Federal Agricultural Mortgage Corp (AGM) 2009 Q1 法說會逐字稿

Greetings, and welcome to the first quarter 2009 earnings conference call for Federal Agricultural Mortgage Corporation. (Operator Instructions).

It is now my pleasure to introduce your host, Mr. Michael Gerber, President and CEO. Thank you, Mr. Gerber. You may begin.

Thank you, and good morning, everyone. I am Mike Gerber, President and CEO of Farmer Mac; and the Farmer Mac management team and I are pleased to welcome you to Farmer Mac's first quarter 2009 earnings conference call. Before starting, I would like to comment on forward-looking statements that may be made today. In addition to historical information, this conference call may include forward-looking statements that reflect management's current expectations for Farmer Mac's future, financial results, business prospects and business developments. Management's expectation for the corporation's future necessarily involve a number of assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by those forward-looking statements. Some of these factors and events are identified in our press release issued today and discussed in Farmer Mac's quarterly reports on Form 10-Q for the first quarter 2009, and in Farmer Mac's annual report on Form 10-K for 2008. The Form 10-Q and a Form 8-K containing the press release were filed this morning with the SEC. The Form 10-K was filed with the SEC on March 16th, 2009. Any forward-looking statements made by Farmer Mac during this call represent management's current expectations. Farmer Mac undertakes no obligation to release publicly the results of revisions to any such forward-looking statements to reflect any future events or circumstances except as otherwise mandated by the SEC. A recording of this call will be available on Farmer Mac's website approximately two hours after the conclusion of the call. We are pleased with Farmer Mac's financial results for first quarter 2009. Farmer Mac's capital surplus now exceeds $67 million. During the first quarter, Farmer Mac raised an additional 10.8 million of capital in conjunction with new business and bolstered our capital position by selling $354.5 million of loans at a gain of $1.6 million. In addition, both GAAP and core earnings were positive for the quarter, with GAAP earnings topping $33 million and core earnings at 4.8 million. As of March 31st, Farmer Mac's core capital totaled $250.3 million compared to 207 million as of December 31st, 2008.

Farmer Mac's core capital as of March 31st, 2009 exceeded the statutory minimum capital requirement of 182.9 million by $67.4 million. Farmer Mac was also in compliance with its risk-based capital standards as of the end of the quarter. The risk based capital stress test generated a regulatory capital requirement of $40 million as of March 31st, 2009. As of March 31st, 2009, Farmer Mac's regulatory capital of 271.5 million exceeded the risk-based capital requirement by approximately $231.5 million. Farmer Mac does report financial results on a GAAP basis and also reports core earnings. The Company uses core earnings to measure corporate economic performance and develop financial plans, because in management's view, core earnings more accurately represent Farmer Mac's economic performance, the transaction economics and the business trends before the effects of earnings, or on earnings of changes in the fair values of financial derivatives and trading assets and FAS-B 159. Farmer Mac's disclosure of core earnings, a non-GAAP measure, is not intended to replace GAAP information, but rather to supplement it. Farmer Mac's core earnings of $4.8 million or $0.47 per diluted share for the first quarter of 2009 compared to a loss of 8.8 million or $0.86 per diluted share for fourth quarter 2008, and core earnings of 10.5 million or $1.06 per diluted share for the first quarter of 2008.

For the first quarter of 2009, GAAP net income available to common stockholders was 33.5 million or $3.31 per diluted share compared to a loss of 61.1 million, or $6.03 per diluted share for fourth quarter 2008, and a loss of 8.3 million or $0.84 of diluted share for the first quarter in 2008. The GAAP net income in the first quarter of 2009 was primarily driven by gains on the values of financial derivatives, trading assets, offset somewhat by further provisions for losses principally related to credits in our ethanol portfolio. Net interest income was 23.4 million for the first quarter compared to 25.1 for the fourth quarter of 2008, and 17.9 for the first quarter in 2008. Farmer Mac's effective net interest spread was 101 basis points for the first quarter of 2009 compared to 106 basis points for the first quarter of 2008. Farmer Mac's short-term borrowing cost continued at historically low levels during the first quarter of 2009.

And the Company's interest rate sensitivity remained low during the quarter, despite the continued volatility in the financial markets. As of March 31st, 2009, Farmer Mac's effective duration GAAP was minus .7 months compared to minus 2.4 months at December 31st, 2008. Loans underlining the Corporation's guarantees and commitments remain steady, at just under $10 billion; and with the exception of the ethanol loans, continued to perform well. Guarantee and commitment fees which compensate Farmer Mac for assuming the credit risk on loans underlying Farmer Mac's guaranteed securities and standby commitments were 7.4 million for the first quarter 2009 compared to 7.8 for the fourth quarter of 2008, and 6.6 million for the first quarter of 2008. Delinquencies on non-ethanol loans remained near historic loan levels, consistent with strength of the US AG economy.

The ethanol industry has suffered due to the volatility of commodity prices; and while those prices have stabilized, the industry still faces significant challenges. Farmer Mac's 90-day delinquencies, including ethanol loans, were 86.2 million, representing 1.9% of the portfolio as of March 31st, 2009. Excluding ethanol loans, 90-day delinquencies were 27.7 million, or 60 -- .61% of the portfolio. Farmer Mac did record provisions for losses of $6.1 million and chargeoffs of 2 million during the first quarter of 2009, again both primarily related to ethanol. We continue to monitor the ethanol portfolio; and in fact, do so for all segments of our portfolio. As we look ahead, we continue to believe that any credit losses will remain within manageable levels. As evidence by these results, Farmer Mac continues to make progress. Our focus has been on evaluating our business model, removing risk from the balance sheet and strengthening our capital position. We remain committed to those efforts, and they are beginning to show benefits.

In addition, lenders in both the agricultural and rural utility sectors continue to face both capital market and economic challenges. These will provide opportunities, we believe, for new products and for growth for Farmer Mac. We look forward to working with our customers and our partners and our investors to fulfill our mission of bringing liquidity and the benefits of the secondary markets to rural America. More complete information on Farmer Mac's performance for the quarter ended March 31st, 2009, is set forth in the Form 10-Q Farmer Mac filed this morning with the SEC. We will now open the call up to questions.

Thank you, sir. (Operator Instructions). Thank you, ladies and gentlemen. Our first question comes from the line of [Masia Taylor] with DTF. Please proceed with your question.

Yes, Mr. Gerber. You were talking about Farmer Mac's delinquencies in relationship to ethanol loans. I wonder if you could give us a little more detail about how significant ethanol is to your overall portfolio and how the ethanol segment is performing. They bring your total delinquencies -- 90-day delinquencies -- to 1.9%, but what percent of the ethanol portfolio is delinquent?

At this point in time -- well as of March 31st, we had about $305 million of ethanol exposure, and the non-performing rate on that was 19%, or about $58 million of that portfolio. So obviously, that's the significant portion of our -- both non-performing assets and our delinquencies.

Thank you.

(Operator Instructions).

We do have two questions that were called in ahead of time, and I will go through those. First of all, the question was asked, is the Company able to buy back shares of stock in the open market? The answer is, yes; although at this point, we have no plan filed and in place to do so. The second question that was sent in asked about the ownership of stock by the upper management and why that was at lower levels. The answer there is really twofold. One is a change in management; so by definition, those numbers will be lower because of new management people in those positions. And secondly, we have had clearly a situation because of the financial position of the Company, a blackout period over the last five or six months that have not allowed management really to step in and purchase stock.

Thank you sir; but we have no further questions currently if queue.

Well, if not, thank you for your attendance on the call today. We appreciate you joining us for our call, and we will look forward to speaking with you on our second quarter earnings call. Thank you, and have a great day.

Ladies and gentlemen this concludes today's teleconference, and you may disconnect your lines at this time. Thank you for your participation.