Federal Agricultural Mortgage Corp (AGM) 2003 Q1 法說會逐字稿

Good morning ladies and gentleman, and welcome to the Federal Agricultural Mortgage Corporation Q1 2003 Earnings Conference Call. At this time our participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star 0 on your telephone keypad.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Henry Edelman, President and CEO of Federal Agricultural Mortgage Corporation. Thank you Mr. Edelman. You may begin.

Morning. Pleased you could join us this morning for Farmer Mac's first quarter earnings call. And I have with me the other officers of Farmer Mac. Nancy Corsiglia our CFO, Tom Stenson our VP Ag Finance, Tim Buzby our Controller and Jerry Oslick our General Counsel.

I'd like to start off with a mention about forward-looking statements. In addition to the historical information that will be contained in the call, the conference call may also include forward-looking statements that reflect management's current expectations for Farmer Mac's future financial results, business prospects and business development.

Management's expectations for Farmer Mac future necessarily involves 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, are set forth in the press release which was filed today as an 8K and also discussed in Farmer Mac's annual report on form 10K for the year ended December 31 '02 as filed with the Securities and Exchange Commission on March 27 of this year.

Any forward-looking statements we make during this call represent management's expectations as of the date of the call. Farmer Mac undertakes no obligation to release publicly the results of any revision to such forward-looking statements to reflect events or circumstances after today or to reflect the occurrence of unanticipated events except as otherwise mandated by the SEC.

With that, let me turn to the earnings release. I'm going to be brief. I'm going to simply go through the very beginning of the release and open the call up to questions to provide discussion opportunity for our investors to participate in the call.

Farmer Mac is pleased to announce net income for first quarter of 2003 of $8.4 million or 70 cents per diluted share, compared to $2.8 million and 23 cents per diluted share for fourth quarter 2002 and $7.2 million and 59 cents per diluted share for first quarter 2002. Farmer Mac's first quarter performance further evidences it's ongoing financial strength as it fulfills its congressionally mandated mission to serve farmers, ranchers and rural homeowners throughout America.

We are pleased with our record GAAP earnings. In addition, Farmer Mac focuses on its core earnings, which as described in this press release is a non-GAP measure developed by Farmer Mac to present net income less the after tax effect of FAS 133. And less the after tax net gains and losses on the repurchase of debt.

Whereas Farmer Mac GAAP earnings increased significantly, its core earnings were $5.9 million for first quarter 2003, compared to $5.9 million for fourth quarter 2002 and $5.2 million for first quarter of 2002. We are encouraged by the continuing improvements in the performance of the portfolio of loans underlying our guarantees and long term standby purchase commitments.

As of March 31, 2003, non performing assets were somewhat higher in dollars than they were a year ago, at $94.8 million versus $87.1 million. But lowered the percentage of all loans held in loans underlying post 1996 act Farm Act One guaranteed securities and standbys at 1.97 percent versus 2.32 percent a year ago. When real estate owned and loans performing in bankruptcy are excluded from this measure, 90 day delinquencies at March 31st, 2003, were lower than they were on March 31st, 2002, in both dollars and percentage terms. At $76.2 million, which was 1.58 percent, compared to $79.2 million, which was 2.11 percent on March 31st, 2002. These ladder trends resulted from enhanced credit management effort, directed toward problem loan servicing and lost mitigation.

While we are pleased with our financial performance and progress on loan servicing, new business volumes is down slightly in first quarter 2003. We believe this is traceable to general conditions in the agricultural mortgage market, affecting all agricultural mortgage lenders, and to residual affect of adverse publicity based on misinformation about Farmer Mac disseminated in 2002.

Nonetheless, lender interest in Farmer Mac continues to rebound. Steady stream of new volume was added in the forms of Farm Mac I and II individual loan purchases and additions to existing standby arrangements. And prospects for larger portfolio transactions continue to exist.

First quarter 2003 financial results demonstrate the long term capability of Farmer Mac business model, based in large part on the annuity-like incomes from guarantee and commitment fees. We believe Farmer Mac's financial condition and business prospects are strong. And the core earnings in 2003 will exceed core earnings of $1.90 per share in 2002. With that, I'm going to open it up for questions. Thank you.

Thank you. At this time, we will be conducting a question and answer session. To allow everyone the opportunity to ask a question, your time will be limited to one question. If you would like to ask a question, please press star, one on your telephone keypad. A confirmation tone will indicate your line is in the question cue. To remove your question from the cue, please press star, two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. I will pause while we wait for questions. Once again, if you do have a question, please press star, one on your telephone keypad, keeping in mind that if you are using speaker equipment, it may be necessary to pick up your handset before pressing the key. Your first question comes from with . Sir, please state your question.

Good morning, Henry.

Morning.

You refer in your release to general conditions in the agricultural mortgage market, and I wonder if you could give us a little flavor on that. Has there been a deterioration in the overall volume of mortgages, etc., etc.?

Thank you. The answer to that is that there has not been a deterioration. There has been, actually, a small increase in the volume. However, there has been a dramatic increase in the amount of very short-term reset and short term adjustable rate lending which is the result of attractive short term rates and the fact that the lenders themselves have a very high level of liquidity for short term lending and they are able to take advantage of that, and at this point we haven't seen it coming into our program in Farm Act I, although in Farm Act II we have seen some positive effects because of the increase in shorter term lending.

So we expect that business -- short term situations will begin to correct itself during this year as rates begin to back up a little bit as we look at what's happening in the economy more broadly.

Mr. Edelman, there are no further questions at this time, however, we can allow more additional time for more questions if you'd like.

We'd be happy to take any more questions.

Thank you, sir. Your next question comes from with . Sir, please state your question.

Hi Henry, and congratulations on a good quarter.

Thank you, Jordan.

Quick question. This press release is the most extensive and detailed yet. And with the somewhat liquidating or -- I'm not sure if that's the right term for Partners. Would it be fair to say that almost another regulatory cloud has dissipated from your company, which has been the main thing holding the stock back at this point?

Well, we thing that the regulators are certainly going to be fair and reasonable with Farmer Mac. We believe that right now we're waiting to see the outcome of the GAO report and we don't know exactly what the timing of that is going to be but we can't comment on things with the FDA, and beyond that we have nothing else to add.

Your next question comes from Mr. with UBS Warburg. Sir please state your question.

Good morning, actually, this is Bose George. I'd just like to say that your outlook on the operating expenses going forward has been some volatility in that number in the last couple of quarters and whether the current level is reasonable?

I'll let Tim Buzby answer that.

You're right, Bose, there has been some volatility in that, we've addressed that in previous press releases. We think the levels that you are seeing in the first quarter are somewhat consistent with what we would expect to see going forward. As we've said previously, though, there are always unforeseen circumstances that could come about that could cause that to change, but we think the first quarter is a reasonable indicator.

Thank you. Next question please.

The next question comes from with . Please state your question.

Actually it's David Foster with John. I was just wondering if you could discuss your interest rate sensitivity and how it might have changed from Q1.

might want to talk about it.

Hi David. While our interest rate sensitivity has actually remained relatively stable, year over year, you see the market value of equity and the net interest income sensitivity tests reported in the press release and there is very little change vs. year end. Some change but relatively little.

Thank you Nancy. Next question please?

There are no further questions at this time.

Alright. Well thank everyone very much. We appreciate your participating on the call this morning, we look forward to talking to you in a few months, and many of you even sooner. Thank you and good morning.

Thank you Mr. Edelman. This concludes today's conference. Thank you again for your participation.