GSEs: Past, Present, and Future Focusing on the Farm Credit System March 26, 2009 Presented by: Mark Evans, CFA Executive Vice President Director of Investment Strategies 2009 Conference

Contents  GSE Overview & Background –Purpose & Importance of the GSEs –Implied Guarantee –Future – Options for the future  Federal Farm Credit System  Opportunities and Portfolio Management Today 2

Purpose & Importance of GSEs  Purpose –Improve efficiency of capital markets  Importance –Almost no mortgage financing is occurring outside the agencies today. –FHLB has been a critical and nearly irreplaceable source of funding for banks. –FFCB’s role in the farm & rural economy is equally important.  Concentration of agencies held by –Banks, thrifts, credit unions can buy GSE debt without limit (only prudence) –GSE debt represents sizable percentage of municipalities investments –GSE debt included in “government” bond funds  Need for GSE’s and their governmental support has been proven by this cycle 3

Implied Guarantee  Historic expectations  GSE’s nature & structures  Fannie / Freddie Conservatorship –Did not breach the implied guarantee  Future of implied guarantee is in question –Will investors accept that it is only implied? –Will the government accept the historic structure and relationships? 4

Future of the GSE’s and the Implied Guarantee  Significant issue for  Paulson said guarantees should be “explicit or non- existent”  Possible models to look at –SLMA privatization –Treasury support for Fannie/Freddie –Guarantee for fee –Greater regulatory control – utility model –Bring some GSEs under Federal Government completely –Separate out “guarantee” of mortgages from other functions 5

Managing a GSE Portfolio  Understand, Educate, Develop Policies  Diversification among GSEs Big Four –Fannie Mae –Freddie Mac –Federal Home Loan Bank –Federal Farm Credit Bank  Diversifying among structures / portfolio optimization 6

Overview of Federal Farm Credit System  Created by an Act of Congress (1916)  Mission - to provide sound, dependable funding for American agriculture  Cooperative system owned by its borrowers  Regulated and examined by the Farm Credit Administration (FCA), an independent agency in the Executive Branch of the US Government  Jurisdiction of Senate and House Ag Committees (not Banking Committees)  Significantly less leverage than the other major GSEs  Strong financial performance 7

Source: Bloomberg and the companies

Federal Farm Credit Debt  Issued by the System Banks on a joint and several basis  Ratings for Systemwide Debt Securities: –Aaa/P-1 rating by Moody’s –AAA/A-1+ rating by S&P –AAA/F1+ by Fitch  Interest is generally exempt from state, local and municipal income taxes 9

Loans Source: Federal Farm Credit Bank 10

Loan Portfolio Diversification Source: Federal Farm Credit Bank 11

Net Income 12

Capital Ratios 13

Investments Source: Federal Farm Credit Bank 14

Systemwide Debt Securities Outstanding Source: Federal Farm Credit Bank 15

Designated Bonds Source: Federal Farm Credit Bank 16

Additional Farm Credit Resources  Bloomberg FFCB  Web Page  Finance Desk  Glenn Doran, Managing Director  Regina Gill, VP, Investor Relations  Webpage Investor Relations includes –March 2009 Investor Presenation –12/31/08 Annual Statement –more 17

Additional GSE Resource 18

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5yr/2yr Callable Yields 21

All Spreads Remain Historically Wide 22

Holding Period Performance Comparison 5yr/3mo vs 5yr Bullet 23

Holding Period Performance Comparison 5yr/3mo vs Fed Funds 24

INTENDED FOR INSTITUTIONAL INVESTORS ONLY. The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. Interest rate swaps and derivatives are offered and sold via Vining Sparks Interest Rate Products, LLC. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC. 25