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): March 16, 2006
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
2.02.
Results of Operations and Financial Condition.
On
March
16, 2006, the Registrant issued a press release to announce the Registrant’s
financial results for fourth quarter 2005 and a conference call to discuss
those
results and the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2005. A copy of the press release is attached to this report as
Exhibit
99
and is
incorporated herein by reference.
Item
9.01. Financial Statements and Exhibits.
(a) Not
applicable.
(b) Not
applicable.
(c) Exhibits:
|
99
|
Press
release dated March 16, 2006.
|
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: March
16,
2006
EXHIBIT
INDEX
Exhibit
No. Description Page
No.
99 Press
Release Dated March 16, 2006
5
Exhibit
99
NEWS
FOR IMMEDIATE RELEASE
CONTACT
March
16,
2006
Mary
Waters
202-872-7700
Farmer
Mac Reports Annual and
Fourth
Quarter 2005 Results
Washington,
D.C. — The Federal Agricultural Mortgage Corporation (Farmer Mac, NYSE: AGM and
AGM.A) today reported U.S. GAAP net income for the year ended 2005 and fourth
quarter 2005. For the year ended December 31, 2005, GAAP net income was
$27.3 million or $2.37 per diluted share, compared to $28.2 million or
$2.32 per diluted share for the year ended December 31, 2004. For fourth
quarter
2005, GAAP net income was $6.5 million or $0.57 per diluted share, compared
to $7.6 million or $0.67 per diluted share for third quarter 2005 and
$9.8 million or $0.82 per diluted share for fourth quarter 2004. For the
year ended December 31, 2005, core earnings were $28.7 million or $2.50 per
diluted share, compared to $27.4 million or $2.25 per diluted share for the
year
ended December 31, 2004. Core earnings were $7.2 million or $0.63 per
diluted share for fourth quarter 2005, compared to $9.3 million or
$0.82 per diluted share for third quarter 2005 and $9.9 million or
$0.82 per diluted share for fourth quarter 2004.
Farmer
Mac reports its “core earnings,” a non-GAAP measure, in addition to GAAP
earnings. Farmer Mac uses the core earnings measure 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.
Farmer
Mac President and Chief Executive Officer Henry D. Edelman stated, “Farmer Mac’s
strategic diversification of its marketing focus is beginning to produce
tangible results. Fourth quarter 2005 new business volume was $330.5 million,
which accounted for 43 percent of the year’s $771.7 million of new volume
and was 280 percent of the $117.4 million of new volume in the
corresponding quarter of 2004. In January 2006, business volume continued
to
improve as Farmer Mac, in an AgVantage®
transaction, issued its guarantee of $500 million of five-year
mortgage-backed notes. The increases in business volume in the fourth quarter
2005 and January 2006 were attributable principally to Farmer Mac’s
diversification of its marketing focus to include large program transactions
that emphasize high asset quality, with greater protection against adverse
credit performance and commensurately lower compensation for the assumption
of
credit risk and administrative costs, resulting in marginal returns on equity
equal to or better than the current net return on equity. Notwithstanding
those
indications of recovering business volume, Farmer Mac’s new business continues
to be constrained by market and regulatory factors mentioned in earlier
announcements and disclosures. Looking forward, Farmer Mac will continue
to
focus on the long-term growth of the business and the development of innovative
ways to serve the financing needs of rural America; the Corporation remains
confident of opportunities for growth and increased business volume.
“The
portfolio of loans underlying Farmer Mac’s guarantees and LTSPCs continues to
perform well, with 90-day delinquencies in Farmer Mac’s portfolio remaining at
low levels, in terms of both dollars and percentages. This underscores both
the
effectiveness of Farmer Mac’s ongoing credit risk management and the strength of
the U.S. agricultural economy. Accordingly, Farmer Mac determined that the
appropriate level of allowance for losses as of December 31, 2005 was
$8.7 million, reflecting the overall credit quality of its portfolio and
the recent upward trends in agricultural land values. This resulted in the
release of approximately $2.2 million from the allowance for losses in
fourth quarter 2005, benefiting earnings by $0.13 per share. By way of
comparison, Farmer Mac released $5.6 million from the allowance for losses
in
third quarter 2005 and $5.3 million in fourth quarter 2004; earnings per
share
benefited from those releases by $0.32 and $0.29, respectively.”
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 because, in management’s view, the
non-GAAP measures more accurately represent Farmer Mac’s economic performance,
transaction economics and business trends. Investors and the investment analyst
community have previously relied upon 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.
Farmer
Mac developed the non-GAAP measure “core earnings” to present net income
available to common stockholders less 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”). 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 effects of financial derivatives under FAS 133 included in the
GAAP measure are driven by fluctuations in interest rates that cannot reliably
be predicted, Farmer Mac does not project GAAP net income available to common
stockholders.
The
reconciliation of GAAP net income available to common stockholders to core
earnings is set forth in the following table:
|
Reconciliation
of GAAP Net Income Available to Common Stockholders to Core
Earnings
|
|||||||||||||||||||||||||
|
Three
Months Ended
|
Year
Ended
|
||||||||||||||||||||||||
|
Dec.
31,
|
Dec.
31,
|
Dec.
31,
|
Dec.
31,
|
||||||||||||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||||||||||||||
|
(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
|
$
|
6,511
|
$
|
0.57
|
$
|
9,837
|
$
|
0.82
|
$
|
27,267
|
$
|
2.37
|
$
|
28,228
|
$
|
2.32
|
|||||||||
|
Less
the effects of FAS 133:
|
|||||||||||||||||||||||||
|
Unrealized
gains/(losses)
|
|||||||||||||||||||||||||
|
on
financial derivatives and
|
|||||||||||||||||||||||||
|
trading
assets, net of tax
|
(668
|
)
|
(0.06
|
)
|
(45
|
)
|
0.00
|
(1,438
|
)
|
(0.13
|
)
|
588
|
0.05
|
||||||||||||
|
Benefit
from non-amortization
|
|||||||||||||||||||||||||
|
of
premium payments
|
|||||||||||||||||||||||||
|
on
financial derivatives,
|
|||||||||||||||||||||||||
|
net
of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
228
|
0.02
|
|||||||||||||||||
|
Core
earnings
|
$
|
7,179
|
$
|
0.63
|
$
|
9,882
|
$
|
0.82
|
$
|
28,705
|
$
|
2.50
|
$
|
27,412
|
$
|
2.25
|
|||||||||
Later
in
this release, Farmer Mac provides additional information about the impact
of FAS
133 on GAAP net income available to common stockholders.
Net
Interest Income
Net
interest income, which includes guarantee fees from loans purchased and retained
after 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 $9.4 million for fourth quarter 2005, compared to
$7.9 million for third quarter 2005 and $8.0 million for fourth
quarter 2004. The net interest yield was 91 basis points for fourth quarter
2005, compared to 79 basis points for third quarter 2005 and 88 basis
points for fourth quarter 2004. The effect of FAS 140 for fourth
quarter 2005 was the reclassification of guarantee fee income as interest
income in the amount of $0.9 million (9 basis points), compared to
$0.9 million (9 basis points) in third quarter 2005 and $1.0 million
(11 basis points) in fourth quarter 2004.
Farmer
Mac classifies the net interest income and expense realized on financial
derivatives that are not in fair value or cash flow hedge relationships as
gains
and losses on financial derivatives and trading assets. This classification
resulted in reductions of the net interest yield of 0 basis points, 2 basis
points and 5 basis points for fourth quarter 2005, third quarter 2005 and
fourth quarter 2004, respectively.
The
net
interest yields for fourth quarter 2005, third quarter 2005 and fourth quarter
2004 included the benefits of yield maintenance payments of 12 basis points,
3 basis points and 11 basis points, respectively. Yield maintenance
payments represent the present value of expected future interest income streams
and accelerate the recognition of interest income from the related loans.
Because the timing and size of these payments vary greatly, variations should
not be considered indicative of positive or negative trends to gauge future
financial results. For fourth quarter 2005, yield maintenance payments increased
net income by $0.8 million or $0.07 per diluted share, compared to
$0.3 million or $0.02 per diluted share for third quarter 2005 and $0.7
million or $0.05 per diluted share for fourth quarter 2004.
Guarantee
and Commitment Fees
Guarantee
and commitment fees, which compensate Farmer Mac for assuming the credit
risk on
loans underlying Farmer Mac Guaranteed Securities and LTSPCs, were
$4.9 million for fourth quarter 2005, compared to $4.8 million for
third quarter 2005 and $5.2 million for fourth quarter 2004. As discussed
above,
the effect of FAS 140 classified $0.9 million of guarantee fee income as
interest income in fourth quarter 2005, compared to $0.9 million in third
quarter 2005, and $1.0 million in fourth quarter 2004.
Representation
and Warranty Claims Income
Farmer
Mac received no representation and warranty claims income for fourth quarter
2005 or third quarter 2005, compared to $1.0 million for fourth quarter 2004.
The $1.0 million recognized in fourth quarter 2004 represented a recovery
from a
seller for a breach of representations and warranties associated with the
prior
sale of agricultural mortgage loans to Farmer Mac. Farmer Mac had previously
charged off that amount as losses on the related loans.
Operating
Expenses
Compensation
and employee benefits for fourth quarter 2005 were $2.3 million, compared
to
$2.2 million for third quarter 2005 and $1.8 million for fourth quarter 2004.
General and administrative expenses for fourth quarter 2005 were
$2.8 million, compared to $2.6 million for third quarter 2005 and
$2.9 million for fourth quarter 2004. Regulatory fees were
$0.6 million for fourth and third quarter 2005 and fourth quarter 2004. FCA
has advised the Corporation that its fees for the federal fiscal year ended
September 30, 2006 are estimated to be $2.4 million. FCA’s
regulatory fees charged to Farmer Mac for the federal fiscal year ended
September 30, 2005 were $2.3 million, compared to $2.0 million
for 2004.
Capital
Farmer
Mac’s core capital totaled $244.8 million as of December 31, 2005, compared
to $240.2 million as of September 30, 2005 and $237.7 million as of
December 31, 2004. 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, 2005 exceeded the statutory minimum capital requirement
of $142.4 million by $102.4 million.
Farmer
Mac is required to meet the capital standards of a risk-based capital stress
test promulgated by FCA (“RBC test”) pursuant to federal statute. The RBC test
determines
the amount of regulatory capital (core capital plus the allowance for losses
excluding any REO valuation allowance) 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 equal to the lesser
of
600 basis points or 50 percent of the ten-year U.S. Treasury note
rate. The RBC test
then
adds to the resulting capital requirement an additional 30 percent for
management and operational risk.
As
of
December 31, 2005, the RBC test generated an estimated risk-based capital
requirement of $32.4 million, compared to the risk-based capital requirement
of
$45.6 million as of September 30, 2005 and $37.1 million as of December 31,
2004. Farmer Mac’s regulatory capital of $253.4 million as of December 31,
2005 exceeded the RBC requirement by approximately $221.0 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.
During
fourth quarter 2005, Farmer Mac repurchased 43,950 shares of its Class C
Non-Voting Common Stock, at an average price of $27.97 per share, pursuant
to
the Corporation’s previously announced stock repurchase program. These
repurchases reduced the Corporation’s capital by approximately $1.2 million.
During the year ended December 31, 2005, Farmer Mac repurchased 800,202 shares
of its Class C Non-Voting Common Stock, at an average price of $21.10 per
share,
reducing the Corporation’s capital by approximately $16.9 million. These
repurchases, and additional repurchases of 299,248 shares during 2004, increased
diluted earnings per share for 2005 and 2004 of all classes of Farmer Mac’s
Common Stock by $0.21 and $0.02, respectively.
Credit
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. Analysis of the portfolio by
geographic and commodity distribution indicates that 90-day delinquencies
and
other non-performing assets have been and are expected to be most prevalent
in
the geographic areas and in agricultural commodities that do not receive
significant government support.
As
of
December 31, 2005, Farmer Mac’s 90-day delinquencies totaled $25.5 million,
representing 0.58 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 $25.3 million (0.55 percent)
as of December 31, 2004. 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, 2005, non-performing assets totaled $48.8 million,
representing
1.11 percent of the principal balance of all loans held and loans
underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs, compared
to $50.6 million (1.09 percent) as of December 31, 2004.
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
REO.
As of December 31, 2005, Farmer Mac had $3.5 million of REO, compared to
$1.8 million as of September 30, 2005 and $3.8 million as of December
31, 2004. Prior to acquisition of property securing a loan, Farmer Mac develops
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.
During
third quarter 2005, Farmer Mac completed the planned migration of its
methodology for determining its allowance for losses away from one based
on its
loan pool simulation and guarantee fee model to one based on its own historical
portfolio loss experience and credit trends. Farmer Mac recorded the effects
of
that change as a change in accounting estimate as of September 30, 2005.
Using its new methodology, Farmer Mac determined that the appropriate level
of
allowance for losses as of September 30, 2005 was $10.9 million. This
resulted in the release of approximately $5.6 million from the allowance
for losses in third quarter 2005. Of the $5.6 million of the allowance released
in third quarter 2005, $4.8 million was related to a change in accounting
estimate. As of December 31, 2005, Farmer Mac estimated its allowance for
losses
to be $8.7 million, resulting in the release of approximately $2.2 million
from
the allowance for losses in fourth quarter 2005.
As
of
December 31, 2005, the allowance for losses was $8.7 million and
20 basis points relative to the outstanding Farmer Mac I portfolio,
compared to $10.9 million and 25 basis points as of September 30, 2005
and $17.1 million and 37 basis points as of December 31, 2004.
The
following table summarizes the changes in the components of Farmer Mac’s
allowance for losses for the three months ended December 31, 2005.
|
Contingent
|
||||||||||||||||
|
Allowance
|
|
REO
|
|
|
|
Obligation
|
|
Total
|
||||||||
|
for
Loan
|
|
Valuation
|
|
Reserve
|
|
for
Probable
|
|
Allowance
|
||||||||
|
|
Losses
|
|
Allowance
|
|
for
Losses
|
|
Losses
|
|
for
Losses
|
|||||||
|
(in
thousands)
|
||||||||||||||||
|
Balances
as of September 30, 2005
|
6,668
|
-
|
4,228
|
- |
10,896
|
|||||||||||
|
Provision
for losses
|
(1,732)
|
-
|
(451)
|
- |
(2,183)
|
|||||||||||
|
Net
charge-offs
|
(60)
|
-
|
-
|
- |
(60)
|
|||||||||||
|
Balances
as of December 31, 2005
|
4,876
|
-
|
3,777
|
-
|
8,653
|
|||||||||||
As
of
December 31, 2005, Farmer Mac analyzed $36.0 million of its $73.6 million
of
impaired assets for collateral shortfalls against updated appraised values,
other updated collateral valuations or discounted values. Farmer Mac evaluated
the remaining $37.6 million of impaired assets for which updated valuations
were
not available in the aggregate in consideration of their similar risk
characteristics and historical statistics. Of the $36.0 million of assets
analyzed individually, $33.5 million were adequately collateralized, while
$2.5 million were under-collateralized. The individual collateral
shortfalls totaled $0.2 million. Accordingly, Farmer Mac recorded specific
allowances of $0.2 million for those under-collateralized assets as of
December 31, 2005. As of December 31, 2005, in addition to the specific
allowance provided, Farmer Mac recorded non-specific or general allowances
of
$8.5 million, bringing the total allowance for losses to
$8.7 million.
During
fourth quarter 2005, Farmer Mac charged off $0.1 million of losses against
the
allowance for losses, compared to net recoveries of $0.4 in third quarter
2005
and net charge-offs of $0.1 million in fourth quarter 2004.
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, 2005, a
parallel increase of 100 basis points across the entire U.S. Treasury yield
curve would have decreased MVE by 1.4 percent, while a parallel decrease
of 100
basis points would have no material impact on MVE. As of December 31, 2005,
a
parallel increase of 100 basis points would have increased Farmer Mac’s
NII, a shorter-term measure of interest rate risk, by 4.7 percent, while a
parallel decrease of 100 basis points would have decreased NII by 4.7 percent.
Farmer Mac’s duration gap, another measure of interest rate risk, was 0.5 months
as of December 31, 2005.
The
economic effects of all financial derivatives 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,
2005, Farmer Mac had $710.7 million notional amount of floating-to-fixed
interest rate swaps for terms ranging from 1 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, 2005, Farmer Mac had $594.5 million notional amount of
such interest rate swaps.
Farmer
Mac uses financial derivatives for hedging purposes, not for speculative
purposes. All of Farmer Mac’s financial derivative transactions are conducted
through standard, collateralized agreements that limit Farmer Mac’s potential
credit exposure to any counterparty. As of December 31, 2005, Farmer Mac
had an
aggregate $2.9 million of uncollateralized net exposure to two counterparties.
Financial
Derivatives and Financial Statement Effects of FAS 133
Farmer
Mac accounts for its financial derivatives under FAS 133. During fourth
quarter 2005, the decrease in net after-tax income resulting from FAS 133
was $0.6 million and the net
after-tax increase
in accumulated other comprehensive income was $5.7 million. During third
quarter 2005, the decrease in net after-tax income resulting from FAS 133
was $1.7 million and the net after-tax increase in accumulated other
comprehensive income was $12.9 million. For fourth quarter 2004, the
decrease in net after-tax income resulting from FAS 133 was
$0.1 million and the net after-tax increase in accumulated other
comprehensive income was $7.1 million. Accumulated other comprehensive
income is not a component of Farmer Mac’s regulatory core capital.
Regulatory
Matters
Regulatory
actions continue to affect Farmer Mac’s business outlook. On September 30, 2005,
the final regulation relating to Farmer Mac’s investments and liquidity became
effective. FCA included several of the revisions to the proposed regulation
suggested by Farmer Mac in comments to the proposal and Farmer Mac expects
to be
able to comply with the regulation in accordance with the timeframes established
in the regulation. Farmer Mac is required to comply with the liquidity
provisions of the regulation by September 30, 2007.
In
the
November 17, 2005 issue of the Federal Register, FCA published for public
comment a proposed rule that would revise certain FCA regulations governing
the
risk-based capital test applicable to Farmer Mac. The public comment period
for
that proposed rule will close April 17, 2006. FCA’s announcement of the proposed
rule stated that it “is designed to update Farmer Mac’s risk-based capital
stress test to reflect the evolution of the Corporation’s loan portfolio and the
practices of other leading financial institutions. The FCA Board is currently
scheduled to consider a final rule for the Farmer Mac risk-based capital
stress
test in September 2006.” Farmer Mac has not completed its analysis of the
proposed rule, but believes that the proposal, if adopted in its proposed
form
and under current economic conditions and the state of the Corporation’s
portfolio, would increase the Corporation’s risk-based capital requirement from
the current level to a higher level that would be close to the statutory
minimum
capital requirement. In that regard, FCA has estimated that, had the proposed
rule been effective at the time, the risk-based capital requirement as of
June
30, 2005 would have been $123.5 million, compared to the $49.6 million
risk-based capital requirement under the current risk-based capital stress
test.
As of that date, Farmer Mac’s regulatory capital was $254.3 million. As
part of the formal rule-making process, Farmer Mac will provide written comments
on the proposed regulation to FCA within the public comment period.
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 a number
of assumptions and estimates and the evaluation of risks and uncertainties.
Various factors could cause Farmer Mac’s actual results or events to differ
materially from the expectations as expressed or implied by the forward-looking
statements, including uncertainties regarding: (1) increases in general
and administrative expenses attributable to growth of the business and the
regulatory environment, including the hiring of additional personnel with
expertise in key functional areas; (2) the rate and direction of development
of
the secondary market for agricultural mortgage loans; (3) the rate of growth
in
agricultural mortgage indebtedness; (4) lender interest in Farmer Mac
credit products and the Farmer Mac secondary market; (5) borrower
preferences for fixed-rate agricultural mortgage indebtedness; (6) the
willingness of investors to invest in agricultural mortgage-backed securities;
or (7) possible reaction in the financial markets to events involving
government-sponsored enterprises other than Farmer Mac. Other risk factors
are
discussed in Farmer Mac’s Annual Report on Form 10-K for the year ended December
31, 2005, as filed with the SEC on March 16, 2006. 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 revisions to any forward-looking statements included
in
this release to reflect any future events or circumstances, 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 referenced above)
is
available on Farmer Mac’s website at www.farmermac.com.
The
conference call to discuss Farmer Mac’s fourth quarter 2005 earnings and this
press release will be webcast on Farmer Mac’s website beginning at 10:00 a.m.
eastern time, Friday, March 17, 2006, 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
|
|||||||
|
(unaudited)
|
|||||||
|
(in
thousands)
|
|||||||
|
December
31,
|
|
|
December
31,
|
||||
|
2005
|
2004
|
||||||
|
Assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
458,852
|
$
|
430,504
|
|||
|
Investment
securities
|
1,621,941
|
1,056,143
|
|||||
|
Farmer
Mac Guaranteed Securities
|
1,330,976
|
1,376,847
|
|||||
|
Loans
held for sale
|
41,956
|
15,281
|
|||||
|
Loans
held for investment
|
762,436
|
871,988
|
|||||
|
Allowance
for loan losses
|
(4,876
|
)
|
(4,395
|
)
|
|||
|
Loans
held for investment, net
|
757,560
|
867,593
|
|||||
|
Real
estate owned
|
3,532
|
3,845
|
|||||
|
Financial
derivatives
|
8,719
|
1,499
|
|||||
|
Interest
receivable
|
67,509
|
58,131
|
|||||
|
Guarantee
and commitment fees receivable
|
22,170
|
19,871
|
|||||
|
Deferred
tax asset, net
|
2,397
|
6,518
|
|||||
|
Prepaid
expenses and other assets
|
25,007
|
10,585
|
|||||
|
Total
Assets
|
$
|
4,340,619
|
$
|
3,846,817
|
|||
|
Liabilities
and Stockholders' Equity:
|
|||||||
|
Notes
payable:
|
|||||||
|
Due
within one year
|
$
|
2,587,704
|
$
|
2,620,172
|
|||
|
Due
after one year
|
1,403,598
|
862,201
|
|||||
|
Total
notes payable
|
3,991,302
|
3,482,373
|
|||||
|
Financial
derivatives
|
29,162
|
47,793
|
|||||
|
Accrued
interest payable
|
29,250
|
25,511
|
|||||
|
Guarantee
and commitment obligation
|
17,625
|
14,892
|
|||||
|
Accounts
payable and accrued expenses
|
21,371
|
26,690
|
|||||
|
Reserve
for losses
|
3,777
|
12,706
|
|||||
|
Total
Liabilities
|
4,092,487
|
3,609,965
|
|||||
|
Preferred
stock
|
35,000
|
35,000
|
|||||
|
Common
stock at par
|
11,091
|
11,822
|
|||||
|
Additional
paid-in capital
|
83,058
|
87,777
|
|||||
|
Accumulated
other comprehensive income/(loss)
|
3,339
|
(882
|
)
|
||||
|
Retained
earnings
|
115,644
|
103,135
|
|||||
|
Total
Stockholders' Equity
|
248,132
|
236,852
|
|||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
4,340,619
|
$
|
3,846,817
|
|||
|
Federal
Agricultural Mortgage Corporation
|
|||||||||||||
|
Consolidated
Statements of Operations
|
|||||||||||||
|
(unaudited)
|
|||||||||||||
|
(in
thousands, except per share
amounts)
|
|||||||||||||
|
Three Months Ended
|
Year
Ended
|
||||||||||||
|
|
Dec.
31,
|
Dec.
31,
|
Dec.
31,
|
|
Dec.
31,
|
||||||||
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|||||||
|
Interest
income:
|
|||||||||||||
|
Investments
and cash equivalents
|
$23,173
|
$10,528
|
$70,414
|
$36,386
|
|||||||||
|
Farmer
Mac Guaranteed Securities
|
18,415
|
16,668
|
70,472
|
66,222
|
|||||||||
|
Loans
|
13,211
|
12,412
|
48,769
|
51,386
|
|||||||||
|
Total
interest income
|
54,799
|
39,608
|
189,655
|
153,994
|
|||||||||
|
Interest
expense
|
45,359
|
31,636
|
156,414
|
120,747
|
|||||||||
|
Net
interest income
|
9,440
|
7,972
|
33,241
|
33,247
|
|||||||||
|
Recovery/(provision)
for loan losses
|
1,732
|
830
|
54
|
(1,589
|
)
|
||||||||
|
Net
interest income after provision for loan losses
|
11,172
|
8,802
|
33,295
|
31,658
|
|||||||||
|
Guarantee
and commitment fees
|
4,865
|
5,235
|
19,554
|
20,977
|
|||||||||
|
Gains/(losses)
on financial derivatives
|
|||||||||||||
|
and
trading assets
|
(1,144
|
)
|
399
|
(1,477
|
)
|
2,846
|
|||||||
|
Gain
on sale of Farmer Mac Guaranteed Securities
|
-
|
-
|
-
|
367
|
|||||||||
|
Gain
on the repurchase of debt
|
116
|
-
|
116
|
-
|
|||||||||
|
Gains/(losses)
on the sale of real estate owned
|
-
|
642
|
34
|
523
|
|||||||||
|
Representation
and warranty claims income
|
-
|
1,000
|
79
|
2,816
|
|||||||||
|
Other
income
|
259
|
126
|
1,872
|
1,495
|
|||||||||
|
Total
revenues
|
15,268
|
16,204
|
53,473
|
60,682
|
|||||||||
|
Expenses:
|
|||||||||||||
|
Compensation
and employee benefits
|
2,330
|
1,809
|
8,215
|
7,036
|
|||||||||
|
General
and administrative
|
2,878
|
2,868
|
9,697
|
8,800
|
|||||||||
|
Regulatory
fees
|
588
|
576
|
2,316
|
2,141
|
|||||||||
|
Real
estate owned operating costs, net
|
(14
|
)
|
(4
|
)
|
13
|
287
|
|||||||
|
Provision/(recovery)
for losses
|
(450
|
)
|
(4,427
|
)
|
(8,723
|
)
|
(2,001
|
)
|
|||||
|
Total
operating expenses
|
5,332
|
822
|
11,518
|
16,263
|
|||||||||
|
Income
before income taxes
|
9,936
|
15,382
|
41,955
|
44,419
|
|||||||||
|
Income
tax expense
|
2,865
|
4,985
|
12,448
|
13,951
|
|||||||||
|
Net
income
|
7,071
|
10,397
|
29,507
|
30,468
|
|||||||||
|
Preferred
stock dividends
|
(560
|
)
|
(560
|
)
|
(2,240
|
)
|
(2,240
|
)
|
|||||
|
Net
income available to common stockholders
|
$
|
6,511
|
$
|
9,837
|
$
|
27,267
|
$
|
28,228
|
|||||
|
Earnings
per common share:
|
|||||||||||||
|
Basic
earnings per common share
|
$
|
0.59
|
$
|
0.83
|
$
|
2.40
|
$
|
2.35
|
|||||
|
Diluted
earnings per common share
|
$
|
0.57
|
$
|
0.82
|
$
|
2.37
|
$
|
2.32
|
|||||
|
Common
stock dividends per common share
|
$
|
0.10
|
$
|
0.10
|
$
|
0.40
|
$
|
0.10
|
|||||
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
|
||||||||||||||||
|
Farmer
Mac I
|
||||||||||||||||
|
Loans
and
|
||||||||||||||||
|
Guaranteed
|
||||||||||||||||
|
Securities
|
LTSPCs
|
Farmer
Mac II
|
Total
|
|||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
For
the quarter ended:
|
||||||||||||||||
|
December
31, 2005
|
$
|
31,313
|
$
|
239,957
|
(1
|
)
|
$
|
59,230
|
$
|
330,500
|
||||||
|
September
30, 2005
|
39,821
|
91,783
|
(2
|
)
|
52,181
|
183,785
|
||||||||||
|
June
30, 2005
|
20,382
|
96,419
|
(3
|
)
|
45,123
|
161,924
|
||||||||||
|
March
31, 2005
|
18,540
|
33,282
|
43,634
|
95,456
|
||||||||||||
|
December
31, 2004
|
28,211
|
34,091
|
55,122
|
117,424
|
||||||||||||
|
September
30, 2004
|
23,229
|
84,097
|
49,798
|
157,124
|
||||||||||||
|
June
30, 2004
|
27,520
|
127,098
|
34,671
|
189,289
|
||||||||||||
|
March
31, 2004
|
25,444
|
147,273
|
34,483
|
207,200
|
||||||||||||
|
December
31, 2003
|
25,148
|
218,097
|
44,971
|
288,216
|
||||||||||||
|
For
the year ended:
|
||||||||||||||||
|
December
31, 2005
|
110,056
|
461,441
|
200,168
|
771,665
|
||||||||||||
|
December
31, 2004
|
104,404
|
392,559
|
174,074
|
671,037
|
||||||||||||
|
Outstanding
Balance of Farmer Mac Loans,
|
||||||||||||||||
|
Guarantees
and LTSPCs (4)
|
||||||||||||||||
|
Farmer
Mac I
|
||||||||||||||||
|
Post-1996
Act
|
||||||||||||||||
|
Loans
and
|
||||||||||||||||
|
Guaranteed
|
||||||||||||||||
|
Securities
|
LTSPCs
|
Pre-1996
Act
|
Farmer
Mac II
|
Total
|
||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
As
of:
|
||||||||||||||||
|
December
31, 2005
|
$
|
2,097,942
|
$
|
2,329,798
|
$
|
13,046
|
$
|
835,732
|
$
|
5,276,518
|
||||||
|
September
30, 2005
|
2,118,510
|
2,183,058
|
14,209
|
810,686
|
5,126,463
|
|||||||||||
|
June
30, 2005
|
2,203,074
|
2,181,896
|
16,333
|
786,671
|
5,187,974
|
|||||||||||
|
March
31, 2005
|
2,247,595
|
2,209,792
|
17,236
|
777,465
|
5,252,088
|
|||||||||||
|
December
31, 2004
|
2,371,405
|
2,295,103
|
18,639
|
768,542
|
5,453,689
|
|||||||||||
|
September
30, 2004
|
2,406,133
|
2,381,006
|
18,909
|
742,474
|
5,548,522
|
|||||||||||
|
June
30, 2004
|
2,521,026
|
2,390,779
|
22,155
|
715,750
|
5,649,710
|
|||||||||||
|
March
31, 2004
|
2,566,412
|
2,382,648
|
22,261
|
722,978
|
5,694,299
|
|||||||||||
|
December
31, 2003
|
2,696,530
|
2,348,702
|
24,734
|
729,470
|
5,799,436
|
|||||||||||
|
Outstanding
Balance of Loans Held and Loans Underlying
|
|||||||||||||
|
On-Balance
Sheet 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:
|
|||||||||||||
|
December
31, 2005
|
$
|
866,362
|
$
|
752,885
|
$
|
479,649
|
$ |
2,098,895
|
|||||
|
September
30, 2005
|
840,330
|
785,387
|
477,345
|
2,103,062
|
|||||||||
|
June
30, 2005
|
838,872
|
803,377
|
488,555
|
2,130,804
|
|||||||||
|
March
31, 2005
|
828,985
|
822,275
|
492,358
|
2,143,618
|
|||||||||
|
December
31, 2004
|
761,854
|
921,879
|
532,738
|
2,216,471
|
|||||||||
|
September
30, 2004
|
753,205
|
929,641
|
520,246
|
2,203,092
|
|||||||||
|
June
30, 2004
|
782,854
|
978,531
|
529,654
|
2,291,039
|
|||||||||
|
March
31, 2004
|
818,497
|
978,263
|
548,134
|
2,344,894
|
|||||||||
|
December
31, 2003
|
860,874
|
1,045,217
|
542,024
|
2,448,115
|
|||||||||
|
Non-performing
Assets and 90-Day Delinquencies
|
|||||||||||||||||||
|
Outstanding
|
|||||||||||||||||||
|
Post-1996
Act
|
Less:
|
||||||||||||||||||
|
Loans,
|
Non-
|
REO
and
|
|||||||||||||||||
|
Guarantees
and
|
performing
|
Performing
|
90-Day
|
||||||||||||||||
|
LTSPCs
|
Assets
(5)
|
Percentage
|
Bankruptcies
|
Delinquencies
(6)
|
Percentage
|
||||||||||||||
|
(dollars
in thousands)
|
|||||||||||||||||||
|
As
of:
|
|||||||||||||||||||
|
December
31, 2005
|
4,399,189
|
$
|
48,764
|
1.11
|
%
|
$
|
23,303
|
$
|
25,461
|
0.58
|
%
|
||||||||
|
September
30, 2005
|
4,273,268
|
64,186
|
1.50
|
%
|
23,602
|
40,584
|
0.95
|
%
|
|||||||||||
|
June
30, 2005
|
4,360,670
|
60,696
|
1.39
|
%
|
23,925
|
36,771
|
0.85
|
%
|
|||||||||||
|
March
31, 2005
|
4,433,087
|
70,349
|
1.59
|
%
|
24,561
|
45,788
|
1.04
|
%
|
|||||||||||
|
December
31, 2004
|
4,642,208
|
50,636
|
1.09
|
%
|
25,353
|
25,283
|
0.55
|
%
|
|||||||||||
|
September
30, 2004
|
4,756,839
|
75,022
|
1.58
|
%
|
27,438
|
47,584
|
1.01
|
%
|
|||||||||||
|
June
30, 2004
|
4,882,505
|
69,751
|
1.43
|
%
|
36,978
|
32,773
|
0.68
|
%
|
|||||||||||
|
March
31, 2004
|
4,922,759
|
91,326
|
1.86
|
%
|
33,951
|
57,375
|
1.17
|
%
|
|||||||||||
|
December
31, 2003
|
5,020,032
|
69,964
|
1.39
|
%
|
39,908
|
30,056
|
0.60
|
%
|
|||||||||||
|
Distribution
of Post-1996 Act Non-performing Assets
|
|||||||||||||
|
and
90-Day Delinquencies by Original LTV Ratio (7)
|
|||||||||||||
|
as
of December 31, 2005
|
|||||||||||||
|
(dollars
in thousands)
|
|||||||||||||
|
|
Non-performing
|
90-Day
|
|||||||||||
|
Original
LTV Ratio
|
Assets
|
|
|
Percentage
|
|
|
Delinquencies
|
|
|
Percentage
|
|||
|
0.00%
to 40.00%
|
$
|
3,537
|
7
|
%
|
$
|
2,333
|
9
|
%
|
|||||
|
40.01%
to 50.00%
|
5,954
|
12
|
%
|
615
|
2
|
%
|
|||||||
|
50.01%
to 60.00%
|
24,744
|
51
|
%
|
15,568
|
62
|
%
|
|||||||
|
60.01%
to 70.00%
|
13,633
|
28
|
%
|
6,897
|
27
|
%
|
|||||||
|
70.01%
to 80.00%
|
848
|
2
|
%
|
-
|
0
|
%
|
|||||||
|
80.01%
+
|
49
|
0
|
%
|
49
|
0
|
%
|
|||||||
|
Total
|
$
|
48,765
|
100
|
%
|
$
|
25,461
|
100
|
%
|
|||||
|
Distribution
of Post-1996 Act Non-performing Assets
|
||||||||||||||||
|
and
90-Day Delinquencies by Loan Origination Date
|
||||||||||||||||
|
as
of December 31, 2005
|
||||||||||||||||
|
(dollars
in thousands)
|
||||||||||||||||
|
Outstanding
|
||||||||||||||||
|
|
Post-1996Act
|
|||||||||||||||
|
Loan
|
Loans,
|
|||||||||||||||
|
Origination
|
Guarantees
|
Non-performing
|
90-Day
|
|||||||||||||
|
Date
|
and
LTSPCs
|
Assets
|
Percentage
|
Delinquencies
|
Percentage
|
|||||||||||
|
Before
1994
|
$
|
446,580
|
$
|
2,590
|
0.58
|
%
|
$
|
1,715
|
0.38
|
%
|
||||||
|
1994
|
102,080
|
49
|
0.05
|
%
|
49
|
0.05
|
%
|
|||||||||
|
1995
|
99,497
|
2,229
|
2.24
|
%
|
637
|
0.65
|
%
|
|||||||||
|
1996
|
248,398
|
6,891
|
2.77
|
%
|
5,551
|
2.25
|
%
|
|||||||||
|
1997
|
307,414
|
6,550
|
2.13
|
%
|
483
|
0.16
|
%
|
|||||||||
|
1998
|
504,585
|
8,949
|
1.77
|
%
|
3,099
|
0.62
|
%
|
|||||||||
|
1999
|
498,588
|
6,489
|
1.30
|
%
|
5,422
|
1.09
|
%
|
|||||||||
|
2000
|
289,548
|
7,717
|
2.67
|
%
|
3,556
|
1.25
|
%
|
|||||||||
|
2001
|
446,628
|
6,937
|
1.55
|
%
|
4,950
|
1.11
|
%
|
|||||||||
|
2002
|
530,556
|
350
|
0.07
|
%
|
-
|
0.00
|
%
|
|||||||||
|
2003
|
462,760
|
-
|
0.00
|
%
|
-
|
0.00
|
%
|
|||||||||
|
2004
|
220,448
|
-
|
0.00
|
%
|
-
|
0.00
|
%
|
|||||||||
|
2005
|
242,107
|
13
|
0.01
|
%
|
-
|
0.00
|
%
|
|||||||||
|
Total
|
$
|
4,399,189
|
$
|
48,764
|
1.11
|
%
|
$
|
25,461
|
0.58
|
%
|
||||||
| (1) |
$16.0
million of the LTSPCs during fourth quarter 2005 were for agricultural
storage and processing facilities. Several of the loans underlying
those
LTSPCs are for facilities under construction, and as of December
31, 2005,
approximately $7.7 million of the loans were not yet disbursed
by the
lender.
|
| (2) |
$32.0
million of the LTSPCs during third quarter 2005 were for agricultural
storage and processing facilities. Several of the loans underlying
those
LTSPCs are for facilities under construction, and as of December
31, 2005,
approximately $8.8 million of the loans were not yet disbursed
by the
lender.
|
| (3) |
$56.8
million of the LTSPCs during second quarter 2005 were for agricultural
storage and processing facilities. Several of the loans underlying
those
LTSPCs are for facilities under construction, and as of December
31, 2005,
approximately $21.8 million of the loans were not yet disbursed
by the
lender.
|
| (4) |
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.
|
| (5) |
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.
|
| (6) |
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.
|
| (7) |
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.
|