Farmer Mac Reports 2009 GAAP Earnings of $82 Million

WASHINGTON, March 16 /PRNewswire-FirstCall/ -- The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today reported that Farmer Mac’s net income available to common stockholders for fourth quarter 2009 was $5.5 million ($0.53 per diluted common share), compared to a net loss of $61.1 million ($6.03 per diluted common share) for fourth quarter 2008.  Fourth quarter results brought Farmer Mac’s net income for full year 2009 to $82.3 million ($8.04 per diluted common share), compared to a net loss for 2008 of $154.1 million ($15.40 per diluted common share).  Farmer Mac’s core earnings were $5.4 million and $16.1 million, respectively, for the three and twelve month periods ended December 31, 2009, compared to net losses of $8.8 million and $81.5 million, respectively, for the three and twelve month periods ended December 31, 2008.  Fourth quarter 2009 core earnings were driven by increased guarantee and commitment fees and net interest spread.  Fourth quarter 2009 GAAP and core earnings were reduced by provisions for losses of $2.2 million, compared to provisions of $17.2 million in fourth quarter 2008.  For the twelve months ended December 31, 2009, the net provisions for losses totaled $5.2 million, compared to provisions of $17.8 million for all of 2008.  

Farmer Mac President and Chief Executive Officer Michael Gerber stated, “We are pleased with our fourth quarter and full year results.  Our focus for 2009 was to strengthen our balance sheet, improve our risk profile, and position the company for the future.  Our fourth quarter core earnings improved to their highest level during 2009, and our capital surplus as of December 31, 2009 was $120.2 million, up from $13.5 million as of December 31, 2008.  That surplus was further increased by approximately $100.0 million after our capital raise this past January through the issuance of perpetual preferred stock by our recently-formed operating subsidiary, Farmer Mac II LLC.  With lenders in both the agricultural and rural utilities sectors continuing to experience the need for capital and liquidity and to reduce credit risk, Farmer Mac represents an important potential solution for those challenges and a means to ensure their rural customers’ borrowing needs are met.  Based on the results of 2009 and the capital raise in January, Farmer Mac is well positioned to be part of the solution for those lenders and take advantage of the opportunities ahead of us.”

Farmer Mac’s non-performing assets decreased to $62.0 million (1.41 percent of the portfolio) as of December 31, 2009, down from $84.8 million (1.94 percent) as of September 30, 2009, and $80.0 million (1.61 percent) as of December 31, 2008.  90-day delinquencies were $49.5 million (1.13 percent of the portfolio) as of December 31, 2009, down from $59.4 million (1.36 percent) as of September 30, 2009 and $67.1 million (1.35 percent) as of December 31, 2008.  Those reductions are in part a result of the progression of certain ethanol loans from “in bankruptcy” during fourth quarter 2008, to “real estate owned” as of second quarter 2009, and to “loans held for investment” as of December 31, 2009.  Though reduced, those delinquencies continue to be concentrated in the ethanol industry, with ethanol loans comprising $19.1 million of the $49.5 million of 90-day delinquencies as of December 31, 2009, compared to $49.2 million of $67.1 million as of December 31, 2008.  Other than the ethanol portfolio, the loans underlying the Corporation’s guarantees and commitments continued to perform well during 2009, with delinquencies on non-ethanol loans remaining near historically low levels consistent with the strength of the U.S. agricultural economy through the end of the year.  Farmer Mac anticipates that loan problems and reduced profitability in the protein and dairy sectors are likely to continue during much of 2010, which could lead to higher delinquencies, and a potential for provisions for losses and charge-offs.  However, Farmer Mac anticipates that those additional loan concerns should remain within the Corporation’s historical experience.  Farmer Mac will continue to closely monitor developments in industries and geographic areas experiencing stress.  As of December 31, 2009, there were no delinquencies or non-performing assets in Farmer Mac’s portfolio of rural utilities loans.    

For the year ended December 31, 2009, Farmer Mac’s effective net interest spread was 97 basis points ($49.8 million), compared to 106 basis points ($58.2 million) for the year ended December 31, 2008.  With the disruptions in the financial markets during late 2008, net interest spreads widened dramatically, and Farmer Mac’s short-term borrowing costs were significantly reduced, but in recent quarters, that net interest spread has returned to more historical norms.  Highlighting the return of capital market borrowing conditions to a more comparable year, during 2007 Farmer Mac’s net interest spread was 78 basis points ($40.6 million).

Farmer Mac uses core earnings, a non-GAAP disclosure, 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 changes in the fair values of financial derivatives and trading assets.  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/(loss) available to common stockholders to core earnings is presented in the following table.  Due to the significant other-than-temporary impairment losses recorded on investments in prior periods, that reconciliation is supplemented by a further adjustment for impairment losses on investments to assist in the comparison of results to prior periods.

    
    
    
    
                      Reconciliation of GAAP Net Income/(Loss)               
                  Available to Common Stockholders to Core Earnings          
                  -------------------------------------------------          
                                           Three Months Ended                
                                           ------------------                
                               December 31, 2009           December 31, 2008 
                               -----------------           ----------------- 
                                  (in thousands, except per share amounts)
                                             Per                       Per   
                                           Diluted                   Diluted 
                                            Share                     Share  
                                            -----                     -----  
    GAAP net income/(loss) available
     to common stockholders         $5,495    $0.53         $(61,118)  $(6.03)
                                                                          
    Less the effects of:                                                    
    Unrealized gains/ (losses) on                                             
     financial derivatives,                                                   
     net of tax                      9,110     0.88          (59,537)   (5.88)
    Unrealized gains/ (losses) on                                             
     trading assets, net of tax     (8,731)   (0.85)           7,166     0.71 
    Net effects of settlements on                                             
     agency forward contracts, net                                            
     of tax                           (255)   (0.02)              25        - 
                                    ------    -----          -------   ------ 
    Core earnings                   $5,371    $0.52          $(8,772)  $(0.86)
                                    ------    -----          -------   ------ 
                                                                              
    Impairment losses on investments     -        -           (3,788)   (0.37)
                                                                              
                                    ------    -----          -------   ------ 
    Total                           $5,371    $0.52          $(4,984)  $(0.49)
                                    ------    -----          -------   ------ 
                                                                              
                                                                              
                                                                              
                                          Twelve Months Ended                 
                                          -------------------                 
                               December 31, 2009           December 31, 2008 
                               -----------------           ----------------- 
                                  (in thousands, except per share amounts)
                                             Per                       Per   
                                           Diluted                   Diluted 
                                            Share                     Share  
                                            -----                     -----  
    GAAP net income/(loss) available
     to common stockholders        $82,298    $8.04        $(154,080) $(15.40)
                                                                              
    Less the effects of:                                                      
    Unrealized gains/ (losses) on                                             
     financial derivatives,                                                   
     net of tax                     39,949     3.90          (66,027)   (6.60)
    Unrealized gains/ (losses) on                                             
     trading assets, net of tax     28,128     2.75           (6,915)   (0.69)
    Net effects of settlements on                                             
     agency forward contracts, net                                            
     of tax                         (1,927)   (0.19)             372     0.04 
                                   -------    -----         --------   ------ 
    Core earnings                  $16,148    $1.58         $(81,510)  $(8.15)
                                   -------    -----         --------   ------ 
                         
    Impairment losses on
     investments                    (3,994)   (0.39)        (106,240)  (10.62)
                                                                              
                                   -------    -----          -------    ----- 
    Total                          $20,142    $1.97          $24,730    $2.47 
                                   -------    -----          -------    ----- 
    

Farmer Mac also reported that the lawsuit that was filed in the United States District Court for the District of Columbia against Farmer Mac and certain of its present and former officers and directors on behalf of purchasers of the securities of the Corporation between March 15, 2007 and September 12, 2008 was dismissed on February 26, 2010.

More complete information on Farmer Mac’s performance for the quarter and year ended December 31, 2009 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 of debt financing to Farmer Mac and Farmer Mac II LLC upon 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 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 Form 10-K 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 2009 financial results and the Corporation’s Form 10-K for 2009 will be webcast on Farmer Mac’s website beginning at 11:00 a.m. eastern time on Wednesday, March 17, 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       
                           CONSOLIDATED BALANCE SHEETS                       
                                                                             
                                                          As of December 31,
                                                          ------------------
                                                           2009        2008 
                                                           ----        ---- 
                                                          (in thousands)     
    Assets:                                                                  
      Cash and cash equivalents                         $654,794    $278,412 
      Investment securities:                                                 
        Available-for-sale, at fair value              1,041,923   1,072,096 
        Trading, at fair value                            89,972     163,763 
                                                          ------     ------- 
          Total investment securities                  1,131,895   1,235,859 
                                                       ---------   --------- 
      Farmer Mac Guaranteed Securities:                                      
        Available-for-sale, at fair value              2,524,867   1,511,694 
        Trading, at fair value                           874,129     939,550 
                                                         -------     ------- 
          Total Farmer Mac Guaranteed Securities       3,398,996   2,451,244 
                                                       ---------   --------- 
      Loans:                                                                 
        Loans held for sale, at lower of cost or                             
         fair value                                      666,534      66,680 
        Loans held for investment, at amortized cost      93,478     718,845 
        Allowance for loan losses                         (6,292)    (10,929)
                                                          ------     ------- 
          Total loans, net of allowance                  753,720     774,596 
                                                         -------     ------- 
      Real estate owned, at lower of cost or fair value      739         606 
      Financial derivatives, at fair value                15,040      27,069 
      Interest receivable                                 67,178      73,058 
      Guarantee and commitment fees receivable            55,016      61,109 
      Deferred tax asset, net                             24,146      87,793 
      Prepaid expenses and other assets                   37,289     117,561 
                                                          ------     ------- 
          Total Assets                                $6,138,813  $5,107,307 
                                                      ----------  ---------- 
    Liabilities, Mezzanine Equity and Stockholders'
      Equity:                  
    Liabilities:                                                             
      Notes payable:                                                         
        Due within one year                           $3,662,898  $3,757,099 
        Due after one year                             1,908,713     887,999 
                                                       ---------     ------- 
          Total notes payable                          5,571,611   4,645,098 
      Financial derivatives, at fair value               107,367     181,183 
      Accrued interest payable                            39,562      40,470 
      Guarantee and commitment obligation                 48,526      54,954 
      Accounts payable and accrued expenses               23,445      20,532 
      Reserve for losses                                   7,895       5,506 
                                                           -----       ----- 
          Total Liabilities                            5,798,406   4,947,743 
                                                       ---------   --------- 
    Commitments and Contingencies                                   
    Mezzanine Equity:                                                        
      Series B redeemable preferred stock, par value
       $1,000, 150,000 shares authorized, issued and
       outstanding (redemption value $150,000,000)       144,216     144,216 
    Stockholders' Equity:                                                    
      Preferred stock:                                                       
        Series C, par value $1,000 per share, 100,000
         shares authorized, 57,578 and 9,200 issued and
         outstanding as of December 31, 2009 and 2008,
         respectively                                     57,578       9,200 
      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                                     8,611       8,601 
      Additional paid-in capital                          97,090      95,572 
      Accumulated other comprehensive income/(loss)        3,254     (47,412)
      Retained earnings/(accumulated deficit)             28,127     (52,144)
                                                          ------     ------- 
          Total Stockholders' Equity                     196,191      15,348 
                                                         -------      ------ 
          Total Liabilities, Mezzanine Equity and                            
           Stockholders' Equity                       $6,138,813  $5,107,307 
                                                      ----------  ---------- 
    
    
            FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES      
                      CONSOLIDATED STATEMENTS OF OPERATIONS                 
                                   (unaudited)                              
                                                                            
                                     For the Three Months    For the Year 
                                             Ended               Ended 
                                          December 31,       December 31,   
                                         --------------     --------------- 
                                         2009      2008     2009       2008 
                                         ----      ----     ----       ---- 
                                    (in thousands, except per share amounts)
    Interest income:                                                        
      Investments and cash                                                  
       equivalents                     $6,424   $16,417  $28,727   $113,722 
      Farmer Mac Guaranteed Securities 28,547    29,410  109,779     96,417 
      Loans                             9,791    10,364   37,987     45,556 
                                        -----    ------   ------     ------ 
          Total interest income        44,762    56,191  176,493    255,695 
      Total interest expense           21,992    31,095   90,585    166,980 
                                       ------    ------   ------    ------- 
          Net interest income          22,770    25,096   85,908     88,715 
      Provision for loan losses        (1,914)  (13,800)  (2,853)   (14,531)
                                       ------   -------   ------    ------- 
          Net interest income after                                         
           provision for loan losses   20,856    11,296   83,055     74,184 
                                       ------    ------   ------     ------ 
                                                                            
    Non-interest income/(loss):                                             
      Guarantee and commitment fees     8,319     7,807   31,805     28,381 
      Gains/(losses) on financial                                           
       derivatives                      5,791  (100,712)  21,297   (130,403)
      (Losses)/gains on trading                                             
       assets                         (13,434)   11,025   43,273    (10,639)
      Other-than-temporary                                                  
       impairment losses                    -    (3,788)  (3,994)  (106,240)
      Gains on sale of available-for-                                       
       sale investment securities         440       251    3,353        316 
      (Losses)/gains on sale of                                             
       loans and Farmer Mac                                                 
       Guaranteed Securities                -       (22)   1,581      1,509 
      Gains on repurchase of debt           -        24        -        864 
      Other income                        230        98    1,439      1,413 
                                          ---        --    -----      ----- 
          Non-interest income/(loss)    1,346   (85,317)  98,754   (214,799)
                                        -----   -------   ------   -------- 
                                                                            
    Non-interest expense:                                                   
      Compensation and employee                                             
       benefits                         3,190     3,939   13,683     15,266 
      General and administrative        2,835     3,540   11,167     11,871 
      Regulatory fees                     563       512    2,100      2,050 
      Real estate owned operating                                           
       costs, net                         145        14      353        116 
      Provision for losses                310     3,400    2,389      3,309 
                                          ---     -----    -----      ----- 
          Non-interest expense          7,043    11,405   29,692     32,612 
                                        -----    ------   ------     ------ 
          Income/(loss) before                                              
           income taxes                15,159   (85,426) 152,117   (173,227)
    Income tax expense/(benefit)        4,796   (26,327)  52,517    (22,864)
                                        -----   -------   ------    ------- 
          Net income/(loss)            10,363   (59,099)  99,600   (150,363)
    Preferred stock dividends          (4,868)   (2,019) (17,302)    (3,717)
                                       ------    ------  -------     ------ 
          Net income/(loss)                                                 
           available to common                                              
           stockholders                $5,495  $(61,118) $82,298  $(154,080)
                                       ------  --------  -------  --------- 
                                                                            
    Earnings/(loss) per common share
     and dividends:                         
          Basic earnings/(loss) per                                         
           common share                 $0.54    $(6.03)   $8.12    $(15.40)
          Diluted earnings/(loss)                                           
           per common share             $0.53    $(6.03)   $8.04    $(15.40)
          Common stock dividends per                                        
           common share                 $0.05     $0.10    $0.20      $0.40 

SOURCE Farmer Mac



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