2015 Q4 Press Release



Farmer Mac Reports 2015 Results and Announces Dividend Increase $15.9 Billion in Outstanding Business Volume; Core Earnings of $47.0 Million


WASHINGTON, D.C., March 10, 2016 - The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today announced its results for the fiscal quarter and year ended December 31, 2015, which included $1.3 billion in net new business volume growth in 2015 that brought total outstanding business volume to a record $15.9 billion as of December 31, 2015. Farmer Mac's 2015 core earnings, a non-GAAP measure, were $47.0 million ($4.15 per diluted common share), compared to

$53.0 million ($4.67 per diluted common share) in 2014. For fourth quarter 2015, core earnings were


$13.1 million ($1.17 per diluted common share), compared to $13.2 million ($1.17 per diluted common share) for third quarter 2015, and $9.5 million ($0.84 per diluted common share) for fourth quarter 2014.

Farmer Mac's board of directors also approved an increase in the quarterly dividend on all classes of Farmer Mac's common stock to $0.26 per share for first quarter 2016 and announced a new common stock dividend policy. This quarter's dividend amount represents a 63 percent increase over the $0.16 per share amount paid in each quarter during 2015.

"Farmer Mac completed another successful year in 2015 and positioned itself for continued success over the long-term," said President and Chief Executive Officer Tim Buzby. "Our expanding customer base and product offerings have helped us grow by an average of approximately $1 billion per year in outstanding business volume over the last four years. Our financial results continue to be strong, and our credit quality remains very favorable. While certain segments of agriculture are facing their challenges, Farmer Mac is executing well on the opportunities within its markets and we believe the outlook for us is positive for 2016. We also made some important decisions recently, including the change

to our dividend policy and the adoption of a $25 million share repurchase program in September 2015. With our capital restructuring initiative behind us, we have reevaluated our common stock dividend policy and decided to provide a greater payout of core earnings to our common stockholders - one that is more aligned with other publicly-traded financial companies. Given our existing strong capital base, we expect to maintain a growing and sustainable common dividend and to target a payout ratio of core earnings to common stockholders that is anticipated to grow to approximately 30% over time. Even with this higher target payout ratio, Farmer Mac still expects to retain sufficient earnings each year to fund its growth and to build equity capital over the long term."

Earnings


Farmer Mac's net income attributable to common stockholders for 2015 was $47.4 million ($4.19 per diluted common share), compared to $38.3 million ($3.37 per diluted common share) for 2014. The increase in 2015 from 2014 was primarily attributable to the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $7.1 million after-tax gain in 2015, compared to a

$6.5 million after-tax loss in 2014.


Core earnings for 2015 were $47.0 million ($4.15 per diluted common share), compared to $53.0 million ($4.67 per diluted common share) in 2014. The decrease in core earnings in 2015 compared to 2014 was primarily attributable to the absence of the $11.4 million net economic benefit of the cash management and liquidity initiative, which was completed in 2014, and the loss of $5.6 million after-tax in preferred dividend income resulting from the fourth quarter 2014 redemption of Farmer Mac's investment in $78.5 million of high-yielding preferred stock previously held in Farmer Mac's investment portfolio. Also contributing to the decrease was a $2.6 million after-tax increase in operating expenses primarily due to higher compensation costs resulting from the consolidation of Farmer Mac's appraisal subsidiary, Contour Valuation Services, LLC, and higher legal fees, consulting fees, and information services expenses related to corporate strategic initiatives. The year-over-year decrease in core earnings was partially offset by a $7.7 million after-tax increase in net effective spread (excluding the effect of the

fourth quarter 2014 redemption of high-yielding preferred stock), which was driven by growth in outstanding business volume, and a $7.6 million after-tax decrease in preferred dividend expense resulting from the redemption of all outstanding shares of Farmer Mac II Preferred Stock in first quarter 2015.

Core earnings in fourth quarter 2015 were $13.1 million ($1.17 per diluted common share), compared to $13.2 million ($1.17 per diluted common share) in third quarter 2015, and $9.5 million ($0.84 per diluted common share) in fourth quarter 2014. The increase in core earnings for fourth quarter 2015 compared to fourth quarter 2014 was attributable to a $1.0 million after-tax increase in net effective spread and a $3.5 million after-tax decrease in preferred dividend expense resulting from the redemption of all outstanding shares of Farmer Mac II Preferred Stock in first quarter 2015.

See "Non-GAAP Earnings Measures" below for more information about core earnings and for a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings.

Business Volume Highlights


Farmer Mac added $3.2 billion of new business volume during 2015. Specifically, Farmer Mac:

  • purchased $748.4 million of newly originated Farm & Ranch loans;

  • purchased $743.2 million of AgVantage securities;

  • added $522.3 million of Rural Utilities loans under LTSPCs;

  • added $427.8 million of Farm & Ranch loans under LTSPCs;

  • purchased $363.6 million of USDA Securities;

  • added a $300.0 million revolving floating rate AgVantage facility;

  • purchased $108.3 million of Rural Utilities loans; and

  • purchased $13.3 million of Farmer Mac Guaranteed USDA Securities.

    During fourth quarter 2015, Farmer Mac added $564.1 million of new business volume, with Farm & Ranch loan purchases and Farm & Ranch loans under LTSPCs driving the volume growth. Specifically, Farmer Mac:

  • purchased $245.3 million of newly originated Farm & Ranch loans;

  • added $185.9 million of Farm & Ranch loans under LTSPCs;

  • purchased $72.4 million of USDA Securities;

  • purchased $46.1 million of Rural Utilities loans; and

  • purchased $14.4 million of AgVantage securities.


After $1.9 billion of maturities and principal paydowns on existing business during 2015, which included $715.8 million in scheduled maturities of AgVantage securities, Farmer Mac's outstanding business volume increased by $1.3 billion from December 31, 2014 to $15.9 billion as of December 31, 2015. The increase in Farmer Mac's outstanding business volume was driven by the addition of $522.3 million of Rural Utilities loans under LTSPCs, as well as broad-based portfolio growth across most of Farmer Mac's other products, including AgVantage securities, Farm & Ranch loans, and USDA Securities. The large LTSPC transaction completed in 2015 was the first time Farmer Mac has provided LTSPCs under its Rural Utilities line of business. Of the new business volume in AgVantage securities for 2015, a

$300.0 million revolving floating rate AgVantage facility with the National Rural Utilities Cooperative Finance Corporation ("CFC") was added as an off-balance sheet commitment because CFC had not drawn on the facility as of December 31, 2015. If CFC draws on this facility, the amounts drawn will be presented as on-balance sheet AgVantage securities, and Farmer Mac will earn interest income on the drawn balance.

Net Effective Spread


Farmer Mac's net effective spread was $119.4 million (87 basis points) for 2015, compared to


$113.7 million (91 basis points) for 2014. The contraction in net effective spread in percentage terms in 2015 compared to 2014 was primarily attributable to the loss of $6.5 million in preferred dividend income (5 basis points) from the fourth quarter 2014 redemption of the high-yielding preferred stock previously held in Farmer Mac's investment portfolio and a higher average balance in low-yielding cash and cash equivalents intended to increase Farmer Mac's liquidity position, partially offset by a shift towards products earning higher spreads. The year-over-year increase in dollars was primarily attributable to growth in outstanding business volume.

Net effective spread was $29.9 million (85 basis points) in fourth quarter 2015, compared to $30.4 million (88 basis points) in third quarter 2015, and $28.4 million (91 basis points) in fourth quarter 2014.

Federal Agricultural Mortgage Corporation issued this content on 10 March 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 10 March 2016 13:26:17 UTC

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