WE’RE THERE. AS SURE AS THE WIND BLOWS.
ANNUAL REPORT
2016
WE’RE THERE.
As sure as the wind blows.
Farmer Mac is committed to serving the financial needs of our customers—in times of agricultural growth
and just as faithully during market downturns. As the ag market faces challenges, Farmer Mac remains
steadfast in our mission of improving the financial strength of America’s rural communities.
Farmer Mac has helped fund loans to over 76,000 rural borrowers in all 50 STATES,
$43 BILLION
of investments in rural America.
which has resulted in more than
01
2016
N
B O R A T I O N PASSION FOR RUR
AL A
A
L
L
O
M
E
R
I
C
A
THE COMPASS FOR OUR ACTIONS
OUR CORE VALUES
HIP COLLE GIA L C
S
D
R
A
W
E
T
S
W
C
A
M
R
E
M
R
A
F
E
N
O
Y
T
I
R
G
E
T
E IN
T
ARALLELED SERVICE ABSOLU
C
E U
N
P
S
WHO WE ARE Farmer Mac is a vital part of the
agricultural credit markets and was created to increase
access to and reduce the cost of capital for the benefit
of American agricultural and rural communities. As the
nation’s premier secondary market for agricultural credit,
we provide financial solutions to a broad spectrum of the
agricultural community, including agricultural lenders,
agribusinesses, and other institutions that can benefit
from access to flexible, low-cost financing and risk
E
management tools.
Farmer Mac’s customers benefit from our
low cost of funds, low overhead costs, and high
operational efficiency. In fact, we are often able to
provide the lowest cost of borrowing to agricultural
and rural borrowers. For more than a quarter-century,
Farmer Mac has been delivering the capital and
commitment rural America deserves.
I
N
N
O
V
A
T
I
V
E
T
H
I
N
K
I
N
G
U
N
R
E
L
E
N
TIN
G EXCELLEN
WE’RE THERE.
As sure as the wind blows.
Farmer Mac is committed to serving the financial needs of our customers—in times of agricultural growth
and just as faithully during market downturns. As the ag market faces challenges, Farmer Mac remains
steadfast in our mission of improving the financial strength of America’s rural communities.
Farmer Mac has helped fund loans to over 76,000 rural borrowers in all 50 STATES,
$43 BILLION
of investments in rural America.
which has resulted in more than
01
2016
N
B O R A T I O N PASSION FOR RUR
AL A
A
L
L
O
M
E
R
I
C
A
THE COMPASS FOR OUR ACTIONS
OUR CORE VALUES
HIP COLLE GIA L C
S
D
R
A
W
E
T
S
W
C
A
M
R
E
M
R
A
F
E
N
O
Y
T
I
R
G
E
T
E IN
T
ARALLELED SERVICE ABSOLU
C
E U
N
P
S
WHO WE ARE Farmer Mac is a vital part of the
agricultural credit markets and was created to increase
access to and reduce the cost of capital for the benefit
of American agricultural and rural communities. As the
nation’s premier secondary market for agricultural credit,
we provide financial solutions to a broad spectrum of the
agricultural community, including agricultural lenders,
agribusinesses, and other institutions that can benefit
from access to flexible, low-cost financing and risk
E
management tools.
Farmer Mac’s customers benefit from our
low cost of funds, low overhead costs, and high
operational efficiency. In fact, we are often able to
provide the lowest cost of borrowing to agricultural
and rural borrowers. For more than a quarter-century,
Farmer Mac has been delivering the capital and
commitment rural America deserves.
I
N
N
O
V
A
T
I
V
E
T
H
I
N
K
I
N
G
U
N
R
E
L
E
N
TIN
G EXCELLEN
Letter from Chairman and President
THE
THE
TO THE STOCKHOLDERS
OF FARMER MAC :
In 2016, Farmer Mac
continued to play a vital
role in financing rural
America by increasing the
availability of credit to,
and reducing the cost of
capital for, the benefit
of American agricultural
and rural communities.
Our commitment to that
mission has never been
stronger or more important
as the agricultural
economy’s challenges
extend into a fourth year.
WE’RE THERE. AS SURE AS THE WIND BLOWS.
Farm incomes have fallen over the last year, as certain
sectors have seen lower commodity prices stemming
from excess supply. Throughout inevitable agricultural
economic cycles, Farmer Mac remains resolute in our
commitment to provide financial tools to extend the type
of flexible, low-cost financing that is necessary to allow
rural America to adapt, grow, and flourish. As cash flows
in farming operations softened in certain sectors, and
as rural credit markets have tightened, the increased
demand for our innovative financial solutions affirms the
appeal of our broad offerings throughout market cycles.
At Farmer Mac, we’re honored to collaborate with our
customers in helping to build a stronger rural America
for the resilient people who make up those communities.
We will stand by them in good times and bad. The theme
of this year’s annual report—“We’re There. As Sure as
The Wind Blows.”— signifies this strong commitment.
STRENGTH IN DIVERSITY
Farmer Mac’s unique market position reflects our
distinctive business model, and the breadth of
our customers, products, and portfolio—a diversity
that helps to mitigate the inherent volatility of the
agricultural economy.
Our broad customer base ranges from small community
banks and Farm Credit System institutions to large
banks and insurance companies and a large rural
utilities cooperative. We offer a wide array of products
and solutions to support the evolving, varied needs
of these different groups. We understand that our
customers — whether big or small— need access to
low-cost credit and effective risk management tools.
From loan purchases to credit protection to wholesale
financing, our flexible and efficient solutions help
ensure that our customers, and, ultimately, rural
America’s farmers, ranchers, and broader community
can grow and thrive. And by delivering effectively upon
our mission, Farmer Mac and its stockholders are able to
share in these returns.
Farmer Mac’s portfolio is diversified both geographically
and by commodity, and we believe it is well-positioned
to endure fluctuations in farmland values and commodity
prices. Our reach extends across the United States,
with a proportional mix of business across geographic
regions that reflects the immense diversification of the
American agricultural economy. Accordingly, our portfolio
is also diversified across a vast variety of commodities,
from alfalfa to barley, almonds to apples, beans to dairy
cattle, and over a hundred more. The breadth, strict
underwriting discipline, and quality of our business is
a core strength of Farmer Mac. We have cultivated a
balanced portfolio designed to overcome regional market
and commodity fluctuations to ensure that we can fulfill
our mission in all market conditions and deliver strong
value to our stockholders.
STRENGTH IN CHARACTER
Just as we stand by our customers, we also stand by
our employees. Given the diversity of our customers,
products, and portfolio, we at Farmer Mac understand
that our success as a vital secondary market credit
provider in agricultural and rural communities requires
the tireless efforts of a world-class team. In 2016, we
continued our efforts to recruit and foster the best
talent in rural finance to ensure that we maintain and
grow that position in our industry. Over the past several
years, we have successfully filled key roles and created
new positions to proactively address the ever-changing
demands of those we serve. While it is important to seek
fresh talent and new perspectives, we are proud that
over one-quarter of our employees have dedicated more
than ten years of their career to Farmer Mac, bringing
to bear a deep knowledge of the industry and our
business that is extremely valuable and difficult to
replicate. Ultimately, it is this diverse experience that
fosters a culture of innovative thinking, encourages
collaboration, and bolsters a shared passion for our
important mission, enabling us to quickly respond to
rural America’s complex and ever-changing financing
needs with unrelenting excellence.
STRENGTH IN OUR FINANCIAL PERFORMANCE
Farmer Mac’s commitment to our mission, our “can-do”
ethos, and an intense focus on providing value to our
stockholders continues to produce the results we seek
to achieve. We’re happy to report that the financial results
that Farmer Mac achieved in 2016 continued this strong
trend. Since last year, our core earnings increased by
more than 14% to $53.8 million, and outstanding
business volume grew by over $1.5 billion to $17.4 billion,
representing an all-time high for the company. In fact,
our assets have grown by an average annual rate of more
than 12 percent over the last 17 years! And while we
have begun to see the expected normalization of credit
metrics— from historically favorable levels of the past
several years — we are well positioned to grow and thrive
and believe that our business model is well designed
to deliver upon our mission in markets where the
environment is a bit more challenging and credit is
somewhat tighter.
In early 2017, we also increased our quarterly common
stock dividend 38% to $0.36 per share, which equates to
$1.44 per share per year. Considering this increase along
with last year’s change to our stated dividend policy and
quarterly dividend increase of 63%, we believe we are on
track to reach our targeted 30% core earnings payout in
2018. Farmer Mac’s earnings potential and growing
capital position provide capacity for future growth and
support these higher dividends, demonstrating our
commitment to enhancing stockholder value over the
long-term.
MOVING FORWARD
No matter what challenges the agricultural community
faces, Farmer Mac has shown itself to be a durable
and vibrant part of the agricultural economy, and
we are committed to being a trusted partner to rural
America. We will continue to deliver on our mission by
demonstrating the value of our products and solutions
to our current and prospective customers.
“ No matter what challenges the
agricultural community faces,
Farmer Mac has shown itself
to be a durable and vibrant part
of the agricultural economy,
and we are committed to being a
trusted partner to rural America.”
Over the last year, we have made great strides in
increasing our name recognition and brand awareness
in the marketplace as a leading national expert in
agriculture financing. We have also significantly expanded
our investment in the technology and capacity to better
grow our business and more fully deliver upon our
mission. We plan to build on this momentum to increase
rural America’s access to our products and solutions.
The future holds significant opportunity for our suite
of financing and risk management solutions, and we
strongly believe that this will continue to improve our
market share and our success in bringing new, low-cost
capital to the agricultural and rural communities that
we so proudly serve.
The American agricultural economy has always been
cyclical in nature, going through both prosperous and
stressful periods for generations. But one thing is sure,
as sure as the wind blows …we at Farmer Mac will
continue to devote our energy to improving the lives
and livelihoods of rural Americans and to delivering
value to our stockholders and customers alike.
TIMOTHY L. BUZBY
President and
Chief Executive Officer
LOWELL L. JUNKINS
Chairman of the Board
Letter from Chairman and President
THE
THE
TO THE STOCKHOLDERS
OF FARMER MAC :
In 2016, Farmer Mac
continued to play a vital
role in financing rural
America by increasing the
availability of credit to,
and reducing the cost of
capital for, the benefit
of American agricultural
and rural communities.
Our commitment to that
mission has never been
stronger or more important
as the agricultural
economy’s challenges
extend into a fourth year.
WE’RE THERE. AS SURE AS THE WIND BLOWS.
Farm incomes have fallen over the last year, as certain
sectors have seen lower commodity prices stemming
from excess supply. Throughout inevitable agricultural
economic cycles, Farmer Mac remains resolute in our
commitment to provide financial tools to extend the type
of flexible, low-cost financing that is necessary to allow
rural America to adapt, grow, and flourish. As cash flows
in farming operations softened in certain sectors, and
as rural credit markets have tightened, the increased
demand for our innovative financial solutions affirms the
appeal of our broad offerings throughout market cycles.
At Farmer Mac, we’re honored to collaborate with our
customers in helping to build a stronger rural America
for the resilient people who make up those communities.
We will stand by them in good times and bad. The theme
of this year’s annual report—“We’re There. As Sure as
The Wind Blows.”— signifies this strong commitment.
STRENGTH IN DIVERSITY
Farmer Mac’s unique market position reflects our
distinctive business model, and the breadth of
our customers, products, and portfolio—a diversity
that helps to mitigate the inherent volatility of the
agricultural economy.
Our broad customer base ranges from small community
banks and Farm Credit System institutions to large
banks and insurance companies and a large rural
utilities cooperative. We offer a wide array of products
and solutions to support the evolving, varied needs
of these different groups. We understand that our
customers — whether big or small— need access to
low-cost credit and effective risk management tools.
From loan purchases to credit protection to wholesale
financing, our flexible and efficient solutions help
ensure that our customers, and, ultimately, rural
America’s farmers, ranchers, and broader community
can grow and thrive. And by delivering effectively upon
our mission, Farmer Mac and its stockholders are able to
share in these returns.
Farmer Mac’s portfolio is diversified both geographically
and by commodity, and we believe it is well-positioned
to endure fluctuations in farmland values and commodity
prices. Our reach extends across the United States,
with a proportional mix of business across geographic
regions that reflects the immense diversification of the
American agricultural economy. Accordingly, our portfolio
is also diversified across a vast variety of commodities,
from alfalfa to barley, almonds to apples, beans to dairy
cattle, and over a hundred more. The breadth, strict
underwriting discipline, and quality of our business is
a core strength of Farmer Mac. We have cultivated a
balanced portfolio designed to overcome regional market
and commodity fluctuations to ensure that we can fulfill
our mission in all market conditions and deliver strong
value to our stockholders.
STRENGTH IN CHARACTER
Just as we stand by our customers, we also stand by
our employees. Given the diversity of our customers,
products, and portfolio, we at Farmer Mac understand
that our success as a vital secondary market credit
provider in agricultural and rural communities requires
the tireless efforts of a world-class team. In 2016, we
continued our efforts to recruit and foster the best
talent in rural finance to ensure that we maintain and
grow that position in our industry. Over the past several
years, we have successfully filled key roles and created
new positions to proactively address the ever-changing
demands of those we serve. While it is important to seek
fresh talent and new perspectives, we are proud that
over one-quarter of our employees have dedicated more
than ten years of their career to Farmer Mac, bringing
to bear a deep knowledge of the industry and our
business that is extremely valuable and difficult to
replicate. Ultimately, it is this diverse experience that
fosters a culture of innovative thinking, encourages
collaboration, and bolsters a shared passion for our
important mission, enabling us to quickly respond to
rural America’s complex and ever-changing financing
needs with unrelenting excellence.
STRENGTH IN OUR FINANCIAL PERFORMANCE
Farmer Mac’s commitment to our mission, our “can-do”
ethos, and an intense focus on providing value to our
stockholders continues to produce the results we seek
to achieve. We’re happy to report that the financial results
that Farmer Mac achieved in 2016 continued this strong
trend. Since last year, our core earnings increased by
more than 14% to $53.8 million, and outstanding
business volume grew by over $1.5 billion to $17.4 billion,
representing an all-time high for the company. In fact,
our assets have grown by an average annual rate of more
than 12 percent over the last 17 years! And while we
have begun to see the expected normalization of credit
metrics— from historically favorable levels of the past
several years — we are well positioned to grow and thrive
and believe that our business model is well designed
to deliver upon our mission in markets where the
environment is a bit more challenging and credit is
somewhat tighter.
In early 2017, we also increased our quarterly common
stock dividend 38% to $0.36 per share, which equates to
$1.44 per share per year. Considering this increase along
with last year’s change to our stated dividend policy and
quarterly dividend increase of 63%, we believe we are on
track to reach our targeted 30% core earnings payout in
2018. Farmer Mac’s earnings potential and growing
capital position provide capacity for future growth and
support these higher dividends, demonstrating our
commitment to enhancing stockholder value over the
long-term.
MOVING FORWARD
No matter what challenges the agricultural community
faces, Farmer Mac has shown itself to be a durable
and vibrant part of the agricultural economy, and
we are committed to being a trusted partner to rural
America. We will continue to deliver on our mission by
demonstrating the value of our products and solutions
to our current and prospective customers.
“ No matter what challenges the
agricultural community faces,
Farmer Mac has shown itself
to be a durable and vibrant part
of the agricultural economy,
and we are committed to being a
trusted partner to rural America.”
Over the last year, we have made great strides in
increasing our name recognition and brand awareness
in the marketplace as a leading national expert in
agriculture financing. We have also significantly expanded
our investment in the technology and capacity to better
grow our business and more fully deliver upon our
mission. We plan to build on this momentum to increase
rural America’s access to our products and solutions.
The future holds significant opportunity for our suite
of financing and risk management solutions, and we
strongly believe that this will continue to improve our
market share and our success in bringing new, low-cost
capital to the agricultural and rural communities that
we so proudly serve.
The American agricultural economy has always been
cyclical in nature, going through both prosperous and
stressful periods for generations. But one thing is sure,
as sure as the wind blows …we at Farmer Mac will
continue to devote our energy to improving the lives
and livelihoods of rural Americans and to delivering
value to our stockholders and customers alike.
TIMOTHY L. BUZBY
President and
Chief Executive Officer
LOWELL L. JUNKINS
Chairman of the Board
02
03
U.S. ag economy in 2016
1
Farmer Mac’s position in 2016
We continue to provide solutions to help lenders mitigate risk and
increase access to capital in the face of challenging economic conditions.
WHILE THE FARM ECONOMY CONTINUED
TO CONTRACT IN 2016, FARMER MAC
WAS THERE, AS ALWAYS, WITH THE
RIGHT SOLUTIONS TO HELP FARMERS,
RANCHERS, AND RESIDENTS OF RURAL
COMMUNITIES NATIONWIDE.
Ag producers are accustomed to market swings
that test the resolve of the most resilient farm
and ranch owners, but we’re here to help make
those market fluctuations less of a challenge.
The 2016 farm economy has resulted in falling
farm income, lower land values, fewer farm
operations, and increased debt, placing strains
on rural communities.
Ag lenders across the country use Farmer Mac’s
flexible and diverse solutions to help mitigate
the risks of tighter credit conditions resulting from
a market downturn. Farmer Mac was created
to extend capital and increase lending capacity
in rural America, regardless of market conditions,
and we deliver on that commitment every day.
The American agricultural community is a rich and
diverse part of our country’s heritage. It has always
shown itself to be a durable and vibrant part of the
economy, and Farmer Mac will continue to be there
as a trusted partner.
NET FARM INCOME
$68.3 BILLION
NUMBER OF FARM OPERATIONS
2.1 MILLION
TOTAL FARM ASSETS
$2.9 TRILLION
TOTAL FARM DEBT
$375.7 BILLION
DOWN 15.6%
DOWN 0.4%
DOWN 1.4%
UP 5.3%
TOTAL OUTSTANDING FARM & RANCH LOAN PURCHASE VOLUME
TOTAL OUTSTANDING INSTITUTIONAL CREDIT VOLUME
19%
~$3.5 BILLION
8%
~$7.3 BILLION
NEW FARM & RANCH LOAN PURCHASES: ~$1.0 BILLION
NEW AGVANTAGE SECURITIES PURCHASES: ~$2.1 BILLION
TOTAL OUTSTANDING USDA GUARANTEED LOAN PURCHASE VOLUME
TOTAL OUTSTANDING RURAL UTILITIES VOLUME
9%
~$2.1 BILLION
23%
~$1.9 BILLION
NEW USDA GUARANTEED LOAN PURCHASES: ~$481.3 MILLION
NEW RURAL UTILITIES VOLUME: ~$491.9 MILLION
FARMER MAC ENJOYS A UNIQUE POSITION AS OUR DIVERSE SOLUTIONS PROVIDE OPPORTUNITIES DURING BOTH STRONG AND WEAK MARKETS,
ENABLING LENDERS TO HELP THEIR BORROWERS GROW, AS WELL AS MANAGE RISK, AND PROVIDE LOW-COST CAPITAL TO THE RURAL CREDIT MARKET.
1
SOURCE: USDA Economic Research Service Farm Income & Wealth Statistics (as of February 2017);
comparing 2016 to 2015
Plotted points represent Annual Net Farm Income from 2012-2016
Plotted points represent Farmer Mac Outstanding Business Volume from 2012-2016
As of December 31, 2016
New business volume in 2016
20162016ANNUAL GROWTHANNUAL GROWTHANNUAL GROWTHANNUAL GROWTH 02
03
U.S. ag economy in 2016
1
Farmer Mac’s position in 2016
We continue to provide solutions to help lenders mitigate risk and
increase access to capital in the face of challenging economic conditions.
WHILE THE FARM ECONOMY CONTINUED
TO CONTRACT IN 2016, FARMER MAC
WAS THERE, AS ALWAYS, WITH THE
RIGHT SOLUTIONS TO HELP FARMERS,
RANCHERS, AND RESIDENTS OF RURAL
COMMUNITIES NATIONWIDE.
Ag producers are accustomed to market swings
that test the resolve of the most resilient farm
and ranch owners, but we’re here to help make
those market fluctuations less of a challenge.
The 2016 farm economy has resulted in falling
farm income, lower land values, fewer farm
operations, and increased debt, placing strains
on rural communities.
Ag lenders across the country use Farmer Mac’s
flexible and diverse solutions to help mitigate
the risks of tighter credit conditions resulting from
a market downturn. Farmer Mac was created
to extend capital and increase lending capacity
in rural America, regardless of market conditions,
and we deliver on that commitment every day.
The American agricultural community is a rich and
diverse part of our country’s heritage. It has always
shown itself to be a durable and vibrant part of the
economy, and Farmer Mac will continue to be there
as a trusted partner.
NET FARM INCOME
$68.3 BILLION
NUMBER OF FARM OPERATIONS
2.1 MILLION
TOTAL FARM ASSETS
$2.9 TRILLION
TOTAL FARM DEBT
$375.7 BILLION
DOWN 15.6%
DOWN 0.4%
DOWN 1.4%
UP 5.3%
TOTAL OUTSTANDING FARM & RANCH LOAN PURCHASE VOLUME
TOTAL OUTSTANDING INSTITUTIONAL CREDIT VOLUME
19%
~$3.5 BILLION
8%
~$7.3 BILLION
NEW FARM & RANCH LOAN PURCHASES: ~$1.0 BILLION
NEW AGVANTAGE SECURITIES PURCHASES: ~$2.1 BILLION
TOTAL OUTSTANDING USDA GUARANTEED LOAN PURCHASE VOLUME
TOTAL OUTSTANDING RURAL UTILITIES VOLUME
9%
~$2.1 BILLION
23%
~$1.9 BILLION
NEW USDA GUARANTEED LOAN PURCHASES: ~$481.3 MILLION
NEW RURAL UTILITIES VOLUME: ~$491.9 MILLION
FARMER MAC ENJOYS A UNIQUE POSITION AS OUR DIVERSE SOLUTIONS PROVIDE OPPORTUNITIES DURING BOTH STRONG AND WEAK MARKETS,
ENABLING LENDERS TO HELP THEIR BORROWERS GROW, AS WELL AS MANAGE RISK, AND PROVIDE LOW-COST CAPITAL TO THE RURAL CREDIT MARKET.
1
SOURCE: USDA Economic Research Service Farm Income & Wealth Statistics (as of February 2017);
comparing 2016 to 2015
Plotted points represent Annual Net Farm Income from 2012-2016
Plotted points represent Farmer Mac Outstanding Business Volume from 2012-2016
As of December 31, 2016
New business volume in 2016
20162016ANNUAL GROWTHANNUAL GROWTHANNUAL GROWTHANNUAL GROWTH 04
THE DIVERSITY OF OUR BUSINESS IS OUR STRENGTH
05
OUR CUSTOMERS
From small, rural community banks
to large ag financing institutions,
Farmer Mac’s customers mirror the
rural American landscape.
COMMERCIAL &
COMMUNITY
BANKS
NON-BANK
LENDERS
INSURANCE
COMPANIES
RURAL
UTILITIES
AG
FUNDS
FARM CREDIT
SYSTEM
INSTITUTIONS
OUR SOLUTIONS
Farmer Mac’s solutions reflect the sweeping
scope of our customers’ needs and our
core promise to be stalwart in the face of
changing economic conditions.
LOAN
PURCHASE
USDA
GUARANTEED
LOAN
PURCHASE
CREDIT
PROTECTION
WHOLESALE
FINANCING
A SMALL SAMPLING OF OUR CUSTOMERS ACROSS THE COUNTRY
$ REPRESENTS TOTAL ASSETS AS PROVIDED BY THE INSTITUTION
AG VENTURE FINANCIAL SERVICES, INC.
$104.0 MILLION
WE PROCESSED3,878 LOAN SUBMISSIONS IN 2016.
COLUMBIA BANK
$9.5 BILLION
SECURITY BANK
$200.0 MILLION
HNB NATIONAL BANK
$477.0 MILLION
RABO AGRIFINANCE, LLC
$8.0 BILLION
YOSEMITE FARM CREDIT, ACA
$2.7 BILLION
CAL COASTAL
$15.0 MILLION
$20K $1B
TO
JUST LIKE OUR
CUSTOMERS, OUR TRANSACTIONS VARY IN SIZE
AND SCOPE FROM SMALL AGRICULTURAL
MORTGAGE PURCHASES TO LARGE, SOPHISTICATED
WHOLESALE FINANCING DEALS.
FARM CREDIT OF NEW MEXICO, ACA
$1.7 BILLION
FIRST FINANCIAL BANK
$915.0 MILLION
METLIFE, INC.
$890.0 BILLION
CFC
$24.0 BILLION
AGAMERICA
$360.0 MILLION
OUR DIVERSE FARM & RANCH PORTFOLIO
1
11%
NORTHWEST
4%
NORTHEAST
34%
MID-NORTH
96%
OF OUR CURRENT FARM & RANCH AND USDA GUARANTEED
LOANS ARE TO FAMILY FARMS.
WE’VE UNDERWRITTEN
139
COMMODITIES FROM CATTLE TO CASABA MELONS.
1 4IN
OF OUR LENDING PARTNERS HAVE USED MULTIPLE SOLUTIONS.
1 As of December 31, 2016
Historic average
29%
SOUTHWEST
14%
MID-SOUTH
8%
SOUTHEAST
FARMERS, RANCHERS, AND LENDERS IN 2,510 COUNTIES
ACROSS THE COUNTRY HAVE BENEFITED FROM OUR
FARM & RANCH AND USDA LOAN PURCHASE SOLUTIONS.
THAT’S 80% OF U.S. COUNTIES!
20162016 06
Solutions LOAN PURCHASE USDA GUARANTEED LOAN PURCHASE
AND
07
MANY LENDERS IN RURAL AMERICA face a
daunting challenge when competing against the wide
array of financial products offered by other financial
institutions. Farmer Mac helps even that playing field
with solutions like FARM & RANCH LOAN PURCHASE
and USDA GUARANTEED LOAN PURCHASE, equipping
lenders with the ability to offer competitive rates and
favorable terms from a broad suite of products.
Our solutions also help minimize credit risk and increase
liquidity, affording our lenders the freedom to reallocate
capital to the benefit of the farmers, ranchers, and
residents of rural communities that we’re committed
to supporting.
NEW FARM & RANCH AND USDA GUARANTEED
LOANS PURCHASED INCREASED NEARLY
IN 2016 COMPARED TO THE PRIOR YEAR.
30%
“
Our community bank has experienced significant
growth over the past few years and Farmer Mac’s
Loan Purchase solution has been an integral
component of that success. Since becoming an
approved seller in 2014 and offering Farmer Mac’s
attractive loan products, we’ve acquired new
clients we would not have otherwise secured.”
DAVID BUMAN, CHIEF LENDING OFFICER & SVP TS AG FINANCE,
TS BANKING GROUP
WHAT IS A LOAN PURCHASE?
Farmer Mac purchases loans, as well as
USDA-guaranteed portions of loans, from our
approved lenders that are secured by first lien
mortgages on eligible agricultural real estate
assets. This solution provides attractive
long-term financing at favorable rates,
enabling lenders to not only maintain the
borrower relationship, but also grow
with their existing ag customers while
attracting new ones.
GROW WITH FARM CUSTOMERS
Farmer Mac purchases ag real estate loans of up to
$50 MILLION
per borrower, enabling lenders to accomodate their
borrowers’ growing financing needs.
IMPROVE THE BOTTOM LINE
When utilizing our Loan Purchase solutions,
lenders may earn origination and servicing fees
for the life of the loan.
ATTRACT NEW BORROWERS
Our competitive rates, terms, and loan products
match today’s farmers’ needs. In 2016,
95%
of Farmer Mac lenders locked in
fixed rates between 10 and 30 years.
FAST TURNAROUND
We understand that timing is everything in
farming, proven by our average Loan Purchase
approval time of less than
2 DAYS.
20162016 08
Solution CREDIT PROTECTION
MANAGING CREDIT RISK EFFECTIVELY
is inexorably tied to a lender’s financial strength and
opportunity for growth. Farmer Mac provides credit
protection through products like our PURCHASE
COMMITMENT to ensure lenders have the flexibility to
mitigate credit risk and manage portfolio concentration
while retaining loans on their balance sheets and
maintaining direct customer relationships. This innovative
financial tool provides our lenders peace of mind knowing
they can expand along with their customer base.
“
Innovative financial solutions and quick credit
decisions attracted Bank of the West to Farmer Mac.
We now have the ability to leverage financial tools like
Credit Protection that enable us to manage the credit
risk associated with our large-scale farm operators
who have significant lending needs.”
ROGER STURDEVANT, EXECUTIVE VICE PRESIDENT - AGRIBUSINESS BANKING DIVISION
BANK OF THE WEST
WHAT IS A
PURCHASE COMMITMENT?
The Purchase Commitment product allows
lenders to obtain credit protection
for eligible loans through Farmer Mac.
If the loan goes into default, Farmer Mac
commits to purchase it, making this
an effective portfolio risk management
tool that assists lenders with
obligor limits, capital relief, and
commodity concentration.
32,389
LOANS HAVE RECEIVED CREDIT
PROTECTION SINCE THE PROGRAM STARTED IN 1999.
09
REDUCED REGULATORY RISK WEIGHTING
With Farmer Mac’s Purchase Commitment product,
the capital risk weighting on a loan may drop from
100% to as little as
20%.
RISK
A PROVEN RISK MANAGEMENT TOOL FOR
TODAY’S LENDERS TO HELP MANAGE LOAN
LIMITS AND COMMODITY CONCENTRATIONS
In 2016, Farmer Mac completed over
$840 MILLION
in Rural Utilities and Farm & Ranch
Purchase Commitment transactions.
SERVICING THE NEEDS OF ALL CUSTOMERS,
REGARDLESS OF SIZE
Lenders use Purchase Commitments to
reduce reliance on loan participations and
mitigate credit exposure.
20162016 10
Solution WHOLESALE FINANCING
Our partnership with CFC exemplifies the value of our diverse
financial solutions and its positive effect on rural America.
11
BY LEVERAGING THE FULL POWER OF THEIR
AG REAL ESTATE ASSETS, agricultural lenders,
agribusinesses, and investment firms can access funding
for a broad range of applications through Farmer Mac’s
Wholesale Financing solutions. This distinct and valuable
tool provides fast, efficient, and low-cost funding.
To meet the specific financing needs of our customers—
from the expansion of farm operations to acquisitions
to debt refinancing— Farmer Mac provides customizable
solutions through innovative products such as AGVANTAGE.
Wholesale Financing has two core
products from which to choose.
Both can be customized to fit the
exact needs of the borrower.
AGVANTAGE®
tailored for mortgage lenders
FARM EQUITY AGVANTAGE®
designed for investors or owners of
agricultural real estate assets
LENDERS GAIN ACCESS TO FARMER MAC’S LOW
BORROWING RATES, WHICH CAN SAVE THEM
25 75
TO
BASIS POINTS OR MORE.
“
Working with Farmer Mac provides a
distinct advantage for CFC and our
members. Their collaborative approach
ensures we always find the best
solution to meet our specific financing
needs. Farmer Mac has proven to be an
invaluable resource to the rural electric
cooperative network and the 42 million
Americans in 47 states that we serve.”
SHELDON PETERSEN, CHIEF EXECUTIVE OFFICER,
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (CFC)
NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION (CFC) was created to
provide additional financing options to America’s electric
CREDIT PROTECTION, and WHOLESALE FINANCING
as an additional source of funding for its members,
ensuring they receive the most favorable interest
cooperative network, effectively serving the diverse
rates and best financing terms available. As a private
capital demands of the nation’s rural electric systems.
cooperative lender representing not-for-profit electric
These financing needs vary by regions, seasons, and
cooperatives, these savings are passed directly to the
market conditions, and thus the ability to access capital
18 million American farms, homes, businesses, and
in flexible ways is critical.
schools their members serve, helping to boost the
economies of U.S. rural communities.
CFC TAPS INTO FARMER MAC’S SOLUTIONS
LOAN
PURCHASE
CREDIT
PROTECTION
WHOLESALE
FINANCING
MORE THAN 900 NOT-FOR-PROFIT ELECTRIC COOPERATIVES
DELIVER SAFE, AFFORDABLE, AND RELIABLE ELECTRICITY
TO 18 MILLION HOMES, FARMS, BUSINESSES,
AND SCHOOLS IN 47 STATES
Since 2005, CFC has relied on Farmer Mac’s suite of
adaptive solutions, including LOAN PURCHASE,
BENEFITTING THE 42 MILLION AMERICANS
THEIR MEMBERS SERVE.
20162016
10
Solution WHOLESALE FINANCING
Our partnership with CFC exemplifies the value of our diverse
financial solutions and its positive effect on rural America.
11
BY LEVERAGING THE FULL POWER OF THEIR
AG REAL ESTATE ASSETS, agricultural lenders,
agribusinesses, and investment firms can access funding
for a broad range of applications through Farmer Mac’s
Wholesale Financing solutions. This distinct and valuable
tool provides fast, efficient, and low-cost funding.
To meet the specific financing needs of our customers—
from the expansion of farm operations to acquisitions
to debt refinancing— Farmer Mac provides customizable
solutions through innovative products such as AGVANTAGE.
Wholesale Financing has two core
products from which to choose.
Both can be customized to fit the
exact needs of the borrower.
AGVANTAGE®
tailored for mortgage lenders
FARM EQUITY AGVANTAGE®
designed for investors or owners of
agricultural real estate assets
LENDERS GAIN ACCESS TO FARMER MAC’S LOW
BORROWING RATES, WHICH CAN SAVE THEM
25 75
TO
BASIS POINTS OR MORE.
“
Working with Farmer Mac provides a
distinct advantage for CFC and our
members. Their collaborative approach
ensures we always find the best
solution to meet our specific financing
needs. Farmer Mac has proven to be an
invaluable resource to the rural electric
cooperative network and the 42 million
Americans in 47 states that we serve.”
SHELDON PETERSEN, CHIEF EXECUTIVE OFFICER,
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION (CFC)
NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION (CFC) was created to
provide additional financing options to America’s electric
CREDIT PROTECTION, and WHOLESALE FINANCING
as an additional source of funding for its members,
ensuring they receive the most favorable interest
cooperative network, effectively serving the diverse
rates and best financing terms available. As a private
capital demands of the nation’s rural electric systems.
cooperative lender representing not-for-profit electric
These financing needs vary by regions, seasons, and
cooperatives, these savings are passed directly to the
market conditions, and thus the ability to access capital
18 million American farms, homes, businesses, and
in flexible ways is critical.
schools their members serve, helping to boost the
economies of U.S. rural communities.
CFC TAPS INTO FARMER MAC’S SOLUTIONS
LOAN
PURCHASE
CREDIT
PROTECTION
WHOLESALE
FINANCING
MORE THAN 900 NOT-FOR-PROFIT ELECTRIC COOPERATIVES
DELIVER SAFE, AFFORDABLE, AND RELIABLE ELECTRICITY
TO 18 MILLION HOMES, FARMS, BUSINESSES,
AND SCHOOLS IN 47 STATES
Since 2005, CFC has relied on Farmer Mac’s suite of
adaptive solutions, including LOAN PURCHASE,
BENEFITTING THE 42 MILLION AMERICANS
THEIR MEMBERS SERVE.
20162016
12
13
OUTSTANDING BUSINESS VOLUME BY LINES OF BUSINESS
As of December 31, 2016
OUTSTANDING FARM & RANCH BUSINESS VOLUME BY COMMODITY TYPE
As of December 31, 2016
INSTITUTIONAL CREDIT
$7.3
BILLION
FARM & RANCH
$6.1
BILLION
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
DOLLARS
IN BILLIONS
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
DOLLARS
IN BILLIONS
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$6.1
BILLION
USDA GUARANTEES
$2.1
BILLION
RURAL UTILITIES
$1.9
BILLION
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
DOLLARS
IN BILLIONS
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
DOLLARS
IN BILLIONS
$0.0
$0.5
$1.0
$1.5
$2.0
OUR PORTFOLIO
OF COMMODITIES
56%
CROPS
17%
PERMANENT
PLANTINGS
21%
LIVESTOCK
5%
PART-TIME
FARM
1%
AG STORAGE &
PROCESSING
$17.4 BILLION
60 CROPS
39 PERMANENT PLANTINGS
17 LIVESTOCK
20162016 12
13
OUTSTANDING BUSINESS VOLUME BY LINES OF BUSINESS
As of December 31, 2016
OUTSTANDING FARM & RANCH BUSINESS VOLUME BY COMMODITY TYPE
As of December 31, 2016
INSTITUTIONAL CREDIT
$7.3
BILLION
FARM & RANCH
$6.1
BILLION
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
DOLLARS
IN BILLIONS
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
DOLLARS
IN BILLIONS
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$6.1
BILLION
USDA GUARANTEES
$2.1
BILLION
RURAL UTILITIES
$1.9
BILLION
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
DOLLARS
IN BILLIONS
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
DOLLARS
IN BILLIONS
$0.0
$0.5
$1.0
$1.5
$2.0
OUR PORTFOLIO
OF COMMODITIES
56%
CROPS
17%
PERMANENT
PLANTINGS
21%
LIVESTOCK
5%
PART-TIME
FARM
1%
AG STORAGE &
PROCESSING
$17.4 BILLION
60 CROPS
39 PERMANENT PLANTINGS
17 LIVESTOCK
20162016 14
OUTSTANDING BUSINESS VOLUME
As of December 31 of each year depicted
PROVEN CREDIT PERFORMANCE
As of December 31, 2016
$17.4
BILLION
$15.9
$14.6
$13.9
$13.0
$12.2
$11.9
$10.7
$10.1
$20.0
$18.0
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
S
N
O
I
L
L
I
B
N
I
S
R
A
L
L
O
D
$8.5
$7.2
$5.5
$5.8
$5.5
$5.3
$4.2
$3.1
$2.3
$22 BILLION
OF CUMULATIVE FARM & RANCH LOANS, GUARANTEES, AND PURCHASE COMMITMENTS
15
0.16%
IN CUMULATIVE LOSSES
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
FARMER MAC’S OUTSTANDING BUSINESS VOLUME GROWTH REPRESENTS A 12.4% COMPOUND ANNUAL GROWTH RATE OVER THE LAST 17 YEARS.
OUR HISTORICAL CREDIT LOSSES, WHICH EQUATE TO LESS THAN ONE BASIS POINT PER YEAR, CONTINUE TO DEMONSTRATE OUR LONG-STANDING
FOCUS ON HIGH CREDIT QUALITY.
20162016
14
OUTSTANDING BUSINESS VOLUME
As of December 31 of each year depicted
PROVEN CREDIT PERFORMANCE
As of December 31, 2016
$17.4
BILLION
$15.9
$14.6
$13.9
$13.0
$12.2
$11.9
$10.7
$10.1
$20.0
$18.0
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
S
N
O
I
L
L
I
B
N
I
S
R
A
L
L
O
D
$8.5
$7.2
$5.5
$5.8
$5.5
$5.3
$4.2
$3.1
$2.3
$22 BILLION
OF CUMULATIVE FARM & RANCH LOANS, GUARANTEES, AND PURCHASE COMMITMENTS
15
0.16%
IN CUMULATIVE LOSSES
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
FARMER MAC’S OUTSTANDING BUSINESS VOLUME GROWTH REPRESENTS A 12.4% COMPOUND ANNUAL GROWTH RATE OVER THE LAST 17 YEARS.
OUR HISTORICAL CREDIT LOSSES, WHICH EQUATE TO LESS THAN ONE BASIS POINT PER YEAR, CONTINUE TO DEMONSTRATE OUR LONG-STANDING
FOCUS ON HIGH CREDIT QUALITY.
20162016
EXECUTIVE OFFICERS
TIMOTHY L. BUZBY
President and Chief Executive Officer
R. DALE LYNCH
Executive Vice President –
Chief Financial Officer and Treasurer
STEPHEN P. MULLERY
Senior Vice President –
General Counsel and Secretary
JOHN C. COVINGTON
Senior Vice President –
Agricultural Finance
BOARD OF DIRECTORS
As of April 1, 2017
LOWELL L. JUNKINS, CHAIRMAN 1
Political Affairs Consultant
Lowell Junkins & Associates
Donnellson, Iowa
MYLES J. WATTS, VICE CHAIRMAN 1
Professor Emeritus, 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
RICHARD H. DAVIDSON 3
Director
AgriBank, FCB
St. Paul, Minnesota
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
1999 K Street, N.W.
Fourth Floor
Washington, DC 20006
Phone: 202.872.7700 or
800.879.3276
Website: www.farmermac.com
ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 4, 2017
8:00 a.m.
The Town Hall
1999 K Street, N.W.
First Floor
Washington, DC 20006
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.
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.
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 1
Founder and President
Sara Faivre Executive Mentoring
Cameron, Texas
DOUGLAS A. FELTON 3
President and Owner
D&T Enterprises of Minnesota, Inc.
Northfield, Minnesota
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, District of Columbia
CLARK B. MAXWELL 2
Chief Operating Officer
Chatham Financial Corp.
Kennett Square, Pennsylvania
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 Presidential Appointee
2 Director elected by holders of Class A Common Stock
3 Director elected by holders of Class B Common Stock
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: www.continentalstock.com
CERTIFICATION
Farmer Mac has included as Exhibit 31 to its
Annual Report on Form 10-K for the fiscal year
ended December 31, 2016 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 2016 Annual
Report on Form 10-K, as filed with the SEC on
March 9, 2017, from Farmer Mac’s website or
by contacting Farmer Mac’s Secretary at Farmer
Mac’s Corporate Headquarters.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDED
DECEMBER 31, 2016
PricewaterhouseCoopers LLP
1800 Tysons Boulevard
McLean, VA 22102
NON-GAAP PERFORMANCE MEASURES
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS TO CORE EARNINGS
($ in thousands)
2016
2015
2014
2013
Net income attributable to common stockholders
$64,152
$47,371
$38,251
$71,833
Less reconciling items:
Unrealized gains/(losses) on financial derivatives and hedging activities
13,628
10,924
(9,968)
45,181
Unrealized gains/(losses) on trading securities
Amortization of premiums/discounts and deferred gains on assets
consolidated at fair value
Net effects of settlements on agency forward contracts
Loss on retirement of Farmer Mac II LLC Preferred Stock
Income tax effect related to reconciling items
Core Earnings
1,460
(849)
1,699
-
(5,577)
$53,791
1,220
1,596
(820)
(1,319)
(14,549)
(19,180)
(607)
(8,147)
(1,675)
159
-
882
-
7,966
(9,122)
$46,975
$53,047
$54,892
RECONCILIATION OF NET INTEREST INCOME AND NET YIELD TO NET EFFECTIVE SPREAD
($ in thousands)
2016
2015
2014
2013
Net interest income/yield
140,274
0.90%
125,807
0.88%
70,347
0.51%
109,453
0.89%
Net effects of consolidated trusts
(4,302)
0.03%
(3,078)
0.01%
(2,086)
-
(964)
-
Dollars
Yield
Dollars
Yield
Dollars
Yield
Dollars
Yield
Expense related to undesignated
financial derivatives
Amortization of premiums/discounts on
assets consolidated at fair value
Interest expense related to securities
purchased under agreements to resell
and securities sold, not yet purchased
(11,480)
-0.08%
(5,649)
-0.04%
(9,425)
-0.07%
(12,325)
-0.10%
610
0.01%
2,300
0.02%
15,482
0.12%
20,418
0.17%
-
-
-
-
39,375
0.35%
-
-
Net Effective Spread
125,102
0.86%
119,380
0.87%
113,693
0.91%
116,582
0.96%
inside back cover
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 uses the following non-GAAP financial
measures: core earnings, core earnings per share,
and net effective spread. Farmer Mac uses these
non-GAAP measures to measure corporate economic
performance and develop financial plans because,
in management’s view, they are useful alternative
measures in understanding Farmer Mac’s economic
performance, transaction economics, and business
trends. These non-GAAP financial measures that
Farmer Mac uses may not be comparable to similarly
labeled non-GAAP financial measures disclosed
by other companies. Farmer Mac’s disclosure of
these non-GAAP financial measures 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.
Core earnings and core earnings per share principally
differ from net income attributable to common
stockholders and earnings per common share,
respectively, by excluding the effects of fair value
fluctuations. These fluctuations are not expected
to have a cumulative net impact on Farmer Mac’s
financial condition or results of operations reported
in accordance with GAAP if the related financial
instruments are held to maturity, as is expected.
Core earnings and core earnings per share also differ
from net income attributable to common stockholders
and earnings per common share, respectively, 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.
Farmer Mac uses net effective spread to measure the
net spread Farmer Mac earns between its interest-
earning assets and the related net funding costs
of these assets. Net effective spread differs from
net interest income and net interest yield because
it excludes: (1) the amortization of premiums and
discounts on assets consolidated at fair value that are
amortized as adjustments to yield in interest income
over the contractual or estimated remaining lives of
the underlying assets; and (2) interest income and
interest expense related to consolidated trusts with
beneficial interests owned by third parties, which are
presented on Farmer Mac’s consolidated balance
sheets as “Loans held for investment in consolidated
trusts, at amortized cost.”
EXECUTIVE OFFICERS
TIMOTHY L. BUZBY
President and Chief Executive Officer
R. DALE LYNCH
Executive Vice President –
Chief Financial Officer and Treasurer
STEPHEN P. MULLERY
Senior Vice President –
General Counsel and Secretary
JOHN C. COVINGTON
Senior Vice President –
Agricultural Finance
BOARD OF DIRECTORS
As of April 1, 2017
LOWELL L. JUNKINS, CHAIRMAN 1
Political Affairs Consultant
Lowell Junkins & Associates
Donnellson, Iowa
MYLES J. WATTS, VICE CHAIRMAN 1
Professor Emeritus, 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
RICHARD H. DAVIDSON 3
Director
AgriBank, FCB
St. Paul, Minnesota
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
1999 K Street, N.W.
Fourth Floor
Washington, DC 20006
Phone: 202.872.7700 or
800.879.3276
Website: www.farmermac.com
ANNUAL MEETING OF STOCKHOLDERS
Thursday, May 4, 2017
8:00 a.m.
The Town Hall
1999 K Street, N.W.
First Floor
Washington, DC 20006
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.
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.
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 1
Founder and President
Sara Faivre Executive Mentoring
Cameron, Texas
DOUGLAS A. FELTON 3
President and Owner
D&T Enterprises of Minnesota, Inc.
Northfield, Minnesota
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, District of Columbia
CLARK B. MAXWELL 2
Chief Operating Officer
Chatham Financial Corp.
Kennett Square, Pennsylvania
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 Presidential Appointee
2 Director elected by holders of Class A Common Stock
3 Director elected by holders of Class B Common Stock
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: www.continentalstock.com
CERTIFICATION
Farmer Mac has included as Exhibit 31 to its
Annual Report on Form 10-K for the fiscal year
ended December 31, 2016 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 2016 Annual
Report on Form 10-K, as filed with the SEC on
March 9, 2017, from Farmer Mac’s website or
by contacting Farmer Mac’s Secretary at Farmer
Mac’s Corporate Headquarters.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDED
DECEMBER 31, 2016
PricewaterhouseCoopers LLP
1800 Tysons Boulevard
McLean, VA 22102
NON-GAAP PERFORMANCE MEASURES
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS TO CORE EARNINGS
($ in thousands)
2016
2015
2014
2013
Net income attributable to common stockholders
$64,152
$47,371
$38,251
$71,833
Less reconciling items:
Unrealized gains/(losses) on financial derivatives and hedging activities
13,628
10,924
(9,968)
45,181
Unrealized gains/(losses) on trading securities
Amortization of premiums/discounts and deferred gains on assets
consolidated at fair value
Net effects of settlements on agency forward contracts
Loss on retirement of Farmer Mac II LLC Preferred Stock
Income tax effect related to reconciling items
Core Earnings
1,460
(849)
1,699
-
(5,577)
$53,791
1,220
1,596
(820)
(1,319)
(14,549)
(19,180)
(607)
(8,147)
(1,675)
159
-
882
-
7,966
(9,122)
$46,975
$53,047
$54,892
RECONCILIATION OF NET INTEREST INCOME AND NET YIELD TO NET EFFECTIVE SPREAD
($ in thousands)
2016
2015
2014
2013
Net interest income/yield
140,274
0.90%
125,807
0.88%
70,347
0.51%
109,453
0.89%
Net effects of consolidated trusts
(4,302)
0.03%
(3,078)
0.01%
(2,086)
-
(964)
-
Dollars
Yield
Dollars
Yield
Dollars
Yield
Dollars
Yield
Expense related to undesignated
financial derivatives
Amortization of premiums/discounts on
assets consolidated at fair value
Interest expense related to securities
purchased under agreements to resell
and securities sold, not yet purchased
(11,480)
-0.08%
(5,649)
-0.04%
(9,425)
-0.07%
(12,325)
-0.10%
610
0.01%
2,300
0.02%
15,482
0.12%
20,418
0.17%
-
-
-
-
39,375
0.35%
-
-
Net Effective Spread
125,102
0.86%
119,380
0.87%
113,693
0.91%
116,582
0.96%
inside back cover
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 uses the following non-GAAP financial
measures: core earnings, core earnings per share,
and net effective spread. Farmer Mac uses these
non-GAAP measures to measure corporate economic
performance and develop financial plans because,
in management’s view, they are useful alternative
measures in understanding Farmer Mac’s economic
performance, transaction economics, and business
trends. These non-GAAP financial measures that
Farmer Mac uses may not be comparable to similarly
labeled non-GAAP financial measures disclosed
by other companies. Farmer Mac’s disclosure of
these non-GAAP financial measures 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.
Core earnings and core earnings per share principally
differ from net income attributable to common
stockholders and earnings per common share,
respectively, by excluding the effects of fair value
fluctuations. These fluctuations are not expected
to have a cumulative net impact on Farmer Mac’s
financial condition or results of operations reported
in accordance with GAAP if the related financial
instruments are held to maturity, as is expected.
Core earnings and core earnings per share also differ
from net income attributable to common stockholders
and earnings per common share, respectively, 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.
Farmer Mac uses net effective spread to measure the
net spread Farmer Mac earns between its interest-
earning assets and the related net funding costs
of these assets. Net effective spread differs from
net interest income and net interest yield because
it excludes: (1) the amortization of premiums and
discounts on assets consolidated at fair value that are
amortized as adjustments to yield in interest income
over the contractual or estimated remaining lives of
the underlying assets; and (2) interest income and
interest expense related to consolidated trusts with
beneficial interests owned by third parties, which are
presented on Farmer Mac’s consolidated balance
sheets as “Loans held for investment in consolidated
trusts, at amortized cost.”
1999 K Street, N.W.
Fourth Floor
Washington, DC 20006
Phone: 202.872.7700 or
800.879.3276
www.farmermac.com
Financing Rural America ®