Farmer Mac Reports Fourth Quarter Results WASHINGTON, Jan. 26
/PRNewswire-FirstCall/ -- The Federal Agricultural Mortgage
Corporation (Farmer Mac), (NYSE: AGM; AGM.A) today reported U.S.
GAAP net income of $9.8 million or $0.82 per diluted share for
fourth quarter 2004, compared to $8.6 million or $0.70 per diluted
share for third quarter 2004 and $4.9 million or $0.40 per diluted
share for fourth quarter 2003. For the year ended December 31,
2004, net income was $28.2 million or $2.32 per diluted share,
compared to $25.0 million or $2.08 per diluted share for the year
ended December 31, 2003. Core earnings were $9.9 million or $0.82
per diluted share for fourth quarter 2004, compared to $5.4 million
or $0.44 per diluted share for third quarter 2004 and $5.8 million
or $0.47 per diluted share for fourth quarter 2003. For the year
ended December 31, 2004, core earnings were $27.4 million or $2.25
per diluted share, compared to $23.0 million or $1.91 per diluted
share for the corresponding period in the prior year. 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, "The portfolio of loans underlying Farmer Mac's
guarantees and LTSPCs continues to perform well, underscoring the
effectiveness of Farmer Mac's ongoing credit risk management and
the strength of the U.S. agricultural economy. We are pleased that,
as of December 31, 2004, 90-day delinquencies in Farmer Mac's
portfolio remained at low levels, in terms of both dollars and
percentages. Those delinquencies totaled $25.3 million,
representing 0.55 percent of the portfolio, compared to $30.1
million and 0.60 percent as of December 31, 2003, and $58.2 million
and 1.21 percent as of December 31, 2002. Similarly, real estate
owned (REO) was reduced to $3.8 million as of December 31, 2004,
from $15.5 million as of December 31, 2003. "After careful
evaluation of the overall improved credit quality of Farmer Mac's
portfolio, the strong U.S. agricultural economy, the recent upward
trends in agricultural land values and the year-over-year reduction
in Farmer Mac's outstanding guarantees and commitments, Farmer Mac
determined that the appropriate level of allowance for losses as of
December 31, 2004 was $17.1 million. This resulted in the release
of approximately $5.3 million from the allowance for losses in
fourth quarter 2004, which was $0.28 per diluted share. As of
December 31, 2004, the allowance for losses was 37 basis points
relative to the outstanding Farmer Mac I portfolio, compared to
$22.1 million and 44 basis points as of December 31, 2003 and $20.0
million and 42 basis points as of December 31, 2002. "For fourth
quarter 2004, new business volume was $117.4 million. As in recent
quarters, Farmer Mac's new business was slow as a result of the
increased liquidity of agricultural borrowers, the increased
available capital and liquidity of agricultural lenders, and
regulatory conditions. Looking forward, Farmer Mac's Board and
management are focused on the long-term growth of the business and
the development of new ways to serve the financing needs of rural
America. "For 2005, Farmer Mac remains confident of opportunities
for growth and increased business volume, but the effect of any new
business on earnings will depend on the timing and nature of the
transactions. Farmer Mac's earnings are affected also by recoveries
under representation and warranty claims and the receipt of yield
maintenance payments. Taking account of all these variables, and
the release of a portion of the allowance for losses in fourth
quarter 2004, we anticipate core earnings for 2005 will be somewhat
below the level achieved in 2004." 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.
"Core earnings" is one such non-GAAP measure that Farmer Mac
developed 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 presented in
the following table: Reconciliation of GAAP Net Income Available to
Common Stockholders to Core Earnings Three Months Ended December
31, December 31, 2004 2003 (in thousands, except per share amounts)
Per Per Diluted Diluted Share Share GAAP net income available to
common stockholders $9,837 $0.82 $4,896 $0.40 Less the effects of
FAS 133: Unrealized gains/(losses) on financial derivatives and
trading assets, net of tax (45) 0.00 (974) (0.08) Benefit from
non-amortization of premium payments on financial derivatives, net
of tax - - 76 0.01 Core earnings $9,882 $0.82 $5,794 $0.47
Reconciliation of GAAP Net Income Available to Common Stockholders
to Core Earnings Year Ended December 31, December 31, 2004 2003 (in
thousands, except per share amounts) Per Per Diluted Diluted Share
Share GAAP net income available to common stockholders $28,228
$2.32 $25,030 $2.08 Less the effects of FAS 133: Unrealized
gains/(losses) on financial derivatives and trading assets, net of
tax 588 0.05 1,720 0.14 Benefit from non-amortization of premium
payments on financial derivatives, net of tax 228 0.02 317 0.03
Core earnings $27,412 $2.25 $22,993 $1.91 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 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 $8.0 million for fourth quarter 2004, compared to $8.0 million
for third quarter 2004 and $9.1 million for fourth quarter 2003.
The net interest yield was 88 basis points for fourth quarter 2004,
compared to 84 basis points for third quarter 2004 and 91 basis
points for fourth quarter 2003. The effect of FAS 140 for fourth
quarter 2004 was the reclassification of guarantee fee income as
interest income in the amount of $1.0 million (11 basis points),
compared to $1.0 million (10 basis points) in third quarter 2004,
and $1.1 million (11 basis points) in fourth quarter 2003. 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 5 basis points, 5 basis points and 2 basis
points for fourth quarter 2004, third quarter 2004 and fourth
quarter 2003, respectively. The net interest yields for fourth
quarter 2004, third quarter 2004 and fourth quarter 2003 included
the benefits of yield maintenance payments of 11 basis points, 19
basis points and 11 basis points, respectively. For fourth quarter
2004, yield maintenance payments increased net income by $0.7
million or $0.05 per diluted share, compared to $1.1 million or
$0.09 per diluted share for third quarter 2004 and $0.7 million or
$0.06 per diluted share for fourth quarter 2003. Guarantee and
Commitment Fees Guarantee and commitment fees were $5.2 million for
fourth quarter 2004, compared to $5.3 million for third quarter
2004 and $5.4 million for fourth quarter 2003. As discussed above,
$1.0 million of guarantee fee income was classified as interest
income in fourth quarter 2004, compared to $1.0 million in third
quarter 2004, and $1.1 million in fourth quarter 2003, pursuant to
FAS 140. Miscellaneous Income Miscellaneous income for fourth
quarter 2004 was $1.1 million, compared to $0.7 million for third
quarter 2004 and $0.1 million for fourth quarter 2003. Of the $1.1
million of miscellaneous income in fourth quarter 2004, $1.0
million 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 2004 were $1.8 million, compared to $1.7 million for third
quarter 2004 and $1.6 million for fourth quarter 2003. General and
administrative expenses for fourth quarter 2004 were $2.9 million,
compared to $2.0 million for third quarter 2004 and $2.1 million
for fourth quarter 2003. The increases in compensation and employee
benefits and general and administrative expenses were due, in large
part, to greater staffing levels necessary for increased corporate
governance and regulatory compliance activities, including
requirements of the Sarbanes- Oxley Act of 2002 and the Farm Credit
Administration (FCA), as well as heightened focus on the regulatory
environment for government-sponsored enterprises generally.
Regulatory fees for fourth quarter 2004 were $0.6 million, compared
to $0.5 million for third quarter 2004 and $0.9 million for fourth
quarter 2003. FCA's regulatory fees charged to Farmer Mac for the
federal fiscal year ended September 30, 2004 were $2.0 million,
compared to $1.8 million for 2003. FCA has advised the Corporation
that its fees for the federal fiscal year ending September 30, 2005
are estimated to be $2.3 million. Farmer Mac's net REO operating
costs for fourth quarter 2004 were negligible, compared to income
of $0.1 million for third quarter 2004 and expense of $0.3 million
for fourth quarter 2003. Discussion of the provision for losses is
covered under the topic of "Credit" later in this release. Capital
Farmer Mac's core capital totaled $237.7 million as of December 31,
2004, compared to $233.6 million as of September 30, 2004 and
$215.5 million as of December 31, 2003. 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, 2004 exceeded the statutory minimum
capital requirement of $128.9 million by $108.8 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 the 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 at 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, 2004, the RBC test generated an estimated risk-based
capital requirement of $34.7 million, compared to the risk-based
capital requirement of $43.5 million as of September 30, 2004 and
$38.8 million as of December 31, 2003. Farmer Mac's regulatory
capital of $254.8 million as of December 31, 2004 exceeded the RBC
requirement by approximately $220.1 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 2004, Farmer Mac repurchased 228,297 shares of its Class C
Non-Voting Common Stock, at an average price of $21.10 per share,
pursuant to the Corporation's previously announced stock repurchase
program. These repurchases reduced the Corporation's capital by
approximately $4.8 million. Credit As of December 31, 2004, Farmer
Mac's 90-day delinquencies totaled $25.3 million, representing 0.55
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 $30.1 million
(0.60 percent) as of December 31, 2003. 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, 2004, non-performing assets
totaled $50.6 million, representing 1.09 percent of the principal
balance of all loans held and loans underlying post-1996 Act Farmer
Mac I Guaranteed Securities and LTSPCs, compared to $70.0 million
(1.39 percent) as of December 31, 2003. Non- performing assets are
loans 90 days or more past due, in foreclosure, restructured after
delinquency, in bankruptcy, or REO. The principal balance of
non-performing assets includes certain segments of the portfolio
that have cycled through foreclosure and into the REO asset
category, which completes the involuntary loan liquidation process.
Also included is 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. 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, 2004, Farmer Mac had $3.8 million of REO, compared to
$7.3 million as of September 30, 2004 and $15.5 million as of
December 31, 2003. Analysis of the portfolio by geographic and
commodity distribution indicates that 90-day delinquencies have
been and are expected to be most prevalent in the geographic areas
and in agricultural commodities that do not receive significant
government support. 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. After
careful evaluation of the overall improved credit quality of Farmer
Mac's portfolio, the strong U.S. agricultural economy, the recent
upward trends in agricultural land values and the $345.7 million
year-over-year reduction in Farmer Mac's outstanding guarantees and
commitments, Farmer Mac determined that the appropriate level of
allowance for losses as of December 31, 2004 was $17.1 million.
This resulted in the release of approximately $5.3 million from the
allowance for losses in fourth quarter 2004 ($0.28 per diluted
share). As of December 31, 2004, the allowance for losses was 37
basis points relative to the outstanding Farmer Mac I portfolio,
compared to $22.1 million and 44 basis points as of December 31,
2003 and $20.0 million and 42 basis points as of December 31, 2002.
The following table summarizes the changes in the components of
Farmer Mac's allowance for losses and contingent obligation for
probable losses for the three months ended December 31, 2004. The
contingent obligation for probable losses is a component of Farmer
Mac's guarantee and commitment obligation. Contingent Allowance REO
Obligation for Loan Valuation Reserve for Probable Losses Allowance
for Losses Losses Total (in thousands) Beginning balance $5,225 $-
$14,521 $2,716 $22,462 Provision for losses (830) 100 (3,788) (739)
(5,257) Net charge-offs - (100) (4) - (104) Ending balance $4,395
$- $10,729 $1,977 $17,101 As of December 31, 2004, Farmer Mac
analyzed the following three categories of assets for impairment,
based on the fair value of the underlying collateral: (1) the $50.6
million of non-performing assets; (2) the $32.3 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 $56.6 million of performing loans that have previously
been delinquent or are secured by real estate that produces
commodities currently under stress. Those individual assessments
covered a total of $139.5 million of assets measured for impairment
against updated appraised values, other updated collateral
valuations or discounted values. Of the $139.5 million of assets
analyzed, $126.6 million were found to be collateralized adequately
and $12.9 million of assets were found not to be collateralized
adequately, with individual collateral shortfalls totaling $1.4
million. Accordingly, Farmer Mac allocated specific allowances of
$1.4 million to those under- collateralized assets as of December
31, 2004. After the allocation of specific allowances from the
total allowance for losses of $17.1 million, the non-specific or
general allowance and the contingent obligation for inherent
probable losses totaled $15.7 million. During fourth quarter 2004,
Farmer Mac charged off $0.1 million of losses against the allowance
for losses, compared to charge offs of $1.1 million in third
quarter 2004 and $1.9 million in fourth quarter 2003. 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 2004,
Farmer Mac received $1.0 million from a seller for a breach of
representations and warranties associated with the prior sale of
agricultural mortgage loans to Farmer Mac. This recovery is
reported as miscellaneous income on the Consolidated Statements of
Operations. Farmer Mac had previously charged off this amount as
losses on the related loans. 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, 2004,
a parallel increase of 100 basis points across the entire U.S.
Treasury yield curve would have decreased MVE by 1.2 percent, while
a parallel decrease of 100 basis points would have had a negligible
effect on MVE. As of December 31, 2004, a parallel increase of 100
basis points would have increased Farmer Mac's NII, a shorter-term
measure of interest rate risk, by 9.2 percent, while a parallel
decrease of 100 basis points would have decreased NII by 7.7
percent. Farmer Mac's duration gap, another measure of interest
rate risk, was plus 0.4 months as of December 31, 2004. 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, 2004, Farmer Mac had $648.5 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, 2004, Farmer Mac had $856.7
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, 2004, Farmer Mac had no
uncollateralized net exposure to any counterparty. Financial
Derivatives and Financial Statement Effects of FAS 133 Farmer Mac
accounts for its financial 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
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. During third quarter
2004, the increase in net after-tax income resulting from FAS 133
was $3.2 million and the net after-tax increase in accumulated
other comprehensive income was $10.6 million. For 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. 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. Both FCA, the federal
regulator of both Farmer Mac and the primary lenders in the Farm
Credit System (FCS), and the Farm Credit System Insurance
Corporation (FCSIC), a U.S. Government controlled corporation
managed by a three-member board of directors composed of the
members of the FCA Board, have cautioned FCS institutions about
doing business with GSEs, including Farmer Mac, and FCSIC raised
technical objections to FCS institutions' use of Farmer Mac AMBS
swaps. During second quarter 2004, FCA published a proposed
regulation relating to Farmer Mac's investments and liquidity.
Farmer Mac expects to be able to comply with the regulation if it
is adopted in its current form, though analysis indicates it could
limit future increases in Farmer Mac's non-program investment
portfolio and the related net interest income. The Corporation
disagrees with certain aspects of the proposed regulation and
submitted comments on the proposal to FCA accordingly. During third
quarter 2004, FCA published a proposed regulation that, if adopted
as proposed, could adversely affect Farmer Mac's business by
establishing a new risk-weight allocation of capital applicable to
Farmer Mac transactions with FCS institutions, a major segment of
Farmer Mac's customer base. That proposed regulation would have an
effective date eighteen months after the final regulation is
published. As set forth in prior disclosures, Farmer Mac disagrees
with the proposed regulation as it would affect the Corporation,
and has submitted a comment letter to FCA setting forth its
position. 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) the rate and direction of
development of the secondary market for agricultural mortgage
loans; (2) the possible establishment of additional statutory or
regulatory restrictions or constraints on Farmer Mac that could
hamper its growth or diminish its profitability; (3) legislative or
regulatory developments or interpretations of Farmer Mac's
statutory charter that could adversely affect Farmer Mac or the
ability or motivation of certain lenders to participate in its
programs or the terms of any such participation, or increase the
cost of regulation and related corporate activities; (4) possible
reaction in the financial markets to events involving
government-sponsored enterprises other than Farmer Mac; (5) Farmer
Mac's access to the debt markets at favorable rates and terms; (6)
the possible effect of the risk-based capital requirement, which
could, under certain circumstances, be in excess of the statutory
minimum capital requirement; (7) the rate of growth in agricultural
mortgage indebtedness; (8) lender interest in Farmer Mac credit
products and the Farmer Mac secondary market; (9) borrower
preferences for fixed-rate agricultural mortgage indebtedness; (10)
competitive pressures in the purchase of agricultural mortgage
loans and the sale of agricultural mortgage backed and debt
securities; (11) substantial changes in interest rates,
agricultural land values, commodity prices, export demand for U.S.
agricultural products and the general economy; (12) 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; (13) the willingness of investors to
invest in agricultural mortgage-backed securities; or (14) the
effects on the agricultural economy or the value of agricultural
real estate of any changes in federal assistance for agriculture.
Other factors are discussed in Farmer Mac's Annual Report on Form
10-K for the year ended December 31, 2003, as filed with the SEC on
March 15, 2004 and Farmer Mac's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004, as filed with the SEC on
November 9, 2004. 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 Forms 10-K and 10-Q
referenced above) is available on Farmer Mac's website at
http://www.farmermac.com/. The conference call to discuss Farmer
Mac's fourth quarter 2004 earnings and this press release will be
webcast on Farmer Mac's website beginning at 11:00 a.m. eastern
time, Thursday, January 27, 2005, 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, 2004 2003 Assets: Cash and cash equivalents $430,504
$623,674 Investment securities 1,056,143 1,064,782 Farmer Mac
Guaranteed Securities 1,376,847 1,508,134 Loans held for sale
15,281 46,662 Loans held for investment 871,988 942,929 Allowance
for loan losses (4,395) (5,967) Loans, net 882,874 983,624 Real
estate owned, net of valuation allowance of zero and $0.2 million
3,845 15,478 Financial derivatives 1,499 961 Interest receivable
55,931 58,423 Guarantee and commitment fees receivable 19,871
16,885 Deferred tax asset, net 6,518 10,891 Prepaid expenses and
other assets 10,585 16,798 Total Assets $3,844,617 $4,299,650
Liabilities and Stockholders' Equity: Notes payable: Due within one
year $2,520,172 $2,799,384 Due after one year 962,201 1,136,110
Total notes payable 3,482,373 3,935,494 Financial derivatives
47,793 67,670 Accrued interest payable 23,311 26,342 Guarantee and
commitment obligation 16,869 14,144 Accounts payable and accrued
expenses 26,690 29,574 Reserve for losses 10,729 13,172 Total
Liabilities 3,607,765 4,086,396 Preferred stock 35,000 35,000
Common stock at par 11,822 12,054 Additional paid-in capital 87,777
88,652 Accumulated other comprehensive income/(loss) (882) (2,295)
Retained earnings 103,135 79,843 Total Stockholders' Equity 236,852
213,254 Total Liabilities and Stockholders' Equity $3,844,617
$4,299,650 Federal Agricultural Mortgage Corporation Consolidated
Statements of Operations (unaudited) (in thousands, except per
share amounts) Three Months Ended Year Ended December December
December December 31, 31, 31, 31, 2004 2003 2004 2003 Interest
income: Investments and cash equivalents $10,528 $8,796 $36,386
$35,287 Farmer Mac Guaranteed Securities 16,668 17,708 66,222
73,692 Loans 12,412 12,901 51,386 52,580 Total interest income
39,608 39,405 153,994 161,559 Interest expense 31,636 30,311
120,747 124,307 Net interest income 7,972 9,094 33,247 37,252
Provision for loan losses 830 (509) (1,589) (6,524) Net interest
income after provision for loan losses 8,802 8,585 31,658 30,728
Guarantee and commitment fees 5,235 5,424 20,977 20,685
Gains/(Losses) on financial derivatives and trading assets 399
(1,297) 2,846 2,357 Gain on sale of Farmer Mac Guaranteed
Securities - - 367 - Gains/(Losses) on the sale of real estate
owned 642 201 523 178 Miscellaneous income 1,126 69 4,311 812 Total
revenues 16,204 12,982 60,682 54,760 Expenses: Compensation and
employee benefits 1,809 1,634 7,036 6,121 General and
administrative 2,868 2,078 8,800 6,031 Regulatory fees 576 857
2,141 2,005 REO operating costs, net (4) 264 287 264 Provision for
losses (4,427) 459 (2,001) 761 Total operating expenses 822 5,292
16,263 15,182 Income before income taxes 15,382 7,690 44,419 39,578
Income tax expense 4,985 2,234 13,951 12,308 Net income 10,397
5,456 30,468 27,270 Preferred stock dividends (560) (560) (2,240)
(2,240) Net income available to common stockholders $9,837 $4,896
$28,228 $25,030 Earnings per common share: Basic earnings per
common share $0.83 $0.42 $2.35 $2.13 Diluted earnings per common
share $0.82 $0.40 $2.32 $2.08 Common stock dividends $0.10 $- $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 Farmer Securities LTSPCs Mac II
Total (in thousands) For the quarter ended: 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 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 For the year ended: December 31, 2004 104,404
392,559 174,074 671,037 December 31, 2003 192,577 763,342 271,229
1,227,148 Outstanding Balance of Farmer Mac Loans, Guarantees and
LTSPCs (1) Farmer Mac I Post-1996 Act Loans and Guaranteed Pre-1996
Securities LTSPCs Act (in thousands) As of: December 31, 2004
$2,371,405 $2,295,103 $18,639 September 30, 2004 2,406,133
2,381,006 18,909 June 30, 2004 2,521,026 2,390,779 22,155 March 31,
2004 2,566,412 2,382,648 22,261 December 31, 2003 2,696,530
2,348,702 24,734 September 30, 2003(2) 2,721,775 2,174,182 25,588
June 30, 2003 2,108,180 2,790,480 28,057 March 31, 2003 2,111,861
2,732,620 29,216 December 31, 2002 2,168,994 2,681,240 31,960
Outstanding Balance of Farmer Mac Loans, Guarantees and LTSPCs (1)
Farmer Mac II Total (in thousands) As of: December 31, 2004
$768,542 $5,453,689 September 30, 2004 742,474 5,548,522 June 30,
2004 715,750 5,649,710 March 31, 2004 722,978 5,694,299 December
31, 2003 729,470 5,799,436 September 30, 2003(2) 720,584 5,642,129
June 30, 2003 668,899 5,595,616 March 31, 2003 650,152 5,523,849
December 31, 2002 645,790 5,527,984 Outstanding Balance of Loans
Held and Loans Underlying On-Balance Sheet Farmer Mac Guaranteed
Securities 5-to-10- Fixed Rate Year 1-Month-to- (10-yr. Wtd. ARMs
and 3-Year Avg. Term) Resets ARMs Total (in thousands) As of:
December 31, 2004 $763,210 $923,520 $533,686 $2,220,416 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
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 Non-performing Assets and 90-Day Delinquencies
Outstanding Post-1996 Act Loans, Guarantees and Non-performing
LTSPCs Assets(3) Percentage (dollars in thousands) As of: December
31, 2004 $4,642,208 $50,636 1.09% September 30, 2004 4,756,839
75,022 1.58% June 30, 2004 4,882,505 69,751 1.43% March 31, 2004
4,922,759 91,326 1.86% December 31, 2003 5,020,032 69,964 1.39%
September 30, 2003 4,871,756 84,583 1.74% June 30, 2003 4,875,059
80,169 1.64% March 31, 2003 4,820,887 94,822 1.97% December 31,
2002 4,821,634 75,308 1.56% Non-performing Assets and 90-Day
Delinquencies Less: REO and Performing 90-Day Bankruptcies
Delinquencies(4) Percentage (dollars in thousands) As of: December
31, 2004 $25,353 $25,283 0.55% September 30, 2004 27,438 47,584
1.01% June 30, 2004 36,978 32,773 0.68% March 31, 2004 33,951
57,375 1.17% December 31, 2003 39,908 30,056 0.60% September 30,
2003 37,442 47,141 0.98% June 30, 2003 28,883 51,286 1.06% March
31, 2003 18,662 76,160 1.58% December 31, 2002 17,094 58,214 1.21%
Distribution of Post-1996 Act Non-performing Assets and 90-Day
Delinquencies by Original LTV Ratio(5) as of December 31, 2004
(dollars in thousands) Non- performing 90-Day Original LTV Ratio
Assets Percentage Delinquencies Percentage 0.00% to 40.00% $3,752
8% $2,823 11% 40.01% to 50.00% 7,132 14% 2,321 9% 50.01% to 60.00%
26,494 52% 12,349 49% 60.01% to 70.00% 12,128 24% 7,030 28% 70.01%
to 80.00% 1,059 2% 689 3% 80.01% + 71 0% 71 0% Total $50,636 100%
$25,283 100% Distribution of Post-1996 Act Non-performing Assets
and 90-Day Delinquencies by Loan Origination Date as of December
31, 2004 (dollars in thousands) Outstanding Post-1996 Act Loan
Loans, Non- Origination Guarantees performing 90-Day Date and
LTSPCs Assets Percentage Delinquencies Percentage Before 1994
$541,561 $1,755 0.32% $892 0.16% 1994 130,935 507 0.39% 507 0.39%
1995 127,128 2,869 2.26% 2,097 1.66% 1996 292,258 8,108 2.77% 5,427
1.87% 1997 353,594 8,127 2.30% 2,342 0.67% 1998 565,536 7,328 1.30%
2,167 0.39% 1999 567,633 9,071 1.60% 5,138 0.91% 2000 341,760 5,280
1.54% 1,741 0.51% 2001 519,914 6,069 1.17% 3,979 0.77% 2002 575,000
937 0.16% 408 0.07% 2003 449,799 585 0.13% 585 0.13% 2004 177,090 -
0.00% - 0.00% Total $4,642,208 $50,636 1.09% $25,283 0.55% (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. DATASOURCE:
Farmer Mac CONTACT: Jerome Oslick of Farmer Mac, +1-202-872-7700
Web site: http://www.farmermac.com/
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