As filed with the Securities and Exchange Commission on
- ------------------------------------------------------------------------------
August 14, 1998
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 June 30, 1998. 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 August 10, 1998, there were 1,019,880 shares of Class A Voting
Common Stock, 500,301 shares of Class B Voting Common Stock and 3,090,487 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 ("Farmer Mac" or the "Corporation") 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 1997 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>
<S> <C>
Consolidated Balance Sheets at June 30, 1998 and December 31, 1997........ 3
Consolidated Statements of Operations for the three and
six months ended June 30, 1998 and 1997.................................. 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and 1997.................................................... 5
</TABLE>
<PAGE>
<TABLE>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
--------------- --------------
(in thousands)
Assets:
<S> <C> <C>
Cash and cash equivalents $ 345,740 $ 177,617
Investment securities 651,379 656,737
Farmer Mac guaranteed securities 468,159 442,311
Loans held for securitization 98,448 47,177
Interest receivable 18,454 19,968
Guarantee fees receivable 1,414 1,474
Prepaid expenses and other assets 4,012 2,851
--------------- --------------
--------------- --------------
Total Assets $1,587,606 $1,348,135
--------------- --------------
--------------- --------------
Liabilities and Stockholders' Equity:
Liabilities:
Notes payable, net:
Due within one year $1,199,909 $ 856,028
Due after one year 293,993 402,803
Accrued interest payable 7,998 9,783
Accounts payable and accrued expenses 4,464 2,815
Reserve for losses on guaranteed securities 2,267 1,645
--------------- --------------
Total liabilities 1,508,631 1,273,074
Stockholders' Equity:
Common stock:
Class A Voting, $1 par value, no maximum authorization,
1,016,180 and 1,000,100 shares issued and outstanding at
June 30, 1998 and December 31, 1997 1,016 1,000
Class B Voting, $1 par value, no maximum authorization,
500,301 shares issued and outstanding at June 30, 1998
and December 31, 1997 500 500
Class C Non-Voting, $1 par value, no maximum authorization,
3,090,307 and 3,078,214 shares issued and outstanding
at June 30, 1998 and December 31, 1997 3,090 3,078
Additional paid-in capital 75,943 75,148
Unrealized gain on securities available for sale 768 1,198
Accumulated deficit (2,342) (5,863)
--------------- --------------
Total stockholders' equity 78,975 75,061
--------------- --------------
Total Liabilities and Stockholders' Equity $1,587,606 $1,348,135
--------------- --------------
--------------- --------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
------------------------- -------------------------
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
----------- ------------ ------------ -----------
(in thousands, except per share amounts)
Interest income:
<S> <C> <C> <C> <C>
Farmer Mac guaranteed securities $ 8,113 $ 7,467 $ 15,977 $ 14,847
Investments and cash equivalents 15,724 13,334 30,358 19,092
Loans held for securitization 1,600 501 2,577 844
----------- ------------ ------------ -----------
Total interest income 25,437 21,302 48,912 34,783
Interest expense 22,964 19,474 44,004 31,599
----------- ------------ ------------ -----------
Net interest income 2,473 1,828 4,908 3,184
Other income:
Guarantee fees 841 607 1,597 1,132
Gain on issuance of AMBS, net 552 1,053 980 1,519
Miscellaneous 14 21 62 217
----------- ------------ ------------ -----------
Total other income 1,407 1,681 2,639 2,868
Other expenses:
Compensation and employee benefits 1,028 1,005 1,834 1,708
Professional fees 423 341 791 689
Board of Directors fees and expenses 100 89 176 179
Rent 57 55 113 112
Regulatory fees 165 16 331 31
General and administrative 276 321 618 586
Provision for loan losses 362 340 622 520
----------- ------------ ------------ -----------
Total other expenses 2,411 2,167 4,485 3,825
Income before income taxes 1,469 1,342 3,062 2,227
Income tax (benefit)/provision (306) 36 (458) 63
----------- ------------ ------------ -----------
Net income $ 1,775 $ 1,306 $ 3,520 $ 2,164
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Earnings per share:
Classes A and B Voting Common Stock
Basic earnings per share $ 0.16 $ 0.14 $ 0.33 $ 0.23
Diluted earnings per share $ 0.16 $ 0.13 $ 0.32 $ 0.22
Class C Non-Voting Common Stock
Basic earnings per share $ 0.49 $ 0.41 $ 0.98 $ 0.68
Diluted earnings per share $ 0.48 $ 0.40 $ 0.95 $ 0.66
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
-------------------------------
-------------------------------
1998 1997
-------------- --------------
-------------------------------
(in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income $ 3,520 $ 2,164
Adjustments to reconcile net income to cash (used in) provided
by operating activities:
Amortization of premium on Farmer Mac guaranteed securities 732 1,641
Discount note amortization 30,578 19,415
Decrease (increase) in guarantee fees receivable 60 (157)
Decrease (increase) in interest receivable 1,514 (1,715)
Increase in prepaid expenses and other assets (1,148) (1,205)
Amortization and depreciation 210 349
Increase in accounts payable and accrued expenses 1,649 802
Increase in loans held for securitization (51,271) (15,626)
(Decrease) increase in accrued interest payable (1,785) 744
Provision for loan losses 622 520
-------------- --------------
Net cash (used in) provided by operating activities (15,319) 6,932
Cash flows from investing activities:
Purchases of available-for-sale investments (213,905) (342,419)
Purchases of investment securities (4,017) (207,028)
Purchases of Farmer Mac guaranteed securities (45,758) (42,778)
Proceeds from repayment of available-for-sale investments 193,477 17,244
Proceeds from repayment of investment securities 29,220 11,227
Proceeds from repayment of Farmer Mac guaranteed securities 19,178 30,030
Purchases of office equipment (41) (49)
-------------- --------------
-------------- --------------
Net cash used by investing activities (21,846) (533,773)
Cash flow from financing activities:
Proceeds from issuance of discount notes 13,539,609 10,325,836
Proceeds from issuance of medium-term notes 14,960 54,960
Payments to redeem discount notes (13,238,585) (9,579,455)
Payments to redeem medium-term notes (111,520) (18,740)
Proceeds from common stock issuance 824 742
Purchase and retirement of stock - (1,396)
-------------- --------------
Net cash provided by financing activities 205,288 781,947
-------------- --------------
Net increase in cash and cash equivalents 168,123 255,106
Cash and cash equivalents at beginning of period 177,617 68,912
-------------- --------------
Cash and cash equivalents at end of period $ 345,740 $ 324,018
-------------- --------------
-------------- --------------
Supplemental information:
Cash paid for:
Interest $ 17,406 $ 11,539
Income Taxes $ 206 $ 34
Non-cash activity:
AMBS issued in exchange for Qualified Loans $ 32,755 $ -
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies.
(a) Principles of Consolidation
Financial information at and for the three and six months ended June 30,
1998 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) Earnings Per Share
Basic earnings per share is based on the weighted average shares
outstanding. Diluted earnings per share is based on the weighted average number
of common shares outstanding adjusted to include all dilutive potential common
stock. The computation of earnings per share reflects the 3-to-1 dividend and
liquidation preference applicable to each share of Class C Non-Voting Common
Stock relative to each share of Class A and Class B Voting Common Stock. The
following schedule reconciles basic and diluted earnings per share for the three
and six months ended June 30, 1998 and 1997.
<TABLE>
Three Months Ended June 30,
----------------------------------------------------------------------------------------
1998 1997
------------------------------------------- -------------------------------------------
Effect of Effect of
Basic stock Diluted Basic Stock Diluted
EPS options EPS EPS Options EPS
------------- ---------------- ------------ ------------- ------------ -----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 1,775 $ - $ 1,775 $ 1,306 $ - $ 1,306
Weighted average
shares:
Classes A and B 1,512 - 1,512 1,491 - 1,491
Class C 3,083 140 3,223 2,678 110 2,787
Earnings per share:
Classes A and B $ 0.16 $ 0.16 $ 0.14 $ 0.13
Class C $ 0.49 $ 0.48 $ 0.41 $ 0.40
</TABLE>
<TABLE>
Six Months Ended June 30,
----------------------------------------------------------------------------------------
1998 1997
------------------------------------------- -------------------------------------------
Effect of Effect of
Basic stock Diluted Basic stock Diluted
EPS options EPS EPS options EPS
------------- ---------------- ------------ ------------- ------------ -----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 3,520 $ - $ 3,520 $ 2,164 $ - $ 2,164
Weighted average
shares:
Classes A and B 1,509 - 1,509 1,506 - 1,506
Class C 3,081 140 3,221 2,675 113 2,788
Classes A and B $ 0.33 $ 0.32 $ 0.23 $ 0.22
Class C $ 0.98 $ 0.95 $ 0.68 $ 0.66
</TABLE>
(c) Reclassifications
Certain reclassifications of the 1997 information were made to conform to
the 1998 presentation.
Note 2. Off-Balance Sheet Financial Instruments.
In the ordinary course of its business, Farmer Mac incurs off-balance
sheet risk in connection with the issuance of commitments to purchase and sell
Qualified Loans. At June 30, 1998, outstanding commitments to purchase Qualified
Loans totaled $31.7 million. At that same date, outstanding commitments to sell
Qualified Loans as agricultural mortgage-backed securities (AMBS) totaled $25.6
million. For information regarding the off-balance sheet risks associated with
Farmer Mac Guaranteed Securities not held in portfolio, and with interest-rate
contracts and hedge instruments, which are used to manage exposures inherent in
Farmer Mac's loan pipeline and investment activities, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Risk
Management."
Note 3. Comprehensive Income
In first quarter 1998, Farmer Mac adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
Comprehensive income is comprised of net income plus other changes in
stockholders' equity not resulting from investments by or distributions to
stockholders. The following table sets forth comprehensive income for the three
and six months ended June 30, 1998 and 1997.
<TABLE>
Three Months Ended June 30, Six Months Ended June 30,
-----------------------------------------------------------
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 1,775 $ 1,306 $ 3,520 $ 2,164
Unrealized (loss) gain on
securities available-for-sale (458) 214 (430) 66
------------- ------------- ------------- -------------
Comprehensive income $ 1,317 $ 1,520 $ 3,090 $ 2,230
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
Certain statements made in this Form 10-Q are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995
pertaining to management's current expectations as to Farmer Mac's future
financial results, business prospects and business developments. Forward-looking
statements are typically accompanied by, and identified with, such terms as
"anticipates," "believes," "expects," "intends," "should" and similar phrases.
Management's expectations for the Corporation's future necessarily involve a
number of assumptions, estimates and the evaluation of risks and uncertainties.
Various factors could cause actual results or events to differ materially from
these expectations as expressed or implied by the forward-looking statements.
The following management's discussion and analysis includes
forward-looking statements addressing the Corporation's prospects for earnings
and growth in loan purchase, guarantee and securitization volume; trends in net
interest income and provision for losses; changes in capital position; year 2000
readiness efforts and other business and financial matters. Some of the factors
that could cause Farmer Mac's actual results to differ materially from
management's expectations expressed herein include: uncertainties regarding the
rate and direction of development of the secondary market for agricultural
mortgage loans; 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; substantial
changes in interest rates, agricultural land values, commodity prices and the
general economy; protracted adverse weather, market or other conditions
affecting particular geographic regions or particular commodities related to
agricultural mortgage loans backing Farmer Mac Guaranteed Securities; the
non-compliance of Farmer Mac's internal systems or the systems of critical
vendors with respect to the year 2000 date change; legislative or regulatory
developments or interpretations of Farmer Mac's statutory charter that could
adversely affect Farmer Mac or the ability of certain lenders to participate in
its programs or the terms of any such participation; the availability of debt
funding in sufficient quantities and at favorable rates to support continued
growth; the rate of growth in agricultural mortgage indebtedness; the size of
the agricultural mortgage market; borrower preferences for fixed-rate
agricultural mortgage indebtedness; the willingness of lenders to sell
agricultural mortgage loans; the willingness of investors to invest in
agricultural mortgage-backed securities; competition in the origination or
purchase of agricultural mortgage loans and the sale of agricultural
mortgage-backed and debt securities; or changes in the Corporation's status as a
government-sponsored enterprise.
<PAGE>
Given the foregoing potential risks and uncertainties, no undue reliance
should be placed on any forward-looking statements expressed herein.
Furthermore, Farmer Mac undertakes no obligation to publicly release the results
of revisions to any forward-looking statements that may be made to reflect any
future events or circumstances.
Results of Operations
Overview. Net income totaled $1.8 million for second quarter 1998. Net
income for second quarter 1998 included a $325 thousand tax benefit associated
with the future use of previously deferred tax benefits. Excluding the effect of
the tax benefit, net income would have been $1.5 million for second quarter
1998, an increase of $144 thousand compared to net income of $1.3 million for
second quarter 1997. Year-to-date 1998 net income totaled $3.5 million, which
included a tax benefit of $525 thousand. Excluding the effect of the tax
benefit, year-to-date net income would have been $3.0 million, compared to net
income of $2.2 million for the same period a year ago.
Diluted earnings per share for second quarter 1998 were $0.16 for Classes
A and B Common Stock and $0.48 for Class C Common Stock. Excluding the effect of
the foregoing tax benefit, earnings per share for second quarter 1998 would have
been $0.13 for Classes A and B Common Stock and $0.39 for Class C Common Stock,
as compared to $0.13 and $0.40, respectively, for second quarter 1997.
Year-to-date 1998 diluted earnings per share were $0.32 for Classes A and B
Common Stock and $0.95 for Class C Common Stock. Excluding the effect of the tax
benefit, year-to-date earnings would have been $0.27 for Classes A and B Common
Stock and $0.80 for Class C Common Stock, compared to $0.22 and $0.66 for the
same period a year ago. 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.
The increases in net income from second quarter 1997 to second quarter 1998
and year-to-date 1997 to year-to-date 1998 are attributable to increases in
total revenue (net interest income, guarantee fees, gain on issuance of AMBS and
miscellaneous income) as a result of increases in net interest income. Net
interest income is comprised of income from program assets (Farmer Mac I and II
Securities and loans held for securitization) and non-program assets (cash and
cash equivalents and investment securities). Although income from program assets
continues to be the primary source of net interest income, the most significant
contribution to the increases in net interest income from second quarter 1997 to
second quarter 1998 and year-to-date 1997 to year-to-date 1998 has been income
from non-program assets. In connection with the implementation of Farmer Mac's
expanded debt issuance strategy, which is intended to attract more investors to
its debt and mortgage-backed securities and thereby improve the liquidity of
those securities and reduce its borrowing and securitization costs, Farmer Mac
has increased the size of its non-program investment portfolio (cash and cash
equivalents and investment securities). The proceeds of these increased debt
issuances have been invested primarily in high quality, short- and long-term
floating rate investments, which have generated significant amounts of net
interest income. It is Farmer Mac's objective that, as guarantee volume
increases, revenue from non-program assets will decline as a percentage of total
revenue. During the phase-in of that objective, the term of which is dependent
upon growth in Farmer Mac's core business, Farmer Mac expects income from
non-program assets to continue to be a significant contributor to net interest
income and total revenue.
<PAGE>
In addition to increased net interest income, Farmer Mac has also realized
increased guarantee fee income as a result of increased guarantee volume and the
higher guarantee fee rate applicable to Farmer Mac I Securities since enactment
of its revised legislative authorities. As of June 30, 1998, outstanding Farmer
Mac I and II Guaranteed Securities totaled $979.9 million, compared to $755.1
million as of June 30, 1997.
While Farmer Mac's financial condition has improved, future improvements
in operating results will depend largely upon growth in Farmer Mac's core
business (guarantee fee income and interest income on program assets). Growth in
the core business is dependent upon an increase in the volume of loans acquired
or funded through Farmer Mac's programs. Farmer Mac purchased $183.4 million of
Qualified Loans during year-to-date 1998 and had outstanding commitments to
purchase an additional $31.7 million at June 30, 1998. During the same period a
year ago, purchases totaled $135.4 million and outstanding commitments to
purchase Qualified Loans totaled $10.2 million. In addition, the outstanding
balance of loans in Farmer Mac's "pipeline" that have been submitted for
approval or approved but not yet committed for purchase totaled $148.2 million
at June 30, 1998, compared to $57.6 million at June 30, 1997. Not all loans in
the pipeline are purchased, as some are denied for credit reasons or withdrawn
by the seller.
As part of its efforts to further increase business volume, Farmer Mac has
begun to attract the interest of non-traditional agricultural real estate
lenders, particularly mortgage bankers and agricultural equipment companies, for
whom Farmer Mac believes the advantages of its programs would result in
diversification of income sources and more efficient utilization of their
existing facilities and personnel at low marginal costs through access to their
established customer base. Several of the mortgage banks and large regional
banks approved as Farmer Mac sellers during the previous three quarters have
indicated that their programs are ready or near ready to begin selling loans to
Farmer Mac during the second half of 1998. Based on management's evaluation of
the business potential of its programs and their existing and prospective
participants, Farmer Mac expects to continue to add resources, including
additional field personnel and other employees dedicated to customer service, to
support these institutions' efforts in establishing and expanding a secondary
market presence in the areas they serve, and to attract more sellers who offer
the prospect of active participation in Farmer Mac's programs. Because many of
these institutions are, or will be, new to the Farmer Mac programs, however,
management cannot predict the timing or the level of their participation.
Farmer Mac continues to face the challenge of expanding its business in
what has been a highly static market for agricultural and rural home mortgage
loans. While the revisions to Farmer Mac's charter that permit it to operate in
a manner more similar to Fannie Mae and Freddie Mac do not ensure the long-term
success of Farmer Mac's programs, those programs are now receiving steadily
greater acceptance among an increasingly diverse group of lenders. This reflects
the competitive rates, terms and products offered and the advantages Farmer Mac
believes its programs provide. For Farmer Mac to succeed in realizing its
business development and profitability goals over the long term, agricultural
mortgage lenders, whether traditional or non-traditional, must recognize the
benefits of selling loans to Farmer Mac and must modify their business practices
accordingly.
Set forth below is a discussion of certain items of the income statement
and balance sheet.
<PAGE>
Average Balances, Income and Expense, Yield and Rates. The following table
provides information regarding interest-earning assets and interest-bearing
liabilities for the periods indicated.
<TABLE>
Six Months Ended June 30,
----------------------------------------------------------------------------
1998 1997
------------------------------------- --------------------------------------
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
(dollars in thousands)
Assets:
<S> <C> <C> <C> <C> <C> <C>
Farmer Mac guaranteed securities $ 452,512 $ 15,977 7.04% $ 423,057 $ 14,847 7.00%
Cash and cash equivalents 355,824 9,808 5.48% 278,266 7,624 5.45%
Investments 683,018 20,550 6.01% 375,574 11,468 6.10%
Loans held for securitization 73,905 2,577 6.97% 24,989 844 6.75%
-------------- ----------- ---------- -------------- ------------ ----------
Total interest earning assets 1,565,259 48,912 6.23% 1,101,886 34,783 6.30%
Other assets 22,046 24,780
-------------- -------------
Total assets 1,587,305 1,126,666
-------------- --------------
-------------- --------------
Liabilities and Stockholder's Equity:
Notes payable, net 1,498,373 44,004 5.85% 1,071,004 31,599 5.88%
Other liabilities 12,219 8,079
-------------- --------------
-------------- --------------
Total liabilities 1,510,592 1,079,083
Stockholders' equity 76,713 47,583
-------------- ----------- ---------- -------------- ------------ ----------
-------------- ----------- ---------- -------------- ------------ ----------
Total liabilities and stockholders' equity 1,587,305 1,126,666
-------------- --------------
Net interest income/spread 4,908 0.38% 3,184 0.42%
----------- ---------- ------------ ----------
----------- ---------- ------------ ----------
Net yield on interest-earning assets 0.63% 0.58%
---------- ----------
---------- ----------
</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>
Six Months Ended June 30, 1998
Compared to Six Months Ended
June 30, 1997
-------------------------------------------
Increase/(Decrease) Due to
-------------------------------------------
Rate Volume Total
------------- ------------- -------------
(in thousands)
Income from interest-earning assets
<S> <C> <C> <C>
Farmer Mac guaranteed securities $ 83 $ 1,047 $ 1,130
Cash and cash equivalents 46 2,138 2,184
Investments (178) 9,260 9,082
Loans held for securitization 29 1,704 1,733
------------- ------------- -------------
Total (20) 14,149 14,129
Expense from interest-bearing liabilities (166) 12,571 12,405
------------- ------------- -------------
Change in net interest income $ 146 $ 1,578 $ 1,724
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Net Interest Income. Net interest income for second quarter and
year-to-date 1998 was $2.5 million and $4.9 million, respectively, compared to
$1.8 million and $3.2 million for the same periods in 1997. The increases were
attributable to increases in the balance of program and non-program assets.
Program assets increased due to increases in Farmer Mac II Securities held in
portfolio and loans held for securitization. Farmer Mac II Securities held in
portfolio totaled $281.3 million as of June 30, 1998 compared to $226.5 million
as of June 30, 1997. Loans held for securitization increased due to increased
Farmer Mac I cash window activity, particularly increases in variable rate loan
purchases, which Farmer Mac does not currently include in its AMBS issuances.
Non-program assets increased as a result of Farmer Mac's debt issuance strategy,
as previously discussed (see "- Overview").
Other Income. Other income totaled $1.4 million for second quarter 1998
and $2.6 million for year-to-date 1998, compared to $1.7 million and $2.9
million in 1997. Guarantee fee income increased $234 thousand from second
quarter 1997 to second quarter 1998 and $465 thousand from year-to-date 1997 to
year-to-date 1998, as a result of an increase in the balance of outstanding
guaranteed securities and the increased guarantee fee rate applicable to Farmer
Mac I Securities issued under Farmer Mac's revised legislative authorities (50
basis points compared to 25 basis points on Farmer Mac I Securities issued prior
to the revised authorities). Although AMBS issuances increased during the three
and six months ended June 30, 1998 as compared to the same periods in 1997, gain
on AMBS issuances decreased due to the composition of the AMBS issuances. During
second quarter 1998, Farmer Mac issued $88.8 million of AMBS compared to $71.6
million during second quarter 1997. Of the $88.8 million of AMBS issued in
second quarter 1998, $32.8 million were issued in exchange for Qualified Loans
in a "swap" transaction, for which no gain is realized. A $552 thousand gain was
realized on the remaining $56.0 million of AMBS issued to capital markets
investors. The $1.1 million gain on issuance of AMBS realized in second quarter
1997 included $320 thousand of additional sales proceeds related to first
quarter 1997 issuances. For year-to-date 1998, Farmer Mac AMBS issuances were
$130.2 million, of which $97.4 million were cash issuances, compared to total
AMBS issuances of $121.0 million for year-to-date 1997. Gains resulting from
those issuances totaled $1.0 million and $1.5 million, respectively.
Other Expenses. Other expenses totaled $2.4 million for second quarter
1998 and $4.5 million for year-to-date 1998, compared to $2.2 million for second
quarter 1997 and $3.8 million for year-to-date 1997. The increase was
attributable to increased regulatory fees, as well as increased professional
fees, compensation and other costs related to expanded operations under Farmer
Mac's revised authorities. Farmer Mac's provision for losses, a component of
other expenses, totaled $362 thousand for second quarter 1998 and $622 thousand
for year-to-date 1998, compared to $340 thousand for second quarter 1997 and
$520 thousand for year-to-date 1997. The increases in the provision for losses
were due to increases in the balance of guaranteed securities.
Income Tax Expense. For second quarter and year-to-date 1998, Farmer Mac
recorded tax benefits of $306 thousand and $458 thousand, including tax benefits
of $325 thousand and $525 thousand, respectively, related to the expected future
use of previously deferred tax benefits. Deferred tax benefits that arose in
prior years had not been recognized due to uncertainty regarding the level of
future profitability. As certainty regarding future profitability has increased,
however, Farmer Mac has recognized the previously deferred tax benefits. As of
June 30, 1998, previously deferred tax benefits have been fully recognized.
Accordingly, Farmer Mac's effective tax rate in future periods will approximate
its statutory tax rate of 34 percent.
<PAGE>
Balance Sheet Review
At June 30, 1998, total assets were $1.6 billion compared to $1.3 billion
at December 31, 1997. The increase in assets, and corresponding increase in
notes payable, was due to increases in both program and non-program assets.
Non-program assets will fluctuate from period to period based on investment
opportunities and the Corporation's liquidity needs and investment policy
guidelines. For a discussion of the increase in program assets, see "- Net
Interest Income."
Liquidity and Capital Resources
Liquidity. Farmer Mac's business programs create funding needs that are
driven by the purchase of Qualified Loans, payment of principal and interest on
Farmer Mac Guaranteed Securities and the maturities of debt. Farmer Mac's
primary sources of funds to meet these needs are issuances of debt obligations,
principal and interest payments on mortgages underlying Farmer Mac Guaranteed
Securities and net operating cash flows. Because of Farmer Mac's regular
participation in the capital markets and its status as a government-sponsored
enterprise, Farmer Mac has been able to access the capital markets at favorable
rates. Farmer Mac also maintains a portfolio of cash equivalents, comprised of
commercial paper and other short-term investments, to draw upon as necessary. At
June 30, 1998 and December 31, 1997, Farmer Mac's cash and cash equivalents
totaled $345.7 million and $177.6 million, respectively.
Capital. At June 30, 1998, Farmer Mac's stockholders' equity totaled
$79.0 million, an increase of $3.9 million from December 31, 1997. This
increase was primarily due to net income earned during the first and second
quarters of 1998 and, to a lesser extent, the issuance of Class A and C
Common Stock during the period. Farmer Mac commenced a direct stock purchase
program in early 1997 to offer Class A Common Stock to interested eligible
investors pursuant to which approximately 16,080 shares were issued during
year-to-date 1998. By statute, Farmer Mac's Class A Voting Common Stock can
only be held by banks, insurance companies and other financial entities that are
not members of the Farm Credit System.
At June 30, 1998 and December 31, 1997, Farmer Mac's regulatory required
minimum capital was $41.5 million and $30.0 million, compared with actual
capital of $79.0 million and $75.1 million, respectively.
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 Classes A and B Voting Common Stock and Class C Non-Voting Common
Stock relating to declaration of dividends. The ratio of dividends paid on each
share of Class C Non-Voting Common Stock to each share of Classes A and B 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.
Risk Management
Credit Risk. Farmer Mac guarantees the timely payment of principal and
interest on securities issued under the Farmer Mac I and Farmer Mac II Programs.
Farmer Mac also assumes credit risk on Qualified Loans purchased through the
Farmer Mac I cash window and held in portfolio pending securitization. The
following table sets forth the outstanding principal balance of the securities
issued and loans held for sale through the Farmer Mac programs.
<TABLE>
June 30, 1998 December 31, 1997
----------------------------------------- -----------------------------------------
On-Balance Off-Balance On-Balance Off-Balance
Sheet Sheet Total Sheet Sheet Total
----------------------------------------- -----------------------------------------
(in thousands)
Farmer Mac I
<S> <C> <C> <C> <C> <C> <C>
AMBS $ - $ 462,987 $ 462,987 $ - $ 341,213 $ 341,213
Other Farmer Mac I Securities 179,777 29,653 209,430 184,356 44,548 228,904
Loans held for securitization 98,448 - 98,448 47,177 - 47,177
Farmer Mac II Securities 281,327 32,341 313,668 249,451 23,326 272,777
------------- ------------- ------------- ------------- ------------- -------------
Total $ 559,552 $ 524,981 $ 1,084,533 $ 480,984 $ 409,087 $ 890,071
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
Farmer Mac I AMBS represent securities issued under Farmer Mac's revised
legislative authorities and for which Farmer Mac bears the risk of first loss.
"Other Farmer Mac I Securities" includes securities issued prior to the 1996
enactment of those authorities; these securities are supported by unguaranteed
subordinated interests, which represented 10% of the initial balance of the
loans underlying the security at the time of issuance. Also included in Other
Farmer Mac I Securities are $6.2 million of AgVantage bonds purchased during
first and second quarter 1998. AgVantage bonds, which are general obligations of
the issuers, are secured by eligible collateral in an amount ranging from 120%
to 150% of the bonds' outstanding principal amount. Eligible collateral consists
of Qualified Loans having an aggregate principal balance at least equal to 100%
of the bonds' outstanding principal amount and cash or securities issued by the
U.S. Treasury or guaranteed by an agency or instrumentality of the United
States. Loans held for securitization expose Farmer Mac to the same credit risk
as Farmer Mac I AMBS. The loans underlying Farmer Mac II Securities are backed
by the "full faith and credit" of the United States by virtue of the Secretary
of Agriculture's guarantee of principal and interest on such loans. For further
information regarding the outstanding balance of Farmer Mac Guaranteed
Securities, see "- Supplemental Information."
At June 30, 1998, loans 90 days or more past due or in bankruptcy
represented 0.71% of the principal balance of all loans backing Farmer Mac I
Guaranteed Securities and the loans held for securitization, compared to 0.26%
and 0.10% at December 31, 1997 and June 30, 1997. The increase in delinquencies
is due to the growing number of loans held or securitized by Farmer Mac that are
approaching their anticipated peak default years. Farmer Mac anticipates that
the level of delinquencies will fluctuate from quarter to quarter with higher
delinquency rates reported in the first and third quarters of each year due to
the semiannual payment characteristics of most Farmer Mac loans. On average,
Farmer Mac anticipates that delinquency levels during 1998 will be higher than
those experienced during 1997 due to the aging of loans held or securitized by
Farmer Mac and adverse conditions affecting certain sectors of the agricultural
economy. For further information on delinquencies, see"-Supplemental
Information."
Farmer Mac maintains a reserve for loan losses to cover anticipated losses
on Farmer Mac I AMBS (no loss reserve has been made for Farmer Mac I Securities
issued prior to the revised authorities because of the unguaranteed subordinated
interests or for Farmer Mac II Securities because of the Secretary of
Agriculture's guarantee). Management evaluates the adequacy of the reserve 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
believes the reserve for losses on guaranteed securities is adequate to cover
losses incurred in the Farmer Mac I Program given the overall credit quality and
diversification of loans held or securitized by Farmer Mac.
At June 30, 1998, the reserve for losses on AMBS totaled $2.3 million,
compared to $1.6 million at December 31, 1997. This increase was attributable to
an increase in the outstanding balance of AMBS sold to investors. At June 30,
1998 and December 31, 1997, the reserve for loan losses represented
approximately 0.40 percent of the total outstanding balance of Farmer Mac I AMBS
and loans held for securitization.
Asset and Liability Management. Farmer Mac's asset and liability
management objective is to limit the effect of changes in interest rates on the
Corporation's equity and earnings to within acceptable risk tolerance levels. In
doing so, Farmer Mac enters into off-balance sheet derivative financial
instruments. The Corporation uses these instruments as an end-user and not for
trading or speculative purposes.
The primary off-balance sheet derivative financial instruments used by
Farmer Mac are interest-rate contracts, including interest-rate swaps and caps.
These contracts are used to synthetically create debt instruments and
interest-earning assets. When combined with the underlying liability or asset,
the interest-rate contracts synthetically create debt and investments that
should produce lower effective debt costs or higher effective asset yields than
those available through direct debt issuances or investment purchases. At June
30, 1998, the notional amount of interest-rate contracts outstanding was $491.2
million. To a lesser extent, the Corporation uses futures contracts to reduce
its exposure to interest-rate risk related to outstanding commitments to
purchase fixed-rate Qualified Loans and fixed-rate loans held for securitization
not offset by forward sale commitments. At June 30, 1998, outstanding futures
contracts totaled $8.7 million.
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 cost that would be
incurred by Farmer Mac to replace the instrument (as measured by the fair value
gain on the instrument) should the counterparty default. Credit risk exposure
related to off-balance sheet derivative financial instruments 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 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. Either party delivers collateral 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 Matters
New Accounting Standard. In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities. The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot by applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).
Farmer Mac has not yet quantified the impact of adopting Statement 133 on
its financial statements and has not determined the timing of or method of
adopting Statement 133. However, the Statement could increase volatility in
earnings and other comprehensive income.
Year 2000. The year 2000 problem relates to the inability of some computer
programs to process date-sensitive information due to the use of two digits
(rather than four) to define the applicable year. As a result, these computer
programs may recoginze a date using "00" as the year 1900 rather than 2000,
which could result in miscalculations or system failure. The year 2000 date
change potentially could affect Farmer Mac's internal information technology
(IT) and non-IT systems, as well as systems utilized by its external vendors.
Farmer Mac's internal IT systems, which are "PC software-based," are used to
perform critical business processes including purchases of Qualified Loans; sale
of AMBS; issuance of debt securities; payments to debt security and AMBS
investors; and financial reporting to investors and shareholders. Certain
vendors also perform critical business processes by servicing the loans held or
securitized by Farmer Mac and administering the guaranteed securities issued by
Farmer Mac. Non-IT systems include telephones, facsimile machines and systems
used to maintain building operations. Failure of these systems to handle the
year 2000 date change properly could result in Farmer Mac being unable to
perform critical business processes and expose Farmer Mac to significant
business risk.
To manage the risks related to the year 2000 date change, Farmer Mac has
adopted a Year 2000 Compliance Plan. As specified in the Plan, Farmer Mac has
assessed the compliance status of its internal IT and non-IT systems. While
testing of internal systems will not be completed until the end of 1998, Farmer
Mac has found all but one of these systems to be year 2000 compliant. The
process of replacing the one non-compliant system has begun and will be
completed by the end of 1998. In addition, the Plan places significant emphasis
on vendors that perform critical business processes because of the higher risk
associated with ensuring compliance by external vendors. Farmer Mac has been
engaged in discussions with these critical vendors regarding their year 2000
readiness efforts and has not identified any significant year 2000 compliance
issues. Farmer Mac will continue to monitor their year 2000 readiness efforts
and will complete testing with critical vendors in early 1999. To prepare for
the possibility that a critical vendor will not be year 2000 compliant, Farmer
Mac has developed contingency plans, including Farmer Mac assuming the duties
internally or transferring them to a compliant vendor.
Currently, management believes that the year 2000 date change will not
expose Farmer Mac to significant business risk based on its assessment of Farmer
Mac's internal systems and critical vendors, and that total direct costs to
complete its year 2000 readiness efforts will not exceed $150 thousand.
<PAGE>
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
-----------------------------------------------------------------------
Long-Term 5 and 7 1, 3 and 5
For the quarter Fixed Rate Year Year ARMs Total
ended: Balloons
-------------------------- --------------------------
(in thousands)
<S> <C> <C> <C> <C>
June 30, 1998 $ 49,154 $ 22,095 $ 36,731 $ 107,980
March 31, 1998 (1) 32,394 5,964 58,328 96,686
December 31, 1997 23,040 11,157 14,513 48,710
September 30, 1997 23,066 18,116 5,982 47,164
June 30, 1997 19,196 57,465 9,283 85,944
</TABLE>
<TABLE>
Purchases of Loans
-----------------------------------------------------------------------
Long-Term 5 and 7 1, 3 and 5
For the quarter Fixed Rate Year Year ARMs Total
ended: Balloons
-------------------------- --------------------------
(in thousands)
<S> <C> <C> <C> <C>
June 30, 1998 (1) $ 41,772 $ 18,571 $ 67,116 $ 127,459
March 31, 1998 25,671 6,099 24,147 55,917
December 31, 1997 28,063 11,250 9,674 48,987
September 30, 1997 19,300 19,978 6,800 46,078
June 30, 1997 26,325 55,968 8,990 91,283
</TABLE>
<TABLE>
AMBS Issuances
-----------------------------------------------------------------------
Long-Term 5 and 7 1, 3 and 5
For the quarter Fixed Rate Year Year ARMs Total
ended: Balloons
-------------------------- --------------------------
(in thousands)
<S> <C> <C> <C> <C>
June 30, 1998 (1) $ 35,503 $ 20,555 $ 32,756 $ 88,814
March 31, 1998 31,797 9,601 - 41,398
December 31, 1997 16,373 9,256 - 25,629
September 30, 1997 26,186 24,697 - 50,883
June 30, 1997 57,569 14,063 - 71,632
</TABLE>
<TABLE>
Delinquencies (2)
-----------------------------------------------------------
Farmer Mac I
---------------------------
As of: AMBS Other (3) Total
------------- ------------- -------------
<S> <C> <C> <C>
June 30, 1998 0.70% 0.74% 0.71%
March 31, 1998 1.15% 0.49% 0.92%
December 31, 1997 - 0.66% 0.26%
September 30, 1997 0.29% 0.93% 0.57%
June 30, 1997 - 0.21% 0.10%
</TABLE>
<PAGE>
<TABLE>
Outstanding Guaranteed Securities
- --------------------------------------------------------------------
Farmer Mac I
----------------------- Farmer Held in
As of: AMBS Other (3) Mac II Total Portfolio(4)
----------- ---------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
June 30, 1998 $ 462,987 $ 203,230 $ 313,668 $ 979,885 $ 454,904
March 31, 1998 376,797 214,427 290,947 882,171 439,477
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
</TABLE>
(1)Includes a $32.8 million swap transaction involving 1, 3 and 5
year ARMs.
(2)Based on the outstanding balance of the loans. Includes loans 90 days or
more past due, in foreclosure or in bankruptcy.
(3)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.
(4) Included in total outstanding guaranteed securities.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The registrant is not a party to any material pending legal proceedings.
Item 2. Changes in Securities.
(a) Not applicable.
(b) Not Applicable.
(c)Farmer Mac is a federally chartered instrumentality of the United
States and its Common Stock is exempt from registration pursuant to
Section 3(a)(2) of the Securities Act of 1933.
Under the direct stock purchase program pursuant to which Farmer Mac
is offering approximately 100,000 shares of Class A Voting Common
Stock to interested eligible investors, Farmer Mac sold an aggregate
of 5,800 shares of Class A Common Stock to 22 financial institutions
in the quarter ended June 30, 1998. The aggregate offering price for
the sales was approximately $114,163.
Pursuant to Farmer Mac's policy which permits Directors of Farmer Mac
to elect to receive shares of Class C Non-Voting Common Stock in lieu
of their annual cash retainers, on April 23, 1998, Farmer Mac issued
an aggregate of 193 shares of its Class C Non-Voting Common Stock at
an issue price of $56.00 per share to the nine Directors who elected
to receive such stock in lieu of their cash retainers.
On June 4, 1998, Farmer Mac issued an aggregate 6,715 shares of its
Class C Non-Voting Common Stock at an issue price of $60.00 per share
to the officers of Farmer Mac as incentive compensation.
(d) Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Stockholders.
(a) Farmer Mac's Annual Meeting of Stockholders was held on June 4, 1998.
(b) Not Applicable.
<PAGE>
<TABLE>
(c) (1) Election of Directors - Class A Nominees
Number of Shares
For Withheld
<S> <C> <C>
Hemingway 714,873 5,000
Johnson 714,973 4,900
Mulder 715,973 3,900
Nolan 715,373 4,500
Paul 715,173 4,700
</TABLE>
<TABLE>
Class B Nominees
Number of Shares
For Withheld
<S> <C> <C>
Graff 462,165 400
McCarthy 462,365 200
Nelson 462,365 200
Raines 462,365 200
Rhodes 462,365 200
</TABLE>
(2) Selection of Independent Auditors (Arthur Andersen LLP)
Class A Stockholders:
<TABLE>
Number of Shares
<S> <C>
For 716,773
Against 1,300
Abstain 1,800
Class B Stockholders:
Number of Shares
For 462,565
Against 0
Abstain 0
</TABLE>
Item 5. Other Information.
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
* 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).
+* 10.1.2 - 1996 Stock Option Plan (Form 10-Q filed August 14, 1996).
+* 10.1.3 - 1997 Stock Option Plan (Form 10-Q filed May 15, 1997).
+* 10.1.4 - Amended and Restated 1997 Incentive Plan (Form10-Q filed
August 14, 1997).
+* 10.1.5 - Amended and Restated 1997 Incentive Plan (Form 10-Q filed
November 14, 1997).
+** 10.1.6 - Amended and Restated 1997 Incentive Plan.
+* 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).
+* 10.2.1 - Amendment No. 1 dated as of January 10, 1991 to
Employment Contract 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 September
1, 1993 between Henry D. Edelman and the Registrant (Previously
filed as Exhibit 10.5 to Form 10-Q filed November 15, 1993).
- ------------------
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
+* 10.2.3 - Amendment No. 3 dated as of September 1, 1994 to
Employment Contract between Henry D. Edelman and the Registrant
(Previously 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 September 13, 1996 to
Employment Contract between Henry D. Edelman and the
Registrant (Form 10-Q filed August 14, 1996).
+* 10.2.6 - Amendment No. 6 dated as of August 7, 1997 to Employment
Contract between Henry D. Edelman and the Registrant (Form
10-Q filed November 14, 1997).
+** 10.2.7 - Amendment No. 7 dated as of June 4, 1998 to Employment
Contract between Henry D. Edelman and the Registrant.
+* 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).
+* 10.3.3 - Amendment to Employment Contract dated as of September
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 September 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 September 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).
- ------------------
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
+* 10.3.6 - Amendment No. 6 dated as of September 1, 1995 to
Employment Contract between Nancy E. Corsiglia 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 September 13, 1996 to
Employment Contract between Nancy E. Corsiglia and the
Registrant (Form 10-Q filed August 14, 1996).
+* 10.3.9 - Amendment No. 9 dated as of August 7, 1997 to
Employment Contract between Nancy E. Corsiglia and the
Registrant (Form 10-Q filed November 14, 1997).
+** 10.3.10 - Amendment No. 10 dated as of June 4, 1998 to Employment
Contract between Nancy E. Corsiglia and the Registrant.
+* 10.4 - Employment Agreement dated September 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 September
1, 1993 between Thomas R. Clark and the Registrant (Previously
filed as Exhibit 10.12 to Form 10-Q filed November 15, 1993).
+* 10.4.3 - Amendment No. 3 dated September 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 September 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 September 1, 1995 to Employment
Contract between Thomas R. Clark and the Registrant (Form
10-Q filed August 14, 1995).
- ------------------
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
+* 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 September 13, 1996 to
Employment Contract between Thomas R. Clark and the
Registrant (Form 10-Q filed August 14, 1996).
+* 10.4.8 - Amendment No. 8 dated as of August 7, 1997 to Employment
Contract between Thomas R. Clark and the Registrant (Form
10-Q filed November 14, 1997).
+** 10.4.9 - Amendment No. 9 dated as of June 4, 1998 to Employment
Contract between Thomas R. Clark and the Registrant.
+* 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 September 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 September 13, 1996 to
Employment Contract between Charles M. Lewis and the
Registrant (Form 10-K filed March 29, 1996).
+* 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 September
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 September 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).
- ------------------
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
+* 10.6.3 - Amendment No. 3 dated September 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 September 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 September 13, 1996 to
Employment Contract between Michael T. Bennett and the
Registrant (Form 10-Q filed August 14, 1996).
+* 10.6.7 - Amendment No. 7 dated as of August 7, 1997 to Employment
Contract between Michael T. Bennett and the Registrant (Form
10-Q filed November 14, 1997).
+** 10.6.8 - Amendment No. 8 dated as of June 4, 1998 to Employment
Contract between Michael T. Bennett and the Registrant.
+* 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 September
1, 1993 between Christopher A. Dunn and the Registrant
(Previously filed as Exhibit 10.19 to Form 10-Q filed November
15, 1993).
+* 10.7.2 - Amendment No. 2 dated September 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 September 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 September 1, 1995 to
Employment Contract between Christopher A. Dunn and the
Registrant (Form 10-Q filed August 14, 1995).
- ------------------
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
+* 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 September 13, 1996 to
Employment Contract between Christopher A. Dunn and the
Registrant (Form 10-Q filed August 14, 1996).
+* 10.7.7 - Amendment No. 7 dated as of August 7, 1997 to Employment
Contract between Christopher A. Dunn and the Registrant
(Form 10-Q filed November 14, 1997).
+* 10.8 - Employment Contract dated as of September 1, 1997 between
Tom D. Stenson and the Registrant (Form 10-Q filed November
14, 1997).
+** 10.8.1 - Amendment No. 1 dated as of June 4, 1998 to Employment
Contract between Tom D. Stenson and the Registrant.
* 10.9 - 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 (Secretary of
Agriculture's) Regions (Previously filed as Exhibit 1.1 to
Form 10-K filed April 1, 1991).
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter
ended June 30, 1998.
- ------------------
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory 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
August 14, 1998
By: /s/ Henry D. Edelman
--------------------------------------------------
Henry D. Edelman
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Nancy E. Corsiglia
--------------------------------------------------
Nancy E. Corsiglia
Vice President - Treasurer and Chief Financial
Officer
(Principal Financial Officer)
<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
August 14, 1998
By:
--------------------------------------------------
Henry D. Edelman
President and Chief Executive Officer
(Principal Executive Officer)
--------------------------------------------------
Nancy E. Corsiglia
Vice President - Treasurer and Chief Financial
Officer
(Principal Financial Officer)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-Q
UNDER
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
<PAGE>
Exhibit Description
+** 10.1.6 - Amended and Restated 1997 Incentive Plan.
+** 10.2.7 - Amendment No. 7 dated as of June 4, 1998 to Employment
Contract between Henry D. Edelman and the Registrant.
+** 10.3.10 - Amendment No. 10 dated as of June 4, 1998 to Employment
Contract between Nancy E. Corsiglia and the Registrant.
+** 10.4.9 - Amendment No. 9 dated as of June 4, 1998 to Employment
Contract between Thomas R. Clark and the Registrant.
+** 10.6.8 - Amendment No. 8 dated as of June 4, 1998 to Employment
Contract between Michael T. Bennett and the Registrant.
+** 10.8.1 - Amendment No. 1 dated as of June 4, 1998 to Employment
Contract between Tom D. Stenson and the Registrant.
------------------
** Filed herewith.
+ Management contract or compensatory plan.
EXHIBIT 10.1.6
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
AMENDED AND RESTATED 1997 INCENTIVE PLAN
1. Purpose of the Plan
The purposes of this Amended and Restated 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 not also an employee of the Company 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 (i) the
Board of Directors for any purpose under the Plan, (ii) a committee of the Board
consisting of two or more Directors, each of whom is a "Non-Employee Director"
under Securities Exchange Act Rule 16b-3, for any purpose under the Plan, or
(iii) a committee of the Board consisting of two or more Directors (whether or
not any such Director is a "Non-Employee Director") for purposes of any award
under the Plan to an employee other than an officer subject to Section 16 of the
Securities Exchange Act of 1934 (it being understood and agreed that references
herein to the "Committee" shall mean the Board or either committee referred to
above, as the case may be).
(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 composite 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 composite 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 composite closing price quotation for the next
preceding day on which a composite closing price quotation is available.
(c) In connection with establishing the level of Option awards under the
Plan, the value of an Option shall be calculated by an independent third party
acceptable to the Committee (the "Compensation Consultant") and shall be based
on the "Black-Scholes" method of option valuation, as determined by the
Compensation Consultant. In calculating the Black-Scholes value of an Option,
the average of the composite closing prices of the Company's Common Stock as
reported by NASDAQ, or such other market on which the Common Stock may be listed
or traded, as determined by the Committee, for the 90-day period preceding such
calculation shall be the used by the Compensation Consultant as the "current
market price" and "exercise price" inputs to such Black-Scholes calculation,
irrespective of the Fair Market Value of a share of Common Stock on the date of
calculation. Notwithstanding the foregoing, the Exercise Price of any Option
awarded under the Plan shall be the Fair Market Value of one share of Common
Stock on the date the Option is granted, as provided in subsection (b) above.
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
(a) 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.
(b) Notwithstanding the foregoing, the Committee may, in its discretion,
authorize all or a portion of the Options to be granted to an Optionee to be
transferred to: (i) the spouse, siblings, parents, children or grandchildren of
the Optionee ("Immediate Family Members"); (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members; or (iii) a partnership in
which such Immediate Family Members are the only partners; provided, however,
that (x) there may be no consideration for any such transfer, (y) the Award
Agreement pursuant to which the Options are granted must expressly provide for
transferability in a manner consistent with this Section 8 and (z) subsequent
transfers of transferred Options shall be prohibited, except those in accordance
with the subsection (a) above. Following transfer, any such Options shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that the term "Optionee" shall be deemed
to refer to the transferee.
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 date of the Annual Meeting of Stockholders,
commencing with the Annual Meeting in 1998, there shall be granted automatically
(without any action by the Committee or the Board) a Director Option to each
Director then elected to office to purchase 2,000 shares of Common Stock.
(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) An annual Director Option grant under Section 15(b) shall become fully
vested and exercisable at the rate of one third of the Shares (rounded down to
the nearest whole share number) immediately on the date of grant and one third
on May 31 of each of the following two years if the Director who is an optionee
under the Director Option continues to serve as a Director as of such date.
(f) Each Director Option shall terminate on the date which is the fifth
anniversary of the date of grant (the "Option Termination Date"), unless
terminated earlier as follows:
(i) If a Director's service as a member of the Board terminates for
any reason other than death or Cause (as defined below), the Director may
for a period of up to two years after such termination (but not later than
the Option Termination Date) 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
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.
(iii) If a Director dies while a member of the Board or within 24
months after termination of service as a Director as described in clause
(i) 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
(but not later than the Option Termination Date) 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.
Originally adopted: February 13, 1997
First Amendment: June 12, 1997
Second Amendment: August 7, 1997
Third Amendment: February 5, 1998
Fourth Amendment: June 4, 1998
EXHIBIT 10.2.7
AMENDMENT NO. 7 TO EMPLOYMENT CONTRACT
AGREED, as of the 4th day of June 1998, between the Federal Agricultural
Mortgage Corporation (FAMC) and Henry D. Edelman (you), that the existing
employment contract between the parties hereto, dated May 5, 1989, as amended by
Employment Agreement Amendment No. 1 dated January 10, 1991, Amendment to
Employment Agreement dated as of June 1, 1993, Amendment No. 3 to Employment
Contract dated as of June 1, 1994, Amendment No. 4 to Employment Contract dated
as of February 8, 1996, Amendment No. 5 to Employment Contract dated as of June
13, 1996 and Amendment No. 6 to Employment Contract dated as of August 7, 1997
(collectively, the Agreement), be and hereby is amended as follows:
Sections 1, 4 (a) and 9 (a) (iii) of the Agreement are replaced in their
entirety with the following new sections:
1. Term. The Term of this Agreement shall continue until June 1, 2002 or
any earlier effective date of termination pursuant to Paragraph 9 hereof (the
"Term").
4 (a). Base Salary. You will be paid a base salary (the Base Salary)
during the Term of Three Hundred Eighty Thousand Dollars ($380,000) per year,
payable in arrears on a bi-weekly basis; and
9 (a) (iii). Farmer Mac may terminate the employment of the
Employee without "cause" at any time. Such termination shall become effective on
the earlier of June 1, 2002 or two years from the date of notice of such
termination.
Section 6 of the Agreement is hereby amended by deleting the second
sentence thereof and replacing it with the following sentences: "During the
first six months of each Planning Year, vacation shall accrue at the rate of
four (4) weeks per Planning Year; upon the expiration of such six-month period,
all remaining vacation rights for such Planning Year shall accrue immediately.
Vacation rights must be exercised with two months after the end of the Planning
Year or forfeited."
As amended hereby, the Agreement remains in full force and effect.
Federal Agricultural Mortgage Corporation Employee
By:-------------------------- ------------------------
Chairman of the Board
EXHIBIT 10.3.10
AMENDMENT NO. 10 TO EMPLOYMENT CONTRACT
AGREED, as of the 4th day of June 1998, between the Federal Agricultural
Mortgage Corporation (FAMC) and Nancy E. Corsiglia (you) that the existing
employment contract between the parties hereto, dated May 11, 1989, as amended
by letter dated December 14, 1989, Employment Agreement Amendment No. 2 dated
February 14, 1991, Amendment to Employment Agreement dated as of June 1, 1993,
Amendment No. 4 to Employment Contract dated as of June 1, 1993, Amendment No. 5
to Employment Contract dated as of June 1, 1994, Amendment No. 6 to Employment
Contract dated as of June 1, 1995, Amendment No. 7 to Employment Contract dated
as of February 8, 1996, Amendment No. 8 to Employment Contract dated as of June
13, 1996 and Amendment No. 9 to Employment Contract dated as of August 7, 1997
(collectively, the Agreement), be and hereby is amended as follows:
Sections 1, 3 (a) and 8 (a) (iii) of the Agreement are replaced in their
entirety with the following new sections:
1. Term. The Term of this Agreement shall continue until June 1, 2001 or
any earlier effective date of termination pursuant to Paragraph 8 hereof (the
"Term").
3 (a). Base Salary. You will be paid a base salary (the Base Salary)
during the Term of Two Hundred Two Thousand and Sixty Dollars ($202,060) per
year, payable in arrears on a bi-weekly basis; and
8 (a) (iii). Farmer Mac may terminate your employment without "cause"
at any time. Such termination shall become effective on the earlier of June 1,
2001, or two years from the date of notice of such termination.
Section 5 of the Agreement is hereby amended by deleting the second
sentence thereof and replacing it with the following sentences: "During the
first six months of each Planning Year, vacation shall accrue at the rate of
four (4) weeks per Planning Year; upon the expiration of such six-month period,
all remaining vacation rights for such Planning Year shall accrue immediately.
Vacation rights must be exercised with two months after the end of the Planning
Year or forfeited."
As amended hereby, the Agreement remains in full force and effect.
Federal Agricultural Mortgage Corporation Employee
By:
- --------------------------
President
<PAGE>
EXHIBIT 10.4.9
AMENDMENT NO. 9 TO EMPLOYMENT CONTRACT
AGREED, as of the 4th day of June 1998, between the Federal Agricultural
Mortgage Corporation (FAMC) and Thomas R. Clark (you), that the existing
employment contract between the parties hereto, dated June 13, 1989, as amended
by Employment Agreement Amendment No. 1 dated February 14, 1991 and Amendment to
Employment Contract dated as of June 1, 1993, Amendment No. 3 to Employment
Contract dated as of June 1, 1993, Amendment No. 4 to Employment Contract dated
as of June 1, 1994, Amendment No. 5 to Employment Contract dated as of June 1,
1995, Amendment No. 6 to Employment Contract dated as of February 8, 1996,
Amendment No. 7 to Employment Contract dated as of June 13, 1996 and Amendment
No. 8 to Employment Contract dated as of August 7, 1997 (collectively, the
Agreement), be and hereby is amended as follows:
Sections 1, 3 (a) and 7 (a) (iii) of the Agreement are replaced in their
entirety with the following new sections:
1. Term. The Term of your employment shall continue until June 1, 2001
or any earlier effective date of termination pursuant to Paragraph 7 hereof (the
"Term").
3 (a). Base Salary. You will be paid a base salary (the Base Salary)
during the Term of Two Hundred Two Thousand and Sixty Dollars ($202,060) per
year, payable in arrears on a bi-weekly basis; and
7 (a) (iii). Farmer Mac may terminate your employment without "cause"
at any time. Such termination shall become effective on the earlier of June 1,
2001, or two years from the date of notice of such termination.
Section 5 of the Agreement is hereby amended by deleting the second
sentence thereof and replacing it with the following sentences: "During the
first six months of each Planning Year, vacation shall accrue at the rate of
four (4) weeks per Planning Year; upon the expiration of such six-month period,
all remaining vacation rights for such Planning Year shall accrue immediately.
Vacation rights must be exercised with two months after the end of the Planning
Year or forfeited."
As amended hereby, the Agreement remains in full force and effect.
Federal Agricultural Mortgage Corporation Employee
----------------------------
By: --------------------------
President
EXHIBIT 10.6.8
AMENDMENT NO. 8 TO EMPLOYMENT CONTRACT
AGREED, as of the 4th day of June 1998, between the Federal Agricultural
Mortgage Corporation (FAMC) and Michael T. Bennett (the employee), that the
existing employment contract between the parties hereto, dated October 7, 1991,
as amended by Amendment to Employment Contract dated as of June 1, 1993,
Amendment No. 2 to Employment Contract dated as of January 6, 1994 and Amendment
No. 3 dated as of June 1, 1994, Amendment No. 4 dated as of June 1, 1995,
Amendment No. 5 dated as of February 8, 1996, Amendment No. 6 to Employment
Contract dated as of June 13, 1996 and Amendment No. 7 to Employment Contract
dated as of August 7, 1997 (collectively, the Agreement), be and hereby is
amended as follows:
Sections 1, 3 (a) and 7 (a) (3) of the Agreement are replaced in their
entirety with the following new sections:
1. Term. The Term of this Agreement shall continue until June 1, 2001 or
any earlier effective date of termination pursuant to Paragraph 7 hereof (the
"Term").
3 (a). Base Salary. You will be paid a base salary (the Base Salary)
during the Term of Two Hundred Two Thousand Three Hundred and Eighty-Six Dollars
($202,386) per year, payable in arrears on a bi-weekly basis.
7 (a) (3). Farmer Mac may terminate your employment without "cause" at
any time. Such termination shall become effective on the earlier of June 1,
2001, or two years from the date of notice of such termination.
Section 5 of the Agreement is hereby amended by adding the following
after the first sentence of such section: "During the first six months of each
Planning Year, vacation shall accrue at the rate of four (4) weeks per Planning
Year; upon the expiration of such six-month period, all remaining vacation
rights for such Planning Year shall accrue immediately.
As amended hereby, the Agreement remains in full force and effect.
Federal Agricultural Mortgage Corporation Employee
----------------------------
By:--------------------------
President
EXHIBIT 10.8.1
AMENDMENT NO. 1 TO EMPLOYMENT CONTRACT
AGREED, as of the 4th day of June 1998, between the Federal Agricultural
Mortgage Corporation (FAMC) and Tom D. Stenson (the employee), that the existing
employment contract between the parties hereto, dated as of September 1, 1997
(the Agreement), be and hereby is amended as follows:
Sections 1, 3 (a) and 7 (a) (3) of the Agreement are replaced in their
entirety with the following new sections:
1. Term. The Term of this Agreement shall continue until June 1, 2000 or
any earlier effective date of termination pursuant to Paragraph 7 hereof (the
"Term").
3 (a). Base Salary. You will be paid a base salary (the Base Salary)
during the Term of One Hundred Ninety Thousand Dollars ($190,000) per year,
payable in arrears on a bi-weekly basis.
7 (a) (3). Farmer Mac may terminate your employment without "cause"
at any time. Such termination shall become effective on the earlier of June 1,
2000, or two years from the date of notice of such termination.
Section 5 of the Agreement is hereby amended by adding the following
after the first sentence of such section: "During the first six months of each
Planning Year, vacation shall accrue at the rate of four (4) weeks per Planning
Year; upon the expiration of such six-month period, all remaining vacation
rights for such Planning Year shall accrue immediately.
As amended hereby, the Agreement remains in full force and effect.
Federal Agricultural Mortgage Corporation Employee
----------------------------
By:--------------------------
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Earnings per share represent those for Class C stock. Basic earnings per share
for Classes A and B Common Stock are $0.32 for the six months ended June 30,
1998. Diluted earnings per share for Classes A and B Common Stock are $0.32 for
the six months ended June 30, 1998. </LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<CASH> 345,740
<SECURITIES> 1,119,538
<RECEIVABLES> 116,902
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 369,475
<PP&E> 145
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,587,606
<CURRENT-LIABILITIES> 1,214,638
<BONDS> 293,993
0
0
<COMMON> 4,606
<OTHER-SE> 74,369
<TOTAL-LIABILITY-AND-EQUITY> 1,587,606
<SALES> 51,551
<TOTAL-REVENUES> 51,551
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,485
<LOSS-PROVISION> 622
<INTEREST-EXPENSE> 44,004
<INCOME-PRETAX> 3,062
<INCOME-TAX> (458)
<INCOME-CONTINUING> 3,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,520
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.95
</TABLE>
