SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 21, 1998
-----------------------------------
Federal Agricultural Mortgage Corporation
(Exact Name of Registrant as Specified in its Charter)
Federally chartered
instrumentality
of the United States 0-17440 52-1578738
State or Other Jurisdiction of Incorporation (Commission (IRS Employer
File Number) Identification No.)
919 18th Street, N.W., Suite 200, Washington, D.C. 20006
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (202) 872-7700
- --------------------------------------------------------------------------------
N/A
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events
On January 21, 1998, the Federal Agricultural Mortgage Corporation issued
a press release announcing financial results for the year ended December 31,
1997, a copy of which is attached hereto.
Item 7. Financial Statements and Exhibits
Exhibit 99(1) - Press Release (including Consolidated Balance Sheets at
December 31, 1997 and 1996; Consolidated Statements of Income for the quarters
ended December 31, 1997 and December 31, 1996 and for the years ended December
31, 1997 and 1996; and Supplemental Information for the quarters ended December
31, 1997, September 30, 1997, June 30, 1997, March 31, 1997 and December 31,
1996).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Registrant)
By: /s/ Michael T. Bennett
Michael T. Bennett
Vice President
Date: January 22, 1998
Exhibit Index
Exhibit 99(1)
FOR IMMEDIATE RELEASE CONTACT
January 21, 1998 Tom Clark
202-872-7700
FARMER MAC ANNOUNCES FAVORABLE RESULTS FOR 1997
Washington, D.C. -- The Federal Agricultural Mortgage Corporation (Farmer
Mac, NASDAQ: FAMCA and FAMCK) today reported net income of $4.6 million for 1997
and $1.3 million for fourth quarter 1997. Net income for 1997 and fourth quarter
1997 includes a $250 thousand tax benefit associated with the future use of
operating losses incurred in prior years. Excluding the effect of the tax
benefit, net income would have been $4.4 million for 1997, an increase of $3.6
million compared to net income of $777 thousand for 1996, and $1.0 million for
fourth quarter 1997, compared to $1.2 million for third quarter 1997 and $14
thousand for fourth quarter 1996.
Diluted earnings per share for 1997 and fourth quarter 1997 were $0.46 and
$0.12, respectively, for Classes A and B common stock and $1.39 and $0.37,
respectively, for Class C common stock. Excluding the effect of the foregoing
tax benefit, earnings per share for 1997 would have been $0.44 for Classes A and
B common stock and $1.31 for Class C common stock, as compared to $0.14 and
$0.43, respectively, for 1996. Similarly, earnings per share for fourth quarter
1997 would have been $0.10 for Classes A and B common stock and $0.30 for Class
C common stock, as compared to $0.12 and $0.36, respectively, for third quarter
1997 and $0.00 and $0.01, respectively, for fourth quarter 1996. Earnings per
share reflect the 3-to-1 dividend and liquidation preference accorded to Class C
common stock compared to Classes A and B common stock, as well as the 400,000
share Class C common stock offering completed in November 1997.
Farmer Mac's president and chief executive officer, Henry D. Edelman,
observed that "the Board and management are pleased with the Corporation's
year-end financial results. During 1997, Farmer Mac made significant progress
developing its programs and continued building shareholder value through
profitable operations. Fourth quarter net income (excluding the tax benefit) was
up significantly from the comparable period in 1996, but down modestly from the
third quarter of 1997, as a result of quarter-to-quarter fluctuations in loan
purchases and issuances of guaranteed securities. Management expects those
fluctuations to continue as long as Farmer Mac remains in the developmental
phase of implementing its 1996 revised legislative authorities. A relatively
small number of active participants continue to be the major producers in the
Farmer Mac I seller network, which tends to amplify quarterly fluctuations in
securitization transactions. As Farmer Mac's seller network expands and a
greater number of larger and more active participants sell loans into the
program, management anticipates that quarterly fluctuations should diminish."
"Due, in part, to the longer than expected lead-time between marketing
initiatives and the commencement of seller activities, Farmer Mac's loan
purchase volume has not been increasing as rapidly as management anticipated
following the passage of the Corporation's revised legislative authorities," Mr.
Edelman noted. "Loan volume continues to be the primary focus of Farmer Mac's
current program development efforts. Aggressive efforts have been undertaken to
boost near-term volume, including the expansion of the number of field
representatives marketing the program and providing customer service support,
and the recruitment into the program of new sellers, particularly mortgage
bankers and other non-traditional agricultural mortgage lenders, who have the
potential to generate large volumes of business and are receptive to the
securitization of loans through Farmer Mac. We believe that Farmer Mac made good
overall progress in 1997 and laid a foundation for the growth of program volume
during 1998."
Net Interest Income
Net interest income totaled $7.2 million for 1997 compared to $2.7 million
for 1996. Net interest income for fourth quarter 1997 was $2.0 million, up
slightly from third quarter 1997 and an increase of $1.2 million compared to
fourth quarter 1996. The increases in net interest income compared to 1996 were
attributable to increases in the balance of program (Farmer Mac I and II
securities and loans held for securitization) and non-program (cash and cash
equivalents and investments) assets. The increase in the balance of non-program
assets was due to expansion of Farmer Mac's debt issuance program beginning in
early 1997 to improve spreads on its debt and mortgage-backed securities (and,
thereby, the mortgage rates available to farmers and ranchers) by increasing its
market presence and investor recognition of its securities.
Other Income
Other income totaled $5.2 million for 1997, an increase of $2.4 million
compared to $2.8 million for 1996. The increase in other income was due to
increases in guarantee fee income and the gain on issuance of agricultural
mortgage-backed securities (AMBS). Guarantee fee income increased from $1.6
million for 1996 to $2.6 million for 1997, as the outstanding balance of
guaranteed securities increased from $631.3 million at December 31, 1996 to
$842.9 million at December 31, 1997. Gain on issuance of AMBS totaled $2.4
million for 1997 compared to $1.1 million for 1996. Farmer Mac issued $197.5
million of AMBS in 1997 compared to $149.3 million in 1996.
Other income totaled $989 thousand for fourth quarter 1997, compared to
$1.3 million for third quarter 1997 and $657 thousand for fourth quarter 1996.
Guarantee fee income totaled $718 thousand for fourth quarter 1997, compared to
$725 thousand for third quarter 1997 and $492 thousand for fourth quarter 1996.
During fourth quarter 1997, Farmer Mac issued $25.6 million of AMBS resulting in
a $251 thousand gain. Farmer Mac issued $50.9 million and $27.5 million of AMBS
during third quarter 1997 and fourth quarter 1996, respectively. Gains resulting
from those issuances totaled $592 thousand and $156 thousand, respectively.
Other Expenses
Other expenses totaled $7.8 million for 1997 compared to $5.1 million for
1996. For fourth quarter 1997, other expenses totaled $1.9 million compared to
$2.1 million for third quarter 1997 and $1.4 million for fourth quarter 1996.
The increases compared to 1996 were attributable to increased compensation and
other costs related to expanded operations under Farmer Mac's revised
legislative authorities. Farmer Mac's provision for losses, a component of other
expenses, totaled $990 thousand for 1997 and $210 thousand for fourth quarter
1997, compared to $262 thousand for 1996 and $61 thousand for fourth quarter
1996 and $260 thousand for third quarter 1997.
Income Tax Benefit
As a result of the use of net operating loss carryforwards, including a
$250 thousand tax benefit associated with the future use of operating losses
incurred in prior years, Farmer Mac recorded tax benefits of $115 thousand for
1997 and $219 thousand for fourth quarter 1997. If profits continue at current
levels, all of Farmer Mac's remaining net operating loss carryforwards would be
utilized in 1998, resulting in a higher effective tax rate for the year.
Credit
At December 31, 1997, loans 90 days or more past due, in bankruptcy or in
foreclosure represented 0.26 percent of the principal amount of all loans
underlying Farmer Mac guaranteed securities, compared to 0.73 percent at
December 31, 1996. Farmer Mac's allowance for losses on guaranteed securities
totaled $1.6 million at December 31, 1997 compared to $655 thousand at December
31, 1996.
Capital
Farmer Mac's capital was $75.1 million at December 31, 1997, compared with
$47.2 million at December 31, 1996. Farmer Mac issued 400 thousand shares of
Class C non-voting common stock on November 26, 1997, which generated
approximately $23.0 million in new equity capital. At December 31, 1997 and
1996, Farmer Mac's capital balances were in excess of regulatory minimum capital
requirements.
Forward-Looking Statements
In addition to historical information, this release includes
forward-looking statements reflecting management's current expectations as to
Farmer Mac's future business prospects, business development and financial
results. Management's expectations for Farmer Mac's future necessarily involve
assumptions, estimates and the evaluation of risks and uncertainties. Various
factors could cause actual events or results to differ materially from those
expectations. Some of the important factors that could cause Farmer Mac's actual
results to differ materially from management's expectations include
uncertainties regarding the rate and direction of development of the secondary
market for agricultural mortgage loans, as well as the possible establishment of
additional statutory or regulatory restrictions applicable to Farmer Mac, such
as the imposition of regulatory risk-based capital requirements in excess of
statutory minimum and critical capital levels or restrictions on Farmer Mac's
investment authority. These and other factors are discussed in detail under the
caption "Risk Factors" in the Offering Circular included as an exhibit to Farmer
Mac's current report on Form 8-K filed with the Securities and Exchange
Commission on December 9, 1997. The forward-looking statements contained herein
represent management's expectations as of the date of this release. Farmer Mac
undertakes no obligation to release publicly the results of any revisions to the
forward-looking statements made herein to reflect events or circumstances after
today, or to reflect the occurrence of unanticipated events.
Farmer Mac is a federally-chartered instrumentality of the United States
created by Congress to establish a secondary market for agricultural real estate
and rural housing mortgage loans, and to facilitate capital market funding for
U.S. Department of Agriculture guaranteed farm program and rural development
loans. Farmer Mac's Class A and Class C common stocks are traded on NASDAQ under
the symbols FAMCA and FAMCK, respectively. Additional information about Farmer
Mac (as well as the Form 8-K referenced above) is available on Farmer Mac's web
page at www.farmermac.com.
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1997 1996
----------- -----------
(unaudited) (audited)
Assets:
<S> <C> <C>
Cash and cash equivalents $ 177,617 $ 68,912
Investment securities 656,264 81,280
Farmer Mac I and II securities 442,311 419,260
Loans held for securitization 47,177 12,999
Interest and guarantee fees receivable 21,442 15,566
Other investments 473 4,519
Prepaid expenses and other assets 2,851 568
----------- -----------
Total Assets $ 1,348,135 $ 603,104
=========== ===========
Liabilities and Stockholders' Equity:
Debentures, notes and bonds, net:
Due within one year $ 856,028 $ 259,164
Due after one year 402,803 287,128
Accrued interest payable and other liabilities 12,598 8,952
Allowance for losses on guaranteed
securities 1,645 655
----------- -----------
Total Liabilities 1,273,074 555,899
Stockholders' Equity 75,061 47,205
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,348,135 $ 603,104
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
* * * * *
Federal Agricultural Mortgage Corporation
Consolidated Statements of Income
(in thousands, except per share amounts)
Quarter Ended Year Ended
-------------------- --------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1997 1996 1997 1996
--------- --------- -------- ---------
(unaudited)(unaudited) (unaudited)(audited)
Interest income:
<S> <C> <C> <C> <C>
Farmer Mac I and II securities $ 7,929 $ 7,461 $ 47,371 $ 29,672
Investments and cash equivalents 14,013 2,151 30,541 6,964
Loans held for securitization 689 249 2,241 717
--------- --------- -------- ---------
Total interest income 22,631 9,861 80,153 37,353
Interest expense 20,625 9,076 72,992 34,623
--------- --------- -------- ---------
Net interest income 2,006 785 7,161 2,730
Other income:
Guarantee fees 718 492 2,575 1,623
Gain on issuance of AMBS, net 251 156 2,362 1,070
Miscellaneous 20 9 253 63
--------- --------- -------- ---------
Total other income 989 657 5,190 2,756
--------- --------- -------- ---------
Total revenue 2,995 1,442 12,351 5,486
Other expenses:
Compensation and employee benefits 775 640 3,422 2,361
Professional fees 340 136 1,500 828
Board of Directors fees and expenses 164 84 212 320
Regulatory fees 80 35 331 250
General and administrative 367 460 1,385 1,060
Provision for losses 210 61 990 262
--------- --------- -------- ---------
Total other expenses 1,936 1,416 7,840 5,081
--------- --------- -------- ---------
Income (loss) before income tax
and extraordinary item 1,059 26 4,511 405
Provision for income taxes (219) 12 (115) 12
--------- --------- -------- ---------
Income before extraordinary item 1,278 14 4,626 393
Extraordinary gain from early
extinguishment of debt - - - 384
--------- --------- -------- ---------
Net income $ 1,278 $ 14 $ 4,626 $ 777
========= ========= ======== =========
Earnings per Class A and B
Voting Common Stock:
Basic earnings before
extraordinary item $ 0.13 $ - $ 0.48 $ 0.07
Basic net earnings $ 0.13 $ - $ 0.48 $ 0.15
Diluted earnings defore
extraordinary item $ 0.12 $ - $ 0.46 $ 0.07
Diluted net earnings $ 0.12 $ - $ 0.46 $ 0.14
Earnings per Class C Non-Voting
Common Stock:
Basic earnings before
extraordinary item $ 0.38 $ 0.01 $ 1.44 $ 0.22
Basic net earnings $ 0.38 $ 0.01 $ 1.44 $ 0.44
Diluted earnings before
extraordinary item $ 0.37 $ 0.01 $ 1.39 $ 0.22
Diluted net earnings $ 0.37 $ 0.01 $ 1.39 $ 0.43
</TABLE>
<PAGE>
Federal Agricultural Mortgage Corporation
Supplemental Information
The following tables set forth quarterly activity regarding: mandatory
commitments to purchase loans; purchases of loans; AMBS issuances;
delinquencies; and outstanding guaranteed securities issued under the Farmer Mac
I and II Programs.
<TABLE>
Mandatory Commitments to Purchase Loans
- -----------------------------------------------------------------------------
Fixed Rate Loans
-------------------------------
10 and 7 Year 5 Year 1,3 and 5 Part-Time
For the 15 Year Balloon Balloon Year ARMs Farm Total
quarter ended:
--------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 22,465 $ - $ 11,157 $ 14,513 $ 575 $ 48,710
September 30, 1997 23,066 - 18,116 5,982 - 47,164
June 30, 1997 19,196 2,485 54,980 9,283 - 85,944
March 31, 1997 37,471 - 14,234 3,325 - 55,030
December 31, 1996 15,417 - 11,693 - - 27,110
--------------------------------------------------------------
$117,615 $ 2,485 $110,180 $33,103 $ 575 $263,958
</TABLE>
<TABLE>
<CAPTION>
Purchases of Loans
- -----------------------------------------------------------------------------
Fixed Rate Loans
-------------------------------
10 and 7 Year 5 Year 1,3 and 5 Part-Time
For the 15 Year Balloon Balloon Year ARMs Farm Total
quarter ended:
------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 27,753 $ - $ 11,250 $ 9,674 $ 310 $ 48,987
September 30, 1997 19,300 - 19,978 6,800 - 46,078
June 30, 1997 26,325 2,485 53,483 8,990 - 91,283
March 31, 1997 29,647 - 13,678 840 - 44,165
December 31, 1996 22,299 - 14,006 - - 36,305
--------------------------------------------------------------
$125,324 $ 2,485 $112,395 $ 26,304 $ 310 $266,818
</TABLE>
<TABLE>
<CAPTION>
AMBS Issuances
- -----------------------------------------------------------------------------
Fixed Rate Loans
-------------------------------
10 and 7 Year 5 Year 1,3 and 5 Part-Time
For the 15 Year Balloon Balloon Year ARMs Farm Total
quarter ended:
--------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ 16,373 $ - $ 9,256 $ - $ - $ 25,629
September 30, 1997 26,186 - 24,697 - - 50,883
June 30, 1997 57,569 2,485 11,578 - - 71,632
March 31, 1997 32,255 - 17,105 - - 49,360
December 31, 1996 16,766 - 10,702 - - 27,468
--------------------------------------------------------------
$149,149 $ 2,485 $ 73,338 $ - $ - $224,972
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Delinquencies (1)
- ------------------------------------------------------------
Farmer Mac I
---------------------------
As of: AMBS Other (2) Total
------------- ------------- -------------
<S> <C> <C> <C>
December 31, 1997 - 0.66% 0.26%
September 30, 1997 0.29% 0.93% 0.57%
June 30, 1997 - 0.21% 0.10%
March 31, 1997 - 0.66% 0.39%
December 31, 1996 - 1.11% 0.73%
</TABLE>
(1) Includes loans 90 days or more past due, in foreclosure or in bankruptcy.
(2) Includes loans underlying securities issued prior to the 1996 enactment of
the Corporation's revised legislative authorities. These securities are
supported by unguaranteed subordinated interests, which represented 10% of the
initial balance of the loans underlying the securities at issuance.
<TABLE>
<CAPTION>
Outstanding Guaranteed Mortgage Securities
- ---------------------------------------------------------------------------
Farmer Mac I Farmer Held in
As of: AMBS Other (1) Mac II Total Portfolio (2)
---------------------------------- ----------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
December 31, 1997 $341,213 $228,904 $272,777 $842,894 $433,807
September 30, 1997 316,214 234,085 263,228 813,527 427,395
June 30, 1997 266,838 243,775 244,502 755,115 418,002
March 31, 1997 195,792 252,134 224,197 672,123 403,685
December 31, 1996 148,918 271,341 211,024 631,283 405,253
</TABLE>
(1)Includes securities issued prior to the 1996 enactment of the Corporation's
revised legislative authorities. These securities are supported by
unguaranteed subordinated interests, which represented 10% of the initial
balance of the loans underlying the securities at issuance.
(2) Included in total outstanding guaranteed mortgage securities.
