-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SQLQcc2mXE5Q8GIo92yesf3yMQBrjnFHPjn+prKJeQvU8FgLe+VTjA4s30D1c+wE AXp8wTrc91j1KIZwKaYiCA== 0000845877-95-000006.txt : 20040503 0000845877-95-000006.hdr.sgml : 20040503 19950814141800 ACCESSION NUMBER: 0000845877-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950814 DATE AS OF CHANGE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERAL AGRICULTURAL MORTGAGE CORP CENTRAL INDEX KEY: 0000845877 STANDARD INDUSTRIAL CLASSIFICATION: FEDERAL & FEDERALLY-SPONSORED CREDIT AGENCIES [6111] IRS NUMBER: 521578738 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17440 FILM NUMBER: 95562977 BUSINESS ADDRESS: STREET 1: 1133 21ST STREET, N.W. STREET 2: STE 600 CITY: WASHINGTON STATE: DC ZIP: 20036 BUSINESS PHONE: 2028727700 MAIL ADDRESS: STREET 1: 1133 21ST STREET, N.W. STREET 2: SUITE 600 CITY: WASHINGTON STATE: DC ZIP: 20036 10-Q 1 FORM 10Q FOR SECOND QUARTER FORM 10Q FOR SECOND QUARTER As filed with the Securities and Exchange Commission on August 14, 1995 _______________________________________________________ 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 June 30, 1995. 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 (I.R.S. employer Identification of 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 August 14, 1995, there were 670,000 shares of Class A Voting Common Stock, 500,301 shares of Class B Voting Common Stock, and 1,170,301 shares of Class C Non-Voting Common Stock outstanding. PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements The following interim consolidated financial statements of the Federal Agricultural Mortgage Corporation (the "Corporation" or "Farmer Mac") have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Such interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted as permitted by such rules and regulations. Management believes that the disclosures are adequate to present fairly the consolidated financial position, consolidated results of operations and consolidated cash flows at the dates and for the periods presented. These condensed financial statements should be read in conjunction with the audited 1994 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 as of June 30, 1995, December 31, 1994 and June 30, 1994 is included herein. Consolidated Balance Sheets........................... 3 Consolidated Statements of Operations................. 4 Consolidated Statements of Cash Flows................. 5
FEDERAL AGRICULTURAL MORTGAGE CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) June 30, 1995 December 31, 1994 _____________ _________________ (unaudited) ASSETS: Cash and cash equivalents........ $ 161 $ 200 Interest receivable ............. 13,188 14,023 Guarantee fees receivable ....... 480 454 Mortgage payments receivable..... 4,255 1,196 Investments, net................. 30,739 78,218 Mortgage portfolio, net.......... 421,211 382,833 Office equipment, net............ 82 98 Prepaid expenses and other assets 163 216 TOTAL ASSETS......... $ 470,279 $ 477,238
LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Allowance for mortgage-backed securities sold............... $ 100 $ 81 Accounts payable and accrued expenses...................... 782 972 Accrued interest payable on Medium-Term Notes............. 7,873 7,450 Due within one year........... 162,611 168,307 Due after one year............ 287,275 288,209 TOTAL LIABILITIES.............. $ 458,641 $ 465,019 STOCKHOLDERS' EQUITY: Common stock: Class A Voting, $1 par value, no maximum authorization, 670,000 shares issued and outstanding.................. 670 670 Class B Voting, $1 par value, no maximum authorization, 500,301 shares issued and outstanding................... 500 500 Class C Non-Voting, $1 par value, no maximum authorization, 1,170,301 shares issued and outstanding. 1,170 1,170 Additional paid in capital..... 19,331 19,331 Unrealized gain on securities available for sale............ 11 -- Accumulated deficit............ (10,044) (9,452) TOTAL STOCKHOLDERS' EQUITY... 11,638 12,219 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $ 470,279 $ 477,238
See accompanying notes to consolidated financial statements.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Amounts) Three Months Ended June 30 Six Months Ended June 30 1995 1994 1995 1994 ___________ ___________ ___________ __________ (unaudited) (unaudited) (unaudited) (unaudited) INTEREST INCOME: Investments and cash equivalents............. $ 1,291 $ 1,168 $ 2,510 $ 2,339 Mortgage portfolio....... 7,317 6,770 14,127 13,395 TOTAL INTEREST INCOME... 8,608 7,938 16,637 15,734 INTEREST EXPENSE......... 8,243 7,551 16,005 15,188 NET INTEREST INCOME.... 365 387 632 546 OTHER INCOME: Guarantee fees.......... 286 258 594 525 Miscellaneous........... 55 65 71 122 TOTAL OTHER INCOME... 341 323 665 647 OTHER EXPENSES: Compensation and employee benefits...... 511 655 976 1,107 Professional fees....... 97 103 182 198 Insurance............... 51 37 108 72 Rent.................... 42 54 84 94 Regulatory fees......... 92 70 184 140 Board of Directors fees and meeting expenses.............. 96 86 175 158 Administrative......... 102 126 180 222 TOTAL OTHER EXPENSES.. 991 1,131 1,889 1,991 NET LOSS............... $ (285) $ (421) $ (592) $ (798) NET LOSS PER SHARE..... $(0.12) $ (0.18) $ (0.25) $ (0.34)
See accompanying notes to consolidated financial statements.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Six Months Ended June 30, 1995 June 30, 1994 _____________ _____________ (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Loss from Operations............. $ (592) $ (798) Adjustments to reconcile loss to net cash provided by operating activities: Amortization of premium on mortgage portfolio.............. 2,547 4,025 Depreciation and amortization.... 1,685 655 (Increase) decrease in guarantee fees receivable....... (26) 120 Decrease in interest receivable.. 835 2,236 Increase in mortgage payments receivable .................. .. (3,059) (1,510) Decrease in prepaid expenses and other assets................ 53 45 Amortization of debt issuance costs........................... 101 141 Decrease in accounts payable and accrued expenses............ (190) (109) Increase (decrease) in accrued interest payable on medium term notes...................... 423 (496) Provision for losses on Farmer Mac I Program............ 52 48 Net cash provided by operating activities...................... 1,829 4,357 CASH FLOWS FROM INVESTING ACTIVITIES: Mortgage purchases.............. (69,940) (30,275) Purchase of investments......... (412,360) (213,009) Proceeds from maturity of investments.................... 461,774 230,210 Proceeds from mortgage principal repayments........... 28,994 42,033 Purchases of office equipment... (5) (33) Net cash provided by investing activities..................... 8,463 28,926 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of Medium-Term Notes.............. 48,584 - Payments to redeem Medium-Term Notes.......................... (21,695) (42,370) Proceeds from issuance of Discount Notes............. 904,280 322,840 Discount Notes redeemed......... (941,500) (314,000) Net cash used by financing activities.................... (10,331) (33,530) Net decrease in cash and cash equivalents................... (39) (247) Cash and cash equivalents at beginning of period......... 200 1,081 Cash and cash equivalents at end of period.............. $ 161 $ 834 Supplemental disclosures of cash flow information: Cash paid during the six-month period for: Interest.................. $11,882 $ 13,690
See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ACCOUNTING POLICIES (a) Principles of Consolidation Financial information at and for the six and three months ended June 30, 1995 is consolidated to include the accounts of Farmer Mac and its two wholly owned subsidiaries, Farmer Mac Mortgage Securities Corporation and Farmer Mac Acceptance Corporation. All material intercompany transactions have been eliminated in consolidation. (b) Reclassifications Certain reclassifications of the 1994 information were made to conform with the 1995 presentation. Note 2. OFF-BALANCE SHEET FARMER MAC GUARANTEED SECURITIES. Farmer Mac is a party to transactions involving financial instruments with off-balance sheet risk. These transactions include guarantees by Farmer Mac of securities not held in its portfolio. Farmer Mac issues guarantees in the normal course of business to fulfill its statutory purpose of increasing liquidity for agricultural mortgage lenders. Farmer Mac guarantees the timely payment of principal and interest on securities issued under the Farmer Mac I and Farmer Mac II Programs. The following table sets forth the outstanding principal balances of Farmer Mac Guaranteed Securities issued under the Farmer Mac I and Farmer Mac II Programs and not held in its portfolio.
June 30, 1995 June 30, 1994 _____________ _____________ (In Thousands) Farmer Mac I ........... $ 109,859 $ 75,911 Farmer Mac II.... ...... $ 4,934 $ 6,240
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES Farmer Mac's primary sources of liquidity are issuances of debt obligations, and principal and interest payments received on mortgages underlying securities purchased by Farmer Mac under the Farmer Mac I and Farmer Mac II Programs. Farmer Mac's Board has authorized the issuance of up to $1.5 billion of Discount Notes and Medium-Term Notes. Funds from the borrowings may be used in the Farmer Mac I and Farmer Mac II Programs to cover transaction costs, guarantee payments and the costs of purchasing Farmer Mac Guaranteed Securities and Guaranteed Portions issued in the Farmer Mac I and Farmer Mac II Programs and to retire existing Notes. Funds from the borrowings also may be used for liquidity purposes. At June 30, 1995, Farmer Mac had $449.9 million of Discount Notes and Medium-Term Notes (net of unamortized debt issuance costs, discounts and premiums) outstanding, a $6.6 million decrease from December 31, 1994. During the first six months of 1995, Farmer Mac issued $904.3 million of Discount Notes and $48.6 million of Medium-Term Notes and redeemed $941.5 million of Discount Notes and $21.7 million of Medium Term Notes. The $47.4 million decrease in investments from December 31, 1994 to June 30, 1995 resulted from the maturation of the liquidity portfolio investments, comprised of short-term commercial paper, certificates of deposit, and U.S. agency securities, which were funded by short-term Discount Notes of like maturity. The $38.4 million net increase in the mortgage portfolio is largely attributable to the purchase of $36.8 million of Farmer Mac I Securities, $23.5 million of Farmer Mac II Securities and Guaranteed Portions, and $29.0 million in principal payments and prepayments received on the mortgage portfolio since December 31, 1994. Proceeds of any future Note issuances are expected to be used by the Corporation primarily to fund purchases of Farmer Mac Guaranteed Securities and Guaranteed Portions under the Farmer Mac I and Farmer Mac II Programs and to maintain Farmer Mac's liquidity position. At June 30, 1995, Farmer Mac's total loss allowance was $346 thousand. The mortgage portfolio is shown net of its applicable allowance of $246 thousand at June 30, 1995, representing an increase of $33 thousand from year-end 1994; the allowance for Farmer Mac Guaranteed Securities not held by Farmer Mac was $100 thousand at June 30, 1995, representing an increase of $19 thousand from year-end 1994. Future additions to this allowance will be charged to earnings and the amounts in the allowance account will be used to cover payments of claims under Farmer Mac guarantees. Farmer Mac considers the amounts to be adequate to cover its exposure to guarantee payments in the Farmer Mac I Program. Before Farmer Mac is required to make a guarantee payment on Farmer Mac I Securities, full recourse must be taken against a reserve or subordinated interest initially established in an amount equal to at least ten percent (10%) of the original pool balance. At June 30, 1995, a total of eight loans aggregating $1.5 million were 90 days or more past due, three loans totaling $435 thousand were in foreclosure and title to one loan with an outstanding principal balance of $615 thousand had been acquired by the trust in the Farmer Mac I Program. The twelve loans combined represent 0.64% of the aggregate principal amount of outstanding Farmer Mac I Securities at June 30, 1995. Management believes that no losses will be incurred by Farmer Mac as a result of the loans in foreclosure or the real estate owned by the trust. No loss allowance has been made specifically for the Farmer Mac II Program because the Guaranteed Portions are backed by the full faith and credit of the United States and are not exposed to credit losses. At June 30, 1995, Farmer Mac's regulatory required minimum capital was $4.1 million and its actual capital level was $11.6 million. At December 31, 1994, Farmer Mac's regulatory required minimum capital was $4.8 million, and its actual capital level was $12.2 million. Beginning in December 1996, higher statutory minimum capital requirements are scheduled to become effective, significantly increasing the required amount of Farmer Mac's regulatory capital. If those requirements had been in effect at June 30, 1995, Farmer Mac's actual capital would have been $636 thousand less than the total minimum capital required. The Board has authorized and management is actively pursuing a legislative initiative to obtain revisions to the Farmer Mac charter. That initiative, if successful, would, among other things, delay beyond 1996 the implementation of the higher regulatory capital requirements. Farmer Mac's proposed legislation, which was considered by the Senate Agriculture Committee at a meeting on July 18, 1995, has been included by the Committee in a draft bill entitled "The Farm Credit Improvements Act of 1995." However, that bill has not been reported to the full Senate. It is not expected that final Committee action on that bill will be taken until at least September. In the House of Representatives, the Farmer Mac legislation was introduced on July 27, 1995 in a bill entitled the "Farmer Mac Reform Act of 1995" (H.R. 2130). Despite those developments, there is no assurance that either bill be enacted by Congress or that, if enacted, either bill ultimately will include any or all of the revisions Farmer Mac seeks and not include provisions adverse to Farmer Mac. In addition, there can be no assurance that if legislation is enacted, the volume of any business generated under a revised charter will result in profitability for Farmer Mac or that Farmer Mac will be able to raise capital, either from retained earnings or from external financing sources, such as an offering of common or preferred stock, sufficient to allow Farmer Mac to comply with future capital requirements. If Farmer Mac were unable to satisfy the higher capital requirements, whenever they become effective, the Director of the Office of Secondary Market Oversight, Farmer Mac's regulator, would be required to take the mandatory supervisory measures and authorized to take the optional supervisory measures previously reported, depending upon the capital level in which Farmer Mac is then classified. The imposition of supervisory measures could have a material adverse impact on Farmer Mac's results of operations and its ability to raise capital, borrow or engage in transactions with third parties; thus, such measures could seriously impair Farmer Mac's ability to comply with higher capital standards. Ultimately, if a conservator were to be appointed for Farmer Mac, stockholders could lose some or all of the value of their equity investment in Farmer Mac, and creditors could experience a reduced level of recovery on their claims. In the opinion of management, Farmer Mac has sufficient liquidity and capital for the next twelve months. RESULTS OF OPERATIONS General. Farmer Mac reported a net loss for the six months ended June 30, 1995 of $592 thousand, a decrease of $206 thousand from the $798 thousand loss reported for the six months ended June 30, 1994. The decrease in loss is attributable to both an increase in the net interest spread on interest-earning assets and a reduction in other expenses. The net spread on Farmer Mac's interest-earning assets over its interest-bearing liabilities increased 7 basis points (0.07%) as the average rate on Farmer Mac'interest-earning assets increased more than the interest rate on Farmer Mac's interest-bearing liabilities for the comparable periods. Other expenses declined $102 thousand, largely as a result of the decline in compensation and employee benefits and administrative expenses, which were partially offset by increases in insurance expense and regulatory fees. For the three months ended June 30, 1995, Farmer Mac incurred a loss of $285 thousand, which represents a $136 thousand decrease in Farmer Mac's loss as compared to the three months ended June 30, 1994. The decrease in loss is largely attributable to the reduction in other expenses, specifically compensation and employee benefits, relative to the three months ended June 30, 1994. Improvements in Farmer Mac's operating results will depend upon the volume of new guarantee transactions. While the Agricultural Real Estate and Farmer Mac II Programs have generated interest income and guarantee fee income, the volume of guarantee transactions has not been sufficient to generate income in excess of operating expenses, which has required Farmer Mac to continue to use its capital to fund operations. The use of capital to fund operations has continued to reduce Farmer Mac's stockholders' equity, which has decreased $581 thousand from December 31, 1994 to June 30, 1995. A number of factors have continued to constrain participation in Farmer Mac's programs, and cause its core business activities to remain unprofitable. Those factors include: the excess liquidity of many agricultural lenders; the attractiveness of loans (otherwise qualified under the Farmer Mac programs) as investments; the disinclination of lenders to offer, and the lack of borrower demand for, long-term, fixed rate agricultural real estate loans as a result of the higher profitability and lower interest rates associated with short-term lending; Farmer Mac's inability to control the pooling process, particularly, the pooler's mix of loan products and rates, marketing activities, and loan securitization decisions; and the unfavorable capital treatment afforded banks and Farm Credit institutions holding subordinated securities created in Farmer Mac transactions. With regard to the Prudential Securities/Equitable Agri-Business open window program, Farmer Mac has been informed by Equitable that it continues to have discussions with prospective institutions regarding the continuation of that program following the withdrawal of Prudential as pooler, but that it has not yet contracted with one. The final transaction under that program closed on May 12, 1995 and involved the issuance of approximately $37 million of Farmer Mac I Securities. With regard to the joint Fannie Mae, AgFirst (formerly, the Farm Credit Bank of Columbia) and Farmer Mac rural housing initiative, a press release announcing the program was issued by Fannie Mae on June 20, 1995. Since that time, AgFirst has been approving sellers for participation in the program and has informed Farmer Mac that it will be prepared to accept loans for registration and issue rate locks beginning August 16, 1995. The Western Farm Credit Bank, in accordance with the terms of its strategic alliance with Farmer Mac, has finalized the program documentation for its open window program and formed its nationwide network of originators and sellers. Western publicly announced the program on July 5, 1995 and approved its first loans for purchase in mid-July. While management believes that each of these programs, if continued or commenced, as the case may be, will be successful, there is no assurance that they will generate sufficient volume to result in any Farmer Mac guarantee transactions. Farmer Mac's future profitability will be affected not only by guarantee volume but also by any payments Farmer Mac must make on its guarantees; payments it must make on its Notes; the income it earns on its investment securities, its mortgage portfolio and other funds it is holding; and its administrative expenses. Losses, if any, on guarantees will be affected by many circumstances, including agricultural growing conditions, agricultural market conditions, changes in government agricultural support policies and the general economy. The primary sources of funding for the payment of claims made under guarantees are the fees Farmer Mac charges for providing its guarantees, together with Farmer Mac's loss allowance, invested capital and the proceeds of any other debt issuances. Even if Farmer Mac's legislative initiative is successful and Congress revises the Farmer Mac charter, Farmer Mac's future will still be dependent upon continued, more effective and significantly increased utilization of its programs by its Class A and Class B stockholders. Average Balances, Income and Expense, Yields and Rates. The following table presents, for the periods indicated, information regarding interest income on average interest-earning assets and related yields, as well as interest expense on average interest-bearing liabilities and related rates paid. The average balances were calculated by averaging month-end balances.
Six Months Ended June 30, _____________________________________________________ 1995 1994 _________________________ ___________________________ (Dollars in Thousands) Average Income/ Average Average Income/ Average Balances Expense Rate Balances Expense Rate Assets Interest-earning assets: Mortgage portfolio..... $390,038 $14,127 7.24% $393,797 $13,395 6.80% Investments and cash equivalents.......... 89,020 2,510 5.64% 101,593 2,339 4.60% Total interest-earning assets............... 479,058 16,637 6.95% 495,390 15,734 6.35% Other assets.......... 11,969 11,899 $491,027 $507,289 Liabilities and Stockholders' Equity Interest-bearing liabilities: Debentures, notes and bonds, net......... $471,898 $16,005 6.78% $486,375 $15,188 6.25% Other liabilities......... 7,203 7,636 Stockholders' equity...... 11,926 13,278 $491,027 $507,289 Net interest income/spread. $ 632 .17% $ 546 0.10% Net yield on interest-earning assets .26% 0.22%
Rate/Volume Analysis. The table below sets forth certain information regarding the changes in the components of Farmer Mac's net interest income for the periods indicated. For each category, information is provided on changes attributable to (a) changes in volume (change in volume multiplied by old rate); (b) changes in rate (change in rate multiplied by old volume); and (c) the total. Combined rate/volume variances, a third element of the calculation, are allocated based on their relative size.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994 __________________________________________ Increase or (Decrease) Due to Rate Volume Total (in thousands) Income from interest- earning assets: Mortgage portfolio............. $ 858 $ (126) $ 732 Investments.................... 381 (210) 171 Total income from interest- earning assets................ 1,239 (336) 903 Expense on interest- bearing liabilities.......... 1,248 (431) 817 Change in net interest income...................... $ (9) $ 95 $ 86
PERIOD ENDED JUNE 30, 1995 COMPARED TO PERIOD ENDED JUNE 30, 1994 Net Interest Income. Net interest income totaled $632 thousand for the six months ended June 30, 1995, an $86 thousand increase from the six months ended June 30, 1994. The increase in net interest income is attributable to a 7 basis point (0.07%) increase in the net interest spread, which more than offset the decline in the average balances of interest-earning assets for the comparable periods. Net interest income totaled $365 thousand for the three months ended June 30, 1995, a $22 thousand decrease from the three months ended June 30, 1994. The decrease in net interest income resulted from a 53 basis point (0.53%) increase in the cost of interest- bearing liabilities, which more than offset the increase in the average rate and the average balance of interest-earning assets. Interest Income. Interest income totaled $16.6 million and $8.6 million for the six and three months ended June 30, 1995, an increase of $903 thousand and $670 thousand as compared to the six and three months ended June 30, 1994. The $903 thousand increase is attributable to the increase in the average rate of interest- earning assets which more than offset the decline in the average balances of interest-earning assets. The increase in the average rate of interest-earning assets is attributable to the overall increase in the rate of Guaranteed Portions and securities issued under the Farmer Mac II Program, a result of rate adjustments in January and April 1995 on variable rate product in the Farmer Mac II Program, and the increased level of yield maintenance income over the accelerated level of premium amortization. During the six months ended June 30, 1995, prepayments of mortgage loans underlying the Farmer Mac I Securities totaled $12.0 million, as compared to $19.8 million for the six months ended June 30, 1994. As a result of these prepayments, Farmer Mac recognized $482 thousand of interest income from yield maintenance payments in the six months ended June 30, 1995, as compared to $1.3 million in the six months ended June 30, 1994, and accelerated the level of premium amortization by $294 thousand in the six months ended June 30, 1995, as compared to $1.5 million in the six months ended June 30, 1994. The $670 thousand increase in interest income from the three months ended June 30, 1994 to the three months ended June 30, 1995 is largely attributable to the increase in the average balance of the mortgage portfolio, a result of the purchase of $36.8 million of Farmer Mac I Securities and $15.5 million of Farmer Mac II Securities during the 1995 second quarter. Interest Expense. Interest expense for the six and three months ended June 30, 1995 amounted to $16.0 million and $8.2 million, respectively, an increase of $817 thousand and $692 thousand from the six and three months ended June 30, 1994. The $817 thousand increase in interest expense is attributable to the 53 basis point (0.53%) increase in the average cost of interest-bearing liabilities, a result of the increase in average interest rates from June 30, 1994 to June 30, 1995, which more than offset the decline in the average balances of outstanding debt. Other Income. Other income totaled $665 thousand and $341 thousand for the six and three months ended June 30, 1995, an increase of $18 thousand from the six and three months ended June 30, 1994. Guarantee fee income, the principal component of other income, increased $69 thousand and $28 thousand from the six and three months ended June 30, 1994 to the six and three months ended June 30, 1995. The increase in guarantee fee income is attributable to the increased level of guarantee volume for the comparable periods. As of June 30, 1995, Farmer Mac had $507.0 million of guaranteed transactions outstanding as compared to $446.2 million as of June 30, 1994. Miscellaneous income, composed primarily of transaction fees generated from the Farmer Mac II Program, decreased $51 thousand and $10 thousand from the six and three months ended June 30, 1994 to the six and three months ended June 30, 1995. The decrease in transaction fees resulted from the lower level of issuances of Farmer Mac II Securities and purchases of Guaranteed Portions under the Farmer Mac II Program during the six and three months ended June 30, 1995 as compared to the six and three months ended June 30, 1994. Farmer Mac issued $20.0 million of Farmer Mac II Securities and purchased $3.5 million of Guaranteed Portions for the six months ended June 30, 1995, as compared to the issuance of $31.2 million of Farmer Mac II Securities for the six months ended June 30, 1994. For the three months ended June 30, 1995, Farmer Mac issued $15.5 million of Farmer Mac II Securities as compared to $17.3 million for the three months ended June 30, 1994. Other Expenses. Other expenses totaled $1.9 million and $991 thousand for the six and three months ended June 30, 1995, a decrease of $102 thousand and $140 thousand from the six and three months ended June 30, 1994. The $102 thousand reduction in other expenses is attributable to the decrease in compensation and employee benefits as well as administrative expenses, which were partially offset by the increases in insurance, regulatory fees and Board of Directors fees and meeting expenses. Compensation and employee benefits decreased $131 thousand from the six months ended June 30, 1994 to the six months ended June 30, 1995, largely a result of the decrease in the amount of bonuses paid to management during the comparable periods. Administrative expenses decreased $42 thousand from the six months ended June 30, 1994 to the six months ended June 30, 1995, a result of a reduction in travel related expenses and advertising costs, both of which resulted from less pooler activity. Insurance expense increased $36 thousand from the six months ended June 30, 1994 to the six months ended June 30, 1995, a result of an increase in the amount of Directors and Officers Liability insurance coverage. Regulatory fees increased $44 thousand from the six months ended June 30, 1994 to the six months ended June 30, 1995, a result of the increase in Farmer Mac's assessment by the Farm Credit Administration from $326 thousand for the 1993-94 fiscal year (subsequently reduced by a $34 thousand refund from the 1992-93 fiscal year) to $368 thousand for the 1994-95 fiscal year. Board of Directors fees and meeting expenses increased $17 thousand from the six months ended June 30, 1994 to the six months ended June 30, 1995, a result of an additional meeting of the Board of Directors in 1995 as compared to 1994. The $140 thousand decrease in other expenses from the three months ended June 30, 1994 to the three months ended June 30, 1995 is largely attributable to the $144 thousand decrease in compensation and employee benefits which resulted from a decrease in the amount of bonuses paid to management in 1995 as compared to 1994. Dividends. Farmer Mac has not paid and does not expect to pay dividends on its common stock in the near future. Dividends on the common stock are subject to determination and declaration by the Board. The Board has adopted a policy stating that no dividends will be paid on Farmer Mac Voting or Non-Voting Common Stock until such time as Farmer Mac's stockholders' equity is at least equal to $22 million (the amount of gross proceeds raised by Farmer Mac in its initial common stock offering). Thereafter, up to 50% of accumulated net earnings may be paid out as dividends, provided that stockholders' equity remains at least equal to $22 million. No preference between holders of the Voting Common Stock and Class C Non-Voting Common Stock has been established relating to dividends. The ratio of dividends paid on each share of Class C Non-Voting Common Stock to each share of Voting Common Stock, however, will be three-to-one. If dividends are to be paid to holders of Voting Common Stock, such per share dividends to holders of Class A and Class B Voting Common Stock will be equal. PART II - OTHER INFORMATION Item 1. Legal Proceedings. The registrant is not a party to any pending legal proceedings. Item 2. Changes in Securities. Not applicable. Item 3. Defaults upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Stockholders. (a) Farmer Mac's Annual Meeting of Stockholders was held on June 8, 1995. (b) Not Applicable. (c) (1) Election of Directors - Class A Nominees
Number of Shares For Withheld Brandon 404,541 8,800 Brown 406,391 6,950 Dean 406,391 6,950 Holthus 404,391 8,950 Nolan 399,491 13,850
- Class B Nominees
Number of Shares For Withheld Cirona 494,101 200 Mainer 494,101 200 McCarthy 494,101 200 Raines 494,101 200 Rhodes 494,101 200
(2) Selection of Independent Auditors Class A Stockholders:
Number of Shares For 409,541 Against 2,400 Abstain 1,400
Class B Stockholders:
Number of Shares For 494,201 Against 100 Abstain 0
(d) Not Applicable Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Description * 3.1 - Title VII of Public Law 100-233 (Form 10 filed January 24, 1989). * 3.2 - Section 1839 of the Food, Agriculture, Conservation and Trade Act of 1990 (P.L. 101-624) (Form 10-K filed April 1, 1991). * 3.3 - Section 503 of the Food, Agriculture, Conservation, and Trade Act Amendments of 1991 (P.L. 102-237) (Form 10-K filed March 30, 1992). * 3.4 - Amended and restated Bylaws of the Registrant (Form 10-Q filed May 15, 1995). +* 10.1 - Stock Option Plan (Previously filed as Exhibit 19.1 to Form 10-Q filed August 14, 1992). __________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. +* 10.1.1 - Amendment No. 1 to Stock Option Plan (Previously filed as Exhibit 10.2 to Form 10-Q filed August 16, 1993). +* 10.2 - 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 January 10, 1991 to Employment Agreement 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 June 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 June 1, 1994 to Employment Contract between Henry D. Edelman and the Registrant (Previously filed as Exhibit 10.6 to Form 10-Q filed August 15, 1994). +* 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 June 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 June 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). __________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. +* 10.3.5 - Amendment No. 5 dated as of June 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). +** 10.3.6 - Amendment No. 6 dated as of June 1, 1995 to Employment Contract between Nancy E. Corsiglia and the Registrant. +* 10.4 - Employment Agreement dated June 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 June 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 June 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 June 1, 1994 to Employment Contract between Thomas R. Clark and the Registrant (Previously filed as Exhibit 10.17 to Form 10-Q filed August 15, 1994). +**10.4.5 - Amendment No. 5 dated as of June 1, 1995 to Employment Contract between Thomas R. Clark and the Registrant. +* 10.5 - Employment Agreement dated April 29, 1994 between Charles M. Lewis and the Registrant (Previously filed as Exhibit 10.18 to Form 10-Q filed August 15, 1994). +**10.5.1 - Amendment No. 1 dated as of June 1, 1995 to Employment Contract between Charles M. Lewis and the Registrant. __________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. * 10.6 - Employment Agreement dated October 7, 1991 between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.16 to Form 10-K filed March 30, 1992). +* 10.6.1 - Amendment to Employment Contract dated as of June 1, 1993 between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.17 to Form 10-Q filed November 15, 1993). +* 10.6.2 - Amendment No. 2 dated June 1, 1993 to Employment Contract between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.21 to Form 10-K filed March 30, 1994). +* 10.6.3 - Amendment No. 3 dated June 1, 1994 to Employment Contract between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.22 to Form 10-K filed August 15, 1994). +**10.6.4 - Amendment No. 4 dated as of June 1, 1995 to Employment Contract between Michael T. Bennett and the Registrant. +* 10.7 - Employment Agreement dated March 15, 1993 between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.17 to Form 10-Q filed May 17, 1993). +* 10.7.1 - Amendment to Employment Contract dated as of June 1, 1993 between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.19 to Form 10-Q filed November 15, 1993). +* 10.7.2 - Amendment No. 2 dated June 1, 1993 to Employment Contract between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.25 to Form 10-K filed March 30, 1994). +* 10.7.3 - Amendment No. 3 dated as of June 1, 1994 to Employment Contract between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.26 to Form 10-Q filed August 15, 1994). __________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. +** 10.7.4 - Amendment No. 4 dated as of June 1, 1995 to Employment Contract between Christopher A. Dunn and the Registrant. * 10.8 - 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). * 10.9 - Strategic Alliance Agreement, dated November 15, 1994 between Western Farm Credit Bank and the Registrant, as amended January 1, 1995 (Previously filed as Exhibit 10.28 to Form 10-K filed March 31, 1995). 21 - Subsidiaries. 21.1 - Farmer Mac Mortgage Securities Corporation, a Delaware Corporation. 21.2 - Farmer Mac Acceptance Corporation, a Delaware corporation. * 99.1 Map of U.S. Department of Agriculture (USDA) Regions (Previously filed as Exhibit 1.1 to Form 10-K filed April 1, 1991). (b) Reports on Form 8-K. The Registrant has not filed any reports on Form 8-K during the quarter ended June 30, 1995. __________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. 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 August 14, 1995 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) Securities and Exchange Commission Washington, D.C. 20549 Exhibits to Form 10-Q under The Securities Exchange Act of 1934 Federal Agricultural Mortgage Corporation Exhibit Description +** 10.3.6 Amendment No. 6 dated as of June 1, 1995 to Employment Contract between Nancy E. Corsiglia and the Registrant +** 10.4.5 Amendment No. 5 dated as of June 1, 1995 to Employment Contract between Thomas R. Clark and the Registrant. +** 10.5.1 Amendment No. 1 dated as of June 1, 1995 to Employment Contract between Charles M. Lewis and the Registrant. +** 10.6.4 Amendment No. 4 dated as of June 1, 1995 to Employment Contract between Michael T. Bennett and the Registrant. +** 10.7.4 Amendment No. 4 dated as of June 1, 1995 to Employment Contract between Christopher A. Dunn and the Registrant. __________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. EXHIBIT 10.3.6 AMENDMENT NO. 6 TO EMPLOYMENT CONTRACT AGREED, as of the 1st day of June 1995, between the Federal Agricultural Mortgage Corporation (FAMC) and Nancy E. Corsiglia (the Employee), that the existing employment contract between the parties hereto, dated May 11, 1989, as amended by letter dated December 14, 1989, Employment Agreement Amendment No. 2 dated February 14, 1991, Amendment to Employment Agreement dated as of June 1, 1993, Amendment No. 4 to Employment Contract dated as of June 1, 1993 and Amendment No. 5 to Employment Contract dated as June 1, 1994 (collectively, the Agreement), be and hereby is amended as follows: Sections 3 (a) of the Agreement is replaced in its entirety with the following new section: 3 (a). Base Salary. You will be paid a base salary (the Base Salary) during the Term of One Hundred Fifty-Two Thousand Two Hundred and Fifty Dollars ($152,250) per year, payable in arrears on a bi-weekly basis; and As amended hereby, the Agreement remains in full force and effect. Federal Agricultural Mortgage Corporation Employee By: /s/ Henry D. Edelman /s/ Nancy E. Corsiglia Title: President EXHIBIT 10.4.5 AMENDMENT NO. 5 TO EMPLOYMENT CONTRACT AGREED, as of the 1st day of June 1995, between the Federal Agricultural Mortgage Corporation (FAMC) and Thomas R. Clark (the Employee), that theexisting employment contract between the parties hereto, dated June 13,1989, as amended by Employment Agreement Amendment No. 1 dated February 14,1991 and Amendment to Employment Contract dated as of June 1, 1993, Amendment No. 3 to Employment Contract dated as of June 1, 1993 and Amendment No. 4 to Employment Contract dated as of June 1, 1994 (collectively, the Agreement), be and hereby is amended as follows: Section 3 (a) of the Agreement is replaced in its entirety with the following new section: 3 (a). Base Salary. You will be paid a base salary during the Term of One Hundred Fifty-Two Thousand Two Hundred and Fifty Dollars ($152,250) per year, payable in arrears on a bi-weekly basis; and As amended hereby, the Agreement remains in full force and effect. Federal Agricultural Mortgage Corporation Employee By: /s/ Henry D. Edelman /s/ Thomas R. Clark Title: President EXHIBIT 10.5.1 AMENDMENT NO. 1 TO EMPLOYMENT CONTRACT AGREED, as of the 1st day of June 1995, between the Federal Agricultural Mortgage Corporation (FAMC) and Charles M. Lewis (the employee), that the existing employment contract between the parties hereto, dated April 29, 1994 (the Agreement), be and hereby is amended as follows: Sections 1, 3 (a) and 7 (a) (iii) of the Agreement are replaced in their entirety with the following new sections: 1. Term. The term of this Agreement shall be from June 1, 1995 to June 1, 1996. 3 (a). Base Salary. You will be paid a base salary (the Base Salary) during the Term of Seventy-Eight Thousand Seven Hundred and Fifty Dollars ($78,750) per year, payable in arrears on a bi-weekly basis. 7 (a) (3). FAMC may terminate your employment without "cause" at any time. Such termination shall become effective on June 1, 1996. As amended hereby, the Agreement remains in full force and effect. Federal Agricultural Mortgage Corporation Employee By: /s/ Henry D. Edelman /s/ Charles M. Lewis Title: President EXHIBIT 10.6.4 AMENDMENT NO. 4 TO EMPLOYMENT CONTRACT AGREED, as of the 1st day of June 1995, between the Federal Agricultural Mortgage Corporation (FAMC) and Michael T. Bennett (the employee), that the existing employment contract between the parties hereto, dated October 7, 1991, as amended by Amendment to Employment Contract dated as of June 1, 1993, Amendment No. 2 to Employment Contract dated as of January 6, 1994 and Amendment No. 3 dated as of June 1, 1994 (collectively, the Agreement), be and hereby is amended as follows: Sections 1, 3 (a) and 7 (a) (3) of the Agreement are replaced in their entirety with the following new sections: 1. Term. The Term of this Agreement shall be from June 1, 1995 to June 1, 1997. 3 (a). Base Salary. You will be paid a base salary (the Base Salary) during the Term of One Hundred Fifty-Seven Thousand Five Hundred Dollars ($157,500) per year, payable in arrears on a bi-weekly basis; and 7 (a) (3). Farmer Mac may terminate your employment without "cause" at any time. Such termination shall become effective on June 1, 1997. As amended hereby, the Agreement remains in full force and effect. Federal Agricultural Mortgage Corporation Employee By: /s/Henry D. Edelman /s/ Michael T. Bennett Title: President EXHIBIT 10.7.4 AMENDMENT NO. 4 TO EMPLOYMENT CONTRACT AGREED, as of the 1st day of June 1995, between the Federal Agricultural Mortgage Corporation (FAMC) and Christopher A. Dunn (the employee), that the existing employment contract between the parties hereto, dated March 15, 1993, as amended by Amendment to Employment Contract dated as of June 1, 1993 and Amendment No. 2 to Employment Contract dated as June 1, 1993 and Amendment No. 3 to Employment Contract dated as of June 1, 1994 (collectively, the Agreement), be and hereby is amended as follows: Section 3 (a) of the Agreement is replaced in its entirety with the following new section: 3 (a). Base Salary. You will be paid a base salary (the Base Salary) during the Term of One Hundred-Forty Four Thousand Three Hundred and Seventy-Five Dollars ($144,375) per year, payable in arrears on a bi-weekly basis; and As amended hereby, the Agreement remains in full force and effect. Federal Agricultural Mortgage Corporation Employee By: /s/ Henry D. Edelman /s/ Christopher A. Dunn Title: President EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 6-MOS DEC-31-1994 DEC-31-1994 JUN-30-1995 JUN-30-1995 161 161 451,950 451,950 17,923 17,923 0 0 0 0 470,034 470,034 82 82 0 0 470,279 470,279 171,366 171,366 287,275 287,275 2,340 2,340 0 0 0 0 9,298 9,298 470,279 470,279 8,949 17,302 8,949 17,302 0 0 0 0 991 1,889 0 0 8,243 16,005 (285) (592) 0 0 (285) (592) 0 0 0 0 0 0 (285) (592) (.12) (.25) (.12) (.25)
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