UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________

FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 16, 2015

FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Exact name of registrant as specified in its charter)

Federally chartered instrumentality
of the United States
 
001-14951
 
52-1578738
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer Identification No.)
 
 
 
 
 
1999 K Street, N.W., 4th Floor, Washington D.C.
 
20006
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code (202) 872-7700

No change
(Former name or former address, if changed since last report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Item 2.02    Results of Operations and Financial Condition.

On March 16, 2015, the Federal Agricultural Mortgage Corporation (“Farmer Mac”) issued a press release to announce (1) its financial results for 2014 and (2) a conference call to discuss those results and Farmer Mac’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference. All references to www.farmermac.com and www.farmermac2.com in Exhibit 99.1 are inactive textual references only and the information contained on those websites are not incorporated by reference into this Current Report on Form 8-K.

The information furnished in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor will any of such information or Exhibit be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 7.01    Regulation FD Disclosure.

On March 16, 2015, Farmer Mac posted an investor slide presentation for its equity investors to its website at www.farmermac.com under the tab “Investors — Events and Presentations.” Farmer Mac expects to use the slide presentation in connection with future investor presentations to analysts and investors. The slide presentation is attached to this Current Report on Form 8-K as Exhibit 99.2 and in incorporated herein by reference. All references to www.farmermac.com in Exhibit 99.2 are inactive textual references only and the information contained on Farmer Mac's website is not incorporated by reference into this Current Report on Form 8-K.

The information furnished in this Item 7.01, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, nor will any of such information or Exhibit be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01    Financial Statements and Exhibits.

(d)    Exhibits

99.1    Press Release, dated March 16, 2015

99.2    Equity investor slide presentation




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



FEDERAL AGRICULTURAL MORTGAGE CORPORATION                    


By: /s/ Stephen P. Mullery            
Name: Stephen P. Mullery
Title: Senior Vice President – General Counsel

Dated: March 16, 2015







Farmer Mac Reports 2014 Financial Results
Core Earnings of $53.0 Million, Record Outstanding Business
Volume, and Continued Strong Credit Quality
WASHINGTON, D.C., March 16, 2015 — The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today announced its results for the quarter and year ended December 31, 2014, which included a new high of $14.6 billion in outstanding business volume and ongoing strong portfolio credit quality that remains at the most favorable end of Farmer Mac's historical range. Farmer Mac's 2014 core earnings, a non-GAAP measure, were $53.0 million ($4.67 per diluted common share), compared to $54.9 million ($4.90 per diluted common share) in 2013. Fourth quarter 2014 core earnings were $9.5 million ($0.84 per diluted common share), compared to $9.3 million ($0.82 per diluted common share) for third quarter 2014, and $15.3 million ($1.36 per diluted common share) for fourth quarter 2013.     
Farmer Mac's President and Chief Executive Officer Tim Buzby stated, "Farmer Mac had a very successful year in 2014 and is poised for a great year in 2015. We grew our outstanding business volume by $647.4 million in 2014, and our credit quality continues to be extremely favorable. Throughout the year, our net effective spread trended up in all four lines of our business, reversing the contraction that occurred in all lines of business in 2013. We also issued new preferred stock in 2014 as part of our plan to redeem more expensive preferred stock issued five years ago. We strive to continuously innovate for our customers and to help them problem solve, all with the goal of delivering lower-cost capital for the benefit of their customers in rural America. This year, our customization of an existing product to offer the 'Farm Equity AgVantage' product, a financing vehicle for investors in agricultural assets, is the most recent example of this. This new product, plus growth in funding to the rural utilities industry within our

1


institutional credit line of business helped lead to particularly strong net growth in the fourth quarter of nearly $600 million."
Earnings
Farmer Mac's net income attributable to common stockholders for 2014 was $38.3 million ($3.37 per diluted common share), compared to $71.8 million ($6.41 per diluted common share) for 2013 and in fourth quarter 2014 was $5.6 million ($0.50 per diluted common share), compared to $12.5 million ($1.11 per diluted common share) in fourth quarter 2013. Table 1 below provides a reconciliation of net income attributable to common stockholders to core earnings for the years ended December 31, 2014 and 2013 and for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013. The table also includes an additional presentation that shows core earnings excluding the effects of two short-term initiatives implemented in 2014: (1) the cash management and liquidity initiative described in more detail below that resulted in a net economic benefit of $11.4 million in 2014; and (2) the capital structure initiative described in more detail below that resulted in a significant increase in Farmer Mac's Tier 1 capital position and an increase in preferred stock dividend payments of $6.3 million in 2014 compared to before the issuance of the new capital.

2


Table 1
Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings and Core Earnings Excluding Indicated Items
 
For the Quarter Ended
 
For the Year Ended
 
December 2014
 
September 2014
 
December 2013
 
2014
 
2013
 
(in thousands)
Net income attributable to common stockholders
$
5,647

 
$
11,586

 
$
12,485

 
$
38,251

 
$
71,833

Less the after-tax effects of:
 
 
 
 
 

 
 

 
 

Unrealized (losses)/gains on financial derivatives and hedging activities
(3,717
)
 
2,685

 
8,003

 
(6,480
)
 
29,368

Gains on trading assets
679

 
(21
)
 
(50
)
 
1,038

 
(533
)
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value
(811
)
 
(440
)
 
(10,864
)
 
(9,457
)
 
(12,467
)
Net effects of settlements on agency forward contracts
(30
)
 
73

 
114

 
103

 
573

      Sub-total
(3,879
)
 
2,297

 
(2,797
)
 
(14,796
)
 
16,941

Core earnings
$
9,526

 
$
9,289

 
$
15,282

 
$
53,047

 
$
54,892

 
 
 
 
 
 
 
 
 
 
Less the after-tax effects of:
 
 
 
 
 

 
 
 
 
Cash Management and Liquidity Initiative:
 
 
 
 
 
 
 
 
 
Gains on securities sold, not yet purchased
8,328

 
10,661

 
—

 
24,070

 
—

Interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased
(8,863
)
 
(11,646
)
 
—

 
(25,595
)
 
—

Tax benefits related to cash management and liquidity initiative
1,361

 
—

 
—

 
12,961

 
—

      Sub-total
826

 
(985
)
 
—

 
11,436

 
—

Capital Structure Initiative:
 
 
 
 
 
 
 
 
 
Net increase in preferred dividends due to pre-funding of preferred issuances in advance of calling Farmer Mac II LLC Preferred Stock (1)
(2,279
)
 
(2,268
)
 
—

 
(6,318
)
 
—

Core earnings excluding indicated items
$
10,979

 
$
12,542

 
$
15,282

 
$
47,929

 
$
54,892

(1)
Amounts for 2014 reflect the changes from the capital structure as of December 31, 2013 which consisted of $60.0 million of Series A preferred stock and $250.0 million of Farmer Mac II LLC Preferred Stock, in addition to common stock, additional paid-in capital, accumulated other comprehensive income, and retained earnings. The capital structure effects of pre-funding include issuances of $75.0 million of 6.875% Non-Cumulative Preferred Stock, Series B on March 25, 2014 and $75.0 million of 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C on June 20, 2014 and the purchase of $6.0 million of FALConS from certain holders on May 14, 2014.


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Table 2 below analyzes the performance of Farmer Mac's underlying business apart from the effects of the cash management and liquidity initiative and the capital structure initiative.

Table 2

Changes in Core Earnings Excluding Indicated Items
 
Quarter-to-Quarter Changes
 
Year-over-year changes from 2013 to 2014
 
Sequentially from third quarter 2014 to fourth quarter 2014
 
Year-over-year from fourth quarter 2013 to fourth quarter 2014
 
 
(in thousands)
Previous respective quarter's and year's core earnings excluding indicated items
$
12,542

 
$
15,282

 
$
54,892

Change in after-tax effects of:
 
 
 
 
 
Net effective spread
(863
)
 
(801
)
 
(1,333
)
Net credit related income (1)
(260
)
 
255

 
1,838

Guarantee and commitment fees
(34
)
 
(326
)
 
(422
)
Gains on sales of available-for-sale investment securities and gains on repurchase of debt
257

 
(326
)
 
(2,479
)
Operating expenses
(100
)
 
(546
)
 
(1,191
)
Other tax benefits
—

 
(2,100
)
 
(2,112
)
Other components (2)
(563
)
 
(459
)
 
(1,264
)
      Sub-total
(1,563
)
 
(4,303
)
 
(6,963
)
Core earnings excluding indicated items for the quarter ended December 31, 2014 and year ended December 31, 2014
$
10,979

 
$
10,979

 
$
47,929

(1)
The change in net credit related income for the quarter-to-quarter changes is primarily attributable to the after-tax difference between the net releases from/provision for the allowance for losses, which was $0.3 million after-tax release in fourth quarter 2014, $0.5 million after-tax release in third quarter 2014, and a $8,000 after-tax provision in fourth quarter 2013. The change in net credit related income from the full year 2013 to full year 2014 was primarily attributable to the after-tax difference between the net release from/provision for the allowance for losses, which was a $2.1 million after-tax release in 2014 and $0.3 million after-tax provision in 2013.
(2)
Represents other income, hedging costs, and other miscellaneous items.

When removing the effects of the items indicated in Table 1 related to the two 2014 initiatives, core earnings for 2014 were $47.9 million ($4.22 per diluted common share), compared to $54.9 million ($4.90 per diluted common share) in 2013. The decrease in core earnings excluding indicated items in 2014 relative to 2013 was due in large part to several unique items that decreased net effective spread, gains on the sale of available-for-sale investment securities and gains on repurchase of debt, and other tax benefits, as well as an increase in operating expenses. The decrease in gains on sale of available-for-sale investment securities and gains on repurchase of debt was a result of a $2.0 million after-tax gain from the sale of a single investment security in 2013 on which Farmer Mac also realized tax benefits of $1.1 million, as well as a $1.0 million after-tax gain from the repurchase of debt, neither of which recurred in 2014. The reduction in other tax benefits was a result of a $2.1 million recognition of tax benefits from

4


applying capital loss carryforwards to capital gains recognized on investment securities in 2013, compared to $0.9 million of similar tax benefits in 2014. The increase in operating expenses was primarily attributable to an increase in compensation expense and other costs related to corporate initiatives. The increase in compensation expense was due primarily to increased headcount and annual salary adjustments. The increase in annual salary adjustments reflects a change to the allocation of total compensation elements for Farmer Mac's executive officers in 2014 that resulted in a shift in compensation opportunity toward base salary and annual cash compensation and a commensurate reduction in the targeted value of equity-based long-term incentive compensation.
Core earnings in fourth quarter 2014 were $9.5 million, compared to $15.3 million in fourth quarter 2013 and $9.3 million in third quarter 2014. When removing the effects of the indicated items, core earnings for fourth quarter 2014 were $11.0 million ($0.97 per diluted common share), compared to $15.3 million ($1.36 per diluted share) in fourth quarter 2013 and $12.5 million ($1.10 per diluted share) in third quarter 2014. The decrease in fourth quarter 2014 core earnings excluding indicated items compared to fourth quarter 2013 was primarily attributable to:

•
a $0.8 million after-tax decrease in net effective spread;
 
•
the loss of $0.5 million of tax benefits as a result of the October 2014 redemption of CoBank preferred stock; and

•
the recognition of a $2.1 million federal income tax benefit in fourth quarter 2013 unrelated to the cash management and liquidity initiative that did not recur in fourth quarter 2014.
The decrease in core earnings excluding indicated items for fourth quarter 2014 compared to third quarter 2014 was primarily attributable to:

•
a $0.9 million after-tax decrease in net effective spread; and
 
•
the loss of $0.5 million of tax benefits as a result of the October 2014 redemption of CoBank preferred stock.
See "Non-GAAP Earnings Measures" below for more information about core earnings and core earnings excluding indicated items.

5


Regarding the change in net income attributable to common stockholders, the decrease in both annual and year-over-year fourth quarters was mostly due to the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $6.5 million after-tax loss in 2014 compared to a $29.4 million after-tax gain in 2013 and a $3.7 million after-tax loss in fourth quarter 2014 compared to a $8.0 million after-tax gain in fourth quarter 2013. Also contributing to these decreases was the increase in preferred stock dividend payments attributable to the capital structure initiative. Fourth quarter 2013 also included a $2.1 million federal income tax benefit not related to the cash management and liquidity initiative, as capital loss carryforwards offset certain capital gains, and $10.3 million after-tax of acceleration of premium amortization from significant refinancing activity in the Rural Utilities line of business.
Net Effective Spread
Farmer Mac's net effective spread was $103.2 million (83 basis points) in 2014, compared to $105.3 million (86 basis points) in 2013. This decrease was primarily attributable to:

•
the loss of $2.1 million in preferred dividend income resulting from the October 2014 redemption of CoBank preferred stock (2 basis points);

•
a $2.2 million decrease in interest income payments received from non-accruing Farm & Ranch loans; and

•
an increase of $0.6 million in interest expense due to double financing resulting from the early recasting of certain rural utilities loans and AgVantage securities in fourth quarter 2013 and first quarter 2014, which expired at the end of first quarter 2014.
In the absence of the redemption of the CoBank preferred stock and the impact of the double financing, net effective spread in 2014 would have increased relative to 2013 as Farmer Mac increased its spreads on certain Farm & Ranch loan products in second quarter 2014 and also benefited from a decrease in the amount of unscheduled prepayments on the loans in its portfolio and the fact that new loans purchased in 2014 generally earned higher spreads than the spreads on the loans that did prepay during the year.
Farmer Mac's net effective spread was $25.9 million (83 basis points) in fourth quarter 2014, compared to $27.1 million (85 basis points) in fourth quarter 2013 and $27.2 million (89 basis points) in

6


third quarter 2014. The decrease in net effective spread compared to fourth quarter 2013 and third quarter 2014 was primarily attributable to the loss of $2.1 million in preferred dividend income resulting from the October 2014 redemption of CoBank preferred stock (7 basis points on an annualized basis), which was partially offset by net growth in higher spread Farm & Ranch loans and USDA Securities throughout 2014. The decrease in net effective spread compared to fourth quarter 2013 was also due to a $1.8 million decrease in interest income payments received from non-accruing Farm & Ranch loans, which was partially offset by $0.7 million of double financing resulting from the early recasting of certain rural utilities loans and AgVantage securities in fourth quarter 2013.
Business Segments and Presentation
Farmer Mac's management has determined that Farmer Mac's operations consist of four reportable operating segments, effective January 1, 2014. The four segments are Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. The Institutional Credit business segment is comprised of all of Farmer Mac's AgVantage securities, which were included as components of the Farm & Ranch and Rural Utilities segments prior to 2014. Net effective spread by business segment for 2014 was $31.8 million (164 basis points) for Farm & Ranch, $18.3 million (107 basis points) for USDA Guarantees, $10.7 million (106 basis points) for Rural Utilities, and $28.6 million (57 basis points) for Institutional Credit. Net effective spread by business segment for fourth quarter 2014 was $8.7 million (171 basis points) for Farm & Ranch, $5.3 million (119 basis points) for USDA Guarantees, $2.9 million (118 basis points) for Rural Utilities, and $7.3 million (58 basis points) for Institutional Credit. Net effective spread for all four operating segments increased in terms of both dollars and basis points in fourth quarter 2014 compared to third quarter 2014.




7


Business Volume    
Farmer Mac added $2.8 billion of new business during 2014, with Farm & Ranch loan purchases and LTSPCs, USDA Securities purchases, and Institutional Credit AgVantage securities purchases driving the volume. Specifically, Farmer Mac:
•
purchased $1.3 billion of AgVantage securities;
•
purchased $697.8 million of newly originated Farm & Ranch loans;
•
added $369.9 million of Farm & Ranch loans under LTSPCs;
•
purchased $343.0 million of USDA Securities; and
•
purchased $75.5 million of Rural Utilities loans.

During fourth quarter 2014, Farmer Mac added $816.5 million of new business volume, with Institutional Credit AgVantage securities and Farm & Ranch loan purchases driving the volume. Specifically, Farmer Mac:
•
purchased $454.5 million of AgVantage securities;
•
purchased $196.1 million of newly originated Farm & Ranch loans;
•
added $72.0 million of Farm & Ranch loans under LTSPCs;
•
purchased $86.9 million of USDA Securities; and
•
purchased $7.0 million of Rural Utilities loans.
The total new business volume for 2014 was more than the $2.1 billion of maturities and principal paydowns on existing business during 2014, resulting in Farmer Mac's outstanding business volume increasing a net $647.4 million from December 31, 2013 to $14.6 billion as of December 31, 2014. Farmer Mac had $223.6 million in maturities and principal paydowns on existing business during fourth quarter 2014.
Farmer Mac has experienced continuing stable demand for its loan products in the Farm & Ranch line of business, although growth rates have leveled off as the refinancing trend has abated. However, net growth in Farm & Ranch loans is expected to continue to increase as prepayment rates have slowed more than gross loan growth. Farmer Mac continues to expand its lender network, customer base, and product set, which may generate additional demand for Farmer Mac's products from new sources. As an example, $95.0 million of the AgVantage securities new business volume for 2014 was purchased under "Farm

8


Equity AgVantage" facilities, a variation of Farmer Mac's AgVantage wholesale financing product. Although this product is in the early stages of development, Farmer Mac believes there is opportunity to expand this type of business as both the trend toward institutional investment in agricultural assets and awareness of the Farm Equity AgVantage product continue to grow.
Credit Quality 
The high credit quality of Farmer Mac's four lines of business continued during 2014. In the Farm & Ranch portfolio, 90-day delinquencies were $18.9 million (0.35 percent of the Farm & Ranch portfolio) as of December 31, 2014, compared to $24.7 million (0.46 percent) as of September 30, 2014, and $28.3 million (0.55 percent) as of December 31, 2013. Farmer Mac recorded net releases of $3.2 million from the allowance for losses during 2014, compared to $0.4 million of net provisions for 2013. Charge-offs were $0.1 million in 2014 compared to $4.0 million in 2013. Farmer Mac also recorded recoveries of $45,000 in 2014 compared to no recoveries in 2013. In fourth quarter 2014, Farmer Mac recorded net releases of $0.5 million compared to net releases of $0.8 million in third quarter 2014, and net provisions of $12,000 in fourth quarter 2013.
For Farmer Mac's other lines of business, there are currently no delinquent AgVantage securities or Rural Utilities loans, and USDA Securities are backed by the full faith and credit of the United States. As a result, across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.13 percent of total business volume as of December 31, 2014, compared to 0.20 percent as of December 31, 2013.
The western part of the United States, including California, continues to experience drought conditions, with the water level in many California reservoirs at historically low levels. Although to date Farmer Mac has not observed any material effect on its portfolio from drought conditions, the persistence of extreme drought conditions in the western states could have an adverse effect on Farmer Mac’s delinquency rates or loss experience. This is particularly true in the permanent plantings sector and the dairy sector. For permanent plantings, the value of the related collateral is closely tied to the production value and capability of the permanent plantings. The dairy sector may experience increased feed costs as

9


water is diverted away from hay acreage commonly relied upon by dairy producers and toward land supporting other agricultural commodities. Farmer Mac continues to monitor the drought and its effects on the agricultural industries located in the western states, as well as its effects on Farmer Mac's Farm & Ranch line of business.
Liquidity and Capital
Farmer Mac is required to hold capital in excess of the higher of its statutory minimum capital requirement and the amount required by the risk-based capital stress test prescribed by Farm Credit Administration ("FCA") regulations. Farmer Mac's core capital totaled $766.3 million as of December 31, 2014, exceeding the statutory minimum capital requirement by $345.0 million, or 82 percent. The statutory minimum requirement was higher than the amount required by the risk-based capital stress test as of December 31, 2014.
As of December 31, 2014, Farmer Mac's total stockholders' equity was $545.8 million, compared to $332.6 million as of December 31, 2013. Farmer Mac enhanced its Tier 1 capital position through issuances of a total of $150.0 million in preferred stock during the first half of 2014 and also increased its retained earnings in 2014. Based on this strengthened capital position and consistent with Farmer Mac's recapitalization plans, Farmer Mac and its subsidiary, Farmer Mac II LLC, announced on February 27, 2015 the intent to redeem all outstanding shares of Farmer Mac II Preferred Stock on March 30, 2015. That redemption also will trigger the redemption of all $250.0 million of the outstanding related Farm Asset Linked Capital Securities ("FALConS") on March 30, 2015, which is the initial redemption date for those securities. Farmer Mac does not currently anticipate the need to issue any more preferred stock to fund the planned redemption of the Farmer Mac II Preferred Stock and related FALConS, which do not constitute Tier 1 capital-eligible securities.
As prescribed by FCA regulations, Farmer Mac is required to maintain a minimum of 90 days of liquidity. In accordance with the methodology prescribed by those regulations, Farmer Mac maintained an average of 162 days of liquidity during 2014 and had 146 days of liquidity as of December 31, 2014.

10


Cash Management and Liquidity Initiative
Effective January 16, 2015, the Federal Reserve Bank of New York accepted Farmer Mac as a counterparty in its fixed-rate, full-allotment overnight reverse repurchase facility (the "RRP Facility"). Approved participants in the RRP Facility are eligible to make short-term loans to the Federal Reserve secured by U.S. Treasury securities by entering into repurchase (repo) transactions with the Federal Reserve’s trading desk. Farmer Mac believes that participation in the RRP Facility will provide Farmer Mac with key benefits including:

•
diversifying Farmer Mac’s short-term investment alternatives by providing a cost-effective alternative to other sources of short-term investments that can be used in significant size and that is likely to be available even in times of stress in the financial markets; and
•
reducing Farmer Mac’s counterparty risk compared to the typical commercial counterparty risk inherent in similar transactions with non-governmental entities.
This initiative involved establishing a significant term repo investment, as well as an associated financing liability of securities sold, not yet purchased. As of December 31, 2014, Farmer Mac had closed these term repo asset and related financing liability positions. For 2014, Farmer Mac incurred a total of $39.4 million in interest expense related to the financing costs of this initiative and $37.0 million of realized gains from the securities sold, not yet purchased. The initiative produced a $13.0 million tax benefit as of December 31, 2014 from capital loss carryforwards that previously had a full valuation allowance against them, which was recorded as a reduction to income tax expense in 2014. Farmer Mac's full-year, net economic benefit of the cash management and liquidity initiative was $11.4 million in 2014, after netting the related incremental after-tax net financing costs over the term of the initiative with the tax benefit recognized in 2014. The interest expense, realized gains, and the tax benefits of this initiative are included as part of core earnings, just as the investment portfolio losses that generated the related capital loss carryforwards were included in core earnings when the losses occurred in 2008 and 2009. The interest expense is excluded from net effective spread because the associated benefit is not similarly recorded in net effective spread, but rather through tax benefits.

11


For more information about this initiative, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cash Management and Liquidity Initiative" in Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the U.S. Securities and Exchange Commission (the "SEC") today.
Capital Structure Initiative
During 2014, Farmer Mac issued a total of $150.0 million of preferred stock during the first half of 2014 as part of a capital structure initiative under which Farmer Mac increased its Tier 1 capital position and reduced its risk by taking advantage of favorable market conditions to issue preferred stock in advance of the planned March 30, 2015 redemption of all outstanding shares of Farmer Mac II LLC Preferred Stock (presented as "Non-controlling interest - preferred stock" within equity on Farmer Mac's consolidated balance sheets). This redemption will trigger the redemption of all outstanding related FALConS on the same day. The $8.1 million of direct costs related to the issuance of Farmer Mac II LLC Preferred Stock will be recognized as expense in the consolidated statement of operations in the period in which the Farmer Mac II LLC Preferred Stock is redeemed and, consistent with prior treatment of such non-cash expenses, will be excluded from Farmer Mac's core earnings. The capital structure initiative resulted in an increase in preferred stock dividend payments of $6.3 million in 2014 compared to before the issuance of the $150.0 million of preferred stock.
Non-GAAP Earnings Measures
Farmer Mac uses core earnings, a non-GAAP financial measure, to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends. Core earnings principally differs from net income attributable to common stockholders by excluding the effects of fair value accounting, which are not expected to have a cumulative net impact on financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is generally expected. Core earnings also differs from net income

12


attributable to common stockholders 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. Although the interest expense, realized gains, and tax benefits for 2014 related to the cash management and liquidity initiative implemented in second quarter 2014 are not expected to significantly affect Farmer Mac's earnings beyond 2014, these items are included as part of core earnings because they reflect Farmer Mac's economic financial performance and significantly contribute to cash profitability and retained earnings while the initiative is in effect. The inclusion of the effects of the cash management and liquidity initiative in core earnings is also consistent with the inclusion in core earnings of the investment portfolio losses recognized in 2008 and 2009 that generated the capital loss carryforwards related to the tax benefits recognized in 2014.
In management's view, core earnings excluding items related to the cash management and liquidity initiative and the capital structure initiative is another useful alternative measure in understanding Farmer Mac's profitability because the measure excludes these shorter-term initiatives that are not expected to significantly affect Farmer Mac's financial performance beyond 2014. Farmer Mac believes that this alternative measure facilitates useful comparisons of financial performance between quarters within 2014 as the two initiatives were phased in and to prior years when these initiatives were not in effect and therefore had no effect on Farmer Mac's financial performance. Core earnings excluding the indicated items principally differs from net income attributable to common stockholders by excluding the items discussed above that are also excluded from core earnings (primarily the effects of fair value accounting guidance and specified transactions that may not reflect Farmer Mac's economic financial performance) and then also excluding the effects of the cash management and liquidity initiative and the capital structure initiative.
These non-GAAP financial measures may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of these non-GAAP measures is intended to be supplemental in nature, and is not meant to be considered in isolation from, as a

13


substitute for, or as more important than, the related financial information prepared in accordance with GAAP.

14


A reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings is presented in the following tables along with a breakdown of the composition of core earnings:
Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
 
For the Three Months Ended
 
December 31, 2014
 
December 31, 2013
 
(in thousands, except per share amounts)
Net income attributable to common stockholders
$
5,647

 
$
12,485

Less the after-tax effects of:
 
 
 

Unrealized (losses)/ gains on financial derivatives and hedging activities
(3,717
)
 
8,003

Gains/(losses) on trading assets (1)
679

 
(50
)
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value
(811
)
 
(10,864
)
Net effects of settlements on agency forward contracts
(30
)
 
114

      Sub-total
(3,879
)
 
(2,797
)
Core earnings
$
9,526

 
$
15,282

 
 
 
 
Composition of Core Earnings:
 
 
 
Revenues:
 
 
 
Net effective spread (2)
$
25,911

 
$
27,144

Guarantee and commitment fees
6,628

 
7,130

Other (3)
(1,285
)
 
427

Total revenues
31,254

 
34,701

 
 
 
 
Credit related expenses:
 
 
 
(Release of)/provision for losses
(479
)
 
12

REO operating expenses
48

 
3

Losses/(gains) on sale of REO
28

 
(26
)
Total credit related income
(403
)
 
(11
)
 
 
 
 
Operating expenses:
 
 
 
Compensation and employee benefits
4,971

 
4,025

General and administrative
2,992

 
3,104

Regulatory fees
600

 
594

Total operating expenses
8,563

 
7,723

 
 
 
 
Net earnings
23,094

 
26,989

Income tax expense (4)
4,858

 
5,279

Non-controlling interest
5,414

 
5,546

Preferred stock dividends
3,296

 
882

Core earnings
$
9,526

 
$
15,282

 
 
 
 
Core earnings per share:
 
 
 
  Basic
$
0.87

 
$
1.41

  Diluted
0.84

 
1.36

(1)
Excludes realized gains related to securities sold, not yet purchased of $12.8 million during the three months ended December 31, 2014.
(2)
Fourth quarter 2013 includes the impact of one-time adjustments for recovered buyout interest and yield maintenance of $1.8 million in fourth quarter 2013 and $0.7 million associated with the early refinancing of AgVantage securities and the recasting of certain Rural Utilities loans.
(3)
Includes $13.6 million of interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased and $12.8 million of realized gains on securities sold, not yet purchased during the three months ended December 31, 2014. Fourth quarter 2013 includes gains on the repurchase of debt of $1.5 million, partially offset by realized losses on the sale of available-for-sale securities of $0.9 million.
(4)
Includes the reduction of $1.4 million of tax valuation allowance against capital loss carryforwards related to capital gains on securities sold, not yet purchased during the three months ended December 31, 2014 and a reduction in tax valuation allowance of $2.1 million associated with certain gains on investment portfolio assets during the three months ended December 31, 2013.


15


Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
 
For the Year Ended
 
December 31, 2014
 
December 31, 2014
 
(in thousands, except per share amounts)
Net income attributable to common stockholders
$
38,251

 
$
71,833

Less the after-tax effects of:
 

 
 

Unrealized (losses)/gains on financial derivatives and hedging activities
(6,480
)
 
29,368

Gains/(losses) on trading assets (1)
1,038

 
(533
)
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (2)
(9,457
)
 
(12,467
)
Net effects of settlements on agency forward contracts
103

 
573

      Sub-total
(14,796
)
 
16,941

Core earnings
$
53,047

 
$
54,892

 
 
 
 
Composition of Core Earnings:
 
 
 
Revenues:
 
 
 
Net effective spread
$
103,200

 
$
105,251

Guarantee and commitment fees
27,273

 
27,922

Other (3)
(4,216
)
 
3,421

Total revenues
126,257

 
136,594

 
 
 
 
Credit related expenses:
 
 
 
(Release of)/provision for losses
(3,166
)
 
448

REO operating expenses
110

 
423

Gains on sale of REO
(137
)
 
(1,236
)
Total credit related income
(3,193
)
 
(365
)
 
 
 
 
Operating expenses:
 
 
 
Compensation and employee benefits
19,009

 
17,817

General and administrative
12,197

 
11,563

Regulatory fees
2,381

 
2,375

Total operating expenses
33,587

 
31,755

 
 
 
 
Net earnings
95,863

 
105,204

Income tax expense (4)
10,785

 
24,630

Non-controlling interest
22,192

 
22,187

Preferred stock dividends
9,839

 
3,495

Core earnings
$
53,047

 
$
54,892

 
 
 
 
Core earnings per share:
 
 
 
  Basic
$
4.86

 
$
5.07

  Diluted
4.67

 
4.90

(1)
Excludes realized gains related to securities sold, not yet purchased of $37.0 million during 2014.
(2)
Includes $7.5 million and $10.3 million related to the acceleration of premium amortization in 2014 and 2013, respectively, due to significant refinancing activity in the Rural Utilities line of business.
(3)
Includes $39.4 million of interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased and $37.0 million of realized gains on securities sold, not yet purchased during 2014. Includes $3.1 million of realized gains from the sale of an available-for-sale investment security during 2013.
(4)
Includes the reduction of $13.0 million of tax valuation allowance against capital loss carryforwards related to capital gains on securities sold, not yet purchased during 2014, a reduction in tax valuation allowance of $0.9 million and $2.1 million associated with certain gains on investment portfolio assets during 2014 and 2013, respectively, and the reduction of $1.1 million of tax valuation allowance against capital loss carryforwards related to realized gains from the sale of an available-for-sale investment security during 2013.

    

16


For 2014, the aggregate effect of the cash management and liquidity initiative was after-tax expense of $25.6 million and after-tax income of $37.0 million, respectively, and the effect of the capital structure initiative was additional after-tax expense of $6.3 million. Core earnings excluding these initiatives for the years ended December 31, 2014 and 2013 were $47.9 million and $54.9 million, respectively.
More complete information about Farmer Mac's performance during 2014 is set forth in Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2014 filed today with the SEC.
Forward-Looking Statements
In addition to historical information, this release includes forward-looking statements that reflect management's current expectations as to Farmer Mac's future financial results, business prospects, and business developments. 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 could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including uncertainties regarding:

•
the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms;

•
legislative or regulatory developments that could affect Farmer Mac or its sources of business;

•
fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries;

•
the rate and direction of development of the secondary market for agricultural mortgage and rural utilities loans, including lender interest in Farmer Mac credit products and the secondary market provided by Farmer Mac;

•
the general rate of growth in agricultural mortgage and rural utilities indebtedness;

•
the impact of economic conditions, including the effects of drought and other weather-related conditions and fluctuations in agricultural real estate values, on agricultural mortgage lending and borrower repayment capacity;

•
developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac;


17


•
changes in the level and direction of interest rates, which could, among other things, affect the value of collateral securing Farmer Mac's agricultural mortgage loan assets; and

•
volatility in commodity prices relative to costs of production and/or export demand for U.S. agricultural products.
Other risk factors are discussed in Farmer Mac's Annual Report on Form 10‑K for the year ended December 31, 2014 as filed with the SEC earlier today. In light of these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this release.  The forward-looking statements contained in this release represent management's expectations as of the date of this release. Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements included in this release to reflect new information or any future events or circumstances, except as the SEC otherwise requires. 
Earnings Conference Call Information
The conference call to discuss Farmer Mac's 2014 financial results and Form 10-K will be held beginning at 11:00 a.m. eastern time on Monday, March 16, 2015 and can be accessed by telephone or live webcast as follows:
Telephone (Domestic): (888) 346-2616
Telephone (International): (412) 902-4254
Webcast: http://www.farmermac.com/Investors/ConferenceCall/
If you are dialing in to the call, please ask for the conference chairman Tim Buzby. You will receive additional instructions when you join the call. The call can be heard live and will also be available for replay on Farmer Mac’s website at the link provided above for two weeks following the conclusion of the call.

18


About Farmer Mac
Farmer Mac is the stockholder-owned company created to deliver capital and increase lender competition for the benefit of American agriculture and rural communities. Additional information about Farmer Mac (including the Annual Report on Form 10-K referenced above) is available on Farmer Mac's website at www.farmermac.com. Farmer Mac II LLC is a subsidiary of Farmer Mac that operates the USDA Guarantees line of business of purchasing and holding USDA-guaranteed loans. Information about Farmer Mac II LLC is available on its website at www.farmermac2.com.

CONTACT:     Jalpa Nazareth, Investor Relations
Chris Bohanon, Media Inquiries
(202) 872-7700


* * * *




19


FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
As of
 
December 31,
2014
 
December 31,
2013
 
(in thousands)
Assets:
 
 
 
Cash and cash equivalents
$
1,363,387

 
$
749,313

Investment securities:
 

 
 

Available-for-sale, at fair value
1,938,499

 
2,483,147

Trading, at fair value
689

 
928

Total investment securities
1,939,188

 
2,484,075

Farmer Mac Guaranteed Securities:
 

 
 

Available-for-sale, at fair value
3,659,281

 
5,091,600

Held-to-maturity, at amortized cost
1,794,620

 
—

Total Farmer Mac Guaranteed Securities
5,453,901

 
5,091,600

USDA Securities:
 

 
 

Available-for-sale, at fair value
1,731,222

 
1,553,669

Trading, at fair value
40,310

 
58,344

Total USDA Securities
1,771,532

 
1,612,013

Loans:
 

 
 

Loans held for investment, at amortized cost
2,833,461

 
2,570,125

Loans held for investment in consolidated trusts, at amortized cost
692,478

 
629,989

Allowance for loan losses
(5,864
)
 
(6,866
)
Total loans, net of allowance
3,520,075

 
3,193,248

Real estate owned, at lower of cost or fair value
421

 
2,617

Financial derivatives, at fair value
4,177

 
19,718

Interest receivable (includes $9,509 and $9,276, respectively, related to consolidated trusts)
104,550

 
107,201

Guarantee and commitment fees receivable
41,786

 
43,904

Deferred tax asset, net
33,391

 
44,045

Prepaid expenses and other assets
55,413

 
14,046

Total Assets
$
14,287,821

 
$
13,361,780

 
 
 
 
Liabilities and Equity:
 

 
 

Liabilities:
 

 
 

Notes payable:
 

 
 

Due within one year
$
7,353,953

 
$
7,338,781

Due after one year
5,471,186

 
5,001,169

Total notes payable
12,825,139

 
12,339,950

Debt securities of consolidated trusts held by third parties
424,214

 
261,760

Financial derivatives, at fair value
84,844

 
75,708

Accrued interest payable (includes $5,145 and $2,823, respectively, related to consolidated trusts)
48,355

 
53,772

Guarantee and commitment obligation
37,925

 
39,667

Accounts payable and accrued expenses
81,252

 
9,986

Reserve for losses
4,263

 
6,468

Total Liabilities
13,505,992

 
12,787,311

Commitments and Contingencies (Note 6)
 
 
 
Equity:
 

 
 

Preferred stock:
 

 
 

Series A, par value $25 per share, 2,400,000 shares authorized, issued and outstanding
58,333

 
58,333

Series B, par value $25 per share, 3,000,000 shares authorized, issued and outstanding
73,044

 
—

      Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding
73,382

 
—

Common stock:
 

 
 

Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding
1,031

 
1,031

Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding
500

 
500

Class C Non-Voting, $1 par value, no maximum authorization, 9,406,267 shares and 9,354,804 shares outstanding, respectively
9,406

 
9,355

Additional paid-in capital
113,559

 
110,722

Accumulated other comprehensive income/(loss), net of tax
15,533

 
(16,202
)
Retained earnings
201,013

 
168,877

Total Stockholders' Equity
545,801

 
332,616

Non-controlling interest - preferred stock
236,028

 
241,853

Total Equity
781,829

 
574,469

Total Liabilities and Equity
$
14,287,821

 
$
13,361,780






20


CONSOLIDATED STATEMENTS OF OPERATIONS

 
For the Three Months Ended
 
For the Year Ended
 
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
 
(in thousands, except per share amounts)
Interest income:
 
 
 
 
 
 
 
Investments and cash equivalents
$
2,423

 
$
5,472

 
$
17,269

 
$
21,940

Farmer Mac Guaranteed Securities and USDA Securities
28,057

 
32,328

 
118,430

 
128,399

Loans
27,719

 
11,380

 
94,875

 
85,059

Total interest income
58,199

 
49,180

 
230,574

 
235,398

Total interest expense
44,606

 
35,777

 
170,720

 
137,276

Net interest income
13,593

 
13,403

 
59,854

 
98,122

Release of/(provision for) loan losses
462

 
(117
)
 
961

 
481

Net interest income after release of/(provision for) for loan losses
14,055

 
13,286

 
60,815

 
98,603

Non-interest income:
 
 
 
 
 
 
 
Guarantee and commitment fees
6,094

 
6,768

 
25,187

 
26,958

(Losses)/gains on financial derivatives and hedging activities
(9,178
)
 
9,263

 
(21,646
)
 
31,764

Gains/(losses) on trading securities
13,857

 
(76
)
 
38,629

 
(819
)
(Losses)/gains on sale of available-for-sale investment securities
—

 
(960
)
 
(238
)
 
2,113

Gains on repurchase of debt
—

 
1,462

 
—

 
1,462

(Losses)/gains on sale of real estate owned
(28
)
 
26

 
137

 
1,236

Other income
920

 
539

 
1,714

 
3,057

Non-interest income
11,665

 
17,022

 
43,783

 
65,771

Non-interest expense:
 
 
 
 
 
 
 
Compensation and employee benefits
4,971

 
4,025

 
19,009

 
17,817

General and administrative
2,992

 
3,104

 
12,197

 
11,563

Regulatory fees
600

 
594

 
2,381

 
2,375

Real estate owned operating costs, net
48

 
3

 
110

 
423

(Release of)/provision for reserve for losses
(17
)
 
(105
)
 
(2,205
)
 
929

Non-interest expense
8,594

 
7,621

 
31,492

 
33,107

Income before income taxes
17,126

 
22,687

 
73,106

 
131,267

Income tax expense
2,769

 
3,774

 
2,824

 
33,752

Net income
14,357

 
18,913

 
70,282

 
97,515

Less: Net income attributable to non-controlling interest - preferred stock dividends
(5,414
)
 
(5,546
)
 
(22,192
)
 
(22,187
)
Net income attributable to Farmer Mac
8,943

 
13,367

 
48,090

 
75,328

Preferred stock dividends
(3,296
)
 
(882
)
 
(9,839
)
 
(3,495
)
Net income attributable to common stockholders
$
5,647

 
$
12,485

 
$
38,251

 
$
71,833

 
 
 
 
 
 
 
 
Earnings per common share and dividends:
 
 
 
 
 
 
 
Basic earnings per common share
$
0.52

 
$
1.14

 
$
3.50

 
$
6.64

Diluted earnings per common share
$
0.50

 
$
1.11

 
$
3.37

 
$
6.41

Common stock dividends per common share
$
0.14

 
$
0.12

 
$
0.56

 
$
0.48



21


The following table sets forth information regarding outstanding volume in each of Farmer Mac's four lines of business as of the dates indicated:


Lines of Business - Outstanding Volume
 
As of December 31, 2014
 
As of December 31, 2013
 
(in thousands)
On-balance sheet:
 
 
 
Farm & Ranch:
 
 
 
Loans
$
2,118,867

 
$
1,875,958

Loans held in trusts:
 
 
 
Beneficial interests owned by third party investors
421,355

 
259,509

USDA Guarantees:
 
 
 
USDA Securities
1,756,224

 
1,645,806

Farmer Mac Guaranteed USDA Securities
27,832

 
21,089

Rural Utilities:
 
 
 
Loans
718,213

 
698,010

Loans held in trusts:
 
 
 
Beneficial interests owned by Farmer Mac
267,396

 
354,241

Institutional Credit:
 
 
 
AgVantage Securities
5,410,413

 
5,066,855

Total on-balance sheet
$
10,720,300

 
$
9,921,468

Off-balance sheet:
 

 
 

Farm & Ranch:
 

 
 

LTSPCs
$
2,240,866

 
$
2,261,862

Guaranteed Securities
636,086

 
765,751

USDA Guarantees:
 
 
 
Farmer Mac Guaranteed USDA Securities
13,978

 
20,222

Institutional Credit:
 
 
 
AgVantage Securities
986,528

 
981,009

Total off-balance sheet
$
3,877,458

 
$
4,028,844

Total
$
14,597,758

 
$
13,950,312




22


The following table presents the quarterly net effective spread by segment for fourth quarter 2014 and the previous eight quarters:

 
Net Effective Spread by Line of Business
 
 
 
Farm & Ranch
 
USDA Guarantees
 
Rural Utilities
 
Institutional Credit
 
Corporate
 
Net Effective Spread
 
Dollars
 
Yield
 
Dollars
 
Yield
 
Dollars
 
Yield
 
Dollars
 
Yield
 
Dollars
 
Yield
 
Dollars
 
Yield
 
(dollars in thousands)
For the quarter ended:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014 (1)
$
8,682

 
1.71
%
 
$
5,250

 
1.19
%
 
$
2,908

 
1.18
%
 
$
7,339

 
0.58
%
 
$
1,732

 
0.26
%
 
$
25,911

 
0.83
%
September 30, 2014
8,207

 
1.68
%
 
5,073

 
1.18
%
 
2,890

 
1.16
%
 
7,295

 
0.58
%
 
3,773

 
0.59
%
 
27,238

 
0.89
%
June 30, 2014
7,820

 
1.64
%
 
4,159

 
0.99
%
 
2,953

 
1.16
%
 
7,257

 
0.57
%
 
4,160

 
0.57
%
 
26,349

 
0.84
%
March 31, 2014 (2)
7,114

 
1.53
%
 
3,784

 
0.91
%
 
1,990

 
0.73
%
 
6,672

 
0.53
%
 
4,142

 
0.56
%
 
23,702

 
0.75
%
December 31, 2013 (2)
10,113

 
2.20
%
 
4,022

 
0.97
%
 
2,379

 
0.89
%
 
6,210

 
0.49
%
 
4,420

 
0.58
%
 
27,144

 
0.85
%
September 30, 2013
7,980

 
1.86
%
 
4,505

 
1.09
%
 
2,974

 
1.12
%
 
6,205

 
0.49
%
 
4,117

 
0.57
%
 
25,781

 
0.83
%
June 30, 2013
8,228

 
2.08
%
 
4,508

 
1.12
%
 
3,056

 
1.14
%
 
5,977

 
0.48
%
 
4,294

 
0.63
%
 
26,063

 
0.87
%
March 31, 2013
8,083

 
2.20
%
 
4,694

 
1.17
%
 
3,183

 
1.20
%
 
5,863

 
0.50
%
 
4,440

 
0.61
%
 
26,263

 
0.90
%
December 31, 2012
7,936

 
2.24
%
 
4,718

 
1.21
%
 
3,154

 
1.22
%
 
5,970

 
0.52
%
 
4,682

 
0.61
%
 
26,460

 
0.91
%
(1)
On October 1, 2014, $78.5 million of preferred stock issued by CoBank was called, resulting in a loss of net effective spread of $2.1 million or 30 basis points in the corporate segment. The impact on consolidated net effective spread for fourth quarter 2014 was 7 basis points.
(2)
First quarter 2014 includes the impact in Rural Utilities of spread compression from the early refinancing of loans (41 basis points). Fourth quarter 2013 includes the impact in Farm & Ranch net effective spread of one-time adjustments for recovered buyout interest and yield maintenance (40 basis points in aggregate) and the impact in Rural Utilities of spread compression from the early refinancing of loans (26 basis points).





23


The following table presents quarterly core earnings reconciled to net income attributable to common stockholders for fourth quarter 2014 and each of the previous eight quarters:

Core Earnings by Quarter Ended
 
December 2014
 
September 2014
 
June 2014
 
March 2014
 
December 2013
 
September 2013
 
June 2013
 
March 2013
 
December 2012
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net effective spread (1)
$
25,911

 
$
27,238

 
$
26,349

 
$
23,702

 
$
27,144

 
$
25,781

 
$
26,063

 
$
26,263

 
$
26,460

Guarantee and commitment fees
6,628

 
6,680

 
6,916

 
7,049

 
7,130

 
7,046

 
6,954

 
6,792

 
6,764

Other (2)
(1,285
)
 
(2,001
)
 
(520
)
 
(410
)
 
427

 
(466
)
 
3,274

 
186

 
393

Total revenues
31,254

 
31,917

 
32,745

 
30,341

 
34,701

 
32,361

 
36,291

 
33,241

 
33,617

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit related (income)/expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Release of)/provision for losses
(479
)
 
(804
)
 
(2,557
)
 
674

 
12

 
(36
)
 
(704
)
 
1,176

 
1,157

REO operating expenses
48

 
1

 
59

 
2

 
3

 
35

 
259

 
126

 
47

Loss/(gains) on sale of REO
28

 
—

 
(168
)
 
3

 
(26
)
 
(39
)
 
(1,124
)
 
(47
)
 
(629
)
Total credit related (income)/expense
(403
)
 
(803
)
 
(2,666
)
 
679

 
(11
)
 
(40
)
 
(1,569
)
 
1,255

 
575

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
4,971

 
4,693

 
4,889

 
4,456

 
4,025

 
4,523

 
4,571

 
4,698

 
5,752

General and administrative
2,992

 
3,123

 
3,288

 
2,794

 
3,104

 
2,827

 
2,715

 
2,917

 
2,913

Regulatory fees
600

 
593

 
594

 
594

 
594

 
593

 
594

 
594

 
594

Total operating expenses
8,563

 
8,409

 
8,771

 
7,844

 
7,723

 
7,943

 
7,880

 
8,209

 
9,259

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings
23,094

 
24,311

 
26,640

 
21,818

 
26,989

 
24,458

 
29,980

 
23,777

 
23,783

Income tax expense/(benefit) (3)
4,858

 
6,327

 
(4,734
)
 
4,334

 
5,279

 
6,263

 
7,007

 
6,081

 
5,914

Non-controlling interest
5,414

 
5,412

 
5,819

 
5,547

 
5,546

 
5,547

 
5,547

 
5,547

 
5,546

Preferred stock dividends
3,296

 
3,283

 
2,308

 
952

 
882

 
881

 
881

 
851

 
720

Core earnings
$
9,526

 
$
9,289

 
$
23,247

 
$
10,985

 
$
15,282

 
$
11,767

 
$
16,545

 
$
11,298

 
$
11,603

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciling items (after-tax effects):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized (losses)/gains on financial derivatives and hedging activities
(3,717
)
 
2,685

 
(3,053
)
 
(2,395
)
 
8,003

 
4,632

 
11,021

 
5,712

 
4,719

Unrealized gains/(losses) on trading assets
679

 
(21
)
 
(46
)
 
426

 
(50
)
 
(407
)
 
(212
)
 
136

 
1,778

Amortization of premiums/discounts and deferred gains on assets consolidated at fair value
(811
)
 
(440
)
 
(179
)
 
(8,027
)
 
(10,864
)
 
(421
)
 
(564
)
 
(618
)
 
(4,534
)
Net effects of settlements on agency forwards
(30
)
 
73

 
236

 
(176
)
 
114

 
(158
)
 
955

 
(338
)
 
(102
)
Lower of cost or fair value adjustments on loans held for sale
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(3,863
)
Net income attributable to common stockholders
$
5,647

 
$
11,586

 
$
20,205

 
$
813

 
$
12,485

 
$
15,413

 
$
27,745

 
$
16,190

 
$
9,601

(1)
The difference between first quarter 2014 and fourth quarter 2013 net effective spread was due to the impact of one-time adjustments for recovered buyout interest and yield maintenance of $1.8 million in fourth quarter 2013, $0.6 million associated with the early refinancing of AgVantage securities and the recasting of certain Rural Utilities loans, and a lower day count in first quarter 2014.
(2)
Third quarter 2014 includes $17.9 million of interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased and $16.4 million of unrealized gains on securities sold, not yet purchased. First quarter 2014 includes additional hedging costs of $0.6 million. Fourth quarter 2013 includes gains on the repurchase of debt of $1.5 million, partially offset by realized losses on the sale of available-for-sale securities of $0.9 million and additional hedging costs of $0.2 million. Second quarter 2013 includes $3.1 million of realized gains from the sale of an available-for-sale investment security.
(3)
Fourth quarter 2014 and second quarter 2014 reflect a reduction of $1.4 million and $11.6 million, respectively, in the tax valuation allowance against capital loss carryforwards related to capital gains on securities sold, not yet purchased. First quarter 2014 and fourth quarter 2013 reflect a reduction in tax valuation allowance of $0.9 million and $2.1 million, respectively, associated with certain gains on investment portfolio assets. Second quarter 2013 includes the reduction of $1.1 million of tax valuation allowance against capital loss carryforwards related to realized gains from the sale of an available-for-sale investment security.

24


December 31, 2014 Equity Investor Presentation

 
2 Forward-Looking Statements 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 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, 2014, filed with the SEC on March 16, 2015, which is 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 December 31, 2014. Farmer Mac undertakes no obligation to release publicly the results of revisions to any such forward-looking statements to reflect any future events or circumstances, except as otherwise mandated by the SEC. 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 © 2015 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.

 
3 Non-GAAP Financial Measures This presentation is for general informational purposes only, is current only as of December 31, 2014, and should be read in conjunction with Farmer Mac’s Annual Report on Form 10-K. Farmer Mac uses core earnings, a non-GAAP financial measure, to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends. Core earnings principally differs from net income attributable to common stockholders by excluding the effects of fair value accounting guidance, which are not expected to have a cumulative net impact on financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is generally expected. Core earnings also differs from net income attributable to common stockholders 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. Although the interest expense, realized gains, and tax benefits for 2014 related to the cash management and liquidity initiative are not expected to significantly affect Farmer Mac's earnings beyond 2014, these items are included as part of core earnings because they reflect Farmer Mac's economic financial performance and significantly contribute to cash profitability and retained earnings while the initiative is in effect. The inclusion of the effects of the cash management and liquidity initiative in core earnings is also consistent with the inclusion in core earnings of the investment portfolio losses recognized in 2008 and 2009 that generated the capital loss carryforwards related to the tax benefits recognized in 2014. In management's view, core earnings excluding items related to the cash management and liquidity initiative and the capital structure initiative is another useful alternative measure in understanding Farmer Mac's profitability because the measure excludes these shorter-term initiatives that are not expected to significantly affect Farmer Mac's financial performance beyond 2014. Farmer Mac believes that this alternative measure facilitates useful comparisons of financial performance between 2014 and to prior years when these initiatives were not in effect and therefore had no effect on Farmer Mac's financial performance. Core earnings excluding the indicated items principally differs from net income attributable to common stockholders by excluding the items discussed above that are also excluded from core earnings (primarily the effects of fair value accounting guidance and specified transactions that may not reflect Farmer Mac's economic financial performance) and then also excluding the effects of the cash management and liquidity initiative and the capital structure initiative. These non-GAAP financial measures may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of these non-GAAP 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.

 
4 Table of Contents • Overview and Highlights.............................5 • Business and Products...............................12 • Portfolio and Lines of Business..................15 • Financial Performance................................23 • Funding and Risk Management..................27 • Appendix.....................................................31

 
Overview and Highlights

 
6 Farmer Mac Overview • Created in the 1980s to help prevent future agricultural credit crises – Provide a secondary market for agricultural and rural utilities credit – Broaden access and drive more efficient credit pricing – Reduce agricultural credit market volatility • Organized around four business segments: – Farm & Ranch – USDA Guarantees – Rural Utilities – Institutional Credit • Provide diverse product suite to lenders – Loan Purchases – Credit Guarantees – Wholesale Financing TIMELINE 1987 – Farmer Mac initially chartered by Congress as an instrumentality of the United States 1996 – First major charter revision and expansion of authority (e.g., direct loan purchases) 1999 – First listed on NYSE (AGM) 2008 – Second major charter revision and expansion of authority (Rural Utilities)

 
7 • Rigorous underwriting standards • Low delinquencies • Low cumulative historical credit losses Quality Assets • Directly financed through issuance of low-cost debt to capital markets • Issue debt at narrow, GSE spreads to U.S. Treasuries Funding Advantage • Robust worldwide demand for agricultural products • Increase market share through significant business development efforts • Increasing financial investment in agriculture leads to new wholesale financing opportunities Growth Prospects • Overhead / outstanding business volume ~ 23 bps • Outstanding business volume / total employees ~ $200 million per employee Operational Efficiency • Steady core earnings growth • Core earnings return on equity ~ 17% to 25% • Steady growth in common dividends Consistent Returns Investment Highlights

 
8 $9.1 $11.7 $11.3 $11.0 $10.0 $12.9 $16.5 $23.2 $11.2 $13.4 $11.8 $9.3 $12.6 $11.6 $15.3 $9.5 $0 $10 $20 $30 $40 $50 $60 2011 2012 2013 2014 Mil lion s Q4 Q3 Q2 Q1 Key Company Metrics – Core Earnings $42.9 $49.6 $54.9 $53.0 Core earnings for 2014 include the effects of the cash management and liquidity initiative implemented in the 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 LLC preferred stock. Excluding these short-term initiatives, core earnings for Q1 2014, Q2 2014, Q3 2014, and Q4 2014 were $11.0 million, $13.4 million, $12.5 million, and $11.0 million, respectively. (1) (1)

 
9 Key Company Metrics – Outstanding Volume $4.4 $4.8 $5.2 $5.4 $5.1 $5.6 $6.0 $6.4 $1.5 $1.6 $1.7 $1.8 $0.9 $1.0 $1.1 $1.0 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 2011 2012 2013 2014 B il li o n s Rural Utilities USDA Guarantees Institutional Credit Farm & Ranch $14.6 Note: Includes on- and off-balance sheet outstanding business volume As of Year-end $11.9 $13.0 $14.0

 
10 Key Company Metrics – 90-Day Delinquencies $40.6 $33.3 $28.3 $18.9 0.93% 0.70% 0.55% 0.35% 0.34% 0.26% 0.20% 0.13% 0.00% 0.50% 1.00% 1.50% $0 $20 $40 $60 $80 2011 2012 2013 2014 M il li o n s 90-day Delinquencies (Left Axis) % of Farm & Ranch Only (Right Axis) % of Total Portfolio (Right Axis)

 
11 $475 $519 $591 $766 $127 $145 $192 $345 $0 $50 $100 $150 $200 $250 $300 $350 $400 $0 $200 $400 $600 $800 2011 2012 2013 2014 M illio n s M il li o n s Core Capital (Left Axis) Excess Statutory Capital (Right Axis) Key Company Metrics – Capital Core capital defined as total equity less accumulated other comprehensive income Excess statutory capital defined as core capital less statutory minimum capital (1) (2) (1) (2) As of Year-end

 
Business and Products

 
13 Business Overview BORROWERS LOAN ORIGINATORS FARMER MAC Mortgage Lenders: • Community Banks • Farm Credit System • Mortgage Companies • Commercial Banks • Insurance Companies • Credit Unions Rural Utilities Cooperative Lenders: • National Rural Utilities Cooperative Finance Corporation • CoBank Farmers & Ranchers Rural Utilities Cooperatives Farm & Ranch Segment: Loans $2.5B Standbys / AMBS(1) Guar. $2.9B Total $5.4B USDA Guarantees Segment: USDA-guaranteed portions $1.8B of loans Rural Utilities Segment: Loans $1.0B 37% of Total 7% of Total 12% of Total Institutional Credit Segment: AgVantage Securities $4.7B 32% of Total 12% of Total Institutional Credit Segment: AgVantage Securities $1.7B (1) Agricultural mortgage-backed securities (AMBS)

 
14 PRODUCT TYPE FEATURES LINES OF BUSINESS Loan Purchases • Originator bank sells loans that are not good fit with its funding sources • Originator maintains field servicing • Frees capital for originator F & R USDA RU IC Total $2.5B 17% $1.8B 12% $1.0B 7% -- $5.3B 36% Wholesale Financing: • AgVantage • Originator retains loans; issues AgVantage securities • Attractive funding rates • Reduce capital risk weightings • Originator maintains borrower relationships -- -- -- $6.4B 44% $6.4B 44% Credit Protection: • Purchase Commitments / Security Guarantees • Reduce capital risk weightings • Originator maintains borrower relationships $2.9B 20% -- -- -- $2.9B 20% Total $5.4B $1.8B $1.0B $6.4B $14.6B Products and Features

 
Portfolio and Lines of Business

 
16 $2.7 $3.3 $3.5 $5.6 $6.0 $6.4 $3.1 $3.0 $2.9 $1.6 $1.7 $1.8 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 2012 2013 2014 B ill io n s Loans AgVantage Standbys / Guar. USDA Guarantees (1) (2) Outstanding Business Volume • $14.6 billion total business volume – 4.6% annual growth • Lines of business ($ and % annual growth) – Farm & Ranch – $5.4B; +5% – USDA – $1.8B; +7% – Rural Utilities – $1.0B; -6% – Institutional Credit – $6.4B; +6% • Product types – Loan purchases • USDA-Guaranteed portions of loans are a distinct line of business – Loan financing • AgVantage securities – Loan guarantees • Standbys • AMBS Guarantees Product Type (1) Includes loans underlying consolidated AMBS (2) Includes off-balance sheet Farmer Mac Guaranteed AMBS $13.0 $14.0 $14.6

 
17 $1.7 $2.2 $2.5 $3.1 $3.0 $2.9 $0 $1 $2 $3 $4 $5 2012 2013 2014 B ill io n s Loans Standbys / Guarantees (1) (2) $4.8 $5.2 $5.4 Line of Business Focus: Farm & Ranch • Purchase or guarantee first lien mortgages on agricultural real estate – Loans (spread) • Purchase and retain eligible whole loans • Higher spreads; underwriting standards mitigate direct credit risk – Standbys / Guarantees (fees) • Issue purchase commitments (Standbys) for eligible loans • Guarantee scheduled payments on off-balance sheet AMBS Farm & Ranch by Product Type (1) Includes loans underlying consolidated AMBS (2) Includes off-balance sheet Farmer Mac Guaranteed AMBS Direct Credit Risk Portfolio

 
18 Line of Business Focus: Farm & Ranch Crops 55% Permanen t Plantings 17% Livestock 23% Part-time Farm / Rural Housing 3% Ag Storage and Processin g 2% Northwes t 10% Southwes t 32% Mid- North 35% Mid- South 12% Northeast 4% Southeast 7% December 31, 2014 Commodity Type Geography

 
19 Line of Business Focus: Rural Utilities • Work with rural utilities cooperative lenders (two eligible) • Rural utilities borrowers are local monopolies – Represent ~10% of U.S. electricity sales and retail customers – Have cost-plus pricing – Loans secured by a first lien on all assets, future revenues • Product types similar to Farm & Ranch (no Standbys at this time) $0 $1 2012 2013 2014 B ill io n s Rural Utilities Loans Includes loans underlying consolidated trusts $1.0 $1.1 $1.0 (1) (1)

 
20 Line of Business Focus: USDA Guarantees • U.S. Department of Agriculture guarantee on portions of private sector loans – Full faith and credit of U.S. government • Loan collateral – Farm real estate (FO) – Farm equipment (OL) – Rural business assets (BI) – Community facilities (CF) OL = operating line, FO = farm ownership, CF = community facility, BI = business & industry $0.2 $0.2 $0.2 $0.1 $0.1 $0.1 $1.2 $1.3 $1.4 $0.1 $0.1 $0.1 $0 $1 $2 2012 2013 2014 B ill io n s BI CF FO OL USDA Guarantees by Loan Type $1.6 $1.7 $1.8 Note:

 
21 Line of Business Focus: Institutional Credit • Finance lenders’ agricultural and rural utilities portfolios • Originator retains loans – AgVantage (spread and fees) • Buy general obligation securities issued by loan originators • Secured by pools of eligible loans $1.3 $1.5 $1.7 $4.3 $4.5 $4.7 $0 $2 $4 $6 $8 2012 2013 2014 B ill io n s Rural Utilities Farm & Ranch AgVantage Securities $5.6 $6.0 $6.4

 
22 Historical Credit Losses • Rural Utilities has not had any delinquencies or credit losses • USDA Guarantees and Institutional Credit have not had any credit losses • Farm & Ranch has cumulative losses of 0.15%, or approximately 1bp/year – Cumulative losses of $31 million – On $19.9 billion of cumulative originations -$2 $0 $2 $4 $6 $8 $10 $12 Net Loss / (G a in ) $ i n M il li o n s Loan Origination Year Part-Time Farm / Rural Housing Permanent Plantings Livestock Crops Ag Storage & Processing

 
Financial Performance

 
24 • Net effective spread of 83 bps, compared to 86 bps last year – Sequential decline mostly attributable to loss of $2.1 million in preferred dividend income resulting from the October 2014 redemption of CoBank preferred stock (2 bps); and – Double financing expense in Q1 2014 due to early recasting of certain assets (2 bps) and less cash interest (2 bps) • Core earnings of $53.0 million ($4.67 per diluted common share) – The decline is primarily attributable to the redemption of CoBank preferred stock • Total new business volume of $2.8 billion – Purchased $1.3 billion of AgVantage securities – Purchased $698 million of Farm & Ranch loans – Purchased $335 million of USDA securities – Net business volume growth of $647 million after repayments • Credit quality reflects the strength of the agricultural and rural utilities sectors – 90-day delinquencies of $18.9 million (0.35% of Farm & Ranch loans), down from $28.3 million (0.55% of Farm & Ranch loans) in 2013 • Regulatory capital level exceeds statutory minimum capital levels by $345 million, or 82% – Enhanced Farmer Mac’s Tier 1 capital position through the issuance of $150 million additional preferred stock during 2014 – Preferred stock issued in advance of the redemption of $250 million of Farmer Mac II LLC preferred stock and related Farm Asset Linked Capital Securities (“FALConS”) in March 2015 2014 Performance

 
25 Farmer Mac’s Core Earnings History Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Revenues: Net effective spread 25,911$ 27,238$ 26,349$ 23,702$ 27,144$ 25,781$ 26,063$ 26,263$ 26,460$ Guarantee and commitment fees 6,628 6,680 6,916 7,049 7,130 7,047 6,954 6,792 6,764 Other (1,285) (2,001) (520) (410) 427 (466) 3,274 187 393 Total revenues 31,254 31,917 32,745 30,341 34,701 32,361 36,291 33,242 33,617 Credit related (income)/expense: (Release of)/provisions for losses (479) (804) (2,557) 674 12 (36) (704) 1,176 1,157 REO operating expenses 48 1 59 2 3 35 259 126 47 Losses/(gains) on sale of REO 28 - (168) 3 (26) (39) (1,124) (47) (629) Total credit related (income)/expense (403) (803) (2,666) 679 (11) (40) (1,569) 1,255 575 Operating expenses: Compensation and employee benefits 4,971 4,693 4,889 4,456 4,025 4,523 4,571 4,698 5,752 General and administrative 2,992 3,123 3,288 2,794 3,104 2,827 2,715 2,917 2,913 Regulatory fees 600 593 594 594 594 593 594 594 594 Total operating expenses 8,563 8,409 8,771 7,844 7,723 7,943 7,880 8,209 9,259 Net earnings 23,094 24,311 26,640 21,818 26,989 24,458 29,980 23,777 23,783 Income tax expense/(benefit) 4,858 6,327 (4,734) 4,334 5,279 6,263 7,007 6,081 5,914 Non-controlling interest 5,414 5,412 5,819 5,547 5,546 5,547 5,547 5,547 5,546 Preferred stock dividends 3,296 3,283 2,308 952 882 881 881 851 720 Core earnings 9,526$ 9,289$ 23,247$ 10,985$ 15,282$ 11,767$ 16,545$ 11,298$ 11,603$ Less the after-tax effects of: Cash Management and Liquidity Initiative 826 (985) 11,596 - - - - - - Capital Structure Initiative (2,279) (2,268) (1,699) (72) - - - - - Core earnings excluding indicated items 10,979$ 12,542$ 13,350$ 11,057$ 15,282$ 11,767$ 16,545$ 11,298$ 11,603$ Core Earnings by Quarter Ended (in thousands) (1) (1) See Appendix for reconciliation of GAAP net income attributable to common stockholders to core earnings and core earnings excluding indicated items

 
26 Summary Balance Sheets December 31, 2014 December 31, 2013 December 31, 2012 December 31, 2011 December 31, 2010 (in millions) Cash and cash equivalents $ 1,363.4 $ 749.3 $ 785.6 $ 817.0 $ 729.9 Investment securities 1,939.2 2,484.1 2,499.6 2,184.5 1,763.3 Farmer Mac Guaranteed Securities 5,453.9 5,091.6 4,766.3 4,289.3 2,907.3 USDA Securities 1,771.5 1,612.0 1,590.8 1,491.9 1,317.4 Total loans 3,525.9 3,200.1 2,741.2 2,904.4 2,568.4 Allowance for loan losses (5.8 ) (6.9 ) (11.4 ) (10.2 ) (9.8 ) Total loans, net of allowance 3,520.1 3,193.2 2,729.8 2,894.2 2,558.6 Other assets 239.7 231.6 250.1 206.6 203.4 Total assets $ 14,287.8 $ 13,361.8 $ 12,622.2 $ 11,883.5 $ 9,479.9 Notes payable $ 12,825.1 $ 12,340.0 $ 11,602.1 $ 10,192.8 $ 7,940.1 Reserve for losses 4.3 6.5 5.5 7.4 10.3 Other liabilities 676.6 440.8 421.6 1,128.8 1,050.6 Total liabilities 13,506.0 12,787.3 12,029.2 $11,329.0 9,001.0 Total stockholders’ equity 545.8 332.6 351.1 312.6 237.0 Non-controlling interest - preferred stock 236.0 241.9 241.9 241.9 241.9 Total equity 781.8 574.5 593.0 554.5 478.9 Total liabilities and equity $ 14,287.8 $ 13,361.8 $ 12,622.2 $ 11,883.5 $ 9,479.9

 
Funding and Risk Management

 
28 Funding • Finance asset purchases with proceeds of debt issuances – 20+ dealers – Match funding effectively locks in net spread • Debt securities trade at narrow spreads to comparable maturity Treasuries * As of February 27, 2015 • 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 Maturity (Years) 1 3 5 10 Spread to Treasury* 14 bps 17 bps 27 bps 63 bps

 
29 Interest Rate Risk • Match fund asset purchases with liabilities that have similar interest rate characteristics – Duration and convexity matching – Coupon type – Reset frequency • Manage prepayment risk on mortgages – Callable debt and bullet issuances across spectrum of maturities – Can adjust effective asset and debt coupon and duration characteristics through the use of interest rate swaps • Perform regular stress testing and disclose a variety of sensitivity measures – Duration Gap – Market Value of Equity (MVE) Sensitivity – Net Interest Income (NII) Sensitivity

 
30 Liquidity – Investment Portfolio • Farmer Mac maintains an investment portfolio to provide a back-up source of liquidity in excess of regulatory requirements – A minimum of 90 days of liquidity required by regulation • $3.3 billion investment portfolio at year-end – Cash and highly-rated investment securities – Conservative portfolio goals • Minimize exposure to market volatility • Preservation of capital • Ready access to cash – Provided 146 days of liquidity at year-end • Farmer Mac also has a $1.5 billion line of credit with the U.S. Treasury – Supports Farmer Mac’s guarantee obligations – Farmer Mac has never used this line of credit Cash & Equiv. 41% Guar. by GSEs and other U.S. Gov't Agencies 55% Corporate Debt Securities 1% Asset- Backed Securities 3% Liquidity Portfolio

 
Appendix

 
32 Key Company Metrics 2014 2013 2012 2011 (dollars in thousands, except per share amounts) Core Earnings $53,047 $54,892 $49,642 $42,907 Core Earnings per Diluted Share $4.67 $4.90 $4.51 $3.97 Net Effective Spread ($) $103,200 $105,251 $106,557 $89,419 Net Effective Spread (%) 0.83% 0.86% 0.95% 0.96% Guarantee & Commitment Fees $27,273 $27,922 $26,622 $28,090 Excess Regulatory Capital $344,968 $192,200 $145,000 $126,500 Common Stock Dividends per Share $0.56 $0.48 $0.40 $0.20 Outstanding Business Volume $14,597,758 $13,950,312 $13,015,188 $11,913,302 90-Day Delinquencies – Farm & Ranch 0.35% 0.55% 0.70% 0.93% Charge-Offs $86 $4,004 $2,501 $252 Book Value per Share $29.76 $26.68 $20.52 $17.19 Core Earnings Return on Equity 17% 22% 25% 25% Core earnings for 2014 include the effects of the cash management and liquidity initiative implemented in the 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 LLC preferred stock. Excluding these short-term initiatives, core earnings for 2014 was $47.9 million, or $4.22 per diluted share. (1) (1)

 
33 Core Earnings & Core Earnings Excluding Indicated Items (Non-GAAP Measures) 2014 2013 2012 2011 Net effective spread: (in millions) Interest income $ 246.4 $ 255.8 $ 274.9 $ 281.4 Interest expense 143.2 150.5 168.3 192.0 Net effective spread 103.2 105.3 106.6 89.4 Non-interest income: Guarantee and commitment fees 27.3 27.9 26.6 28.1 Other (expense)/income (4.2 ) 3.4 1.4 1.2 Non-interest income 23.1 31.3 28.0 29.3 Non-interest expenses: (Release of)/provision for losses (3.2 ) (0.4 ) 1.9 (2.3 ) Compensation and employee benefits 19.0 17.8 19.2 17.9 General and administrative 12.2 11.6 11.1 9.7 Other non-interest expenses 2.4 2.4 2.4 3.9 Non-interest expense 30.4 31.4 34.6 29.2 Core earnings before income taxes 95.9 105.2 100.0 89.5 Income tax expense 10.8 24.6 25.3 21.5 Core earnings before preferred stock dividends 85.1 80.6 74.7 68.0 Preferred stock dividends (32.1 ) (25.7 ) (25.1 ) (25.1 ) Core earnings $ 53.0 $ 54.9 $ 49.6 $ 42.9 Less the after-tax effects of: Cash Management and Liquidity Initiative 11.4 -- -- -- Capital Structure Initiative (6.3 ) -- -- -- Core earnings excluding indicated items $ 47.9 $ 54.9 $ 49.6 $ 42.9

 
34 2014 2013 2012 2011 Net income attributable to common stockholders 38,251$ 71,833$ 43,894$ 13,784$ Less the after-tax effects of: Unrealized (losses)/gains on financial derivatives and hedging activities (6,480) 29,368 4,325 (30,930) Unrealized gains/(losses) on trading assets 1,038 (533) 200 2,246 Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (9,457) (12,467) (7,266) (3,692) Net effects of settlements on agency forwards 103 573 856 (2,523) Lower of cost or fair value adjustments on loans held for sale - - (3,863) 5,776 Core earnings 53,047$ 54,892$ 49,642$ 42,907$ Less the after-tax effects of: Cash Management and Liquidity Initiative: Gains on securities sold, not yet purchased 24,070 - - - Interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased (25,595) - - - Tax benefits related to cash management and liquidity initiative 12,961 - - - Sub-total 11,436 - - - Capital Structure Initiative: Net increase in preferred dividends due to pre- funding of preferred issuances in advance of calling the Farmer Mac II LLC preferred stock (6,318) - - - Core earnings excluding indicated items 47,929$ 54,892$ 49,642$ 42,907$ (in thousands) Reconciliation of Net Income to Core Earnings and Core Earnings Excluding Indicated Items Amounts for 2014 reflect the changes from the capital structure as of December 31, 2013, which consisted of $60.0 million of Series A preferred stock and $250 million of Farmer Mac II LLC preferred stock, in addition to common stock, additional paid-in capital, accumulated other comprehensive income, and retained earnings. The capital structure effects of pre-funding include the issuance of $150.0 million of preferred stock in 2014 and the purchase of $6.0 million of FALConS from certain holders on May 14, 2014. (1) (1)

 
35 Reconciliation of Net Income to Core Earnings and Core Earnings Excluding Indicated Items Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Net income attributable to common stockholders 5,647$ 11,586$ 20,205$ 813$ 12,485$ 15,413$ 27,745$ 16,190$ 9,601$ Reconciling items (after-tax effects): Unrealized gains/(losses) on financial derivatives and hedging activities (3,717) 2,685 (3,053) (2,395) 8,003 4,632 11,021 5,712 4,719 Unrealized gains/(losses) on trading assets 679 (21) (46) 426 (50) (407) (212) 136 1,778 Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (811) (440) (179) (8,027) (10,864) (421) (564) (618) (4,534) Net effects of settlements on agency forwards 30 73 236 (176) 114 (158) 955 (338) (102) Lower of cost or fair value adjustments on loans held for sale - - - - - - - (3,863) Core earnings 9,526$ 9,289$ 23,247$ 10,985$ 15,282$ 11,767$ 16,545$ 11,298$ 11,603$ Less the after-tax effects of: Cash Management and Liquidity Initiative: Unrealized gains on securities sold, not yet purchased 8,328 10,661 5,082 - - - - - - Interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased (8,863) (11,646) (5,086) - - - - - - Tax benefits related to cash management and liquidity initiative 1,361 - 11,600 - - - - - - Sub-total 826 (985) 11,596 - - - - - - Capital Structure Initiative: Net increase in preferred dividends due to pre-funding of preferred issuances in advance of calling the Farmer Mac II LLC preferred stock (2,279) (2,268) (1,699) (72) - - - - - Core earnings excluding indicated items 10,979$ 12,542$ 13,350$ 11,057$ 15,282$ 11,767$ 16,545$ 11,298$ 11,603$ (in thousands) Core Earnings by Quarter Ended (1) Amounts for 2014 reflect the changes from the capital structure as of December 31, 2013, which consisted of $60.0 million of Series A preferred stock and $250 million of Farmer Mac II LLC preferred stock, in addition to common stock, additional paid-in capital, accumulated other comprehensive income, and retained earnings. The capital structure effects of pre-funding include the issuance of $150.0 million of preferred stock in 2014 and the purchase of $6.0 million of FALConS from certain holders on May 14, 2014. (1)

 
36 Historical Net Effective Spread Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield For the quarter ended: December 31, 2014 (1) 8,682$ 1.71% 5,250$ 1.19% 2,908$ 1.18% 7,339$ 0.58% 1,732$ 0.26% 25,911$ 0.83% September 30, 2014 8,207 1.68% 5,073 1.18% 2,890 1.16% 7,295 0.58% 3,773 0.59% 27,238 0.89% June 30, 2014 7,820 1.64% 4,159 0.99% 2,953 1.16% 7,257 0.57% 4,160 0.57% 26,349 0.84% March 31, 2014 (2) 7,114 1.53% 3,784 0.91% 1,990 0.73% 6,672 0.53% 4,142 0.56% 23,702 0.75% December 31,2013 (3) 10,113 2.20% 4,022 0.97% 2,379 0.89% 6,210 0.49% 4,420 0.58% 27,144 0.85% September 30, 2013 7,980 1.86% 4,505 1.09% 2,974 1.12% 6,205 0.49% 4,117 0.57% 25,781 0.83% June 30, 2013 8,228 2.08% 4,508 1.12% 3,056 1.14% 5,977 0.48% 4,294 0.63% 26,063 0.87% March 31, 2013 8,083 2.20% 4,694 1.17% 3,183 1.20% 5,863 0.50% 4,440 0.61% 26,263 0.90% December 31, 2012 7,936 2.24% 4,718 1.21% 3,154 1.22% 5,970 0.52% 4,682 0.61% 26,460 0.91% On October 1, 2014, $78.5 million of preferred stock issued by CoBank was called, resulting in a loss of net effective spread of $2.1 million or 30 basis points in the corporate segment. The impact on consolidated net effective spread for fourth quarter 2014 was 7 basis points. First quarter 2014 includes the impact of spread compression in Rural Utilities line of business from the early refinancing of loans (41 basis points). Fourth quarter 2013 includes the impact in net effective spread in the Farm & Ranch line of business of one-time adjustments for recovered buyout interest and yield maintenance. (dollars in thousands) Farm & Ranch USDA Guarantees Rural Utilities Corporate Net Effective SpreadInstitutional Credit (1) (2) (3)

 
37 Regulatory/Congressional Oversight • SEC regulation under federal securities laws since initial charter • Subject to NYSE rules and regulations since 1999 • Regulated by the Farm Credit Administration (FCA) through its Office of Secondary Market Oversight (see www.fca.gov for more information) • Congressional oversight through Congressional committees – Agriculture-related committees in House and Senate

 
38 Number of Shares Class A Voting Common Stock • NYSE-traded “AGM.A” • Ownership restricted to 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-traded “AGM” • No ownership restrictions 9.4 million Three Common Equity Share Classes

 
39 Source: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1446 Agricultural Land Values Agricultural Land Values 0 500 1000 1500 2000 2500 3000 3500 4000 4500 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 A v er a g e V a lu e P er A cr e Cropland Values All Farm Real Estate

 
40 5% 10% 15% 20% 25% 30 yr. average 2014/5 Forecast as of 2/10/15 Source: USDA Farm Sector & Household Income Real Net Farm Income Debt-to-Asset Ratio 0 20 40 60 80 100 120 140 $Bil lio n s 10 yr. average Agricultural Income and Leverage • Agricultural sector used favorable conditions of last 10 years to reduce leverage • Net farm incomes moderating as a result of high global grain stocks and expense rigidity • Real 2015 net farm income is expected to be $67 billion

 
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