UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 29, 2002
Federal Agricultural Mortgage Corporation
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(Exact name of registrant as specified in its charter)
Federally chartered
instrumentality of
the United States 0-17440 52-1578738
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1133 21st Street, N.W., Suite 600, Washington, D.C. 20036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 872-7700
No Change
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(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99 Press release dated April 29, 2002.
Item 9. Regulation FD Disclosure.
On April 29, 2002, the Registrant issued a press release to clarify
inaccurate information contained in a news article about the Registrant
published on April 28, 2002. The press release is filed as Exhibit 99 hereto and
incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
By: /s/ Jerome G. Oslick
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Name: Jerome G. Oslick
Title:Vice President - General Counsel
Dated: April 29, 2002
EXHIBIT INDEX
Exhibit No. Description Page No.
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99 Press Release Dated April 29, 2002 5
Exhibit 99
FOR IMMEDIATE RELEASE CONTACT
April 29, 2002 Jerome Oslick
202-872-7700
Farmer Mac Discredits NY Times "Smear" Article
Appears to Have Been Prompted by Short Sellers
Washington, D.C. -- The Federal Agricultural Mortgage Corporation (Farmer
Mac, NYSE: AGM and AGMA) today responded to an article that appeared on the
front page of the Business Section of the April 28, 2002 New York Times. The
company noted the numerous inaccuracies contained in the article, expressed its
view that the article was prompted by short sellers whom the author could have
identified as such, and stated that it expects to refer the matter to the
Securities and Exchange Commission for appropriate action.
Article Riddled with Inaccuracies
Farmer Mac noted that the article contained many inaccuracies, and made the
following corrective statements:
(a) Farmer Mac's health is not "dicey": it had capital of $137 million on
March 31, 2002, $21.8 million in excess of current statutory minimum levels
currently enforced by its independent federally-chartered regulator, the Farm
Credit Administration (FCA) and the company is confident that it will have
capital an even-greater excess of "risk-based capital" when those standards go
into effect on May 23, 2002;
(b) the company's General Counsel does not earn $1 million per year; the
accurate number is about half of that amount, in line with the recommendations
of an independent outside compensation consultant to place him below the 75th
percentile level for similar companies;
(c) PaineWebber was not being paid $66,000 per month by Farmer Mac in 1988
- the correct number was lower than that during the public offering and $25,000
per month thereafter;
(d) the insulting story about Mr. Edelman insisting upon participating in
the artificial insemination of a cow is patently untrue;
(e) there was no talk in 1996 that "Washington might pull the plug" on
Farmer Mac - based upon its track record of performance, the company asked to
have its charter reformed to bring it into conformity with the residential
secondary markets, to carry out its Congressional mission more effectively;
(f) while it is true that Farmer Mac owns approximately $166 million in
preferred stock, the article omits to state that these are mission-related
assets, issued by Farm Credit institutions (also Government-Sponsored
Enterprises) to facilitate their lending activities, and supported by their
agricultural mortgage assets;
(g) Farmer Mac did not "pay itself" guarantee fees - it received those fees
out of the income from agricultural mortgage-backed securities it held and
classified a portion of that income as guarantee income rather than as interest
income, to more accurately present the net interest yield on those assets;
(h) while it is true that Farmer Mac offers loans to "part-time farmers,"
that term fairly describes a large percentage of American farmers who derive a
significant portion of their income from non-farm activities but, nevertheless,
own farms and make a meaningful contribution to the U.S. agricultural economy;
(i) there is nothing improper about Farmer Mac's guarantee being made
available to cover loans on the books of agricultural lenders, as this
assumption of credit risk on qualified mortgages is wholly within the company's
purpose and does, indeed, increase funds available for agricultural mortgage
lending;
(j) based upon the fact that guarantee commitments received by AgFirst Farm
Credit Bank accounted for less than 1.7% of the bank's total loan assets,
Director Raines' participation on the Audit Committee was approved by the full
Board, as was that of Director DeBriyn, from whose AgStar Farm Credit
Association Farmer Mac purchased loans under a long-term standby agreement equal
to 0.01% of the association's total loan assets;
(k) retired Farmer Mac vice-president Thomas R. Clark did not make $5.2
million, or any number close to that, in pre-tax (much less after-tax) gains
upon exercising the options he accumulated over 12 years' service to the company
and receiving a pension equal to less than two years' pay;
(l) the company does not end its fiscal year in May, but on December 31st;
(m) Farmer Mac does not understate the value of options granted to its
employees: it relies upon the valuations provided by its independent outside
compensation consultant in accordance with industry standards;
(n) the company's definition of "delinquent loans" has never shifted - the
method of calculation has been constant and the definition has been clarified at
times, as part of a broader ongoing effort to improve disclosure;
(o) the article understates Farmer Mac's current reserves by referring to
the year-end 2001 level (though the higher $17.2 million level was set forth in
its April 18, 2002 earnings release) and omits to state that net reserves are
growing at a rate of approximately $1.13 million per quarter;
(p) the article ignores the loan-to-value ratios on all of the company's
seriously delinquent loans, a weighted average of 59% as set forth in its Form
10-K filed on March 27, 2002, which makes the recovery of 73% of the $59.8
million of delinquent loans referred to in the article a very reasonable
expectation to beat;
(q) Farmer Mac has created a thriving secondary market for agricultural
mortgages, despite the assertion to the contrary in the article, as witnessed by
its current 10.7% guarantee coverage of agricultural mortgages held by
conventional lenders, with a 67% increase for the twelve months ended March 31,
2002 compared to the twelve months ending March 31, 2001;
(r) while the article suggests that the company's assets and liabilities
are not matched, they are in fact closely matched, as evidenced by the relative
insensitivity of "market value of equity" to interest rate fluctuations, as
disclosed in the previously-mentioned Form 10-K; and
(s) the average holding of Class C common stock held by company directors
is not the $816,249 number in the article - actually, the average current value
of stock and options held by directors (excluding shares as to which they
disclaim beneficial ownership), both vested and non-vested, is approximately
$465,000.
Author Taken in by Short Sellers
Ms. Cowan's statements in the article, and in her conversations and e-mail
exchanges with Farmer Mac, suggest to management that her undertaking may have
been prompted by short sellers of Farmer Mac Class C common stock. A number of
unusual questions asked by Ms. Cowan correlated closely to misconceived queries
first raised by suspected short sellers of the stock in a meeting prior to the
company's April 18, 2002 press release. That release showed the company to have
performed better in the first quarter of 2002 than analysts or investors might
have expected, and the stock rose in value in subsequent trading. Those events
placed short sellers in a "short squeeze," unable to cover their short positions
in a rising stock and on the verge of losing millions of dollars. Under the
circumstances, management has reason to believe that they contacted Ms. Cowan,
an author with a track record of presumptive "expose" articles, and suggested
that she compose one about Farmer Mac based upon their misconceptions about the
company. Farmer Mac believes Ms. Cowan breached her professional duty in failing
to "know" her sources before writing an article, particularly a financial
article that could benefit those sources. As Ms. Cowan wrote the article, the
short sellers who were also her sources appear to have increased their short
positions. Finally, they appear to have indulged in a crescendo of short sales
in the afternoon of April 26, 2002, when Ms. Cowan likely informed them that a
negative article about the company would be published in the April 28, 2002
edition of her newspaper.
Matter to be Referred to SEC
Based upon the foregoing facts, Farmer Mac has determined to refer this
matter to the U.S. Securities and Exchange Commission (SEC) for review of
possible price manipulation and illegal trading activities by the author of the
article and the short sellers.
Forward-Looking Statements
In addition to historical information, this release includes
forward-looking statements reflecting 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; and (3) the
possibility of additional statutory or regulatory restrictions applicable to
Farmer Mac, such as the imposition of regulatory risk-based capital requirements
in excess of the statutory minimum and critical capital levels or restrictions
on Farmer Mac's investment authority. These and other factors are discussed in
Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2001, as
filed with the Securities and Exchange Commission on March 27, 2002. 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 U.S. Department of Agriculture 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-K referenced
above) is available on Farmer Mac's website at www.farmermac.com.
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