset values decline approximately 23% from peak to trough
FARMER MAC OVERVIEW
16 (1) Source: USDA, National Agricultural Statistics Service (as of August 2015).
(1)
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
FARMER MAC OVERVIEW
17 (1) Source: USDA, Risk Management Agency 2016 Summary of Business, Net Acres Insured and USDA NASS 2016 Acreage Report.
(1)
FARMER MAC
Lines of Business and Products
Product Type
Customers
Lines of Business
$ IN BILLIONS AND PERCENTAGE OF TOTAL VOLUME
LOAN PURCHASES
• Ag Banks
• FCS Institutions
• Insurance Companies
• Rural Utilities Cooperatives
F & R USDA RU IC Total
$3.9
21%
$2.3
12%
$1.0
6%
-- $7.2
39%
WHOLESALE FINANCING
• AgVantage
• Farm Equity AgVantage
• Ag Banks
• Ag Investment Funds
• Insurance Companies
• Production and Agribusiness
Companies
• Rural Utilities Cooperatives
-- -- -- $7.7
42%
$7.7
42%
CREDIT PROTECTION
• Long-term Standby Purchase
Commitments (LTSPCs)/
AMBS Guarantees
• FCS Institutions
• Ag Banks
• Insurance Companies
• Ag Investment Funds
• Rural Utilities Cooperatives
$2.5
14%
-- $0.9
5%
-- $3.4
19%
Total $6.4 $2.3 $1.9 $7.7 $18.3 = Allowances and provisions recorded on these assets
FARMER MAC OVERVIEW
18
AS OF JUNE 30, 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
• 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
19
(1)
(1) Source: FDIC Statistics on Depository Institutions datasets (https://www2.fdic.gov/sdi/index.asp).
FARMER MAC
Northwest
11%
Southwest
30%
Mid-North
34%
Mid-South
13%
Northeast
4%
Southeast
8%
By Geographic Region
Crops
55%
Permanent
Plantings
18%
Livestock
20%
Part-time
Farm
6%
Ag. Storage
and
Processing
1%
By Commodity Type
Farm & Ranch Loan Portfolio Diversification
FARMER MAC OVERVIEW
20
(1) Farm & Ranch portfolio includes on-balance sheet loans and LTSPCs.
AS OF JUNE 30, 2017
(1)
FARMER MAC
Core earnings are primarily a direct function of three key factors:
Core Earnings Drivers
FARMER MAC OVERVIEW
21
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 core earnings to GAAP net income attributable to common stockholders and a reconciliation of
net effective spread to GAAP net interest income, please refer to pages 35-38 of the “Appendix – Farmer Mac.”
(1)
FARMER MAC
Farmer Mac Outstanding Business Volume
$18.3
$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 2Q17
$
I
N
B
IL
L
IO
N
S
FARMER MAC OVERVIEW
22
12.4% CAGR
(1999 to 2016)
FARMER MAC
Farmer Mac Net Effective Spread
FARMER MAC OVERVIEW
23
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 2Q17
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 net effective spread to GAAP net interest income, please refer to page 38 of the “Appendix – Farmer Mac.”
(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 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%
0.65%
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 2Q17
90-Day Delinquencies
Industry 90-Day Delinquencies Farmer Mac 90-Day Delinquencies (Farm & Ranch Portfolio Only)
(1)
FARMER MAC OVERVIEW
24
(2)
Farmer Mac Historical
Average 1.00%
FARMER MAC
Farmer Mac – Historical Credit Losses
Farm & Ranch line of business has historical cumulative losses of 0.15%, or less than 1bp per year
• Cumulative losses of $34 million on $23 billion of cumulative historical business volume
Farmer Mac’s Rural Utilities, USDA Guarantees, and Institutional Credit lines of business have not
had any credit losses to date
FARMER MAC OVERVIEW
25
-$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
Financial Performance
FARMER MAC
$11.0 $9.1
$12.4
$15.6
$23.2
$11.6
$13.0
$16.0
$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
27
(1) Core earnings is a non-GAAP measure. For a reconciliation of core earnings to GAAP net income attributable to common stockholders, please refer to pages 35-36 of the “Appendix – Farmer Mac.”
(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
$31.6
FARMER MAC
Business Volume
FARMER MAC FINANCIAL PERFORMANCE
28
$5.4 $5.8 $6.1 $5.8 $6.4
$6.4
$6.7
$7.3 $7.4
$7.7
$1.8
$1.9
$2.1 $2.0
$2.3
$1.0
$1.5
$1.9 $1.9
$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 2Q16 2Q17
$
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
$17.1
$18.3
(1)
$17.4
FARMER MAC
Net Effective Spread (Non-GAAP Measure)
$113.7 $119.4 $125.1 $61.0 $68.5
0.91%
0.87% 0.86%
0.83%
0.92%
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 2Q16 YTD 2Q17 YTD
$
I
N
M
IL
L
IO
N
S
Net Effective Spread (dollars) Net Effective Spread (percent)
FARMER MAC FINANCIAL PERFORMANCE
29 (1) For a reconciliation of net effective spread to GAAP net interest income, a non-GAAP financial measure, please refer to page 38 of the “Appendix – Farmer Mac.”
(1)
AS OF YEAR-END
FARMER MAC
$25.9 $31.9 $22.1 $41.9
0.49%
0.58%
0.38% 0.65%
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
2Q14 2Q15 2Q16 2Q17
%
$
I
N
M
IL
L
IO
N
S
90-Day Delinquencies
90-Day Delinquencies % of Farm & Ranch Portfolio
Historical
Average ~1.0%
$151.3 $136.4 $122.3 $192.1
2.8% 2.5%
2.1%
3.0%
-0.5%
0.5%
1.5%
2.5%
3.5%
4.5%
5.5%
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
2Q14 2Q15 2Q16 2Q17
%
$
I
N
M
IL
L
IO
N
S
Substandard Assets
Substandard Assets % of Farm & Ranch Portfolio
Credit Metrics
$11.4 $10.6 $7.1 $8.1
0.21%
0.19%
0.12% 0.13%
0.0%
0.1%
0.2%
0.3%
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
2Q14 2Q15 2Q16 2Q17
%
$
I
N
M
IL
L
IO
N
S
Total Allowance for Losses
Total Allowance for Losses % of Farm & Ranch Portfolio
FARMER MAC FINANCIAL PERFORMANCE
30
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 $573 $639
$345
$102
$143
$76
$134
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$0
$200
$400
$600
$800
2014 2015 2016 2Q16 2Q17
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
31
(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
FARMER MAC
Historical Dividend Growth
$0.05
$0.10
$0.12
$0.14
$0.16
$0.26
$0.36
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
2011 2012 2013 2014 2015 2016 YTD 2017
$
P
E
R
S
H
A
R
E
Quarterly Dividend per Share per Year
FARMER MAC FINANCIAL PERFORMANCE
32
Initiated New Dividend Policy:
Target ~30% Payout Ratio of Core
Earnings Over Time
Appendix –
Farmer Mac
FARMER MAC
(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
$150 million of preferred stock in advance of the planned March 30, 2015 redemption of all outstanding Farmer Mac II Preferred Stock and related FALConS. Each of these initiatives have
been described in Farmer Mac’s prior SEC filings, including its Annual Reports on Form 10-K for the years ended December 31, 2014 and December 31, 2015, filed with the SEC on March 16, 2015
and March 10, 2016, respectively.
(2) Core earnings, core earnings per share, and net effective spread are non-GAAP measures. For a reconciliation of core earnings to GAAP net income attributable to
common stockholders and core earnings per share to earnings per common share, and a reconciliation of net effective spread to GAAP net interest income, please refer to pages 35-38 of the
“Appendix – Farmer Mac.”
(3) Book Value per Share excludes accumulated other comprehensive income.
Key Company Metrics
APPENDIX – FARMER MAC
34
($ in thousands, except per share amounts) 2Q17 YTD 2016 2015 2014
Core Earnings $31,559 $53,791 $46,975 $53,047
Core Earnings per Diluted Share $2.93 $5.01 $4.15 $4.67
Net Effective Spread ($) $68,476 $125,102 $119,380 $113,693
Net Effective Spread (%) 0.92% 0.86% 0.87% 0.91%
Guarantee & Commitment Fees $10,259 $19,170 $17,155 $16,780
Core Capital Above Statutory Minimum $134,100 $143,200 $102,400 $345,000
Common Stock Dividends per Share $0.72 $1.04 $0.64 $0.56
Outstanding Business Volume $18,258,858 $17,399,475 $15,898,820 $14,597,758
90-Day Delinquencies – Farm & Ranch 0.65% 0.34% 0.56% 0.35%
Charge-Offs $241 $130 $3,772 $86
Book Value per Share $40.90 $38.42 $33.66 $29.76
Core Earnings Return on Equity 15% 14% 14% 17%
(1) (2)
(3)
(2)
(2)
(2)
FARMER MAC
Reconciliation of Core Earnings to Net Income
APPENDIX – FARMER MAC
35
($ in thousands) Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15 Sep-15 Jun-15
Net income attributable to common stockholders 17,488$ 18,615$ 25,465$ 16,364$ 12,006$ 10,317$ 15,032$ 8,359$ 22,162$
Reconciling items:
Gains/(losses) on f inancial derivatives and
hedging activities due to fair value changes 2,221 4,805 17,233 1,460 (2,076) (2,989) 2,743 (6,906) 15,982
Unrealized (losses)/gains on trading assets (2) (82) (474) 1,182 394 358 696 (8) 170
Amortization of premiums/discounts and
deferred gains on assets consolidated
at fair value (117) (127) (40) (157) (371) (281) (263) (117) (125)
Net effects of settlements on agency forw ard
contracts 261 32 1,024 464 466 (255) (162) (390) 197
Income tax effect related to reconciling items (827) (1,620) (6,210) (1,032) 556 1,109 (1,055) 2,598 (5,679)
Core earnings 15,952$ 15,607$ 13,932$ 14,447$ 13,037$ 12,375$ 13,073$ 13,182$ 11,617$
Core Earnings by Quarter Ended
FARMER MAC
Reconciliation of Core Earnings to Net Income
APPENDIX – FARMER MAC
36
(in thousands) 2Q17 YTD 2016 2015 2014
Net income attributable to common stockholders 36,103$ 64,152$ 47,371$ 38,251$
Less reconciling items:
Gains/(losses) on financial derivatives and hedging activities due to fair value
changes 7,026 13,628 10,924 (9,968)
Unrealized (losses)/gains on trading assets (84) 1,460 1,220 1,596
Amortization of premiums/discounts and deferred gains on assets
consolidated at fair value (244) (849) (1,319) (14,549)
Net effects of settlements on agency forward contracts 293 1,699 (607) 159
Loss on retirement of Farmer Mac II LLC Preferred Stock - - (8,147) -
Income tax effect related to reconciling items (2,447) (5,577) (1,675) 7,966
Core earnings 31,559$ 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 Core Earnings per Share to Earnings
per Common Share
APPENDIX – FARMER MAC
37
Jun-17 Jun-16 Dec-16 Dec-15 Dec-14
GAAP - Diluted EPS 1.62$ 1.13$ 5.97$ 4.19$ 3.37$
Less reconciling items:
Gains/(losses) on financial derivatives and hedging
activities due to fair value changes 0.21 (0.20) 1.26 0.97 (0.87)
Unrealized (losses)/gains on trading assets - 0.04 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 0.04 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 (0.08) 0.05 (0.52) (0.15) 0.70
Sub-total 0.14 (0.10) 0.96 0.04 (1.30)
Core Earnings - Diluted EPS 1.48$ 1.23$ 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 Effective Spread to Net Interest
Income
APPENDIX – FARMER MAC
38
(in thousands) 2Q17 YTD 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Net interest yield 0.95% 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 0.04% 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 -0.07% -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 0.92% 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 – FARMER MAC
39
($ in thousands) Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield
For the quarter ended:
June 30, 2017 11,331$ 1.80% 4,681$ 0.90% 2,736$ 1.09% 14,395$ 0.81% 2,467$ 0.35% 35,610$ 0.92%
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%
Net Effective Spread (1)Institutional Credit
Net Effective Spread by Business Segment
Farm & Ranch USDA Guarantees Rural Utilities Corporate
(1)
(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 38 of the “Appendix – Farmer Mac.”
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
$2.7 billion investment portfolio at June 30
• Cash and highly-rated investment securities
• Conservative portfolio goals
− Minimize exposure to market volatility
− Preservation of capital
− Ready access to cash
• Provided 208 days of liquidity as of June 30, 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.,
11.9%
Guar. by
GSEs and
U.S. Gov't
Agencies,
86.4%
Corporate
Debt
Securities,
0.4%
Asset-
Backed
Securities,
1.3%
Liquidity Portfolio
APPENDIX – FARMER MAC
40
AS OF JUNE 30, 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 – FARMER MAC
41
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.)
APPENDIX – FARMER MAC
42
Debt Securities Trade at Narrow Spreads to Comparable Maturity Treasuries
MATURITY (YEARS) 1 3 5 10
SPREAD TO TREASURY
(AS OF JUNE 30, 2017)
5 bps 15 bps 17 bps 50 bps
FARMER MAC
Equity Capital Structure
APPENDIX – FARMER MAC
43
NYSE
Ticker
Dividend
Yield
Shares
Outstanding
CO
M
M
O
N
S
T
OC
K
CLASS A VOTING COMMON STOCK
• Ownership restricted to non-Farm Credit System financial institutions
AGM.A 2.26% 1.0 million
CLASS B VOTING COMMON STOCK
• Ownership restricted to Farm Credit System institutions
-- -- 0.5 million
CLASS C NON-VOTING COMMON STOCK
• No ownership restrictions
AGM 2.23% 9.1 million
P
REF
E
R
R
E
D
S
T
OC
K
SERIES A NON-CUMULATIVE PREFERRED STOCK
• Option to redeem at any time on or after January 17, 2018
• Redemption Value: $25 per share
AGM.PR.A 5.875% 2.4 million
SERIES B NON-CUMULATIVE PREFERRED STOCK
• Option to redeem at any time on or after April 17, 2019
• Redemption Value: $25 per share
AGM.PR.B 6.875% 3.0 million
SERIES C FIXED-TO-FLOATING RATE NON-CUMULATIVE
PREFERRED STOCK
• Option to redeem at any time on or after July 18, 2024
• Redemption Value: $25 per share
AGM.PR.C 6.000% 3.0 million
(1)
(1) Common stock dividend annualized divided by quarter-end closing price
(2) Par value of annual dividend
(1)
(2)
(2)
(2)
Appendix –
Agricultural Industry
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
• 2017 would be the fourth consecutive year of declining income
• USDA currently projects a 9% decline in 2017
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
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
APPENDIX – AGRICULTURAL INDUSTRY
45
(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
$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.
APPENDIX – AGRICULTURAL INDUSTRY
46
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 August 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)
APPENDIX – AGRICULTURAL INDUSTRY
47
FARMER MAC
USDA – Key 2017 Forecasts
Demand for U.S. agricultural products to increase
• Demographic trends and a stabilizing global economy contributing to growth
• Lower commodity prices stimulating quantity demanded
• Total U.S. export values to increase 6% to $137 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, but prices in the last quarter of the year will reflect this year’s harvest
• Despite increased production, livestock prices have been higher than the USDA’s initial projections so far in 2017
• 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 flat to slightly higher
• Declining land values in the corn belt have stabilized in 2017 (down -0.5% YTD)
– USDA data shows year-over-year increases in Iowa and Wisconsin
• Rest of U.S. remains stable to increasing – demand steady in non-grain producing regions
– Quickest growth seen in Pacific and Southern states
U.S. agricultural mortgage market forecast to grow 7% in 2017
APPENDIX – AGRICULTURAL INDUSTRY
48
(1) Source: USDA, National Agricultural Statistics Service, nominal dollars (as of July 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 July 2017).
(4) Source: USDA, Economic Research Service Trade Outlook (as of May 2017).
(1) (2) (3) (4)