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| EX-99.1 - EXHIBIT 99.1 - FEDERAL AGRICULTURAL MORTGAGE CORP | a2016q1pressrelease.htm |
| 8-K - 8-K - FEDERAL AGRICULTURAL MORTGAGE CORP | a2016q1earningsrelease8-k.htm |
2016 Equity Investor Presentation First Quarter
FARMER MAC Forward-Looking Statements In addition to historical information, this presentation includes forward- looking statements that reflect management’s current expectations for Farmer Mac’s future financial results, business prospects, and business developments. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements. Management’s expectations for Farmer Mac’s future necessarily involve a number of assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events 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, 2015, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2016 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 10, 2016, which are also available on Farmer Mac’s website (www.farmermac.com). In light of these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this presentation. Any forward-looking statements made in this presentation are current only as of March 31, 2016, except as otherwise indicated. Farmer Mac undertakes no obligation to release publicly the results of revisions to any such forward-looking statements to reflect new information or any future events or circumstances, except as otherwise mandated by the SEC. The information contained in this presentation is not necessarily indicative of future results. NO OFFER OR SOLICITATION OF SECURITIES This presentation does not constitute an offer to sell or a solicitation of an offer to buy any Farmer Mac security. Farmer Mac securities are offered only in jurisdictions where permissible by offering documents available through qualified securities dealers. Any investor who is considering purchasing a Farmer Mac security should consult the applicable offering documents for the security and their own financial and legal advisors for information about and analysis of the security, the risks associated with the security, and the suitability of the investment for the investor’s particular circumstances. Copyright © 2016 by Farmer Mac. No part of this document may be duplicated, reproduced, distributed, or displayed in public in any manner or by any means without the written permission of Farmer Mac. EQUITY INVESTOR PRESENTATION 2016 02
FARMER MAC Non-GAAP Financial Measures This presentation is for general informational purposes only, is current only as of March 31, 2016, and should be read in conjunction with Farmer Mac’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2016. 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 fluctuations, 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. This non-GAAP financial measure may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of this non-GAAP measure 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. EQUITY INVESTOR PRESENTATION 2016 03
FARMER MAC Table of Contents 05 Executive Summary 13 Agricultural Industry Highlights 22 Farmer Mac Overview 33 Farmer Mac Financial Performance 40 Appendix EQUITY INVESTOR PRESENTATION 2016 04
Executive Summary
FARMER MAC Farmer Mac Overview Created in the 1980s to help provide a deeper credit market for rural America • Provide wholesale financing, secondary market and credit enhancements for agricultural and rural utilities lenders • Increase access to credit and drive more efficient credit pricing for rural America • Reduce rural credit market volatility by increasing liquidity and lending capacity for rural lenders Lines of business – focused on customers • Farm & Ranch • USDA Guarantees • Rural Utilities • Institutional Credit Diverse product suite provided to customers • Loan purchases • Wholesale financing • Credit protection EXECUTIVE SUMMARY 06 1987 1996 1998 1999 2008 Farmer Mac initially chartered by Congress as an instrumentality of the United States First major charter revision and expansion of authority (direct loan purchases) Outstanding business volume reaches $1 billion First listed on NYSE (AGM & AGM.A) Second major charter revision and expansion of authority (Rural Utilities) Outstanding business volume reaches $10 billion Outstanding business volume reaches $15 billion 2015
FARMER MAC $12.0 Billion {5.9% Market Share} Agricultural Real Estate Mortgage Market Structure EXECUTIVE SUMMARY 07 FINANCIAL INVESTORS (Developing Market) | various institutional investors investing in agricultural assets (and seeking leverage) FARM CREDIT SYSTEM (GSE) Retail & Agribusiness NON-FCS AG LENDERS Secondary Market CREDIT PROTECTION CREDIT PROTECTION W HOLESALE FINANCING LOAN SALES Primary Agriculture Mortgage Market {Farmers & Ranchers} Mortgage Financing Mortgage Financing $205 Billion $ 9 3 B il li o n $11 2 B illio n F C S F U N D IN G C O R P O R A T IO N A G F IR S T S o u th e a s t $ 1 1 B A G R IB A N K M id w e s t $ 4 7 B F C B O F T X S o u th w e s t $ 1 1 B C O B A N K N a ti o n w id e $ 2 4 B IN S U R A N C E C O M P A N IE S $ 1 2 B A G B A N K S $ 7 7 B N O N -B A N K L E N D E R S $ 2 3 B 7 6 R E T A IL A C A s (1) Ag real estate mortgage market structure shown here includes only the outstanding unpaid principal balance of first lien ag mortgage assets forecast as of December 31, 2015. (2) Source: USDA, Economic Research Service, nominal dollars forecast for year-end 2015 on a prorated basis; (as of February 2016). (3) Source: Farm Credit Administration, Call Report Data on a prorate basis for year-end 2015 (as of December 2015). (4) Sum of FCS, non-FCS, and Farmer Mac first lien ag real estate mortgage assets does not add up to the total due to the nature of Farmer Mac’s secondary market business model. (1) (2) (3) (2) (4) (4) AS OF DECEMBER 31, 2015 (1)
FARMER MAC Rural Utilities (RU) Cooperative Mortgage Market EXECUTIVE SUMMARY 08 FARM CREDIT SYSTEM (GSE) NON-GSE RU LENDERS $ 1 5 B il li o n $2 3 B illio n C O B A N K (2) (3) $3.9 Billion {10.3% Market Share} Secondary Market CREDIT PROTECTION W HOLESALE FINANCING LOAN SALES Rural Utilities Cooperative Mortgage Market {900+ Cooperatives in Util it ies Distribution, Generation and Transmission} Mortgage Financing Mortgage Financing (4) $38 Billion (4) N A T IO N A L R U R A L U T IL IT IE S C O O P E R A T IV E F IN A N C E C O R P O R A T IO N (“ C F C ” ) Market Opportunity Kilowatt-hour sales growing nearly 3% annually (2014), the first growth in several years • May lead to increased demand for credit Other industry dynamics may lead to Farmer Mac growth opportunities • Push toward higher Tier 1 capital and more duration-matched funding • Opportunities to help CFC refinance debt away from other sources of rural utility credit • Needs for longer term capital expenditures in response to regulatory policies (1) RU cooperative mortgage market structure includes only the outstanding unpaid principal balance of first lien RU cooperative real estate mortgage assets as of 2015Q3. (2) Source: CoBank 2015Q4 Financial Information, Energy Loan Portfolio nominal dollars as of December 31, 2015. (3) Source: CFC 10-Q, nominal dollars as of November 30, 2015, Long-term Loans Table 6. (4) Nominal dollars for 2015; Sum of FCS, non-GSE and Farmer Mac first lien RU cooperative real estate mortgage assets does not add up to the total due to the nature of Farmer Mac’s secondary market business model. (5) Source: CFC 2014 Key Ratio Trend Analysis (July 2015). (1) (1) (5)
FARMER MAC Farmer Mac Business Volume $ IN BILLIONS Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q16 Agricultural Outstanding Business Volume $3.1 $4.2 $5.5 $5.8 $5.5 $5.3 $7.2 $8.5 $9.0 $8.6 $9.6 $9.6 $10.7 $11.4 $11.9 $12.0 $12.1 Total Outstanding Volume $3.1 $4.2 $5.5 $5.8 $5.5 $5.3 $7.2 $8.5 $10.1 $10.7 $12.2 $11.9 $13.0 $14.0 $14.6 $15.9 $16.2 Ag Real Estate Mortgage Market and Farmer Mac $85 $89 $98 $97 $104 $114 $113 $132 $148 $146 $154 $167 $173 $185 $196 $205 $207 3.7% 4.7% 5.6% 6.0% 5.3% 4.7% 6.4% 6.5% 6.1% 5.9% 6.2% 5.7% 6.2% 6.2% 6.1% 5.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% $0 $50 $100 $150 $200 $250 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F $ I N B IL L IO N S Agricultural Real Estate Mortgage Market Ag Real Estate Mortgage Market AGM – Ag Real Estate Mortgage Market Share (1) Source: USDA, Economic Research Service, nominal dollars (as of February 2016). (2) Includes total outstanding balance of loan purchases, guarantees, and Long-Term Standby Purchase Commitments (LTSPCs) in the Farm & Ranch line of business, USDA Guarantees, and AgVantage securities secured by collateral eligible for the Farm & Ranch line of business; excludes all loan purchases, guarantees, and LTSPCs in the Rural Utilities line of business and AgVantage securities secured by collateral eligible for Rural Utilities line of business. (1) (2) EXECUTIVE SUMMARY 09 (2)
FARMER MAC $2,520 $2,730 $2,950 $3,020 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2012 2013 2014 2015 $ P E R A C R E Land Value (2)(4) Agricultural Industry Dashboard $96 $123 $91 $56 $0 $20 $40 $60 $80 $100 $120 $140 2012 2013 2014 2015F $ I N B IL L IO N S Farm Income (1) 321 297 200 182 190 195 240 219 0 100 200 300 400 2012 2013 2014 2015 IN D E X Commodity Index Feed Grains Prices Received Index Livestock Prices Received Index (2)(3) 1.67% 1.23% 0.96% 0.80% 0.00% 0.50% 1.00% 1.50% 2.00% 2012 2013 2014 2015 90-Day Delinquencies (5) (1) Source: USDA, Economic Research Service, nominal dollars (as of February 2016). (2) Source: USDA, National Agricultural Statistics Service, nominal dollars (as of February 2016). (3) Commodity prices indexed according to 1999 base year as 100. (4) Land values per acre include all farm and pasture land, irrigated and non-irrigated. (5) Source: Kansas City Federal Reserve, Ag Finance Databook & Farm Credit Funding Corp Annual Information Statements – Non-accrual real estate loans and accruing loans that are 90 days or more past due made by commercial and Farm Credit System banks (as of May 2016). EXECUTIVE SUMMARY 10 10-year Average $83 billion 10-year Average 1.30% 10-year Average $2,377
FARMER MAC Farmer Mac Dashboard $49.6 $54.9 $53.0 $47.0 $12.4 $0 $10 $20 $30 $40 $50 $60 2012 2013 2014 2015 1Q16 YTD $ I N M IL L IO N S Core Earnings EXECUTIVE SUMMARY 11 104 96 91 87 82 0 20 40 60 80 100 120 2012 2013 2014 2015 1Q16 YTD B A S IS P O IN T S Net Effective Spread $13.0 $14.0 $14.6 $15.9 $16.2 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 FY12 FY13 FY14 FY15 1Q16 $ I N B IL L IO N S Outstanding Business Volume 70 55 35 56 61 0 20 40 60 80 FY12 FY13 FY14 FY15 1Q16 B A S IS P O IN T S 90-Day Delinquencies (Farm & Ranch Line of Business Only) (1) Core earnings is a non-GAAP measure. For a reconciliation of GAAP net income attributable to common stockholders to core earnings, please refer to page 44 of the Appendix. (2) Delinquencies include loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan. (2) (1)
FARMER MAC Farmer Mac’s Investment Highlights •Rigorous underwriting standards •Low delinquencies •Low cumulative historical credit losses Quality Assets •Finance assets through issuance of low-cost public debt •Issue at narrow, GSE spreads to U.S. Treasuries Funding Advantage •Robust worldwide demand for agricultural products •Increase market share through business development efforts •Significant wholesale financing opportunities Growth Prospects •Overhead / outstanding business volume ~ 25 bps •Outstanding business volume ~$200 million per employee Operational Efficiency •Core earnings growth •Annual core earnings return on equity ~ 15% to 20% •New dividend policy targeted at growing payouts of core earnings to ~ 30% over the next several years Consistent Returns EXECUTIVE SUMMARY 12
Agricultural Industry Highlights
FARMER MAC Grain prices fell in 2015 due to record plantings/yields; livestock also under pressure • U.S. agricultural product use increased 6% in 2015; however, ending stocks also increased due to record grain production • Exports decreased 7%, driven by a stronger dollar and greater competition in overseas markets • Some reversal of these trends in 2016Q1 but still under pressure Farm income declined 38% in 2015; another 3% drop forecasted for 2016 • At $56 billion, 2015 projected farm income falls below the 10-year average of $83 billion • Initial forecasts suggest a modest three percent decline in farm income in 2016 • Dairy prices remain pressured as a result of increased production and lower overseas demand Average inflation-adjusted U.S. agricultural real estate values decreased 3% in 2015 • Corn belt farmland values down between 4% and 5% highs as falling grain prices reduced regional income • Rest of U.S. land values remain stable to modestly increasing, led by demand for pasture ground • Continued softening of land values in grain-heavy states in 2016 Land sales transactions have slowed with lower income and declining land values • However, demographic trend (average age of U.S. farmer >60 years) provides support of primary transaction volume California drought improved by El Nino; dryness persists but reservoirs healthier • Farmer Mac portfolio in Western states remained strong throughout drought conditions State of Agriculture – USDA Forecasts AGRICULTURAL INDUSTRY HIGHLIGHTS 14 (1) Source: USDA, National Agricultural Statistics Service, Nominal (current dollars) (as of February 2016). (2) Source: USDA, Economic Research Service, Nominal (current dollars) (as of February 2016). (3) Source: Federal Reserve Bank of Chicago Seventh District, Ag Credit Conditions Survey AgLetter (as of February 2016). (1) (2) (3)
FARMER MAC Global Outlook Demand • USDA’s Future Agricultural Resources Model (FARM) projects a 75% increase in total production and consumption of major field crops between 2005 and 2050 • 43% increase in global population • Higher protein diets as incomes in developing countries increase • Thus significant “demand pull” for agricultural products Supply • Very high rate of capacity utilization • Finite amount of arable farmland • Estimated that less than 10% of U.S. cropland is idle • Thus, productivity would need to nearly double by 2050 to feed the world AGRICULTURAL INDUSTRY HIGHLIGHTS 15 (1) (1) Source: USDA, Economic Research Service Global Drivers of Agricultural Demand and Supply, September 2014. (2) Source: USDA, Census of Agriculture; 2012 (2)
FARMER MAC Farmer Mac’s Unique Market Position Farmer Mac enjoys a unique position, sharing in upside opportunity in strong markets and benefiting from downside protection and increased relative demand in weak markets Strong Market – Farmer Mac can participate in the upside • Situation: Credit is healthy, transaction volumes are high, and capital is plentiful • Impacts on Farmer Mac: – Farmer Mac can benefit from the higher industry volumes and healthy credit – However, when farm income is high and capital is plentiful, the relative value of access to GSE capital may be marginally lower – Earnings can benefit from lower credit costs, but spreads may be tighter Weak Market – Farmer Mac can benefit from loss protection and increased demand due to tighter credit conditions • Situation: Declining farm income, land values and credit quality; less access to capital • Impacts on Farmer Mac: – Farmer Mac can benefit from loss protection given its unique diversified geographic/commodity portfolio and its conservative underwriting standards – Farmer Mac can also benefit from the greater relative value of GSE capital in tighter credit market conditions – However, in bear markets, no entity will be immune to declining credit quality, although spreads may be more favorable AGRICULTURAL INDUSTRY HIGHLIGHTS 16
FARMER MAC Farmer Mac’s Downside Protection Conservative underwriting with significant focus on repayment strength and low LTVs • Total Debt Coverage (TDC) ratio of at least 1.25x • Generally maximum LTVs of 60% to 70%, but in practice average 40% to 45% on mortgages purchased • Require minimum borrower net equity of 50% across all agricultural assets • Significant scrutiny given to property access and access to water, among other items Farmer Mac credits less likely to default as compared to the broader industry • Farmer Mac is generally recognized as having the tightest credit requirements for ag mortgage loans • Primary focus on repayment capacity through stressed input assumptions during underwriting process • Farmer Mac is not a “lender of last resort”; Farm Credit Administration is a strong safety and soundness regulator Farmer Mac credits less likely to incur losses even when a default occurs • “Expected losses” of farm asset values range from 0% to 30% for various commodity types in Farmer Mac’s base case scenario • Farmer Mac’s “stress scenario losses” of farm asset values range from 17% to 50% for various commodity types • Given Farmer Mac’s portfolio average LTV of 44% as of March 31, average farm asset value losses would need to be in excess of 56% to begin to generate the first dollar of loss to Farmer Mac – The 1980s agricultural credit crisis saw land values decline approximately 23% from peak to trough AGRICULTURAL INDUSTRY HIGHLIGHTS 17 (1) Source: USDA, National Agricultural Statistics Service (as of August 2015). (1)
FARMER MAC $48 $51 $55 $39 $61 $87 $79 $57 $70 $78 $62 $77 $114 $96 $123 $91 $56 179 289 218 50 100 150 200 250 300 350 $0 $20 $40 $60 $80 $100 $120 $140 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F IN D E X $ I N B IL L IO N S Nominal Farm Income Grain Index Livestock Index Export Change Index (1) (2) (2) (1) Farm Income and Related Trends (1) Source: USDA, Economic Research Service, nominal dollars (as of February 2016). (2) Source: USDA, National Agricultural Statistics Service; Indexed to 1999 as 100. AGRICULTURAL INDUSTRY HIGHLIGHTS 18
FARMER MAC Ag Land Value and Leverage Trends $1.0 $1.1 $1.2 $1.2 $1.3 $1.3 $1.6 $1.8 $2.0 $2.2 $2.1 $2.2 $2.3 $2.5 $2.7 $3.0 $3.0 $48 $51 $55 $39 $61 $87 $79 $57 $70 $78 $62 $77 $114 $96 $123 $91 $56 $0 $20 $40 $60 $80 $100 $120 $140 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F $ IN B IL L IO N S A V E R A GE L A N D V A L U E $ I N T H O U S A N D S /A C R E Ag Land Values Land Value Nominal Farm Income Average 12.8% 9% 10% 11% 12% 13% 14% 15% 16% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F D E B T TO A S S E T R A T IO ( % ) Leverage Debt to Asset Ratio Average (1) Source: USDA, National Agricultural Statistics Service, nominals dollars, (as of February 2016); includes all farm and pasture land, irrigated and non-irrigated. (2) Source: USDA, Economic Research Service, nominal dollars (as of February 2016). (1) (2) (2) AGRICULTURAL INDUSTRY HIGHLIGHTS 19
FARMER MAC Agricultural Risk Management Tools Farmers today use a broad array of risk management tools, many of which were not available or not accepted during the ag credit crisis of the 1980s • Many now view costs of hedging simply as a cost of doing business • Have learned from their parents’ experiences in the 1980s • Risk management includes revenue and cost protection and more sophisticated asset liability management Revenue Hedging • Crop insurance – approximately 93% of planted acres to principle crops carry some form of crop insurance • Crop insurance premiums still federally subsidized and losses shared by the federal government • Futures/forward sales – many producers use hedging instruments to sell grain crops forward at planting stage Cost Hedging • Feed costs hedged with futures/forwards • Fertilizer and fuel costs can be similarly hedged • Water availability can be provided via “water banks” and secondary sources of water, e.g. wells • Water costs can also be hedged with forward purchase agreements Debt service is better managed with lower absolute leverage levels and better ALM AGRICULTURAL INDUSTRY HIGHLIGHTS 20 (1) Source: USDA, Risk Management Agency 2015 Summary of Business, Net Acres Insured and USDA NASS 2015 Acreage Report (1)
FARMER MAC USDA – Key 2016 Forecasts Demand for U.S. agricultural products to increase 1.3% • Demographic trends and a stabilizing economy contributing to growth • Lower commodity prices stimulating quantity demanded • However, total U.S. export values to decrease 10% to $125 billion, driven by higher global ending stocks and a stronger U.S. dollar reducing prices U.S. farm income to decline approximately 3% to $55 billion • Grain prices remain range-bound at lower levels and livestock prices down on higher global supplies • Input costs are stable to modestly declining – Labor, seed, and water costs are largely static, while fertilizer, fuel, and feed costs are declining modestly Average U.S. ag land values expected to stay relatively flat to slightly down • Midwest most impacted with estimates ranging from 5% to 15% declines as compared to 2015 levels • Rest of U.S. remains stable to modestly increasing – high non-grain commodity prices and high demand for pasture ground contributing to appreciation Total U.S. agricultural mortgage market to grow 1% to $207 billion AGRICULTURAL INDUSTRY HIGHLIGHTS 21 (1) Source: USDA, National Agricultural Statistics Service, nominal dollars (as of February 2016). (2) Source: USDA, Economic Research Service, nominal dollars (as of February 2016). (3) Source: USDA, World Agricultural Supply and Demand Estimates Report, nominal dollars (as of February 2016). (4) Source: USDA, Economic Research Service Trade Outlook (as of March 2016). (1) (2) (3) (4)
Farmer Mac Overview
FARMER MAC Lines of Business and Products Product Type Customers Lines of Business $ IN BILLIONS AND PERCENTAGE OF TOTAL VOLUME LOAN PURCHASES • Ag Banks • Insurance Companies • Rural Utilities Cooperatives F & R USDA RU IC Total $3.0 19% $1.9 12% $1.0 6% -- $5.9 37% WHOLESALE FINANCING • AgVantage • Farm Equity AgVantage • Ag Banks • Insurance Companies • Ag Investment Funds • Production and Agribusiness Companies • Rural Utilities Cooperatives -- -- -- $7.1 44% $7.1 44% CREDIT PROTECTION • Long-term Standby Purchase Commitments (LTSPCs)/ AMBS Guarantees • FCS Institutions • Ag Banks • Insurance Companies • Ag Investment Funds • Rural Utilities Cooperatives $2.7 16% -- $0.5 3% -- $3.2 19% Total $5.7 $1.9 $1.5 $7.1 $16.2 = Allowances and provisions recorded on these assets FARMER MAC OVERVIEW 23 AS OF MARCH 31, 2016
FARMER MAC Business Development Product Type Marketing Channel Target Customers AG LOAN PURCHASES AND CREDIT PROTECTION • Marketing department with 5 relationship managers • Geographically dispersed nationwide • Cover ag banks and non-bank originators • Seek to add new ag lenders as eligible loan sellers for Farmer Mac • Seek to add LTSPCs • Over 3,200 commercial banks with agricultural loans on-balance sheet (approximately 800 are currently sellers) • Special focus on large-cap ag banks • Farm Credit System (FCS) • Insurance company ag lenders WHOLESALE FINANCING FOR RURAL LENDERS • Director of Institutional Business Development • C-suite outreach to target firms • Attend industry conferences • Insurance company ag lenders • Larger banks with ag mortgage portfolios • Rural utilities cooperative lenders WHOLESALE FINANCING FOR INVESTORS IN AG ASSETS • Same as Wholesale Financing for Rural Lenders • Paid deal sourcing relationships with industry contacts • Leverage capital markets relationships to identify ag funds and ag companies seeking low-cost wholesale financing • Public or private ag investment funds (all structures) • Agricultural companies – production ag and agribusiness (for profit and cooperative) RURAL UTILITIES LOAN PURCHASES AND CREDIT PROTECTION • C-suite relationships • Credit department contacts • Capital markets relationship contacts • National Rural Utilities Cooperative Finance Corporation (non-GSE) • CoBank (FCS GSE) FARMER MAC OVERVIEW 24 (1) (1) Source: FDIC Statistics on Depository Institutions datasets (https://www2.fdic.gov/sdi/index.asp).
FARMER MAC Outstanding Volume - Portfolio Summary Farm & Ranch 35% USDA Guarantees 12% Rural Utilities 9% Institutiona l Credit 44% By Line of Business AgVantage 44% On-Balance Sheet Loans 25% LTSPCs 16% AMBS 3% USDA 12% By Product Type FARMER MAC OVERVIEW 25 AS OF MARCH 31, 2016
FARMER MAC Northwest 10% Southwest 30% Mid-North 35% Mid-South 13% Northeast 4% Southeast 8% By Geographic Region Crops 57% Permanent Plantings 17% Livestock 21% Part-time Farm 4% Ag. Storage and Processing 1% By Commodity Type Farm & Ranch Loans Portfolio Diversification FARMER MAC OVERVIEW 26 (1) Farm & Ranch portfolio includes on-balance sheet loans and LTSPCs. AS OF MARCH 31, 2016 (1)
FARMER MAC Core earnings are primarily a direct function of three key factors: Core Earnings Value Drivers FARMER MAC OVERVIEW 27 Value Drivers Things to Consider BUSINESS VOLUME •Macro supply/demand for ag credit •Farmer Mac business development success • Impact of potential credit quality shocks • Impact of potential rate shocks NET EFFECTIVE SPREAD •Macro supply/demand for ag credit •Absolute level of interest rates •Business mix •Delinquencies CREDIT QUALITY • Idiosyncratic borrower impacts: death in family, divorce, & disease •Commodity price volatility •Acts of nature: droughts, disease, etc. (1) (1) Core earnings is a non-GAAP measure. For a reconciliation of GAAP net income attributable to common stockholders to core earnings, please refer to page 44 of the Appendix.
FARMER MAC Farmer Mac Outstanding Business Volume $16.2 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q16 $ I N B IL L IO N S FARMER MAC OVERVIEW 28 12.6% CAGR (1999 to 2015)
FARMER MAC Farmer Mac Net Effective Spread FARMER MAC OVERVIEW 29 69 78 106 97 106 106 104 96 91 87 82 0.9% 0.9% 1.8% 2.0% 1.1% 1.0% 1.3% 0.9% 0.7% 1.1% 1.2% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 0 20 40 60 80 100 120 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q16 YTD M OO D Y ’S C OR P OR A TE S P R E A D IN D E X N E T E FF E C T IV E S P R E A D B A S IS P O IN T S Farmer Mac Net Effective Spread Moody's Corporate Spread Index(2) (1) Beginning Jan. 1, 2015, Farmer Mac classified all of the income from Farmer Mac Guaranteed Securities that it holds in its portfolio as interest income. Periods prior to 2011 have not been restated. (2) Source: St. Louis Fed, Economic Database: Average Moody’s Baa – Average Moody’s Aaa band spreads. (1)
FARMER MAC (1) Source: Kansas City Federal Reserve, Ag Finance Databook & Farm Credit Funding Corp Annual Information Statements – Non-accrual real estate loans and accruing loans that are 90 days or more past due made by commercial and Farm Credit System banks; 1Q16 data not yet available. (2) Delinquencies include loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan. Farmer Mac Credit vs. Industry 1.30% 1.20% 1.17% 0.75% 0.60% 0.52% 0.54% 0.95% 2.00% 2.40% 2.10% 1.67% 1.23% 0.96% 0.80% 1.59% 1.21% 0.60% 0.55% 0.58% 0.41% 0.21% 1.35% 1.13% 1.63% 0.93% 0.70% 0.55% 0.35% 0.56% 0.61% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 1Q16 90-Day Delinquencies Industry 90-Day Delinquencies Farmer Mac 90-Day Delinquencies (Farm & Ranch Portfolio Only) (1) FARMER MAC OVERVIEW 30 (2) Farmer Mac Historical Average 1.00%
FARMER MAC Farmer Mac – Historical Credit Losses Farmer Mac’s Rural Utilities, USDA Guarantees, and Institutional Credit lines of business have not had any credit losses to date Farm & Ranch line of business has historical cumulative losses of 0.17%, or less than 1bp per year • Cumulative losses of $34 million on $21 billion of cumulative historical business volume FARMER MAC OVERVIEW 31 -$2 $0 $2 $4 $6 $8 $10 $12 1995 & Prior 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 N E T L OS S / ( GA IN ) $ I N M IL L IO N S BY YEAR OF ORIGINATION Ag Storage & Processing Crops Permanent Plantings Livestock Part-Time Farm / Rural Housing
FARMER MAC Funding Finance asset purchases with proceeds of debt issuances • 20+ dealers • Match-funding provides for stable net effective spread and immaterial interest rate risk Farmer Mac’s debt securities carry privileges for certain holders • 20% capital risk weighting • Eligible collateral for Fed advances • Legal investments for federally supervised financial institutions (banks, etc.) FARMER MAC OVERVIEW 32 Debt Securities Trade at Narrow Spreads to Comparable Maturity Treasuries MATURITY (YEARS) 1 3 5 10 SPREAD TO TREASURY (AS OF MARCH 31, 2016) 10 bps 18 bps 25 bps 64 bps
Farmer Mac Financial Performance
FARMER MAC First Quarter 2016 Financial Performance Net effective spread (NES) of $29.9 million (82 bps) compared to $29.9 million (85 bps) last quarter, and $29.3 million (86 bps) in first quarter 2015 • 1Q16 NES impacted by market increases in short-term LIBOR-based funding costs ($0.4 million; 1 bp) and the refinance of a large AgVantage bond at a shorter maturity and tighter spread ($0.3 million; 1 bp) • Year-over-year increase in dollars attributable to growth in outstanding business volume Core earnings of $12.4 million ($1.12 per diluted share), compared to $13.1 million ($1.17 per diluted share) last quarter, and $9.1 million ($0.80 per diluted share) for first quarter 2015 • Sequential decrease due to higher compensation costs resulting from the annual vesting of stock-based awards and higher G&A expenses related to corporate strategic initiatives and general corporate matters • Year-over-year increase due to elimination of dividends on redeemed preferred stock and an increase in NES Total business volume of $16.2 billion, an increase of $317 million from December 31, 2015 and $1.6 billion from first quarter 2015 • Purchased $927 million of AgVantage securities (+$337 million net) • Purchased $199 million of Farm & Ranch loans (+$65 million net) • Purchased $95 million of USDA Securities (+$8 million net) • Added $68 million of Farm & Ranch loans under LTSPCs (-$76 million net) • Purchased $10 million of Rural Utilities loans (-$16 million net) • Issued $4 million of Farm & Ranch Guaranteed USDA Securities (+$3 million net) Credit quality remains stable • 90-day delinquencies of $34.7 million (0.61% of Farm & Ranch loans), slight increase from $32.1 million (0.56% of Farm & Ranch loans) in fourth quarter 2015 34 FARMER MAC FINANCIAL PERFORMANCE (1) Core earnings is a non-GAAP measure. For a reconciliation of GAAP net income attributable to common stockholders to core earnings, please refer to page 44 of the Appendix. (1)
FARMER MAC $11.7 $11.3 $11.0 $9.1 $12.4 $12.9 $16.5 $23.2 $11.6 $13.4 $11.8 $9.3 $13.2 $11.6 $15.3 $9.5 $13.1 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 2012 2013 2014 2015 2016 $ I N M IL L IO N S 1Q 2Q 3Q 4Q $49.6 $54.9 $53.0 $47.0 Core Earnings (Non-GAAP Measure) FARMER MAC FINANCIAL PERFORMANCE 35 (1) For a reconciliation of GAAP net income attributable to common stockholders to core earnings, a non-GAAP financial measure, please refer to page 44 of the Appendix. (2) Core earnings for 2014 include the effects of the cash management and liquidity initiative implemented in second quarter 2014, and the capital structure initiative under which Farmer Mac issued $150 million of preferred stock in advance of the planned March 30, 2015 redemption of all outstanding Farmer Mac II Preferred Stock and related Farm Asset-Linked Capital Securities (FALConS). Each of these initiatives have been described in Farmer Mac’s prior SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015. (2) (1) $12.4
FARMER MAC Business Volume FARMER MAC FINANCIAL PERFORMANCE 36 $5.2 $5.4 $5.8 $5.4 $5.7 $6.0 $6.4 $6.7 $6.5 $7.1 $1.7 $1.8 $1.9 $1.8 $1.9 $1.1 $1.0 $1.5 $1.0 $1.5 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 2013 2014 2015 1Q15 1Q16 $ I N B IL L IO N S Farm & Ranch Institutional Credit USDA Guarantees Rural Utilities $14.6 AS OF YEAR-END AS OF QUARTER-END (1) Includes on- and off-balance sheet outstanding business volume. $14.0 $14.7 $16.2 (1) $15.9
FARMER MAC Net Effective Spread $117.2 $116.6 $113.7 $119.4 $29.9 1.04% 0.96% 0.91% 0.87% 0.82% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 2012 2013 2014 2015 1Q16 YTD $ I N M IL L IO N S Net Effective Spread (dollars) Net Effective Spread (percent) FARMER MAC FINANCIAL PERFORMANCE 37 AS OF YEAR-END
FARMER MAC Credit Quality – 90-Day Delinquencies FARMER MAC FINANCIAL PERFORMANCE 38 $53.1 $39.7 $29.4 $32.1 $34.7 1.21% 0.83% 0.56% 0.60% 0.61% 0.44% 0.30% 0.21% 0.22% 0.21% -0.10% 0.10% 0.30% 0.50% 0.70% 0.90% 1.10% 1.30% $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 1Q12 1Q13 1Q14 1Q15 1Q16 $ I N M IL L IO N S 90-Day Delinquencies (dollars) % of Farm & Ranch Portfolio Only % of Total Portfolio
FARMER MAC $591 $766 $564 $531 $563 $192 $345 $102 $97 $85 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $0 $200 $400 $600 $800 2013 2014 2015 1Q15 1Q16 E X C E S S S T A T U TO R Y C A P IT A L $ IN M IL L IO N S C O R E C A P IT A L $ I N M IL L IO N S Core Capital Excess Statutory Capital AS OF YEAR-END AS OF QUARTER-END Capital FARMER MAC FINANCIAL PERFORMANCE 39 (1) Core capital defined as total stockholders’ equity less accumulated other comprehensive income. (2) Excess statutory capital defined as core capital less statutory minimum capital. (1) (2) $250m Redemption of Farmer Mac II Preferred Stock and related FALConS
Appendix
FARMER MAC Key Company Metrics APPENDIX 41 ($ in thousands, except per share amounts) 1Q16 YTD 2015 2014 2013 2012 Core Earnings $12,375 $46,975 $53,047 $54,892 $49,642 Core Earnings per Diluted Share $1.12 $4.15 $4.67 $4.90 $4.51 Net Effective Spread ($) $29,949 $119,380 $113,693 $116,582 $117,190 Net Effective Spread (%) 0.82% 0.87% 0.91% 0.96% 1.04% Guarantee & Commitment Fees $4,669 $17,155 $16,780 $16,591 $15,989 Excess Regulatory Capital $84,900 $102,400 $345,000 $192,200 $145,000 Common Stock Dividends per Share $0.26 $0.64 $0.56 $0.48 $0.40 Outstanding Business Volume $16,215,572 $15,898,820 $14,597,758 $13,950,312 $13,015,188 90-Day Delinquencies – Farm & Ranch 0.61% 0.56% 0.35% 0.55% 0.70% Charge-Offs $0 $3,772 $86 $4,004 $2,501 Book Value per Share $34.25 $33.66 $29.76 $26.68 $20.52 Core Earnings Return on Equity 14% 14% 17% 22% 25% (1) Core earnings for 2014 include the effects of the cash management and liquidity initiative implemented in second quarter 2014 and the capital structure initiative under which Farmer Mac issued $150 million of preferred stock in advance of the planned March 30, 2015 redemption of all outstanding Farmer Mac II Preferred Stock and related FALConS. Each of these initiatives have been described in Farmer Mac’s prior SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 16, 2015. (2) Core earnings is a non-GAAP measure. For a reconciliation of GAAP net income attributable to common stockholders to core earnings, please refer to page 44 of the Appendix. (3) Book Value per Share excludes accumulated other comprehensive income. (1) (2) (3)
FARMER MAC ($ in thousands) Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Dec-14 Sep-14 Jun-14 Mar-14 Revenues: Net effective spread 29,949$ 29,949$ 30,387$ 29,787$ 29,257$ 28,442$ 29,766$ 29,049$ 26,436$ Guarantee and commitment fees 4,669 4,730 4,328 4,085 4,012 4,097 4,152 4,216 4,315 Other (517) (284) (93) (24) (405) (1,285) (2,001) (520) (410) Total revenues 34,101 34,395 34,622 33,848 32,864 31,254 31,917 32,745 30,341 Credit related expense/(income): Provision for/(release of) losses 63 (49) (303) 1,256 (696) (479) (804) (2,557) 674 REO operating expenses 39 44 48 - (1) 48 1 59 2 Losses/(gains) on sale of REO - - - - 1 28 - (168) 3 Total credit related expense/(income) 102 (5) (255) 1,256 (696) (403) (803) (2,666) 679 Operating expenses: Compensation and employee benefits 5,774 5,385 5,236 5,733 5,693 4,971 4,693 4,889 4,456 General and administrative 3,526 3,238 3,676 3,374 2,823 2,992 3,123 3,288 2,794 Regulatory fees 613 613 600 600 600 600 593 594 594 Total operating expenses 9,913 9,236 9,512 9,707 9,116 8,563 8,409 8,771 7,844 Net earnings 24,086 25,164 25,365 22,885 24,444 23,094 24,311 26,640 21,818 Income tax expense/(benefit) 8,444 8,855 8,924 8,091 6,692 4,858 6,327 (4,734) 4,334 Non-controlling interest (28) (60) (36) (119) 5,354 5,414 5,412 5,819 5,547 Preferred stock dividends 3,295 3,296 3,295 3,296 3,295 3,296 3,283 2,308 952 Core earnings 12,375$ 13,073$ 13,182$ 11,617$ 9,103$ 9,526$ 9,289$ 23,247$ 10,985$ Core Earnings by Quarter Ended Farmer Mac’s Core Earnings History APPENDIX 42 (1) Core earnings is a non-GAAP measure. See page 43 of the Appendix for reconciliation of GAAP net income attributable to common stockholders to core earnings. (1)
FARMER MAC Reconciliation of Net Income to Core Earnings APPENDIX 43 ($ in thousands) Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Dec-14 Sep-14 Jun-14 Mar-14 Net income attributable to common stockholders 10,317$ 15,032$ 8,359$ 22,162$ 1,818$ 5,647$ 11,586$ 20,205$ 813$ Reconciling items (after-tax effects): Unrealized (losses)/gains on f inancial derivatives and hedging activities (1,943) 1,784 (4,489) 10,388 (582) (3,717) 2,685 (3,053) (2,395) Unrealized gains/(losses) on trading assets 233 452 (5) 110 236 679 (21) (46) 426 Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (183) (171) (76) (81) (529) (811) (440) (179) (8,027) Net effects of settlements on agency forw ard contracts (165) (106) (253) 128 (164) 30 73 236 (176) Loss on retirement of Farmer Mac II LLC Preferred Stock - - - - (6,246) - - - - Core earnings 12,375$ 13,073$ 13,182$ 11,617$ 9,103$ 9,526$ 9,289$ 23,247$ 10,985$ Core Earnings by Quarter Ended (1) (1) The loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings because it is not a frequently occurring transaction and not indicative of future operating results. This is also consistent with Farmer Mac’s previous treatment of these types of origination costs associated with securities underwriting that are capitalized and deferred during the life of the security.
FARMER MAC Reconciliation of Net Income to Core Earnings APPENDIX 44 (in thousands) 1Q16 YTD 2015 2014 2013 2012 Net income attributable to common stockholders 10,317$ 47,371$ 38,251$ 71,833$ 43,894$ Less the after-tax effects of: Unrealized (losses)/gains on financial derivatives and hedging activities (1,943) 7,101 (6,480) 29,368 4,325 Unrealized gains/(losses) on trading assets 233 793 1,038 (533) 200 Amortization of premiums/discounts and deferred gains on assets consolidated at fair value (183) (857) (9,457) (12,467) (7,266) Net effects of settlements on agency forward contracts (165) (395) 103 573 856 Lower of cost or fair value adjustments on loans held for sale - - - - (3,863) Loss on retirement of Farmer Mac II LLC Preferred Stock - (6,246) Core earnings 12,375$ 46,975$ 53,047$ 54,892$ 49,642$ Core Earnings by Period Ended (1) (1) The loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings because it is not a frequently occurring transaction and not indicative of future operating results. This is also consistent with Farmer Mac’s previous treatment of these types of origination costs associated with securities underwriting that are capitalized and deferred during the life of the security.
FARMER MAC Farmer Mac’s Net Effective Spread History APPENDIX 45 ($ in thousands) Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield For the quarter ended: March 31, 2016 9,461$ 1.71% 4,308$ 0.91% 2,538$ 1.02% 11,090$ 0.80% 2,552$ 0.26% 29,949$ 0.82% December 31, 2015 9,381 1.72% 4,518 0.96% 2,845 1.14% 10,899 0.80% 2,306 0.26% 29,949 0.85% September 30, 2015 9,628 1.80% 4,630 0.99% 2,907 1.18% 11,271 0.81% 1,951 0.25% 30,387 0.88% June 30, 2015 9,681 1.82% 4,466 0.98% 2,838 1.18% 10,860 0.78% 1,942 0.25% 29,787 0.88% March 31, 2015 (1) 10,114 1.97% 4,225 0.95% 2,804 1.15% 10,425 0.77% 1,689 0.20% 29,257 0.86% December 31,2014 (2) 8,682 1.71% 5,250 1.19% 2,908 1.18% 9,870 0.78% 1,732 0.26% 28,442 0.91% September 30, 2014 8,207 1.68% 5,073 1.18% 2,890 1.16% 9,823 0.78% 3,773 0.59% 29,766 0.97% June 30, 2014 7,820 1.64% 4,159 0.99% 2,953 1.16% 9,957 0.78% 4,160 0.57% 29,049 0.92% March 31, 2014 (3) 7,114 1.53% 3,784 0.91% 1,990 0.73% 9,406 0.74% 4,142 0.56% 26,436 0.84% (1) Beginning in f irst quarter 2015, Farmer Mac revised it's methodology for interest expense allocation among Farm & Ranch, USDA Guarantees, and Rural Utilities lines of business. As a result of this revision, a greater percentage of interest expense has been allocated to the longer term assets included w ithin the USDA Guarantees and Rural Utilities lines of business. Net effective spread for periods prior to the quarter ended March 31, 2015 does not reflect this revision. (2) On October 1, 2014, $78.5 million of preferred stock issued by CoBank w as 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 on a quarterly basis is 7 basis points. (3) First quarter 2014 includes the impact of spread compression in Rural Utilities line of business from the early refinancing of loans (41 basis points). Net Effective SpreadInstitutional Credit Net Effective Spread by Business Segment Farm & Ranch USDA Guarantees Rural Utilities Corporate
FARMER MAC Liquidity – Investment Portfolio Farmer Mac maintains an investment portfolio to provide back-up source of liquidity in excess of regulatory requirements • Minimum of 90 days of liquidity required by regulation $4.2 billion investment portfolio at March 31 • Cash and highly-rated investment securities • Conservative portfolio goals − Minimize exposure to market volatility − Preservation of capital − Ready access to cash • Provided 178 days of liquidity as of March 31, 2016 Farmer Mac also has $1.5 billion line of credit with U.S. Treasury • Supports Farmer Mac’s guarantee obligations • Farmer Mac has never used this line of credit Cash & Equiv. 41.4% Guar. by GSEs and U.S. Gov't Agencies 57.2% Corporate Debt Securities 0.2% Asset- Backed Securities 1.2% Liquidity Portfolio APPENDIX 46 AS OF MARCH 31, 2016
FARMER MAC Interest Rate Risk Match fund asset purchases with liabilities that have similar interest rate characteristics • Duration and convexity matching • Coupon type • Reset frequency Manage pre-payment risk on mortgages • Issue a portfolio of callable and bullet debt across spectrum of maturities to obtain the appropriate match • Can adjust effective asset and debt coupon and duration characteristics through the use of interest rate swaps or other derivatives Perform regular stress testing and disclose a variety of sensitivity measures • Duration Gap • Market Value of Equity (MVE) Sensitivity • Net Interest Income (NII) Sensitivity • Measure these sensitivities’ impact on various capital metrics APPENDIX 47
FARMER MAC Three Classes of Common Stock Number of Shares CLASS A VOTING COMMON STOCK • NYSE: AGM.A • Ownership restricted to non-Farm Credit System 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: AGM • No ownership restrictions 8.9 million APPENDIX 48
FARMER MAC Three Classes of Preferred Stock Number of Shares SERIES A NON-CUMULATIVE PREFERRED STOCK • NYSE: AGM.PR.A • Dividend Yield: 5.875%** • Option to redeem at any time on or after January 17, 2018 • Redemption Value: $25 per share 2.4 million SERIES B NON-CUMULATIVE PREFERRED STOCK • NYSE: AGM.PR.B • Dividend Yield: 6.875%** • Option to redeem at any time on or after April 17, 2019 • Redemption Value: $25 per share 3.0 million SERIES C FIXED-TO-FLOATING NON-CUMULATIVE PREFERRED STOCK • NYSE: AGM.PR.C • Dividend Yield: 6.000%** • Option to redeem at any time on or after July 18, 2024 • Redemption Value: $25 per share 3.0 million APPENDIX 49 **Par value annual dividend yield