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): January 27, 2004
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
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(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 January 27, 2004.
Item 9. Regulation FD Disclosure.
On January 27, 2004, the Registrant issued a press release to announce the
Registrant's financial results for fourth 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: January 27, 2004
EXHIBIT INDEX
Exhibit No. Description Page No.
----------- ----------- --------
99 Press Release Dated January 27, 2004 5
Exhibit 99
FARMER MAC
NEWS
FOR IMMEDIATE RELEASE CONTACT
January 27, 2004 Jerome Oslick
202-872-7700
Farmer Mac Reports Fourth Quarter Results
2003 GAAP Earnings of $2.08 per Share
Washington, D.C. -- The Federal Agricultural Mortgage Corporation (Farmer
Mac, NYSE: AGM and AGM.A) today reported U.S. GAAP net income for fourth quarter
2003 of $4.9 million or $0.40 per diluted share, compared to $3.3 million or
$0.28 per diluted share for third quarter 2003 and $2.8 million or $0.23 per
diluted share for fourth quarter 2002. For the year ended December 31, 2003, net
income was $25.1 million or $2.08 per diluted share, compared to $21.3 million
or $1.77 per diluted share for the year ended December 31, 2002.
Farmer Mac reports its "core earnings," a non-GAAP measure, in addition to
GAAP earnings. That measure was developed by Farmer Mac to present net income
available to common stockholders less the after-tax effects of unrealized gains
and losses on financial derivatives resulting from the application of the
derivative accounting standards, and less the after-tax net gains and losses on
the repurchase of debt.
Farmer Mac President and Chief Executive Officer Henry D. Edelman stated,
"Core earnings were $5.8 million or $0.47 per diluted share for fourth quarter
2003, compared to $5.5 million or $0.46 per diluted share for third quarter 2003
and $5.9 million or $0.49 per diluted share for fourth quarter 2002. For the
year ended December 31, 2003, core earnings were $23.0 million or $1.91 per
diluted share, compared to $22.9 million or $1.90 per diluted share for the year
ended December 31, 2002. Farmer Mac's financial results reflect the fundamental
strength of its business model as it fulfills its Congressionally-mandated
mission to serve America's farmers, ranchers and rural homeowners.
"We are pleased by the continued improvements in the performance of the
portfolio of loans underlying our guarantees and LTSPCs. As of December 31,
2003, 90-day delinquencies in Farmer Mac's portfolio were at their lowest levels
in more than two years, as a result of Farmer Mac's ongoing credit risk
management discussed later in this release, aided by increasing strength in the
U.S. agricultural economy. As of December 31, 2003, those delinquencies totaled
$29.6 million, representing 0.59 percent of the portfolio, down from $58.2
million and 1.21 percent as of December 31, 2002, and $54.5 million and 1.59
percent as of December 31, 2001.
"Continued lender interest in Farmer Mac produced new Farmer Mac I and II
business volume through loan purchases and additions to existing long-term
standby purchase commitments ("LTSPCs"). New business volume was $288.2 million
for fourth quarter 2003, bringing total volume for the year to $1.2 billion.
Recent business activity has been affected adversely by slower loan growth in
the agricultural mortgage market and increased regulatory pressure on
government-sponsored enterprises, including Farmer Mac.
"Marketing initiatives Farmer Mac launched last quarter are generating
promising business opportunities for 2004. New and expanded business
relationships, including a strategic alliance, product enhancements and new
security structures, are underway. Based on these ongoing developments and on
improving credit quality, we believe that Farmer Mac's financial condition is
strong and expect that 2004 core earnings per diluted share will exceed the 2003
level by as much as 10 percent."
The GAAP measure most comparable to core earnings is net income available
to common stockholders. Unlike core earnings, however, the GAAP measure 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.
Because the value of those financial derivatives is driven by fluctuations in
interest rates that cannot reliably be predicted, Farmer Mac does not project
GAAP net income available to common stockholders.
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 the latter measures to develop financial plans, to
gauge corporate performance and to set incentive compensation. They more
accurately represent 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.
"Core earnings" is one such non-GAAP measure that Farmer Mac developed to
present net income available to common stockholders less: (a) the after-tax
effects of unrealized gains and losses on financial derivatives resulting from
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"), and (b) the after-tax net gains
and losses on the repurchase of debt that, prior to January 1, 2003, were
reported under GAAP as extraordinary items. Due in part to the effects of FAS
133, Farmer Mac's GAAP net income available to common stockholders increased to
$4.9 million for fourth quarter 2003, compared to $2.8 million for fourth
quarter 2002, while its core earnings were $5.8 million for fourth quarter 2003,
compared to $5.9 million for fourth 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 Twelve Months Ended
-------------------------------------------- -------------------------------------------
December 31, December 31, December 31, December 31,
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 $ 4,917 $ 0.40 $ 2,777 $ 0.23 $ 25,056 $ 2.08 $ 21,295 $ 1.77
Less the effects of FAS 133:
Unrealized gains/(losses)
on financial derivatives and
trading assets, net of tax
(974) (0.08) (1,887) (0.16) 1,720 0.14 (2,834) (0.23)
Benefit from non-amortization
of premium payments
on financial derivatives,
net of tax
76 0.01 82 0.01 317 0.03 382 0.03
Less gains/(losses) on the repurchase
of debt previously reported
as
extraordinary items, net of
tax - - (1,313) (0.11) - - 889 0.07
----------------------- ----------- ---------- ----------- ----------- ------------ ----------
Core earnings $ 5,815 $ 0.47 $ 5,895 $ 0.49 $ 23,019 $ 1.91 $ 22,858 $ 1.90
----------------------- ----------- ---------- ----------- ----------- ------------ ----------
Later in this release, Farmer Mac provides additional information about the
impact of FAS 133, which decreased GAAP net income available to common
stockholders by $0.9 million in fourth quarter 2003.
Net Interest Income
Net interest income, which does not include guarantee fees from loans
purchased and retained 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 $9.1 million for fourth quarter 2003, compared to $8.9 million for third
quarter 2003 and $9.5 million for fourth quarter 2002. The net interest yield
was 91 basis points for fourth quarter 2003, compared to 89 basis points for
third quarter 2003 and 96 basis points for fourth quarter 2002. The effects of
FAS 140 for fourth quarter 2003, third quarter 2003 and fourth quarter 2002
were, in each quarter, the reclassification of guarantee fee income as interest
income in the amount of approximately $1.1 million (11 basis points).
During third quarter 2003, the Chief Accountant at the U.S. Securities and
Exchange Commission ("SEC") provided additional guidance to all registrants
regarding the classification on the statement of operations of realized gains
and losses resulting from financial derivatives that are not in fair value or
cash flow hedge relationships. All registrants were requested to comply with
this guidance in future filings and to reclassify this activity for all prior
periods presented. As a result of the application of this additional guidance,
the net interest income and expense realized on financial derivatives that are
not in fair value or cash flow hedge relationships has been reclassified from
net interest income into gains and losses on financial derivatives and trading
assets. In each of fourth quarter 2003, third quarter 2003 and fourth quarter
2002, this reclassification resulted in a reduction of the net interest yield of
6 basis points, a reduction of 1 basis point and an increase of 8 basis points,
respectively.
The net interest yields for fourth quarter 2003, third quarter 2003 and
fourth quarter 2002 included the benefits of yield maintenance payments of 11
basis points, 11 basis points and 5 basis points, respectively. For fourth
quarter 2003, yield maintenance payments increased net income by $0.7 million or
$0.06 per diluted share, compared to $0.7 million or $0.06 per diluted share for
third quarter 2003 and $0.3 million or $0.03 per diluted share for fourth
quarter 2002.
Guarantee and Commitment Fees
Guarantee and commitment fees were $5.4 million for fourth quarter 2003,
compared to $5.1 million for third quarter 2003 and $5.1 million for fourth
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 fourth 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 third quarter 2003 and $1.1 million for fourth
quarter 2002.
Operating Expenses
Compensation and employee benefits for fourth quarter 2003 were $1.6
million, compared to $1.6 million for third quarter 2003 and $1.2 million for
fourth quarter 2002. The year-to-year increase was due, in large part, to
increased staffing levels for administrative activities and compliance with
regulatory requirements, including those of the Sarbanes-Oxley Act of 2002.
General and administrative expenses for fourth quarter 2003 were $1.0 million,
compared to $1.6 million for third quarter 2003 and $0.8 million for fourth
quarter 2002. The decrease from the level in third quarter 2003 to a level
consistent with the first two quarters of 2003 was due to higher levels of
professional fees incurred during third quarter 2003. For the year ended
December 31, 2003, general and administrative expenses were $5.0 million,
compared to $5.5 million for the year ended December 31, 2002.
Regulatory fees for fourth quarter 2003 were $0.9 million, compared to $0.4
million for third quarter 2003 and $0.4 million for fourth quarter 2002. The
increase was a result of two items. First, Farmer Mac's federal regulator, the
Farm Credit Administration ("FCA"), set its estimated regulatory assessment for
the year ending September 30, 2004 at $1.7 million, up from its $1.4 million
estimated assessment level for the year ended September 30, 2003. Second, in
December 2003, FCA advised Farmer Mac of an upward revision to its estimated
assessment for the fiscal year ended September 30, 2003, and issued an
additional assessment in the amount of $0.4 million.
Farmer Mac's net REO operating costs for fourth quarter 2003 were $0.3
million, resulting from operating revenues of $0.4 million and expenses of $0.7
million. Net REO operating costs in prior periods were nominal. Discussion of
the provision for losses is covered under the topic of "Credit" later in this
release.
Capital
Farmer Mac's core capital totaled $215.5 million as of December 31, 2003,
compared to $206.4 million as of September 30, 2003 and $184.0 million as of
December 31, 2002. The regulatory methodology for calculating core capital
excludes the effects on capital 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
December 31, 2003 exceeded the statutory minimum capital requirement of $142.0
million by $73.5 million.
Farmer Mac is required to meet the capital standards of a risk-based
capital stress test promulgated by FCA ("RBC test"). The RBC test determines the
amount of regulatory capital (core capital plus the allowance 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 December 31, 2003, the RBC test generated an estimated risk-based
capital requirement of $38.8 million, compared to the risk-based capital
requirement of $45.5 million as of September 30, 2003. Farmer Mac's regulatory
capital of $239.0 million as of December 31, 2003 exceeded the RBC requirement
by approximately $200.2 million. 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 December 31, 2003, Farmer Mac's 90-day delinquencies totaled $29.6
million, representing 0.59 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 $58.2 million (1.21 percent) as
of December 31, 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 December 31, 2003, non-performing assets totaled $67.6 million,
representing 1.35 percent of the principal balance of all loans held and loans
underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs, compared
to $75.3 million (1.56 percent) as of December 31, 2002. Non-performing assets
are loans 90 days or more past due, in foreclosure, restructured after
delinquency, in bankruptcy, or real estate owned ("REO"). The principal balance
of non-performing assets includes a group of loans that are current under the
original loan terms or a court-approved bankruptcy plan, though the borrowers on
those loans have filed for bankruptcy protection, and certain segments of the
portfolio that have cycled through foreclosure and into the REO asset category,
which completes the involuntary loan liquidation process.
The difference between the non-performing asset and 90-day delinquency
measures is the exclusion of REO 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 many Farmer Mac I loans.
As of December 31, 2003, Farmer Mac had $13.9 million of REO, compared to
$16.4 million as of September 30, 2003 and $5.0 million as of December 31, 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 geographic and commodity distribution indicates
that non-performing assets, including REO, have been and are expected to be most
prevalent in the loans 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 the
requirements of local law.
As of December 31, 2003, Farmer Mac analyzed the following three categories
of assets for impairment, based on the fair value of the underlying collateral:
(1) the $67.6 million of non-performing assets; (2) the $37.4 million of loans
for which Farmer Mac has adjusted the timing of borrowers' payment schedules
within the past three years, but still expects to collect all amounts due and
has not made economic concessions; and (3) the additional $65.3 million of
performing loans it suspects may have inherent credit issues. Those individual
assessments covered a total of $170.3 million of assets measured for impairment
against updated appraised values, other updated collateral valuations or
discounted values. Of the $170.3 million of assets analyzed, $152.1 million were
adequately collateralized. For the $18.2 million that were not adequately
collateralized, individual collateral shortfalls totaled $3.8 million.
Accordingly, Farmer Mac allocated specific allowances of $3.8 million to those
under-collateralized assets as of December 31, 2003. After the allocation of
specific allowances from the total allowance for losses of $23.5 million,
non-specific or general allowances and the contingent obligation for inherent
probable losses were $19.7 million.
During fourth quarter 2003, Farmer Mac charged off $1.7 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. During fourth
quarter 2003, Farmer Mac recovered $0.2 million of losses previously charged
off. Farmer Mac's total provision for losses was $2.2 million for fourth quarter
2003, compared to $2.1 million for third quarter 2003 and $2.1 million for
fourth quarter 2002. As of December 31, 2003, Farmer Mac's allowance for losses
and contingent obligation for probable losses totaled $23.5 million, or 47 basis
points of the outstanding balance of loans held and loans underlying post-1996
Act Farmer Mac I Guaranteed Securities and LTSPCs, compared to $22.7 million (47
basis points) as of September 30, 2003 and $20.0 million (42 basis points) as of
December 31, 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 its Market Value of Equity ("MVE") and Net Interest Income
("NII") to uniform or "parallel" yield curve shocks. As of December 31, 2003, a
parallel increase of 100 basis points across the entire U.S. Treasury yield
curve would have increased MVE by 0.4 percent, while a parallel decrease of 100
basis points would have had no effect on MVE. As of December 31, 2003, a
parallel increase of 100 basis points would have increased Farmer Mac's NII, a
shorter-term measure of interest rate risk, by 5.6 percent, while a parallel
decrease of 100 basis points would have decreased NII by 9.4 percent. Farmer
Mac's duration gap, another measure of interest rate risk, was minus 0.1 months
as of December 31, 2003.
The economic effects of derivatives, including interest rate swaps, are
included in the MVE, NII and duration gap analyses. As an alternative to
long-term fixed-rate debt issuance, Farmer Mac issues short-term debt and 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 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 December 31, 2003, Farmer Mac had $674.4 million
notional amount of floating-to-fixed interest rate swaps for terms ranging from
two months to 15 years. In addition, Farmer Mac enters into "fixed-to-floating"
interest rate swaps and "basis 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 December 31, 2003, Farmer Mac had
$591.9 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 December 31, 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 fourth quarter 2003, the decrease in net after-tax income
resulting from FAS 133 was $0.9 million and the net after-tax increase in
accumulated other comprehensive income was $11.0 million. During third quarter
2003, the decrease in net after-tax income resulting from FAS 133 was $2.2
million and the net after-tax increase in accumulated other comprehensive income
was $11.5 million. For fourth quarter 2002, the decreases in net after-tax
income and accumulated other comprehensive income resulting from FAS 133 were
$1.8 million and $16.9 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) borrower preferences for
fixed-rate agricultural mortgage indebtedness; (9) lender interest in Farmer Mac
credit products and the Farmer Mac secondary market; (10) competitive pressures
in the purchase of agricultural mortgage loans and the sale of agricultural
mortgage-backed and debt securities; (11) the effects on the agricultural
economy of any changes in federal assistance for agriculture; (12) possible
reaction in the financial markets to events involving government-sponsored
enterprises other than Farmer Mac; or (13) the rate of growth in agricultural
mortgage indebtedness. 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 SEC on
March 27, 2003 and Farmer Mac's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2003, as filed with the SEC on November 14, 2003. The
forward-looking statements contained in this release 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 in this release 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 fourth quarter 2003 earnings and this press release will be
webcast on Farmer Mac's website beginning at 11:00 a.m. eastern time, Wednesday,
January 28, 2004, 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)
December 31, December 31,
2003 2002
------------------- ------------------
(unaudited) (audited)
Assets:
Cash and cash equivalents $ 623,674 $ 723,800
Investment securities 1,064,782 830,409
Farmer Mac Guaranteed Securities 1,508,134 1,608,507
Loans 989,006 966,123
Allowance for loan losses (7,388) (2,662)
------------------- ------------------
Loans, net 981,618 963,461
Real estate owned, net of valuation allowance
of $0.2 million and $0.6 million 13,918 5,031
Financial derivatives 961 317
Interest receivable 58,819 65,276
Guarantee and commitment fees receivable 16,885 5,938
Deferred tax asset 10,891 9,666
Prepaid expenses and other assets 20,008 10,510
------------------- ------------------
Total Assets $ 4,299,690 $ 4,222,915
------------------- ------------------
Liabilities and Stockholders' Equity:
Notes payable:
Due within one year $ 2,799,384 $ 2,895,746
Due after one year 1,136,110 985,318
------------------- ------------------
Total notes payable 3,935,494 3,881,064
Financial derivatives 67,670 94,314
Accrued interest payable 26,342 29,756
Guarantee and commitment obligation 14,144 -
Accounts payable and accrued expenses 29,588 17,453
Reserve for losses 13,172 16,757
------------------- ------------------
Total Liabilities 4,086,410 4,039,344
Preferred stock 35,000 35,000
Common stock at par 12,054 11,638
Additional paid-in capital 88,652 82,527
Accumulated other comprehensive income/(loss) (2,295) (407)
Retained earnings 79,869 54,813
------------------- ------------------
Total Stockholders' Equity 213,280 183,571
------------------- ------------------
Total Liabilities and Stockholders' Equity $ 4,299,690 $ 4,222,915
------------------- ------------------
Federal Agricultural Mortgage Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
--------------------------- ---------------------------
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
------------ ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (audited)
Interest income:
Investments and cash equivalents $ 8,797 $ 10,101 $ 35,287 $ 42,629
Farmer Mac Guaranteed Securities 18,104 21,383 74,088 89,736
Loans 12,901 12,578 52,580 39,505
------------ ------------- ------------- -------------
Total interest income 39,802 44,062 161,955 171,870
Interest expense 30,668 34,557 124,664 132,771
------------ ------------- ------------- -------------
Net interest income 9,134 9,505 37,291 39,099
Provision for loan losses (1,930) (1,340) (7,944) (1,340)
------------ ------------- ------------- -------------
Net interest income after provision for loan losses 7,204 8,165 29,347 37,759
Guarantee and commitment fees 5,424 5,114 20,685 19,277
Gains/(Losses) on financial derivatives
and trading assets (939) (3,679) 2,714 (8,433)
Gains/(Losses) on the repurchase of debt - (2,021) - 1,368
Miscellaneous income 68 114 812 1,333
------------ ------------- ------------- -------------
Total revenues 11,757 7,693 53,558 51,304
------------ ------------- ------------- -------------
Expenses:
Compensation and employee benefits 1,634 1,238 6,121 5,142
General and administrative 1,019 774 4,969 5,522
Regulatory fees 857 383 2,005 1,172
REO operating costs, net 264 7 264 25
Provision for losses 258 808 581 6,883
------------ ------------- ------------- -------------
Total operating expenses 4,032 3,210 13,940 18,744
------------ ------------- ------------- -------------
Income before income taxes 7,725 4,483 39,618 32,560
Income tax expense 2,248 1,146 12,322 9,809
------------ ------------- ------------- -------------
Net income 5,477 3,337 27,296 22,751
Preferred stock dividends (560) (560) (2,240) (1,456)
------------ ------------- ------------- -------------
Net income available to common stockholders $ 4,917 $ 2,777 $ 25,056 $ 21,295
------------ ------------- ------------- -------------
Earnings per common share:
Basic earnings per common share $ 0.42 $ 0.24 $ 2.13 $ 1.83
Diluted earnings per common share $ 0.40 $ 0.23 $ 2.08 $ 1.77
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 LTSPCs
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Farmer Mac I
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Loans and
Guaranteed
Securities LTSPCs Farmer Mac II Total
--------------- -------------- --------------------------------
(in thousands)
For the quarter ended:
December 31, 2003 $ 25,148 $ 218,097 $ 44,971 $ 288,216
September 30, 2003 42,760 199,646 106,729 349,135
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, 2003 192,577 763,342 271,229 1,227,148
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
Outstanding Balance of Farmer Mac Loans, Guarantees and LTSPCs (1)
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Farmer Mac I
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Post-1996 Act
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Loans and
Guaranteed Pre-1996
Securities LTSPCs Act Farmer Mac II Total
--------------- -------------- -------------- ---------------- ----------------
(in thousands)
As of:
December 31, 2003 $ 2,693,280 $2,348,702 $ 24,734 $ 729,470 $ 5,796,186
September 30, 2003 (2) 2,721,775 2,174,182 25,588 720,584 5,642,129
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
Outstanding Balance of Loans Held and Loans Underlying
On-Balance Sheet Farmer Mac Guaranteed Securities
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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:
December 31, 2003 $ 860,874 $ 1,045,217 $ 542,024 $ 2,448,115
September 30, 2003 865,817 1,037,168 535,915 2,438,900
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
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Outstanding
Post-1996 Act Less:
Loans, Non- REO and
Guarantees and performing Performing 90-Day
LTSPCs Assets (3) Percentage Bankruptcies Delinquencies (4) Percentage
------------------ -------------- ------------- --------------- -------------------- --------------
(dollars in thousands)
As of:
December 31, 2003 $ 5,016,781 $ 67,590 1.35% $ 37,986 $ 29,604 0.59%
September 30, 2003 4,871,756 84,583 1.74% 37,442 47,141 0.98%
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 (5)
as of December 31, 2003
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(dollars in thousands)
Non-performing
Original LTV Ratio Assets Percentage
----------------------- ------------------- ----------------
0.00% to 40.00% $ 7,239 11%
40.01% to 50.00% 9,879 14%
50.01% to 60.00% 27,562 41%
60.01% to 70.00% 21,687 32%
70.01% to 80.00% 1,050 2%
80.01% + 173 0%
------------------- ----------------
Total $ 67,590 100%
------------------- ----------------
Distribution of Post-1996 Act Non-performing Assets
by Loan Origination Date
as of December 31, 2003
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(dollars in thousands)
Outstanding
Loan Loans,
Origination Non-performing Guarantees
Date Assets and LTSPCs Percentage
---------------- ---------------------- ------------------ -------------------
Before 1994 $ 2,328 $ 660,588 0.35%
1994 863 156,634 0.55%
1995 4,902 154,805 3.17%
1996 8,693 342,153 2.54%
1997 13,436 403,455 3.33%
1998 13,595 644,931 2.11%
1999 9,928 671,921 1.48%
2000 7,517 390,061 1.93%
2001 5,791 581,473 1.00%
2002 537 627,122 0.09%
2003 - 383,638 0.00%
---------------------- ------------------ -------------------
Total $ 67,590 $ 5,016,781 1.35%
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(1) Farmer Mac assumes 100 percent of the credit risk on post-1996 Act loans.
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 II loans are guaranteed by the U.S. Department of
Agriculture.
(2) The Loans and Guaranteed Securities and LTSPCs amounts reflect the
conversion of $722.3 million of existing LTSPCs to Guaranteed Securities
during third quarter 2003 at the request of a program participant.
(3) 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.
(4) 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.
(5) Original LTV ratio is calculated by dividing the loan principal balance at
the time of guarantee, purchase or commitment by the appraised value at the
date of loan origination or, when available, the updated appraised value at
the time of guarantee, purchase or commitment.