2016 Q1 Press Release Farmer Mac Reports First Quarter Financial Results $16.2 Billion in Outstanding Business Volume; Core Earnings of $12.4 Million

WASHINGTON, May 10, 2016 - The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today announced its results for the fiscal quarter ended March 31, 2016, which included $317 million in net new business volume growth that brought total outstanding business volume to $16.2 billion as of March 31, 2016. Farmer Mac's first quarter 2016 core earnings, a non-GAAP measure, were $12.4 million ($1.12 per diluted common share), compared to $13.1 million ($1.17 per diluted common share) in fourth quarter 2015 and $9.1 million ($0.80 per diluted common share) in first quarter 2015.

"Our financial results continue to be strong, and our credit quality remains good," said President and Chief Executive Officer Tim Buzby. "While certain segments of agriculture are facing their challenges, the overall business environment remains favorable for Farmer Mac. Our Institutional Credit business is growing nicely and we continue to expand our customer base for our AgVantage funding products, including a new Farm Equity AgVantage customer this quarter and more in the pipeline. Our Farm & Ranch loan purchase business is also making good strides, helped by our business development efforts as well as an increase in the demand for agricultural credit. As the agricultural economy continues to adjust to lower commodity prices and the West Coast drought, we expect credit quality to revert to more historic levels for Farmer Mac. However, we believe that this is a necessary and healthy adjustment for the market and that Farmer Mac is well positioned to deliver upon its mission as credit becomes somewhat tighter in agriculture. We believe that our financial outlook is strong and that we have good opportunities in front of us."

Earnings

Farmer Mac's net income attributable to common stockholders for first quarter 2016 was

$10.3 million ($0.94 per diluted common share), compared to $1.8 million ($0.16 per diluted common share) for first quarter 2015. The increase in first quarter 2016 compared to first quarter 2015 was primarily attributable to the absence in first quarter 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 the preferred stock. The increase was partially offset by the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $1.9 million after-tax loss in first quarter 2016, compared to a $0.6 million after-tax loss in first quarter 2015.

Core earnings in first quarter 2016 were $12.4 million ($1.12 per diluted common share), compared to $13.1 million ($1.17 per diluted common share) in fourth quarter 2015, and $9.1 million ($0.80 per diluted common share) in first quarter 2016. The $0.7 million sequential quarterly decrease in core earnings was primarily attributable to a $0.4 million after-tax increase in operating expenses. The increase in operating expenses was driven by higher stock compensation expense in first quarter 2016 resulting primarily from the annual vesting of stock-based awards and higher payroll taxes as well as higher general and administrative expenses driven by higher legal and consulting fees related to corporate strategic initiatives and general corporate matters. Farmer Mac also realized an increase in credit-related expenses of $0.1 million after-tax due to provisions to the allowance for losses in first quarter 2016 compared to releases in fourth quarter 2015. The year-over-year $3.3 million increase in core earnings was attributable to 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, a $0.4 million after-tax increase in net effective spread, and an increase in guarantee fee income of $0.4 million after-tax. The increase was partially offset by (1) a $0.5 million after-tax increase in credit-related expenses due to

provisions to the allowance for losses in first quarter 2016 compared to releases in first quarter 2015 and

(2) a $0.5 million after-tax increase in operating expenses primarily due to legal fees, consulting fees, and information services expenses related to corporate strategic initiatives and general corporate matters.

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

During first quarter 2016, Farmer Mac added $1.3 billion of new business volume, with AgVantage securities and Farm & Ranch loan purchases driving the volume growth. Specifically, Farmer

Mac:

  • purchased $927.2 million of AgVantage securities, including $25.2 million in Farm Equity AgVantage securities;

  • purchased $198.5 million of newly originated Farm & Ranch loans;

  • purchased $95.3 million of USDA Securities;

  • added $68.0 million of Farm & Ranch loans under LTSPCs;

  • purchased $9.7 million of Rural Utilities loans; and

  • issued $3.6 million of Farmer Mac Guaranteed USDA Securities.

After $1.0 billion of maturities and principal paydowns on existing business during first quarter

2016, which included $589.8 million in scheduled maturities of AgVantage securities, Farmer Mac's outstanding business volume increased by $316.8 million from December 31, 2015 to $16.2 billion as of March 31, 2016. The increase in Farmer Mac's outstanding business volume was driven by portfolio growth in AgVantage securities, including the purchase of $250.0 million in AgVantage securities from the National Rural Utilities Cooperative Finance Corporation ("CFC") and purchases of $25.2 million under Farm Equity AgVantage facilities with agricultural real estate investment funds, including $9.7 million with a new counterparty. Farmer Mac's Farm & Ranch loan portfolio also grew this quarter despite the large amount of repayments resulting from the January 1 payment date on almost all loans in the portfolio.

Net Effective Spread

Farmer Mac's net effective spread was $29.9 million (82 basis points) in first quarter 2016, compared to $29.9 million (85 basis points) in fourth quarter 2015, and $29.3 million (86 basis points) in first quarter 2015. The decrease in percentage terms in first quarter 2016 compared to fourth quarter 2015 was primarily attributable to market increases in short-term LIBOR-based funding costs and a tighter spread on a large AgVantage security that was refinanced at a shorter maturity than the original security.

In addition to the items previously mentioned, the decrease in net effective spread in percentage terms in first quarter 2016 compared to first quarter 2015 was also attributable to a decline in cash basis interest income received on non-accrual Farm & Ranch loans. The increase in dollar terms in first quarter 2016 compared to first quarter 2015 was primarily attributable to growth in outstanding business volume.

Credit Quality

Credit quality remained stable across Farmer Mac's four lines of business. In the Farm & Ranch portfolio, 90-day delinquencies were $34.7 million (0.61 percent of the Farm & Ranch portfolio) as of March 31, 2016, compared to $32.1 million (0.56 percent) as of December 31, 2015, and $32.1 million (0.60 percent) as of March 31, 2015. Farmer Mac expects that over time its 90-day delinquency rate will eventually revert closer to Farmer Mac's historical averages due to macroeconomic and other potential factors, but Farmer Mac has not yet seen an impact on its portfolio or a rise in delinquencies related to these factors. Farmer Mac's average 90-day delinquency rate for the Farm & Ranch line of business over the last fifteen years has been approximately one percent.

For Farmer Mac's other lines of business, there are currently no delinquent AgVantage securities or Rural Utilities loans held or underlying LTSPCs, 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 0.21 percent of total business volume as of March 31, 2016, compared to 0.20 percent as of December 31, 2015, and 0.22 percent as of March 31, 2015.

Federal Agricultural Mortgage Corporation published this content on 10 May 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 10 May 2016 13:01:05 UTC.

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