Farmer Mac Reports Third Quarter Results WASHINGTON, Oct. 27
/PRNewswire-FirstCall/ -- The Federal Agricultural Mortgage
Corporation (Farmer Mac), (NYSE: AGM; AGM.A) today reported U.S.
GAAP net income for third quarter 2004 of $8.6 million or $0.70 per
diluted share, compared to $2.0 million or $0.16 per diluted share
for second quarter 2004 and $3.3 million or $0.28 per diluted share
for third quarter 2003. For the nine months ended September 30,
2004, net income was $18.4 million or $1.50 per diluted share,
compared to $20.1 million or $1.68 per diluted share for the nine
months ended September 30, 2003. Core earnings were $5.4 million or
$0.44 per diluted share for third quarter 2004, compared to $6.2
million or $0.51 per diluted share for second quarter 2004 and $5.5
million or $0.46 per diluted share for third quarter 2003. For the
nine months ended September 30, 2004, core earnings were $17.5
million or $1.43 per diluted share, compared to $17.2 million or
$1.43 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 September 30, 2004, 90-day delinquencies in
Farmer Mac's portfolio remained at low levels, in terms of both
dollars and percentages. Those delinquencies totaled $47.6 million,
representing 1.01 percent of the portfolio, compared to $47.1
million and 0.98 percent as of September 30, 2003, and $79.8
million and 1.77 percent as of September 30, 2002. Real estate
owned (REO) was reduced to $7.3 million as of September 30, 2004,
from $16.4 million as of September 30, 2003. "For third quarter
2004, new business volume was $145.3 million. As in recent
quarters, Farmer Mac's new business continued to be slowed by
certain economic factors, particularly the increased liquidity of
agricultural borrowers, the increased available capital and
liquidity of agricultural lenders, and regulatory conditions.
Looking ahead, Farmer Mac is implementing a new strategic alliance
and sees additional longer-term opportunities that could lead to
more vigorous growth in business volume. "The annuity-like nature
of our income streams and the demonstrated credit strength of the
loans underlying our guarantees and LTSPCs, though offset by Farmer
Mac's reduced business volume, increased expenses, and current
market and regulatory conditions, lead us to continue to believe
the Corporation's 2004 core earnings per diluted share will be at
approximately the same level as in 2003." Non-GAAP Performance
Measures Farmer Mac reports its financial results in accordance
with GAAP. In addition to GAAP measures, Farmer Mac presents
certain non-GAAP performance measures. Farmer Mac uses 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. Due in part to the effects of FAS 133,
Farmer Mac's GAAP net income available to common stockholders
increased to $8.6 million for third quarter 2004, compared to $3.3
million for third quarter 2003, while its core earnings were $5.4
million for third quarter 2004, compared to $5.5 million for third
quarter 2003. 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 September 30, September 30,
2004 2003 (in thousands, except per share amounts) Per Per Diluted
Diluted Share Share GAAP net income available to common
stockholders $8,604 $0.70 $3,345 $0.28 Less the effects of FAS 133:
Unrealized gains/(losses) on financial derivatives and trading
assets, net of tax 3,144 0.25 (2,269) (0.19) Benefit from
non-amortization of premium payments on financial derivatives, net
of tax 76 0.01 76 0.01 Core earnings $5,384 $0.44 $5,538 $0.46 Nine
Months Ended September 30, September 30, 2004 2003 (in thousands,
except per share amounts) Per Per Diluted Diluted Share Share GAAP
net income available to common stockholders $18,391 $1.50 $20,139
$1.68 Less the effects of FAS 133: Unrealized gains/(losses) on
financial derivatives and trading assets, net of tax 633 0.05 2,695
0.23 Benefit from non-amortization of premium payments on financial
derivatives, net of tax 228 0.02 238 0.02 Core earnings $17,530
$1.43 $17,206 $1.43 Later in this release, Farmer Mac provides
additional information about the impact of FAS 133, which increased
GAAP net income available to common stockholders by $3.2 million in
third quarter 2004. 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 third quarter 2004,
compared to $7.8 million for second quarter 2004 and $8.9 million
for third quarter 2003. The net interest yield was 84 basis points
for third quarter 2004, compared to 81 basis points for second
quarter 2004 and 89 basis points for third quarter 2003. The effect
of FAS 140 for third quarter 2004 was the reclassification of
guarantee fee income as interest income in the amount of $1.0
million (10 basis points), compared to $1.1 million (11 basis
points) in each of second quarter 2004 and third 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 1
basis point for third quarter 2004, second quarter 2004 and third
quarter 2003, respectively. The net interest yields for third
quarter 2004, second quarter 2004 and third quarter 2003 included
the benefits of yield maintenance payments of 19 basis points, 13
basis points and 11 basis points, respectively. For third quarter
2004, yield maintenance payments increased net income by $1.1
million or $0.09 per diluted share, compared to $0.8 million or
$0.07 per diluted share for second quarter 2004 and $0.7 million or
$0.06 per diluted share for third quarter 2003. Guarantee and
Commitment Fees Guarantee and commitment fees were $5.3 million for
third quarter 2004, compared to $5.3 million for second quarter
2004 and $5.1 million for third quarter 2003. As discussed above,
$1.0 million of guarantee fee income was classified as interest
income in third quarter 2004, compared to $1.1 million in each of
second quarter 2004 and third quarter 2003. Miscellaneous Income
Miscellaneous income for third quarter 2004 was $0.7 million,
compared to $2.0 million for second quarter 2004 and $0.4 million
for third quarter 2003. Of the $2.0 million for second quarter
2004, $1.8 million represented recoveries from two sellers for
breaches of representations and warranties associated with prior
sales of agricultural mortgage loans to Farmer Mac and no such
recoveries occurred in third quarter 2004 or 2003. Farmer Mac had
previously charged off these amounts as losses on the related
loans. Operating Expenses Compensation and employee benefits for
third quarter 2004 were $1.7 million, compared to $1.7 million for
second quarter 2004 and $1.6 million for third quarter 2003.
General and administrative expenses for third quarter 2004 were
$2.0 million, compared to $1.8 million for second quarter 2004 and
$1.6 million for third quarter 2003. The year-to-year 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
third quarter 2004 were $0.5 million, compared to $0.6 million for
second quarter 2004 and $0.4 million for third quarter 2003. FCA's
regulatory fees charged to Farmer Mac for the federal fiscal year
ended September 30, 2004 were $2.0 million, and FCA has advised the
Corporation that its fees for the federal fiscal year ended
September 30, 2005 will be $2.3 million. Farmer Mac expects all of
the above-mentioned expenses to continue at or above current levels
through 2005. Farmer Mac's net REO operating costs for third
quarter 2004 resulted in income of $0.1 million, compared to costs
of $0.3 million for second quarter 2004. Net REO operating costs in
prior periods were nominal. Discussion of the provision for losses
is covered under the topic of "Credit" later in this release.
Capital Farmer Mac's core capital totaled $233.6 million as of
September 30, 2004, compared to $226.3 million as of June 30, 2004
and $206.4 million as of September 30, 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 September 30, 2004 exceeded the statutory
minimum capital requirement of $128.1 million by $105.5 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 September 30, 2004, the RBC test generated an estimated
risk-based capital requirement of $43.5 million, compared to the
risk-based capital requirement of $49.3 million as of June 30,
2004. Farmer Mac's regulatory capital of $256.1 million as of
September 30, 2004 exceeded the RBC requirement by approximately
$212.6 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 third quarter 2004, Farmer Mac
repurchased 70,951 shares of its Class C Non-Voting Common Stock,
at an average price of $19.88 per share, pursuant to the
Corporation's previously announced stock repurchase program. These
repurchases reduced the Corporation's capital by approximately $1.4
million. Credit As of September 30, 2004, Farmer Mac's 90-day
delinquencies totaled $47.6 million, representing 1.01 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 $47.1 million (0.98
percent) as of September 30, 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 September 30, 2004, non-performing assets totaled $75.0
million, representing 1.58 percent of the principal balance of all
loans held and loans underlying post-1996 Act Farmer Mac I
Guaranteed Securities and LTSPCs, compared to $84.6 million (1.74
percent) as of September 30, 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
September 30, 2004, Farmer Mac had $7.3 million of REO, compared to
$9.2 million as of June 30, 2004 and $16.4 million as of September
30, 2003. The commodity and geographic diversification of the REO
properties is consistent with the commodity and geographic
diversification of the non- performing assets. Analysis of the
portfolio by geographic and commodity distribution indicates that
non-performing assets, including REO, have been and are expected to
be most prevalent in the 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. As of September 30, 2004, Farmer
Mac analyzed the following three categories of assets for
impairment, based on the fair value of the underlying collateral:
(1) the $75.0 million of non-performing assets; (2) the $27.2
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 $35.9 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 $138.1 million of assets
measured for impairment against updated appraised values, other
updated collateral valuations or discounted values. Of the assets
so analyzed, $126.6 million were found to be collateralized
adequately and $11.5 million of assets were found not to be
collateralized adequately, with individual collateral shortfalls
totaling $1.3 million. Accordingly, Farmer Mac allocated specific
allowances of $1.3 million to those under-collateralized assets as
of September 30, 2004. After the allocation of specific allowances
from the total allowance for losses of $22.5 million, the
non-specific or general allowance and the contingent obligation for
inherent probable losses totaled $21.2 million. During third
quarter 2004, Farmer Mac charged off $1.1 million in losses against
the allowance for losses, compared to $2.0 million in second
quarter 2004 and $1.3 million in third 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 third quarter 2004,
Farmer Mac recovered $0.1 million of previously charged off losses.
Farmer Mac's total provision for losses was $1.6 million for third
quarter 2004, compared to $1.6 million for second quarter 2004 and
$2.2 million for third quarter 2003. As of September 30, 2004,
Farmer Mac's allowance for losses and contingent obligation for
probable losses totaled $22.5 million, or 47 basis points of the
outstanding balance of loans held and loans underlying post-1996
Act Farmer Mac I Guaranteed Securities and LTSPCs, compared to
$21.8 million (45 basis points) as of June 30, 2004 and $22.7
million (47 basis points) as of September 30, 2003. 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. 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 September
30, 2004. The contingent obligation for probable losses is a
component of Farmer Mac's guarantee and commitment obligation.
Contingent Allowance REO Reserve Obligation for Loan Valuation for
for Probable Losses Allowance Losses Losses Total (in thousands)
Beginning balance $5,565 $545 $13,187 $2,501 $21,798 Provision for
losses (144) 210 1,334 215 1,615 Net charge-offs (196) (755) - -
(951) Ending balance $5,225 $- $14,521 $2,716 $22,462 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 September 30, 2004, a parallel increase
of 100 basis points across the entire U.S. Treasury yield curve
would have decreased MVE by 0.5 percent, while a parallel decrease
of 100 basis points would have decreased MVE by 1.0 percent. As of
September 30, 2004, a parallel increase of 100 basis points would
have increased Farmer Mac's NII, a shorter-term measure of interest
rate risk, by 9.4 percent, while a parallel decrease of 100 basis
points would have decreased NII by 7.6 percent. Farmer Mac's
duration gap, another measure of interest rate risk, was minus 0.2
months as of September 30, 2004. The economic effects of financial
derivatives, including interest rate swaps, are included in the
MVE, NII and duration gap analyses. As an alternative to long-term
fixed-rate debt issuance, Farmer Mac issues short- term debt and
enters into contracts to pay fixed rates of interest and receive
floating rates of interest from counterparties. These
"floating-to-fixed" interest rate swaps are used to adjust the
characteristics of Farmer Mac's short-term debt to match more
closely the cash flow and duration characteristics of its
longer-term assets, thereby reducing interest rate risk, and also
to derive an overall lower effective fixed-rate cost of borrowing
than would otherwise be available in the conventional debt market.
As of September 30, 2004, Farmer Mac had $614.6 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 September 30, 2004, Farmer Mac had $905.7
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 September 30, 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 third quarter
2004, the increase in net after-tax income resulting from FAS 133
was $3.2 million and the net after-tax decrease in accumulated
other comprehensive income was $10.6 million. During second quarter
2004, the decrease in net after-tax income resulting from FAS 133
was $4.3 million and the net after-tax increase in accumulated
other comprehensive income was $27.1 million. For third quarter
2003, the decrease in net after-tax income resulting from FAS 133
was $2.2 million and the net after-tax increase in accumulated
other comprehensive income was $11.5 million. 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. Statements by either FCA, the
federal regulator of both Farmer Mac and the primary lenders in the
Farm Credit System (FCS), or 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, or both, have cautioned FCS institutions
about doing business with GSEs, including Farmer Mac, and have
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.
While Farmer Mac expects to be able to comply with the regulation
if it is adopted in its current form, the Corporation disagrees
with certain aspects of the proposed regulation and submitted
comments on the proposal to FCA accordingly. On August 5, 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 is subject to a 90-day
public comment period and, as drafted, 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 intends to
submit 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 June 30, 2004,
as filed with the SEC on August 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 third quarter 2004 earnings and this press release will be
webcast on Farmer Mac's website beginning at 9:00 a.m. eastern
time, Thursday, October 28, 2004, and an audio recording of that
call will be available for two weeks on Farmer Mac's website after
the call is concluded. Federal Agricultural Mortgage Corporation
Consolidated Balance Sheets (unaudited) (in thousands) September
December September 30, 31, 30, 2004 2003 2003 Assets: Cash and cash
equivalents $499,806 $623,674 $513,370 Investment securities
949,391 1,064,782 1,083,477 Farmer Mac Guaranteed Securities
1,349,256 1,508,134 1,521,167 Loans held for sale 13,863 46,662
30,511 Loans held for investment 886,409 942,929 949,132 Allowance
for loan losses (5,225) (5,967) (6,171) Loans, net 895,047 983,624
973,472 Real estate owned, net of valuation allowance of zero, $0.2
million, and $1.0 million 7,279 15,478 16,413 Financial derivatives
940 961 2,816 Interest receivable 37,820 58,423 42,290 Guarantee
and commitment fees receivable 18,894 16,885 14,729 Deferred tax
asset, net 10,800 10,891 10,408 Prepaid expenses and other assets
15,687 16,798 18,229 Total Assets $3,784,920 $4,299,650 $4,196,371
Liabilities and Stockholders' Equity: Notes payable: Due within one
year $2,201,229 $2,799,384 $2,763,811 Due after one year 1,222,609
1,136,110 1,074,070 Total notes payable 3,423,838 3,935,494
3,837,881 Financial derivatives 57,873 67,670 82,112 Accrued
interest payable 25,689 26,342 29,782 Guarantee and commitment
obligation 17,751 14,144 15,659 Accounts payable and accrued
expenses 17,146 29,574 16,279 Reserve for losses 14,521 13,172
10,592 Total Liabilities 3,556,818 4,086,396 3,992,305 Preferred
stock 35,000 35,000 35,000 Common stock at par 12,033 12,054 11,796
Additional paid-in capital 89,146 88,652 84,655 Accumulated other
comprehensive loss (5,487) (2,295) (2,336) Retained earnings 97,410
79,843 74,951 Total Stockholders' Equity 228,102 213,254 204,066
Total Liabilities and Stockholders' Equity $3,784,920 $4,299,650
$4,196,371 Federal Agricultural Mortgage Corporation Consolidated
Statements of Operations (unaudited) (in thousands, except per
share amounts) Three Months Nine Months Ended Ended Sept. Sept.
Sept. Sept. 30, 30, 30, 30, 2004 2003 2004 2003 Interest income:
Investments and cash equivalents $9,412 $7,994 $25,857 $26,490
Farmer Mac Guaranteed Securities 16,689 17,783 49,555 55,984 Loans
12,285 13,543 38,974 39,679 Total interest income 38,386 39,320
114,386 122,153 Interest expense 30,417 30,402 89,112 93,995 Net
interest income 7,969 8,918 25,274 28,158 Provision for loan losses
144 (3,391) (2,420) (6,015) Net interest income after provision for
loan losses 8,113 5,527 22,854 22,143 Guarantee and commitment fees
5,269 5,056 15,742 15,261 Gains/(Losses) on financial derivatives
and trading assets 5,350 (3,348) 2,446 3,653 Gain on sale of Farmer
Mac Guaranteed Securities - - 367 - Gains/(Losses) on the sale of
real estate owned 133 79 (120) (23) Miscellaneous income 703 354
3,185 743 Total revenues 19,568 7,668 44,474 41,777 Expenses:
Compensation and employee benefits 1,715 1,582 5,227 4,488 General
and administrative 2,038 1,550 5,929 3,949 Regulatory fees 504 383
1,565 1,148 REO operating costs, net (52) - 290 - Provision for
losses 1,759 (1,190) 2,426 300 Total operating expenses 5,964 2,325
15,437 9,885 Income before income taxes 13,604 5,343 29,037 31,892
Income tax expense 4,440 1,438 8,966 10,073 Net income 9,164 3,905
20,071 21,819 Preferred stock dividends (560) (560) (1,680) (1,680)
Net income available to common stockholders $8,604 $3,345 $18,391
$20,139 Earnings per common share: Basic earnings per common share
$0.71 $0.28 $1.52 $1.72 Diluted earnings per common share $0.70
$0.28 $1.50 $1.68 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: September 30, 2004
$23,229 $84,097 $38,010 $145,336 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 September 30, 2002 58,475
140,157 37,374 236,006 For the year ended: December 31, 2003
192,577 763,342 271,229 1,227,148 December 31, 2002 747,881
1,155,479 173,011 2,076,371 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:
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 September 30, 2002 2,127,460
2,407,469 35,297 Farmer Mac II Total (in thousands) As of:
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 September 30, 2002 630,452 5,200,678
Outstanding Balance of Loans Held and Loans Underlying On-Balance
Sheet Farmer Mac Guaranteed Securities Fixed Rate 5-to-10-
1-Month-to- (10-yr. Wtd. Year ARMs 3-Year Avg. Term) and Resets
ARMs Total (in thousands) As of: 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
September 30, 2002 1,000,518 934,435 498,815 2,433,768
Non-performing Assets and 90-Day Delinquencies Outstanding
Post-1996 Act Loans, Guarantees Non- and performing LTSPCs
Assets(3) Percentage (dollars in thousands) As of: 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% September 30, 2002
4,506,330 91,286 2.03% Less: REO and Performing 90-Day Bankruptcies
Delinquencies(4) Percentage (dollars in thousands) As of: 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% September 30, 2002 11,460 79,826 1.77%
Distribution of Post-1996 Act Non-performing Assets and 90-Day
Delinquencies by Original LTV Ratio(5) as of September 30, 2004
(dollars in thousands) Non- 90-Day performing Percent- Delinquen-
Percent- Original LTV Ratio Assets age cies age 0.00% to 40.00%
$5,311 7% $4,334 9% 40.01% to 50.00% 15,588 21% 10,615 22% 50.01%
to 60.00% 33,714 45% 18,741 40% 60.01% to 70.00% 16,815 22% 11,117
23% 70.01% to 80.00% 3,417 5% 2,777 6% 80.01% + 177 0% - 0% Total
$75,022 100% $47,584 100% Distribution of Post-1996 Act
Non-performing Assets and 90-Day Delinquencies by Loan Origination
Date as of September 30, 2004 (dollars in thousands) Outstanding
Post-1996 Act Loan Loans, Non- 90-Day Origination Guarantees
Performing Percent- Delinquen- Percent- Date and LTSPCs Assets age
cies age Before 1994 $577,672 $2,896 0.50% $2,001 0.35% 1994
137,947 656 0.48% 656 0.48% 1995 131,148 2,589 1.97% 1,817 1.39%
1996 308,300 8,745 2.84% 5,392 1.77% 1997 365,381 12,488 3.42%
5,745 1.60% 1998 580,036 12,206 2.10% 7,444 1.29% 1999 588,624
16,035 2.72% 11,704 2.00% 2000 347,383 8,755 2.52% 4,647 1.35% 2001
541,206 7,025 1.30% 4,758 0.88% 2002 594,977 3,048 0.51% 2,841
0.48% 2003 463,527 579 0.12% 579 0.12% 2004 120,638 - 0.00% - 0.00%
Total $4,756,839 $75,022 1.58% $47,584 1.01% (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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