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2001 Another Record Year for Farmer Mac

Fourth Quarter Earnings Up 72%

WASHINGTON, Jan. 23 /PRNewswire-FirstCall/ -- The Federal Agricultural Mortgage Corporation (Farmer Mac) (AGM) today announced diluted operating earnings per share of $0.43 for fourth quarter 2001, a new record and a 72 percent increase over fourth quarter 2000 diluted earnings per share of $0.25. Diluted earnings per share for 2001 reached $1.45, another record and a 58 percent increase compared to $0.92 for 2000. Operating income was $5.2 million for the quarter and $17.1 million for the year, compared to $2.9 million and $10.4 million for the same periods in 2000. Operating income, revenues, and earnings per share are measures that exclude the cumulative effect of the change in accounting principles recognized on January 1, 2001 under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), and its ongoing effects during 2001, in order to present measures consistent with prior presentations. Net income for fourth quarter 2001, including the cumulative and ongoing effects of FAS 133 during the quarter, was $5.5 million or $0.46 per share.

Farmer Mac President and Chief Executive Officer Henry D. Edelman observed, "During 2001, the financial markets experienced both dramatic changes and volatility in interest rates. The agricultural economy was under continued stress and our country entered into its first recession in ten years. Farmer Mac met these challenges with its flexible financial framework and adapted its product offerings to meet customer needs and targeted marketing efforts to increase brand awareness. We successfully expanded our market penetration and grew our portfolio of outstanding guarantees. The fourth quarter marked another consecutive period of record-setting financial performance for Farmer Mac and was a fine finish to a solid year."

"As of December 31st, our outstanding guarantees are $1.1 billion higher than they were one year ago; our retained earnings are more than $16.2 million higher; and our interest-earning assets are over $250 million higher. Farmer Mac is positioned for another year of growth and success during 2002. We believe Farmer Mac is on track to meet or exceed current market analyst projections for its financial performance in 2002."

Net Interest Income
Net interest income was $7.2 million for fourth quarter 2001, and $26.9 million for the year, compared to $4.5 million and $17.7 million for the same periods in 2000. The net interest yield, exclusive of guarantee fees, was 0.88 percent for fourth quarter 2001, compared to 0.98 percent for third quarter 2001, which included a 0.09 percent benefit from yield maintenance payments, and 0.60 percent for fourth quarter 2000. The strength in Farmer Mac's net interest yield is a result of continued emphasis on sound interest rate risk management and debt issuance strategies and a 0.04 percent benefit from yield maintenance payments.

Other Income
Other income, which is comprised of guarantee fee income and miscellaneous income, totaled $4.7 million for fourth quarter 2001 and $16.4 million for the year, compared to $3.5 million and $12.1 million, respectively, in 2000. Guarantee fee income, the largest component of other income, was $4.5 million for fourth quarter 2001, compared to $3.4 million for fourth quarter 2000 and $4.2 million for third quarter 2001. The relative increase in guarantee fees reflects an increase in the average balance of outstanding guarantees.

Operating Expenses
During fourth quarter 2001, operating expenses totaled $2.4 million, compared to $2.3 million for fourth quarter 2000 and $2.5 million for third quarter 2001. Operating expenses as a percentage of operating revenues were 21 percent for fourth quarter 2001, compared to 28 percent for fourth quarter 2000 and 21 percent for third quarter 2001.

Credit
As of December 31, 2001, Farmer Mac I loans purchased or guaranteed after the enactment in 1996 of changes to Farmer Mac's statutory charter ("post-1996 Act loans") that were 90 days or more past due, in foreclosure or in bankruptcy represented 1.90 percent of the principal balance of all post-1996 Act loans, compared to 2.16 percent as of September 30, 2001 and 1.25 percent as of December 31, 2000. (Farmer Mac assumes 100 percent of the credit risk on post-1996 Act loans; pre-1996 Act loans are supported by mandatory 10 percent subordinated interests that mitigate Farmer Mac's credit exposure.) Farmer Mac anticipates fluctuations in the delinquency rate from quarter to quarter, with higher levels likely to be reported at the end of the first and third quarters of each year due to the semiannual payment characteristics of most Farmer Mac loans. The year-over-year increase in the delinquency rate is attributable to the aging of the portfolio and continuing liquidity issues in the agricultural sector rather than to a decline in land values or other drivers of loan losses.

USDA is forecasting net cash income on farms at $50.9 billion for 2002, down $8.7 billion from the revised 2001 forecast of $59.6 billion, assuming government payments of $10.7 billion for 2002. The USDA's government payments assumption is based on existing legislation however, and does not take into account increases expected to be enacted in the pending farm bill or any emergency assistance that may be contained in special legislation, which represented $9.1 billion of the $21.0 billion in government payments to the agricultural sector for 2001. USDA currently expects farm real estate values to rise during 2002 by about 1 percent. Regionally, farm real estate values may vary with differing rates of increase, or even decrease, depending on commodities grown and regional economic factors.

Management believes that existing post-1996 Act delinquent loans have current loan-to-value ratios that adequately protect against losses at liquidation, with the exception of certain loans that are secured by land with improvements related to particular commodities that do not benefit from direct government payments. Farmer Mac expects loan losses to migrate to somewhat higher levels than in prior quarters, similar to the $850,000 in losses recognized during fourth quarter 2001. Notwithstanding that, management believes that ongoing potential losses will be covered adequately by the reserve for losses, based on the value of the collateral securing the loans, Farmer Mac's loan collection experience and continuing provisions for the reserve for losses. In certain collateral liquidation scenarios Farmer Mac may recover amounts previously written off, if liquidation proceeds exceed previous estimates. As of December 31, 2001, the weighted average original loan-to-value ratio for all post-1996 Act loans was 49 percent. Farmer Mac's provision for principal and interest losses was $2.0 million for fourth quarter 2001, compared to $1.3 million for fourth quarter 2000 and $2.0 million for third quarter 2001. As of December 31, 2001, Farmer Mac's net reserve for losses totaled $15.9 million, or 0.45 percent of outstanding post- 1996 Act loans and AMBS, compared to $14.7 million (0.44 percent) as of September 30, 2001 and $11.3 million (0.45 percent) as of December 31, 2000.

Provision for Income Taxes
The provision for income taxes totaled $2.3 million for fourth quarter 2001 and $8.4 million for the year, compared to $1.6 million and $5.7 million for the same periods in 2000. Farmer Mac's effective tax rate for 2001 was 33.1 percent compared to 35.5 percent for the year 2000. The reduction in the rate from year to year reflects the effects of certain tax-advantaged investment securities.

Capital
Farmer Mac's regulatory core capital totaled $126.0 million as of December 31, 2001, compared to $101.2 million as of December 31, 2000 and $116.3 million as of September 30, 2001. The regulatory core capital balance as of December 31, 2001 exceeded Farmer Mac's regulatory minimum capital requirement by approximately $15.5 million.

On April 12, 2001, the Farm Credit Administration ("FCA") issued its final risk-based capital regulation for Farmer Mac. The regulation became effective on May 23, 2001, and Farmer Mac will be required to meet the risk-based capital standards by May 23, 2002. As noted in our June 12, 2000 comment letter to the FCA on the proposed regulation, Farmer Mac believes that certain significant aspects of the risk-based capital regulation do not comply with the authorizing statute. We have maintained a dialogue with FCA regarding the application of the regulation and the complex underlying economic model -- particularly the provisions that suggest to us that the FCA went outside the authorizing statute. If no change is made to the regulation before compliance is required, it could lead to an increase in the capital requirement for certain newly guaranteed program assets and so cause Farmer Mac to alter its strategic plan for future growth. While we are at this time uncertain whether the regulation, as issued, would alter that strategic plan, we continue to expect that any significant issues raised by the regulation will be resolved in accordance with the authorizing statute before Farmer Mac is required to meet the risk-based capital standards.

Average return on equity, excluding the effects of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities, and FAS 133, was 17.1 percent for fourth quarter 2001, compared to 11.5 percent for fourth quarter 2000 and 17.7 percent for third quarter 2001.

Financial Statement Effects of FAS 133
During fourth quarter 2001, the net after-tax income resulting from FAS 133 was $204,000, and the net after-tax increase in accumulated other comprehensive income was $7.6 million. For third quarter 2001, the net after- tax charge against earnings and the reduction in accumulated other comprehensive income were $190,000 and $14.1 million, respectively. Accumulated other comprehensive income is not a component of Farmer Mac's regulatory core capital. Management believes that reporting financial results by reference to operating income, revenues, and earnings per share (excluding the effects of FAS 133) provides a more accurate comparison of Farmer Mac's financial performance to previous presentations.


                    Federal Agricultural Mortgage Corporation
Consolidated Balance Sheets
(in thousands)

December 31, December 31,
2001 2000
(unaudited) (audited)
Assets:
Cash and cash equivalents $437,831 $537,871
Investment securities 1,007,954 836,757
Farmer Mac guaranteed securities 1,690,376 1,679,993
Loans 201,812 30,279
Financial derivatives 15 -
Interest receivable 56,253 55,681
Guarantee fees receivable 6,004 5,494
Prepaid expenses and other assets 16,963 14,824
Total assets $3,417,208 $3,160,899
Liabilities and stockholders' equity:
Notes payable:
Due within one year $2,233,267 $2,201,691
Due after one year 968,463 767,492
Total notes payable 3,201,730 2,969,183
Financial derivatives 20,762 -
Accrued interest payable 26,358 20,852
Accounts payable and accrued
expenses 18,037 26,880
Reserve for losses 15,884 11,323
Total liabilities 3,282,771 3,028,238
Stockholders' equity 134,437 132,661
Total liabilities and stockholders'
equity $3,417,208 $3,160,899


Federal Agricultural Mortgage Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)

Quarter Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2000 2001 2000
(unaudited)(unaudited)(unaudited)(audited)
Interest income:
Investments and cash
equivalents $11,494 $23,147 $65,334 $91,905
Farmer Mac guaranteed
securities 25,234 28,886 110,169 100,649
Loans 2,525 534 5,710 2,866
Total interest income 39,253 52,567 181,213 195,420
Interest expense 32,056 48,061 154,274 177,722
Net interest income 7,197 4,506 26,939 17,698
Gains/(Losses) on financial
derivatives
and trading assets 317 - (726) -
Other income:
Guarantee fees 4,534 3,368 15,807 11,677
Miscellaneous 140 149 560 399
Total other income 4,674 3,517 16,367 12,076
Total revenues 12,188 8,023 42,580 29,774
Expenses:
Compensation and
employee benefits 1,454 1,168 5,601 4,521
Regulatory fees 23 133 735 584
General and administrative 957 966 4,094 3,744
Total operating expenses 2,434 2,267 10,430 8,849
Provision for losses 1,986 1,297 6,725 4,739
Total expenses 4,420 3,564 17,155 13,588
Income before income taxes 7,768 4,459 25,425 16,186
Income tax provision 2,287 1,586 8,419 5,749
Net income before
cumulative effect 5,481 2,873 17,006 10,437
Cumulative effect of change
in accounting principles,
net of tax - - (726) -
Net income $5,481 $2,873 $16,280 $10,437
Earnings per share:
Basic earnings per share $0.48 $0.26 $1.44 $0.94
Diluted earnings per share $0.46 $0.25 $1.38 $0.92
Earnings per share excluding
cumulative
effect of change in accounting
principles:
Basic earnings per share $0.48 $0.26 $1.50 $0.94
Diluted earnings per share $0.46 $0.25 $1.45 $0.92
Operating earnings per share:*
Basic earnings per share $0.45 $0.26 $1.51 $0.94
Diluted earnings per share $0.43 $0.25 $1.45 $0.92
* operating earnings per share excludes the cumulative effect of FAS 133
and its ongoing effects during 2001.


Federal Agricultural Mortgage Corporation
Supplemental Information

The following tables present quarterly and annual information regarding loan purchases and guarantees, outstanding guarantees and delinquencies.

                       Farmer Mac Purchases and Guarantees
Farmer Mac I

Loans & Farmer
AMBS LTSPC Mac II Total
(in thousands)
For the quarter ended:

December 31, 2001 $62,953 $237,140 $39,564 $339,657
September 30, 2001 69,561 246,472 42,396 358,429
June 30, 2001 85,439 499,508 57,012 641,959
March 31, 2001 48,600 49,695 47,707 146,002
December 31, 2000 45,727 180,502 36,029 262,258
September 30, 2000 292,658 158,291 40,036 490,985
June 30, 2000 45,578 34,409 94,870 174,857
March 31, 2000 58,283 - 22,570 80,853

For the year ended:
December 31, 2001 266,553 1,032,815 186,679 1,486,047
December 31, 2000 442,246 373,202 193,505 1,008,953


Outstanding Guarantees (1)
Farmer Mac I
Post-1996 Act
Loans & AMBS Pre-1996
(2) LTSPC Act
(in thousands)
As of:
December 31, 2001 $1,658,716 $1,884,260 $48,979
September 30, 2001 1,605,160 1,731,861 58,813
June 30, 2001 1,572,800 1,537,061 65,709
March 31, 2001 1,466,443 1,083,528 72,646
December 31, 2000 1,615,914 862,804 83,513
September 30, 2000 1,621,516 707,850 92,536
June 30, 2000 1,354,623 575,143 100,414
March 31, 2000 1,310,710 551,423 107,403
December 31, 1999 1,266,522 575,097 118,214


Outstanding Guarantees (1)

Farmer Mac Held in
II Total Portfolio(3)

As of:
December 31, 2001 $595,156 $4,187,111 $1,857,232
September 30, 2001 608,944 4,004,778 1,804,391
June 30, 2001 579,251 3,754,821 1,763,676
March 31, 2001 549,003 3,171,620 1,648,896
December 31, 2000 517,703 3,079,934 1,581,905
September 30, 2000 491,820 2,913,722 1,571,315
June 30, 2000 467,352 2,497,532 1,292,359
March 31, 2000 387,992 2,357,528 1,268,889
December 31, 1999 383,266 2,343,099 1,237,623


Farmer Mac I Delinquencies (4)
Distribution of Post-1996
Post- Pre-
1996 1996 Act Delinquencies -
As of: Act Act Total UPB as of Dec. 31, 2001
(by original loan-to-value
ratio)
December 31, 2001 1.90% 7.00% 1.99% 0.00% to 40.00% 5%
September 30, 2001 2.16% 4.66% 2.21% 40.01% to 50.00% 9%
June 30, 2001 1.72% 3.69% 1.77% 50.01% to 60.00% 38%
March 31, 2001 2.62% 5.83% 2.72% 60.01% to 70.00% 45%
December 31, 2000 1.25% 6.49% 1.44% 70.01% to 80.00% 3%
September 30, 2000 1.80% 5.55% 1.96% Total 100%
June 30, 2000 1.25% 4.12% 1.41%
March 31, 2000 1.45% 4.89% 1.65%


(1) Pre-1996 Act loans back securities that are supported by unguaranteed
subordinated interests representing approximately 10 percent of the
balance of the loans. Farmer Mac assumes 100 percent of the credit
risk on post-1996 Act loans. Farmer Mac II loans are guaranteed by
the U.S. Department of Agriculture.
(2) Periods prior to June 30, 2001 include only AMBS.
(3) Included in total outstanding guarantees.
(4) Includes loans 90 days or more past due, in foreclosure or in
bankruptcy.
MortgageDaily.com
Forward-Looking Statements
In addition to historical information, this release includes forward- looking statements that reflect management's current expectations for Farmer Mac's future financial results, business prospects and business developments. Management's expectations for Farmer Mac's future necessarily involve assumptions, estimates, and the evaluation of risks and uncertainties. Various factors could cause actual events or results to differ materially from those expectations. Some of the important factors that could cause Farmer Mac's actual results to differ materially from management's expectations include: (1) uncertainties regarding the rate and direction of the development of the secondary market for agricultural mortgage loans; (2) uncertainties in the agricultural economy resulting from low commodity prices, weak demand for U.S. agricultural products and crop damage from natural disasters; (3) uncertainties concerning the level of government payments for agriculture that are expected to be provided for in the pending farm bill and the effect of the level of such payments on the agricultural economy; (4) uncertainties as to the intended operation of the risk-based capital standards promulgated by FCA in the second quarter of 2001, which Farmer Mac is required to comply with by May 23, 2002; and (5) the implementation of additional statutory or regulatory restrictions applicable to Farmer Mac or restrictions on Farmer Mac's investment authority. These and other factors are discussed in Farmer Mac's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, as filed with the Securities and Exchange Commission on November 13, 2001. The forward-looking statements contained herein represent management's expectations as of the date of this release. Farmer Mac undertakes no obligation to release publicly the results of any revisions to the forward- looking statements included herein to reflect events or circumstances after today, or to reflect the occurrence of unanticipated events.

Farmer Mac is a stockholder-owned instrumentality of the United States chartered by Congress to establish a secondary market for agricultural real estate and rural housing mortgage loans, and to facilitate capital market funding for USDA guaranteed farm program and rural development loans. Farmer Mac's Class C and Class A common stocks are listed on the New York Stock Exchange under the symbols AGM and AGMA, respectively. Additional information about Farmer Mac (as well as the Form 10-Q referenced above) is available on Farmer Mac's website at http://www.farmermac.com. The conference call to discuss Farmer Mac's fourth quarter 2001 earnings and this press release will be webcast on Farmer Mac's website beginning at 10:00 a.m. eastern time, Thursday, January 24, 2002, and an audio recording of that call will be available on Farmer Mac's website after the call is concluded.

SOURCE:
Farmer Mac

CONTACT:
Jerome Oslick of Farmer Mac
202.872.7700
http://www.farmermac.com

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