Investor Conference Call Fiscal Year 2015 Third Quarter February 28, 2015 April 17, 2015 at 10:00 am ET
2 Forward-Looking Statements This presentation contains forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, and are generally identified by our use of words such as intend, plan, may, should, will, project, estimate, anticipate, believe, expect, continue, potential, opportunity and similar expressions, whether in the negative or affirmative. All statements about future expectations or projections are forwardlooking statements. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, actual results and performance could materially differ. Factors that could cause future results to vary from current expectations are included in our annual and quarterly periodic reports previously filed with the U.S. Securities and Exchange Commission. Except as required by law, we undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date on which the statement is made.
Financial Performance J. Andrew Don, SVP and Chief Financial Officer
4 Non-GAAP Financial Measures During our discussion today we will review certain non- GAAP adjusted financial measures. Please refer to our Form 10-Q for the fiscal quarter ended February 28, 2015, as filed with the SEC and as posted on the CFC website, for a discussion of why we believe our adjusted measures provide useful information in analyzing CFC s financial performance and the reconciliation to the most comparable GAAP measures.
5 Operating Results For the nine months ended February 28, $ % (dollar amounts in thousands) 2014 2015 Change Change Interest Income $719,057 $711,266 ($7,791) -1% Interest Expense (496,464) (471,677) 24,787-5% Derivative Cash Settlements (54,944) (63,377) (8,433) 15% Adjusted Net Interest Income 167,649 176,212 8,563 5% (Provision)Recovery for Loan Losses (3,161) 3,475 6,636-210% Other Non-Interest Income (Loss) 6,501 (13,810) (20,311) -312% Non-Interest Expense (56,070) (55,441) 629-1% Income Tax Expense (2,045) (100) 1,945-95% Adjusted Net Income 112,874 110,336 (2,538) -2% Derivative Forward Value 98,925 (159,832) (258,757) -262% Net Income (Loss) $211,799 ($49,496) ($261,295) -123% Adjusted TIER (1) 1.20 1.21 0.01 1% (1) Adjusted TIER = (Adjusted Interest Expense + Adjusted Net Income) Adjusted Interest Expense. Adjusted Interest Expense is a sum of Interest Expense and Deriv ativ e Cash Settlements.
6 Balance Sheet Summary (dollar amounts in thousands) 05/31/14 02/28/15 Change % Change Cash and Cash Equivalents $338,715 $298,771 ($39,944) -12% Time Deposits $550,000 $385,000 (165,000) -30% Investments 55,177 85,423 30,246 55% Gross Loans to Members 20,476,642 21,212,092 735,450 4% Less: Allowance for Loan Losses )56,429( )53,114( 3,315-6% Loans to Members, Net $20,420,213 $21,158,978 $738,765 4% Foreclosed Assets 245,651 207,154 (38,497) -16% Derivative Assets 209,759 113,231 (96,528) -46% Other Assets 413,228 400,364 (12,864) -3% Total Assets $22,232,743 $22,648,921 $416,178 2% Short-term Debt 4,099,331 3,213,860 (885,471) -22% Long-term Debt 14,513,284 15,861,011 1,347,727 9% Subordinated Deferrable Debt 400,000 400,000 0 0% Members' Subordinated Certificates 1,612,227 1,526,452 (85,775) -5% Total Debt Outstanding $20,624,842 $21,001,323 $376,481 2% Derivative Liabilities 388,208 451,938 63,730 16% Other Liabilities 249,319 311,156 61,837 25% Total Equity 970,374 884,504 (85,870) -9% Total Liabilities & Equity $22,232,743 $22,648,921 $416,178 2% Guarantees $1,064,822 $987,833 (76,989) -7% Key Financial Metrics Adjusted Total Equity $3,161,463 $3,150,363 ($11,100) 0% Adjusted Debt-to-Equity Ratio 5.90 6.10 0.20 3%
7 Loan Portfolio Overview 73% 74% 89% 90% 90% 90%
Debt Funding Sources 51% from Capital Markets 21% from Guaranteed Underwriter Program 19% from Member- Owners 9% from Farmer Mac Debt Instrument Maturity Range 5/31/2014 Amount ($000s) % 2/28/2015 Amount ($000s) % Daily liquidity fund Demand note $ 486,501 2.4% $ 451,435 2.1% Member commercial paper 1 to 270 days $ 858,389 4.2% $ 778,909 3.7% Member select notes 30 to 270 days $ 548,610 2.7% $ 569,405 2.7% Member medium-term notes Up to 30 years $ 498,262 2.4% $ 619,116 2.9% Member capital securities Up to 35 years $ 267,560 1.3% $ 219,420 1.0% Membership Certificates Up to 100 years $ 644,944 3.1% $ 644,881 3.1% Loan and Guarantee Certificates Up to 100 years $ 699,724 3.4% $ 662,151 3.2% Total - Members $ 4,003,990 19.4% $ 3,945,317 18.8% Guaranteed Underwriter Program Up to 20 years $ 4,299,000 20.8% $ 4,412,036 21.0% Notes payable (Farmer Mac) Up to 30 years $ 1,667,505 8.1% $ 1,919,911 9.1% Other Up to 30 years $ 52,535 0.3% $ 49,036 0.2% Total - Other $ 6,019,040 29.2% $ 6,380,983 30.4% Bank bid notes Up to 3 months $ 20,000 0.1% $ - 0.0% Non-member commercial paper 1 to 270 days $ 1,973,557 9.6% $ 1,184,952 5.6% Non-member medium-term notes Up to 30 years $ 2,228,041 10.8% $ 2,310,551 11.0% Collateral trust bonds Up to 30 years $ 5,980,214 29.0% $ 6,779,520 32.3% Subordinated deferrable debt Up to 30 years $ 400,000 1.9% $ 400,000 1.9% Total - Capital Markets $ 10,601,812 51.4% $ 10,675,023 50.8% Total Debt Outstanding $ 20,624,842 100.0% $ 21,001,323 100.0% 8
Monthly Debt Maturity Schedule Data as of 4/9/2015 Note: Our members traditionally roll over their MTN investments at maturity 9
Liquidity Management At February 28, 2015, CFC had the following projected liquidity sources available: CFC is a well-known seasoned issuer and believes it has adequate access to both long-term and short-term funding options. Total Liquidity Total Short-Term Debt Maturities = 1.8x Total Liquidity Total Nonmember Related Short-Term Debt Maturities = 3.6x (1) Subject to market conditions for debt issued by Farmer Mac. (2) Scheduled LT loan amortization and other repayments over the next 12 months (3) Short-term debt maturities include long-term debt maturities over the next 12 months 10
11 Liquidity Position at 2/28/2015 ($ in Mils.) LT Loan Amortization & Repayment Projected Sources of Liquidity Other Loan Repayments Debt Issuance - LT Debt Total Sources of Liquidity Projected Uses of Liquidity LT Debt Maturities Other Loan Advances LT Loan Advances Total Uses of Liquidity Cumulative Excess Sources Over Uses of Liquidity(1) Feb15 $684 May15 $267 $111 $880 $1,258 $460 $0 $947 $1,407 535 Aug15 282 0 300 582 164 0 401 565 552 Nov15 253 0 1,000 1,253 845 0 425 1,270 535 Feb16 267 0 280 547 253 0 288 541 541 May16 229 0 550 779 576 0 199 775 545 Aug16 249 0 100 349 63 0 284 347 547 Totals $1,547 $111 $3,110 $4,768 $2,361 $0 $2,544 $4,905 (1) Cumulative excess sources over uses of liquidity includes cash and time deposits. (2) The dates presented are intended to reflect the end of each quarterly period through the quarter ending August 31, 2016.
FY15 Major Financing Activities Revolvers October 2014 Amended and extended the credit facilities: consolidated the three credit facilities into two, extended the maturity date of one facility to 2019 and increased the total commitment by $196 million to $3.42 billion MTN/FRN September 2014 reopened $250 million 3-year FRNs at L+25 bps. Issued additional $25 million in the same security increasing the total amount outstanding to $275 million April 2015 Issued $200 million 3-year FRNs at L+35 bps CTBs November 2014 Issued a $300 million 5-year CTB @ 2.30% December 2014 Redeemed early a $400 million 3-year 1% CTB due February 2015 January 2015 Issued a $400 million 5-year CTB @ 2.00% and a $500 million 10-year CTB @ 2.85% GUP November 2014 Closed a new facility for $250 million commitment, bringing the total Guaranteed Underwriter Program (GUP) commitment to $874 million February 2015 Advanced $124 million @ 2.896% for a fixed maturity of 20 years February 2015 Submitted application for additional $500 million commitment Farmer Mac June 2014 Refinanced a maturing $95 million Farmer Mac note for seven years @ 3ML+55 bps August 2014 Refinanced $75 million of maturing $175 million Farmer Mac note for five years @ 3ML + 35 bps October 2014 Issued a $80 million 30-year Farmer Mac note @ 3ML + 65 bps December 2014 Issued a $200 million 6-year Farmer Mac note @ 3ML + 40 bps January 2015 Executed an amendment to increase the total commitment by $600 million to $4.5 billion and extend the maturity date by four years to January 2020. February 2015 Issued a $200 million 30-year Farmer amortizing Mac note @ 3ML + 75 bps 12
Key Takeaways Credit Ratings Moody s: P-1 (Short-Term); A1 (Senior Secured); A2 (Senior Unsecured); Stable Outlook (Reaffirmed on 11/24/14) S&P: A-1 (Short-Term); A (Senior Secured); A (Senior Unsecured); Stable Outlook (Outlook revised on 1/20/15) Management s long-term incentives are tied to CFC credit ratings High-Quality Portfolio 98% of loans are to rural electric systems 90% of loans are on a senior secured basis Only 0.01% of loans in the portfolio are classified as nonperforming Stable Member Investment & Strong Member Support 19% of funding is from member-owners Historically low reinvestment risk on member investments Liquidity and Funding Diversity Maintain dealer commercial paper balance at the $1 $1.25 billion level 1.8 times liquidity coverage ratio over the next 12 months 3.6 times liquidity coverage ratio over the next 12 months, excluding short-term debt maturities related to member investments Total equity at $885 million at 2/28/2015, a 71% increase from $519 million at 5/31/2009 13