Farmer Mac Reports 2016 Results and Announces Dividend Increase Record Outstanding Business Volume of $17.4 Billion

WASHINGTON, March 9, 2017- 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, 2016, which included $1.5 billion in net new business volume growth in 2016 that brought total outstanding business volume to $17.4 billion as of December 31, 2016. Farmer Mac's net income attributable to common stockholders for 2016 was $64.2 million ($5.97 per diluted common share), compared to $47.4 million ($4.19 per diluted common share) in 2015. Farmer Mac's 2016 core earnings, a non-GAAP measure, were $53.8 million ($5.01 per diluted common share), compared to $47.0 million ($4.15 per diluted common share) in 2015.

Farmer Mac's board of directors also approved an increase in the quarterly dividend on all classes of Farmer Mac's common stock to $0.36 per share beginning in first quarter 2017. This quarter's dividend amount represents a 38 percent increase over the $0.26 per share amount paid in each quarter during 2016 and is consistent with Farmer Mac's common stock dividend policy announced in March 2016, which has a goal of increasing the common dividend payout ratio of core earnings to approximately 30 percent over time.

"Our 2016 results reflect another strong year for Farmer Mac," said President and Chief Executive Officer Tim Buzby. "We achieved record outstanding business volume of $17.4 billion and 14.5 percent core earnings growth. Our credit quality is showing signs of normalization in some metrics, which we have been anticipating as part of the agricultural credit cycle, but is within our expectations and remains near historically favorable levels. Last year we increased our common stock dividend 63 percent, and

with our 38 percent increase this year we believe we are on track to reach our targeted 30 percent core earnings payout for the 2018 year. Farmer Mac has increased its quarterly common stock dividend each of the past six years, and we believe these increases are supported by our earnings potential and overall capital position and are representative of Farmer Mac's commitment to enhancing shareholder value over the long-term. We are also proud of the way we have positioned Farmer Mac for continued success in the future, as over the past several years we have brought in new personnel to fill key positions, created new positions, and significantly expanded our investment in the technology and capacity to better grow our business and more fully deliver upon our mission."

Earnings

Farmer Mac's net income attributable to common stockholders for 2016 was $64.2 million ($5.97 per diluted common share), compared to $47.4 million ($4.19 per diluted common share) for 2015. The

$16.8 million increase in net income attributable to common stockholders from 2016 compared to 2015 was driven by an increase of $9.4 million after-tax in net interest income and the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $8.9 million after-tax gain in 2016 compared to a $7.1 million after-tax gain in 2015. Also contributing to the increase was the absence in 2016 of (1) an $8.1 million ($6.2 million after-tax) loss recorded in first quarter 2015 resulting from the write-off of deferred issuance costs upon the redemption of the Farmer Mac II LLC Preferred Stock on March 30, 2015; and (2) $3.5 million after-tax in dividend expense recorded during first quarter 2015 on that preferred stock. The increase was offset in part by a $3.1 million after-tax increase in non-interest expense driven primarily by higher general and administrative ("G&A") expenses, higher compensation and employee benefits expenses, and a decrease in the release of reserve for losses.

Core earnings in 2016 were $53.8 million ($5.01 per diluted common share), compared to $47.0 million ($4.15 per diluted common share) in 2015. The $6.8 million increase in core earnings was primarily attributable to higher total revenues, which included a $3.7 million after-tax increase in net effective spread, a non-GAAP measure, a $1.3 million after-tax increase in guarantee and commitment fee

income, and a $0.4 million after-tax decrease in hedging costs. Also contributing to the increase was a

$3.5 million after-tax decrease in preferred dividend expense resulting from the redemption of all outstanding shares of Farmer Mac II LLC Preferred Stock in first quarter 2015. The increase in core earnings in 2016 was offset in part by several factors. Credit-related expenses increased $0.5 million after-tax resulting from net provisions to the allowance for losses of $0.6 million after-tax in 2016 compared to net provisions of $0.1 million after-tax in 2015. Operating expenses also increased by $1.8 million after-tax, driven by higher G&A expenses and higher compensation and benefits expenses. The

$1.3 million after-tax increase in G&A expenses was primarily attributable to higher consulting fees and information services expenses related to corporate strategic initiatives, continued technology and business infrastructure investments, and expenses related to business development efforts. The $0.5 million after- tax increase in compensation and benefits expenses was primarily due to an increase in headcount and employee health insurance costs.

Farmer Mac's net income attributable to common stockholders for fourth quarter 2016 was $25.5 million ($2.38 per diluted common share), compared to $15.0 million ($1.35 per diluted common share) for fourth quarter 2015. The $10.5 million increase in net income attributable to common stockholders from fourth quarter 2016 compared to fourth quarter 2015 was driven primarily by the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $11.2 million after- tax gain in fourth quarter 2016 compared to a $1.8 million after-tax gain in fourth quarter 2015.

Core earnings in fourth quarter 2016 were $13.9 million ($1.30 per diluted common share), compared to $13.1 million ($1.17 per diluted common share) in fourth quarter 2015. The $0.8 million increase in core earnings was primarily due to a $2.5 million after-tax increase in total revenues, which was led by a $1.3 million after-tax increase in net effective spread. The increase was offset in part by a

$0.3 million after-tax increase in credit costs, a $0.7 million after-tax increase in G&A expenses, and a

$0.4 million after-tax increase in compensation and benefits expenses. The increases in G&A expenses

and compensation and benefits expenses for fourth quarter 2016 were attributable to the same factors described above that affected full year 2016.

See "Use of Non-GAAP Measures" below for more information about core earnings, core earnings per share, and net effective spread and for a reconciliation of the comparable GAAP measures to these non-GAAP measures.

Business Volume Highlights

During 2016, Farmer Mac added $4.4 billion of new business volume, with purchases of AgVantage securities, Farm & Ranch loans, and Rural Utilities loans under long-term standby purchase commitments ("LTSPCs") driving the volume growth. Specifically, Farmer Mac:

  • purchased $2.1 billion of AgVantage securities, including $68.4 million in Farm Equity AgVantage securities;

  • purchased $966.0 million of newly originated Farm & Ranch loans;

  • added $441.4 million of Rural Utilities loans under LTSPCs;

  • added $399.1 million of Farm & Ranch loans under LTSPCs;

  • purchased $375.2 million of USDA Securities;

  • issued $106.1 million of Farmer Mac Guaranteed USDA Securities; and

  • purchased $50.5 million of Rural Utilities loans.

After $2.9 billion of maturities and principal paydowns on existing business during 2016, which included over $1.5 billion in scheduled maturities of AgVantage securities, Farmer Mac's outstanding business volume increased by $1.5 billion from December 31, 2015 to $17.4 billion as of December 31, 2016. The increase in Farmer Mac's outstanding business volume was driven by broad-based net portfolio growth across most of Farmer Mac's products and lines of business. The increase in AgVantage securities was primarily driven by net portfolio growth from two long-standing issuers: (1) Rabo Agrifinance, Inc. and (2) National Rural Utilities Cooperative Finance Corporation ("CFC"), which increased their outstanding AgVantage business volume with Farmer Mac by $300.0 million and $210.1 million, respectively, in 2016. The new business volume in the Institutional Credit line of business also included

Federal Agricultural Mortgage Corporation published this content on 09 March 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 09 March 2017 13:30:18 UTC.

Original documenthttps://www.farmermac.com/wp-content/uploads/Farmer-Mac-Reports-2016-Results-and-Announces-Dividend-Increase.pdf

Public permalinkhttp://www.publicnow.com/view/E58528F1AF2E8D60716E72373E132E2229E2DF24