UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): July 23, 2003
Federal Agricultural Mortgage Corporation
----------------------------------------------
(Exact name of registrant as specified in its charter)
Federally chartered
instrumentality of
the United States 0-17440 52-1578738
------------------------ ------------ -----------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1133 21st Street, N.W., Suite 600, Washington, D.C. 20036
----------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 872-7700
No change
(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99 Press release dated July 23, 2003.
Item 9. Regulation FD Disclosure.
On July 23, 2003, the Registrant issued a press release to announce the
Registrant's financial results for second quarter 2003. A copy of the press
release is attached to this report as Exhibit 99 and is incorporated herein by
reference.
The information set forth above is being furnished under "Item 9.
Regulation FD Disclosure" and "Item 12. Results of Operations and Financial
Condition" and shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
section. The information in this Form 8-K shall not be incorporated by reference
in any other filing under the Securities Exchange Act of 1934 or the Securities
Act of 1933 except as shall be expressly set forth by specific reference to this
Form 8-K in such a filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FEDERAL AGRICULTURAL
MORTGAGE CORPORATION
By: /s/ Jerome G. Oslick
---------------------
Name: Jerome G. Oslick
Title: Vice President - General Counsel
Dated: July 23, 2003
EXHIBIT INDEX
Exhibit No. Description Page No.
99 Press Release Dated July 23, 2003 5
Exhibit 99
Farmer Mac
NEWS
FOR IMMEDIATE RELEASE CONTACT
July 23, 2003 Jerome Oslick
202-872-7700
Farmer Mac Reports Solid Second Quarter
Washington, D.C. -- The Federal Agricultural Mortgage Corporation (Farmer
Mac, NYSE: AGM and AGM.A) today announced net income for second quarter 2003 of
$8.4 million, or $0.70 per diluted share, compared to $8.4 million and $0.70 per
diluted share for first quarter 2003 and $6.3 million and $0.52 per diluted
share for second quarter 2002.
Farmer Mac President and Chief Executive Officer Henry D. Edelman stated,
"Farmer Mac's second quarter performance is continuing evidence of its financial
strength as it fulfills its Congressionally-mandated mission to serve America's
farmers, ranchers and rural homeowners.
"We are pleased with our GAAP earnings. In addition, Farmer Mac focuses on
its `core earnings,' which, as described in this press release, is a non-GAAP
measure developed by Farmer Mac to present net income available to common
stockholders less the after-tax effects of FAS 133 and less the after-tax net
gains and losses on the repurchase of debt. Core earnings were $5.8 million for
second quarter 2003, compared to $5.9 million for first quarter 2003 and $5.8
million for second quarter 2002.
"We are encouraged by the continuing improvements in the performance of the
portfolio of loans underlying our guarantees and long-term standby purchase
commitments ("LTSPCs"). As of June 30, 2003, there were $51.3 million of 90-day
delinquencies representing 1.06 percent of the portfolio, versus $50.3 million
and 1.12 percent as of June 30, 2002. Segments of the portfolio have aged into
their expected peak loss years and Farmer Mac has enhanced its credit management
efforts directed toward problem loan servicing and loss mitigation. These
efforts have been successful in leveling the amount of 90-day delinquencies in
Farmer Mac's portfolio.
"Farmer Mac's financial performance was solid and progress continued on
loan servicing. New business volume improved to $322.3 million for second
quarter 2003, compared to $267.5 million for first quarter 2003, but still
remained light compared to prior quarters. We believe this is traceable to lower
demand in the agricultural mortgage market, affecting all agricultural mortgage
lenders, and to residual effects of adverse publicity based on misinformation
about Farmer Mac disseminated in 2002. Nonetheless, lender interest in Farmer
Mac has produced a steady stream of new volume in the form of Farmer Mac I and
II individual loan purchases and additions to existing LTSPC arrangements, and
prospects for larger portfolio transactions continue to exist. Second quarter
2003 financial results demonstrate the long-term stability of Farmer Mac's
business model, based in large part on the annuity-like income from guarantee
and commitment fees.
"We believe that Farmer Mac's financial condition and business prospects
are strong and that core earnings per share in 2003 will exceed core earnings of
$1.90 per share in 2002."
GAAP (generally accepted accounting principles in the United States) net
income, the most comparable GAAP measure to core earnings, is heavily influenced
by unrealized gains or losses in the value of financial derivatives used to
hedge interest rate risk in Farmer Mac's mortgage portfolio. Since the value of
those financial derivatives is driven by fluctuations in interest rates that
cannot reliably be projected, Farmer Mac is unable to provide an outlook for
GAAP net income for 2003.
Non-GAAP Performance Measures
Farmer Mac reports its financial results in accordance with GAAP. In
addition to GAAP measures, Farmer Mac presents certain non-GAAP performance
measures. Farmer Mac uses these non-GAAP performance measures to develop
financial plans, to measure corporate performance and to set incentive
compensation. They provide relatively less volatile financial information and
are a more accurate representation of Farmer Mac's economic performance,
transaction economics and business trends. Investors and the investment analyst
community have previously used similar measures to evaluate Farmer Mac's
historical and future performance. Farmer Mac's disclosure of non-GAAP measures
is not intended to replace GAAP information but, rather, to supplement it.
One such non-GAAP measure is core earnings, which Farmer Mac developed to
present net income available to common stockholders less the after-tax effects
of Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("FAS 133"), and less the
after-tax net gains and losses on the repurchase of debt that, prior to January
1, 2003, were reported as extraordinary items. Due in part to the favorable
effects of FAS 133, Farmer Mac's GAAP net income available to common
stockholders increased to $8.4 million for second quarter 2003, compared to $6.3
million for second quarter 2002, while its less volatile core earnings were $5.8
million for both second quarter 2003 and second quarter 2002. The reconciliation
of GAAP net income available to common stockholders to core earnings is
presented in the following table:
Reconciliation of GAAP Net Income Available to Common Stockholders to Core Earnings
------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
---------------------- ----------------------- ----------------------- ----------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
---------------------- ----------------------- ----------------------- ----------------------
(in thousands, except per share amounts)
Per Per Per Per
Diluted Diluted Diluted Diluted
Share Share Share Share
---------- ---------- ---------- ----------
GAAP net income available
to common stockholders $ 8,366 $ 0.70 $ 6,286 $ 0.52 $ 16,790 $ 1.40 $ 13,493 $ 1.12
Less the effects of FAS 133:
Gains and (Losses) on financial
derivatives and trading
assets, net of tax 2,521 0.21 (149) (0.01) 4,963 0.41 (4) -
Benefit from non-amortization
of premium payments
on financial derivatives,
net of tax 81 0.01 101 0.01 162 0.02 202 0.02
Less gains and on the
repurchase of debt previously
reported as extraordinary items,
net of tax - - 583 0.04 - - 2,203 0.18
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Core earnings $ 5,764 $ 0.48 $ 5,751 $ 0.48 $ 11,665 $ 0.97 $ 11,092 $ 0.92
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Later in this release, Farmer Mac provides additional information about the
impact of FAS 133, which increased net income by $2.6 million in second quarter
2003.
Net Interest Income
Net interest income, which does not include guarantee fees for loans
purchased prior to April 1, 2001 (the effective date of Statement of Financial
Accounting Standards No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities ("FAS 140")), was $9.2
million for second quarter 2003, compared to $9.5 million for first quarter 2003
and $8.9 million for second quarter 2002. The net interest yield was 89 basis
points for second quarter 2003, compared to 95 basis points for first quarter
2003 and 93 basis points for second quarter 2002. The effects of FAS 140 for
second quarter 2003, first quarter 2003 and second quarter 2002 were the
reclassification of guarantee fee income as interest income in the amount of
approximately $1.1 million (10 basis points), $1.1 million (11 basis points) and
$0.7 million (7 basis points), respectively. The net interest yields for second
quarter 2003, first quarter 2003 and second quarter 2002 included the benefits
of yield maintenance payments of 11 basis points, 14 basis points and 7 basis
points, respectively. For second quarter 2003, the effects of yield maintenance
payments on net income and diluted earnings per share were $0.8 million and
$0.06 per diluted share, respectively, compared to $0.9 million and $0.07 per
diluted share for first quarter 2003 and $0.4 million and $0.04 per diluted
share for second quarter 2002.
Guarantee and Commitment Fees
Guarantee and commitment fees were $5.1 million for second quarter 2003,
compared to $5.1 million for first quarter 2003 and $4.7 million for second
quarter 2002. The year-to-year increase in guarantee and commitment fees
reflects an increase in the average balance of outstanding guarantees and
commitments. As discussed above, for second quarter 2003, $1.1 million of
guarantee fee income was reclassified as interest income in accordance with FAS
140, compared to $1.1 million for first quarter 2003 and $0.7 million for second
quarter 2002.
Operating Expenses
Compensation and employee benefits for second quarter 2003 were $1.5
million, compared to $1.4 million for first quarter 2003 and $1.3 million for
second quarter 2002. General and administrative expenses for second quarter 2003
were $1.2 million, compared to $1.2 million for first quarter 2003 and $1.5
million for second quarter 2002. Regulatory fees for second quarter 2003 were
$0.4 million, compared to $0.4 million for first quarter 2003 and $0.2 million
for second quarter 2002. Discussion of the provision for losses is covered under
the topic of "Credit" later in this release.
Capital
Farmer Mac's core capital totaled $202.9 million as of June 30, 2003,
compared to $192.4 million as of March 31, 2003 and $176.0 million as of June
30, 2002. The regulatory methodology for calculating core capital excludes the
effects of Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities ("FAS 115") and FAS 133, which
are reported on Farmer Mac's balance sheet as accumulated other comprehensive
income/(loss). Farmer Mac's core capital as of June 30, 2003 exceeded the
statutory minimum capital requirement of $138.8 million by $64.1 million.
Farmer Mac is required to meet the capital standards of a risk-based
capital stress test promulgated by the Farm Credit Administration ("RBC test").
The RBC test determines the amount of regulatory capital (core capital plus
allowances for losses) Farmer Mac would need to maintain positive capital during
a ten-year stress period while incurring credit losses equivalent to the highest
historical two-year agricultural mortgage loss rates and an interest rate shock
at the lesser of 600 basis points or 50 percent of the ten-year U.S. Treasury
rate. The RBC test then adds to the resulting capital requirement an additional
30 percent for management and operational risk.
As of June 30, 2003, the RBC test generated an estimated risk-based capital
requirement of $50.4 million. Farmer Mac's regulatory capital of $224.8 million
exceeded that amount by approximately $174.4 million. The $7.5 million decrease
in the risk-based capital requirement from $57.9 million as of March 31, 2003
was a result of changes in the interest rate environment and the ageing of
Farmer Mac's loan portfolio. Farmer Mac is required to hold capital at the
higher of the statutory minimum capital requirement or the amount required by
the RBC test.
Credit
As of June 30, 2003, Farmer Mac's 90-day delinquencies totaled $51.3
million, representing 1.06 percent of the principal balance of all loans held
and loans underlying post-Farm Credit System Reform Act ("1996 Act") Farmer Mac
I Guaranteed Securities and LTSPCs, compared to $50.3 million and 1.12 percent,
respectively, as of June 30, 2002. The 90-day delinquencies are loans 90 days or
more past due, in foreclosure, restructured after delinquency, or in bankruptcy,
excluding loans performing under either their original loan terms or a
court-approved bankruptcy plan.
As of June 30, 2003, non-performing assets totaled $80.2 million,
representing 1.64 percent of the principal balance of all loans held and loans
underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs, compared
to $65.2 million (1.45 percent) as of June 30, 2002. Non-performing assets are
loans 90 days or more past due, in foreclosure, restructured after delinquency,
in bankruptcy, or real estate owned ("REO"). As described in more detail below,
the year-to-year increase in the principal balance of non-performing assets
reflects a group of loans that, though the borrowers on those loans have filed
for bankruptcy protection, are current under the original loan terms or a
court-approved bankruptcy plan and certain segments of the portfolio that are
cycling through foreclosure and into the asset category real estate owned, which
completes the involuntary loan liquidation process.
The difference between the non-performing asset and 90-day delinquency
measures is the exclusion of the real estate owned asset category and loans
performing in bankruptcy from 90-day delinquencies. Unlike the non-performing
asset measure, the 90-day delinquency measure takes into account only those
outstanding loans on which borrowers are not current on their required payments
and does not include loans that have been liquidated.
From quarter to quarter, Farmer Mac anticipates that 90-day delinquencies
and non-performing assets will fluctuate, both in dollars and as a percentage of
the outstanding portfolio, with higher levels likely at the end of the first and
third quarters of each year corresponding to the semi-annual (January 1st and
July 1st) payment characteristics of most Farmer Mac I loans.
As each cohort year of loan originations in Farmer Mac's portfolio of loans
held and loans underlying LTSPCs and post-1996 Act Farmer Mac I Guaranteed
Securities has entered, and started to exit, its peak default years, segments of
the portfolio have begun to exhibit characteristics of a mature portfolio. For
example, during 2001 and 2002, the portfolio had its first loans cycle through
foreclosure and into the real estate owned asset category, which completes the
involuntary loan liquidation process. As of June 30, 2003, Farmer Mac had $17.2
million of real estate owned, compared to $8.2 million as of March 31, 2003 and
$2.5 million as of June 30, 2002. The commodity and geographic diversification
of the REO properties is consistent with the commodity and geographic
diversification of the non-performing assets. Analysis of the portfolio by its
geographic distribution indicates that non-performing assets, including REO,
have been and are expected to be most prevalent in the loans concentrated in
geographic areas and commodities that do not receive significant government
support.
Prior to acquisition of property securing a loan, Farmer Mac devises a
liquidation strategy that results in either an immediate sale or retention
pending later sale. Farmer Mac evaluates these and other alternatives based upon
the economics of the transactions and requirements of local law. Under the law
in many states, borrowers whose mortgages have been foreclosed have a period of
time, called a "redemption period," during which they have a right to re-acquire
their property. In such cases, the redemption period results in a restriction on
the marketability of the property and the most economically advantageous
disposition strategy often includes a holding period beyond the expiration of
the redemption period. As of June 30, 2003, approximately one-third of Farmer
Mac's REO was subject to borrower redemption.
Farmer Mac analyzes each loan in its portfolio of non-performing assets to
measure impairment, based on the fair value of the underlying collateral. As of
June 30, 2003, Farmer Mac's analysis of its $80.2 million of non-performing
assets and their updated appraisals or other collateral valuations indicated
that $68.3 million of non-performing assets were adequately collateralized. On
the remaining $11.9 million of non-performing assets, loan-by-loan analyses
considering updated collateral values indicated individual collateral shortfalls
that totaled $2.8 million. Farmer Mac allocated specific allowances in that
amount to those loans. As of June 30, 2003, after the allocation of specific
allowances to under-collateralized loans, Farmer Mac had additional non-specific
or general allowances of $19.1 million relating to inherent probable losses in
the portfolio, with the total allowance for losses at $21.9 million.
During second quarter 2003, Farmer Mac charged off $1.3 million in losses
against the allowance for losses. In certain collateral liquidation scenarios,
Farmer Mac may recover amounts previously charged off or incur additional
losses, if liquidation proceeds vary from previous estimates. Farmer Mac's total
provision for losses was $2.1 million for second quarter 2003, compared to $2.1
million for first quarter 2003 and $2.0 million for second quarter 2002. As of
June 30, 2003, Farmer Mac's allowance for losses totaled $21.9 million, or 45
basis points on the outstanding post-1996 Act loans, compared to $21.1 million
(44 basis points) as of March 31, 2003 and $18.3 million (41 basis points) as of
June 30, 2002. Based on Farmer Mac's analysis of its entire portfolio,
individual loan-by-loan analyses, and loan collection experience, Farmer Mac
believes that specific and inherent probable losses are covered adequately by
its allowance for losses.
Interest Rate Risk
Farmer Mac measures its interest rate risk through several tests, including
the sensitivity of Market Value of Equity ("MVE") and Net Interest Income
("NII") to uniform or "parallel" yield curve shocks. As of June 30, 2003, a
parallel increase of 100 basis points across the entire U.S. Treasury yield
curve would have increased MVE by 1.5 percent, while a parallel decrease of 100
basis points would have decreased MVE by 2.9 percent. As of June 30, 2003, a
parallel increase of 100 basis points would have increased Farmer Mac's NII, a
shorter-term measure of interest rate risk, by 6.6 percent, while a parallel
decrease of 100 basis points would have decreased NII by 7.0 percent. Farmer Mac
also measures the sensitivity of both MVE and NII to a variety of non-parallel
interest rate shocks. As of June 30, 2003, Farmer Mac's MVE and NII were less
sensitive to those non-parallel shocks than to parallel shocks. Farmer Mac's
duration gap, another measure of interest rate risk, was minus 1.2 months.
The economic effects of derivatives, including interest rate swaps, are
included in the MVE, NII and duration gap analyses. Farmer Mac uses derivatives
principally as an alternative to traditional debt issuance in which it enters
into contracts to pay fixed rates of interest and receive floating rates of
interest from counterparties. These "floating-to-fixed interest rate swaps" are
used to adjust the characteristics of Farmer Mac's short-term debt to match more
closely the cash flow and duration characteristics of its longer-term mortgage
assets, thereby reducing interest rate risk, and also to derive an overall lower
effective fixed-rate cost of borrowing than would otherwise be available in the
conventional debt market. As of June 30, 2003, Farmer Mac had $703.0 million
notional amount of floating-to-fixed interest rate swaps for terms ranging from
one month to 15 years. In addition, Farmer Mac enters into interest rate swaps
to adjust the characteristics of its assets and liabilities to match more
closely, on a cash flow and duration basis, thereby reducing interest rate risk.
As of June 30, 2003, Farmer Mac had $478.7 million of such interest rate swaps.
Farmer Mac uses derivatives for hedging purposes, not for speculative
purposes. All of Farmer Mac's derivative transactions are conducted through
standard, collateralized agreements that limit Farmer Mac's potential credit
exposure to any counterparty. As of June 30, 2003, Farmer Mac had no
uncollateralized net exposure to any counterparty.
Derivatives and Financial Statement Effects of FAS 133
Farmer Mac accounts for its derivatives under FAS 133, which became
effective January 1, 2001. The implementation of FAS 133 resulted in significant
accounting changes to both the consolidated statements of operations and balance
sheets. During second quarter 2003, the increase in net after-tax income
resulting from FAS 133 was $2.6 million and the net after-tax decrease in
accumulated other comprehensive income was $6.5 million. During first quarter
2003, the increase in net after-tax income resulting from FAS 133 was $2.5
million and the net after-tax increase in accumulated other comprehensive income
was $1.1 million. For second quarter 2002, the decreases in net after-tax income
and accumulated other comprehensive income resulting from FAS 133 were $0.1
million and $14.6 million, respectively. Accumulated other comprehensive income
is not a component of Farmer Mac's regulatory core capital.
Forward-Looking Statements
In addition to historical information, this release includes
forward-looking statements that reflect management's current expectations for
Farmer Mac's future financial results, business prospects and business
developments. Management's expectations for Farmer Mac's future necessarily
involve assumptions, estimates and the evaluation of risks and uncertainties.
Various factors could cause actual events or results to differ materially from
those expectations. Some of the important factors that could cause Farmer Mac's
actual results to differ materially from management's expectations include
uncertainties regarding: (1) the rate and direction of development of the
secondary market for agricultural mortgage loans; (2) the possible establishment
of additional statutory or regulatory restrictions on Farmer Mac that could
hamper its growth or restrain its profitability; (3) substantial changes in
interest rates, agricultural land values, commodity prices, export demand for
U.S. agricultural products and the general economy; (4) protracted adverse
weather, market or other conditions affecting particular geographic regions or
particular commodities related to agricultural mortgage loans backing Farmer Mac
I Guaranteed Securities or under LTSPCs; (5) legislative or regulatory
developments or interpretations of Farmer Mac's statutory charter that could
adversely affect Farmer Mac or the ability of certain lenders to participate in
its programs or the terms of any such participation; (6) Farmer Mac's access to
the debt markets at favorable rates and terms; (7) the possible effect of the
risk-based capital requirement, which could, under certain circumstances, be in
excess of the statutory minimum capital level; (8) the outcome of the pending
review of Farmer Mac by the General Accounting Office; (9) borrower preferences
for fixed-rate agricultural mortgage indebtedness; (10) lender interest in
Farmer Mac credit products and the Farmer Mac secondary market; (11) competitive
pressures in the purchase of agricultural mortgage loans and the sale of
agricultural mortgage-backed and debt securities; or (12) the effects on the
agricultural economy of any changes in federal assistance for agriculture. Other
factors are discussed in Farmer Mac's Annual Report on Form 10-K for the year
ended December 31, 2002, as filed with the Securities and Exchange Commission
("SEC") on March 27, 2003 and Farmer Mac's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003, as filed with the SEC on May 15, 2003. The
forward-looking statements contained herein represent management's expectations
as of the date of this release. Farmer Mac undertakes no obligation to release
publicly the results of any revisions to the forward-looking statements included
herein to reflect events or circumstances after today, or to reflect the
occurrence of unanticipated events, except as otherwise mandated by the SEC.
Farmer Mac is a stockholder-owned instrumentality of the United States
chartered by Congress to establish a secondary market for agricultural real
estate and rural housing mortgage loans and to facilitate capital market funding
for USDA-guaranteed farm program and rural development loans. Farmer Mac's Class
C non-voting and Class A voting common stocks are listed on the New York Stock
Exchange under the symbols AGM and AGM.A, respectively. Additional information
about Farmer Mac (as well as the Form 10-K and Form 10-Q referenced above) is
available on Farmer Mac's website at www.farmermac.com. The conference call to
discuss Farmer Mac's second quarter 2003 earnings and this press release will be
webcast on Farmer Mac's website beginning at 11:00 a.m. eastern time, Thursday,
July 24, 2003, and an audio recording of that call will be available for two
weeks on Farmer Mac's website after the call is concluded.
* * * *
Federal Agricultural Mortgage Corporation
Consolidated Balance Sheets
(in thousands)
June 30, December 31, June 30,
2003 2002 2002
------------------ ------------------ -------------------
(unaudited) (audited) (unaudited)
Assets:
Cash and cash equivalents $ 620,581 $ 723,800 $ 479,528
Investment securities 976,330 830,409 977,474
Farmer Mac Guaranteed Securities 1,543,039 1,608,507 1,655,356
Loans 1,005,403 966,123 837,102
Allowance for loan losses (3,102) (2,662) (4,672)
------------------ ------------------ -------------------
Loans, net 1,002,301 963,461 832,430
Real estate owned, net of valuation allowance
of $0.6 million, $0.6 million and zero 17,241 5,031 2,489
Financial derivatives 4,751 317 721
Interest receivable 56,171 65,276 63,076
Guarantee and commitment fees receivable 4,648 5,938 5,051
Deferred tax asset 10,106 9,666 7,261
Prepaid expenses and other assets 32,679 10,510 9,459
------------------ ------------------ -------------------
Total assets $ 4,267,847 $ 4,222,915 $ 4,032,845
------------------ ------------------ -------------------
Liabilities and Stockholders' Equity:
Notes payable:
Due within one year $ 2,863,112 $ 2,895,746 $ 2,661,792
Due after one year 1,026,864 985,318 1,086,671
------------------ ------------------ -------------------
Total notes payable 3,889,976 3,881,064 3,748,463
Financial derivatives 98,433 94,314 35,035
Accrued interest payable 29,349 29,756 30,744
Accounts payable and accrued expenses 29,227 17,453 19,997
Reserve for losses 18,169 16,757 13,655
------------------ ------------------ -------------------
Total liabilities 4,065,154 4,039,344 3,847,894
Preferred stock 35,000 35,000 35,000
Common stock at par 11,790 11,638 11,629
Additional paid-in capital 84,504 82,527 82,380
Accumulated other comprehensive income/(loss) (203) (407) 8,932
Retained earnings 71,602 54,813 47,010
------------------ ------------------ -------------------
Total Stockholders' Equity 202,693 183,571 184,951
------------------ ------------------ -------------------
Total Liabilities and Stockholders' Equity $ 4,267,847 $ 4,222,915 $ 4,032,845
------------------ ------------------ -------------------
Federal Agricultural Mortgage Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------------ -------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
Interest income:
Investments and cash equivalents $ 8,574 $ 10,556 $ 17,751 $ 20,882
Farmer Mac Guaranteed Securities 18,688 22,541 38,200 45,560
Loans 13,288 10,394 26,137 14,193
------------ -------------- ------------- -------------
Total interest income 40,550 43,491 82,088 80,635
Interest expense 31,395 34,641 63,481 64,315
------------ -------------- ------------- -------------
Net interest income 9,155 8,850 18,607 16,320
Provision for loan losses (1,416) - (2,624) -
------------ -------------- ------------- -------------
Net interest income after provision for loan losses 7,739 8,850 15,983 16,320
Guarantee and commitment fees 5,111 4,723 10,205 9,290
Gains/(Losses) on financial derivatives
and trading assets 3,879 (230) 7,635 (6)
Gains on the repurchase of debt - 897 - 3,389
Miscellaneous income 138 368 389 760
------------ -------------- ------------- -------------
Total revenues 16,867 14,608 34,212 29,753
------------ -------------- ------------- -------------
Expenses:
Compensation and employee benefits 1,465 1,324 2,905 2,580
General and administrative 1,213 1,499 2,404 2,592
Regulatory fees 382 197 765 393
Provision for losses 697 2,022 1,592 4,038
------------ -------------- ------------- -------------
Total operating expenses 3,757 5,042 7,666 9,603
------------ -------------- ------------- -------------
Income before income taxes 13,110 9,566 26,546 20,150
Income tax expense 4,184 2,944 8,636 6,321
------------ -------------- ------------- -------------
Net income 8,926 6,622 17,910 13,829
Preferred stock dividends (560) (336) (1,120) (336)
------------ -------------- ------------- -------------
Net income available to common stockholders $ 8,366 $ 6,286 $ 16,790 $ 13,493
------------ -------------- ------------- -------------
Earnings per common share:
Basic earnings per common share $ 0.71 $ 0.55 $ 1.44 $ 1.17
Diluted earnings per common share $ 0.70 $ 0.52 $ 1.40 $ 1.12
Federal Agricultural Mortgage Corporation
Supplemental Information
The following tables present quarterly and annual information regarding
loan purchases, guarantees and LTSPCs, outstanding guarantees and LTSPCs and
non-performing assets and 90-day delinquencies.
Farmer Mac Purchases, Guarantees and Commitments
----------------------------------------------------------------------------------------
Farmer Mac I
------------------------------
Loans and
Guaranteed
Securities LTSPCs Farmer Mac II Total
--------------- -------------- ---------------- -------------
(in thousands)
For the quarter ended:
June 30, 2003 $ 65,615 $ 179,025 $ 77,636 $ 322,276
March 31, 2003 59,054 166,574 41,893 267,521
December 31, 2002 62,841 395,597 38,714 497,152
September 30, 2002 58,475 140,157 37,374 236,006
June 30, 2002 551,690 280,904 57,769 890,363
March 31, 2002 74,875 338,821 39,154 452,850
December 31, 2001 62,953 237,292 51,056 351,301
September 30, 2001 75,135 246,472 42,396 364,003
June 30, 2001 85,439 499,508 57,012 641,959
March 31, 2001 48,600 49,695 47,707 146,002
For the year ended:
December 31, 2002 747,881 1,155,479 173,011 2,076,371
December 31, 2001 272,127 1,032,967 198,171 1,503,265
Farmer Mac Outstanding Loans, Guarantees and Commitments (1)
------------------------------------------------------------------------------------------------------
Farmer Mac I
----------------------------------------------
Post-1996 Act
-------------------------------
Loans and
Guaranteed Pre-1996
Securities LTSPCs Act Farmer Mac II Total
--------------- --------------- -------------- ---------------- ----------------
(in thousands)
As of:
June 30, 2003 $ 2,108,180 $2,790,480 $ 28,057 $ 668,899 $ 5,595,616
March 31, 2003 2,111,861 2,732,620 29,216 650,152 5,523,849
December 31, 2002 2,168,994 2,681,240 31,960 645,790 5,527,984
September 30, 2002 2,127,460 2,407,469 35,297 630,452 5,200,678
June 30, 2002 2,180,948 2,336,886 37,873 617,503 5,173,210
March 31, 2002 1,655,485 2,126,485 41,414 592,836 4,416,220
December 31, 2001 1,658,716 1,884,260 48,979 595,156 4,187,111
September 30, 2001 1,605,160 1,731,861 58,813 608,944 4,004,778
June 30, 2001 1,572,800 1,537,061 65,709 579,251 3,754,821
Outstanding Balance of Loans Held and Loans Underlying
On-Balance Sheet Post-1996 Act Farmer Mac Guaranteed Securities
--------------------------------------------------------------------------------------------------------
Fixed Rate
(10-yr. Wtd. 5-to-10-Year 1-Month-to-3-Year
Avg. Term) ARMs and Resets ARMs Total
------------------ ----------------- ---------------------- ----------------
(in thousands)
As of:
June 30, 2003 $ 889,839 $ 1,064,824 $ 511,700 $ 2,466,363
March 31, 2003 880,316 1,057,310 515,910 2,453,536
December 31, 2002 1,003,434 981,548 494,713 2,479,695
September 30, 2002 1,000,518 934,435 498,815 2,433,768
June 30, 2002 1,016,997 892,737 516,892 2,426,626
March 31, 2002 751,222 797,780 350,482 1,899,484
December 31, 2001 764,115 790,948 302,169 1,857,232
Non-performing Assets and 90-Day Delinquencies
---------------------------------------------------------------------------------------------------------------------------------
Outstanding
Post-1996 Act Less:
Loans, Non- REO and
Guarantees and Performing Performing 90-Day
LTSPCs Assets (2) Percentage Bankruptcies Delinquencies (3) Percentage
------------------ -------------- ------------- --------------- --------------------- -------------
(dollars in thousands)
As of:
June 30, 2003 $ 4,875,059 $ 80,169 1.64% $ 28,883 $ 51,286 1.06%
March 31, 2003 4,820,887 94,822 1.97% 18,662 76,160 1.58%
December 31, 2002 4,821,634 75,308 1.56% 17,094 58,214 1.21%
September 30, 2002 4,506,330 91,286 2.03% 11,460 79,826 1.77%
June 30, 2002 4,489,735 65,196 1.45% 14,931 50,265 1.12%
March 31, 2002 3,754,171 87,097 2.32% 7,903 79,194 2.11%
December 31, 2001 3,428,176 58,279 1.70% 3,743 54,536 1.59%
September 30, 2001 3,318,796 71,686 2.16% 5,183 66,503 2.00%
June 30, 2001 3,089,460 53,139 1.72% 4,274 48,865 1.58%
March 31, 2001 2,562,374 67,134 2.62% 2,154 64,980 2.54%
Distribution of Post-1996 Act
Non-performing Assets by Original LTV Ratio
as of June 30, 2003
---------------------------------------------------------------
(dollars in thousands)
Non-performing
Original LTV Ratio Assets Percentage
----------------------- ------------------- ----------------
0.00% to 40.00% $ 10,106 13%
40.01% to 50.00% 10,788 13%
50.01% to 60.00% 26,421 33%
60.01% to 70.00% 29,897 37%
70.01% to 80.00% 2,264 3%
80.01% + 693 1%
------------------- ----------------
Total $ 80,169 100%
------------------- ----------------
Distribution of Post-1996 Act Non-performing Assets
by Loan Origination Date
as of June 30, 2003
------------------------------------------------------------------------------
(dollars in thousands)
Loan Outstanding
Origination Non-performing Guarantees
Date Assets and LTSPCs Percentage
---------------- ------------------ -------------------- ------------------
Before 1994 $ 4,076 $ 643,596 0.63%
1994 610 157,836 0.39%
1995 3,452 148,556 2.32%
1996 12,552 347,339 3.61%
1997 15,846 397,069 3.99%
1998 14,725 672,812 2.19%
1999 12,846 714,419 1.80%
2000 9,123 425,374 2.14%
2001 6,570 609,014 1.08%
2002 - 579,485 0.00%
2003 369 179,559 0.21%
------------------ -------------------- ------------------
Total $ 80,169 $ 4,875,059 1.64%
------------------ -------------------- ------------------
(1) Pre-1996 Act loans back securities that are supported by unguaranteed
subordinated interests representing approximately 10 percent of the balance
of the loans. Farmer Mac assumes 100 percent of the credit risk on
post-1996 Act loans. Farmer Mac II loans are guaranteed by the U.S.
Department of Agriculture.
(2) Non-performing assets are loans 90 days or more past due, in foreclosure,
restructured after delinquency, in bankruptcy (including loans performing
under either their original loan terms or a court-approved bankruptcy plan)
or real estate owned.
(3) 90-day delinquencies are loans 90 days or more past due, in foreclosure,
restructured after delinquency, or in bankruptcy, excluding loans
performing under either their original loan terms or a court-approved
bankruptcy plan.