<PAGE>
As filed with the Securities and Exchange Commission on
- ------------------------------------------------------------------------------
May 11, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- ------------------------------------------------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000. Commission File Number
0-17440
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Exact name of registrant as specified in its charter)
Federally chartered instrumentality
Of the United States 52-1578738
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
919 18th Street, N.W., Suite 200,
Washington, D.C. 20006
(Address of principal executive (Zip code)
offices)
(202) 872-7700
(Registrant's telephone number, including area code)
-----------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
As of May 11, 2000, there were 1,030,780 shares of Class A Voting Common
Stock, 500,301 shares of Class B Voting Common Stock and 9,544,936 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. These 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 financial statements should be read in conjunction with the
audited 1999 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.
Consolidated Balance Sheets at March 31, 2000 and December 31, 1999....3
Consolidated Statements of Operations for the three months ended
March 31, 2000 and 1999.............................................4
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999.............................................5
<PAGE>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------- ------------------
(in thousands)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 344,822 $ 336,282
Investment securities 927,673 847,220
Farmer Mac guaranteed securities 1,289,175 1,306,223
Loans 28,897 38,509
Interest receivable 29,308 42,900
Guarantee fees receivable 2,618 4,358
Prepaid expenses and other assets 16,827 14,918
------------------- ----------------
Total Assets $ 2,639,320 $ 2,590,410
------------------- ----------------
Liabilities and Stockholders' Equity:
Liabilities:
Notes payable
Due within one year $ 1,781,310 $ 1,722,061
Due after one year 745,735 750,337
------------------- ----------------
Total notes payable 2,527,045 2,472,398
Accrued interest payable 11,904 18,549
Accounts payable and accrued expenses 5,398 5,736
Reserve for losses 7,901 6,584
------------------- ----------------
Total Liabilities 2,552,248 2,503,267
Stockholders' Equity:
Common stock:
Class A Voting, $1 par value, no maximum authorization,
1,030,780 shares issued and outstanding at March 31,
2000 and December 31, 1999. 1,031 1,031
Class B Voting, $1 par value, no maximum authorization,
500,301 shares issued and outstanding at March 31,
2000 and December 31, 1999. 500 500
Class C Non-Voting, $1 par value, no maximum amortization,
9,418,761 and 9,370,961 shares issued and outstanding
at March, 2000 and December 31, 1999. 9,419 9,371
Additional paid-in capital 71,504 71,097
Accumulated other comprehensive loss (4,541) (1,657)
Retained earnings 9,159 6,801
------------------- ----------------
Total Stockholders' Equity 87,072 87,143
------------------- ----------------
Total Liabilities and Stockholders' Equity $ 2,639,320 $ 2,590,410
------------------- ----------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
March 31, 2000 March 31, 1999
-------------------------------------
(in thousands, except per share amounts)
<S> <C> <C>
Interest income:
Investments and cash equivalents $ 21,958 $ 15,416
Farmer Mac guaranteed securities 21,694 9,302
Loans 1,240 3,317
--------------- ---------------
Total interest income 44,892 28,035
Interest expense 40,276 24,455
--------------- ---------------
Net interest income 4,616 3,580
Other income:
Guarantee fees 2,582 1,465
Miscellaneous 182 66
--------------- ---------------
Total other income 2,764 1,531
--------------- ---------------
Total revenues 7,380 5,111
Operating expenses:
Compensation and employee benefits 1,251 992
Regulatory fees 150 68
General and administrative 1,007 858
--------------- ---------------
Total operating expenses 2,408 1,918
Provision for losses 1,317 798
--------------- ---------------
Total expenses 3,725 2,716
--------------- ---------------
Income before income taxes 3,655 2,395
Income tax expense 1,297 814
--------------- ---------------
Net income $ 2,358 $ 1,581
--------------- ---------------
Earnings per share:
Basic earnings per share $ 0.22 $ 0.15
Diluted earnings per share $ 0.21 $ 0.14
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
2000 1999
---------------- ---------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,358 $ 1,581
Adjustments to reconcile net income to cash provided by
operating activities:
Amortization of investment premiums and discounts 635 2,139
Decrease in interest receivable 13,592 5,548
Decrease in guarantee fees receivable 1,740 555
Increase in prepaid expenses and other assets (1,977) (2,377)
Amortization of debt premiums, discounts and issuance costs 27,360 17,739
(Decrease) increase in accrued interest payable (6,645) 80
(Decrease) increase in accounts payable and accrued expenses (338) 578
Provision for losses 1,317 798
---------------- ---------------
Net cash provided by operating activities 38,042 26,641
Cash flows from investing activities:
Purchases of available-for-sale investments (105,356) (99,331)
Purchases of investment securities (2,585) (4,014)
Purchases of Farmer Mac guaranteed securities (147,344) (38,555)
Purchases of loans (58,451) (122,635)
Proceeds from repayment of available-for-sale investments 20,773 74,686
Proceeds from repayment of investment securities 4,311 17,124
Proceeds from repayment of Farmer Mac guaranteed securities 210,623 42,161
Proceeds from repayment of loans 105 5,095
Proceeds from securitization of loans 20,611 -
---------------- ---------------
Net cash used by investing activities (57,313) (125,469)
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of discount notes 18,817,569 20,816,854
Proceeds from issuance of medium-term notes 15,020 97,982
Payments to redeem discount notes (18,794,172) (20,823,285)
Payments to redeem medium-term notes (11,060) (18,300)
Proceeds from common stock issuance 454 26
---------------- ---------------
Net cash provided by financing activities 27,811 73,277
---------------- ---------------
Net increase (decrease) in cash and cash equivalents 8,540 (25,551)
Cash and cash equivalents at beginning of period 336,282 540,626
---------------- ---------------
Cash and cash equivalents at end of period $ 344,822 $ 515,075
---------------- ---------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies.
(a) Cash and Cash Equivalents
Farmer Mac considers highly liquid investment securities with original
maturities of three months or less to be cash equivalents. Changes in the
balance of cash and cash equivalents are reported in the Consolidated Statements
of Cash Flows using the indirect method of presentation. The following table
sets forth information regarding certain cash and non-cash transactions for the
three months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------
2000 1999
------------- ------------
(in thousands)
<S> <C> <C>
Cash paid for:
Interest $ 16,420 $ 5,566
Income taxes - 300
Non-cash activity:
Real estate owned acquired through foreclosure - 578
Loans securitized and retained as Farmer Mac guaranteed securities 46,467 268,386
Loans acquired in exchange for AMBS - 73,597
</TABLE>
(b) Loans
At March 31, 2000, loans held by Farmer Mac included $25.9 million held
for sale and $3.0 million held for investment. At December 31, 1999, loans held
by Farmer Mac included $21.4 million held for sale and $17.1 million held for
investment.
(c) Interest-Rate Contracts and Hedge Instruments
Interest-rate contracts, including interest-rate swaps and caps, are used
to synthetically alter the interest rate characteristics of specific investments
or debt. As such, the net differential received or paid is recorded as an
adjustment to interest income or expense of the associated assets or
liabilities, on an accrual basis.
Hedge instruments, consisting solely of forward sale contracts involving
debt securities of other government-sponsored enterprises (GSEs) and futures
contracts involving U.S. Treasury securities, are used by Farmer Mac to manage
interest-rate risk exposure related to the purchase of loans and the issuances
of debt. Farmer Mac measures correlation using changes in interest rates for the
hedged items against changes in interest rates for the hedge instruments. Gains
and losses on effective hedge instruments that have been terminated or have
matured are deferred as an adjustment to the cost basis of the hedged item.
Gains and losses on ineffective hedge instruments are marked-to-fair value
directly through the consolidated statement of income.
(d) Earnings Per Share
Basic earnings per share are based on the weighted average common shares
outstanding. Diluted earnings per share are based on the weighted average number
of common shares outstanding adjusted to include all dilutive potential common
stock. The following schedule reconciles basic and diluted earnings per share
for the quarter ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
------------------------------- -------------------------------
Dilutive Dilutive
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 $ 2,358 - $ 2,358 $ 1,581 - $ 1,581
Weighted average shares 10,921 345 11,266 10,802 374 11,176
Earnings per share $ 0.22 $ 0.21 $ 0.15 $ 0.14
</TABLE>
(e) Reclassifications
Certain reclassifications of prior period information were made to conform
to the current period 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
loans, the issuance of its guarantee and the use of interest-rate contracts and
hedge instruments. At March 31, 2000, outstanding commitments to purchase Farmer
Mac I and II loans totaled $11.8 million. There were $18.1 million of
commitments outstanding to sell loans at March 31, 2000. For information
regarding the off-balance sheet risks associated with off-balance sheet
guarantees, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Management - Credit Risk." For information related
to the use of interest-rate contracts and hedge instruments, see Note 1 (c) and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Management - Interest Rate Risk."
In June 1998, the FASB issued SFAS 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.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000. SFAS
No. 133 cannot be applied retroactively. SFAS No.133 must be applied to (a)
free-standing derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1998. Farmer Mac has not yet quantified the impact
of adopting SFAS No. 133 on its financial statements. However, the Statement
could increase volatility in earnings and other comprehensive income.
Note 3. 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
months ended March 31, 2000 and 1999. Comprehensive income for the three months
ended March 31, 2000 and 1999 is net of the related tax benefit/(expense) of
$1.6 million and $(150) thousand, respectively.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
------------- --------------
(in thousands)
<S> <C> <C>
Net income $2,358 $1,581
Change in unrealized gain (loss) on securities
available-for-sale, net of taxes (2,884) 450
------------- ------------
Comprehensive income (loss) $ (526) $2,031
------------- ------------
</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 Farmer Mac's prospects for earnings and growth in loan purchase,
guarantee and securitization volume; trends in net interest income,
delinquencies and provision for losses; changes in capital position; and other
business and financial matters. Management's expectations for Farmer Mac's
future necessarily involve a number of assumptions and estimates and the
evaluation of risks and uncertainties. Various factors could cause Farmer Mac's
actual results or events to differ materially from the expectations as expressed
or implied by the forward-looking statements, including: uncertainties regarding
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 current statutory minimum and
critical capital levels or restrictions on Farmer Mac's investment authority;
substantial changes in interest rates, the agricultural economy (including
agricultural land values, commodity prices, export demand for U.S. agricultural
products and federal assistance to farmers) or 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; 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 into the Farmer Mac secondary market; 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 Farmer Mac'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 in this report.
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 $2.4 million for first quarter 2000, or $0.21
per share on a diluted basis, compared to $1.6 million, or $0.14 per share, for
first quarter 1999. Earnings per share for the first quarter increased 50
percent over first quarter 1999.
Farmer Mac's strong earnings and revenue growth during the first quarter
of 2000 enabled it to maintain the positive financial performance trend from
1999. Net income and total revenues for first quarter 2000 grew 49 percent and
44 percent, respectively, compared to the same period a year ago, due to a 29
percent increase in net interest income (primarily from Agricultural
Mortgage-Backed Securities (AMBS) retained in portfolio) and a 76 percent rise
in guarantee fees, while operating expenses only increased by 26 percent, all
over the same one year period. Farmer Mac's continued earnings growth reflects
the annuity-like structure of interest and guarantee fee income from program
assets, whereby the annual revenue stream from new business volume is layered
onto ongoing annual revenues earned on loans purchased or guaranteed during
prior years.
Although Farmer Mac's earnings increased, cash window loan purchases and
guarantee volume for the quarter were down compared to prior quarters. This was
largely due to unusual economic conditions in the agricultural sector. During
fourth quarter 1999 and first quarter 2000, the combination of continuing low
agricultural commodity prices and substantial government cash payments to
farmers slowed demand for agricultural mortgages. In addition, higher interest
rates increased farmer demand for variable rate mortgages, which many
agricultural lenders were inclined to hold in portfolio, further reducing the
supply of newly originated mortgages for sale into the secondary market.
Nevertheless, total loans held or guaranteed were up 28 percent over the
balance at the end of the first quarter of 1999.
Consistent with fluctuations in business volume over the past several
quarters, Farmer Mac expects business growth to vary significantly from quarter
to quarter until the Corporation's secondary market programs for the
agricultural credit sector attract wider participation. While current market
conditions are expected to constrain cash window purchase volume over the next
several quarters, Farmer Mac continues to develop competitive new loan products
and intensify marketing efforts to increase its market share of new
originations. Farmer Mac is also currently pursuing significant opportunities
for business volume growth during 2000 through the addition of swap and
long-term standby purchase commitment transactions.
Set forth below is a more detailed discussion of Farmer Mac's results of
operations.
Net Interest Income. Net interest income was $4.6 million for first
quarter 2000, compared to $3.6 million for first quarter 1999. The increase
compared to first quarter 1999 was due to a 42 percent increase in the average
balance of interest-earning assets driven by Farmer Mac's retention of AMBS. The
following table provides information regarding the average balances and rates of
interest-earning assets and funding for the three months ended March 31, 2000
and 1999. The decrease in net interest yield from first quarter 1999 to first
quarter 2000, as reflected in the table below, was due to tighter spreads on
short-term and variable rate investments.
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------------------
2000 1999
-------------------------------------- ---------------------------------------
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Cash and cash equivalents $ 540,967 $ 7,919 5.86% $ 583,202 $ 7,242 4.97%
Investments 887,845 14,039 6.32% 607,438 8,174 5.38%
Farmer Mac guaranteed securities 1,272,145 21,694 6.82% 549,915 9,302 6.82%
Loans 63,579 1,240 7.80% 213,071 3,317 6.23%
-------------- ----------- ----------- -------------- ------------ -----------
Total interest earning assets 2,764,536 44,892 6.50% 1,953,626 28,035 5.74%
-------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Funding:
Discount notes 1,926,731 27,296 5.67% 1,477,704 17,716 4.80%
Medium-term notes 781,482 12,980 6.64% 421,012 6,739 6.40%
-------------- ----------- ----------- -------------- ------------ -----------
Total interest -earing liabilities 2,708,213 40,276 5.95% 1,898,716 24,455 5.15%
Net non-interest bearing funding 56,323 - 0.00% 54,910 - 0.00%
-------------- ----------- ----------- -------------- ------------ -----------
Total funding $2,764,536 40,276 5.83% $1,953,626 24,455 5.01%
-------------- ----------- ----------- -------------- ------------ -----------
Net interest income/yield $ 4,616 0.67% $ 3,580 0.73%
----------- ----------- ------------ -----------
</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 changes in
volume (change in volume multiplied by old rate) and changes in rate (change in
rate multiplied by old volume). Combined rate/volume variances, a third element
of the calculation, are allocated based on their relative size.
<TABLE>
<CAPTION>
Comparison of Three Months Ended
March 31, 2000 and 1999
-----------------------------------------------
Increase/(Decrease) Due to
-----------------------------------------------
Rate Volume Total
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Income from interest earning assets:
Cash and cash equivalents $ 1,228 $ (551) $ 677
Investments 1,613 4,252 5,865
Farmer Mac guaranteed securities 76 12,316 12,392
Loans 683 (2,760) (2,077)
------------- ------------- -------------
Total 3,600 13,257 16,857
Expense from interest-bearing liabilities 4,212 11,609 15,821
------------- ------------- -------------
Change in net interest income $ (612) $ 1,648 $ 1,036
------------- ------------- -------------
</TABLE>
Other Income. Other income, which is comprised of guarantee fee income and
miscellaneous income, totaled $2.8 million for first quarter 2000, compared to
$1.5 million for first quarter 1999. Guarantee fee income, the largest component
of other income, was $2.6 million for first quarter 2000 and $1.5 million for
first quarter 1999. The increase in guarantee fees reflects an increase in the
average balance of outstanding guarantees. Miscellaneous income totaled $182
thousand for first quarter 2000, compared to $66 thousand for first quarter
1999. Miscellaneous income, which includes fees and hedging gains and losses
related to program activities, as well as valuation adjustments related to loans
held for sale, is expected to fluctuate from period to period.
Expenses. During the first quarter 2000, operating expenses totaled $2.4
million compared to $1.9 million for first quarter 1999. While operating
expenses have been increasing with growth in the balance of loans held or
guaranteed, they have been increasing at a slower rate than increases in total
revenues due to Farmer Mac's ability to leverage existing resources to support
that growth. Operating expenses as a percentage of total revenues for the same
quarters were 33 percent and 38 percent, respectively. First quarter 2000
operating expenses included expenses totaling $133 thousand related to
foreclosed properties held by Farmer Mac, including anticipated losses on the
sale of the properties based on sales contracts entered into during the quarter.
Farmer Mac's provision for principal and interest losses was $1.3 million
for first quarter 2000, compared to $798 thousand for first quarter 1999. The
increase in the provision for losses corresponds to growth in outstanding
post-1996 Act loans held or guaranteed by Farmer Mac, which totaled $1.9 billion
at March 31, 2000.
Income Tax Expense. The provision for income taxes totaled $1.3 million
for first quarter 2000, compared to $814 thousand for first quarter 1999. Farmer
Mac's effective tax rate for each of these periods was 35.5 percent and 34.0
percent, respectively.
Business Volume. The following table sets forth the amount of loans
---------------
purchased or guaranteed, and AMBS issued during the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
2000 1999
------------- -------------
(in thousands)
<S> <C> <C>
Purchase and guarantee volume:
Farmer Mac I
Cash window $ 58,283 $ 127,625
Swap transactions - 73,597
LTSPC - 407,701
Farmer Mac II 22,570 29,965
------------- -------------
Total loans purchased or
guaranteed $ 80,853 $ 638,888
------------- -------------
<S> <C> <C>
AMBS issuances:
Retained $ 46,467 $ 268,386
Sold 20,611 -
Swap transactions - 73,597
------------- -------------
Total AMBS issuances $ 67,078 $ 341,983
------------- -------------
Total loans held or guaranteed $ 2,386,211 $ 1,867,189
------------- -------------
</TABLE>
See "Overview" for a discussion regarding changes in the amount of loans
purchased and guaranteed by Farmer Mac.
Indicators of future purchase and guarantee volume, particularly cash
window activity, include outstanding commitments to purchase loans and the total
balance of loans submitted for approval or approved but not yet purchased. Most
purchase commitments entered into by Farmer Mac are mandatory delivery
commitments. If a Seller obtains a mandatory commitment and is unable to deliver
the loans required thereunder within the specified time period, Farmer Mac
requires the Seller to pay a fee to extend or cancel the commitment. At March
31, 2000, outstanding commitments to purchase Farmer Mac I loans totaled $10.7
million, compared to $22.5 million at March 31, 1999. Of the total commitments
outstanding at March 31, 2000, $2.9 million were optional commitments. All the
commitments outstanding at March 31, 1999 were mandatory commitments. Loans
submitted for approval or approved but not yet committed to purchase totaled
$108.1 million at March 31, 2000, compared to $205.6 million at March 31, 1999.
Not all of these loans are expected to be purchased, as Farmer Mac is expected
to deny some for credit reasons and others may be withdrawn by the Seller.
While significant progress has been made in developing the secondary
market for agricultural mortgages, Farmer Mac continues to face the challenges
of establishing a new market. Management believes that acceptance of Farmer
Mac's programs is increasing among lenders, reflecting the competitive rates,
terms and products offered and the advantages we believe Farmer Mac's programs
provide. For Farmer Mac to succeed in realizing its business development and
profitability goals over the long term, however, agricultural mortgage lenders,
whether traditional or non-traditional, must value the benefits of selling loans
to Farmer Mac or otherwise obtaining the benefits of the Farmer Mac guarantee
and must be persuaded to modify their business practices accordingly.
Balance Sheet Review
During first quarter 2000, total assets grew by $48.9 million. The growth
in total assets was due to an $89.0 million increase in non-program assets (cash
and cash equivalents and investments), partially offset by a $26.7 million
decrease in on-balance sheet program assets (Farmer Mac guaranteed securities
and loans). The decrease in program assets was due to the maturity of AgVantage
bonds and the issuance of a $20.6 million AMBS to a capital market investor
during the quarter. For further information regarding both on- and off-balance
sheet guaranteed securities, see "Supplemental Information."
Total liabilities increased by $49.0 million from December 31, 1999 to
March 31, 2000 due to growth in notes payable, which corresponded to the net
increase in program and non-program assets. Medium-term notes, including
discount notes converted to long-term debt through interest-rate swap contracts,
totaled $837.8 million at March 31, 2000, compared to $797.5 million at December
31, 1999. The increase in medium-term notes corresponds to AMBS issued and
retained by Farmer Mac during the quarter.
During first quarter 2000, stockholders' equity decreased by $71 thousand
as the increasing effect of net income earned during the quarter was offset by
an unrealized loss on available for sale securities, which are marked-to-fair
value through equity. Farmer Mac's regulatory core capital, which excludes
unrealized gains and losses on available for sale securities, totaled $91.6
million at March 31, 2000 compared to $88.8 million at December 31, 1999. The
capital balance at March 31, 2000 exceeded Farmer Mac's regulatory minimum
capital requirements by $10.7 million. Farmer Mac's current surplus capital
would support additional asset growth in amounts ranging from $385 million of
on-balance sheet assets to $1.4 billion of off-balance sheet assets based on
existing minimum capital requirements. Furthermore, Farmer Mac has an even
greater ability to replace on-balance sheet non-program assets with on- and
off-balance sheet program assets and, ultimately, to sell on-balance sheet
program assets in order to support increases in off-balance sheet program
activities.
Return on average equity increased to 10.8 percent during first quarter
2000, compared to 8.7 percent during fourth quarter 1999.
Risk Management
Interest Rate Risk. Farmer Mac's asset and liability management objective
is to limit the effect of changes in interest rates on its equity and earnings
to within acceptable risk tolerance levels. In doing so, Farmer Mac enters into
off-balance sheet derivative financial instruments, including interest-rate
swaps and caps (collectively "interest-rate contracts"), forward sale contracts
involving GSE debt securities and futures contracts involving U.S. Treasury
securities. Interest-rate contracts are used to synthetically alter the interest
rate characteristics of specific investments or debt such that the interest rate
characteristics of Farmer Mac's investments and debt are better matched. At
March 31, 2000, the notional amount of interest-rate contracts was $802.1
million compared to $769.5 million at December 31, 1999. Farmer Mac uses forward
sale and futures contracts to reduce its interest rate risk exposure to loans
committed or purchased and not yet sold or funded as retained investments, which
totaled $12.3 million at March 31, 2000 and $19.7 million at December 31, 1999.
At March 31, 2000, the notional amount of outstanding forward sale and futures
contracts totaled $10.5 million, compared to $16.7 million at December 31, 1999.
Farmer Mac monitors its exposure to interest rate risk by measuring the
sensitivity of its market value of equity (MVE) to an immediate and permanent
parallel shift in the Treasury yield curve. The following schedule summarizes
the results of Farmer Mac's MVE sensitivity analysis at March 31, 2000 and
December 31, 1999. The increase in MVE sensitivity in the decreasing interest
rate scenarios reflects the lengthening of Farmer Mac's debt maturities (see
"Balance Sheet Review").
<TABLE>
<CAPTION>
Percentage Change in FVE
from Base Case
------------------------------------
Interest Rate March 31, December 31,
Scenario 2000 1999
------------- ---------------- ----------------
<S> <C> <C> <C>
+ 300 bp -10.9% -9.4%
+ 200 bp -5.4% -5.6%
+ 100 bp -1.1% -2.1%
- 100 bp -4.1% -1.1%
- 200 bp -11.7% -6.5%
- 300 bp -20.3% -15.0%
</TABLE>
Credit Risk. The outstanding principal balance of those loans held or
guaranteed by Farmer Mac as of March 31, 2000 and December 31, 1999 is
summarized in the table below.
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
---------------- ------------------
(in thousands)
<S> <C> <C>
Farmer Mac I:
Post-1996 Act $ 1,890,816 $ 1,879,978
Pre-1996 Act 107,403 118,214
Farmer Mac II 387,992 383,266
---------------- ----------------
Total $ 2,386,211 $ 2,381,458
---------------- ----------------
</TABLE>
Farmer Mac believes it has little or no credit risk exposure to pre-1996
Act Farmer Mac I loans because of the subordinated interests related to the
loans, or to Farmer Mac II loans because they are guaranteed by the USDA. Farmer
Mac assumes 100 percent of the credit risk on post-1996 Act loans; pre-1996 Act
loans are supported by mandatory 10 percent subordinated interests that mitigate
credit exposure.
At March 31, 2000, post-1996 Act loans that were 90 days or more past due
represented 1.36 percent of the principal amount of all post-1996 Act loans,
compared to 1.59 percent at March 31, 1999 and 0.94 percent at December 31,
1999. Consistent with the increase in the delinquency rate at March 31, 2000
compared to December 31, 1999, Farmer Mac anticipates fluctuations in the
delinquency rate from quarter to quarter, with higher levels likely to be
reported during the first and third quarters of each year due to the semiannual
payment characteristics of most Farmer Mac loans. For the remainder of 2000 and
into 2001, preliminary steps already taken by Congress to provide additional
income support to the agricultural sector, by including authority for
approximately $7 billion in new farm assistance in the federal budget, should
help to moderate delinquencies.
The following table segregates the post-1996 Act delinquencies at March
31, 2000 by year of origination, geographic region and commodity.
<PAGE>
<TABLE>
<CAPTION>
Distribution
of Post-1996 Delinquency
Act Loans Rate
---------------- ---------------
<S> <C> <C>
By year of origination:
Before 1996 36% 0.41%
1996 9% 4.55%
1997 11% 3.87%
1998 20% 1.61%
1999 21% 0.34%
2000 3% 0.00%
----------------
Total 100% 1.36%
----------------
<S> <C> <C>
By geographic region: (1)
Mid-north 19% 0.33%
Mid-south 4% 0.70%
Northeast 3% 0.00%
Northwest 41% 1.88%
Southeast 1% 7.45%
Southwest 32% 1.23%
----------------
Total 100% 1.36%
----------------
<S> <C> <C>
By commodity:
Crops 52% 1.96%
Livestock 20% 0.83%
Permanent plantings 24% 0.75%
Other 4% 0.17%
----------------
Total 100% 1.36%
----------------
(1)Geographic regions - Mid-North (IA, IL, IN, MI, MN, MO, WI); Mid-South (KS,
OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ, NY, OH, PA, RI, TN,
VA, VT, WV); Northwest (ID, MT, ND, NE, OR, SD, WA, WY); Southeast (AL, AR,
FL, GA, LA, MS, SC); and Southwest (AZ, CA, CO, NM, NV, UT).
</TABLE>
Farmer Mac maintains a reserve to cover credit losses incurred on
post-1996 Act loans. The following schedule summarizes the change in the reserve
for loan losses for the three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------
2000 1999
------------ -------------
(in thousands)
<S> <C> <C>
Beginning balance $6,584 $3,259
Provision for losses 1,317 798
Net charge-offs - (41)
------------ -------------
Ending balance $7,901 $4,016
------------ -------------
</TABLE>
Although credit losses are expected to be incurred on the existing
post-1996 Act Farmer Mac I delinquencies, Farmer Mac expects those losses to be
within current reserve levels based on the collateral values supporting the
loans. The following table summarizes the post-1996 Act delinquencies by
loan-to-value ratio (calculated by dividing the current loan principal balance
by the original appraised value):
<PAGE>
<TABLE>
<CAPTION>
Distribution of
Post-1996 Act
Delinquencies
----------------
<S> <C>
By loan-to-value ratio:
0.00% to 40.00% 7%
40.01% to 50.00% 17%
50.01% to 60.00% 45%
60.01% to 70.00% 30%
70.01% to 80.00% 1%
----------------
Total 100%
----------------
</TABLE>
As of March 31, 2000, the weighted average loan-to-value ratio of
post-1996 Act loans was approximately 50 percent.
Supplemental Information
The following tables set forth quarterly activity regarding: commitments
to purchase loans; purchases and guarantees of loans; AMBS issuances;
delinquencies; and outstanding guarantees.
<TABLE>
<CAPTION>
Commitments to Purchase or Guarantee Farmer Mac I Loans (1) (2)
- -------------------------------------------------------------------------------------------------------
Long Term 5 and 7 Year
Fixed Rate Balloons ARMs Total Outstanding
-------------- --------------- -------------- --------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
For the quarter ended:
March 31, 2000 $ 10,369 $ 16,835 $ 32,438 $ 59,642 $ 10,707
December 31,1999 317,357 6,882 75,326 399,565 12,470
September 30, 1999 26,623 19,384 34,170 80,177 17,010
June 30, 1999 56,010 17,025 48,791 121,826 12,069
March 31, 1999 137,200 14,774 45,249 197,223 22,501
For the year ended:
December 31, 1999 537,190 58,065 203,536 798,791 12,470
December 31, 1998 302,227 48,412 502,283 852,922 431,544
</TABLE>
<TABLE>
<CAPTION>
Purchases and Guarantees of Farmer Mac I Loans (1) (2)
- ----------------------------------------------------------------------------------------
Long Term 5 and 7 Year
Fixed Rate Balloons ARMs Total
------------------------------ --------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
For the quarter ended:
March 31, 2000 $ 11,917 $ 13,185 $ 33,181 $ 58,283
December 31, 1999 319,478 9,522 73,030 402,030
September 30, 1999 26,670 14,862 29,029 70,561
June 30, 1999 58,406 16,975 52,244 127,625
March 31, 1999 257,632 15,817 329,099 602,548
For the year ended:
December 31, 1999 662,186 57,176 483,402 1,202,764
December 31, 1998 164,436 48,086 211,737 424,259
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Farmer Mac I AMBS Issuances (1) (3)
- --------------------------------------------------------------------------------------
Long Term 5 and 7 Year
Fixed Rate Balloons ARMs Total
--------------- -------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
For the quarter ended:
March 31, 2000 $ 6,582 $ 14,616 $ 45,880 $ 67,078
December 31, 1999 128,641 8,084 17,069 153,794
September 30, 1999 95,121 33,532 24,744 153,397
June 30, 1999 1,018 - 44,397 45,415
March 31, 1999 134,405 16,271 191,307 341,983
For the year ended:
December 31, 1999 359,185 57,887 277,517 694,589
December 31, 1998 165,383 51,941 84,322 301,646
</TABLE>
<TABLE>
<CAPTION>
Farmer Mac I Delinquencies (4) (5)
- -------------------------------------------------------------------------
As of: Post-1996 Act Pre-1996 Act Total
--------------- -------------- ---------------
<S> <C> <C> <C>
March 31, 2000 1.36% 5.04% 1.56%
December 31, 1999 0.94% 3.06% 1.06%
September 30, 1999 1.56% 3.48% 1.72%
June 30, 1999 1.03% 1.44% 1.07%
March 31, 1999 1.59% 3.71% 1.81%
</TABLE>
<TABLE>
<CAPTION>
Outstanding Loans Held or Guaranteed (5)
- --------------------------------------------------------------------------------------------------------------------
Farmer Mac I
-----------------------------------------
Post-1996 Act
---------------------------- Pre-1996 Farmer Held in
Loans/AMBS LTSPC Act Mac II Total Portfolio (6)
---------------- ----------- ------------ ------------- ------------ -----------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of:
March 31, 2000 $1,339,393 $ 551,423 $ 107,403 $ 387,992 $2,386,211 $1,292,571
December 31,1999 1,304,881 575,097 118,214 383,266 2,381,458 1,275,982
September 30, 1999 1,137,037 367,934 130,452 377,663 2,013,179 1,209,512
June 30, 1999 1,083,713 375,915 142,842 367,250 1,967,657 1,145,478
March 31, 1999 963,032 390,520 157,710 345,927 1,857,189 817,690
</TABLE>
(1)Includes loans guaranteed by Farmer Mac through swap transactions. Such
transactions totaled $103.2 million in fourth quarter 1999 and $73.6 million
in first quarter 1999.
(2)Includes guarantee transactions of $226.8 million committed to and executed
in fourth quarter 1999, and $407.7 million committed to in fourth quarter
1998 and executed in first quarter 1999. The transactions, referred to as
long-term standby purchase commitments (LTSPC), obligate Farmer Mac to
purchase loans within the pool at par when they become four or more months
delinquent. In exchange, Farmer Mac receives an annual commitment fee on the
outstanding balance of the pool over the life of the loans.
(3)Includes AMBS issued and retained by Farmer Mac. Such transactions totaled
$46.5 million in first quarter 2000, $50.6 million in fourth quarter 1999,
$153.4 million in third quarter 1999, $45.4 million in second quarter 1999
and $268.4 million in first quarter 1999.
(4)Includes loans 90 days or more past due, in foreclosure or in bankruptcy.
(5)Pre-1996 Act loans back securities that are supported by unguaranteed
subordinated interests representing approximately 10 percent of the balance
of the loans. Farmer Mac assumes 100 percent of the credit risk on post-1996
Act loans. Farmer Mac II loans are guaranteed by the U.S. Department of
Agriculture.
(6)Included in total outstanding guarantees.
<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.
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 January 19, 2000, Farmer Mac
issued an aggregate of 450 shares of its Class C Non-Voting Common
Stock at an issue price of $20.1875 per share to the 9 Directors who
elected to receive such stock in lieu of their cash retainers.
On February 3, 2000, Farmer Mac issued 2,615 restricted shares of its
Class C Non-Voting Common Stock to an employee of Farmer Mac in
connection with that employee's appointment as an officer of the
Corporation.
(d) Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
<PAGE>
Item 4. Submission of Matters to a Vote of Stockholders.
------------------------------------------------
Not applicable.
Item 5. Other Information.
------------------
None.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
* 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-Q
filed August 12, 1999).
+* 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 - Amended and Restated 1997 Stock Option 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).
+* 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).
* Incorporated by reference to the indicated prior filing.
+ Management contract or compensatory plan.
<PAGE>
+* 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 September 4, 1998 to
Employment Contract between Henry D. Edelman and the
Registrant (Form 10-Q filed August 14, 1998).
+* 10.2.8 - Amendment No. 8 dated as of September 3, 1999 to
Employment Contract between Henry D. Edelman and the
Registrant (Form 10-Q filed August 12, 1999).
+* 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 September 4, 1998 to Employment
Contract between Nancy E. Corsiglia and the Registrant (Form
10-Q filed August 14, 1998).
+* 10.3.11 - Amendment No. 11 dated as of September 3, 1999 to Employment
Contract between Nancy E. Corsiglia and the Registrant (Form
10-Q filed August 12, 1999).
+* 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).
* Incorporated by reference to the indicated prior filing.
+ Management contract or compensatory plan.
<PAGE>
+* 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).
+* 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 September 4, 1998 to Employment
Contract between Thomas R. Clark and the Registrant (Form
10-Q filed August 14, 1998).
+* 10.4.10 -Amendment No. 10 dated as of September 3, 1999 to Employment
Contract between Thomas R. Clark and the Registrant (Form
10-Q filed August 12, 1999).
+* 10.5 -Employment Contract dated as of September 1, 1997 between
Tom D. Stenson and the Registrant (Previously filed as
Exhibit 10.8 to Form 10-Q filed November 14, 1997).
+* 10.5.1 -Amendment No. 1 dated as of September 4, 1998 to
Employment Contract between Tom D. Stenson and the Registrant
(Previously filed as Exhibit 10.8.1 to Form 10-Q filed August
14, 1998).
+* 10.5.2 -Amendment No. 2 dated as of September 3, 1999 to
Employment Contract between Tom D. Stenson and the
Registrant (Form 10-Q filed August 12, 1999).
+** 10.6 -Employment Agreement dated February 1, 2000 between Jerome
G. Oslick and the Registrant.
* Incorporated by reference to the indicated prior filing.
** Filed herewith.
+ Management contract or compensatory plan.
<PAGE>
* 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.
* 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 March 31, 2000.
* 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
May 11, 2000
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>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-Q
UNDER
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
<PAGE>
Exhibit Index
10.6 - Employment Agreement dated February 1, 2000 between Jerome G.
Oslick and the Registrant.
EMPLOYMENT CONTRACT
AGREED, as of the 1st day of February 2000, between the Federal
Agricultural Mortgage Corporation ("Farmer Mac") and Jerome G. Oslick
("Employee" or "you"), that the following terms and conditions shall apply to
the employment relationship between the parties:
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").
2. Scope of Authority and Employment. You will report directly to the
President of Farmer Mac. You will have responsibility for the general legal
affairs of the corporation under business plans submitted by management to, and
approved by, the Board of Directors of Farmer Mac. You shall be an officer of
Farmer Mac, with the title of Vice President - General Counsel and Secretary.
You will devote your best efforts and substantially all your time and
endeavor to your duties hereunder, and you will not engage in any other gainful
occupation without the prior written consent of Farmer Mac; provided, however,
that this provision will not be construed to prevent you from personally, and
for your own account or that of members of your immediate family, investing or
trading in real estate, stocks, bonds, securities, commodities, or other forms
of investment, so long as such investing or trading is not in conflict with the
best interests of Farmer Mac. You will be employed to perform your duties at the
principal office of Farmer Mac. Notwithstanding this, it is expected that you
will be required to travel a reasonable amount of time in the performance of
your duties under this Agreement.
3. Compensation. Farmer Mac will pay to you the following aggregate
compensation for all services rendered by you under this Agreement:
(a) Base Salary. You will be paid a base salary (the "Base Salary")
during the Term of One Hundred Fifty-Nine Thousand Five Hundred Dollars
($159,500) per year, payable in arrears on a bi-weekly basis;
(b) Deferred Compensation. In addition to your Base Salary, you will be
granted restricted stock having a value of $50,000 as of the close of trading
on February 3, 2000. Your rights to the restricted stock will vest on May 31,
2001, subject to the terms of the restricted stock award agreement evidencing
such grant.
(c) Incentive Compensation. In addition to your Base Salary, you will be
paid additional payments during the term of this Agreement in respect of the
work performed by you during the preceding "Planning Year" (June 1 through
May 31), or portion thereof as follows: on June 1 of each year through and
including the effective date of termination, an additional payment in an
amount at the sole discretion of the Board of Directors if it determines that
you have performed in an extraordinary manner your duties, pursuant to
business plans proposed by management and approved by the Board of Directors,
during the preceding Planning Year.
<PAGE>
4. Expenses. Farmer Mac will reimburse you for your reasonable and necessary
expenses incurred in carrying out your duties under this Agreement, including,
without limitation, expenses for: travel; attending approved business meetings,
continuing legal education, conventions and similar gatherings; and business
entertainment. Reimbursement will be made to you within ten (10) days after
presentation to Farmer Mac of an itemized accounting and documentation of such
expenses. You will notify the President of Farmer Mac prior to incurring any
such expenses of an extraordinary or unusual nature.
5. Vacation and Sick Leave. You will be entitled to four (4) weeks of paid
vacation for each full Planning Year during the Term of this Agreement, to be
taken in spans not exceeding two (2) weeks each. Vacation rights must be
exercised within two months after the end of the Planning Year or forfeited. You
will be entitled to reasonable and customary amounts of sick leave.
6. Employee Benefits. Farmer Mac will provide you with all employee benefits
regularly provided to employees of Farmer Mac and the following other (or
upgraded) benefits: the best level of personal and family health insurance
obtainable by Farmer Mac on reasonable terms; an annual medical examination;
business travel and personal accident insurance; life insurance in the amount of
Two Hundred Fifty Thousand Dollars ($250,000); disability benefits at least
equal to statutory benefits in the District of Columbia; participation in the
Farmer Mac Pension Plan; and participation in a savings plan established under
Paragraph 401(k) of the Internal Revenue Code. The providers of any insurance
will be listed in Best's Insurance Guide. All of the foregoing is subject to the
limitation that the total cost thereof will not exceed twenty five percent (25%)
of your Base Salary, exclusive of administrative expense. In the event that such
cost limitation would be exceeded in any year, you may be required to select
from among the foregoing a group of benefits within that cost limitation.
7. Termination.
(a) Events of Termination. This Agreement will be terminated and the
employment relationship between you and Farmer Mac will be severed as set
forth below:
(1) Farmer Mac may terminate your employment effective upon notice
to you (or your legal representative) if you die or are incapacitated
or disabled by accident, sickness or otherwise so as to render you (in
the opinion of an independent medical consultant on the full-time
faculty of Georgetown University School of Medicine) mentally or
physically incapable of performing the services required to be
performed by you under the terms of this Agreement for a period of at
least sixty (60) consecutive days, or for sixty (60) days (whether
consecutive or not) during any six-month period.
(2) Farmer Mac may terminate your employment effective upon notice
to you at any time for "cause." For the purposes of this subsection,
"cause" will mean only: (A) your willful failure to perform
substantially your duties hereunder, other than any such failure
resulting from your incapacity due to physical or mental illness; or
(B) your willful engagement in activities contrary to the best
interests of Farmer Mac. For purposes of this subsection, no act, or
failure to act on your part, shall be considered "willful" unless done,
or omitted to be done, by you not in good faith and without reasonable
belief that your action or omission was in the best interests of Farmer
Mac.
<PAGE>
(3) Farmer Mac may terminate your employment without "cause" at
any time. Such termination shall become effective June 1, 2001.
(4) Notwithstanding the provisions of subsection 7(a)(3) above,
Farmer Mac may terminate your employment at any time after the passage
by the Board of Directors of Farmer Mac of a resolution authorizing the
dissolution of Farmer Mac. Such termination of your employment shall
become effective on the later of twelve (12) months after notice of
termination or the date that such dissolution of Farmer Mac becomes
final as a matter of law, provided, however, that neither of the
following shall be deemed to be a dissolution for the purposes of this
Agreement: (i) dissolution of Farmer Mac which becomes final as a
matter of law more than twelve (12) months after adoption of the
resolution of dissolution; or (ii) incorporation, organization or
reorganization of a corporation or other business entity which is
substantially similar to Farmer Mac and which uses substantially the
same assets or equity as Farmer Mac, within twelve (12) months after
adoption of the resolution of dissolution. As used herein, the term
"reorganization" shall have the same meaning as in Section 368(a) of
the Internal Revenue Code of 1986.
(b) Payment of Accrued Compensation.
(1) Upon termination of this Agreement pursuant to preceding
subsection (a), you (or your estate or heirs, as the case may be) will
be entitled to receive all Base Salary, Incentive Compensation, expense
reimbursements, vacation pay, and similar amounts accrued and unpaid as
of the date of such termination. The obligations of Farmer Mac under
this subsection (b) will survive any termination of this Agreement.
(2) In the event of your voluntary termination of employment
hereunder, Farmer Mac will not be obligated to make any further
compensation payments to you beyond those accrued prior to the
effective date of such termination.
(c) Disability Pay. Upon termination of this Agreement pursuant to the
preceding subsection (a)(1), Farmer Mac, in its discretion, will either:
(1) continue to pay you (or your estate or heirs, as the case may
be) for the lesser of two (2) years or the balance of the Term the
difference between your current Base Salary and the amount of
disability insurance payments received by you under insurance policies
provided by Farmer Mac in accordance with this Agreement; or
<PAGE>
(2) pay you (or your estate or heirs, as the case may be) the
present value of the payments described in preceding subsection (c)(1),
discounted at a rate equal to the yield then available for two-year
U.S. Treasury Notes, plus 50 basis points (0.50%).
(d) Severance Pay. Upon termination of this Agreement pursuant to
preceding subsection 7(a)(3) or 7(a)(4), Farmer Mac will pay you within
thirty (30) days after such termination an aggregate amount in cash equal to
one hundred percent (100%) of all Base Salary scheduled to be paid and not
yet paid to you under this Agreement for the balance of the Term.
In the event of Farmer Mac's severance of your employment pursuant
to preceding subsection 7(a)(1), (3), or (4), the amount to be paid by Farmer
Mac to you hereunder will not be mitigated by any subsequent earnings by you
from any source.
(e) Constructive Termination. You may, at your option, deem this
Agreement to have been terminated by Farmer Mac in the event of its breach,
including prospective breach, of any term hereof unremedied for thirty (30) days
after notice thereof to Farmer Mac. Upon notice to Farmer Mac of your exercise
of this option, you will have the same rights under such a constructive
termination as if Farmer Mac had terminated your employment pursuant to
preceding subsection (a)(3).
8. Agreement Not to Compete with Farmer Mac.
Notwithstanding anything in this Agreement to the contrary, in the
event of the termination of your employment, for a period of two years
thereafter, you shall not, without the prior written consent of Farmer Mac,
directly or indirectly, engage in any business or activity, whether as
principal, agent, officer, director, partner, employee, independent contractor,
consultant, stockholder or otherwise, alone or in association with any other
person, firm, corporation or other business organization, that directly or
indirectly competes with any of the businesses of Farmer Mac in any manner,
including without limitation, the acquisition and securitization (for capital
market sale) of agricultural mortgage loans or USDA "guaranteed portions"
(hereinafter referred to as "Farmer Mac Qualified Loans"); provided, however,
that such prohibited activity shall not include the ownership of up to 20% of
the common stock in a public company.
9. Agreement Not to Use Confidential or Proprietary Information.
Farmer Mac and you both recognize that you have access to and acquire,
and may assist in developing, confidential and proprietary information relating
to the business and operations of Farmer Mac as a result of your employment or
association with Farmer Mac. You hereby covenant and agree that you will retain
all "Confidential Information" (as defined below) in trust for the sole benefit
of Farmer Mac and its successors and assigns. You hereby covenant further that,
in addition to your fiduciary responsibilities as an officer not to disclose
certain information of or relating to Farmer Mac, you will not, at any time
during or after the term of this Agreement, without the prior written consent of
Farmer Mac, directly or indirectly communicate or divulge any such Confidential
Information to any person, firm, corporation or other business organization, or
use any such Confidential Information for your own account or for the account of
any other person, except as required in connection with the performance of your
services hereunder. The term "Confidential Information" shall mean any trade
secret, data or other confidential or proprietary information related to the
business and activities of Farmer Mac. Notwithstanding the foregoing,
Confidential Information shall not include any information that is or becomes a
part of the public domain or generally available to the public (unless such
availability occurs as a result of any breach by you of this Section 11), or
becomes available to you on a non-confidential basis from a source (other than
Farmer Mac) that is not bound by a confidentiality agreement and does not breach
his or her fiduciary responsibilities. The provisions of this Section 9 shall
survive the termination of this Agreement and the termination of your employment
hereunder.
<PAGE>
10. Agreement Not to Solicit Farmer Mac Employees.
For a period of two years after the termination of your employment
hereunder, you shall not, directly or indirectly, induce any employee of Farmer
Mac who is a "member of management" (as defined below) or is directly involved
in the acquisition and securitization (for capital market sale) of Farmer Mac
Qualified Loans to engage in any activity in which you are prohibited from
engaging in under this Agreement, or to terminate such person's employment with
Farmer Mac. You shall not directly or indirectly, either individually or as
owner, agent, employee, consultant or otherwise, employ, offer employment to,
lure, entice away or assist others in recruiting or hiring any person who is or
was employed by Farmer Mac unless such person shall have ceased to be employed
by Farmer Mac for a period of at least six months and is not subject to any
non-compete covenants substantially similar in nature to those contained in
Section 8 hereof. "Member of management" means the President, any Vice
President, the Controller of Farmer Mac or attorney or paralegal in the employ
of Farmer Mac.
11. Notices. Any notice given under this Agreement will be sufficient if in
writing and either: (a) mailed postage prepaid by registered or certified mail,
return receipt requested; or (b) delivered by hand to, in the case of Farmer
Mac, 919 18th Street, N.W., Washington, D.C. 20006, attention President or, in
the case of the Employee, 18505 Rolling Acres Way, Olney, MD 20832 (or to such
other addresses as may be from time to time designated by notice from the
recipient party to the other). Any such notice will be effective upon actual
receipt or refusal thereof.
12. Miscellaneous.
(a) Governing Law. This Agreement will be governed by, and interpreted
and enforced in accordance with, the laws of the District of Columbia.
(b) Waiver. The waiver by any party of a breach of any provision of
this Agreement will not operate as a waiver of any other breach of any
provision of this Agreement by any party.
(c) Entire Agreement. This Agreement sets forth the entire
understanding of the parties concerning the subject matter hereof, and may
not be changed or modified except by a written instrument duly executed by or
on behalf of the parties hereto.
(d) Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors,
heirs, personal representatives and assigns. This subsection is not to be
construed to permit you to assign your obligation to perform the duties of
your employment hereunder. This subsection permits Farmer Mac the right to
assign this Agreement to a successor entity.
<PAGE>
(e) Severability. If any term, condition, or provision of this
Agreement or the application thereof to any party or circumstances will, at
any time or to any extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such term, condition or provision to parties
or circumstances other than those to which it is held invalid or
unenforceable, will not be affected thereby, and each term, condition and
provision of this Agreement will be valid and enforceable to the fullest
extent permitted by law.
(f) Action by Farmer Mac. Except as expressly provided otherwise in
this Agreement, reference to actions, decisions, determinations or similar
occurrences by Farmer Mac (other than the execution of this Agreement and any
modifications hereto or notices given hereunder) will mean the action,
decision or determination of the Board of Directors or the President of
Farmer Mac.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
By:______________________________________
Henry D. Edelman
President and Chief Executive Officer
EMPLOYEE
______________________________________
Jerome G. Oslick
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<ARTICLE> 5
<LEGEND>
Basic earnings per share are $0.22. Diluted earnings per share are $0.21.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 344,822
<SECURITIES> 2,216,848
<RECEIVABLES> 31,926
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 393,575
<PP&E> 280
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,639,320
<CURRENT-LIABILITIES> 1,798,612
<BONDS> 745,735
0
0
<COMMON> 10,950
<OTHER-SE> 76,122
<TOTAL-LIABILITY-AND-EQUITY> 2,639,320
<SALES> 47,656
<TOTAL-REVENUES> 47,656
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,725
<LOSS-PROVISION> 1,317
<INTEREST-EXPENSE> 40,276
<INCOME-PRETAX> 3,655
<INCOME-TAX> 1,297
<INCOME-CONTINUING> 2,358
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 2,358
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
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