WASHINGTON, May 10, 2018 /PRNewswire/ -- The Federal
Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A)
today announced its results for the fiscal quarter ended
March 31, 2018, which included
$372.1 million in net new business
volume growth that brought total outstanding business volume to
$19.4 billion as of March 31, 2018. Farmer Mac's net income
attributable to common stockholders for first quarter 2018 was
$22.5 million ($2.10 per diluted common share), compared to
$16.7 million ($1.55 per diluted common share) in fourth quarter
2017 and $18.6 million ($1.73 per diluted common share) in first quarter
2017. Farmer Mac's first quarter 2018 core earnings, a
non-GAAP measure, were $21.8 million ($2.03 per diluted common share), compared to
$17.9 million ($1.65 per diluted common share) in fourth quarter
2017 and $15.0 million ($1.39 per diluted common share) in first quarter
2017.
"Our first quarter 2018 results demonstrate the talent and
commitment of the exceptional team here at Farmer Mac," said
Chairman of the Board and Acting President and Chief Executive
Officer Lowell Junkins.
"During the quarter, Farmer Mac maintained good fundamental trends
in business volume and strong asset quality, positioning itself for
continued success in 2018. The business opportunities in
front of Farmer Mac are robust, and we continue to make significant
investments in our people, technology, and infrastructure to
maintain our leadership position in financing rural America."
Earnings
Farmer Mac's net income attributable to common stockholders in
first quarter 2018 was $22.5 million ($2.10 per diluted common share), compared to
$16.7 million ($1.55 per diluted common share) in fourth quarter
2017 and $18.6 million ($1.73 per diluted common share) in first quarter
2017.
The $5.8 million sequential
increase in net income attributable to common stockholders was
driven by an increase of $1.5 million
after-tax in net interest income and the impact of the lower
federal corporate income tax rate, which resulted in a $4.5 million decrease in income tax expense for
first quarter 2018. Also contributing to the sequential
increase were (1) the absence in first quarter 2018 of $1.4 million in income tax expense resulting
from the re-measurement of deferred tax assets recorded in fourth
quarter 2017 due to the enactment of the new federal income tax
legislation; and (2) a decrease of $0.7
million after-tax in total allowance for losses.
The increase was offset in part by (1) a $1.6 million after-tax decrease in gains in fair
value of financial derivatives and hedged assets; and (2) a
$1.1 million after-tax increase in
compensation and employee benefits expenses due to the absence in
first quarter 2018 of the recoupment of compensation costs that
occurred in fourth quarter 2017 as a result of the termination of
employment of Farmer Mac's former President and Chief Executive
Officer in December 2017.
The $3.9 million year-over-year
increase in net income attributable to common stockholders was
driven by an increase of $4.9 million
after-tax in net interest income. Also contributing to the
year-over-year increase was the aforementioned $4.5 million decrease in income tax
expense. The increase was offset in part by (1) a
$5.0 million after-tax decrease in
gains in fair value of financial derivatives and hedged assets; and
(2) a $0.9 million after-tax increase
in non-interest expense in first quarter 2018, primarily
attributable to higher compensation and employee benefits expenses
and higher general and administrative ("G&A")
expenses.
Farmer Mac's non-GAAP core earnings in first quarter 2018 were
$21.8 million ($2.03 per diluted common share), compared to
$17.9 million ($1.65 per diluted common share) in fourth quarter
2017 and $15.0 million ($1.39 per diluted common share) in first quarter
2017.
The $3.9 million sequential
increase in core earnings was primarily attributable to (1) a
decrease in income tax expense of $5.5
million in first quarter 2018 attributable primarily to the
lower federal corporate income tax rate; and (2) a $0.7 million after-tax decrease in credit-related
expenses due to a release of the total allowance for losses of
$0.3 million after-tax in first
quarter 2018 compared to a provision to the total allowance for
losses of $0.4 million after-tax in
fourth quarter 2017. The increase was offset in part
primarily by a $1.1 million after-tax
increase in operating expenses, driven by higher compensation and
employee benefits expenses. The increase in compensation and
employee benefits expenses was due to the absence in first quarter
2018 of the recoupment of compensation costs that occurred in
fourth quarter 2017 as a result of the termination of employment of
Farmer Mac's former President and Chief Executive Officer in
December 2017.
The $6.8 million year-over-year
increase in core earnings was primarily attributable to a
$3.6 million after-tax increase in
net effective spread. Also contributing to the increase were
(1) a $2.6 million decrease in income
tax expense attributable to the lower federal corporate income tax
rate; and (2) a $0.7 million decrease
in credit-related expenses, primarily attributable to a release of
the total allowance for losses of $0.3 million after-tax in first quarter 2018
compared to a provision to the total allowance for losses of
$0.4 million after-tax in first
quarter 2017. The year-over-year increase in core earnings
was offset in part by a $0.7 million
after-tax increase in operating expenses.
See "Use of Non-GAAP Measures" below for more information about
core earnings, core earnings per share, and net effective spread
and for reconciliations of the comparable GAAP measures to these
non-GAAP measures.
Business Volume Highlights
During first quarter 2018, Farmer Mac added $1.4 billion of new business volume, compared to
$1.1 billion in first quarter
2017. Specifically, Farmer Mac:
- purchased $813.3 million of
AgVantage securities;
- purchased $259.1 million of newly
originated Farm & Ranch loans;
- added $159.1 million of Farm
& Ranch loans under LTSPCs;
- purchased $89.2 million of USDA
Securities;
- issued $34.3 million of Farmer
Mac Guaranteed USDA Securities; and
- purchased $8.6 million of Rural
Utilities loans.
After $992.3 million of maturities
and principal paydowns on existing business during first quarter
2018, Farmer Mac's outstanding business volume increased by
$372.1 million from December 31, 2017 to $19.4 billion as of March 31, 2018. The increase in Farmer
Mac's outstanding business volume was driven by net portfolio
growth in AgVantage securities from 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 $313.9
million in first quarter 2018. Farmer Mac also
experienced net portfolio growth in AgVantage securities from
Rabobank N.A., which increased its outstanding AgVantage business
volume with Farmer Mac by $100.0
million in first quarter 2018. Farmer Mac also grew
its Farm & Ranch portfolio by $75.6
million despite the large amount of repayments occurring
during first quarter as a result of the January 1 payment date on almost all loans in
that portfolio. Farmer Mac's net portfolio growth was offset
by a decrease of $120.0 million in
outstanding business volume resulting from the partial termination
of an outstanding LTSPC pool of loans with CFC in the Rural
Utilities line of business.
Spreads
Net interest income was $43.2
million for first quarter 2018, compared to $41.3 million for fourth quarter 2017 and
$37.1 million for first quarter
2017. The overall net interest yield was 0.98 percent for
first quarter 2018, compared to 0.94 percent for fourth quarter
2017 and 0.96 percent for first quarter 2017.
The $1.9 million sequential
increase was driven primarily by fair value changes on financial
derivatives and corresponding financial assets and liabilities in
fair value hedge relationships. Effective first quarter 2018,
Farmer Mac adopted Accounting Standard Update ("ASU") 2017-12,
"Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities." The new accounting
guidance requires the changes in the fair value of both the
financial derivative designated in a fair value hedge relationship
and the corresponding hedged item to be recorded in the same line
item in Farmer Mac's consolidated statements of operations.
Thus, Farmer Mac recognizes changes in fair value of both the
financial derivatives and corresponding hedged items within net
interest income in its consolidated statements of operations.
Prior to first quarter 2018, changes in the fair value of financial
derivatives designated in a fair value hedge relationship were
recognized in "Gains/(losses) on financial derivatives and hedging
activities" in Farmer Mac's consolidated statements of
operations. Also contributing to the increase was net growth
in Farm & Ranch loans and on-balance sheet AgVantage
securities. Another factor contributing to the increase was
the effect of an increase in short-term interest rates on assets
and liabilities indexed to LIBOR due to the Federal Reserve's
decisions since December 2017 to
raise the target range for the federal funds rate. This
effect on net interest income occurred because interest expense
used to calculate net interest income does not include all the
funding expenses related to these assets, specifically the expense
on financial derivatives not designated in hedge
relationships. The increase in net interest income was offset
in part by an increase in net yield adjustments related to
amortization of premiums and discounts on assets consolidated at
fair value. The 4 basis point sequential increase in net
interest yield was primarily attributable to the aforementioned
fair value changes on financial derivatives and corresponding
financial assets and liabilities in fair value hedge relationships
included in net interest income in first quarter 2018.
The $6.2 million year-over-year
increase in net interest income was driven by net growth in
on-balance sheet AgVantage securities, Farm & Ranch loans, and
USDA Securities. Another factor contributing to the increase
was the effect of an increase in short-term interest rates on
assets and liabilities indexed to LIBOR due to the Federal
Reserve's decisions since December
2016 to raise the target range for the federal funds
rate. As noted above, the effect on net interest income
occurred because interest expense does not include the expense on
financial derivatives not designated in hedge relationships.
Also contributing to the increase were the aforementioned fair
value changes on financial derivatives and corresponding financial
assets and liabilities in fair value hedge relationships. The
increase was offset in part by an increase in net yield adjustments
related to amortization of premiums and discounts on assets
consolidated at fair value. The 2 basis point year-over-year
increase in net interest yield was primarily driven by an increase
in the aforementioned fair value changes on financial derivatives
and corresponding financial assets and liabilities in fair value
hedge relationships included in net interest income in first
quarter 2018. This increase was offset in part by the dilutive
effect of the refinancing of a $1.0 billion AgVantage security in second
quarter 2017, $970.0 million of which
was previously held by third party investors and reported as
off-balance sheet business volume in the Institutional Credit line
of business.
Farmer Mac's net effective spread, a non-GAAP measure, was
$37.1 million for first quarter 2018,
compared to $37.5 million for fourth
quarter 2017 and $32.5 million for
first quarter 2017. In percentage terms, net effective spread
for first quarter 2018 was 0.91 percent, compared to 0.93 percent
for fourth quarter 2017 and 0.90 percent for first quarter 2017.
Farmer Mac uses net effective spread as an alternative measure to
net interest income because management believes it is a useful
metric that 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 included in
net interest income.
The $0.4 million and 2 basis point
sequential decrease in net effective spread in dollars and
percentage terms was primarily attributable to two fewer days of
interest in first quarter 2018 compared to fourth quarter
2017. The $4.6 million
year-over-year increase in net effective spread in dollars was
primarily attributable to the growth in outstanding business
volume, which increased net effective spread by approximately
$3.9 million. The 1 basis
point year-over-year increase in net effective spread in percentage
terms was primarily attributable to changes in Farmer Mac's funding
strategies and improvements in LIBOR-based short-term funding costs
for floating rate assets indexed to LIBOR and a reduction in the
average balance of lower earning investment securities.
Credit
In the Farm & Ranch portfolio, 90-day delinquencies were
$47.6 million (0.69 percent of the
Farm & Ranch portfolio), compared to $48.4 million (0.71 percent of the Farm &
Ranch portfolio) as of December 31, 2017 and $50.8 million (0.81 percent of the Farm &
Ranch portfolio) as of March 31,
2017. Those 90-day delinquencies were comprised of 65
delinquent loans as of March 31,
2018, compared with 51 delinquent loans as of December 31, 2017 and 57 delinquent loans as of
March 31, 2017. The modest
decrease in 90-day delinquencies compared to December 31, 2017 is primarily attributable to
(1) lower than expected seasonal delinquencies associated with
loans that have annual (January 1st)
and semi-annual (January 1st and
July 1st) payment terms, which
account for most of the loans in the Farm & Ranch portfolio;
and (2) a paydown on $15.3 million in
permanent planting loans to a single borrower that resulted in the
loans becoming current.
Farmer Mac's 90-day delinquencies have historically fluctuated
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 and
lower levels generally observed at the end of the second and fourth
quarters of each year as a result of the annual (January 1st) and semi-annual (January 1st and July
1st) payment terms of most Farm & Ranch loans.
Farmer Mac believes that it remains adequately collateralized on
its delinquent loans. Farmer Mac expects that over time its
90-day delinquency rate will eventually revert closer to, and
possibly exceed, Farmer Mac's historical average due to
macroeconomic factors and the cyclical nature of the agricultural
economy. Farmer Mac's average 90-day delinquency rate as a
percentage of its Farm & Ranch portfolio over the last 15 years
is approximately 1 percent. The highest 90-day delinquency rate
observed during that period occurred in 2009 at approximately 2
percent, which coincided with increased delinquencies in loans
within Farmer Mac's then-held ethanol loan portfolio that Farmer
Mac no longer holds.
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
0.25 percent of total business volume as of both March 31, 2018 and December 31, 2017.
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, 2018, Farmer Mac's substandard assets
were $221.2 million (3.2 percent of
the Farm & Ranch portfolio), compared to $221.3 million (3.2 percent of the
Farm & Ranch portfolio) as of December 31, 2017.
Those substandard assets were comprised of 318 loans as of
March 31, 2018 and 307 loans as of
December 31, 2017. As of
March 31, 2018, substandard asset
volume includes several large exposures and represents a relatively
diverse set of commodities. Farmer Mac's substandard asset
volume remained flat from the prior quarter because assets newly
classified as substandard were offset by upgrades in risk rating,
payoffs, and paydowns of existing substandard assets. Farmer Mac
expects that over time its substandard asset rate will eventually
revert closer to, and possibly exceed, Farmer Mac's historical
average due to macroeconomic factors and the cyclical nature of the
agricultural economy. Farmer Mac's average substandard assets as a
percentage of its Farm & Ranch portfolio over the last 15 years
is approximately 4 percent. The highest substandard asset rate
observed during that period occurred in 2010 at approximately 8
percent, which coincided with an increase in substandard loans
within Farmer Mac's then-held ethanol portfolio that Farmer Mac no
longer holds. If Farmer Mac's substandard asset rate continues to
increase from current levels, it is likely that Farmer Mac's
provision to the allowance for loan losses and the reserve for
losses will also increase.
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.
Liquidity and Capital
Farmer Mac's core capital totaled $673.2
million as of March 31, 2018,
exceeding the statutory minimum capital requirement by $136.9 million, or 26 percent, compared to
$657.1 million as of
December 31, 2017, which was $136.8
million, or 26 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, which was mostly offset by an increase in minimum capital
required to support the growth of on-balance sheet assets during
first quarter 2018.
As of March 31, 2018, Farmer Mac's
total stockholders' equity was $745.3
million, compared to $708.1
million as of December 31,
2017. The increase in total stockholders' equity was a result
of an increase in retained earnings and accumulated other
comprehensive income. The increase in accumulated other
comprehensive income was due to increases in fair value on certain
floating-rate AgVantage securities.
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 192 days of liquidity
during first quarter 2018 and had 156 days of liquidity
as of March 31, 2018.
Use of Non-GAAP Measures
In the accompanying analysis of its financial information,
Farmer Mac sometimes uses "non-GAAP measures," which are measures
of financial performance that are not presented in accordance with
generally accepted accounting principles in the United States (GAAP). 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. Since the beginning of first quarter 2017, Farmer Mac
has excluded 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. More information about the the effects of realized
gains or losses resulting from the exchange of variation margin on
cleared derivatives is available in "Management's Discussion and
Analysis of Financial Condition and Results of Operations—Use of
Non-GAAP Measures" in Farmer Mac's Quarterly Report on Form 10-Q
for the period ended March 31, 2018
filed today with the U.S. Securities and Exchange Commission
("SEC").
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.
Accordingly, the one-time, non-cash charge to income tax expense
due to the re-measurement of the net deferred tax asset was
excluded from core earnings and core earnings per share. Farmer Mac
re-measured its net deferred tax asset at a lower U.S. corporate
tax rate due to the enactment of new tax legislation on
December 22, 2017. This charge is
excluded from core earnings and core earnings per share because it
is not a frequently occurring transaction, is a non-cash charge,
and is not indicative of future operating results. 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; (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;" and (3)
beginning January 1, 2018, the fair
value changes of financial derivatives and the corresponding assets
or liabilities designated in a fair value hedge relationship.
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.
Effective in first quarter 2018, Farmer Mac adopted ASU 2017-12,
"Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities." Prior
to first quarter 2018, gains and losses on financial derivatives
were included in "(Losses)/gains due to fair value changes" whether
or not they were designated in hedge relationships. Beginning
in first quarter 2018, gains and losses on financial derivatives in
hedge relationships are included in either interest income or
interest expense depending on the corresponding hedged financial
asset or liability, respectively. Farmer Mac excludes from
net effective spread those fair value changes of financial
derivatives and the corresponding assets or liabilities designated
in fair value hedge relationships because they are not expected to
have an economic effect on Farmer Mac's financial performance if
the financial derivatives and corresponding hedged items are held
to maturity, as is expected.
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
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 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 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.
Net effective spread also includes the net effects of
terminations or net settlements on financial derivatives and
hedging activities. The inclusion of these items in net effective
spread, along with the accrual of contractual amounts due for
undesignated financial derivatives described above, is intended to
reflect management's view of the complete net spread between an
asset and all of its related funding, including any associated
derivatives, whether or not they are in a hedge
relationship. More information about the specific components
that relate to the net effects of terminations or net settlements
on financial derivatives and hedging activities is available in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations—Results of Operations" in Farmer Mac's
Quarterly Report on Form 10‑Q for the period ended
March 31, 2018 filed today with the
SEC.
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 in this release, 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;
- the effect of any changes in Farmer Mac's executive
leadership;
- 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,
changes in U.S. trade policies, and/or fluctuations in 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, 2017 filed with
the SEC on March 8, 2018. 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 2018
financial results will be held beginning at 11:00 a.m. eastern
time on Thursday, May 10, 2018 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
"Farmer Mac Earnings Conference Call." 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 2018 is set forth in Farmer Mac's Quarterly Report on
Form 10-Q for the period ended March 31,
2018 filed today with the SEC.
About Farmer Mac
Farmer Mac is a vital part of the agricultural credit markets
and works 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 thirty years, Farmer Mac has been
delivering the capital and commitment rural America deserves.
Additional information about Farmer Mac (including the Quarterly
Report on Form 10-Q and the Annual Report on Form 10-K referenced
above) is available on Farmer Mac's website at
www.farmermac.com.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND
SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (unaudited)
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
March 31,
|
|
December
31,
|
|
|
|
|
|
2018
|
2017
|
|
|
|
|
|
|
(in
thousands)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
493,258
|
|
|
$
|
302,022
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
Available-for-sale,
at fair value
|
|
2,193,352
|
|
|
|
2,215,405
|
|
|
|
Held-to-maturity, at
amortized cost
|
|
45,032
|
|
|
|
45,032
|
|
|
|
|
Total Investment
Securities
|
|
2,238,384
|
|
|
|
2,260,437
|
|
|
Farmer Mac Guaranteed
Securities
|
|
|
|
|
|
|
|
|
|
Available-for-sale,
at fair value
|
|
5,839,387
|
|
|
|
5,471,914
|
|
|
|
Held-to-maturity, at
amortized cost
|
|
2,182,043
|
|
|
|
2,126,274
|
|
|
|
|
Total Farmer Mac
Guaranteed Securities
|
|
8,021,430
|
|
|
|
7,598,188
|
|
|
USDA
Securities
|
|
|
|
|
|
|
|
|
|
Trading, at fair
value
|
|
11,558
|
|
|
|
13,515
|
|
|
|
Held-to-maturity, at
amortized cost
|
|
2,127,769
|
|
|
|
2,117,850
|
|
|
|
|
Total USDA
Securities
|
|
2,139,327
|
|
|
|
2,131,365
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for
investment, at amortized cost
|
|
3,866,844
|
|
|
|
3,873,755
|
|
|
|
Loans held for
investment in consolidated trusts, at amortized cost
|
|
1,441,718
|
|
|
|
1,399,827
|
|
|
|
Allowance for loan
losses
|
|
(6,365)
|
|
|
|
(6,796)
|
|
|
|
|
Total loans, net of
allowance
|
|
5,302,197
|
|
|
|
5,266,786
|
|
|
Real estate owned, at
lower of cost or fair value
|
|
123
|
|
|
|
139
|
|
|
Financial
derivatives, at fair value
|
|
5,142
|
|
|
|
7,093
|
|
|
Interest receivable
(includes $10,179 and $17,373, respectively, related to
consolidated trusts)
|
|
114,070
|
|
|
|
155,278
|
|
|
Guarantee and
commitment fees receivable
|
|
39,997
|
|
|
|
39,895
|
|
|
Deferred tax asset,
net
|
|
-
|
|
|
|
2,048
|
|
|
Prepaid expenses and
other assets
|
|
43,308
|
|
|
|
29,023
|
|
|
|
|
Total
Assets
|
$
|
18,397,236
|
|
|
$
|
17,792,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Notes
Payable:
|
|
|
|
|
|
|
|
|
|
Due within one
year
|
$
|
7,896,359
|
|
|
$
|
8,089,826
|
|
|
|
Due after one
year
|
|
8,127,594
|
|
|
|
7,432,790
|
|
|
|
|
Total notes
payable
|
|
16,023,953
|
|
|
|
15,522,616
|
|
|
Debt securities of
consolidated trusts held by third parties
|
|
1,463,653
|
|
|
|
1,404,945
|
|
|
Financial
derivatives, at fair value
|
|
22,570
|
|
|
|
26,599
|
|
|
Accrued interest
payable (includes $8,533 and $14,631, respectively, related to
consolidated trusts)
|
|
71,348
|
|
|
|
75,402
|
|
|
Guarantee and
commitment obligation
|
|
38,487
|
|
|
|
38,400
|
|
|
Accounts payable and
accrued expenses
|
|
25,641
|
|
|
|
14,096
|
|
|
Deferred tax
liability, net
|
|
4,227
|
|
|
|
-
|
|
|
Reserve for
losses
|
|
2,091
|
|
|
|
2,070
|
|
|
|
|
Total
Liabilities
|
|
17,651,970
|
|
|
|
17,084,128
|
|
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, 9,119,416 shares and
9,087,670 shares outstanding, respectively
|
|
9,119
|
|
|
|
9,088
|
|
|
Additional paid-in
capital
|
|
118,208
|
|
|
|
118,979
|
|
|
Accumulated other
comprehensive income, net of tax
|
|
72,111
|
|
|
|
51,085
|
|
|
Retained
earnings
|
|
339,538
|
|
|
|
322,704
|
|
|
|
|
|
Total
Equity
|
|
745,266
|
|
|
|
708,146
|
|
|
|
|
|
|
Total Liabilities and
Equity
|
$
|
18,397,236
|
|
|
$
|
17,792,274
|
|
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited)
|
|
|
|
|
For the Three Months
Ended
|
|
|
|
March 31,
2018
|
|
March 31,
2017
|
|
|
|
(in thousands, except per share amounts)
|
Interest
income:
|
|
|
|
|
Investments and cash
equivalents
|
$
|
11,463
|
|
|
$
|
7,243
|
|
|
Farmer Mac Guaranteed
Securities and USDA Securities
|
|
62,430
|
|
|
|
42,522
|
|
|
Loans
|
|
45,653
|
|
|
|
36,852
|
|
|
|
Total interest
income
|
|
119,546
|
|
|
|
86,617
|
|
|
Total interest
expense
|
|
76,317
|
|
|
|
49,546
|
|
|
|
Net interest
income
|
|
43,229
|
|
|
|
37,071
|
|
|
Release of/(provision
for)
|
|
431
|
|
|
|
(637)
|
|
|
|
Net interest income
after provision for loan losses
|
|
43,660
|
|
|
|
36,434
|
|
Non-interest
income:
|
|
|
|
|
Guarantee and
commitment fees
|
|
3,499
|
|
|
|
3,844
|
|
|
(Losses)/gains on
financial derivatives and hedging activities
|
|
(3,850)
|
|
|
|
2,486
|
|
|
Gains/(losses) on
trading securities
|
|
16
|
|
|
|
(82)
|
|
|
Gains on sale of real
estate owned
|
|
-
|
|
|
|
(5)
|
|
|
Other
income
|
|
574
|
|
|
|
553
|
|
|
|
Non-interest
income
|
|
239
|
|
|
|
6,796
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
Compensation and
employee benefits
|
|
6,654
|
|
|
|
6,317
|
|
|
General and
administrative
|
|
4,326
|
|
|
|
3,800
|
|
|
Regulatory
fees
|
|
625
|
|
|
|
625
|
|
|
Real estate owned
operating costs, net
|
|
16
|
|
|
|
-
|
|
|
Provision
for/(release of) for reserve for losses
|
|
21
|
|
|
|
(193)
|
|
|
|
Non-interest
expense
|
|
11,642
|
|
|
|
10,549
|
|
|
|
Income before income
taxes
|
|
32,257
|
|
|
|
32,681
|
|
Income tax
expense
|
|
6,438
|
|
|
|
10,786
|
|
|
|
Net income
|
|
25,819
|
|
|
|
21,895
|
|
Less: Net loss
attributable to non-controlling interest
|
|
-
|
|
|
|
15
|
|
|
Net income
attributable to Farmer Mac
|
|
25,819
|
|
|
|
21,910
|
|
Preferred stock
dividends
|
|
(3,295)
|
|
|
|
(3,295)
|
|
|
|
Net income
attributable to common stockholders
|
$
|
22,524
|
|
|
$
|
18,615
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share and dividends:
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share
|
$
|
2.12
|
|
|
$
|
1.76
|
|
|
|
Diluted earnings per
common share
|
$
|
2.10
|
|
|
$
|
1.73
|
|
|
|
Common stock
dividends per common share
|
$
|
0.58
|
|
|
$
|
0.36
|
|
Reconciliations
Reconciliations 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 information about
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,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
|
|
|
|
(in thousands,
except per share amounts)
|
Net income
attributable to common stockholders
|
|
$
|
22,524
|
|
|
$
|
16,710
|
|
|
$
|
18,615
|
|
Less reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial derivatives and hedging activities due to fair value
changes
|
|
|
285
|
|
|
|
(264)
|
|
|
|
4,805
|
|
|
Unrealized
gains/(losses) on trading securities
|
|
|
16
|
|
|
|
60
|
|
|
|
(82)
|
|
|
Amortization of
premiums/discounts and deferred gains on assets consolidated at
fair value
|
|
(686)
|
|
|
|
(129)
|
|
|
|
(127)
|
|
|
Net effects of
terminations or net settlements on financial derivatives and
hedging activities(1)
|
|
1242
|
|
|
|
632
|
|
|
|
948
|
|
|
Re-measurement of net
deferred tax asset due to enactment of new tax
legislation
|
|
-
|
|
|
|
(1,365)
|
|
|
|
-
|
|
|
Income tax effect
related to reconciling items
|
|
|
(180)
|
|
|
|
(105)
|
|
|
|
(1,941)
|
|
|
|
Sub-total
|
|
|
677
|
|
|
|
(1,171)
|
|
|
|
3,603
|
|
Core
earnings
|
|
$
|
21,847
|
|
|
$
|
17,881
|
|
|
$
|
15,012
|
|
|
|
|
|
|
|
|
|
|
Composition of Core
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effective
spread(2)
|
|
$
|
37,101
|
|
|
$
|
37,467
|
|
|
$
|
32,526
|
|
|
Guarantee and
commitment fees(3)
|
|
|
5,083
|
|
|
|
5,157
|
|
|
|
5,316
|
|
|
Other(4)
|
|
|
428
|
|
|
|
69
|
|
|
|
485
|
|
|
|
Total
revenues
|
|
|
42,612
|
|
|
|
42,693
|
|
|
|
38,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit related
(income)/expense (GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Release)/Provision
for losses
|
|
|
(410)
|
|
|
|
464
|
|
|
|
444
|
|
|
REO operating
expenses
|
|
|
16
|
|
|
|
-
|
|
|
|
-
|
|
|
Gains on sale of
REO
|
|
|
-
|
|
|
|
(964)
|
|
|
|
5.00
|
|
|
|
Total credit related
(income)/expense
|
|
|
(394)
|
|
|
|
(500)
|
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
(GAAP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation &
employee benefits
|
|
|
6,654
|
|
|
|
5,247
|
|
|
|
6,317
|
|
|
General &
Administrative
|
|
|
4,326
|
|
|
|
4,348
|
|
|
|
3,800
|
|
|
Regulatory
fees
|
|
|
625
|
|
|
|
625
|
|
|
|
625
|
|
|
|
Total operating
expenses
|
|
|
11,605
|
|
|
|
10,220
|
|
|
|
10,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
31,401
|
|
|
|
32,973
|
|
|
|
27,136
|
|
|
Income tax
expense(5)
|
|
|
6,259
|
|
|
|
11,796
|
|
|
|
8,844
|
|
|
Net loss attributable
to non-controlling interest (GAAP)
|
|
|
-
|
|
|
|
-
|
|
|
|
(15)
|
|
|
Preferred stock
dividends (GAAP)
|
|
|
3,295
|
|
|
|
3,296
|
|
|
|
3,295
|
|
|
|
Core
earnings
|
|
$
|
21,847
|
|
|
$
|
17,881
|
|
|
$
|
15,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.06
|
|
|
$
|
1.68
|
|
|
$
|
1.42
|
|
|
Diluted
|
|
|
2.03
|
|
|
|
1.65
|
|
|
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Effective in fourth quarter 2017, Farmer Mac revised its
methodology for calculating net effective spread, which is a
component of core earnings, to also include the net effects of
terminations or net settlements on financial derivatives and
hedging activities. All prior period information has been recast to
reflect the revised methodology. For more information, see
"Use of Non-GAAP Measures—Net Effective Spread" above and the
information set forth below.
|
(2) Net
effective spread is a non-GAAP measure. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations—Use of Non-GAAP Measures—Net Effective Spread" for an
explanation of net effective spread. See below for a
reconciliation of net interest income to net effective
spread.
|
(3)
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.
|
(4)
Reflects reconciling adjustments for the reclassification to
exclude expenses related to interest rate swaps not designated as
hedges and terminations or net settlements on financial derivatives
and hedging activities, and reconciling adjustments to exclude fair
value adjustments on financial derivatives and trading assets and
the recognition of deferred gains over the estimated lives of
certain Farmer Mac Guaranteed Securities and USDA
Securities.
|
(5)
Includes the tax impact of non-GAAP reconciling items between net
income attributable to common stockholders and core
earnings.
|
|
Reconciliation of
GAAP Basic Earnings Per Share to Core Earnings Basic Earnings Per
Share
|
|
|
|
For the Three Months
Ended
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
|
|
|
(in thousands, except per share amounts)
|
GAAP - Basic
EPS
|
$
|
2.12
|
|
|
$
|
1.57
|
|
|
$
|
1.76
|
|
Less reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial derivatives and hedging activities due to fair value
changes
|
|
0.03
|
|
|
|
(0.03)
|
|
|
|
0.45
|
|
|
Unrealized
gains/(losses) on trading securities
|
|
-
|
|
|
|
0.01
|
|
|
|
(0.01)
|
|
|
Amortization of
premiums/discounts and deferred gains on assets consolidated at
fair value
|
|
(0.06)
|
|
|
|
(0.01)
|
|
|
|
(0.1)
|
|
|
Net effects of
terminations or net settlements on financial derivatives and
hedging activities
|
|
0.12
|
|
|
|
0.06
|
|
|
|
0.09
|
|
|
Re-measurement of net
deferred tax asset due to enactment of new tax
legislation
|
|
-
|
|
|
|
(0.13)
|
|
|
|
-
|
|
|
Income tax effect
related to reconciling items
|
|
(0.03)
|
|
|
|
(0.01)
|
|
|
|
(0.18)
|
|
|
|
Sub-total
|
|
0.06
|
|
|
|
(0.11)
|
|
|
|
0.34
|
|
Core Earnings - Basic
EPS
|
$
|
2.06
|
|
|
$
|
1.68
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculation (GAAP and Core Earnings)
|
|
10,622
|
|
|
|
10,618
|
|
|
|
10,551
|
|
Reconciliation of
GAAP Diluted Earnings Per Share to Core Earnings Diluted Earnings
Per Share
|
|
|
|
For the Three Months
Ended
|
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
March 31,
2017
|
|
|
|
(in thousands, except per share amounts)
|
GAAP - Diluted
EPS
|
$
|
2.10
|
|
|
$
|
1.55
|
|
|
$
|
1.73
|
|
Less reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial derivatives and hedging activities due to fair value
changes
|
|
0.03
|
|
|
|
(0.02)
|
|
|
|
0.45
|
|
|
Unrealized
gains/(losses) on trading securities
|
|
-
|
|
|
|
0.01
|
|
|
|
(0.01)
|
|
|
Amortization of
premiums/discounts and deferred gains on assets consolidated at
fair value
|
|
(0.06)
|
|
|
|
(0.01)
|
|
|
|
(0.01)
|
|
|
Net effects of
terminations or net settlements on financial derivatives and
hedging activities
|
|
0.12
|
|
|
|
0.06
|
|
|
|
0.09
|
|
|
Re-measurement of net
deferred tax asset due to enactment of new tax
legislation
|
|
-
|
|
|
|
(0.13)
|
|
|
|
-
|
|
|
Income tax effect
related to reconciling items
|
|
(0.02)
|
|
|
|
(0.01)
|
|
|
|
(0.18)
|
|
|
|
Sub-total
|
|
0.07
|
|
|
|
(0.10)
|
|
|
|
0.34
|
|
Core Earnings -
Diluted EPS
|
$
|
2.03
|
|
|
$
|
1.65
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per
share calculation (GAAP and Core Earnings)
|
|
10,741
|
|
|
|
10,815
|
|
|
|
10,782
|
|
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,
2018
|
|
|
December 31,
2017
|
|
March 31,
2017
|
|
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
|
|
|
(dollars
in thousands)
|
Net interest
income/yield
|
$
|
43,229
|
|
0.98
|
%
|
|
$
|
41,283
|
|
0.94
|
%
|
|
$
|
37,071
|
|
0.96
|
%
|
Net effects of
consolidated trusts
|
|
(1,584)
|
|
0.04
|
%
|
|
|
(1,673)
|
|
0.04
|
%
|
|
|
(1,472)
|
|
0.03
|
%
|
Expense related to
undesignated financial derivatives
|
|
(2,302)
|
|
(0.06)
|
%
|
|
|
(1,943)
|
|
(0.05)
|
%
|
|
|
(2,837)
|
|
(0.08)
|
%
|
Amortization of
premiums/discounts and deferred gains on assets
consolidated at fair value
|
|
694
|
|
0.02
|
%
|
|
|
(28)
|
|
-
|
%
|
|
|
134
|
|
-
|
%
|
Amortization of
losses due to terminations or net settlements on financial
derivatives and hedging activities
|
|
(98)
|
|
-
|
%
|
|
|
(172)
|
|
-
|
%
|
|
|
(340)
|
|
(0.01)
|
%
|
Fair Value changes on
fair value hedge relationships
|
|
(2,838)
|
|
(0.07)
|
%
|
|
|
-
|
|
|
%
|
|
|
-
|
|
|
%
|
Net
effective spread
|
$
|
37,101
|
|
0.91
|
%
|
|
$
|
37,467
|
|
0.93
|
%
|
|
$
|
32,526
|
|
0.90
|
%
|
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, 2018:
Core Earnings by
Business Segment
|
For the Three Months
Ended March 31, 2018
|
|
|
|
Farm &
Ranch
|
|
USDA
Guarantees
|
|
Rural
Utilities
|
|
Institutional
Credit
|
|
Corporate
|
|
Reconciling
Adjustments
|
|
Consolidated
Net Income
|
|
|
|
(in thousands)
|
Net interest
income
|
$
|
14,941
|
|
|
$
|
5,070
|
|
|
$
|
2,537
|
|
|
$
|
17,832
|
|
|
$
|
2,849
|
|
|
$
|
-
|
|
|
$
|
43,229
|
|
|
Less: reconciling
adjustments(1)(2)(3)
|
|
(2,401)
|
|
|
|
(670)
|
|
|
|
413
|
|
|
|
(3,008)
|
|
|
|
(462)
|
|
|
|
6,128
|
|
|
|
-
|
|
Net effective
spread
|
|
12,540
|
|
|
|
4,400
|
|
|
|
2,950
|
|
|
|
14,824
|
|
|
|
2,387
|
|
|
|
6,128
|
|
|
|
-
|
|
Guarantee and
commitment fees(2)
|
|
4,378
|
|
|
|
166
|
|
|
|
449
|
|
|
|
90
|
|
|
|
-
|
|
|
|
(1,584)
|
|
|
|
3,499
|
|
Other
income(3)(5)
|
|
557
|
|
|
|
5
|
|
|
|
5
|
|
|
|
-
|
|
|
|
(139)
|
|
|
|
(3,688)
|
|
|
|
(3,260)
|
|
|
Non-interest
income/(loss)
|
|
4,935
|
|
|
|
171
|
|
|
|
454
|
|
|
|
90
|
|
|
|
(139)
|
|
|
|
(5,272)
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
|
431
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Release of reserve
for losses
|
|
(21)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21)
|
|
Other non-interest
expense
|
|
(4,520)
|
|
|
|
(1,193)
|
|
|
|
(673)
|
|
|
|
(1,846)
|
|
|
|
(3,389)
|
|
|
|
-
|
|
|
|
(11,621)
|
|
|
Non-interest
expense(4)
|
|
(4,541)
|
|
|
|
(1,193)
|
|
|
|
(673)
|
|
|
|
(1,846)
|
|
|
|
(3,389)
|
|
|
|
-
|
|
|
|
(11,642)
|
|
Core earnings before
income taxes
|
|
13,365
|
|
|
|
3,378
|
|
|
|
2,731
|
|
|
|
13,068
|
|
|
|
(1,141)
|
|
|
|
856
|
|
(5)
|
|
32,257
|
|
Income tax
(expense)/benefit
|
|
(2,807)
|
|
|
|
(709)
|
|
|
|
(574)
|
|
|
|
(2,744)
|
|
|
|
575
|
|
|
|
(179)
|
|
|
|
(6,438)
|
|
|
Core earnings before
preferred stock dividends and attribution of income to
non-controlling interest - preferred stock dividends
|
|
10,558
|
|
|
|
2,669
|
|
|
|
2,157
|
|
|
|
10,324
|
|
|
|
(566)
|
|
|
|
677
|
|
(5)
|
|
25,819
|
|
Preferred stock
dividends
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,295)
|
|
|
|
-
|
|
|
|
(3,295)
|
|
|
Segment core
earnings/(losses)
|
$
|
10,558
|
|
|
$
|
2,669
|
|
|
$
|
2,157
|
|
|
$
|
10,324
|
|
|
$
|
(3,861)
|
|
|
$
|
677
|
|
(5)
|
$
|
22,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at
carrying value
|
$
|
4,306,960
|
|
|
$
|
2,195,714
|
|
|
$
|
1,043,335
|
|
|
$
|
8,066,231
|
|
|
$
|
2,784,996
|
|
|
$
|
-
|
|
|
$
|
18,397,236
|
|
Total on-and
off-balance sheet program assets at principal balance
|
$
|
6,932,002
|
|
|
$
|
2,391,739
|
|
|
$
|
1,729,797
|
|
|
$
|
8,325,905
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
19,379,443
|
|
|
(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
"(Losses)/gains on financial derivatives and hedging activities" on
the consolidated financial statements, to determine the effective
funding cost for each operating segment.
|
(4)
Includes directly attributable costs and an allocation of
indirectly attributable costs based on employee
headcount.
|
(5)
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,
2018
|
|
As of December 31,
2017
|
|
|
|
|
|
(in thousands)
|
On-balance
sheet:
|
|
|
|
|
Farm &
Ranch:
|
|
|
|
|
|
Loans
|
$
|
2,832,641
|
|
|
$
|
2,798,906
|
|
|
|
Loans held in
trusts:
|
|
|
|
|
|
|
|
|
|
|
Beneficial interests
owned by third party investors
|
|
1,441,718
|
|
|
|
1,399,827
|
|
|
USDA
Guarantees:
|
|
|
|
|
|
|
|
|
|
USDA
Securities
|
|
2,077,708
|
|
|
|
2,068,017
|
|
|
|
Farmer Mac Guaranteed
USDA Securities
|
|
29,596
|
|
|
|
29,980
|
|
|
Rural
Utilities:
|
|
|
|
|
|
|
|
|
|
Loans
|
|
1,043,477
|
|
|
|
1,076,291
|
|
|
Institutional
Credit:
|
|
|
|
|
|
|
|
|
|
AgVantage
Securities(1)
|
|
8,014,349
|
|
|
|
7,593,322
|
|
|
|
|
Total on-balance
sheet
|
$
|
15,439,489
|
|
|
$
|
14,966,343
|
|
Off-balance
sheet:
|
|
|
|
|
Farm &
Ranch:
|
|
|
|
|
|
LTSPCs
|
$
|
2,343,146
|
|
|
$
|
2,335,342
|
|
|
|
Guaranteed
Securities
|
|
314,497
|
|
|
|
333,511
|
|
|
USDA
Guarantees:
|
|
|
|
|
|
|
|
|
|
Farmer Mac Guaranteed
USDA Securities
|
|
284,435
|
|
|
|
254,217
|
|
|
Rural
Utilities:
|
|
|
|
|
|
|
|
|
LTSPCs(1)
|
|
686,320
|
|
|
|
806,342
|
|
|
Institutional
Credit:
|
|
|
|
|
|
|
|
|
|
AgVantage
Securities
|
|
11,556
|
|
|
|
11,556
|
|
|
|
AgVantage Revolving
Line of Credit Facility(2)
|
|
300,000
|
|
|
|
300,000
|
|
|
|
|
Total off-balance
sheet
|
$
|
3,939,954
|
|
|
$
|
4,040,968
|
|
|
|
|
|
Total
|
$
|
19,379,443
|
|
|
$
|
19,007,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes $20.0 million related to one-year loan purchase
commitments on which Farmer Mac receives a nominal unused
commitment fee as of both March 31, 2018 and 2017.
|
(2)
During first quarter 2018, this facility was not utilized.
During 2017, $100.0 million of this facility was drawn and
subsequently repaid. 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(1)
|
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
Dollars
|
|
Yield
|
|
|
(dollars in
thousands)
|
For the quarter
ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2018(2)
|
$
|
12,540
|
|
|
1.80
|
%
|
|
$
|
4,400
|
|
|
0.82
|
%
|
|
$
|
2,950
|
|
|
1.12
|
%
|
|
$
|
14,824
|
|
|
0.78
|
%
|
%
|
$
|
2,387
|
|
|
0.36
|
%
|
|
$
|
37,101
|
|
|
0.91
|
%
|
|
December 31,
2017
|
|
12,396
|
|
|
1.80
|
%
|
|
|
4,979
|
|
|
0.93
|
%
|
|
|
3,057
|
|
|
1.14
|
%
|
|
|
14,800
|
|
|
0.78
|
%
|
|
|
2,235
|
|
|
0.35
|
%
|
|
|
37,467
|
|
|
0.93
|
%
|
|
September 30,
2017
|
|
11,303
|
|
|
1.73
|
%
|
|
|
4,728
|
|
|
0.90
|
%
|
|
|
2,765
|
|
|
1.07
|
%
|
|
|
14,455
|
|
|
0.78
|
%
|
|
|
2,725
|
|
|
0.41
|
%
|
|
|
35,976
|
|
|
0.91
|
%
|
|
June 30,
2017
|
|
11,158
|
|
|
1.77
|
%
|
|
|
4,551
|
|
|
0.87
|
%
|
|
|
2,669
|
|
|
1.06
|
%
|
|
|
14,467
|
|
|
0.81
|
%
|
|
|
2,489
|
|
|
0.36
|
%
|
|
|
35,334
|
|
|
0.91
|
%
|
|
March 31,
2017(2)
|
|
10,511
|
|
|
1.77
|
%
|
|
|
4,561
|
|
|
0.89
|
%
|
|
|
2,568
|
|
|
1.04
|
%
|
|
|
12,615
|
|
|
0.82
|
%
|
|
|
2,271
|
|
|
0.32
|
%
|
|
|
32,526
|
|
|
0.90
|
%
|
|
December 31,
2016
|
|
10,131
|
|
|
1.75
|
%
|
|
|
5,152
|
|
|
1.04
|
%
|
|
|
2,530
|
|
|
1.02
|
%
|
|
|
11,636
|
|
|
0.78
|
%
|
|
|
1,999
|
|
|
0.26
|
%
|
|
|
31,448
|
|
|
0.88
|
%
|
|
September 30,
2016
|
|
10,476
|
|
|
1.86
|
%
|
|
|
4,994
|
|
|
1.03
|
%
|
|
|
2,541
|
|
|
1.01
|
%
|
|
|
11,431
|
|
|
0.75
|
%
|
|
|
2,239
|
|
|
0.24
|
%
|
|
|
31,681
|
|
|
0.85
|
%
|
|
June 30,
2016
|
|
9,644
|
|
|
1.74
|
%
|
|
|
4,392
|
|
|
0.92
|
%
|
|
|
2,459
|
|
|
0.98
|
%
|
|
|
11,412
|
|
|
0.77
|
%
|
|
|
2,596
|
|
|
0.29
|
%
|
|
|
30,503
|
|
|
0.83
|
%
|
|
March 31,
2016
|
|
9,238
|
|
|
1.67
|
%
|
|
|
4,118
|
|
|
0.87
|
%
|
|
|
2,438
|
|
|
0.99
|
%
|
|
|
11,093
|
|
|
0.80
|
%
|
|
|
2,553
|
|
|
0.26
|
%
|
|
|
29,440
|
|
|
0.81
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net
effective spread is a non-GAAP measure. Effective in fourth quarter
2017, Farmer Mac revised its methodology for calculating net
effective spread to also include the net effects of terminations or
net settlements on financial derivatives and hedging
activities. All prior period information has been recast to
reflect the revised net effective spread methodology.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations—Use of Non-GAAP Measures—Net Effective
Spread" for more information regarding the explanation of net
effective spread.
|
(2) See
above for a reconciliation of GAAP net interest income by line of
business to net effective spread by line of business for three
months ended March 31, 2018.
|
The following table presents quarterly core earnings reconciled
to net income attributable to common stockholders:
Core Earnings by
Quarter Ended
|
|
|
|
|
March
2018
|
|
December
2017
|
|
September
2017
|
|
June
2017
|
|
March
2017
|
|
December
2016
|
|
September
2016
|
|
June
2016
|
|
March
2016
|
|
|
|
|
(in
thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effective
spread
|
$
|
37,101
|
|
$
|
37,467
|
|
$
|
35,976
|
|
$
|
35,334
|
|
$
|
32,526
|
|
$
|
31,448
|
|
$
|
31,681
|
|
$
|
30,503
|
|
$
|
29,440
|
|
Guarantee and
commitment fees
|
|
5,083
|
|
|
5,157
|
|
|
4,935
|
|
|
4,942
|
|
|
5,316
|
|
|
5,158
|
|
|
4,533
|
|
|
4,810
|
|
|
4,669
|
|
Other
|
|
428
|
|
|
69
|
|
|
274
|
|
|
107
|
|
|
485
|
|
|
545
|
|
|
713
|
|
|
466
|
|
|
346
|
|
|
Total
revenues
|
|
42,612
|
|
|
42,693
|
|
|
41,185
|
|
|
40,383
|
|
|
38,327
|
|
|
37,151
|
|
|
36,927
|
|
|
35,779
|
|
|
34,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit related
(income)/expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Release
of)/provision for losses
|
|
(410)
|
|
|
464
|
|
|
384
|
|
|
466
|
|
|
444
|
|
|
512
|
|
|
(31)
|
|
|
458
|
|
|
63
|
|
REO operating
expenses
|
|
16
|
|
|
-
|
|
|
-
|
|
|
23
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
39
|
|
(Gains)/losses on
sale of REO
|
|
-
|
|
|
(964)
|
|
|
(32)
|
|
|
(757)
|
|
|
5
|
|
|
-
|
|
|
(15)
|
|
|
-
|
|
|
-
|
|
|
Total credit
related
(income)/expense
|
|
(394)
|
|
|
(500)
|
|
|
352
|
|
|
(268)
|
|
|
449
|
|
|
512
|
|
|
(46)
|
|
|
458
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
employee
benefits
|
|
6,654
|
|
|
5,247
|
|
|
5,987
|
|
|
6,682
|
|
|
6,317
|
|
|
5,949
|
|
|
5,438
|
|
|
5,611
|
|
|
5,774
|
|
General and
administrative
|
|
4,326
|
|
|
4,348
|
|
|
3,890
|
|
|
3,921
|
|
|
3,800
|
|
|
4,352
|
|
|
3,474
|
|
|
3,757
|
|
|
3,526
|
|
Regulatory
fees
|
|
625
|
|
|
625
|
|
|
625
|
|
|
625
|
|
|
625
|
|
|
625
|
|
|
613
|
|
|
612
|
|
|
613
|
|
|
Total operating
expenses
|
|
11,605
|
|
|
10,220
|
|
|
10,502
|
|
|
11,228
|
|
|
10,742
|
|
|
10,926
|
|
|
9,525
|
|
|
9,980
|
|
|
9,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
31,401
|
|
|
32,973
|
|
|
30,311
|
|
|
29,423
|
|
|
27,136
|
|
|
25,713
|
|
|
27,448
|
|
|
25,341
|
|
|
24,440
|
Income tax
expense(1)
|
|
6,259
|
|
|
11,796
|
|
|
10,268
|
|
|
10,307
|
|
|
8,844
|
|
|
9,189
|
|
|
9,577
|
|
|
8,979
|
|
|
8,568
|
Net (loss)/income
attributable to
non-controlling interest
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(150)
|
|
|
(15)
|
|
|
28
|
|
|
(18)
|
|
|
(16)
|
|
|
(28)
|
Preferred stock
dividends
|
|
3,295
|
|
|
3,296
|
|
|
3,295
|
|
|
3,296
|
|
|
3,295
|
|
|
3,296
|
|
|
3,295
|
|
|
3,296
|
|
|
3,295
|
|
|
Core
earnings
|
$
|
21,847
|
|
$
|
17,881
|
|
$
|
16,768
|
|
$
|
15,970
|
|
$
|
15,012
|
|
$
|
13,200
|
|
$
|
14,594
|
|
$
|
13,082
|
|
$
|
12,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses) on
financial
derivatives and hedging
activities due to fair value
changes
|
|
285
|
|
|
(264)
|
|
|
2,737
|
|
|
2,221
|
|
|
4,805
|
|
|
17,233
|
|
|
1,460
|
|
|
(2,076)
|
|
|
(2,989)
|
|
|
Unrealized
gains/(losses) on
trading assets
|
|
16
|
|
|
60
|
|
|
-
|
|
|
(2)
|
|
|
(82)
|
|
|
(474)
|
|
|
1,182
|
|
|
394
|
|
|
358
|
|
|
Amortization of
premiums/discounts and
deferred gains on assets
consolidated at fair value
|
|
(686)
|
|
|
(129)
|
|
|
(954)
|
|
|
(117)
|
|
|
(127)
|
|
|
(40)
|
|
|
(157)
|
|
|
(371)
|
|
|
(281)
|
|
|
Net effects of
terminations or
net settlements on financial
derivatives and hedging
activities
|
|
1,242
|
|
|
632
|
|
|
862
|
|
|
232
|
|
|
948
|
|
|
2,150
|
|
|
238
|
|
|
398
|
|
|
(608)
|
|
|
Re-measurement of net
deferred
tax asset due to enactment of
new tax legislation
|
|
-
|
|
|
(1,365)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Income tax effect
related to
reconciling items
|
|
(180)
|
|
|
(105)
|
|
|
(926)
|
|
|
(816)
|
|
|
(1,941)
|
|
|
(6,604)
|
|
|
(953)
|
|
|
579
|
|
|
1,232
|
|
|
|
Net income
attributable to
common stockholders
|
|
22,524
|
|
$
|
16,710
|
|
$
|
18,487
|
|
$
|
17,488
|
|
$
|
18,615
|
|
$
|
25,465
|
|
$
|
16,364
|
|
$
|
12,006
|
|
$
|
10,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) As of
May 1, 2017, Farmer Mac transferred its entire 65% ownership
interest in AgVisory back to the limited liability
company.
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/farmer-mac-reports-first-quarter-2018-results-300645932.html
SOURCE Farmer Mac