WASHINGTON, May 10, 2017 /PRNewswire/ -- The Federal
Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A)
today announced its results for the fiscal quarter ended
March 31, 2017, which included
$445 million in net new business
volume growth that brought total outstanding business volume to
$17.8 billion as of March 31, 2017. Farmer Mac's net income
attributable to common stockholders for first quarter 2017 was
$18.6 million ($1.73 per diluted common share), compared to
$25.5 million ($2.38 per diluted common share) in fourth
quarter 2016 and $10.3 million
($0.94 per diluted common share) in
first quarter 2016. Farmer Mac's first quarter 2017 core
earnings, a non-GAAP measure, were $15.6 million ($1.45 per diluted common share), compared to
$13.9 million ($1.30 per diluted common share) in fourth quarter
2016 and $12.4 million ($1.12 per diluted common share) in first quarter
2016.
"Our first quarter 2017 results reflect a continuation of the
favorable trends that developed over the course of last year," said
President and Chief Executive Officer Tim
Buzby. "The strength of our business model can be seen
in our financial results for first quarter 2017, as we grew
outstanding business volume by $445
million and core earnings per share by 29 percent
year-over-year. Our credit quality remains favorable and
within our expectations despite showing signs of the expected
normalization related to the current agricultural credit
cycle. Our capital base is strong and growing, even with the
significant dividend increases of the last two years and our
continued growth in business volume. We are also proud of the
other ways we have positioned Farmer Mac for continued success in
the future, such as expanding our human and technology
resources. These initiatives, coupled with our healthy
capital base, will allow us to better grow our business and deliver
upon our mission throughout agricultural economic cycles,
especially in today's more challenging environment."
Earnings
Farmer Mac's net income attributable to common stockholders for
first quarter 2017 was $18.6 million ($1.73 per diluted common share), compared to
$10.3 million ($0.94 per diluted common share) for first quarter
2016. The $8.3 million increase
compared to first quarter 2016 was driven by the effects of fair
value changes on financial derivatives and hedged assets, which was
a $3.1 million after-tax gain in
first quarter 2017 compared to a $1.9
million after-tax loss in first quarter 2016. Also
contributing to the year-over-year increase was an increase in net
interest income of $2.2 million,
after tax, and $0.7 million of tax
benefits from the vesting of restricted stock and the exercise of
stock appreciation rights ("SARs"), both of which were accounted
for under new accounting guidance that became effective in first
quarter 2017.
Core earnings in first quarter 2017 were $15.6 million ($1.45 per diluted common share), compared to
$13.9 million ($1.30 per diluted common share) in fourth quarter
2016 and $12.4 million ($1.12 per diluted common share) in first quarter
2016.
The $1.7 million sequential
increase in core earnings was primarily attributable to (1) higher
total revenues, which included a $0.6
million after-tax increase in net effective spread and a
$0.1 million after-tax increase in
guarantee and commitment fee income, partially offset by a
$0.1 million after-tax decrease in
other income; and (2) $0.7 million of
the aforementioned tax benefits from stock-based awards. Also
contributing to the sequential increase in core earnings was a
decrease in operating expenses of $0.1
million, after tax, as an increase in compensation and
employee benefits expense was more than offset by the decrease in
general and administrative ("G&A") expenses.
The $3.2 million year-over-year
increase in core earnings was primarily attributable to higher
total revenues, which included (1) a $1.9
million after-tax increase in net effective spread; (2) a
$0.4 million after-tax increase in
guarantee and commitment fee income; (3) a $0.6 million after-tax increase in fees received
upon the inception of swaps cleared through the Chicago Mercantile
Exchange ("CME"); and (4) a $0.3
million after-tax decrease in hedging losses. Also
contributing to the increase was $0.7
million of the aforementioned tax benefits from stock-based
awards. Offsetting the year-over-year core earnings increase in
part was a $0.5 million after-tax
increase in operating expenses compared to first quarter 2016,
driven by higher G&A expenses and higher compensation and
employee benefits expenses. The year-over-year $0.2 million after-tax increase in G&A
expenses was attributable primarily to higher expenses related to
continued technology and business infrastructure investments and
expenses related to business development efforts. The
year-over-year $0.3 million after-tax
increase in compensation and benefits expenses was due primarily to
an increase in staffing, related employee health insurance costs
and benefits, and higher variable incentive compensation driven by
exceeding certain performance targets. Year-over-year
credit-related expenses also increased by $0.2 million, after tax, resulting from net
provisions to the allowance for losses of $0.3 million, after tax, in first quarter 2017,
compared to net provisions of $0.1
million, after tax, in first quarter 2016.
See "Use of Non-GAAP Measures" below for more information about
core earnings, core earnings per share, and net effective spread
and for a reconciliation of the comparable GAAP measures to these
non-GAAP measures.
Business Volume Highlights
During first quarter 2017, Farmer Mac added $1.1 billion of new business volume, with
purchases of AgVantage securities and Farm & Ranch loans
and loans placed under long-term standby purchase commitments
("LTSPCs") driving the volume growth. Specifically, Farmer
Mac:
- purchased $561.4 million of
AgVantage securities, including $32.2
million in Farm Equity AgVantage securities;
- purchased $314.1 million of newly
originated Farm & Ranch loans;
- added $113.3 million of Farm
& Ranch loans under LTSPCs;
- purchased $92.6 million of USDA
Securities;
- issued $38.5 million of Farmer
Mac Guaranteed USDA Securities; and
- purchased $27.3 million of Rural
Utilities loans.
After $702.2 million of maturities
and principal paydowns on existing business during first quarter
2017, Farmer Mac's outstanding business volume increased by
$445.1 million from December 31, 2016 to $17.8 billion as of March 31, 2017. The increase in Farmer
Mac's outstanding business volume was driven by net portfolio
growth in AgVantage securities with one of Farmer Mac's
long-standing issuers, National Rural Utilities Cooperative Finance
Corporation ("CFC"), which increased its outstanding AgVantage
business volume with Farmer Mac by $240.3
million in first quarter 2017. Farmer Mac also
experienced net portfolio growth of $32.2
million within its Farm Equity AgVantage product line in
first quarter 2017. Additionally, Farmer Mac grew its Farm &
Ranch portfolio by $128.9 million
notwithstanding the seasonal large amounts of repayments during
first quarter resulting from the January
1 payment date on almost all loans in the portfolio.
Subsequent to the end of first quarter 2017, Farmer Mac
purchased and retained $1.0 billion
of AgVantage securities issued by Metropolitan Life Insurance
Company ("MetLife"). MetLife used the proceeds from Farmer
Mac's purchase of $1.0 billion in
AgVantage securities to refinance an AgVantage security of the same
amount that matured in April 2017. Previously, Farmer Mac
held $30.0 million of the
$1.0 billion AgVantage security that
matured in April 2017 on-balance
sheet and earned a spread between the interest income earned on
that portion of the security and the related funding costs.
The remaining $970.0 million of the
$1.0 billion AgVantage security that
matured in April 2017 had previously
been sold to third parties and reported as an off-balance sheet
program asset on which Farmer Mac earned a guarantee fee of
approximately 0.15 percent on an annual basis. For the newly
purchased $1.0 billion in AgVantage
securities, which are now held entirely on-balance sheet, Farmer
Mac will earn weighted average net effective spread income of
approximately 0.42 percent on an annual basis. The newly
purchased AgVantage securities are comprised of three maturities –
$500.0 million of a one-year
security, which is callable in six months, $250.0 million of a two-year security, and
$250.0 million of a three-year
security.
Spreads
Net interest income was $37.1
million in first quarter 2017, compared to $33.6 million in first quarter 2016. In
percentage terms, net interest income for first quarter 2017 was
0.96 percent, compared to 0.88 percent in first quarter 2016.
The $3.5 million year-over-year
increase in net interest income was driven by net growth in Farm
& Ranch loans, USDA Securities, and AgVantage Securities.
Another factor contributing to the increase was the full quarter
effect of an increase in short-term interest rates on assets and
liabilities indexed to LIBOR due to the Federal Reserve's decision
to raise the target range for the federal funds rate in
December 2016, as well as the
incremental effect of the Federal Reserve's decision to raise this
target range again in March 2017. Also contributing to the
increase was an increase in the net effect of consolidated trusts
from an increase in securitization of Farm & Ranch loans
throughout 2016 and the first three months of 2017. Farmer
Mac earns the difference between the interest income recognized on
loans in consolidated trusts and the related interest expense
recognized on debt securities of consolidated trusts held by third
parties. This increase was offset in part by one less day of
interest in first quarter 2017 compared to first quarter
2016 and an increase in funding costs due to greater
application of hedge accounting as funding expense from financial
derivatives related to assets designated in hedge accounting
relationships is recorded through net interest income. The
0.08 percent increase in net interest yield for first quarter 2017
compared to the same period in 2016 was driven by (1) a reduction
in the average balance of lower-earning cash and cash equivalents;
(2) a full quarter effect from the Federal Reserve's decision to
raise the short-term target range for the federal funds interest
rate in December 2016; and
(3) the incremental effect of the additional increase in the
target range in March 2017. This increase was offset in part
by one less day of interest in first quarter 2017 compared to first
quarter 2016.
Farmer Mac's net effective spread, a non-GAAP measure, was
$32.9 million in first quarter 2017,
compared to $31.9 million in fourth
quarter 2016, and $29.9 million in
first quarter 2016. In percentage terms, net effective spread
for first quarter 2017 was 0.91 percent, compared to 0.89 percent
in fourth quarter 2016, and 0.82 percent in first quarter 2016.
Farmer Mac uses net effective spread as an alternative measure to
net interest income because management believes it is a useful
metric that accurately reflects the economics of the net spread
between all the assets owned by Farmer Mac and all related funding,
including any associated derivatives, some of which may not be
reflected in net interest income under GAAP.
The sequential increase in quarterly net effective spread in
dollar terms was primarily attributable to (1) growth in AgVantage
securities, Farm & Ranch loans, and other business volume,
which increased net effective spread by approximately $0.8 million; and (2) changes in Farmer Mac's
funding strategies and continued improvements in LIBOR-based
short-term funding costs for floating rate assets indexed to LIBOR,
which added approximately $0.4
million. This increase was offset in part by two fewer days
of interest in first quarter 2017 compared to fourth quarter 2016.
The 2 basis point sequential increase in net effective spread in
percentage terms was primarily attributable to a reduction in the
average balance in Treasury bills and senior agency debt within
Farmer Mac's liquidity investment portfolio, which added
approximately 2 basis points to net effective spread. Also
contributing to the increase were the effects of the aforementioned
changes in Farmer Mac's funding strategy and improvements in the
LIBOR-based funding market, which added approximately 1 basis
point. This increase was offset in part by two fewer days of
interest in first quarter 2017 compared to fourth quarter 2016,
which reduced net effective spread by approximately 1 basis
point.
The $3.0 million year-over-year
increase in net effective spread in dollars was primarily
attributable to (1) growth in AgVantage securities, Farm &
Ranch loans, and other business volume, which increased net
effective spread by approximately $2.0
million; (2) changes in Farmer Mac's funding strategies and
continued improvements in LIBOR-based short-term funding costs for
floating rate assets indexed to LIBOR, which added approximately
$0.8 million; and (3) wider spreads
on certain AgVantage securities that were refinanced throughout
2016 and the first three months of 2017. The year-over-year
increase in net effective spread was offset in part by one less day
of interest in first quarter 2017 compared to first quarter
2016. The 9 basis point year-over-year increase in net
effective spread in percentage terms was primarily attributable to
a significant reduction in the average balance of cash and cash
equivalents, which added approximately 5 basis points to net
effective spread. Also contributing to the increase were the
effects of the aforementioned changes in Farmer Mac's funding
strategy and improvements in the LIBOR-based funding market, which
added approximately 2 basis points, and the aforementioned
refinance of certain AgVantage securities at wider spreads, which
added approximately 1 basis point.
Credit
In the Farm & Ranch portfolio, 90-day delinquencies were
$50.8 million (0.81 percent of the
Farm & Ranch portfolio) as of March 31,
2017, compared to $21.0
million (0.34 percent) as of December
31, 2016 and $34.7 million (0.61 percent of the Farm
& Ranch portfolio) as of March
31, 2016. Those 90-day delinquencies were comprised of
57 delinquent loans as of March 31, 2017, compared with 38
delinquent loans as of December 31,
2016 and 60 delinquent loans as of March 31, 2016. Approximately half of the
net increase in Farmer Mac's 90-day delinquencies as a percentage
of its Farm & Ranch portfolio from year-end resulted from the
delinquency of a single borrower on two permanent planting loans to
which Farmer Mac had $15.4 million of
exposure as of March 31, 2017.
That delinquency was due to idiosyncratic factors specific to the
borrower and not related to macroeconomic factors in the
agricultural economy. Farmer Mac believes that it remains
adequately collateralized on these loans. The increase in
90-day delinquencies from year-end is consistent with the seasonal
pattern of Farmer Mac's 90-day delinquencies fluctuating from
quarter to quarter, both in dollars and as a percentage of the
outstanding Farm & Ranch portfolio, with higher levels
generally observed at the end of the first and third quarters of
each year, which corresponds with the annual (January 1st) and semi-annual (January 1st and July
1st) payment characteristics of most Farm & Ranch
loans. Farmer Mac expects that over time its 90-day
delinquency rate will eventually revert closer to Farmer Mac's
historical average due to macroeconomic factors and the cyclical
nature of the agricultural economy and believes that approximately
half of the increase in Farmer Mac's delinquency rate in first
quarter 2017 from year-end was attributable at least in part to
these factors. Farmer Mac's average 90-day delinquency rate
for the Farm & Ranch line of business over the last fifteen
years is approximately one percent.
For Farmer Mac's other lines of business, there are currently no
delinquent AgVantage securities or Rural Utilities loans held or
underlying LTSPCs, and USDA Securities are backed by the full faith
and credit of the United States. As a result, across all of
Farmer Mac's lines of business, 90-day delinquencies represented
0.28 percent of total business volume as of March 31, 2017, compared to 0.12 percent as of
December 31, 2016 and 0.21 percent as
of the year-ago quarter.
Another indicator that Farmer Mac considers in analyzing the
credit quality of its Farm & Ranch portfolio is the level of
internally-rated "substandard" assets, both in dollars and as a
percentage of the outstanding Farm & Ranch portfolio.
Assets categorized as "substandard" have a well-defined weakness or
weaknesses, and there is a distinct possibility that some loss will
be sustained if deficiencies are not corrected. As of
March 31, 2017, Farmer Mac's substandard assets were
$171.5 million (2.7 percent of the
Farm & Ranch portfolio), compared to $165.2 million (2.7 percent of the
Farm & Ranch portfolio) as of December 31,
2016. Those substandard assets were comprised of 263 loans as
of March 31, 2017, compared to 287 loans as of December 31, 2016. The $6.3 million increase from year-end 2016 was
in-line with growth in the Farm & Ranch portfolio. Farmer
Mac expects that over time its substandard asset rate will
eventually revert closer to Farmer Mac's historical average due to
macroeconomic factors and the cyclical nature of the agricultural
economy. Although some credit losses are inherent to the
business of agricultural lending, Farmer Mac believes that any
losses associated with the current agricultural credit cycle will
be moderated by the strength and diversity of its portfolio, which
Farmer Mac believes is adequately collateralized. Farmer
Mac's average substandard assets as a percentage of its Farm &
Ranch portfolio over the last 15 years is approximately 4
percent.
Lines of Business
Farmer Mac's operations consist of four lines of business – Farm
& Ranch, USDA Guarantees, Rural Utilities, and Institutional
Credit. Net interest income by business segment for first
quarter 2017 was $12.8 million (214
basis points) for Farm & Ranch, $5.3
million (103 basis points) for USDA Guarantees, $2.9 million (119 basis points) for Rural
Utilities, and $13.5 million (88
basis points) for Institutional Credit. Net effective spread
by business segment for first quarter 2017 was $10.7 million (180 basis points) for
Farm & Ranch, $4.7 million
(91 basis points) for USDA Guarantees, $2.6
million (106 basis points) for Rural Utilities, and
$12.6 million (82 basis points) for
Institutional Credit.
Liquidity and Capital
Farmer Mac's core capital totaled $624.3
million as of March 31, 2017,
exceeding the statutory minimum capital requirement by $148.7 million, or 31 percent, compared to
$609.7 million as of
December 31, 2016, which was $143.2
million, or 31 percent, above the statutory minimum capital
requirement. The increase in capital in excess of the
minimum capital level was due primarily to an increase in retained
earnings and offset in part by an increase in the minimum capital
required to support the growth of on-balance sheet assets during
first quarter 2017.
As of March 31, 2017, Farmer Mac's
total stockholders' equity was $665.8
million, compared to $643.4
million as of December 31,
2016. The increase in total stockholders' equity was a result
of an increase in retained earnings and accumulated other
comprehensive income.
As prescribed by FCA regulations, Farmer Mac is required to
maintain a minimum of 90 days of liquidity. In
accordance with the methodology prescribed by those regulations,
Farmer Mac maintained an average of 181 days of liquidity
during first quarter 2017 and had 194 days of liquidity
as of March 31, 2017.
Use of Non-GAAP Measures
In the analysis of its financial information, Farmer Mac
sometimes uses measures of financial performance that are not
presented in accordance with generally accepted accounting
principles in the United States
(GAAP), and these are considered "non-GAAP measures."
Specifically, Farmer Mac uses the following non-GAAP measures:
"core earnings," "core earnings per share," and "net effective
spread." Farmer Mac uses these non-GAAP measures to measure
corporate economic performance and develop financial plans because,
in management's view, they are useful alternative measures in
understanding Farmer Mac's economic performance, transaction
economics, and business trends. The non-GAAP financial
measures that Farmer Mac uses may not be comparable to similarly
labeled non-GAAP financial measures disclosed by other
companies. Farmer Mac's disclosure of these non-GAAP measures
is intended to be supplemental in nature, and is not meant to be
considered in isolation from, as a substitute for, or as more
important than, the related financial information prepared in
accordance with GAAP.
Core Earnings and Core Earnings per Share
Core earnings and core earnings per share principally differ
from net income attributable to common stockholders and earnings
per common share, respectively, by excluding the effects of fair
value fluctuations. These fluctuations are not expected to have a
cumulative net impact on Farmer Mac's financial condition or
results of operations reported in accordance with GAAP if the
related financial instruments are held to maturity, as is
expected. Among other items, these fair value fluctuations
have included unrealized gains or losses on financial derivatives
and hedging activities. Variation margin is exchanged between
Farmer Mac and its counterparties on both its cleared and
non-cleared derivatives portfolios. Prior to first quarter 2017,
Farmer Mac accounted for variation margin as collateral and
associated unrealized gains or losses on those centrally cleared
derivative contracts. However, beginning in first quarter 2017, the
variation margin amounts exchanged between Farmer Mac and its
counterparties on cleared derivatives are considered as settlement
rather than collateral as a result of a change in variation margin
rules implemented by the CME, the central clearinghouse used by
Farmer Mac. Specifically, effective January 3, 2017, CME began to deem the exchange
of variation margin between derivatives counterparties as a partial
settlement of each respective derivative contract rather than as
collateral pledged by a counterparty. Accordingly, beginning
in first quarter 2017, Farmer Mac presents its cleared derivatives
portfolio net of variation margin payments on its consolidated
balance sheets and recognizes realized gains or losses as a result
of these payments on its consolidated statements of
operations. However, Farmer Mac believes that even though
these variation margin amounts are accounted for as realized gains
or losses on financial derivatives and hedging activities as a
result of the CME rule change, the economic character of these
transactions remains the same as they were before the change. The
exchange of variation margin, whether considered a partial
settlement of or the pledge of collateral under a derivatives
contract, is not expected to have a cumulative net impact on Farmer
Mac's financial condition or results of operations reported in
accordance with GAAP because the related financial instruments are
expected to be held to maturity. Therefore, beginning in
first quarter 2017, Farmer Mac excludes the effects of realized
gains or losses resulting from the exchange of variation margin on
its cleared derivatives portfolio in its calculations of core
earnings and core earnings per share to present them on a
consistent basis with quarters prior to 2017.
Core earnings and core earnings per share also differ from net
income attributable to common stockholders and earnings per common
share, respectively, by excluding specified infrequent or unusual
transactions that Farmer Mac believes are not indicative of future
operating results and that may not reflect the trends and economic
financial performance of Farmer Mac's core business. For
example, the loss from retirement of the Farmer Mac II LLC
Preferred Stock in first quarter 2015 has been excluded from core
earnings and core earnings per share because it is not a frequently
occurring transaction and not indicative of future operating
results. This is also consistent with Farmer Mac's previous
treatment of these types of origination costs associated with
securities underwriting that are capitalized and deferred during
the life of the security. For a reconciliation of Farmer
Mac's net income attributable to common stockholders to core
earnings and of earnings per common share to core earnings per
share, see the "Reconciliations" section below.
Net Effective Spread
Farmer Mac uses net effective spread to measure the net spread
Farmer Mac earns between its interest-earning assets and the
related net funding costs of these assets. Net effective
spread differs from net interest income and net interest yield
because it excludes (1) the amortization of premiums and discounts
on assets consolidated at fair value that are amortized as
adjustments to yield in interest income over the contractual or
estimated remaining lives of the underlying assets, and (2)
interest income and interest expense related to consolidated trusts
with beneficial interests owned by third parties, which are
presented on Farmer Mac's consolidated balance sheets as "Loans
held for investment in consolidated trusts, at amortized
cost." Farmer Mac excludes from net effective spread premiums
and discounts on assets consolidated at fair value because they
either do not reflect actual cash premiums paid for the assets at
acquisition or are not expected to have an economic effect on
Farmer Mac's financial performance if the assets are held to
maturity, as is expected. Farmer Mac also excludes from net
effective spread the interest income and interest expense
associated with the consolidated trusts and the average balance of
the loans underlying these trusts to reflect management's view that
the net interest income Farmer Mac earns on the related Farmer Mac
Guaranteed Securities owned by third parties is effectively a
guarantee fee. Accordingly, the excluded interest income and
interest expense associated with consolidated trusts is
reclassified to guarantee and commitment fees for purposes of
determining Farmer Mac's core earnings.
Net effective spread also principally differs from net interest
income and net interest yield because it includes the accrual of
income and expense related to the contractual amounts due on
financial derivatives that are not designated in hedge accounting
relationships ("undesignated financial derivatives"). Farmer
Mac uses interest rate swaps to manage its interest rate risk
exposure by synthetically modifying the interest rate reset or
maturity characteristics of certain assets and
liabilities. The accrual of the contractual amounts due
on interest rate swaps designated in hedge accounting relationships
is included as an adjustment to the yield or cost of the hedged
item and is included in net interest income. For undesignated
financial derivatives, Farmer Mac records the income or expense
related to the accrual of the contractual amounts due in
"Gains/(losses) on financial derivatives and hedging activities" on
the consolidated statements of operations. However, the
accrual of the contractual amounts due for undesignated financial
derivatives are included in Farmer Mac's calculation of net
effective spread, which is intended to reflect management's view of
the net spread between an asset and all of its related funding,
including any associated derivatives, whether or not they are in a
hedge accounting relationship. For a reconciliation of net
interest income and net interest yield to net effective spread, see
the "Reconciliations" section below.
Forward-Looking Statements
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, both
known and unknown, could cause Farmer Mac's actual results to
differ materially from the expectations as expressed or implied by
the forward-looking statements herein, including uncertainties
regarding:
- the availability to Farmer Mac of debt and equity financing
and, if available, the reasonableness of rates and terms;
- legislative or regulatory developments that could affect Farmer
Mac, its sources of business, or the agricultural or rural
utilities industries;
- fluctuations in the fair value of assets held by Farmer Mac and
its subsidiaries;
- the rate and direction of development of the secondary market
for agricultural mortgage and rural utilities loans, including
lender interest in Farmer Mac's products and the secondary market
provided by Farmer Mac;
- the general rate of growth in agricultural mortgage and rural
utilities indebtedness;
- the effect of economic conditions, including the effects of
drought and other weather-related conditions and fluctuations in
agricultural real estate values, on agricultural mortgage lending
and borrower repayment capacity;
- developments in the financial markets, including possible
investor, analyst, and rating agency reactions to events involving
government-sponsored enterprises, including Farmer Mac;
- changes in the level and direction of interest rates, which
could, among other things, affect the value of collateral securing
Farmer Mac's agricultural mortgage loan assets;
- the degree to which Farmer Mac is exposed to basis risk, which
results from fluctuations in Farmer Mac's borrowing costs relative
to market indexes such as LIBOR; and
- volatility in commodity prices relative to costs of production
and/or export demand for U.S. agricultural products.
Other risk factors are discussed in "Risk Factors" in Part I,
Item 1A in Farmer Mac's Annual Report on Form 10-K for the year
ended December 31, 2016 filed with
the U.S. Securities and Exchange Commission ("SEC") on March 9, 2017 and in the Quarterly Report on Form
10-Q for the quarter ended March 31,
2017 filed with the SEC earlier today. In light of
these potential risks and uncertainties, no undue reliance should
be placed on any forward-looking statements expressed in this
release. 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. The information contained in this release is not
necessarily indicative of future results.
Earnings Conference Call Information
The conference call to discuss Farmer Mac's first quarter 2017
financial results will be held beginning at 11:00 a.m. eastern
time on Wednesday, May 10, 2017 and
can be accessed by telephone or live webcast as follows:
Telephone (Domestic): (888)
346-2616
Telephone (International): (412)
902-4254
Webcast:
https://www.farmermac.com/investors/events-presentations/
Presentation materials to be referenced during the call will be
posted on the webpage that can be accessed by clicking on the link
noted above. When dialing in to the call, please ask for the
conference chairman Tim Buzby.
The call can be heard live and will also be available for replay on
Farmer Mac's website for two weeks following the conclusion of the
call.
More complete information about Farmer Mac's performance for
first quarter 2017 is set forth in Farmer Mac's Annual Report on
Form 10-Q for the period ended March 31,
2017 filed today with the SEC.
About Farmer Mac
Farmer Mac is a vital part of the agricultural credit markets
and was created to increase access to and reduce the cost of
capital for the benefit of American agricultural and rural
communities. As the nation's premier secondary market for
agricultural credit, we provide financial solutions to a broad
spectrum of the agricultural community, including agricultural
lenders, agribusinesses, and other institutions that can benefit
from access to flexible, low-cost financing and risk management
tools. Farmer Mac's customers benefit from our low cost of funds,
low overhead costs, and high operational efficiency. In fact, we
are often able to provide the lowest cost of borrowing to
agricultural and rural borrowers. For more than a quarter-century,
Farmer Mac has been delivering the capital and commitment rural
America deserves. Additional information about Farmer Mac
(including 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.
* * * *
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
As of
|
|
March 31,
2017
|
|
December 31,
2016
|
|
(in
thousands)
|
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
313,641
|
|
$
|
265,229
|
Investment
securities
|
|
|
|
|
|
Available-for-sale, at
fair value
|
|
2,479,244
|
|
|
2,515,851
|
Farmer Mac Guaranteed
Securities
|
|
|
|
|
|
Available-for-sale, at
fair value
|
|
5,243,046
|
|
|
4,853,685
|
Held-to-maturity, at
amortized cost
|
|
1,074,686
|
|
|
1,149,231
|
Total Farmer Mac
Guaranteed Securities
|
|
6,317,732
|
|
|
6,002,916
|
USDA
Securities
|
|
|
|
|
|
Trading, at fair
value
|
|
18,602
|
|
|
20,388
|
Held-to-maturity, at
amortized cost
|
|
2,025,822
|
|
|
2,009,225
|
Total USDA
Securities
|
|
2,044,424
|
|
|
2,029,613
|
Loans:
|
|
|
|
|
|
Loans held for
investment, at amortized cost
|
|
3,432,091
|
|
|
3,379,884
|
Loans held for
investment in consolidated trusts, at amortized cost
|
|
1,208,950
|
|
|
1,132,966
|
Allowance for loan
losses
|
|
(5,811)
|
|
|
(5,415)
|
Total loans, net of
allowance
|
|
4,635,230
|
|
|
4,507,435
|
Real estate owned, at
lower of cost or fair value
|
|
5,456
|
|
|
1,528
|
Financial derivatives,
at fair value
|
|
2,674
|
|
|
23,182
|
Interest receivable
(includes $8,163 and $12,584, respectively, related to consolidated
trusts)
|
|
85,522
|
|
|
122,782
|
Guarantee and
commitment fees receivable
|
|
38,748
|
|
|
38,871
|
Deferred tax asset,
net
|
|
5,085
|
|
|
12,291
|
Prepaid expenses and
other assets
|
|
4,001
|
|
|
86,322
|
Total
Assets
|
$
|
15,931,757
|
|
$
|
15,606,020
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Notes
Payable:
|
|
|
|
|
|
Due within one
year
|
$
|
7,616,431
|
|
$
|
8,440,123
|
Due after one
year
|
|
6,300,750
|
|
|
5,222,977
|
Total notes
payable
|
|
13,917,181
|
|
|
13,663,100
|
Debt securities of
consolidated trusts held by third parties
|
|
1,212,792
|
|
|
1,142,704
|
Financial derivatives,
at fair value
|
|
32,054
|
|
|
58,152
|
Accrued interest
payable (includes $6,771 and $10,881, respectively, related to
consolidated trusts)
|
|
46,845
|
|
|
49,700
|
Guarantee and
commitment obligation
|
|
36,802
|
|
|
37,282
|
Accounts payable and
accrued expenses
|
|
18,234
|
|
|
9,415
|
Reserve for
losses
|
|
1,827
|
|
|
2,020
|
Total
Liabilities
|
|
15,265,735
|
|
|
14,962,373
|
Commitments and
Contingencies
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
Preferred
stock:
|
|
|
|
|
|
Series A, par value
$25 per share, 2,400,000 shares authorized, issued and
outstanding
|
|
58,333
|
|
|
58,333
|
Series B, par value
$25 per share, 3,000,000 shares authorized, issued and
outstanding
|
|
73,044
|
|
|
73,044
|
Series C, par value
$25 per share, 3,000,000 shares authorized, issued and
outstanding
|
|
73,382
|
|
|
73,382
|
Common
stock:
|
|
|
|
|
|
Class A Voting, $1 par
value, no maximum authorization, 1,030,780 shares
outstanding
|
|
1,031
|
|
|
1,031
|
Class B Voting, $1 par
value, no maximum authorization, 500,301 shares
outstanding
|
|
500
|
|
|
500
|
Class C Non-Voting, $1
par value, no maximum authorization, 9,065,194 shares and 9,007,481
shares
outstanding, respectively
|
|
9,065
|
|
|
9,008
|
Additional paid-in
capital
|
|
118,386
|
|
|
118,655
|
Accumulated other
comprehensive income, net of tax
|
|
41,544
|
|
|
33,758
|
Retained
earnings
|
|
290,530
|
|
|
275,714
|
Total Stockholders'
Equity
|
|
665,815
|
|
|
643,425
|
Non-controlling
interest
|
|
207
|
|
|
222
|
Total
Equity
|
|
666,022
|
|
|
643,647
|
Total Liabilities and
Equity
|
$
|
15,931,757
|
|
$
|
15,606,020
|
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
For the Three Months
Ended
|
|
March 31,
2017
|
|
March 31,
2016
|
|
(in thousands, except per share amounts)
|
Interest
income:
|
|
|
|
Investments and cash
equivalents
|
$
|
7,243
|
|
$
|
6,681
|
Farmer Mac Guaranteed
Securities and USDA Securities
|
|
42,522
|
|
|
35,510
|
Loans
|
|
36,852
|
|
|
31,700
|
Total interest
income
|
|
86,617
|
|
|
73,891
|
Total interest
expense
|
|
49,546
|
|
|
40,251
|
Net interest
income
|
|
37,071
|
|
|
33,640
|
Provision for loan
losses
|
|
(637)
|
|
|
(49)
|
Net interest income
after provision for loan losses
|
|
36,434
|
|
|
33,591
|
Non-interest
income/(loss):
|
|
|
|
Guarantee and
commitment fees
|
|
3,844
|
|
|
3,626
|
Gains/(losses) on
financial derivatives and hedging activities
|
|
2,486
|
|
|
(6,782)
|
(Losses)/gains on
trading securities
|
|
(82)
|
|
|
358
|
Losses on sale of
available-for-sale investment securities
|
|
-
|
|
|
(9)
|
Losses on sale of real
estate owned
|
|
(5)
|
|
|
-
|
Other income
|
|
553
|
|
|
101
|
Non-interest
income/(loss)
|
|
6,796
|
|
|
(2,706)
|
Non-interest
expense:
|
|
|
|
|
|
Compensation and
employee benefits
|
|
6,317
|
|
|
5,774
|
General and
administrative
|
|
3,800
|
|
|
3,526
|
Regulatory
fees
|
|
625
|
|
|
613
|
Real estate owned
operating costs, net
|
|
-
|
|
|
39
|
(Release of)/provision
for reserve for losses
|
|
(193)
|
|
|
14
|
Non-interest
expense
|
|
10,549
|
|
|
9,966
|
Income before income
taxes
|
|
32,681
|
|
|
20,919
|
Income tax
expense
|
|
10,786
|
|
|
7,335
|
Net income
|
|
21,895
|
|
|
13,584
|
Less: Net loss
attributable to non-controlling interest
|
|
15
|
|
|
28
|
Net income
attributable to Farmer Mac
|
|
21,910
|
|
|
13,612
|
Preferred stock
dividends
|
|
(3,295)
|
|
|
(3,295)
|
Net income
attributable to common stockholders
|
$
|
18,615
|
|
$
|
10,317
|
|
|
|
|
|
|
Earnings per common
share and dividends:
|
|
|
|
|
|
Basic earnings per
common share
|
$
|
1.76
|
|
$
|
0.99
|
Diluted earnings per
common share
|
$
|
1.73
|
|
$
|
0.94
|
Common stock dividends
per common share
|
$
|
0.36
|
|
$
|
0.26
|
Reconciliations
A reconciliation of Farmer Mac's net income attributable to
common stockholders to core earnings and core earnings per share
are presented in the following tables along with a breakdown of the
composition of core earnings for the periods indicated:
Reconciliation of Net
Income Attributable to Common Stockholders to Core
Earnings
|
|
For the Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
|
(in thousands,
except per share amounts)
|
Net income
attributable to common stockholders
|
$
|
18,615
|
|
$
|
25,465
|
|
$
|
10,317
|
Less reconciling
items:
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial derivatives and hedging activities due to
fair value changes
|
|
4,805
|
|
|
17,233
|
|
|
(2,989)
|
Unrealized
(losses)/gains on trading securities
|
|
(82)
|
|
|
(474)
|
|
|
358
|
Amortization of
premiums/discounts and deferred gains on assets
consolidated at fair value
|
|
(127)
|
|
|
(40)
|
|
|
(281)
|
Net effects of
settlements on agency forward contracts
|
|
32
|
|
|
1,024
|
|
|
(255)
|
Income tax effect
related to reconciling items
|
|
(1,620)
|
|
|
(6,210)
|
|
|
1,109
|
Sub-total
|
|
3,008
|
|
|
11,533
|
|
|
(2,058)
|
Core
earnings
|
$
|
15,607
|
|
$
|
13,932
|
|
$
|
12,375
|
|
|
|
|
|
|
Composition of Core
Earnings:
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Net effective
spread(1)
|
$
|
32,866
|
|
$
|
31,928
|
|
$
|
29,949
|
Guarantee and
commitment fees(2)
|
|
5,317
|
|
|
5,158
|
|
|
4,669
|
Other(3)
|
|
1,061
|
|
|
1,189
|
|
|
(517)
|
Total
revenues
|
|
39,244
|
|
|
38,275
|
|
|
34,101
|
|
|
|
|
|
|
|
|
|
Credit related
expense (GAAP):
|
|
|
|
|
|
|
|
|
Provision for
losses
|
|
444
|
|
|
512
|
|
|
63
|
REO operating
expenses
|
|
-
|
|
|
-
|
|
|
39
|
Losses on sale of
REO
|
|
5
|
|
|
-
|
|
|
-
|
Total credit related
expense
|
|
449
|
|
|
512
|
|
|
102
|
|
|
|
|
|
|
|
|
|
Operating expenses
(GAAP):
|
|
|
|
|
|
|
|
|
Compensation &
employee benefits
|
|
6,317
|
|
|
5,949
|
|
|
5,774
|
General &
Administrative
|
|
3,800
|
|
|
4,352
|
|
|
3,526
|
Regulatory
fees
|
|
625
|
|
|
625
|
|
|
613
|
Total operating
expenses
|
|
10,742
|
|
|
10,926
|
|
|
9,913
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
28,053
|
|
|
26,837
|
|
|
24,086
|
Income tax
expense(4)
|
|
9,166
|
|
|
9,581
|
|
|
8,444
|
Net (loss)/income
attributable to non-controlling interest (GAAP)
|
|
(15)
|
|
|
28
|
|
|
(28)
|
Preferred stock
dividends (GAAP)
|
|
3,295
|
|
|
3,296
|
|
|
3,295
|
Core
earnings
|
$
|
15,607
|
|
$
|
13,932
|
|
$
|
12,375
|
|
|
|
|
|
|
|
|
|
Core earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.48
|
|
$
|
1.33
|
|
$
|
1.18
|
Diluted
|
|
1.45
|
|
|
1.30
|
|
|
1.12
|
|
|
|
|
|
|
|
|
|
(1)
Net effective spread is a non-GAAP measure. See below for a
reconciliation of net interest income to net effective
spread.
|
(2)
Includes interest income and interest expense related to
consolidated trusts owned by third parties reclassified from net
interest income to guarantee and
commitment fees to reflect management's view that the net interest
income Farmer Mac earns is effectively a guarantee fee on the
consolidated Farmer
Mac Guaranteed Securities.
|
(3)
Reflects reconciling adjustments for the reclassification to
exclude expenses related to interest rate swaps not designated as
hedges and fair value
adjustments on financial derivatives and trading assets and a
reconciling adjustment to exclude the recognition of deferred gains
over the estimated lives
of certain Farmer Mac Guaranteed Securities and USDA
Securities. First quarter 2017 includes $1.0 million of fees
received upon the inception of swaps
cleared through CME and $0.5 million of hedging losses, compared to
$0.1 million of fees received and $0.9 million of hedging losses,
respectively, in
first quarter 2016.
|
(4)
Includes the tax impact of non-GAAP reconciling items between net
income attributable to common stockholders and core earnings. First
quarter 2017 includes $0.7 million
of tax benefits upon the vesting of restricted stock and the
exercise of SARs under new accounting guidance for stock-based
awards that became effective
in first quarter.
|
|
|
Reconciliation of
GAAP Basic Earnings Per Share to Core Earnings Basic Earnings Per
Share
|
|
For the Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
|
(in thousands, except per share amounts)
|
GAAP - Basic
EPS
|
$
|
1.76
|
|
$
|
2.42
|
|
$
|
0.99
|
Less reconciling
items:
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial derivatives and hedging activities due to fair value
changes
|
|
0.45
|
|
|
1.63
|
|
|
(0.28)
|
Unrealized
(losses)/gains on trading securities
|
|
(0.01)
|
|
|
(0.05)
|
|
|
0.03
|
Amortization of
premiums/discounts and deferred gains on assets consolidated at
fair value
|
|
(0.01)
|
|
|
-
|
|
|
(0.03)
|
Net effects of
settlements on agency forward contracts
|
|
-
|
|
|
0.10
|
|
|
(0.02)
|
Income tax effect
related to reconciling items
|
|
(0.15)
|
|
|
(0.59)
|
|
|
0.11
|
Sub-total
|
|
0.28
|
|
|
1.09
|
|
|
(0.19)
|
Core Earnings - Basic
EPS
|
$
|
1.48
|
|
$
|
1.33
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculation (GAAP and Core Earnings)
|
|
10,551
|
|
|
10,512
|
|
|
10,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Diluted Earnings Per Share to Core Earnings Diluted Earnings
Per Share
|
|
For the Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
|
(in thousands, except per share amounts)
|
GAAP - Diluted
EPS
|
$
|
1.73
|
|
$
|
2.38
|
|
$
|
0.94
|
Less reconciling
items:
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial derivatives and hedging activities due to fair value
changes
|
|
0.45
|
|
|
1.60
|
|
|
(0.26)
|
Unrealized
(losses)/gains on trading securities
|
|
(0.01)
|
|
|
(0.04)
|
|
|
0.03
|
Amortization of
premiums/discounts and deferred gains on assets consolidated at
fair value
|
|
(0.01)
|
|
|
-
|
|
|
(0.03)
|
Net effects of
settlements on agency forward contracts
|
|
-
|
|
|
0.10
|
|
|
(0.02)
|
Income tax effect
related to reconciling items
|
|
(0.15)
|
|
|
(0.58)
|
|
|
0.10
|
Sub-total
|
|
0.28
|
|
|
1.08
|
|
|
(0.18)
|
Core Earnings -
Diluted EPS
|
$
|
1.45
|
|
$
|
1.30
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculation (GAAP and Core Earnings)
|
|
10,782
|
|
|
10,700
|
|
|
11,003
|
The following table presents a reconciliation of net interest
income and net yield to net effective spread for the periods
indicated:
Reconciliation of
GAAP Net Interest Income/Yield to Net Effective Spread
|
|
For the Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
(dollars
in thousands)
|
Net interest
income/yield
|
$
|
37,071
|
|
0.96
|
%
|
|
$
|
36,713
|
|
0.95
|
%
|
|
$
|
33,640
|
|
0.88
|
%
|
Net effects of
consolidated trusts
|
|
(1,472)
|
|
0.03
|
%
|
|
|
(1,369)
|
|
0.04
|
%
|
|
|
(1,043)
|
|
0.02
|
%
|
Expense related to
undesignated financial derivatives
|
|
(2,867)
|
|
(0.08)
|
%
|
|
|
(3,495)
|
|
(0.10)
|
%
|
|
|
(2,669)
|
|
(0.08)
|
%
|
Amortization of
premiums/discounts and deferred gains on assets consolidated at
fair value
|
|
134
|
|
-
|
|
|
|
79
|
|
-
|
|
|
|
21
|
|
-
|
%
|
Net effective
spread
|
$
|
32,866
|
|
0.91
|
%
|
|
$
|
31,928
|
|
0.89
|
%
|
|
$
|
29,949
|
|
0.82
|
%
|
The following table presents core earnings for Farmer Mac's
reportable operating segments and a reconciliation to consolidated
net income for the three months ended March
31, 2017:
Core Earnings by
Business Segment
|
For the Three Months
Ended March 31, 2017
|
|
Farm &
Ranch
|
|
USDA
Guarantees
|
|
Rural
Utilities
|
|
Institutional
Credit
|
|
Corporate
|
|
Reconciling
Adjustments
|
|
Consolidated
Net Income
|
|
(in thousands)
|
Net interest
income
|
$
|
12,754
|
|
$
|
5,283
|
|
$
|
2,948
|
|
$
|
13,502
|
|
$
|
2,584
|
|
$
|
-
|
|
$
|
37,071
|
Less: reconciling
adjustments(1)(2)(3)
|
|
(2,070)
|
|
|
(580)
|
|
|
(309)
|
|
|
(921)
|
|
|
(325)
|
|
|
4,205
|
|
|
-
|
Net effective
spread
|
|
10,684
|
|
|
4,703
|
|
|
2,639
|
|
|
12,581
|
|
|
2,259
|
|
|
4,205
|
|
|
-
|
Guarantee and
commitment fees(2)
|
|
4,295
|
|
|
74
|
|
|
492
|
|
|
455
|
|
|
-
|
|
|
(1,472)
|
|
|
3,844
|
Other
income(3)(4)
|
|
194
|
|
|
14
|
|
|
5
|
|
|
-
|
|
|
843
|
|
|
1,896
|
|
|
2,952
|
Non-interest
income/(loss)
|
|
4,489
|
|
|
88
|
|
|
497
|
|
|
455
|
|
|
843
|
|
|
424
|
|
|
6,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
|
(637)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(637)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Release of reserve
for losses
|
|
193
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
193
|
Other non-interest
expense
|
|
(4,065)
|
|
|
(1,087)
|
|
|
(587)
|
|
|
(1,521)
|
|
|
(3,482)
|
|
|
-
|
|
|
(10,742)
|
Non-interest
expense(5)
|
|
(3,872)
|
|
|
(1,087)
|
|
|
(587)
|
|
|
(1,521)
|
|
|
(3,482)
|
|
|
-
|
|
|
(10,549)
|
Core earnings before
income taxes
|
|
10,664
|
|
|
3,704
|
|
|
2,549
|
|
|
11,515
|
|
|
(380)
|
|
|
4,629
|
(6)
|
|
32,681
|
Income tax
(expense)/benefit
|
|
(3,732)
|
|
|
(1,296)
|
|
|
(892)
|
|
|
(4,030)
|
|
|
785
|
|
|
(1,621)
|
|
|
(10,786)
|
Core earnings before
preferred
stock dividends and attribution of
income to non-controlling interest -
preferred stock dividends
|
|
6,932
|
|
|
2,408
|
|
|
1,657
|
|
|
7,485
|
|
|
405
|
|
|
3,008
|
(6)
|
|
21,895
|
Preferred stock
dividends
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,295)
|
|
|
-
|
|
|
(3,295)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interest -
preferred stock dividends
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15
|
|
|
-
|
|
|
15
|
Segment core
earnings/(losses)
|
$
|
6,932
|
|
$
|
2,408
|
|
$
|
1,657
|
|
$
|
7,485
|
|
$
|
(2,875)
|
|
$
|
3,008
|
(6)
|
$
|
18,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at
carrying value
|
$
|
3,693,360
|
|
$
|
2,109,264
|
|
$
|
1,005,187
|
|
$
|
6,315,591
|
|
$
|
2,808,355
|
|
$
|
-
|
|
$
|
15,931,757
|
Total on-and
off-balance sheet
program assets at principal balance
|
$
|
6,240,467
|
|
$
|
2,149,697
|
|
$
|
1,868,794
|
|
$
|
7,585,583
|
|
|
|
|
$
|
-
|
|
$
|
17,844,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Excludes the amortization of premiums and discounts on assets
consolidated at fair value, originally included in interest income,
to reflect core earnings
amounts.
|
(2)
Includes the reclassification of interest income and interest
expense from consolidated trusts owned by third parties to
guarantee and commitment fees, to
reflect management's view that the net interest income Farmer Mac
earns is effectively a guarantee fee.
|
(3)
Includes the reclassification of interest expense related to
interest rate swaps not designated as hedges, which are included in
"Gains/(losses) on financial
derivatives and hedging activities" on the consolidated financial
statements, to determine the effective funding cost for each
operating segment.
|
(4)
Includes reconciling adjustments for fair value adjustments on
financial derivatives and trading assets. Also includes a
reconciling adjustment related to
the recognition of deferred gains over the estimated lives of
certain Farmer Mac Guaranteed Securities and USDA Securities. In
2016 and prior periods,
fair value adjustments on financial derivatives included variation
margin payment amounts because those amounts were considered to be
collateral of the
related exposure and were accounted for as unrealized gains or
losses. However, effective first quarter 2017, CME implemented a
change in its rules
related to the exchange of variation margin, whereby variation
margin payments are considered a partial settlement of the
respective derivatives contracts
rather than as pledged collateral, and accounted for as realized
gains and losses. See Note 4 for more information about this rule
change. Farmer Mac
believes that even though these variation margin amounts are now
accounted for as realized gains or losses on financial derivatives
and hedging activities
as a result of the CME rule change, their economic character will
remain the same as they were before the change. The exchange of
variation margin,
whether considered a partial settlement of or the pledge of
collateral under a derivatives contract, is not expected to have a
cumulative net impact on
Farmer Mac's financial condition or results of operations reported
in accordance with GAAP because the related financial instruments
are expected to be
held to maturity. Therefore, beginning in 2017, this reconciling
adjustment includes realized gains and losses on financial
derivatives centrally cleared
through CME resulting from the exchange of variation margin. As a
result, core earnings subsequent to 2016 will be presented on a
consistent basis with
core earnings in 2016 and prior periods.
|
(5)
Includes directly attributable costs and an allocation of
indirectly attributable costs based on staffing.
|
(6)
Net adjustments to reconcile to the corresponding income
measures: core earnings before income taxes reconciled to income
before income taxes; core
earnings before preferred stock dividends and attribution of income
to non-controlling interest reconciled to net income; and segment
core earnings
reconciled to net income attributable to common
stockholders.
|
Supplemental Information
The following table sets forth information regarding outstanding
volume in each of Farmer Mac's four lines of business as of the
dates indicated:
Lines of Business -
Outstanding Business Volume
|
|
As of March 31,
2017
|
|
As of December 31,
2016
|
|
(in thousands)
|
On-balance
sheet:
|
|
|
|
Farm &
Ranch:
|
|
|
|
Loans
|
$
|
2,434,436
|
|
$
|
2,381,488
|
Loans held in
trusts:
|
|
|
|
|
|
Beneficial interests
owned by third party investors
|
|
1,208,950
|
|
|
1,132,966
|
USDA
Guarantees:
|
|
|
|
|
|
USDA
Securities
|
|
1,973,628
|
|
|
1,954,800
|
Farmer Mac Guaranteed
USDA Securities
|
|
40,735
|
|
|
35,599
|
Rural
Utilities:
|
|
|
|
|
|
Loans
|
|
999,130
|
|
|
999,512
|
Institutional
Credit:
|
|
|
|
|
|
AgVantage
Securities
|
|
6,302,369
|
|
|
6,004,472
|
Total on-balance
sheet
|
$
|
12,959,248
|
|
$
|
12,508,837
|
Off-balance
sheet:
|
|
|
|
Farm &
Ranch:
|
|
|
|
LTSPCs
|
$
|
2,209,809
|
|
$
|
2,209,409
|
Guaranteed
Securities
|
|
387,272
|
|
|
415,441
|
USDA
Guarantees:
|
|
|
|
|
|
Farmer Mac Guaranteed
USDA Securities
|
|
135,334
|
|
|
103,976
|
Rural
Utilities:
|
|
|
|
|
|
LTSPCs(1)
|
869,664
|
|
|
878,598
|
Institutional
Credit:
|
|
|
|
|
|
AgVantage
Securities
|
|
983,214
|
|
|
983,214
|
AgVantage Revolving
Line of Credit Facility(2)
|
|
300,000
|
|
|
300,000
|
Total off-balance
sheet
|
$
|
4,885,293
|
|
$
|
4,890,638
|
Total
|
$
|
17,844,541
|
|
$
|
17,399,475
|
|
|
|
|
|
|
(1)
As of both March 31, 2017 and December 31 2016, includes $20.0
million related to one-year loan purchase commitments on which
Farmer Mac receives
a nominal unused commitment fee.
|
(2)
During first quarter 2017, $100.0 million of this facility was
drawn and subsequently repaid. As of December 31, 2016, this
facility had not been utilized.
Farmer Mac receives a fixed fee based on the full dollar amount of
the facility. If the counterparty draws on the facility, the
amounts drawn will be in the
form of AgVantage securities, and Farmer Mac will earn interest
income on those securities.
|
The following table presents the quarterly net effective spread
by segment:
|
Net Effective Spread
by Line of Business
|
|
|
Farm &
Ranch
|
|
USDA
Guarantees
|
|
Rural
Utilities
|
|
Institutional
Credit
|
|
Corporate
|
|
Net Effective
Spread
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
(dollars in
thousands)
|
For the quarter
ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2017(1)
|
$
|
10,684
|
|
1.80
|
%
|
|
$
|
4,703
|
|
0.91
|
%
|
|
$
|
2,639
|
|
1.06
|
%
|
|
$
|
12,581
|
|
0.82
|
%
|
|
$
|
2,259
|
|
0.32
|
%
|
|
$
|
32,866
|
|
0.91
|
%
|
December 31,
2016
|
|
10,349
|
|
1.78
|
%
|
|
|
5,334
|
|
1.08
|
%
|
|
|
2,623
|
|
1.05
|
%
|
|
|
11,627
|
|
0.78
|
%
|
|
|
1,995
|
|
0.26
|
%
|
|
|
31,928
|
|
0.89
|
%
|
September 30,
2016
|
|
10,703
|
|
1.90
|
%
|
|
|
5,189
|
|
1.07
|
%
|
|
|
2,643
|
|
1.05
|
%
|
|
|
11,427
|
|
0.75
|
%
|
|
|
2,237
|
|
0.24
|
%
|
|
|
32,199
|
|
0.86
|
%
|
June 30,
2016
|
|
9,875
|
|
1.78
|
%
|
|
|
4,588
|
|
0.96
|
%
|
|
|
2,562
|
|
1.03
|
%
|
|
|
11,407
|
|
0.77
|
%
|
|
|
2,594
|
|
0.29
|
%
|
|
|
31,026
|
|
0.84
|
%
|
March 31,
2016
|
|
9,461
|
|
1.71
|
%
|
|
|
4,308
|
|
0.91
|
%
|
|
|
2,538
|
|
1.02
|
%
|
|
|
11,090
|
|
0.80
|
%
|
|
|
2,552
|
|
0.26
|
%
|
|
|
29,949
|
|
0.82
|
%
|
December 31,
2015
|
|
9,381
|
|
1.72
|
%
|
|
|
4,518
|
|
0.96
|
%
|
|
|
2,845
|
|
1.14
|
%
|
|
|
10,899
|
|
0.80
|
%
|
|
|
2,306
|
|
0.26
|
%
|
|
|
29,949
|
|
0.85
|
%
|
September 30,
2015
|
|
9,628
|
|
1.80
|
%
|
|
|
4,630
|
|
0.99
|
%
|
|
|
2,907
|
|
1.18
|
%
|
|
|
11,271
|
|
0.81
|
%
|
|
|
1,951
|
|
0.25
|
%
|
|
|
30,387
|
|
0.88
|
%
|
June 30,
2015
|
|
9,681
|
|
1.82
|
%
|
|
|
4,466
|
|
0.98
|
%
|
|
|
2,838
|
|
1.18
|
%
|
|
|
10,860
|
|
0.78
|
%
|
|
|
1,942
|
|
0.25
|
%
|
|
|
29,787
|
|
0.88
|
%
|
March 31,
2015(2)
|
|
10,114
|
|
1.97
|
%
|
|
|
4,225
|
|
0.95
|
%
|
|
|
2,804
|
|
1.15
|
%
|
|
|
10,425
|
|
0.77
|
%
|
|
|
1,689
|
|
0.20
|
%
|
|
|
29,257
|
|
0.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Net effective spread is a non-GAAP measure. See "Non-GAAP
Measures" for a reconciliation of GAAP net interest income by line
of business to net effective spread by line of business.
|
(2)
Beginning in first quarter 2015, Farmer Mac revised its methodology
for interest expense allocation among the Farm & Ranch, USDA
Guarantees, and Rural
Utilities lines of business. As a result of this revision, a
greater percentage of interest expense has been allocated to the
longer-term assets included within the
USDA Guarantees and Rural Utilities lines of business.
|
The following table presents quarterly core earnings reconciled
to net income attributable to common stockholders:
Core Earnings by
Quarter Ended
|
|
|
|
|
March
2017
|
|
December
2016
|
|
September
2016
|
|
June
2016
|
|
March
2016
|
|
December
2015
|
|
September
2015
|
|
June
2015
|
|
March
2015
|
|
|
|
|
(in
thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effective
spread
|
$
|
32,866
|
|
|
$
|
31,928
|
|
|
$
|
32,199
|
|
|
$
|
31,026
|
|
|
$
|
29,949
|
|
|
$
|
29,949
|
|
|
$
|
30,387
|
|
|
$
|
29,787
|
|
|
$
|
29,257
|
|
|
Guarantee and
commitment fees
|
|
5,317
|
|
|
|
5,158
|
|
|
|
4,533
|
|
|
|
4,810
|
|
|
|
4,669
|
|
|
|
4,730
|
|
|
|
4,328
|
|
|
|
4,085
|
|
|
|
4,012
|
|
|
Other
|
|
1,061
|
|
|
|
1,189
|
|
|
|
(32)
|
|
|
|
(125)
|
|
|
|
(517)
|
|
|
|
(284)
|
|
|
|
(93)
|
|
|
|
(24)
|
|
|
|
(405)
|
|
|
|
Total
revenues
|
|
39,244
|
|
|
|
38,275
|
|
|
|
36,700
|
|
|
|
35,711
|
|
|
|
34,101
|
|
|
|
34,395
|
|
|
|
34,622
|
|
|
|
33,848
|
|
|
|
32,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit related
expense/(income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(release of) losses
|
|
444
|
|
|
|
512
|
|
|
|
(31)
|
|
|
|
458
|
|
|
|
63
|
|
|
|
(49)
|
|
|
|
(303)
|
|
|
|
1,256
|
|
|
|
(696)
|
|
|
REO operating
expenses
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39
|
|
|
|
44
|
|
|
|
48
|
|
|
|
-
|
|
|
|
(1)
|
|
|
Losses/(gains) on
sale of REO
|
|
5
|
|
|
|
-
|
|
|
|
(15)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
Total credit
related
expense/(income)
|
|
449
|
|
|
|
512
|
|
|
|
(46)
|
|
|
|
458
|
|
|
|
102
|
|
|
|
(5)
|
|
|
|
(255)
|
|
|
|
1,256
|
|
|
|
(696)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
employee
benefits
|
|
6,317
|
|
|
|
5,949
|
|
|
|
5,438
|
|
|
|
5,611
|
|
|
|
5,774
|
|
|
|
5,385
|
|
|
|
5,236
|
|
|
|
5,733
|
|
|
|
5,693
|
|
|
General and
administrative
|
|
3,800
|
|
|
|
4,352
|
|
|
|
3,474
|
|
|
|
3,757
|
|
|
|
3,526
|
|
|
|
3,238
|
|
|
|
3,676
|
|
|
|
3,374
|
|
|
|
2,823
|
|
|
Regulatory
fees
|
|
625
|
|
|
|
625
|
|
|
|
613
|
|
|
|
612
|
|
|
|
613
|
|
|
|
613
|
|
|
|
600
|
|
|
|
600
|
|
|
|
600
|
|
|
|
Total operating
expenses
|
|
10,742
|
|
|
|
10,926
|
|
|
|
9,525
|
|
|
|
9,980
|
|
|
|
9,913
|
|
|
|
9,236
|
|
|
|
9,512
|
|
|
|
9,707
|
|
|
|
9,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
28,053
|
|
|
|
26,837
|
|
|
|
27,221
|
|
|
|
25,273
|
|
|
|
24,086
|
|
|
|
25,164
|
|
|
|
25,365
|
|
|
|
22,885
|
|
|
|
24,444
|
|
Income tax
expense(1)
|
|
9,166
|
|
|
|
9,581
|
|
|
|
9,497
|
|
|
|
8,956
|
|
|
|
8,444
|
|
|
|
8,855
|
|
|
|
8,924
|
|
|
|
8,091
|
|
|
|
6,692
|
|
Net (loss)/income
attributable to non-
controlling interest
|
|
(15)
|
|
|
|
28
|
|
|
|
(18)
|
|
|
|
(16)
|
|
|
|
(28)
|
|
|
|
(60)
|
|
|
|
(36)
|
|
|
|
(119)
|
|
|
|
5,354
|
|
Preferred stock
dividends
|
|
3,295
|
|
|
|
3,296
|
|
|
|
3,295
|
|
|
|
3,296
|
|
|
|
3,295
|
|
|
|
3,296
|
|
|
|
3,295
|
|
|
|
3,296
|
|
|
|
3,295
|
|
|
|
Core
earnings
|
$
|
15,607
|
|
|
$
|
13,932
|
|
|
$
|
14,447
|
|
|
$
|
13,037
|
|
|
$
|
12,375
|
|
|
$
|
13,073
|
|
|
$
|
13,182
|
|
|
$
|
11,617
|
|
|
$
|
9,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial
derivatives and hedging activities
due to fair value changes
|
|
4,805
|
|
|
|
17,233
|
|
|
|
1,460
|
|
|
|
(2,076)
|
|
|
|
(2,989)
|
|
|
|
2,743
|
|
|
|
(6,906)
|
|
|
|
15,982
|
|
|
|
(895)
|
|
|
|
Unrealized
(losses)/gains on
trading assets
|
|
(82)
|
|
|
|
(474)
|
|
|
|
1,182
|
|
|
|
394
|
|
|
|
358
|
|
|
|
696
|
|
|
|
(8)
|
|
|
|
170
|
|
|
|
362
|
|
|
|
Amortization of
premiums/discounts and deferred
gains on assets consolidated at fair value
|
|
(127)
|
|
|
|
(40)
|
|
|
|
(157)
|
|
|
|
(371)
|
|
|
|
(281)
|
|
|
|
(263)
|
|
|
|
(117)
|
|
|
|
(125)
|
|
|
|
(814)
|
|
|
|
Net effects of
settlements on
agency forwards
|
|
32
|
|
|
|
1,024
|
|
|
|
464
|
|
|
|
466
|
|
|
|
(255)
|
|
|
|
(162)
|
|
|
|
(390)
|
|
|
|
197
|
|
|
|
(252)
|
|
|
|
Loss on retirement of
Farmer Mac
II LLC Preferred Stock
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,147)
|
|
|
|
Income tax effect
related to
reconciling items
|
|
(1,620)
|
|
|
|
(6,210)
|
|
|
|
(1,032)
|
|
|
|
556
|
|
|
|
1,109
|
|
|
|
(1,055)
|
|
|
|
2,598
|
|
|
|
(5,679)
|
|
|
|
2,461
|
|
|
|
|
Net income
attributable to
common stockholders
|
$
|
18,615
|
|
|
$
|
25,465
|
|
|
$
|
16,364
|
|
|
$
|
12,006
|
|
|
$
|
10,317
|
|
|
$
|
15,032
|
|
|
$
|
8,359
|
|
|
$
|
22,162
|
|
|
$
|
1,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
First quarter 2017 includes $0.7 million of tax benefits upon the
vesting of restricted stock and the exercise of SARs associated
with new accounting
guidance
for stock-based awards that became effective in first quarter
2017.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/farmer-mac-reports-first-quarter-2017-financial-results-300454543.html
SOURCE Farmer Mac