Quantcast
Last updated on April 21, 2014 at 1:20 EDT

Farmer Mac Reports Strong Fourth Quarter and Full Year Results for 2011

March 15, 2012

WASHINGTON, March 15, 2012 /PRNewswire/ — The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today reported continued strong performance in 2011, as a robust agricultural economy contributed to Farmer Mac’s positive earnings, increased capital, and improved asset quality. Farmer Mac’s core earnings, a non-GAAP measure, for fourth quarter 2011 were $12.6 million ($1.16 per diluted common share), up from $6.7 million ($0.63 per diluted common share) for fourth quarter 2010. Core earnings increased 69 percent for the full year to $42.9 million ($3.97 per diluted common share) in 2011, up from $25.4 million ($2.39 per diluted common share) in 2010. This increase was primarily due to increased net interest income and releases from the allowance for losses, compared to provisions in 2010.

Farmer Mac’s GAAP net income attributable to common stockholders was $13.3 million ($1.23 per diluted common share) and $13.8 million ($1.28 per diluted common share) for the three and twelve months ended December 31, 2011, respectively, compared to $12.5 million ($1.16 per diluted common share) and $22.1 million ($2.08 per diluted common share) for the same periods in 2010. Farmer Mac’s 2011 GAAP results were impacted by decreases in the fair values of financial derivatives compared to 2010. Farmer Mac uses financial derivatives, primarily interest rate swaps, to mitigate its exposure to interest rate risk and often times achieve an overall lower effective cost of borrowing. Because these financial derivatives are not designated in hedge relationships for accounting purposes, as changes in long-term interest rates affect the fair values of the financial derivatives, those fair value changes are recorded in earnings, while much of the offsetting changes in the fair values of related assets and liabilities are not recorded in earnings. Farmer Mac excludes these fair value fluctuations from its core earnings.

Farmer Mac President and Chief Executive Officer Michael Gerber stated, “2011 was an excellent year for Farmer Mac. We achieved significant growth in core earnings despite reduced demand for loans by rural borrowers at the retail level. The positive trend in credit quality has also continued, as our 90-day delinquencies were again down compared to both the previous quarter and the prior year. In addition, our capital position remains significantly above applicable statutory and regulatory requirements. As a result of our continued strong performance, Farmer Mac remains well-positioned to meet the expanding demand for access to credit in rural America that is expected over time. The recent doubling of the quarterly dividend on common stock underscores our confidence in Farmer Mac’s future and our commitment to provide enhanced returns to shareholders over the long term while fulfilling our mission of serving rural America.”

Business Results

For the year ended December 31, 2011, Farmer Mac’s net effective interest spread was $89.4 million (96 basis points), compared to $66.5 million (106 basis points) in 2010. This increase in dollars was a result of net interest income earned on new on-balance sheet program assets added during 2011. The 10 basis point decrease in yield is mainly attributable to the addition of (1) lower yielding assets in Farmer Mac’s liquidity investment portfolio, such as U.S. Treasuries, which have a negative net yield but offer a source of contingent liquidity, and (2) on balance sheet AgVantage securities at lower net yields than the average net yield on Farmer Mac’s existing portfolio.

Farmer Mac’s guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying Farmer Mac Guaranteed Securities and long term standby purchase commitments (LTSPCs) were $24.8 million for 2011, compared to $24.1 million for 2010.

Program Activity

During 2011, Farmer Mac added $3.4 billion of new program volume from a variety of sources:

  • purchased $495.5 million of newly originated Farmer Mac I eligible loans;
  • added $472.0 million of Farmer Mac I eligible loans under LTSPCs;
  • purchased $1.8 billion of Farmer Mac I AgVantage securities;
  • purchased $203.8 million of loans under the Rural Utilities program;
  • guaranteed $2.8 million of Rural Utilities AgVantage securities; and
  • purchased $407.7 million of Farmer Mac II USDA-guaranteed portions.

This new business volume was offset by principal paydowns on outstanding loans and loans underlying Farmer Mac Guaranteed Securities and LTSPCs and the maturity of a $475.0 million AgVantage security that was not replaced with new business. Farmer Mac’s outstanding program volume was $11.9 billion as of December 31, 2011, a net decrease of $303.4 million from December 31, 2010.

Credit Quality

Farmer Mac’s 90-day delinquencies were $40.6 million (0.93 percent of the portfolio) as of December 31, 2011, compared to $70.2 million (1.63 percent of the portfolio) as of December 31, 2010. As of December 31, 2011, there were no ethanol loans in the 90-day delinquencies, compared to $10.9 million as of December 31, 2010. Farmer Mac recorded charge-offs of $0.3 million in 2011, compared to charge-offs of $0.6 million during 2010.

When analyzing the overall risk profile of its program business, Farmer Mac takes into account more than the Farmer Mac I agricultural loan delinquency information provided above. The total program business includes AgVantage securities and rural utilities loans, neither of which have any delinquencies, and USDA-guaranteed portions (Farmer Mac II), which are backed by the full faith and credit of the United States. Across Farmer Mac’s entire program business, 90day delinquencies represented 0.34 percent of total program assets as of December 31, 2011, compared to 0.58 percent as of December 31, 2010.

Capital and Liquidity

Farmer Mac is required to hold capital at the higher of its statutory minimum capital requirement and the amount required by the risk-based capital stress test prescribed by Farm Credit Administration regulations. As of December 31, 2011, Farmer Mac’s core capital totaled $475.2 million and exceeded its statutory minimum capital requirement of $348.7 million by $126.5 million. As of December 31, 2011 the risk-based capital stress test generated a risk-based capital requirement of $52.9 million. Farmer Mac’s regulatory capital of $492.7 million exceeded that amount by approximately $439.8 million.

As prescribed by FCA regulations, Farmer Mac is required to maintain a minimum of 60 days of liquidity. As of December 31, 2011, Farmer Mac had 151 days of liquidity, as calculated in accordance with FCA regulations.

Reconciliation of Core and GAAP Earnings

Farmer Mac uses core earnings, a non-GAAP financial measure, to measure corporate economic performance and develop financial plans because, in management’s view, core earnings is a useful alternative measure in understanding Farmer Mac’s economic performance, transaction economics and business trends. Core earnings differs from GAAP net income by excluding the effects of fair value accounting guidance. Core earnings also differs from GAAP net income by excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of the Corporation’s core business. This non-GAAP financial measure may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac’s disclosure of this non-GAAP measure is not intended to replace GAAP information but, rather, to supplement it.

A reconciliation of Farmer Mac’s GAAP net income attributable to common stockholders to core earnings is presented in the following table.


                       Reconciliation of GAAP Net Income Attributable to Common
                                     Stockholders to Core Earnings
                                                                   For the Three Months Ended
                                                                 December 31,          December 31,
                                                                      2011                  2010
                                                                 -------------         -------------
                                                                    (in thousands, except per
                                                                          share amounts)
    GAAP net income attributable
     to common stockholders                                          $13,323               $12,492
    Less the after-tax effects
     of:
    Unrealized gains on financial
     derivatives                                                         386                13,069
    Unrealized gains/(losses) on
     trading assets                                                    2,476                  (931)
    Amortization of premiums on
     assets consolidated at fair
     value                                                            (2,285)               (2,371)
    Recognition of deferred gains
     related to certain Farmer
     Mac II Guaranteed Securities
     and USDA Guaranteed
     Securities                                                          410                -
    Net effects of settlements on
     agency forward contracts                                           (240)                 (341)
    Lower of cost or fair value
     adjustment on loans held for
     sale                                                                 -                (3,677)
                                                                        ---                ------
          Sub-total                                                      747                 5,749
                                                                         ---                 -----
    Core earnings                                                    $12,576                $6,743
                                                                     -------                ------

    Core earnings per share:
    Basic                                                              $1.21                 $0.66
    Diluted                                                             1.16                  0.63

    Weighted-average shares:
    Basic                                                             10,357                10,282
    Diluted                                                           10,837                10,732

                                                                      For the Year Ended
                                                                December 31,        December 31,
                                                                      2011                  2010
                                                                 -------------         -------------
                                                                   (in thousands, except per
                                                                         share amounts)
    GAAP net income attributable
     to common stockholders                                          $13,784               $22,080
    Less the after-tax effects
     of:
    Unrealized (losses)/gains on
     financial derivatives                                           (30,930)               13,046
    Unrealized gains on trading
     assets                                                            2,246                 3,426
    Amortization of premiums on
     assets consolidated at fair
     value                                                            (7,060)               (7,617)
    Recognition of deferred gains
     related to certain Farmer
     Mac II Guaranteed Securities
     and USDA Guaranteed
     Securities                                                        3,368                -
    Net effects of settlements on
     agency forward contracts                                         (2,523)                 (670)
    Lower of cost or fair value
     adjustment on loans held for
     sale                                                              5,776                (5,686)
    Issuance costs on the
     retirement of preferred
     stock                                                                -                (5,784)
                                                                        ---                ------
          Sub-total                                                  (29,123)               (3,285)
                                                                     -------                ------
    Core earnings                                                    $42,907               $25,365
                                                                     -------               -------

    Core earnings per share:
    Basic                                                              $4.15                 $2.48
    Diluted                                                             3.97                  2.39

    Weighted-average shares:
    Basic                                                             10,335                10,229
    Diluted                                                           10,802                10,615

More complete information on Farmer Mac’s performance for 2011 is set forth in the Form 10-K filed by Farmer Mac earlier today with the Securities and Exchange Commission (SEC).

Forward-Looking Statements

In addition to historical information, this release includes forward-looking statements that reflect management’s current expectations for Farmer Mac’s future financial results, business prospects and business developments. 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 or events could cause Farmer Mac’s actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including uncertainties regarding: (1) the availability to Farmer Mac and Farmer Mac II LLC of debt financing and, if available, the reasonableness of rates and terms; (2) legislative or regulatory developments that could affect Farmer Mac, including those related to the Dodd-Frank Act; (3) fluctuations in the fair value of assets held by Farmer Mac and Farmer Mac II LLC; (4) the rate and direction of development of the secondary market for agricultural mortgage and rural utilities loans, including lender interest in Farmer Mac credit products and the Farmer Mac secondary market; (5) the general rate of growth in agricultural mortgage and rural utilities indebtedness; (6) the impact of economic conditions and real estate values on agricultural mortgage lending; (7) developments in the financial markets, including possible investor, analyst and rating agency reactions to events involving GSEs, including Farmer Mac; and (8) financial market volatility, including the future level and direction of interest rates, commodity prices, and export demand for U.S. agricultural products. Other risk factors are discussed in Farmer Mac’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC earlier today. The forward-looking statements contained in this release represent management’s expectations as of the date of this release. Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements included in this release to reflect new information or any future events or circumstances, except as otherwise mandated by the SEC.

Farmer Mac is a stockholder-owned instrumentality of the United States chartered by Congress to establish a secondary market for agricultural real estate and rural housing mortgage loans, rural utilities loans, and USDA-guaranteed farm program and rural development loans. Farmer Mac’s Class C non-voting and Class A voting common stocks are listed on the New York Stock Exchange under the symbols AGM and AGM.A, respectively. Additional information about Farmer Mac (as well as the Annual Report on Form 10-K referenced above) is available on Farmer Mac’s website at www.farmermac.com. Farmer Mac II LLC is a subsidiary of Farmer Mac that operates the Farmer Mac II business of purchasing and holding USDA-guaranteed loans. Additional information about Farmer Mac II LLC is available on its website at www.farmermac2.com.

The conference call to discuss Farmer Mac’s 2011 financial results and the Corporation’s Form 10-K for 2011 will be webcast on Farmer Mac’s website beginning at 11:00 a.m. eastern time on Friday, March 16, 2012. An audio recording of that call will be available on Farmer Mac’s website for two weeks after the call is concluded.


                         FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND
                                          SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEET
                                          (unaudited)

                                                                  As of December 31,
                                                                  ------------------
                                                                        2011                  2010
                                                                        ----                  ----
                                                                    (in thousands)
    Assets:
    Cash and cash equivalents                                    $817,046              $729,920
    Investment securities:
    Available-for-sale, at
     fair value                                                 2,182,694             1,677,233
    Trading, at fair value                                          1,796                86,096
    Total investment securities                                 2,184,490             1,763,329
                                                                ---------             ---------
    Farmer Mac Guaranteed
     Securities:
    Available-for-sale, at
     fair value                                                 4,289,272             2,907,264

    USDA Guaranteed Securities:
    Available-for-sale, at
     fair value                                                 1,279,546             1,005,679
    Trading, at fair value                                        212,359               311,765
    Total USDA Guaranteed
     Securities                                                 1,491,905             1,317,444
                                                                ---------             ---------
    Loans:
    Loans held for sale, at
     lower of cost or fair
     value                                                        541,447             1,212,065
    Loans held for investment,
     at amortized cost                                          1,241,311                90,674
    Loans held for investment
     in consolidated trusts, at
     amortized cost                                             1,121,559             1,265,663
    Allowance for loan losses                                     (10,161)               (9,803)
    Total loans, net of
     allowance                                                  2,894,156             2,558,599
                                                                ---------             ---------
    Real estate owned, at lower
     of cost or fair value                                          3,136                 1,992
    Financial derivatives, at
     fair value                                                    40,250                41,492
    Interest receivable                                           110,339                90,295
    Guarantee and commitment
     fees receivable                                               31,384                34,752
    Deferred tax asset, net                                            -                14,530
    Prepaid expenses and other
     assets                                                        21,530                20,297
    Total Assets                                              $11,883,508            $9,479,914
                                                              ===========            ==========

    Liabilities and Equity:
    Liabilities:
    Notes payable:
    Due within one year                                        $6,087,879            $4,509,419
    Due after one year                                          4,104,882             3,430,656
    Total notes payable                                        10,192,761             7,940,075
    Debt securities of
     consolidated trusts held
     by third parties                                             701,583               827,411
    Financial derivatives, at
     fair value                                                   160,024               113,687
    Accrued interest payable                                       60,854                57,131
    Guarantee and commitment
     obligation                                                    27,440                30,308
    Accounts payable and
     accrued expenses                                             178,708                22,113
    Deferred tax liability, net                                       250                    -
    Reserve for losses                                              7,355                10,312
    Total Liabilities                                          11,328,975             9,001,037
                                                               ----------             ---------
    Equity:
    Preferred stock:
    Series C                                                       57,578                57,578
    Common stock:
    Class A Voting                                                  1,031                 1,031
    Class B Voting                                                    500                   500
    Class C Non-Voting                                              8,826                 8,753
    Additional paid-in capital                                    102,821               100,050
    Accumulated other
     comprehensive income                                          79,370                18,275
    Retained earnings                                              62,554                50,837
    Total Stockholders' Equity                                    312,680               237,024
    Non-controlling interest -
      preferred stock                                             241,853               241,853
                                                                  -------
    Total Equity                                                  554,533               478,877
    Total Liabilities and
     Equity                                                   $11,883,508            $9,479,914
                                                              ===========            ==========

                             FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (unaudited)

                                                            For the Three
                                                             Months Ended                  For the Year Ended
                                                            December 31,                      December 31,
                                                             2011               2010              2011              2010
                                                             ----               ----              ----              ----
                                                                  (in thousands, except per share
                                                                              amounts)
    Interest income:
    Investments and cash
     equivalents                                        $7,017             $8,194           $28,117           $27,497
    Farmer Mac Guaranteed
     Securities and USDA
     Guaranteed Securities                              35,863             24,145           127,394            86,742
    Loans                                               29,762             29,738           119,176           124,472
    Total interest income                               72,642             62,077           274,687           238,711
    Total interest expense                              39,277             36,308           153,382           142,668
    Net interest income                                 33,365             25,769           121,305            96,043
    Release of/(provision for)
     loan losses                                           482               (501)             (610)           (1,893)
    Net interest income after
     release of/(provision for)
     loan losses                                        33,847             25,268           120,695            94,150
                                                        ------             ------           -------            ------
    Non-interest income/(loss):
    Guarantee and commitment fees                        5,966              6,485            24,821            24,091
    (Losses)/gains on financial
     derivatives                                       (10,277)            11,349           (92,645)          (17,159)
    Gains/(losses) on trading
     assets                                              3,809             (1,433)            3,455             5,270
    Gains on sale of available-
     for-sale investment
     securities                                             -                  2               269               266
    Gain on sale of real estate
     owned                                                 254                 10               974                10
    Lower of cost or fair value
     adjustment on loans held for
     sale                                                   -             (5,658)            8,887            (8,748)
    Other income                                         1,102                 64             6,850             1,244
    Non-interest income/(loss)                             854             10,819           (47,389)            4,974
                                                           ---             ------           -------             -----
    Non-interest expense:
    Compensation and employee
     benefits                                            3,916              5,313            17,884            17,232
    General and administrative                           2,315              2,235             9,732             8,564
    Regulatory fees                                        563                550             2,277             2,243
    Real estate owned operating
     costs, net                                             82                674               823             2,171
    Provision for/(release of)
     losses                                                364                737            (2,957)            2,417
    Other expense                                           -                 -               900                -
    Non-interest expense                                 7,240              9,509            28,659            32,627
                                                         -----              -----            ------            ------
    Income before income taxes                          27,461             26,578            44,647            66,497
    Income tax expense                                   7,872              7,820             5,797            13,797
    Net income                                          19,589             18,758            38,850            52,700
    Less: Net income attributable
     to non-controlling interest
     - preferred stock dividends                        (5,546)            (5,547)          (22,187)          (20,707)
    Net income attributable to
     Farmer Mac                                         14,043             13,211            16,663            31,993
    Preferred stock dividends                             (720)              (719)           (2,879)           (4,129)
    Loss on retirement of
     preferred stock                                        -                 -                -            (5,784)
    Net income attributable to
     common stockholders                               $13,323            $12,492           $13,784           $22,080
                                                       =======            =======           =======           =======
    Earnings per common share and
     dividends:
    Basic earnings per common
     share                                               $1.29              $1.21             $1.33             $2.16
    Diluted earnings per common
     share                                               $1.23              $1.16             $1.28             $2.08
    Common stock dividends per
     common share                                        $0.05              $0.05             $0.20             $0.20

SOURCE Farmer Mac


Source: PR Newswire