I N N OVAT I O N . PA S S I O N . E X C E L L E N C E . O P P O R T U N I T Y.
A N N UA L R E P O R T
2014
“Farmer Mac’s high-quality assets, strong industry fundamentals, and
significant operational efficiencies represent a unique opportunity for
investors to experience the strength of agriculture and rural America.”
R. DALE LYNCH
EXECUTIVE VICE PRESIDENT–CHIEF FINANCIAL OFFICER AND TREASURER
FARMER MAC
ABOUT US
Delivering the
capital and
commitment rural
America deserves.
Farmer Mac is the stockholder-owned company created
to deliver capital and increase lender competition for
the benefit of American agriculture and rural communities.
For more than a quarter-century, Farmer Mac has been
a vital partner helping America’s rural lenders meet the
evolving needs of their customers, bringing the financial
strength of the nation’s premier secondary market for
agriculture right to their customers’ farms.
Lenders of all sizes use Farmer Mac’s broad portfolio of
loan products to offer more financial choices to their
rural customers, helping them keep pace with today’s
capital-intensive agricultural industry.
FARMER MAC HAS NEVER EXPERIENCED
ANY CREDIT LOSSES IN ITS RURAL
UTILITIES, USDA GUARANTEES, OR
INSTITUTIONAL CREDIT LINES OF BUSINESS
AND IN ITS ENTIRE HISTORY HAS
EXPERIENCED CUMULATIVE LOSSES OF ONLY
0.15%
ON ITS
$19.9B
OF CUMUL ATIVE FARM & RANCH LOANS
INVESTMENT HIGHLIGHTS
2014 Key Metrics
By successfully adding new customers and developing
innovative products, Farmer Mac had a very successful
year. We achieved record outstanding business volume
of $14.6 billion, while maintaining a strong credit profile
and operational efficiency.
$ 15 . 0 B
FA R MER M AC
01
OUTSTA NDING BUSI NES S
VO LUME B Y LINES
OF BUSINES S
OU TSTANDING FA RM & R A NCH
BU SINES S VOLUME B Y
COMMODITY TYPE DECEMBER 31, 2014
$14.6
$14.0
$13.0
$ 12 . 0 B
$11.9
AVERAGED
$900M
IN
ANNUAL NET OUTSTANDING BUSINESS
VOLUME GROWTH IN L AST THREE YEARS
$ 9. 0 B
$ 6. 0 B
$ 3. 0 B
Millions (M), Billions (B)
0
2 01 1
2 01 2
2 01 3
2 01 4
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NATIONWIDE
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54%
C R O P S
17%
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PA R T-T I M E FA R M
2%
P E R M A N E N T P L A N T I N G S
A G S T O R A G E & P R O C E S S I N G
24%
L I V E S T O C K
A NNUA L R EP OR T 2014
02
INVESTMENT HIGHLIGHTS
2014 Key Metrics
CORE
EARNINGS*
$60.0M
$50.0M
$49.6
$42.9
$40.0M
$54.9
$53.0
$30.0M
$20.0M
$10.0M
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90 -DAY
DELINQUENCIES
(as of December 31)
0.93%
1 . 00 %
0 . 90 %
0 . 80 %
0.70%
0 . 70 %
$ 15 . 0 M
0.34%
0.26%
0.55%
0 . 60 %
0 . 50 %
0 . 40 %
0.35%
0 . 30 %
0.20%
0 . 20 %
0.13%
0 . 10 %
$ 45 . 0 M
$ 40 . 0 M
$ 35 . 0 M
$ 30 . 0 M
$ 25 . 0 M
$ 20 . 0 M
$ 10 . 0 M
$ 5. 0 M
0
NE T E FFE CTIVE
SPREAD
$1 20. 0M
1. 50%
$107
$105
$103
$1 00. 0M
1. 25%
$89
$8 0. 0M
0.96% 0.95%
1. 00%
0.86%
0.83%
$6 0. 0M
0. 75%
$4 0. 0M
0. 50%
$2 0. 0M
0. 25%
0
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}
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—
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{
$40.6 $33.3 $28.3 $18.9
0 %
2 01 1
2 01 2
2 01 3
2 01 4
2 01 1
2 01 2
2 01 3
2 01 4
2 01 1
2 01 2
2 01 3
2 01 4
CORE EARNINGS HAS MORE THAN
DOUBLED SINCE 2010, INCREASING
FROM $25.4 MILLION TO $53.0 MILLION
DELINQUENCY RATES AT
HISTORIC LOWS FOR
FARMER MAC
NET EFFECTIVE SPREAD TRENDED
HIGHER IN ALL LINES OF BUSINESS
THROUGHOUT THE QUARTERS OF 2014
* Core Earnings is a non-GAAP measure. For a reconciliation of core earnings
to GAAP net income attributable to common stockholders, see “Non-GAAP
Performance Measures” section in this Annual Report.
INVESTMENT HIGHLIGHTS
2014 Key Metrics
CAPITAL
(as of December 31)
HISTORICA L CR EDIT LOS SES
FA R MER M AC
03
PART-TIME FARM
PERMANENT PLANTINGS
LIVESTOCK
CROPS
AG STORAGE & PROCES SING
$800M
$700M
$600M
$500M
$400M
$400M
$345
$350M
$300M
$250M
}
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{
$192
$200M
$300M
$127
$145
$200M
$100M
0
$475
$519
$591
$766
$150M
$100M
}
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{
$50M
0
$ 12 M
$ 11 M
$ 10 M
$ 9M
$ 8M
$ 7M
$ 6M
$ 5M
$ 4M
$ 3M
$ 2M
$ 1M
0
$ –1 M
2 01 1
2 01 2
2 01 3
2 01 4
1 9 9 5
1 9 9 6
1 9 97
1 9 9 8
1 9 9 9
2 0 0 0
2 0 01
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 07
2 0 0 8
2 0 0 9
2 01 0
2 01 1
2 01 2
2 01 3
2 01 4
WELL-POSITIONED WITH SIGNIFICANT NEW
CAPITAL TO SUCCESSFULLY COMPLETE OUR
CAPITAL RESTRUCTURING PL AN IN MARCH 2015
ONLY $31 MILLION OF CUMUL ATIVE LOSSES
ON OUR $19.9 BILLION OF CUMUL ATIVE FARM & RANCH
LOANS, OR LESS THAN 0.01% PER YEAR
A NNUA L R EP OR T 2014
04
LETTER FROM
the Chairman and the President
TO THE STOCKHOLDERS OF FARMER MAC:
Ever since Farmer Mac was chartered by Congress in 1987, we have been steadfast in
our mission of helping to increase access to capital and reducing the cost of credit for
the benefit of American agricultural and rural communities. Over a quarter-century
later, our commitment to serving rural America has only grown stronger, guiding our
efforts to expand our customer base and the breadth of our innovative solutions.
2014 FINANCIAL PERFORMANCE
Two thousand fourteen proved to be another strong year for
agriculture despite continuing signs of an expected decline
in farm income in the near term. Agricultural producers
continued to reap the rewards of healthy demand for
their products in the global economy, although declining
commodity prices for grains has reduced profitability in the
Corn Belt region. Despite this normalization in grain prices
and drought in the Southwest, the agricultural economy
in the U.S. remains healthy and incomes remain above
long-term averages.
Thanks to the outstanding efforts of our employees and
valued partners, Farmer Mac had a very successful 2014.
We ended the year with record outstanding business volume
of approximately $14.6 billion, reflecting annual net growth of
nearly $650 million despite 2014 being a year with a
significant number of maturing loans. Our core earnings for
2014 were $53 million, and net effective spread generally
improved throughout the year in all four of our lines of
business—Farm & Ranch, Rural Utilities, USDA Guarantees,
and Institutional Credit. Credit quality continues to be very
favorable, with 90-day delinquencies near historic lows.
In addition to healthy growth in our outstanding business
volume, strong credit quality, and improving spreads, we also
announced the fourth consecutive annual dividend increase
on our common stock. This reflects our continued confidence
in the strength of our business and our commitment to
delivering consistent returns for our investors.
“We are proud of our ability to help rural Americans while, at the
same time, delivering strong profits for our stockholders.”
FA R MER M AC
05
FOR MORE THAN A QUARTER-CENTURY,
FARMER MAC HAS BEEN HELPING AMERICA’S
RURAL LENDERS MEET THE EVOLVING NEEDS
OF THEIR CUSTOMERS
BUILDING A STRONG AND VITAL
RURAL AMERICA THROUGH INNOVATION,
COLL ABORATION, AND EXCELLENCE
SUCCESSFULLY COMPLETED
A CAPITAL RESTRUCTURING
PL AN FOR THE BENEFIT OF
OUR STOCKHOLDERS
TODAY’S INITIATIVES AND TOMORROW’S REWARDS
In 2014, Farmer Mac was able to capitalize on two strategic
opportunities that we believe better position us for the future.
The first was a cash management and liquidity initiative
implemented in second quarter 2014. This successful
initiative enabled Farmer Mac to become eligible to apply
for and later be approved as a counterparty for the Federal
Reserve Bank of New York’s reverse repurchase (repo) facility.
This effort will help improve liquidity and diversify our short
term investment strategy to include large repo investments
with the highest credit quality counterparty. In a second
noteworthy initiative, we took advantage of favorable market
conditions to issue preferred stock on two separate occasions
during 2014 in advance of the planned redemption of more
expensive preferred stock at the end of March 2015. In the
short term, these initiatives complicated our financial
statements for 2014. Taking the longer view, these initiatives
position us very well. We now have access to invest directly
with the Federal Reserve and the capital restructuring will
have a positive effect in core earnings available for our
common stockholders. Going forward, our financial results
will benefit from the completion of these initiatives and
should more clearly highlight our fundamental business of
providing financing to rural America.
INVESTING IN OUR RESOURCES
At Farmer Mac, we have always understood that our
continued success requires investment in our most valuable
resource—our people. The energy, talent, knowledge, and
commitment of our team members keep us at the forefront
of innovation and at the same time bolsters our own sense of
mission. In return, we are committed to helping our team
members enhance their skills and expand their professional
success. As we seek to grow our customer base in 2015 and
beyond, we understand the need to attract and retain the
best and the brightest candidates that the workforce can
offer. As an example, last year we implemented a diversity
and inclusion strategy to ensure that Farmer Mac continues
to harness the power of our employees’ diverse backgrounds
by fostering an inclusive work environment that encourages
collaboration, vision, and the highest standards of excellence.
With the help of this outstanding team, Farmer Mac’s focus
remains on innovating for our customers and helping them
problem solve, expanding our seller network, and launching
new products, all in service of our consistent goal of improving
access to capital and delivering lower borrowing costs to
customers in rural America. For example, in the last quarter
of 2014, we customized an existing product to launch “Farm
Equity AgVantage” so that we could offer a more efficient
wholesale financing vehicle for investors in agricultural
assets. This product is still in the early stages of development,
and we look forward to helping bring more investment capital
to rural America through this and other types of financing
structures.
OPPORTUNITIES
“Opportunity.” This word came to mind frequently as we
reflected upon the past year. As we look toward our future,
the word remains fitting. We believe that the agricultural and
rural economies present a tremendous opportunity for us. No
matter how you look at Farmer Mac’s market share, it is
small. That means there are still many potential customers
who can benefit from our products and services—it’s up to
us to find them. And we plan to do just that, with an energetic
and passionate approach to delivering on our mission. All
four lines of our business remain healthy and strong and
we are very optimistic about the opportunities for growth.
Ultimately, we are proud of our ability to help rural Americans
while, at the same time, delivering strong profits for our
stockholders.
STRENGTH AND AGILITY
If there is one certainty, it is that there are no certainties in
American agriculture. But be assured that we are prepared
for whatever the future may bring so that we can be there
for our customers when they need us the most. Should credit
become a bit tighter and cash less plentiful, access to credit
or capital from Farmer Mac will be of even greater importance.
With a combination of sound underwriting, effective risk
management, rigorous stress tests, and a diverse commodity
portfolio, Farmer Mac is built to last. But more than that, our
forward-thinking approach ensures that we can also be
innovative and agile in seeking solutions for tomorrow’s
problems today.
LOWELL L. JUNKINS
CHAIRMAN OF THE BOARD
TIMOTHY L. BUZBY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
A NNUA L R EP OR T 2014
06
INNOVATION. PASSION. EXCELLENCE. OPPORTUNIT Y.
the Significance
We look back on the past years with pride,
and forward to the next years of success.
1988
1991
1996
1999
FARMER MAC LAUNCHES USDA
GUARANTEES LINE OF BUSINESS
AFTER CHARTER REVISION AND
EXPANSION OF AUTHORITY BY
CONGRESS IN 1990
CONGRESS CONTINUES TO
SHOW CONFIDENCE IN THE
BUSINESS BY EXPANDING FARMER
MAC’S AUTHORITY TO INCLUDE
PURCHASING LOANS
FARMER MAC IS LISTED
ON NYSE
FARMER MAC WAS CHARTERED
BY CONGRESS UNDER THE
AGRICULTURAL CREDIT ACT OF
1987, ENACTED IN 1988, IN
RESPONSE TO THE NATIONAL
FARM CRISIS OF THE 1980s
THROUGH LOW COST FINANCING, FARMER MAC CONTINUES TO HELP
REDUCE POWER COSTS FOR TENS OF MILLIONS OF AMERICANS IN
RURAL COMMUNITIES ACROSS THE COUNTRY
FA R MER M AC
07
2008
2011
2013
2014
CONGRESS EXPANDS FARMER
MAC’S AUTHORIZED SECONDARY
MARKET ACTIVITIES TO INCLUDE
RURAL UTILITIES LOANS
TOTAL ASSETS SURPASS
$10 BILLION
FARMER MAC CELEBRATES ITS
25TH ANNIVERSARY
APPROVED AS A COUNTERPART Y TO
THE FRBNY’S REVERSE REPO FACILITY
RURAL AMERICA HAS COME A LONG
WAY SINCE 1988…SO HAVE WE
FARMER MAC REMAINS STEADFAST
IN ITS COMMITMENT TO RURAL
AMERICA BY DEEPENING RELATIONSHIPS,
BROADENING ITS CUSTOMERS BASE,
AND DEVELOPING INNOVATIVE
SOLUTIONS TO INJECT NEEDED
CAPITAL INTO AGRICULTURAL AND
RURAL COMMUNITIES ACROSS THE
COUNTRY
A NNUA L R EP OR T 2014
08
INNOVATIVE THINKING—We encourage strategic thinking, ask questions, seek answers,
embrace new technologies, value new ideas, and acquire knowledge that displays
thought leadership within the industries we proudly serve.
innovation.
PASSION FOR RURAL AMERICA—We share a passion for serving the people who help
America set the global standard in agriculture and rural utilities while advancing the
livelihood of rural communities.
passion.
UNRELENTING EXCELLENCE—We never underestimate the importance of accuracy
or the significance of every action and interaction that contributes to our reputation
for excellence in the marketplace.
excellence.
FA R MER M AC
09
Farmer Mac: Solving Problems for
Bankers Across Rural America
FARMER MAC
HAS HELPED FUND LOANS TO MORE THAN
62,000
RURAL BORROWERS IN ALL 50 STATES
RESULTING IN OVER
$36B
OF INVESTMENT IN RURAL AMERICA
opportunity.
A NNUA L R EP OR T 2014
10
TESTIMONIALS
Dakota Mac
TESTIMONIALS
Ruby Valley National Bank
“Twenty years ago First Dakota made
a decision to have a division that
we call Dakota Mac. We felt so
passionate about Farmer Mac and
offering long-term fixed rates to our
customers, the ag customer out there,
that we created a separate division
just for that.”
“This program is a ‘win-win.’
Our customers win by gaining
access to loan terms; the bank
wins with a new source of
liquidity and ability to serve
a full array of customers,
including those with large
borrowing needs.”
JEFF WOLFGRAM
SENIOR VICE PRESIDENT, DAKOTA MAC, A DIVISION OF FIRST DAKOTA NATIONAL BANK
YANKTON, SD
KEN WALSH
PRESIDENT, RUBY VALLEY NATIONAL BANK
TWIN BRIDGES, MT
TESTIMONIALS
Pioneer Bank
TESTIMONIALS
Carrollton Bank
FA R MER M AC
11
“Farmer Mac has a number of fixed-
rate products that we can offer to the
customer, not just 1, 2, or 3. I mean
you have a multitude of products you
can offer. So from that standpoint, it
makes us more competitive having more
products and fixed-rate financing. Which
is very important in the ag sector.”
“Farmer Mac always knows
the answer to the question
before you ask it.”
MARVIN KIMM
PRESIDENT, PIONEER BANK
MAPLETON, MN
ALAN KARCHER
REGIONAL PRESIDENT, CARROLLTON BANK
JERSEYVILLE, IL
A NNUA L R EP OR T 2014
12
Board
of Directors
LOWELL L. JUNKINS, CHAIRMAN 1
Political Affairs Consultant
Lowell Junkins & Associates
Donnellson, Iowa
RICHARD H. DAVIDSON 3
Director
AgriBank, FCB
St. Paul, Minnesota
MYLES J. WATTS, VICE CHAIRMAN 1
Professor, Agricultural Economics
Montana State University
Bozeman, Montana
DENNIS L. BRACK 2
Director
Bath State Bank and
Bath State Bancorp
Bath, Indiana
CHESTER J. CULVER 1
Founder
Chet Culver Group
Des Moines, Iowa
JAMES R. ENGEBRETSEN 2
Retired Professor, Finance
Marriott School of Management
Brigham Young University
Provo, Utah
DENNIS A. EVERSON 2
Director
First Dakota National Bank
Yankton, South Dakota
SARA L. FAIVRE-DAVIS 1
Co-Owner and Managing Partner
Wild Type Ranch
Cameron, Texas
DOUGLAS L. FLORY 3
Former Farm Credit Administration
Board Member
Former Farm Credit System Insurance
Corporation Board Chairman
McLean, Virginia
THOMAS W. HILL 3
Former Chief Financial
and Operations Officer
Farm Credit Bank of Texas
Austin, Texas
MITCHELL A. JOHNSON 2
Financial Consultant
Washington, DC
CLARK B. MAXWELL 2
Chief Operating Officer
Chatham Financial Corp.
Kennett Square, Pennsylvania
JAMES B. MCELROY 3
Former Director
AgriBank, FCB
St. Paul, Minnesota
BRUCE J. SHERRICK 1
Professor, Agricultural and
Applied Finance
University of Illinois
Champaign, Illinois
DOUGLAS E. WILHELM 3
Former Chief Risk Officer
CoBank, ACB
Denver, Colorado
1 Director appointed by the President
of the United States
2 Director elected by Class A Stockholders
3 Director elected by Class B Stockholders
Executive
Officers
TIMOTHY L. BUZBY
President and Chief Executive Officer
R. DALE LYNCH
Executive Vice President –
Chief Financial Officer and Treasurer
J. CURTIS COVINGTON
Senior Vice President –
Agricultural Finance
TOM D. STENSON
Executive Vice President and
Chief Operating Officer
STEPHEN P. MULLERY
Senior Vice President –
General Counsel and Secretary
FARMER MAC
Corporate Information
STOCK EXCHANGE
Farmer Mac’s Class A voting common stock and Class C
non-voting common stock trade on the New York Stock
Exchange under the symbols AGM.A and AGM, respectively.
TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer & Trust Company
17 Battery Place
Eighth Floor
New York, NY 10004
Phone: (212) 509-4000
(800) 509-5586
Website: http://www.continentalstock.com
CORPORATE HEADQUARTERS
1999 K Street, N.W.
Fourth Floor
Washington, DC 20006
Phone: (202) 872-7700 or
(800) 879-3276
Fax: (800) 999-1814
Website: http://www.farmermac.com
ANNUAL MEETING OF STOCKHOLDERS
Thursday, June 4, 2015
8:00 a.m.
The Town Hall
1999 K Street, N.W.
First Floor
Washington, DC 20006
Formal notice of the meeting, the proxy statement, and
the proxy card are being mailed to each stockholder of
record entitled to vote at the meeting simultaneously with
the mailing of this Annual Report.
NON-GAAP PERFORMANCE MEASURES
Reconciliation of Net Income Attributable to
Common Stockholders to Core Earnings
(in thousands)
Net income attributable to common stockholders
$ 13,784
$43,894
$ 71,833
$38,251
2011
2012
2013
2014
Less the after-tax effects of:
Unrealized (losses)/gains on financial derivatives and
hedging activities
Unrealized gains/(losses) on trading assets
Amortization of premiums/discounts and deferred gains on
assets consolidated at fair value
Net effects of settlements on agency forwards
Lower of cost or fair value adjustments on loans held for sale
(30,930)
2,246
(3,692)
(2,523)
5,776
4,325
200
29,368
(533)
(6,480)
1,038
(7,266)
(12,467)
(9,457)
856
(3,863)
573
—
103
—
Core earnings
$ 42,907
$49,642
$ 54,892
$53,047
Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com
CERTIFICATION
Farmer Mac has included as Exhibit 31 to its Annual Report
on Form 10-K for the fiscal year ended December 31, 2014
filed with the SEC the certifications of the Chief Executive
Officer and Chief Financial Officer certifying the quality of
Farmer Mac’s financial disclosures.
FORM 10-K
Stockholders may obtain, without charge, a copy of
Farmer Mac’s 2014 Annual Report on Form 10-K, as filed
with the SEC on March 16, 2015, from Farmer Mac’s
website or by contacting Farmer Mac’s Secretar y at
Farmer Mac’s Corporate Headquarters.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE YEAR ENDED DECEMBER 31, 2014
PricewaterhouseCoopers LLP
1800 Tysons Boulevard
McLean, VA 22102
Farmer Mac reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP”). In addition to GAAP measures, Farmer Mac
also presents its “core earnings,” a non-GAAP performance
measure. Farmer Mac uses core earnings 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.
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.
1999 K Street, N.W.
Fourth Floor
Washington, DC 20006
Phone: 800.879.3276
Fax: 800.999.1814
www.farmermac.com
Financing Rural America®