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 19, 2001
Federal Agricultural Mortgage Corporation
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(Exact name of registrant as specified in its charter)
Federally chartered
instrumentality of
the United States 0-17440 52-1578738
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
919 18th Street, N.W., Suite 200, Washington, DC 20006
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 872-7700
No Change
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(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 19, 2001.
Item 9. Regulation FD Disclosure.
On July 19, 2001, the Registrant issued a press release announcing the
Registrant's financial results for second quarter 2001. The press release is
filed as Exhibit 99 hereto and incorporated herein by reference.
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/ Nancy E. Corsiglia
---------------------------------
Name: Nancy E. Corsiglia
Title: Vice President - Finance
Dated: July 20, 2001
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
99 Press Release Dated July 19, 2001 5
Exhibit 99
FOR IMMEDIATE RELEASE CONTACT
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July 19, 2001 Tom Clark
202-872-7700
Farmer Mac Posts Record Quarterly Results
Operating Earnings Per Share Up 45% for Second Quarter
Washington, D.C. -- The Federal Agricultural Mortgage Corporation (Farmer
Mac, NYSE: AGM and AGMA) today announced diluted operating earnings per share of
$0.32 for second quarter 2001, a new record reflecting a 45 percent increase
over second quarter 2000 diluted earnings per share of $0.22. Operating income
was $3.7 million for the quarter and $6.9 million year-to-date, compared to $2.5
million and $4.8 million for the same periods in 2000. Operating income,
revenue, and earnings per share are measures that exclude the cumulative effect
of the change in accounting principles recognized on January 1, 2001 under
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"), and its ongoing effects during
2001, in order to present measures consistent with prior presentations. Net
income for second quarter 2001 did not differ materially from operating income.
Net income for first quarter 2001, including the cumulative and ongoing effects
of FAS 133 during the quarter, was $2.2 million or $0.18 per share.
Farmer Mac President and Chief Executive Officer Henry D. Edelman observed,
"During the quarter, Farmer Mac entered into several Long-Term Standby Purchase
Commitment ("LTSPC") transactions, totaling approximately $500 million, while
the daily volume of loan purchases in both the Farmer Mac I cash window and
Farmer Mac II programs continued at an increasing pace, which delivered a record
level of combined quarterly guarantee volume. At the end of the quarter,
outstanding guarantee volume for all Farmer Mac programs was at a new high of
$3.8 billion, up 50 percent over the year-earlier level. The growth in Farmer
Mac's revenue stream of guarantee fee and net interest income, as well as
controlled expenses, carried Farmer Mac to record earnings."
"Our flexibility to meet the changing and growing needs of agricultural
lenders, through our current products and those under development, has allowed
Farmer Mac to expand its market share and make additions to its core business
that should provide a stable revenue stream for years to come. While Farmer Mac
is certainly pleased to report a record level of business volume for the
quarter, the timing and size of our transactions will continue to vary.
Accordingly, our focus for measuring Farmer Mac's success remains on
year-to-year growth in the cumulative portfolio of guarantees - not the
shorter-term timing of those transactions. Operationally, we continue to stress
the prudent management of our assets, growth of our market presence, and
delivery of value to America's farmers and ranchers, our participating sellers,
and our stockholders."
"Taking fair account of the current stress in the agricultural economy, we
continue to believe Farmer Mac is on track to meet or exceed market analyst
projections as of the date of this release for its financial performance in
2001."
"Farmer Mac is especially pleased to note that, as of June 30, 2001, its
Class C common stock has been added to the Russell 3000(R) Equity Index, a
leading investment ranking of U.S. stocks compiled by the Frank Russell Company.
The Russell 3000(R) index lists the 3,000 largest U.S. stocks and ranks them by
market capitalization. The addition of the Farmer Mac Class C common stock was
part of the annual reconstitution of the Russell indices."
Net Interest Income
Net interest income was $6.4 million for second quarter 2001 and $11.9
million for the year-to-date, compared to $4.2 million and $8.9 million for the
same periods in 2000. The net interest yield, exclusive of guarantee fees, was
0.82 percent for second quarter 2001, compared to 0.67 percent for first quarter
2001 and 0.61 percent for second quarter 2000. Net interest income and net
interest yield for second quarter 2001 benefited from one-time increases
resulting from yield maintenance payments received in conjunction with
prepayments on loans. Excluding these items, net interest income and the net
interest yield for second quarter 2001 remained strong at $6.1 million and 0.78
percent, respectively, as a result of the continued emphasis on sound financial
management strategies.
Other Income
Other income, which is comprised of guarantee fee income and miscellaneous
income, totaled $3.8 million for second quarter 2001 and $7.4 million for
year-to-date 2001, compared to $2.7 million and $5.5 million, respectively, in
2000. Guarantee fee income, the largest component of other income, was $3.7
million for second quarter 2001 and $7.1 million for year-to-date 2001, compared
to $2.8 million for second quarter 2000 and $3.4 million for first quarter 2001.
The relative increases in guarantee fees reflect an increase in the average
balance of outstanding guarantees. Miscellaneous income was $116,000 for second
quarter 2001, compared to a loss of $10,000 and income of $166,000 for second
quarter 2000 and first quarter 2001, respectively.
Operating Expenses
During second quarter 2001, operating expenses totaled $2.8 million,
compared to $2.1 million for second quarter 2000 and $2.6 million for first
quarter 2001. Operating expenses as a percentage of operating revenues edged
down to 28 percent, compared to 30 percent and 29 percent, respectively, in the
prior periods.
Credit
As of June 30, 2001, Farmer Mac I loans purchased or guaranteed after the
enactment in 1996 of changes to Farmer Mac's statutory charter ("post-1996 Act
loans") that were 90 days or more past due, in foreclosure or in bankruptcy
represented 1.72 percent of the principal balance of all post-1996 Act loans,
compared to 1.25 percent as of June 30, 2000 and 2.62 percent as of March 31,
2001. (Farmer Mac assumes 100 percent of the credit risk on post-1996 Act loans;
pre-1996 Act loans are supported by mandatory 10 percent subordinated interests
that mitigate Farmer Mac's credit exposure.) Farmer Mac anticipates fluctuations
in the delinquency rate from quarter to quarter, with higher levels likely to be
reported at the end of the first and third quarters of each year due to the
semiannual payment characteristics of most Farmer Mac loans. The year-over-year
increase is reflective of liquidity issues in the agricultural sector in general
and a decline in real estate values related to commodities that do not directly
benefit from direct governmental payments to the agricultural sector.
Total direct governmental payments to the agricultural sector for 2000, as
estimated by the U.S. Department of Agriculture ("USDA"), were a record $22.9
billion, resulting in net cash farm income levels during 2000 significantly
above the decade (1991-2000) average. The federal income support is not
allocated equally to producers of all agricultural commodities, however, and
farmers and ranchers producing agricultural commodities that receive significant
federal income support should have greater liquidity than those who do not
receive payments. USDA currently forecasts net cash farm income for 2001 to be
below the decade average. That forecast, however, does not take into account
additional support for agriculture that was included in the federal budget. It
is generally expected that at least $5.5 billion of additional federal support
will be provided to the agricultural sector in 2001, although the specific
amount has not yet been determined.
As of June 30, 2001, the weighted-average original loan-to-value ratio for
all post-1996 Act loans was 50.3 percent. Although Farmer Mac expects to
recognize losses on the existing post-1996 Act delinquent loans, management
believes those losses are adequately covered by the reserve for losses, based on
the value of the collateral securing the loans. Management further believes that
the delinquent loans have current loan-to-value ratios that adequately protect
against losses at liquidation, with the exception of certain loans that are
secured in whole or in part by depreciable assets or by real estate planted with
commodities that do not directly benefit from direct governmental payments to
the agricultural sector. Those instances may result in Farmer Mac incurring
losses upon loan liquidation, such as the $600,000 in losses recognized on
delinquent loans during second quarter 2001. Farmer Mac's provision for
principal and interest losses was $1.4 million for second quarter 2001, compared
to $1.1 million for second quarter 2000 and $1.4 million for first quarter 2001.
As of June 30, 2001, Farmer Mac's net reserve for losses totaled $13.2 million,
or 0.43 percent of outstanding post-1996 Act loans, compared to $12.4 million
(0.49 percent) as of March 31, 2001 and $9.0 million (0.46 percent) as of June
30, 2000.
Provision for Income Taxes
The provision for income taxes totaled $2.1 million for second quarter 2001
and $3.7 million year-to-date, compared to $1.4 million and $2.7 million for the
same periods in 2000. Farmer Mac's effective tax rate for each quarter was
approximately 35.5 percent.
Capital
Farmer Mac's statutory core capital totaled $110.6 million as of June 30,
2001, compared to $101.2 million as of December 31, 2000 and $104.8 million as
of March 31, 2001. The core capital balance as of June 30, 2001 exceeded Farmer
Mac's statutory minimum capital requirement by approximately $7.3 million.
On April 12, 2001, the Farm Credit Administration ("FCA") issued its final
risk-based capital regulation for Farmer Mac. The regulation became effective on
May 23, 2001, and Farmer Mac will be required to meet the risk-based capital
standards by May 23, 2002. As noted in our June 12, 2000 comment letter to the
FCA on the proposed regulation, Farmer Mac believes that certain significant
aspects of the risk-based capital regulation do not comply with the authorizing
statute. The economic model incorporated in the regulation is extremely complex,
and we are still analyzing its potential effects. We have requested that FCA
assist us in understanding the operation of the regulation and the model. If
unchanged, the regulation - particularly those provisions that suggest to us
that the FCA went outside the authorizing statute - could lead to an increase in
the capital requirement for certain newly guaranteed off-balance sheet program
assets and so alter Farmer Mac's strategic plan for future growth. While we are
at this time uncertain whether the regulation, as issued, would alter that
strategic plan, we expect that any issues raised by the regulation will be
resolved in accordance with the authorizing statute before Farmer Mac is
required to meet the risk-based capital standards.
Average return on equity, excluding the effects of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities, and FAS 133, moved up to 13.8 percent for second quarter
2001, compared to 10.6 percent for second quarter 2000 and 12.3 percent for
first quarter 2001.
Financial Statement Effects of FAS 133
During second quarter 2001, the net after-tax charge against earnings
resulting from FAS 133 was $102,000, and the net after-tax increase to other
comprehensive income was $3.3 million. For first quarter 2001, the net after-tax
charge against earnings and the reduction to other comprehensive income were
$380,000 and $3.6 million, respectively. Management believes that reporting
financial results by reference to operating income, revenues, and earnings per
share (excluding the effects of FAS 133) provides a more accurate comparison of
Farmer Mac's financial performance to previous presentations.
Forward-Looking Statements
In addition to historical information, this release includes
forward-looking statements reflecting 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: (1)
uncertainties regarding the rate and direction of the development of the
secondary market for agricultural mortgage loans; (2) uncertainties in the
agricultural economy resulting from low commodity prices, weak demand for U.S.
agricultural products, and crop damage from natural disasters; (3) uncertainties
as to the intended operation of the risk-based capital standards promulgated by
FCA in the second quarter of 2001, which Farmer Mac is required to comply with
by May 23, 2002; and (4) the implementation of additional statutory or
regulatory restrictions applicable to Farmer Mac or restrictions on Farmer Mac's
investment authority. These and other factors are discussed in Farmer Mac's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, as filed
with the Securities and Exchange Commission on May 15, 2001. 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.
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 U.S. Department of Agriculture guaranteed farm program and rural
development loans. Farmer Mac's Class C and Class A common stocks are listed on
the New York Stock Exchange under the symbols AGM and AGMA, respectively.
Additional information about Farmer Mac (as well as the Form 10-Q referenced
above) is available on Farmer Mac's website at www.farmermac.com. An audio
recording of the conference call to discuss Farmer Mac's second quarter 2001
earnings and this press release will be available on Farmer Mac's website after
2 p.m. eastern time, Friday, July 20, 2001.
* * * *
Federal Agricultural Mortgage Corporation
Consolidated Balance Sheets
(in thousands)
June 30, December 31, June 30,
2001 2000 2000
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(unaudited) (audited) (unaudited)
Assets:
Cash and cash equivalents $ 473,546 $ 537,871 $ 372,458
Investment securities 890,065 836,757 903,205
Farmer Mac guaranteed securities 1,698,207 1,679,993 1,347,035
Loans 79,089 30,279 18,714
Financial derivatives 625 - -
Interest receivable 48,851 55,681 42,650
Guarantee fees receivable 4,594 5,494 3,944
Prepaid expenses and other assets 14,104 14,824 15,314
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Total assets $ 3,209,081 $ 3,160,899 $ 2,703,320
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Liabilities and stockholders' equity:
Notes payable:
Due within one year $ 2,280,276 $ 2,201,691 $ 1,832,888
Due after one year 759,544 767,492 741,251
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Total notes payable 3,039,820 2,969,183 2,574,139
Financial derivatives 14,767 - -
Accrued interest payable 22,121 20,852 19,616
Accounts payable and accrued expenses 8,508 26,880 7,138
Reserve for losses 13,180 11,323 8,958
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Total liabilities 3,098,396 3,028,238 2,609,851
Stockholders' equity 110,685 132,661 93,469
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Total liabilities and stockholders' equity $ 3,209,081 $ 3,160,899 $ 2,703,320
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Federal Agricultural Mortgage Corporation
Consolidated Statements of Operations
Quarter Ended Six Months Ended
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June 30, June 30, June 30, June 30,
2001 2000 2001 2000
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(in thousands, except per share amounts)
Interest income:
Investments and cash equivalents $ 17,148 $ 23,040 $ 38,236 $ 44,998
Farmer Mac guaranteed securities 28,481 23,398 57,221 45,092
Loans 740 506 1,343 1,746
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Total interest income 46,369 46,944 96,800 91,836
Interest expense 39,947 42,700 84,925 82,976
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Net interest income 6,422 4,244 11,875 8,860
Gains/(Losses) on financial derivatives
and trading assets (159) - (748) -
Other income:
Guarantee fees 3,669 2,755 7,097 5,337
Miscellaneous 116 (10) 282 172
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Total other income 3,785 2,745 7,379 5,509
----------------- ----------------- --------------- --------------
Total revenues 10,048 6,989 18,506 14,369
Expenses:
Compensation and employee benefits 1,496 1,065 2,733 2,316
Regulatory fees 245 151 468 301
General and administrative 1,107 882 2,252 1,889
----------------- ----------------- --------------- --------------
Total operating expenses 2,848 2,098 5,453 4,506
Provision for losses 1,394 1,057 2,777 2,374
----------------- ----------------- --------------- --------------
Total expenses 4,242 3,155 8,230 6,880
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Income before income taxes 5,806 3,834 10,276 7,489
Income tax provision 2,091 1,362 3,679 2,659
----------------- ----------------- --------------- --------------
Net income before cumulative effect 3,715 2,472 6,597 4,830
Cumulative effect of change
in accounting principles, net of tax - - (726) -
----------------- ----------------- --------------- --------------
Net income $ 3,715 $ 2,472 $ 5,871 $ 4,830
----------------- ----------------- -------------------------------
Earnings per share:
Basic earnings per share $ 0.33 $ 0.22 $ 0.52 $ 0.44
Diluted earnings per share $ 0.32 $ 0.22 $ 0.50 $ 0.43
Earnings per share excluding cumulative effect
of change in accounting principles:
Basic earnings per share $ 0.33 $ 0.22 $ 0.59 $ 0.44
Diluted earnings per share $ 0.32 $ 0.22 $ 0.57 $ 0.43
Operating earnings per share:*
Basic earnings per share $ 0.33 $ 0.22 $ 0.61 $ 0.44
Diluted earnings per share $ 0.32 $ 0.22 $ 0.59 $ 0.43
* operating earnings per share excludes the cumulative effect of FAS 133 and its ongoing effects during 2001.
Federal Agricultural Mortgage Corporation
Supplemental Information
The following tables present quarterly information regarding: loan purchases and
guarantees, outstanding guarantees, and delinquencies.
Farmer Mac Purchases and Guarantees
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Farmer Mac I
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Loans & AMBS LTSPC Farmer Mac II Total
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(in thousands)
For the quarter ended:
June 30, 2001 $ 85,439 $ 499,508 $ 57,012 $ 641,959
March 31, 2001 48,600 49,695 47,707 146,002
December 31, 2000 45,727 180,502 36,029 262,258
September 30, 2000 292,658 158,291 40,036 490,985
June 30, 2000 45,578 34,409 94,870 174,857
March 31, 2000 58,283 - 22,570 80,853
December 31, 1999 168,828 229,984 18,511 417,323
For the year ended:
December 31, 2000 442,246 373,202 193,505 1,008,953
December 31, 1999 568,236 637,685 116,148 1,322,069
Outstanding Guarantees (1)
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Farmer Mac I
---------------------------------------------
Post-1996 Act
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Loans & AMBS(2) LTSPC Pre-1996 Act Farmer Mac II Total Held in Portfolio(3)
------------------ ----------- -------------- --------------- ---------- ---------------------
(in thousands)
As of:
June 30, 2001 $1,572,800 $1,537,061 $ 65,709 $ 579,251 $3,754,821 $1,763,676
March 31, 2001 1,466,443 1,083,528 72,646 549,003 3,171,620 1,648,896
December 31, 2000 1,615,914 862,804 83,513 517,703 3,079,934 1,581,905
September 30, 2000 1,621,516 707,850 92,536 491,820 2,913,722 1,571,315
June 30, 2000 1,354,623 575,143 100,414 467,352 2,497,532 1,292,359
March 31, 2000 1,310,710 551,423 107,403 387,992 2,357,528 1,268,889
December 31, 1999 1,266,522 575,097 118,214 383,266 2,343,099 1,237,623
Farmer Mac I Delinquencies (4)
| Distribution of Post-1996
Post-1996 Pre-1996 | Act Delinquencies by
As of: Act Act Total | UPB as of June 30, 2001
------------------------------ --------------- | -------------------------------
| (original loan-to-value ratio)
June 30, 2001 1.72% 3.69% 1.77% | 0.00% to 40.00% 6%
March 31, 2001 2.62% 5.83% 2.72% | 40.01% to 50.00% 11%
December 31, 2000 1.25% 6.49% 1.44% | 50.01% to 60.00% 37%
September 30, 2000 1.80% 5.55% 1.96% | 60.01% to 70.00% 46%
June 30, 2000 1.25% 4.12% 1.41% | 70.01% to 80.00% 0%
March 31, 2000 1.45% 4.89% 1.65% | ----------
Total 100%
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(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) Periods prior to June 30, 2001 include only AMBS.
(3) Included in total outstanding guarantees.
(4) Includes loans 90 days or more past due, in foreclosure or in bankruptcy.