As filed with the Securities and Exchange Commission
on
- -----------------------------------------------------------------------
May 15, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997. Commission File Number 0-17440
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Exact name of registrant as specified in its
charter)
Federally chartered
instrumentality 52-1578738
of the United States
---------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
919 18th Street, N.W., Suite 200, 20006
Washington, D.C.
---------------------------------- ---------------------------------
(Address of principal executive (Zip code)
offices)
(202) 872-7700
(Registrant's telephone number, including area code)
----------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days
Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
As of May 15, 1996, there were 990,600 shares of Class A Voting Common
Stock, 500,301 shares of Class B Voting Common Stock, and 2,677,681 shares of
Class C Non-Voting Common Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The following interim consolidated financial statements of the Federal
Agricultural Mortgage Corporation (the "Corporation" or "Farmer Mac") have been
prepared, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Such interim consolidated financial statements reflect
all normal and recurring adjustments that are, in the opinion of management,
necessary to a fair statement of the results for the interim periods presented.
Certain information and footnote disclosures normally included in annual
consolidated financial statements have been condensed or omitted as permitted by
such rules and regulations. Management believes that the disclosures are
adequate to present fairly the consolidated financial position, consolidated
results of operations and consolidated cash flows at the dates and for the
periods presented. These condensed financial statements should be read in
conjunction with the audited 1996 financial statements of Farmer Mac. Results
for interim periods are not necessarily indicative of those to be expected for
the fiscal year.
The following information concerning Farmer Mac's financial statements is
included herein.
<TABLE>
<CAPTION>
<S> <C>
Consolidated Balance Sheets at March 31, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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FEDERAL AGRICULTURAL MORTGAGE CORPORATION
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CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, December 31,
1997 1996
------------------ ------------------
<S> <C> <C>
(unaudited)
ASSETS:
Cash and cash equivalents $ 252,649 $ 68,912
Interest receivable 11,281 14,821
Guarantee fees receivable 560 745
Loans held for securitization 8,974 12,999
Investments 511,733 85,799
Farmer Mac I and II Securities, net 414,236 416,501
Farmer Mac I and II payments receivable 5,012 2,421
Prepaid expenses and other assets 872 568
================= ==================
TOTAL ASSETS $ 1,205,317 $ 602,766
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Debentures, notes and bonds, net:
Due within one year $ 861,013 $ 261,054
Due after one year 288,326 285,238
Accrued interest payable 6,770 7,231
Accounts payable and accrued expenses 1,504 1,721
Allowance for sold Farmer Mac I & II Securities 484 317
----------------- ------------------
TOTAL LIABILITIES 1,158,097 555,561
----------------- ------------------
STOCKHOLDERS' EQUITY Common stock:
Class A Voting, $1 par value, 2,000,000 shares
authorized, 990,000
shares issued and outstanding at March 31, 1997 990 990
and
December 31, 1996
Class B Voting, $1 par value, 2,000,000 shares
authorized, 500,301 and
593,401 shares issued and outstanding at March 500 593
31, 1997 and
December 31, 1996, respectively
Class C Non-Voting, $1 par value, 4,000,000
shares authorized,
2,677,681 and 2,658,897 shares issued and 2,678 2,659
outstanding at
March 31, 1997 and December 31, 1996
Additional paid in capital 52,501 52,513
Note receivable for purchase of stock - (557)
Unrealized gain on securities available-for-sale 181 329
Accumulated deficit (9,630) (9,322)
----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 47,220 47,205
----------------- ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,205,317 $ 602,766
================= ==================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended March 31
------------------------------
1997 1996
------------------------------
<S> <C> <C>
(unaudited)
INTEREST INCOME:
Farmer Mac I and II securities $ 7,381 $ 7,452
Investments and cash equivalents 5,758 1,469
Loans held for securitization 343 -
------------------------------
TOTAL INTEREST INCOME 13,482 8,921
INTEREST EXPENSE 12,125 8,394
------------------------------
NET INTEREST INCOME 1,357 527
OTHER INCOME:
Guarantee fees 525 324
Gain on issuance of
mortgage-backed 466 -
securities, net
Miscellaneous 196 35
------------------------------
TOTAL OTHER INCOME 1,187 359
OTHER EXPENSES:
Compensation and employee 703 531
benefits
Professional fees 348 157
Marketing and advertising 7 11
Insurance 59 51
Rent 57 41
Regulatory fees 16 71
Board of Directors fees and
meeting 90 88
Expenses
Administrative 198 73
Provision for losses 180 21
------------------------------
TOTAL OTHER EXPENSES 1,658 1,044
------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES 886 (158)
Provision for income taxes 28 -
------------------------------
NET INCOME/(LOSS) $ 858 $ (158)
==============================
EARNINGS/(LOSS) PER SHARE:
Class A and B Voting Common Stock
$ 0.09 $ (0.03)
Class C Non-Voting Common Stock $ 0.26 $ (0.10)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Three Months Ended
------------------------------------
March 31, 1997 March 31, 1996
---------------- ----------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Income (loss) from Operations $ 858 $ (158)
Adjustments to reconcile net loss to
cash provided by operating activities:
Amortization of premium on Farmer Mac I and II 684 942
Securities
Discount Note amortization 6,291 2,309
Decrease in guarantee fees receivable 185 240
Decrease in interest receivable 3,540 5,988
Increase in Farmer Mac I and II payments receivable (2,591) (6,031)
Increase in prepaid expenses and other assets (304) (113)
Amortization and depreciation 22 45
Decrease in accounts payable and accrued expenses (217) (25)
Decrease in loans held for securitization 4,025 -
Decrease in accrued interest payable on Medium-Term
Notes (461) (1,731)
Provision for losses on Farmer Mac I Program 180 27
Other - (20)
---------------- ----------------
Net cash provided by operating activities 12,212 1,473
---------------- ----------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Farmer Mac I and II purchases (18,583) (15,033)
Purchases of investments (429,484) (11,645)
Proceeds from maturity of investments 3,406 994
Proceeds from Farmer Mac I and II principal 20,152 30,190
repayments
Purchases of office equipment (9) (3)
---------------- ----------------
Net cash used by investing activities (424,518) 4,503
---------------- ----------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance of Medium-Term Notes 34,965 -
Payments to redeem Medium-Term Notes (9,240) (29,280)
Proceeds from issuance of Discount Notes 3,330,067 371,505
Discount Notes redeemed (2,759,055) (282,000)
Repurchase of Class B Common Stock (1,396) -
Proceeds from issuance of common stock 702 -
---------------- ----------------
Net cash provided by financing activities 596,043 60,225
---------------- ----------------
----------------
Net increase in cash and cash equivalents 183,737 66,201
Cash and cash equivalents at beginning of period 68,912 8,336
================ ================
Cash and cash equivalents at end of period $ 252,649 $ 74,537
================ ================
Supplemental disclosures of cash flow information: Cash paid during the
three-month period for:
Interest $ 6,278 $ 7,800
Taxes 14 -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Accounting Policies.
(a) Principles of Consolidation
......Financial information at and for the three months ended March 31,
1997 is consolidated to include the accounts of Farmer Mac and its two wholly
owned subsidiaries, Farmer Mac Mortgage Securities Corporation and Farmer Mac
Acceptance Corporation. All material intercompany transactions have been
eliminated in consolidation.
(b) Reclassifications
Certain reclassifications of the 1996 information were made to
conform with the 1997 presentation.
Note 2. Off-Balance Sheet Farmer Mac Guaranteed Securities.
Farmer Mac issues guarantees in the normal course of business to
fulfill its statutory purpose of increasing liquidity for agricultural mortgage
lenders. Farmer Mac guarantees the timely payment of principal and interest on
securities issued under the Farmer Mac I and Farmer Mac II Programs. The
following table sets forth the outstanding principal balances of Farmer Mac
Guaranteed Securities issued under the Farmer Mac I and Farmer Mac II Programs
and not held in its portfolio.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
----------------------- ----------------------
(In Thousands)
<S> <C> <C>
Farmer Mac I $ 253,365 $ 214,424
Farmer Mac II $ 15,073 $ 11,606
</TABLE>
At March 31, 1997, the $253.4 million of Farmer Mac I Securities included $195.8
million of agricultural mortgage-backed securities ("AMBS") issued under Farmer
Mac's expanded legislative authorities for which Farmer Mac bears the risk of
first loss.
Note 3. Commitments
At March 31, 1997, Farmer Mac had committed to purchase $14.3
million of Qualified Loans through the Farmer Mac I cash window and had
committed to sell forward $10.3 million of AMBS for settlements in April 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Overview. Farmer Mac reported net income for the three months ended March
31, 1997 of $858 thousand, compared with a net loss of $158 thousand for the
first quarter of 1996. Earnings per share for the first quarter of 1997 for
Class A and B Voting Common Stocks were $0.09 and for Class C Non-Voting Common
Stock were $0.26, compared with losses per share for the first quarter of 1996
of $0.03 for Class A and B Voting Common Stock and $0.10 for Class C Non-Voting
Common Stock, as adjusted to reflect the 3-to-1 dividend and liquidation ratio
applicable to each share of Class C Non-Voting Common Stock relative to each
share of Voting Common Stock. The $1.0 million increase in net income from March
31, 1996 to March 31, 1997 was largely attributable to an increase in the
issuance of Farmer Mac I Securities, resulting in a $466 thousand gain; an
increase in the outstanding balance of Farmer Mac I and II Securities, resulting
in an increase of $201 thousand in guarantee fee income; and an increase in
interest income from cash and cash equivalents, investments and loans held for
securitization.
During the first quarter of 1997, Farmer Mac continued to expand
operations under its revised legislative authorities. Approximately $49.4
million of AMBS, backed by loans acquired through the cash window, were sold to
capital markets investors, resulting in gains on sale commensurate with those
from previous transactions. Approximately $38.0 million of guaranteed securities
were sold in April 1997, with an additional $33.0 million scheduled for sale in
May 1997.
To date, Farmer Mac has approved and authorized 120 sellers from 24 states
to submit loans for sale through the cash window and currently has under review
another 20 applications. Management is continuing to expand the seller network
by focusing its marketing initiatives on "super-regional" banks and
non-traditional agricultural mortgage lenders, such as agricultural suppliers
and mortgage bankers. Over $282.0 million of loans have been submitted to Farmer
Mac for approval since the opening of the cash window in July 1996, of which
approximately 27% have been securitized and sold, 14% have been purchased and
are pending securitization, and 25% are in various stages of the pipeline. The
remaining 33% of loans have been either denied by Farmer Mac for credit reasons
or withdrawn by the seller/servicer.
With the expanded seller network, both seller and geographic distribution
continue to broaden. Only two sellers represent more than 10% each of the total
principal balance of loans submitted for purchase through the cash window.
Although the states comprising the Pacific region continue to provide the
largest source of volume, the level of business from Mountain and Corn Belt
states continues to increase.
In addition to purchasing loans through the cash window, Farmer Mac is
continuing to pursue with portfolio holders of agricultural loans the
acquisition of loans through negotiated bulk purchases and swap transactions,
although there can be no assurance that any such transactions actually will be
consummated.
During the first quarter of 1997, Farmer Mac also undertook a strategy to
increase its presence in the capital markets, particularly the debt markets, in
order to attract more investors to its debt and mortgage-backed securities and
thereby improve the liquidity of its securities and reduce its borrowing and
securitization costs. The Board and management believed that increasing Farmer
Mac's presence in the capital markets would improve the pricing of its AMBS, and
thereby enhance the attractiveness of the loan products offered through its
programs for the benefit of agricultural lenders and borrowers. Since the
implementation of the debt strategy, the Corporation has experienced a
tightening of its AMBS spreads relative to other comparable agency securities
and anticipates continued improvements in pricing as liquidity and investor
recognition increase through the expanded debt issuances. The Corporation's
eventual objective for the proceeds of its increased debt issuances is
investment of those proceeds in Qualified Loans purchased under the Farmer Mac
programs. During the phase-in of that objective, Farmer Mac will be investing a
portion of those proceeds in high quality interest-earning assets, which have
generated, and should continue to generate, increased interest income.
Notwithstanding the increase in Farmer Mac's business activity and the
significant improvements in its financial performance since the enactment of the
legislative revisions to its statutory charter in early 1996, Farmer Mac still
faces many challenges, particularly that of continuing to expand its business in
the highly static market for agricultural and rural home mortgage loans. While
the programs it operates are now more accessible to agricultural lenders and
offer competitive loan rates and terms, they continue to receive only gradual
acceptance in the agricultural lending community for a number of reasons that
have been reported previously. For Farmer Mac to succeed over the long term
through the realization of its business development and profitability goals,
lenders must be convinced of the benefits of selling loans to Farmer Mac and
must be willing to adapt their business practices to sell loans into the
secondary market in significant volume.
Set forth below is a discussion of certain specific items of the income
statement and balance sheet.
Net Interest Income. Net interest income totaled $1.4 million for the
three months ended March 31, 1997, an $830 thousand increase from the three
months ended March 31, 1996. The increase was largely attributable to an
increase in the average balance of investments (primarily floating rate agency
mortgage-backed securities and other short-term investments) and cash
equivalents, a result of the implementation of Farmer Mac's expanded debt
issuance strategy.
<PAGE>
Average Balances, Income and Expense, Yields and Rates. The
following table presents, for the periods indicated, information regarding
interest income on average interest-earning assets and related yields, as well
as interest expense on average interest-bearing liabilities and related rates
paid. The average balances were calculated by averaging month-end balances.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------
1997 1996
------------------------ ---------------------------
(Dollars in Thousands)
Average Income/ Average Average Income/ Average
Balances Expense Rate Balances Expense Rate
Assets
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Farmer Mac I and II Securities $414,918 $ 7,381 7.12% $410,884 $ 7,452 7.25%
Investments and cash Equivalents 350,121 5,758 6.58% 123,444 1,469 4.76%
Loans held for securitization 14,944 343 9.18% - -
--------------------------------------------------------------------------------------------
Total interest-earning assets 779,983 13,482 6.91% 534,328 8,921 6.68%
Other assets 84,927 13,565
-------- --------
$864,910 $547,893
-------------------------------------------------------------------------------------------
Liabilities and Stockholders'
Equity
Interest-bearing liabilities:
Debentures, notes and bonds,
net $744,399$ 12,125 6.52% $ 531,456 $ 8,394 6.32%
Other liabilities $ 78,184 4,870
Stockholders' equity 42,327 11,567
-------------------------------------------------------------------------------------------
$864,910 $ 547,893
---------------------------------------------------------- ---------------------------
Net interest income/spread $ 1,357 .39% $ 527 0.36%
---------------------------------------------------------- ---------------------------
Net yield on interest-earning
assets .70% 0.40%
</TABLE>
Rate/Volume Analysis. The table below sets forth certain information
regarding the changes in the components of Farmer Mac's net interest income for
the periods indicated. For each category, information is provided on changes
attributable to (a) changes in volume (change in volume multiplied by old rate);
(b) changes in rate (change in rate multiplied by old volume); and (c) the
total. Combined rate/volume variances, a third element of the calculation, are
allocated based on their relative size.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
Compared to Three Months Ended March 31,
1996
---------------------------------------------
Increase or (Decrease) Due to
Rate Volume Total
------------ -------------- ------------
(in thousands)
Income from interest-earning assets:
<S> <C> <C> <C>
Farmer Mac I and II Securities.... $ (146) $ 75 $ (71)
Investments and cash equivalents.. 739 3,550 4,289
Loans held for securitization..... - 343 343
------------ -------------- ------------
Total income from
interest-earning assets............. 593 3,968 4,561
Expense on interest-bearing
liabilities......................... 270 3,461 3,731
------------ ------------ ------------
Change in net interest income....... $ 323 $ 507 $ 830
============ ============== ============
</TABLE>
Interest income totaled $13.5 million for the three months ended March 31,
1997, a $4.6 million increase from the three months ended March 31, 1996. The
increase was attributable to an increase in the average balance of investments
and cash equivalents and loans held for securitization.
Interest expense for the three months ended March 31, 1997 amounted to
$12.1 million, an increase of $3.7 million from the three months ended March 31,
1996. The increase was largely attributable to an increase in the average
outstanding balance of interest-bearing liabilities as a result of the
implementation of Farmer Mac's expanded debt issuance strategy.
Asset and Liability Management. In light of Farmer Mac's increased
activity in the capital debt markets, Farmer Mac has begun to use off-balance
sheet derivative financial instruments to manage its exposure to interest rate
risk; such instruments are not used for trading or speculative purposes.
Off-balance sheet instruments primarily include interest rate contracts
(interest rate swaps, caps, floors and corridors), futures and options with
indices that directly correlate to on-balance sheet assets and liabilities.
Interest rate swaps are contractual agreements between two parties for the
exchange of periodic payments based on a notional principal amount and agreed
upon rates that may be fixed or variable. Farmer Mac's interest rate swaps
are executed in conjunction with specific debt issuances or asset purchases.
These swaps, when combined with the underlying liability or asset,
synthetically create debt and asset yields that produce lower effective debt
costs or higher effective asset yields than those available through direct debt
issuances or asset purchases. At March 31, 1997, Farmer Mac had $226.4 million
in notional amount of derivatives outstanding, all of which represent interest
rate swaps acquired for asset and liability management purposes.
While derivative financial instruments reduce Farmer Mac's exposure to
interest rate risk, they increase its exposure to credit risk. Credit risk
arises from the possibility that a counterparty will be unable to perform
according to the terms of the contract and is equal to the fair value gain on
the instrument if the counterparty fails to perform. The credit risk is normally
a small percentage of the notional amount and fluctuates as interest rates move
up or down. Farmer Mac mitigates this risk by subjecting the transactions to the
same rigorous approval and monitoring process as is used for on-balance sheet
credit transactions, by dealing in the national market with highly rated
counterparties, by using International Swaps and Derivatives Association
documentation and by requiring the posting of securities as collateral under
certain circumstances to reduce exposure. Collateral is delivered by either
party when the fair value of a particular transaction on a net basis exceeds an
acceptable threshold of exposure. The threshold level is determined based on the
strength of the individual counterparty.
Other Income. Other income totaled $1.2 million for the three months ended
March 31, 1997, an increase of $828 thousand from the three months ended March
31, 1996. Guarantee fee income increased $201 thousand from the three months
ended March 31, 1996 to the three months ended March 31, 1997. The increase was
primarily a result of the increased balance of outstanding guaranteed securities
for the comparable period and the increased guarantee fee rate (to 50 basis
points from 25 basis points) applicable to Farmer Mac I Securities issued under
the revised legislative authorities. At March 31, 1997, Farmer Mac had $672.1
million of guaranteed securities outstanding as compared to $474.6 million as of
March 31, 1996.
The gain on issuance of mortgage-backed securities, net of related
expenses, totaled $466 thousand for the three months ended March 31, 1997, a
result of the issuance and sale of $49.4 million of AMBS during the quarter. No
AMBS were issued in the first quarter of 1996.
Miscellaneous income totaled $196 thousand for the three months ended
March 31, 1997, as compared to $35 thousand for the three months ended March 31,
1996. The $161 thousand increase was largely attributable to the difference
between the amount Farmer Mac had accrued for expenses related to the Western
Farm Credit Bank (WFCB) litigation and the actual amount incurred during the
1997 first quarter in connection with the settlement of that litigation, which
occurred in January 1997. No additional expenses will be incurred as a result of
the settlement.
Other Expenses. Other expenses totaled $1.7 million for the three months
ended March 31, 1997, as compared to $1.0 million for the three months ended
March 31, 1996. The $614 thousand increase in other expenses was attributable to
increases in compensation and employee benefits, professional fees,
administrative expenses and the provision for losses.
Compensation and employee benefits increased $172 thousand from the three
months ended March 31, 1996 to the three months ended March 31, 1997 because of
an increase in staffing. Over that twelve-month period, Farmer Mac hired eight
additional employees, primarily in the areas of business development and credit
management, to assist with the development of a seller network and to manage the
credit risk associated with the cash window program.
Professional fees, comprised primarily of fees for the administration of
the cash window program, for accounting and for legal services, increased $191
thousand from the three months ended March 31, 1996 to the three months ended
March 31, 1997. This increase was largely attributable to costs associated with
the administration of the cash window, primarily the credit underwriting of
loans submitted for purchase thereunder, since the program was not in place in
the first quarter of 1996. The remaining portion of the increase was
attributable to increased accounting fees and the use of consultants to assist
with the upgrade of Farmer Mac's computer software and hardware technology.
Administrative expenses increased $125 thousand from the three months
ended March 31, 1996 to the three months ended March 31, 1997, largely as a
result of increases in telephone, postage and travel related expenses, all
attributable to the implementation of the cash window.
The provision for losses increased $159 thousand from the three months
ended March 31, 1996 to the three months ended March 31, 1997, as a result of
the issuance of the $237.2 million of AMBS since June 1996 for which Farmer Mac
assumes the first risk of loss.
Income tax expense. As a result of the utilization of net operating loss
carryforwards, Farmer Mac's tax expense was limited to $28 thousand for the
three months ended March 31, 1997.
Financial Condition and Capital
At March 31, 1997, assets totaled $1.2 billion, as compared to $602.8
million at December 31, 1996. The increase was largely attributable to the
implementation of the Corporation's expanded debt issuance strategy, resulting
in a $609.7 million increase from December 31, 1996 to March 31, 1997 in cash
and cash equivalents and investments, which were funded by Discount Notes with
similar terms to maturity. Net proceeds of the debt issuances were used to
increase Farmer Mac's investment and cash equivalents by a corresponding amount.
At March 31, 1997, Farmer Mac had $1.1 billion of Discount Notes and
Medium-Term Notes (net of unamortized debt issuance costs, discounts and
premiums) outstanding, as compared to $546.3 million at December 31, 1996. This
$603.0 million increase was the result of the implementation of Farmer Mac's
debt issuance strategy. During the first three months of 1997, Farmer Mac issued
$3.3 billion of Discount Notes and $35.0 million of Medium-Term Notes and
redeemed $2.8 billion of Discount Notes and $9.2 million of Medium-Term Notes.
Farmer Mac maintains an allowance for loan losses to cover anticipated
losses under the Farmer Mac I Program. At March 31, 1997, the allowance for
losses on guaranteed securities held in portfolio and those sold to investors
totaled $835 thousand, compared to $655 thousand at December 31, 1996. The
Farmer Mac I and II Securities are shown net of their applicable allowance of
$351 thousand at March 31, 1997, representing an increase of $13 thousand from
year-end 1996; the allowance for Farmer Mac Guaranteed Securities sold to
investors was $484 thousand at March 31, 1997, representing an increase of $167
thousand from year-end 1996. This $167 thousand increase was attributable to the
issuance of $49.4 million of AMBS (as to which Farmer Mac bears the risk of
first loss).
No loss allowance has been made for the Farmer Mac II Program because the
Guaranteed Portions are backed by the full faith and credit of the United States
and are not exposed to credit losses.
Management evaluates the adequacy of the allowance for loan losses on a
quarterly basis and considers a number of factors, including: historical
charge-off and recovery activity (noting any particular trends in preceding
periods); trends in delinquencies, bankruptcies and non-performing loans; trends
in loan volume and size of credit risks; current and anticipated economic
conditions; the condition of agricultural segments and geographic areas
experiencing or expected to experience particular economic adversities,
particularly areas where Farmer Mac may have a geographic or commodity
concentration; the degree of risk inherent in the composition of the guaranteed
portfolio; quality control reviews; and underwriting standards. Farmer Mac
considers the amounts in the allowance account to be adequate to cover its
exposure to guarantee payments in the Farmer Mac I Program.
At March 31, 1997, loans that were 90 days or more past due, loans that
were in foreclosure or bankruptcy and loans that had been foreclosed upon and
the related mortgaged property not yet liquidated ("REO Property") represented
0.4% of the principal amount of all loans underlying Farmer Mac Guaranteed
Securities. Management believes that no losses will be incurred by Farmer Mac as
a result of the loans in foreclosure or the REO Property because of the
existence of the 10% subordinated interests with respect to the related
securities.
At March 31, 1997, Farmer Mac's stockholders' equity totaled $47.2
million, an increase of $15 thousand from December 31, 1996. The minimal
increase in stockholders' equity was attributable to certain transactions that
affected stockholders' equity during the first quarter. As part of the
settlement of the WFCB litigation, Farmer Mac repurchased (and subsequently
canceled) 93,100 shares of Class B common stock; issued 18,784 shares of Class C
common stock to WFCB pursuant to the exercise of warrants previously issued to
WFCB; and was repaid the $557 thousand note receivable from WFCB with interest.
At March 31, 1997 and December 31, 1996, Farmer Mac's regulatory required
minimum capital was $27.9 million and $7.4 million, respectively, compared with
actual capital of $47.2 million for both periods.
Farmer Mac has not paid and does not expect to pay dividends on its common
stock in the near future. Dividends on the common stock are subject to
determination and declaration by the Board. There is no preference between
holders of the Voting Common Stock and Class C Non-Voting Common Stock relating
to dividends. The ratio of dividends paid on each share of Class C Non-Voting
Common Stock to each share of Voting Common Stock, however, will be
three-to-one. If dividends are to be paid to holders of the Voting Common Stock,
such per share dividends to holders of Class A and Class B Voting Common Stock
will be equal.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The registrant is not a party to any pending legal proceedings.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Stockholders.
------------------------------------------------
Not applicable.
Item 5. Other Information.
None.
Item 6 Exhibits and Reports on Form 8-K.
(a)...Exhibits.
(a) Exhibits.
Description
* 3.1 - Title VIII of the Farm Credit Act of 1971, as most recently
amended by the Farm Credit System Reform Act of 1996, P.L.
104-105 (Form 10-K filed March 29, 1996).
** 3.2 - Amended and restated Bylaws of the Registrant (Form 10-K
filed March 27, 1997).
+* 10.1 - Stock Option Plan (Previously filed as Exhibit 19.1 to Form
10-Q filed August 14, 1992).
+* 10.1.1 - Amendment No. 1 to Stock Option Plan (Previously filed as
Exhibit 10.2 to Form 10-Q filed August 16, 1993).
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
+* 10.1.2 - 1996 Stock Option Plan (Form 10-Q filed August 14, 1996).
+* 10.2 - Employment Agreement dated May 5, 1989 between Henry D.
Edelman and the Registrant (Previously filed as Exhibit 10.4 to
Form 10-K filed February 14, 1990).
+** 10.1.3 - 1997 Stock Option Plan.
+* 10.2.1 - Amendment No. 1 dated January 10, 1991 to Employment
Agreement between Henry D. Edelman and the Registrant
(Previously filed as Exhibit 10.4 to Form 10-K filed April 1,
1991).
+* 10.2.2 - Amendment to Employment Contract dated as of June 1,
1993 between Henry D. Edelman and the Registrant (Previously
filed as Exhibit 10.5 to Form 10-Q filed November 15, 1993).
+* 10.2.3 - Amendment No. 3 dated as of June 1, 1994 to Employment
Contract between Henry D. Edelman and the Registrant reviously
filed as Exhibit 10.5 to Form 10-Q filed November 15, 1994).
+* 10.2.4 - Amendment No. 4 dated as of February 8, 1996 to Employment
Contract between Henry D. Edelman and the Registrant
(Form 10-K filed March 29, 1996).
+* 10.2.5 - Amendment No. 5 dated as of June 13, 1996 to Employment
Contract between Henry D. Edelman and the Registrant
(Form 10-Q filed August 14, 1996).
+* 10.3 - Employment Agreement dated May 11, 1989 between Nancy E.
Corsiglia and the Registrant (Previously filed as Exhibit
10.5 to Form 10-K filed February 14, 1990).
+* 10.3.1 - Amendment dated December 14, 1989 to Employment
Agreement between Nancy E. Corsiglia and the Registrant
(Previously filed as Exhibit 10.5 to Form 10-K filed February
14, 1990).
+* 10.3.2 - Amendment No. 2 dated February 14, 1991 to Employment
Agreement between Nancy E. Corsiglia and the Registrant
(Previously filed as Exhibit 10.7 to Form 10-K filed April 1,
1991).
- ----------------------
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
+* 10.3.3 - Amendment to Employment Contract dated as of June 1,
1993 between Nancy E. Corsiglia and the Registrant (Previously
filed as Exhibit 10.9 to Form 10-Q filed November 15, 1993).
+* 10.3.4 - Amendment No. 4 dated June 1, 1993 to Employment
Contract between Nancy E. Corsiglia and the Registrant
(Previously filed as Exhibit 10.11 to Form 10-K filed March 30,
1994).
+* 10.3.5 - Amendment No. 5 dated as of June 1, 1994 to Employment
Contract between Nancy E. Corsiglia and the Registrant
(Previously filed as Exhibit 10.12 to Form 10-Q filed August 15,
1994).
+* 10.3.6 - Amendment No. 6 dated as of June 1, 1995 to Employment
Contract between Nancy E. orsiglia and the Registrant
(Form 10-Q filed August 14, 1995).
+* 10.3.7 - Amendment No. 7 dated as of February 8, 1996 to Employment
Contract between Nancy E. Corsiglia and the Registrant
(Form 10-K filed March 29, 1996).
+* 10.3.8 - Amendment No. 8 dated as of June 13, 1996 to Employment
Contract between Nancy E. Corsiglia and the Registrant (Form
10-Q filed August 14, 1996).
+* 10.4 - Employment Agreement dated June 13, 1989 between Thomas
R. Clark and the Registrant (Previously filed as Exhibit 10.6
to Form 10-K filed April 1, 1990).
+* 10.4.1 - Amendment No. 1 dated February 14, 1991 to Employment
Agreement between Thomas R. Clark and the Registrant (Previously
filed as Exhibit 10.9 to Form 10-K filed April 1, 1991).
+* 10.4.2 - Amendment to Employment Contract dated as of June 1,
1993 between Thomas R. Clark and the Registrant (Previously
filed as Exhibit 10.12 to Form 10-Q filed November 15, 1993).
- ---------------------------------
* Incorporated by reference to the indicated prior filing.
+ Management contract or compensatory plan.
<PAGE>
+* 10.4.3 - Amendment No. 3 dated June 1, 1993 to Employment
Contract between Thomas R. Clark and the Registrant (Previously
filed as Exhibit 10.16 to Form 10-K filed March 30, 1994).
+* 10.4.4 - Amendment No. 4 dated as of June 1, 1994 to Employment
Contract between Thomas R. Clark and the Registrant (Previously
filed as Exhibit 10.17 to Form 10-Q filed August 15, 1994).
+* 10.4.5 - Amendment No. 5 dated as of June 1, 1995 to Employment
Contract between Thomas R. Clark and the Registrant (Form
10-Q filed August 14, 1995).
+* 10.4.6 - Amendment No. 6 dated as of February 8, 1996 to Employment
Contract between Thomas R. Clark and the Registrant (Form 10-K
filed March 29, 1996).
+* 10.4.7 - Amendment No. 7 dated as of June 13, 1996 to Employment Contract
between Thomas R. Clark and the Registrant (Form 10-Q filed
August 14, 1996).
+* 10.5 - Employment Agreement dated April 29, 1994 between
Charles M. Lewis and the Registrant (Previously filed as
Exhibit 10.18 to Form 10-Q filed August 15, 1994).
+* 10.5.1 - Amendment No. 1 dated as of June 1, 1995 to Employment Contract
between Charles M. Lewis and the Registrant (Form 10-Q filed
August 14, 1995).
+* 10.5.2 - Amendment No. 2 dated as of February 8, 1996 to
Employment Contract between Charles M.Lewis and the Registrant
(Form 10-K filed March 29, 1996).
+* 10.5.3 - Amendment No. 3 dated as of June 13, 1996 to Employment
Contract between Charles M. Lewis and the Registrant (Form 10-K
filed March 29, 1996).
- --------------------------
* Incorporated by reference to the indicated prior filing.
+ Management contract or compensatory plan.
<PAGE>
+* 10.6 - Employment Agreement dated October 7, 1991 between
Michael T. Bennett and the Registrant (Previously filed as
Exhibit 10.16 to Form 10-K filed March 30, 1992).
+* 10.6.1 - Amendment to Employment Contract dated as of June 1, 1993
between Michael T. Bennett and the Registrant (Previously filed as
Exhibit 10.17 to Form 10-Q filed November 15, 1993).
+* 10.6.2 - Amendment No. 2 dated June 1, 1993 to Employment Contract
between Michael T. Bennett and the Registrant (Previously filed as
Exhibit 10.21 to Form 10-K filed March 30, 1994).
+* 10.6.3 - Amendment No. 3 dated June 1, 1994 to Employment Contract
between Michael T. Bennett and the Registrant (Previously filed as
Exhibit 10.22 to Form 10-K filed August 15, 1994).
+* 10.6.4 - Amendment No. 4 dated as of June 1, 1995 to Employment Contract
between Michael T. Bennett and the Registrant (Form 10-Q filed
August 14, 1995).
+* 10.6.5 - Amendment No. 5 dated as of February 8, 1996 to Employment
Contract between Michael T. Bennett and the Registrant (Form
10-K filed March 29, 1996).
+* 10.6.6 - Amendment No. 6 dated as of June 13, 1996 to Employment Contract
between Michael T. Bennett and the Registrant (Form 10-Q filed
August 14, 1996).
+* 10.7 - Employment Agreement dated March 15, 1993 between
Christopher A. Dunn and the Registrant (Previously filed as
Exhibit 10.17 to Form 10-Q filed May 17, 1993).
+* 10.7.1 - Amendment to Employment Contract dated as of June 1, 1993
between Christopher A. Dunn and the Registrant (Previously filed as
Exhibit 10.19 to Form 10-Q filed November 15, 1993).
- ------------------
* Incorporated by reference to the indicated prior filing.
+ Management contract or compensatory plan.
<PAGE>
+* 10.7.2 - Amendment No. 2 dated June 1, 1993 to Employment Contract
between Christopher A. Dunn and the Registrant (Previously filed
as Exhibit 10.25 to Form 10-K filed March 30, 1994).
+* 10.7.3 - Amendment No. 3 dated as of June 1, 1994 to Employment
Contract between Christopher A. Dunn and the Registrant
(Previously filed as Exhibit 10.26 to Form 10-Q filed August 15,
1994).
+* 10.7.4 - Amendment No. 4 dated as of June 1, 1995 to Employment Contract
between Christopher A. Dunn and the Registrant (Form 10-Q filed
August 14, 1995).
+* 10.7.5 - Amendment No. 5 dated as of February 8, 1996 to Employment
Contract between Christopher A. Dunn and the Registrant
(Form 10-K filed March 29, 1996).
+* 10.7.6 - Amendment No. 6 dated as of June 13, 1996 to Employment Contrac
between Christopher A. Dunn and the Registrant (Form 10-Q filed
August 14, 1996).
* 10.8 - Lease Agreement, dated September 30, 1991 between 919
Eighteenth Street, N.W. Associates Limited Partnership and the
Registrant (Previously filed as Exhibit 10.20 to Form 10-K
filed March 30, 1992).
* 21 - Subsidiaries.
21.1 - Farmer Mac Mortgage Securities Corporation, a Delaware
Corporation.
21.2 - Farmer Mac Acceptance Corporation, a Delaware Corporation.
* 99.1 Map of U.S. Department of Agriculture (USDA) Regions
(Previously filed as Exhibit 1.1 to Form 10-K filed April 1,
1991).
(b) Reports on Form 8-K.
The Registrant has not filed any reports on Form 8-K on March 11, 1997, to
include a press release announcing its financial results for the year ended
December 31, 1996.
- -------------------------
* Incorporated by reference to the indicated prior filing.
+ Management contract or compensatory plan.
<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
to
Form 10-Q
under
The Securities Exchange Act of 1934
Federal Agricultural Mortgage Corporation
Exhibit 10.1.3
Exhibit Description
+** 10.1.3 - 1997 Stock Option Plan.
<PAGE>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
1997 INCENTIVE PLAN
1. Purpose of the Plan
The purposes of this 1997 Incentive Plan (the "Plan") are to encourage
stock ownership by directors, officers, and key employees of the Federal
Agricultural Mortgage Corporation (the "Company") and its subsidiaries, to
provide an incentive for such individuals to expand and improve the profits and
prosperity of the Company and its subsidiaries, and to assist the Company and
its subsidiaries in attracting and retaining directors and key personnel through
the grant of Options (as defined herein) to purchase shares of the Company's
Class C nonvoting common stock, par value $1.00 per share (the "Common Stock").
2. Persons Eligible Under Plan
Any person who is an officer or employee of the Company or any subsidiary
(as defined in Sections 424(f) and 424(g) of the Internal Revenue Code of 1986,
as amended (a "Subsidiary"), shall be eligible for awards under the Plan (a
"Participant"). Any member of the Board of Directors (the "Board") of the
Company (a "Director") who is a "Non-Employee Director" within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") shall be eligible to receive any awards only under Section
15 of the Plan ("Director Options").
3. Stock Subject to Plan
Subject to Section 10, the maximum number of shares that may be the
subject of awards under the Plan shall be 250,000 shares of the Company's Common
Stock, which shall be made available either from authorized but unissued Common
Stock or from Common Stock reacquired by the Company, including shares purchased
in the open market. If any award granted under the Plan is canceled, forfeited,
or otherwise terminates or expires for any reason without having been exercised
in full, the shares of Common Stock allocable to the unexercised portion of such
award may again be the subject of grants under the Plan.
4. Administration of Plan
(a) Except for the provisions of Section 15 (which to the maximum extent
feasible shall be self-effectuating), the Plan shall be administered by a
committee of the Board (the "Committee") consisting of two or more Directors,
each of whom is a "Non-Employee Director," provided, however, that the Board may
determine to administer the Plan, in which case references to the "Committee"
shall mean the Board.
(b) Subject to the express provisions of the Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of the Plan, including, without limitation, the
following:
(i) interpret and construe the Plan and the terms and
conditions of any award hereunder;
(ii) adopt, amend, and rescind rules and regulations for the
administration of the Plan;
(iii) determine which persons meet the eligibility requirements of
Section 2 hereof and to which of such eligible persons, if any, awards
will be granted hereunder;
(iv) grant awards to eligible persons and determine the terms and
conditions thereof, including, but not limited to, the number of shares of
Common Stock issuable pursuant thereto, the time not more than 10 years
after the date of an award at which time the award shall expire or (if not
vested) terminate, and the conditions upon which awards become
exerciseable or vest or shall expire or terminate, and the consideration,
if any, to be paid upon receipt, exercise or vesting of awards;
(v) determine whether, and the extent to which, adjustments are
required pursuant to Section 10 hereof;
(vi) determine the circumstances under which, consistent with
the provisions of Section 11, any outstanding award may be amended;
(vii) exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(viii) generally, exercise such powers and perform such acts as
deemed necessary or advisable to promote the best interests of the Company
with respect to the Plan.
(c) Any action taken by, or inaction of the Company, the Board, or the
Committee relating or pursuant to the Plan, shall be within the absolute
discretion of that entity or body and shall be conclusive and binding upon all
persons. No member of the Board or officer of the Company shall be liable for
any such action or inaction of: (i) the entity or body; (ii) another person; or
(iii) except in circumstances involving bad faith, himself or herself. In making
any determination or in taking or not taking any action under the Plan, the
Board and the Committee may obtain and may rely upon the advice of experts,
including professional advisors to the Company.
(d) The Committee may delegate ministerial, non-discretionary functions to
individuals who are officers or other employees of the Company.
5. Awards
(a) Awards under the Plan shall consist of options ("Options") to purchase
the Common Stock of the Company and shall be evidenced by agreements (the "Award
Agreements") in such form as the Committee shall approve.
(b) The exercise price per share shall be 100% of the Fair Market Value of
one share of Common Stock on the date the Option is granted (the "Exercise
Price"), subject to adjustment only as provided in Section 10 of the Plan. As
used in the Plan, the term "Fair Market Value" shall mean the closing price of
the Company's Common Stock as reported on the National Association of Securities
Dealers Automated Quotations system ("NASDAQ"), or such other market on which
the Common Stock may be listed or traded, as determined by the Committee. If
there is not a closing price quotation for the date as of which Fair Market
Value is to be determined, then the Fair Market Value shall be determined by
reference to the closing price quotation for the next preceding day on which a
closing price quotation is available.
6. Exercise of Options
(a) Options may be exercised in whole or in part at such time or times as
shall be determined by the Committee and set forth in the applicable Award
Agreement. A Participant electing to exercise an Option shall give written
notice to the Company of such election and of the number of shares he or she has
elected to purchase, and shall at the time of exercise tender the full Exercise
Price for those shares.
(b) The Exercise Price shall be payable in cash or by check; provided,
however, that to the extent provided in the applicable Award Agreement, the
Participant may pay the Exercise Price in whole or in part (i) by delivering to
the Company shares of the Common Stock owned by him and having a Fair Market
Value on the date of exercise equal to the Exercise Price of the Option or (ii)
by reducing the number of shares of Common Stock issuable or payable upon the
exercise of an Option by the number of shares of Common Stock having a Fair
Market Value on the date of exercise equal to the Exercise Price of the Option.
In addition, the Options may be exercised through a registered broker-dealer
pursuant to such cashless exercise procedures (other than share withholding)
which are, from time to time, deemed acceptable. No fractional shares of Common
Stock shall be issued upon exercise of an Option and the number of shares of
Common Stock that may be purchased upon exercise shall be rounded to the nearest
number of whole shares.
(c) At such times as a Participant recognizes taxable income in connection
with the receipt of shares of Common Stock hereunder (a "Taxable Event"), the
Participant shall pay to the Company the amount of taxes required by law to be
withheld by the Company in connection with the Taxable Event (the "Withholding
Taxes") prior to the issuance of such shares. In satisfaction of the obligation
to pay the Withholding Taxes to the Company, the Participant may make a written
election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the shares of Common
Stock then issuable to him or her having an aggregate Fair Market Value equal to
the Withholding Taxes.
7. Right of First Refusal
The Committee may, in its discretion, include in any Award Agreement
relating to an Option granted under the Plan a condition that the Participant
shall agree to grant the Company a Right of First Refusal, which, if so
included, shall have the following terms and conditions:
(a) The Participant shall give the Company written notice (the "Offer
Notice") of the Participant's intention to sell any shares of Common Stock
acquired (or to be acquired) upon exercise of an Option (the "Offered Shares").
The Company shall have three business days (the "Exercise Period") following
receipt of the Offer Notice to determine whether to exercise its Right of First
Refusal, which may be exercised either as to all or as to none of the Offered
Shares. By the end of the Exercise Period, the Company shall have given written
notice to the Participant of its election to exercise (the "Acceptance notice")
or not to exercise (the "Rejection Notice") its Right of First Refusal. The
Participant shall tender the Offered Shares to the Company within 10 business
days after receipt of an Acceptance Notice. Upon receipt of a Rejection Notice,
the Participant may sell the Offered Shares free and clear of such Right of
First Refusal.
(b) The price to be paid by the Company for the Offered Shares shall be
the average of the closing price of the Company's Common Stock as reported on
NASDAQ (or such other market on which the Common Stock may be listed or traded,
as determined by the Committee) for the three business days immediately
preceding the date of the Company's receipt of the Offer Notice or, if no such
transactions occurred on those days, the average of the bid and asked prices for
the Common Stock on such days.
8. Transfer Restrictions
Unless otherwise permitted in the applicable Award Agreement, any Option
granted under the Plan shall not be transferable other than by will or the laws
of descent and distribution or pursuant to a domestic relations order, and
during a Participant's lifetime shall be exercisable only by the Participant or
his or her guardian or legal representative. The terms of such Option shall be
final, binding and conclusive upon the legal representatives, heirs and
successors of the Participant.
9. Termination of Employment
(a) Except as provided in the Award Agreement and as provided in Sections
9(b), (c) or (d) below, if a Participant ceases for any reason to be employed by
the Company or any of its Subsidiaries (unless such termination of employment
was for "Cause"), the Participant may, at any time within 90 days after the
effective date of such termination of employment, exercise his or her Options to
the extent that he or she would be entitled to exercise them on such date, but
in no event shall any Option be exercisable more than 10 years from the date it
was granted; provided, however, that the Committee shall have the discretion to
determine whether Options not yet exercisable at the date of termination of
employment shall become immediately exercisable for 90 days thereafter. The
Committee shall determine, subject to applicable law, whether a leave of absence
shall constitute a termination of service.
(b) If a Participant ceases to be employed by the Company or any of its
Subsidiaries for "Cause," the Participant's unexercised Options shall terminate
immediately. For purposes of this Section 9, "Cause" shall be defined as in the
employment agreement, if any, between the Company and such Participant, or, if
there is no employment agreement, shall mean (i) the willful failure of the
Participant substantially to perform his or her duties, other than any such
failure resulting from incapacity due to physical or mental illness or (ii) the
willful engagement by the Participant in activities contrary to the best
interests of the Company.
(c) Unless otherwise provided in the Award Agreement, if a Participant
dies while employed by the Company or any of its Subsidiaries, or within 90 days
after having retired with the consent of the Company, the shares which the
Participant was entitled to exercise on the date of the Participant's death
under an Option or Options granted under the Plan may be exercised at any time
after the Participant's death by the Participant's beneficiary; provided,
however, that no Option may be exercised after the earlier of (i) one (1) year
after the Participant's death or (ii) the expiration date specified for the
particular Option in the Award Agreement.
(d) Unless otherwise provided in the Award Agreement, if a Participant
terminates employment by reason of Disability (as defined below), any
unexercised Option held by the Participant shall expire one (1) year after the
Participant has a termination of employment because of such "Disability" and
such Option may only be exercised by the Participant or his or her beneficiary
to the extent that the Option was exercisable on the date of termination of
employment because of such "Disability;" provided, however, no Option may be
exercised after the expiration date specified for the particular Option in the
Award Agreement. "Disability" shall mean (a) in the case of a Participant whose
employment with the Company or a Subsidiary is subject to the terms of an
employment agreement between such Participant and the Company or Subsidiary,
which employment agreement includes a definition of "Disability", the term
"Disability" as used in this Plan or any Award Agreement shall have the meaning
set forth in such employment agreement during the period that such employment
agreement remains in effect; and (b) in all other cases, the term "Disability"
as used in this Plan or any Award Agreement shall mean a physical or mental
infirmity which impairs the Participant's ability to perform substantially his
or her duties for a period of one hundred eighty (180) consecutive days.
10. Adjustments
(a) In the event of a Change in Capitalization (as defined below) of the
Company, the Committee shall conclusively make equitable and appropriate
adjustments, if any, to (i) the maximum number and class of shares of Common
Stock or other stock or securities with respect to which Options may be granted
under the Plan, (ii) the maximum number and class of shares of Common Stock or
other stock or securities with respect to which Options may be granted to any
Participant during the term of the Plan, (iii) the number and class of shares of
Common Stock or other stock or securities which are subject to outstanding
Options granted under the Plan and the purchase price therefor, if applicable
and (iv) the number and class of shares of Common Stock or other securities in
respect of which Director Options are to be granted under Section 15 hereof.
(b) If, by reason of a Change in Capitalization, a Participant shall be
entitled to exercise an Option with respect to new, additional or different
shares of stock or securities, such new, additional or different shares shall
thereupon be subject to all of the conditions, restrictions and performance
criteria which were applicable to the shares of Common Stock subject to the
Option prior to such Change in Capitalization.
(c) No adjustment of the number of shares of Common Stock available under
the Plan or to which any Option relates that would otherwise be required under
this Section 10 shall be made unless and until such adjustment either by itself
or with other adjustments not previously made under this Section 10 would
require an increase or decrease of at least 1% in the number of shares of Common
Stock available under the Plan or to which any Option relates immediately prior
to the making of such adjustment (the "Minimum Adjustment"). Any adjustment
representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment together with other adjustments required by
this Section 10 and not previously made would result in a Minimum Adjustment.
Notwithstanding the foregoing, any adjustment required by this Section 10 which
otherwise would not result in a Minimum Adjustment shall be made with respect to
shares of Common Stock relating to any Option immediately prior to exercise of
such Option. No fractional shares of Common Stock or units of other securities
shall be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding downward
to the nearest whole share.
(d) "Change in Capitalization" means any increase or reduction in the
number of shares of Common Stock, or any change (including, but not limited to,
a change in value) in the shares of Common Stock or exchange of shares of Common
Stock for a different number or kind of shares or other securities of the
Company or another corporation, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, cash dividend in excess of earnings, property dividend,
combination or exchange of shares, change in corporate structure or other
substantially similar event.
11. Amendment and Termination of Plan
The Board or the Committee, by resolution, may terminate, amend, or revise
the Plan with respect to any shares as to which Options have not been granted.
Neither the Board nor the Committee may, without the consent of a Participant,
alter or impair any award previously granted under the Plan, except as
authorized herein. To the extent necessary under applicable law, no amendment
shall be effective unless approved by the stockholders of the Company in
accordance with applicable law. Unless sooner terminated, the Plan shall remain
in effect for a period of 10 years from the date of the Plan's adoption by the
Board. Termination of the Plan shall not affect any Option previously granted.
12. Effective Date of Plan
This Plan shall be effective on the date upon which it is approved by the
Board.
13. Governing Law
(a) Except as to matters of federal law, the Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with
the laws of the District of Columbia, without giving effect to conflicts of laws
principles thereof.
(b) The obligation of the Company to sell or deliver the shares of Common
Stock with respect to Options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(c) Each Option is subject to the requirement that, if at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of the shares of Common Stock issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
the issuance of the shares of Common Stock, no Options shall be granted or
payment made or shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.
14. Multiple Agreements
The terms of each Option may differ from other Options granted under the
Plan at the same time, or at some other time. The Committee may also grant more
than one Option to a given Participant during the term of the Plan, either in
addition to, or in substitution for, one or more Options previously granted to
that individual.
15. Director Options
(a) Awards relating to the Common Stock authorized under the Plan shall be
made under this section only to Directors.
(b) Annually, on the first Business Day following the Company's Annual
Meeting of Stockholders, commencing with the Annual Meeting following the date
on which the Plan is approved, there shall be granted automatically (without any
action by the Committee or the Board) a Director Option to each Director then in
office to purchase 2,000 shares of Common Stock. "Business Day" shall mean any
day, other than Saturday, Sunday, or a day on which the offices of the Federal
Government are not open for business.
(c) The Exercise Price for shares under each Director Option shall be
equal to 100% of the Fair Market Value of a share of Common Stock on the date
the Director Option is granted, determined in accordance with Section 5(b)
hereof. The Exercise Price of any Director Option granted shall be paid in full
at the time of each purchase (a) in cash and/or (b)(i) by delivering to the
Company shares of the Common Stock owned by the Director and having a Fair
Market Value on the date of exercise equal to the Exercise Price of the Director
Option, or (ii) by reducing the number of Shares of Common Stock issuable or
payable upon the exercise of a Director Option by the number of shares of Common
Stock having a Fair Market Value on the date of exercise equal to the Exercise
Price of the Director Option. In addition, the Options may be exercised through
a registered broker-dealer pursuant to such cashless exercise procedures (other
than share withholding) which are, from time to time, deemed acceptable. No
fractional shares of Common Stock shall be issued upon exercise of an Option and
the number of shares of Common Stock that may be purchased upon exercise shall
be rounded to the nearest number of whole shares. Each Director Option shall be
subject to the Right of First Refusal, as set forth in Section 7.
(d) At such times as a Director recognizes taxable income in connection
with the receipt of shares of Common Stock hereunder (a "Taxable Event"), the
Director shall pay to the Company the amount of taxes required by law to be
withheld by the Company in connection with the Taxable Event (the "Withholding
Taxes") prior to the issuance of such shares. In satisfaction of the obligation
to pay the Withholding Taxes to the Company, the Director may make a written
election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the shares of Common
Stock then issuable to him or her having an aggregate Fair Market Value equal to
the Withholding Taxes.
(e) Each Director Option shall become fully exercisable, in whole or in
part, on the day following the grant date.
(f) Each Director Option shall terminate on the date which is the tenth
anniversary of the date of grant, unless terminated earlier as follows:
(i) If a Director's service as a member of the Board terminates for
any reason other than Disability, death or Cause (as defined below), the
Director may for a period of three (3) months after such termination
exercise his or her Option to the extent, and only to the extent, that
such Option was vested and exercisable as of the date the Director's
service as a member of the Board terminated, after which time the Option
shall automatically terminate in full.
(ii) If a Director's service as a member of the Board terminates by
reason of the Director's resignation or removal from the Board due to
Disability (as defined in Section 9(d)), the Director may, for a period of
one (1) year after such termination, exercise his or her Option to the
extent, and only to the extent, that such Option was vested and
exercisable, as of the date the Director's service as a member of the
Board terminated, after which time the Option shall automatically
terminate in full.
(iii) If a Director's service as a member of the Board terminates
for Cause, the Option granted to the Director hereunder shall immediately
terminate in full and no rights thereunder may be exercised. For purposes
of this Section 15, "Cause" shall mean (i) fraud or intentional
misrepresentation, (ii) embezzlement, misappropriation or conversion of
assets or opportunities of the Company, (iii) conviction of a felony or
(iv) willful engagement by the Director in activities contrary to the
bests interests of the Company.
(iv) If a Director dies while a member of the Board or within three
(3) months after termination of service as a Director as described in
clause (i) of this Section 15(f) or within twelve (12) months after
termination of service as a Director as described in clause (ii) of this
Section 15(f), the Option granted to the Director may be exercised at any
time within twelve (12) months after the Director's death by the person or
persons to whom such rights under the Option shall pass by will, or by the
laws of descent or distribution, after which time the Option shall
terminate in full; provided, however, that an Option may be exercised to
the extent, and only to the extent, that the Option was exercisable on the
date of death or earlier termination of the Director's service as a member
of the Board.
(g) If there shall occur any event described in Section 10, then in
addition to the matters contemplated thereby, the Director Options then
outstanding and future grants thereof shall be automatically adjusted as
contemplated by Section 10.
(h) The provisions of Sections 1, 2, 3, 7, 8, 10, 11, 12 and 13 are
incorporated herein by this reference. Unless the context otherwise requires,
the provisions of this Section 15 shall be construed as a separate plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
May 15, 1997
By: /s/ Henry D. Edelman
Henry D. Edelman
President and Chief Executive Officer
(Principal Executive Office)
/s/ Nancy E. Corsiglia
Nancy E. Corsiglia
Vice President - Treasurer and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Primary EPS shown is for Class C shares.
Primary EPS for Class A and B shares is $0.09.
Fully diluted EPS shown is for Class C shares.
Fully diluted EPS for Class A and B shares is $0.26.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 252,649
<SECURITIES> 511,733
<RECEIVABLES> 16,853
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,204,445
<PP&E> 85
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,205,317
<CURRENT-LIABILITIES> 869,771
<BONDS> 288,326
0
0
<COMMON> 4,168
<OTHER-SE> 43,052
<TOTAL-LIABILITY-AND-EQUITY> 1,205,317
<SALES> 14,669
<TOTAL-REVENUES> 14,669
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,658
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 12,125
<INCOME-PRETAX> 886
<INCOME-TAX> 28
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 858
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
