Quantcast

Farmer Mac Reports First Quarter 2010 Results

May 10, 2010

WASHINGTON, May 10 /PRNewswire-FirstCall/ — The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today reported continued momentum with respect to its core earnings performance and strengthened capital position for the first quarter ended March 31, 2010.

For first quarter 2010, Farmer Mac’s core earnings were $5.4 million ($0.54 per diluted common share) and its GAAP net income available to common stockholders was $1.8 million ($0.17 per diluted common share). Those figures compare to first quarter 2009 core earnings of $4.8 million ($0.47 per diluted common share) and GAAP net income available to common stockholders of $33.5 million ($3.31 per diluted common share). First quarter 2010 core earnings were driven by more favorable net interest income and reduced provisions for losses. First quarter 2010 provisions for losses were $1.4 million, down from $6.1 million in first quarter 2009. Farmer Mac’s first quarter 2010 GAAP earnings were reduced by a $5.8 million charge related to the retirement of previously outstanding preferred stock. First quarter 2009 GAAP results benefited from $33.3 million of gains recorded to reflect increases in the fair values of financial derivatives and trading assets, which Farmer Mac excludes from core earnings.

Farmer Mac President and Chief Executive Officer Michael Gerber stated, “We successfully completed our previously announced capital raise in first quarter 2010. This bolstered our regulatory capital position, allowed Farmer Mac to retire higher-cost preferred stock and, most importantly, positioned Farmer Mac to meet the growing demands of its customer base. During 2009, Farmer Mac focused on the stabilization of its balance sheet and positioning the company for the future. This has been accomplished. During first quarter 2010, we have shifted our strategic focus toward our customers with the goal to grow our $10.7 billion portfolio of outstanding loans, guarantees and commitments. With lenders in both the agricultural and rural utilities sectors continuing to look for sources of capital and liquidity and to reduce their credit risk exposures, Farmer Mac represents an important potential solution for those challenges and a means to meet the borrowing needs of lenders’ rural customers.”

For the quarter ended March 31, 2010, Farmer Mac’s effective net interest spread was 105 basis points, compared to 101 basis points for the quarter ended March 31, 2009. This increased spread combined with growth in our core business produced $14.8 million of net interest spread in first quarter 2010, compared to $12.6 million in first quarter 2009.

Farmer Mac’s 90-day delinquencies were $70.4 million (1.64 percent of the portfolio) as of March 31, 2010, down from $86.2 million (1.90 percent) as of March 31, 2009, but up from $49.5 million (1.13 percent) as of December 31, 2009. For much of 2009, the 90-day delinquencies were concentrated in the ethanol industry and this concentration has been significantly reduced. Ethanol loans comprised $18.6 million of the $70.4 million of 90-day delinquencies as of March 31, 2010, compared to $58.5 million of $86.2 million as of March 31, 2009, and $19.1 million of $49.5 million as of December 31, 2009. The increase in delinquencies when compared to December 31, 2009 is partially due to the cyclical nature of payments by producers; however, certain segments of the ag sector continue to show stress — most notably the dairy sector. We would expect that given current conditions, these industries will continue to experience challenges during 2010. Farmer Mac anticipates that in the near future, delinquencies, losses and charge-offs should remain within the Corporation’s historical experience, but are likely to be greater than the historical average. As of March 31, 2010, there were no delinquencies or non-performing assets in Farmer Mac’s portfolio of rural utilities loans.

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 more accurately represent Farmer Mac’s economic performance, transaction economics and business trends before the effects on earnings of temporary changes in the recorded fair values of assets and liabilities and other one-time items. Core earnings differs from GAAP net income primarily by excluding unrealized gains or losses on financial derivatives and trading assets, lower of cost or fair value adjustments on loans held for sale and, for first quarter 2010, other items related to the retirement of preferred stock and the amortization of premiums on assets consolidated at fair value. 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 available to common stockholders to core earnings is presented in the following table.

    Reconciliation of GAAP Net Income Available to Common Stockholders to
                                Core Earnings
                                             For the Three Months Ended
                                             --------------------------
                                           March 31, 2010     March 31, 2009
                                           --------------     --------------
                                                     Per                Per
                                                   Diluted            Diluted
                                                   Share              Share
                                                   -----              -----
                                              (in thousands, except per
                                                    share amounts)
    GAAP net income available
      to common stockholders              $1,767     $0.17  $33,518     $3.31
    Less the effects of:
      Unrealized gains on financial
       derivatives, net of tax             1,887      0.19    9,728      0.96
      Unrealized gains on trading
       assets, net of tax                  2,188      0.21   20,557      2.03
      Net effects of settlements on
       agency forward contracts, net of
       tax                                   206      0.02  (1,560)     (0.15)
    Plus the effects of:
      Issuance costs on the retirement
       of preferred stock                  5,784      0.57        -         -
      Amortization of premiums on
       assets consolidated at fair
       value, net of tax                     682      0.07        -         -
      Lower of cost or fair value
       adjustment on loans held for
       sale, net of tax                    1,478      0.15        -         -
                                           -----      ----      ---       ---
    Core earnings                         $5,430     $0.54   $4,793     $0.47
                                          ------     -----   ------     -----

More complete information on Farmer Mac’s performance for the quarter ended March 31, 2010 is set forth in the Form 10-Q 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 on reasonable rates and terms; (2) legislative or regulatory developments that could affect Farmer Mac; (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) borrower preferences for fixed rate agricultural mortgage indebtedness; (7) the impact of economic conditions and real estate values on agricultural mortgage lending; (8) the willingness of investors to invest in Farmer Mac Guaranteed Securities; (9) developments in the financial markets, including possible investor, analyst and rating agency reactions to events involving GSEs, including Farmer Mac; and (10) the future level 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 10K for the year ended December 31, 2009, as filed with the SEC on March 16, 2010 and in Farmer Mac’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, 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 and Quarterly Report on Form 10-Q referenced above) is available on Farmer Mac’s website at www.farmermac.com. Farmer Mac II LLC is a recently-organized Delaware limited liability company, in which Farmer Mac owns all of the common equity, that is now operating 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 first quarter 2010 financial results and the Corporation’s Form 10-Q for first quarter 2010 will be webcast on Farmer Mac’s website beginning at 11:00 a.m. eastern time on Tuesday, May 11, 2010. 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
                CONDENSED CONSOLIDATED BALANCE SHEETS
                             (unaudited)
                                                               December
                                                                March 31, 31,
                                                    2010            2009
                                                    ----            ----
                                                   (in thousands)
    Assets:
      Cash and cash equivalents                 $418,211        $654,794
      Investment securities:
        Available-for-sale, at fair
         value                                 1,198,374       1,041,923
        Trading, at fair value                    82,826          89,972
                                                ------          ------
          Total investment securities        1,281,200       1,131,895
                                             ---------       ---------
      Farmer Mac Guaranteed
       Securities:
        Available-for-sale, at fair
         value                               1,793,927       2,524,867
        Trading, at fair value                       -         874,129
                                                   ---         -------
          Total Farmer Mac Guaranteed
           Securities                        1,793,927       3,398,996
                                             ---------       ---------
      USDA Guaranteed Securities:
        Available-for-sale, at fair
         value                                 781,823               -
        Trading, at fair value                 407,844               -
                                               -------             ---
          Total USDA Guaranteed
           Securities                        1,189,667               -
                                             ---------             ---
      Loans:
        Loans held for sale, at lower
         of cost or fair value                 758,437         666,534
        Loans held for investment, at
         amortized cost                         90,823          93,478
        Loans held for investment in
         consolidated trusts, at
         amortized cost                      1,789,026               -
        Allowance for loan losses               (9,142)         (6,292)
                                                ------          ------
          Total loans, net of allowance      2,629,144         753,720
                                             ---------         -------
      Real estate owned, at lower of
       cost or fair value                        3,132             739
      Financial derivatives, at fair
       value                                    21,170          15,040
      Interest receivable                       64,794          67,178
      Guarantee and commitment fees
       receivable                               34,195          55,016
      Deferred tax asset, net                   20,081          24,146
      Prepaid expenses and other
       assets                                   23,644          37,289
                                                ------          ------
                         Total Assets       $7,479,165      $6,138,813
                                            ----------

    Liabilities, Mezzanine Equity
     and Equity:
    Liabilities:
      Notes payable:
        Due within one year                 $3,404,475      $3,662,898
        Due after one year                   2,082,578       1,908,713
                                             ---------       ---------
          Total notes payable                5,487,053       5,571,611
      Debt securities of consolidated
       trusts held by third parties          1,337,331               -
      Financial derivatives, at fair
       value                                   110,602         107,367
      Accrued interest payable                  47,530          39,562
      Guarantee and commitment
       obligation                               31,039          48,526
      Accounts payable and accrued
       expenses                                 12,094          23,445
      Reserve for losses                         6,427           7,895
                                                 -----           -----
                         Total Liabilities   7,032,076       5,798,406
                                             ---------
    Mezzanine Equity:
        Series B redeemable preferred
         stock, par value $1,000 per
         share, 150,000 shares
         authorized, issued and
         outstanding as of December 31,
         2009 (redemption value
         $150,000,000)                               -      144,216
    Stockholders' Equity:
      Preferred stock:
        Series C, par value $1,000 per
         share, 100,000 shares
         authorized, 57,578 issued and
         outstanding as of March 31,
         2010 and December 31, 2009             57,578       57,578
      Common stock:
        Class A Voting, $1 par value,
         no maximum authorization                1,031           1,031
        Class B Voting, $1 par value,
         no maximum authorization                  500             500
        Class C Non-Voting, $1 par
         value, no maximum
         authorization                           8,613           8,611
      Additional paid-in capital                97,861          97,090
      Accumulated other comprehensive
       income                                    7,587           3,254
      Retained earnings                         32,066          28,127
                                                ------          ------
          Total Stockholders' Equity           205,236         196,191
                                               -------         -------
      Non-controlling interest -
       preferred stock                         241,853               -
                                               -------             ---
          Total Equity                         447,089         196,191
                                               -------         -------
                          Total
                          Liabilities,
                          Mezzanine Equity
                          and Equity        $7,479,165      $6,138,813
                                           -----------

      FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             (unaudited)
                                                      For the Three Months
                                                             Ended
                                                      --------------------
                                                  March 31,       March 31,
                                                     2010            2009
                                                 ----------      ----------
                                                     (in thousands, except
                                                       per share amounts)
    Interest income:
      Investments and cash equivalents               $6,483          $8,909
      Farmer Mac and USDA Guaranteed
       Securities                                    20,831          27,759
      Loans                                          33,418          10,485
                                                     ------          ------
        Total interest income                        60,732          47,153
      Total interest expense                         37,115          23,713
                                                     ------          ------
        Net interest income                          23,617          23,440
      Provision for loan losses                      (2,850)         (3,534)
                                                     ------          ------
        Net interest income after provision for
         loan losses                                 20,767          19,906
                                                     ------          ------

    Non-interest income:
      Guarantee and commitment fees                   5,919           7,410
      (Losses)/gains on financial derivatives        (5,804)          1,711
      Gains on trading assets                         3,367          31,625
      Other-than-temporary impairment
       losses                                             -             (81)
      Gains on sale of available-for-sale
       investment securities                            240           3,150
      Gains on sale of loans and Farmer Mac
       Guaranteed Securities                              -           1,581
      Lower of cost or fair value adjustment
       on loans held for sale                        (2,274)              -
      Other income                                      829             234
                                                        ---             ---
        Non-interest income                           2,277          45,630
                                                      -----          ------

    Non-interest expense:
      Compensation and employee benefits              3,511           4,025
      General and administrative                      2,503           2,914
      Regulatory fees                                   563             513
      Real estate owned operating costs                  10              21
      (Recoveries)/provision for losses              (1,468)          2,519
                                                     ------           -----
        Non-interest expense                          5,119           9,992
                                                      -----           -----
        Income before income taxes                   17,925          55,544
    Income tax expense                                4,336          18,090
                                                      -----          ------
        Net income                                   13,589          37,454
    Less: Net income attributable to non-
     controlling interest  -
      preferred stock dividends                      (4,068)              -
                                                     ------             ---
        Net income attributable to Farmer Mac         9,521          37,454
    Preferred stock dividends                        (1,970)         (3,936)
    Loss on retirement of preferred stock            (5,784)              -
                                                     ------             ---
        Net income available to common
         stockholders                                $1,767         $33,518
                                                     ------         -------

    Earnings per common share and
     dividends:
        Basic earnings per common share               $0.17           $3.31
        Diluted earnings per common share             $0.17           $3.31
        Common stock dividends per common share       $0.05           $0.05

SOURCE Farmer Mac


Source: newswire



comments powered by Disqus