As filed with the Securities and Exchange Commission on
- ------------------------------------------------------------------------------
November 9, 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 September 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 November 5, 1998, there were 1,023,880 shares of Class A Voting
Common Stock, 500,301 shares of Class B Voting Common Stock and 3,092,117 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>
<CAPTION>
Consolidated Balance Sheets at September 30, 1998 and
<S> <C>
December 31, 1997 ................................................. 3
Consolidated Statements of Operations for the three and nine
months ended September 30, 1998 and 1997........................... 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997................................... 5
</TABLE>
<TABLE>
<CAPTION>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30December 31,
1998 1997
---------- ----------
----------------------
(in thousands)
Assets:
<S> <C> <C>
Cash and cash equivalents $ 435,288 $ 177,617
Investment securities 622,032 656,737
Farmer Mac guaranteed securities 496,322 442,311
Loans held for securitization 117,948 47,177
Interest receivable 17,104 21,066
Guarantee fees receivable 1,433 1,474
Prepaid expenses and other assets 5,256 1,753
---------- ----------
---------- ----------
Total Assets $ 1,695,383 $ 1,348,135
---------- ----------
---------- ----------
Liabilities and Stockholders' Equity:
Liabilities:
<S> <C> <C>
Notes payable, net:
Due within one year $ 1,361,013 $ 856,028
Due after one year 236,957 402,803
Accrued interest payable 6,683 10,490
Accounts payable and accrued expenses 8,425 2,108
Reserve for losses on guaranteed securities 2,765 1,645
---------- ----------
---------- ----------
Total liabilities 1,615,843 1,273,074
Stockholders' Equity:
Common stock:
Class A Voting, $1 par value, no
maximum authorization, 1,023,080
and 1,000,100 shares issued and
outstanding at September 30, 1998
and December 31, 1997 1,023 1,000
Class B Voting, $1 par value, no
maximum authorization, 500,301 shares
issued and outstanding at
September 30, 1998 and December 31, 1997 500 500
Class C Non-Voting, $1 par value,
no maximum authorization, 3,091,820 and
3,078,214 shares issued and outstanding
at September 30, 1998 and
December 31, 1997 3,092 3,078
Additional paid-in capital 76,130 75,148
Unrealized gain on securities available
for sale 12 1,198
Accumulated deficit (1,217) (5,863)
---------- ----------
---------- ----------
Total stockholders' equity 79,540 75,061
---------- ----------
---------- ----------
Total Liabilities and Stockholders'
Equity $ 1,695,383 $ 1,348,135
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Quarter Ended September 30, Nine Months Ended September 30,
-------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
(in thousands, except per share amounts)
Interest income:
<S> <C> <C> <C> <C>
Farmer Mac guaranteed securities $ 8,401 $ 7,764 $ 24,378 $ 22,612
Investments and cash equivalents 16,215 14,266 46,573 33,357
Loans held for securitization 2,180 708 4,757 1,552
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Total interest income 26,796 22,738 75,708 57,521
Interest expense 24,130 20,768 68,134 52,367
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Net interest income 2,666 1,970 7,574 5,154
Other income:
Guarantee fees 1,037 725 2,634 1,857
Gain on issuance of AMBS, net 420 592 1,400 2,111
Miscellaneous 54 16 116 233
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Total other income 1,511 1,333 4,150 4,201
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Total revenues 4,177 3,303 11,724 9,355
Other expenses:
Compensation and employee benefits 1,004 939 2,838 2,647
Professional fees 349 486 1,140 1,175
Board of Directors fees and expenses 75 72 251 251
Rent 57 56 170 168
Regulatory fees 130 16 461 47
General and administrative 275 250 893 836
Provision for losses 498 260 1,120 780
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Total other expenses 2,388 2,079 6,873 5,904
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Income before income taxes 1,789 1,224 4,851 3,451
Income tax provision 665 40 207 103
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Net income $ 1,124 $ 1,184 $ 4,644 $ 3,348
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Earnings per share:
Class A and B Voting Common Stock
Basic earning per share $ 0.10 $ 0.12 $ 0.43 $ 0.35
Diluted earnings per share $ 0.10 $ 0.12 $ 0.42 $ 0.34
Class C Non-Voting Common Stock
Basic earning per share $ 0.31 $ 0.37 $ 1.29 $ 1.05
Diluted earnings per share $ 0.30 $ 0.36 $ 1.25 $ 1.02
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months Ended September 30,
---------------------------------------
1998 1997
----------------- -----------------
----------------- -----------------
(in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income $ 4,644 $ 3,348
Adjustments to reconcile net income to cash (used in) provided
by operating activities:
Amortization of investment premiums and discounts 2,502 2,545
Amortization of debt premiums, discounts and issuance costs 49,191 33,529
Decrease (increase) in guarantee fees receivable 41 (286)
Decrease (increase) in interest receivable 3,962 (221)
Increase in prepaid expenses and other assets (3,503) (859)
Increase (decrease) in accounts payable and accrued expenses 6,317 (342)
(Decrease) increase in accrued interest payable (3,807) 734
Provision for loan losses 1,120 780
----------------- -----------------
----------------- -----------------
Net cash provided by operating activities 60,467 39,228
Cash flows from investing activities:
Purchases of available-for-sale investments (246,628) (398,401)
Purchases of investment securities (8,280) (209,659)
Purchases of Farmer Mac guaranteed securities (116,041) (63,613)
Purchases of loans held for securitization (237,661) (181,692)
Proceeds from repayment of loans held for securization 2,465 -
Proceeds from sale of loans held for securitization 164,425 170,870
Proceeds from repayment of available-for-sale investments 241,160 32,932
Proceeds from repayment of investment securities 47,074 13,534
Proceeds from repayment of Farmer Mac guaranteed securities 59,720 41,791
----------------- -----------------
----------------- -----------------
Net cash used by investing activities (93,766) (594,238)
Cash flows from financing activities:
Proceeds from issuance of discount notes 25,310,836 15,782,342
Proceeds from issuance of medium-term notes 14,960 104,918
Payments to redeem discount notes (24,863,285) (15,127,555)
Payments to redeem medium-term notes (172,560) (26,820)
Proceeds from common stock issuance 1,019 815
Purchase and retirement of stock - (1,396)
----------------- -----------------
----------------- -----------------
Net cash provided by financing activities 290,970 732,304
----------------- -----------------
----------------- -----------------
Net increase in cash and cash equivalents 257,671 177,294
Cash and cash equivalents at beginning of period 177,617 68,912
----------------- -----------------
----------------- -----------------
Cash and cash equivalents at end of period $ 435,288 $ 246,206
----------------- -----------------
----------------- -----------------
Supplemental information:
Cash paid for:
Interest $ 23,300 $ 18,755
Income Taxes $ 521 $ 34
Non-cash activity:
AMBS issued in exchange for Qualified Loans $ 55,426 $ -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies.
(a) Principles of Consolidation
Financial information at and for the three and nine months ended September
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 nine months ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended September 30,
- -----------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------
Effect of Effect of
stock stock
Basic EPS Options Diluted EPS Basic EPS options Diluted EPS
- --------------------------------------------------- --------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 1,124 $ - $ 1,124 $ 1,184 $ - $ 1,184
Weighted average
shares:
Classes A and B 1,521 - 1,521 1,495 - 1,495
Class C 3,091 131 3,222 2,678 118 2,796
Earnings per share:
Classes A and B $ 0.10 $ 0.10 $ 0.12 $ 0.12
Class C $ 0.31 $ 0.30 $ 0.37 $ 0.36
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
- -----------------------------------------------------------------------------------------------
Effect of Effect of
stock stock
Basic EPS Options Diluted EPS Basic EPS options Diluted EPS
- --------------------------------------------------- --------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 4,644 $ - $ 4,644 $ 3,348 $ - $ 3,348
Weighted average
shares:
Class A and B 1,513 - 1,513 1,502 - 1,502
Class C 3,084 141 3,225 2,676 100 2,776
Earnings per share:
Class A and B $ 0.43 $ 0.42 $ 0.35 $ 0.34
Class C $ 1.29 $ 1.25 $ 1.05 $ 1.02
</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 September 30, 1998, outstanding commitments to purchase
Qualified Loans totaled $23.6 million. There were no outstanding commitments to
sell Qualified Loans as agricultural mortgage-backed securities (AMBS) at
September 30, 1998. 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
The following table sets forth comprehensive income for the three and nine
months ended September 30, 1998 and 1997. Comprehensive income is comprised of
net income plus other changes in stockholders' equity not resulting from
investments by or distributions to stockholders.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 1,124 $ 1,184 $ 4,644 $ 3,348
Unrealized (loss) gain on
securities available-for-sale (756) 541 (1,186) 607
------------ ------------ ------------ -----------
Comprehensive income $ 368 $ 1,725 $ 3,458 $ 3,955
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Special Note Regarding 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 include, without limitation, any statement that may predict,
forecast, indicate or imply future results, performance or achievements, and
typically are accompanied by, and identified with, such terms as "anticipates,"
"believes," "expects," "intends," "should" and similar phrases. 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. Management's expectations for Farmer Mac's
future necessarily involve a number of assumptions, estimates and the evaluation
of risks and uncertainties. Various factors could cause Farmer Mac's actual
results or events to differ materially from the expectations as expressed or
implied by the forward-looking statements, including: uncertainties regarding
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.
The foregoing factors are not exhaustive. Other sections of this report
may include additional factors that could adversely impact Farmer Mac's business
and its financial performance. Furthermore, new risk factors emerge from time to
time and it is not possible for management to predict all such risk factors, nor
assess the impact of such factors on Farmer Mac's business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from the expectations expressed or implied by the forward-looking
statements. Given these 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. Farmer Mac reported net income of $1.1 million for third quarter
1998 and $4.6 million for year-to-date 1998. Prior to third quarter 1998, net
income included provisions for income taxes based on an effective tax rate
significantly lower than Farmer Mac's statutory tax rate, due to the recognition
of previously deferred tax benefits. Had Farmer Mac's effective tax rate equaled
its statutory tax rate in those prior periods, Farmer Mac would have reported
net income on a fully taxable equivalent basis of $1.1 million and $3.1 million
for third quarter and year-to-date 1998, compared to $808 thousand and $2.3
million for the comparable periods a year ago.
Diluted earnings per share for third quarter and year-to-date 1998 were
$0.10 and $0.42 for Classes A and B common stock, and $0.30 and $1.25 for Class
C common stock. On a fully taxable equivalent basis, Classes A and B earnings
per share would have been $0.10 and $0.28 for third quarter and year-to-date
1998, compared to $0.08 and $0.23, respectively, in 1997. Class C earnings per
share would have been $0.30 and $0.84 for third quarter and year-to-date 1998,
compared to $0.25 and $0.69 for the same periods in 1997. Earnings per share are
adjusted to reflect the 3-to-1 dividend and liquidation preference accorded to
Class C common stock compared to Classes A and B common stock.
Operating results improved during third quarter 1998 compared to third
quarter 1997, despite challenging conditions in both the capital markets and the
agricultural economy. During the quarter, loan purchase volume was up 89
percent, though down compared to second quarter 1998 primarily due to seasonal
factors. On a fully taxable equivalent basis, earnings for third quarter 1998
increased 39 percent compared to the same period a year ago as a result of
increased guarantee fees and net interest income from on-balance sheet Farmer
Mac guaranteed securities and investments, notwithstanding volatility in the
capital markets which reduced gain on AMBS issuances. Market volatility in the
latter part of the third quarter resulted in lower rates on Treasury securities,
but wider spreads on Farmer Mac debt securities and even wider spreads on AMBS.
These conditions diminished the economic attractiveness of capital market sales
of AMBS, due to lower potential gains on issuance, but facilitated Farmer Mac's
retention of the AMBS in its portfolio at favorable spreads. Retaining the AMBS
is expected to generate net interest income over the long term with a present
value in excess of the foregone up-front gain on issuance. If current capital
market conditions continue during the fourth quarter and beyond, Farmer Mac
intends to continue this retained portfolio strategy.
Consistent with the semi-annual payment characteristic of most Farmer Mac
loans, which results in higher delinquency rates in the first and third
quarters, the delinquency rate for loans collateralizing AMBS increased during
the third quarter, but was down compared to first quarter 1998. Farmer Mac
believes the credit quality of those loans remains good, based on its credit
underwriting, appraisal and diversification standards. Nevertheless, as loans
approach their peak default years, Farmer Mac expects delinquency rates to
increase and some credit losses well within current reserve levels to occur
beginning in 1999. Adverse conditions affecting certain sectors of the
agricultural economy may also increase delinquency rates. The impact of those
conditions on the agricultural economy should be mitigated by the recent passage
of Federal legislation providing approximately $6 billion of financial
assistance to agriculture.
While Farmer Mac's operating results have improved, future improvements
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.
Set forth below is a more detailed discussion of Farmer Mac's results of
operations.
Net Interest Income. Net interest income totaled $2.7 million for third
quarter 1998, compared to $2.0 million for third quarter 1997. Net interest
income for the first nine months of 1998 was $7.6 million, compared to $5.2
million for the comparable period a year ago. The increases in net interest
income were attributable to increases in the balance of program assets (Farmer
Mac I and II securities and loans held for securitization) and non-program
assets (cash and cash equivalents and investments). See " Balance Sheet Review -
Assets" for further information regarding changes in program and non-program
assets. The following table provides information regarding the average balances
and interest rates of interest-earning assets and interest-bearing liabilities
for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended September 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>
Cash and cash equivalents $ 400,342 $ 16,761 5.52% $ 293,446 $ 12,010 5.42%
Investments 663,851 29,812 5.99% 470,518 21,347 6.04%
Farmer Mac guaranteed securities 458,735 24,378 7.02% 424,847 22,612 7.07%
Loans held for securitization 90,452 4,757 7.01% 26,005 1,552 7.96%
-------------- ----------- ---------- -------------- ------------ ----------
Total interest earning assets 1,613,380 75,708 6.22% 1,214,816 57,521 6.29%
Other assets 20,930 26,742
-------------- --------------
Total assets 1,634,310 1,241,558
-------------- --------------
Liabilities and Stockholders' Equity:
Notes payable, net 1,544,790 68,134 5.83% 1,184,350 52,367 5.87%
Other liabilities 12,219 8,762
-------------- --------------
-------------- --------------
Total liabilities 1,557,009 1,193,112
Stockholders' equity 77,301 48,446
-------------- ----------- ---------- -------------- ------------ ----------
-------------- ----------- ---------- -------------- ------------ ----------
Total liabilities and stockholders' equity 1,634,310 1,241,558
-------------- --------------
-------------- --------------
Net interest income/spread 7,574 0.39% 5,154 0.42%
----------- ---------- ------------ ----------
----------- ---------- ------------ ----------
Net yield on interest-earning assets 0.63% 0.57%
---------- ----------
---------- ----------
</TABLE>
The table below sets forth certain information regarding the changes in
the components of Farmer Mac's net interest income for the periods indicated.
For each category, information is provided on changes attributable to (a)
changes in volume (change in volume multiplied by old rate); (b) changes in rate
(change in rate multiplied by old volume); and (c) the total. Combined
rate/volume variances, a third element of the calculation, are allocated based
on their relative size.
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
Compared to Nine Months Ended
September 30, 1997
-------------------------------------------
Increase/(Decrease) Due to
-------------------------------------------
-------------------------------------------
Rate Volume Total
------------- ------------- -------------
(in thousands)
Income from interest-earning assets
<S> <C> <C> <C>
Cash and cash equivalents $ 229 $ 4,522 $ 4,751
Investments (179) 8,644 8,465
Farmer Mac guaranteed securities (149) 1,915 1,766
Loans held for securitization (206) 3,411 3,205
------------- ------------- -------------
------------- ------------- -------------
Total (305) 18,492 18,187
Expense from interest-bearing liabilities (350) 16,117 15,767
------------- ------------- -------------
------------- ------------- -------------
Change in net interest income $ 45 $ 2,375 $ 2,420
------------- ------------- -------------
</TABLE>
Other Income. Other income totaled $1.5 million for third quarter 1998 and
$4.2 million for year-to-date 1998, compared to $1.3 million and $4.2 million,
respectively, in 1997. Guarantee fee income increased from $725 thousand for
third quarter 1997 to $1.0 million for third quarter 1998. Year-to-date,
guarantee fee income was $2.6 million for 1998 compared to $1.9 million for
1997. The increases in guarantee fee income were attributable to increases in
the outstanding balance of guaranteed securities (see "- Balance Sheet Review -
Off-Balance Sheet Farmer Mac Guaranteed Securities").
Gain on AMBS issuances decreased from $592 thousand and $2.1 million for
the three and nine months ended September 30, 1997 to $420 thousand and $1.4
million for the same periods in 1998. Gain on issuance decreased due to
decreases in the amount of AMBS sold to capital market investors. Farmer Mac
does not recognize a gain on AMBS retained in its portfolio or on AMBS issued in
exchange (or swapped) for Qualified Loans. For further information on AMBS
issuances, see " - Business Volume."
Miscellaneous income totaled $54 thousand and $116 thousand for third
quarter and year-to-date 1998, compared to $16 thousand and $233 thousand for
the same periods in 1997. Miscellaneous income for the nine months ended
September 30, 1997 included the difference between the amount Farmer Mac had
accrued for expenses related to litigation and the actual amount incurred, which
was lower as a result of settlement of that litigation in January 1997.
Other Expenses. Other expenses totaled $2.4 million for third quarter 1998
and $6.9 million for year-to-date 1998, an increase from $2.1 million and $5.9
million, respectively, in 1997. These increases were attributable to increased
compensation and other costs related to expanded operations under Farmer Mac's
revised legislative authorities. Farmer Mac's provision for losses, a component
of other expenses, totaled $498 thousand for third quarter 1998 and $1.1 million
for year-to-date 1998, compared to $260 thousand and $780 thousand,
respectively, in 1997. Increases in the provision for losses were primarily due
to increases in the balance of guaranteed securities.
Income Tax Expense. Provision for income taxes for third quarter and
year-to-date 1998 totaled $665 thousand and $207 thousand, compared to $40
thousand and $103 thousand for the same periods in 1997. The provision for
income taxes for the three months ended September 30, 1997 and the first nine
months of 1997 and 1998 are net of tax benefits related to the recognition of
previously deferred tax benefits. As of June 30, 1998, all previously deferred
tax benefits had been fully recognized. Accordingly, Farmer Mac's effective tax
rate in third quarter 1998 approximated its statutory tax rate.
Business Volume. Farmer Mac purchased $86.9 million and $270.3 million of
Qualified Loans during third quarter and year-to-date 1998, respectively, and
had outstanding commitments to purchase an additional $23.6 million at September
30, 1998. During the same periods a year ago, purchases totaled $46.1 million
and $181.5 million, respectively, and outstanding commitments to purchase
Qualified Loans totaled $11.3 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 $145.7 million at September
30, 1998, compared to $48.0 million at September 30, 1997. Not all loans in the
pipeline are purchased, as some are denied for credit reasons or withdrawn by
the seller.
During third quarter 1998, Farmer Mac issued $67.0 million of AMBS,
including $22.7 million retained by Farmer Mac, compared to $50.9 million during
third quarter 1997. Year-to-date, Farmer Mac has issued $197.2 million of AMBS
in 1998 compared to $171.9 million in 1997. Year-to-date 1998 AMBS issuances
consisted of the $22.7 million retained by Farmer Mac during the third quarter,
as well as $32.8 million swapped for Qualified Loans and $141.7 million sold to
capital market investors. All AMBS issued in 1997 were sold to capital market
investors.
Despite the increase in business volume, 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 other
government-sponsored enterprises such as 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.
Balance Sheet Review
Assets. At September 30, 1998, total assets were $1.7 billion compared to
$1.3 billion at December 31, 1997. The increase in assets was due to increases
in both program and non-program assets. Non-program assets increased in
accordance with Farmer Mac's debt issuance program begun in early 1997 to
increase its market presence and investor recognition of its securities and,
thereby, improve spreads on its debt and mortgage-backed securities and so the
mortgage rates available to farmers, ranchers and rural homeowners. The
increases in the balance of program assets reflect continued growth in the
Farmer Mac II program and increased purchases of mortgages through the Farmer
Mac I program, which have not yet been securitized and sold into the capital
markets, including $22.7 million of AMBS retained in Farmer Mac's portfolio
during third quarter 1998 due to capital market conditions (see " - Results of
Operations - Overview"). Retention of the AMBS caused Farmer Mac I securities
held in portfolio to increase from $184.4 million at December 31, 1997 to $196.8
million at September 30, 1998. If current capital market conditions persist
during the fourth quarter and beyond, Farmer Mac intends to continue to retain
AMBS resulting in further increases in Farmer Mac I securities held in
portfolio. Farmer Mac II securities held in portfolio totaled $293.3 million at
September 30, 1998, compared to $249.5 million at December 31, 1997.
Liabilities. Total liabilities increased from $1.3 billion at December 31,
1997 to $1.6 billion at September 30, 1998. Most of Farmer Mac's liabilities are
due within one year since most of Farmer Mac's assets are short- or long-term
floating rate investments. Notes payable due after one year totaled $237.0
million at September 30, 1998, compared to $402.8 million at December 31, 1997.
Long-term debt at December 31, 1997 includes $120.0 million of debt issued in
conjunction with interest rate swaps, which convert the fixed rate interest cost
to a floating rate (see "- Risk Management - Asset Liability Management"). As of
September 30, 1998, no such interest rate swaps were outstanding as the swaps
and related debt were called during the year. During the first nine months of
1998, $145.0 million of long-term debt was called.
Capital. At September 30, 1998, Farmer Mac's stockholders' equity
totaled $79.5 million, an increase of $4.5 million from December 31, 1997.
This increase was primarily due to net income earned during the first nine
months of 1998 and, to a lesser extent, the issuance of Class A and C Common
Stock during the period. At September 30, 1998 and December 31, 1997, Farmer
Mac's regulatory required minimum capital was $44.3 million and $30.0
million, compared with actual capital of $79.5 million and $75.1 million,
respectively.
- ------
The Farm Credit System Reform Act of 1996 (the "1996 Act") directs the
Farm Credit Administration (the "FCA") to establish a risk-based capital test
for Farmer Mac, using stress- test parameters set forth in the 1996 Act. The FCA
is in the process of developing a risk-based capital regulation and has
indicated that it intends to propose the regulation, in the form of a notice of
proposed rulemaking, in February 1999. In July 1998, the FCA released for public
comment a study estimating historical loss rates for agricultural real estate
loans and stated that it was seeking suggestions that might lead to an improved
credit risk component of the risk-based capital regulation. The period for
commenting on the study expires in early January 1999. Neither Farmer Mac's
regulatory risk-based capital requirement nor the credit risk component of the
stress test can be determined on the basis of the study alone or the estimated
data included in the study. The model the FCA proposes to calculate Farmer Mac's
risk-based capital requirement is expected to be contained in the FCA's notice
of proposed rulemaking. The FCA will issue a final risk-based capital test
following the consideration of public comments submitted by interested persons
on the proposed regulation.
Off-Balance Sheet Farmer Mac Guaranteed Securities. At September 30, 1998,
outstanding guaranteed securities totaled $557.5 million, compared to $409.1
million at December 31, 1997. For further information regarding off-balance
sheet Farmer Mac Guaranteed Securities, see "- Results of Operations - Business
Volume," "- Risk Management - Credit Risk" and "Supplemental Information."
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>
<CAPTION>
September 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 $ 22,671 $ 501,856 $ 524,527 $ - $ 341,213 $ 341,213
Other Farmer Mac I Securities 174,110 25,359 199,469 184,356 44,548 228,904
Loans held for securitization 117,857 - 117,857 47,177 - 47,177
Farmer Mac II Securities 293,347 30,261 323,608 249,451 23,326 272,777
------------- ------------- --------------- ------------- ------------- -------------
------------- ------------- --------------- ------------- ------------- -------------
Total $ 607,985 $ 557,476 $ 1,165,461 $ 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 percent of the initial balance of
the loans underlying the security at the time of issuance. Also included in
Other Farmer Mac I Securities are $10.3 million of AgVantage bonds purchased
during the first nine months of 1998. AgVantage bonds, which are general
obligations of the issuers, are secured by eligible collateral in an amount
ranging from 120 percent to 150 percent of the bonds' outstanding principal
amount. Eligible collateral consists of Qualified Loans having an aggregate
principal balance at least equal to 100 percent 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 September 30, 1998, loans 90 days or more past due or in bankruptcy
represented 0.85 percent of the principal balance of all loans underlying AMBS
and loans held for securitization, compared to none at December 31, 1997 and
0.29 percent at September 30, 1997. For further information on delinquencies,
see"- Results of Operations - Overview" and "-Supplemental Information."
Farmer Mac maintains a reserve for losses to cover losses incurred on 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).
The reserve for losses covers principal and interest due to AMBS investors
related to those underlying loans for which Farmer Mac believes collection of
interest is doubtful. Loans for which collection of interest is considered
doubtful include all loans that are 90 days or more delinquent unless the loan
is well collateralized and in the process of collection. At September 30, 1998,
the amount of the reserve related to interest due to AMBS investors totaled $107
thousand.
At September 30, 1998, the reserve for losses on AMBS totaled $2.8
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 September 30, 1998, the reserve for losses, excluding the amount
related to interest due to AMBS investors, represented approximately 0.41
percent of the total outstanding balance of Farmer Mac I AMBS and loans held for
securitization, compared to 0.42 percent at December 31, 1997. Farmer Mac
believes the reserve for losses on guaranteed securities is adequate to cover
losses incurred in the Farmer Mac I Program.
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.
Off-balance sheet derivative financial instruments used by Farmer Mac are
interest-rate contracts, including interest-rate swaps and caps, and Treasury
futures contracts. Interest-rate 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 September 30, 1998, the notional amount of interest-rate contracts
outstanding was $477.7 million.
The Corporation uses Treasury 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 or "match funded" with debt having comparable cash
flows. At September 30, 1998, outstanding futures contracts totaled $33.2
million. Related deferred hedging losses totaled $1.6 million and are included
in "Prepaid expenses and other assets" on Farmer Mac's statement of financial
condition. While Treasury futures contracts limit Farmer Mac's exposure to
changes in Treasury rates, they do not reduce exposure to changes in AMBS or
debt spreads relative to Treasury rates. While market volatility in the latter
part of third quarter 1998 resulted in wider spreads on AMBS and Farmer Mac
debt, these changes have not had a material effect on the financial condition of
the Corporation because Farmer Mac limits its exposure to changes in AMBS and
debt spreads by entering into forward sales contracts or issuing debt to match
fund the loans on a timely basis.
While derivative financial instruments reduce Farmer Mac's exposure to
interest-rate risk, they increase its exposure to credit risk. 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.
Other Matters
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 recognize a date using "00" as the year 1900 rather than the year
2000, which could result in miscalculations or system failures. 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 stockholders. 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. Failure of IT and/or vendor systems to handle the year 2000 date
change could result in Farmer Mac being unable to perform critical business
processes and expose Farmer Mac to significant business risk. Less critical to
Farmer Mac's operations are non-IT systems, which include telephones, facsimile
machines and systems used to maintain building operations.
To manage the risks related to the year 2000 date change, Farmer Mac has
adopted a Year 2000 Compliance Plan. This Plan consists of four phases: system
inventory, system remediation, testing and contingency planning. Farmer Mac has
completed an inventory and assessment of its internal IT and non-IT systems and
is currently completing the system remediation phase of the Plan. 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 should 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
expects to 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 is developing contingency plans that involve Farmer Mac assuming the duties
internally or transferring them to a compliant vendor. Farmer Mac is also
developing contingency plans in the event critical internal systems fail. These
plans are expected to be completed by June 30, 1999.
Currently, management believes that the year 2000 date change does not
expose Farmer Mac to significant business risk or material loss of revenue, if
any, based on its assessment of Farmer Mac's internal systems and critical
vendors. In addition, Farmer Mac expects total direct costs to complete its year
2000 readiness efforts not to exceed $150 thousand. This amount includes the use
of outside consultants to help Farmer Mac evaluate the readiness of internal IT
systems and critical vendors, the cost of replacing the one non-compliant
system, and estimated costs related to implementing contingency plans, if
needed. Costs incurred to date have totaled approximately $50 thousand.
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>
<CAPTION>
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>
September 30, 1998 $ 50,446 $ 7,333 $ 26,830 $ 84,609
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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>
September 30, 1998 $ 46,713 $ 12,782 $ 27,454 $ 86,949
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
</TABLE>
<TABLE>
<CAPTION>
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>
September 30, 1998 (2) $ 53,635 $ 13,337 $ - $ 66,972
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
</TABLE>
<TABLE>
<CAPTION>
Delinquencies (3)
- ------------------------------------------------------------
Farmer Mac I
---------------------------
As of: AMBS Other (4) Total
------------- ------------- -------------
<S> <C> <C> <C>
September 30, 1998 0.85% 0.47% 0.76%
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%
</TABLE>
<TABLE>
<CAPTION>
Outstanding Guaranteed Mortgage Securities
- ---------------------------------------------------------------------------
Farmer Mac I Farmer Held in
----------------------
As of: AMBS Other(4) Mac II Total Portfolio(5)
---------------------- ----------- ----------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
September 30, 1998 $ 524,527 $ 189,169 $ 323,608 $1,037,304 $ 479,828
June 30, 1998 462,987 203,230 313,668 979,885 454,904
March 31, 1998 376,809 214,427 290,947 882,183 439,477
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
</TABLE>
(1) Includes a $32.8 million swap transaction involving 1, 3 and 5 year ARMs
committed to in first quarter 1998 and settled in second quarter 1998.
(2) Includes $22.7 million of AMBS retained by Farmer Mac.
(3) Includes loans 90 days or more past due, in foreclosure or in bankruptcy.
(4) 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 percent of the
initial balance of the loans underlying the securities at issuance.
(5) Included in total outstanding guaranteed mortgage 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 6,900 shares of Class A Common Stock to 14 financial institutions
in the quarter ended September 30, 1998. The aggregate offering price
for the sales was approximately $138,150.
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 July 16, 1998, Farmer Mac issued
an aggregate of 180 shares of its Class C Non-Voting Common Stock at
an issue price of $56.875 per share to the 10 Directors who elected
to receive such stock in lieu of their cash retainers.
(d) Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Stockholders.
Not applicable.
Item 5. Other Information.
None.
<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 November 10, 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 November 10,
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
November 10, 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 (Form 10-Q
filed August 14, 1998).
+* 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.
+ 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 November 10, 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 (Form
10-Q filed August 14, 1998).
+* 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.
+ 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 November 10, 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 November 10, 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 (Form
10-Q filed August 14, 1998).
+* 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 November 10, 1995).
- --------------
* Incorporated by reference to the indicated prior filing.
+ 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 November 10, 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 (Form
10-Q filed August 14, 1998).
+* 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 November 10, 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.
+ 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 November 10, 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 November 10, 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 (Form
10-Q filed August 14, 1998).
+* 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
ontract 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 November 10, 1995).
- ------------------
* Incorporated by reference to the indicated prior filing.
+ 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 November 10, 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 (Form
10-Q filed August 14, 1998).
* 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 September 30, 1998.
- ------------------
* Incorporated by reference to the indicated prior filing.
+ 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
November 10, 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
November 10, 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
THE SECURITIES EXCHANGE ACT OF 1934
---------------------------------------
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.
<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 $0.43 for the nine months ended September
30, 1998. Diluted earnings per share for Classes A and B Common Stock are
$0.42 for the nine months ended September 30, 1998. </LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 435,288
<SECURITIES> 1,118,354
<RECEIVABLES> 23,793
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 458,938
<PP&E> 143
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,695,383
<CURRENT-LIABILITIES> 1,378,886
<BONDS> 236,957
0
0
<COMMON> 4,619
<OTHER-SE> 74,925
<TOTAL-LIABILITY-AND-EQUITY> 1,695,383
<SALES> 79,858
<TOTAL-REVENUES> 51,551
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,873
<LOSS-PROVISION> 1,120
<INTEREST-EXPENSE> 68,134
<INCOME-PRETAX> 4,851
<INCOME-TAX> (207)
<INCOME-CONTINUING> 4,644
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,644
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.25
</TABLE>
