-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LRrdeSQZeUFlSTvogif93j3nJ7zSDxWsGg+0AHcPY0FxkUbXuJyQP/lHGjfU7l3i 5JhfFZNdlXwqSE2guSZRdA== 0000845877-96-000024.txt : 20040503 0000845877-96-000024.hdr.sgml : 20040503 19960515152700 ACCESSION NUMBER: 0000845877-96-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 DATE AS OF CHANGE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERAL AGRICULTURAL MORTGAGE CORP CENTRAL INDEX KEY: 0000845877 STANDARD INDUSTRIAL CLASSIFICATION: FEDERAL & FEDERALLY-SPONSORED CREDIT AGENCIES [6111] IRS NUMBER: 521578738 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17440 FILM NUMBER: 96567082 BUSINESS ADDRESS: STREET 1: 1133 21ST STREET, N.W. STREET 2: STE 600 CITY: WASHINGTON STATE: DC ZIP: 20036 BUSINESS PHONE: 2028727700 MAIL ADDRESS: STREET 1: 1133 21ST STREET, N.W. STREET 2: SUITE 600 CITY: WASHINGTON STATE: DC ZIP: 20036 10-Q 1 FORM 10Q FOR FIRST QUARTER As filed with the Securities and Exchange Commission on May 15, 1996 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996. Commission File Number 0-17440 FEDERAL AGRICULTURAL MORTGAGE CORPORATION (Exact name of registrant as specified in its charter) Federally chartered instrumentality of the United States ___________________________________ (State or other jurisdiction of incorporation or organization) 52-1578738 _________________________________________ (I.R.S. employer of identification number) 919 18th Street, N.W., Suite 200, Washington, D.C. 20006 _________________________________________ ____________________________ (Address of principal executive offices) (Zip code) (202) 872-7700 (Registrant's telephone number, including area code) ____________________________________________________ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. As of May 15, 1996, there were 990,000 shares of Class A Voting Common Stock, 593,401 shares of Class B Voting Common Stock, and 1,214,463 shares of Class C Non-Voting Common Stock outstanding. PART I - FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS The following interim consolidated financial statements of the Federal Agricultural Mortgage Corporation (the "Corporation" or "Farmer Mac") have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Such interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted as permitted by such rules and regulations. Management believes that the disclosures are adequate to present fairly the consolidated financial position, consolidated results of operations and consolidated cash flows at the dates and for the periods presented. These condensed financial statements should be read in conjunction with the audited 1995 financial statements of Farmer Mac. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year. The following information concerning Farmer Mac's financial statements as of March 31, 1996, December 31, 1995 and March 31, 1995 is included herein. Consolidated Balance Sheets................................... 3 Consolidated Statements of Operations......................... 4 Consolidated Statements of Cash Flows......................... 5
FEDERAL AGRICULTURAL MORTGAGE CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) March 31, December 31, 1996 1995 (unaudited) ASSETS: Cash and cash equivalents $ 74,537 $ 8,336 Interest receivable 9,584 15,572 Guarantee fees receivable 333 573 Investment securities Held-to-maturity 7,419 7,419 Available-for-sale 54,688 55,862 Farmer Mac I & II Securities 401,049 417,169 Other investments 13,985 2,340 Farmer Mac I & II payments receivable 10,970 4,939 Office equipment, net 59 65 Prepaid expenses and other assets 302 189 TOTAL ASSETS $ 572,926 $ 512,464 LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Debentures, notes and bonds, net: Due within one year $ 279,200 $ 207,422 Due after one year 274,857 284,084 Accrued interest payable 6,663 8,394 Accounts payable and accrued expenses 715 740 Allowance for sold Farmer Mac I & II Securities 118 112 TOTAL LIABILITIES 561,553 500,752 STOCKHOLDERS' EQUITY Common stock: Class A Voting, $1 par value, no maximum authorization, 670,000 shares issued and outstanding 670 670 Class B Voting, $1 par value, no maximum authorization, 593,401 shares issued and outstanding 593 500 Class C Non-Voting, $1 par value, no maximum authorization, 1,214,463 shares issued and outstanding 1,214 1,170 Additional paid in capital 19,751 19,331 Loan receivable for purchase of stock (557) - Unrealized (loss) gain on securities available-for-sale (41) 140 Accumulated deficit (10,257) (10,099) TOTAL STOCKHOLDERS' EQUI TY 11,373 11,712 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 572,926 $ 512,464 See accompanying notes to consolidated financial statements.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Amounts) Three months ended March 31, March 31, 1996 1995 (unaudited) INTEREST INCOME: Investments and cash equivalents $ 1,469 $ 1,328 Farmer Mac I and II Securities 7,452 6,702 TOTAL INTEREST INCOME 8,921 8,030 INTEREST EXPENSE 8,394 7,763 NET INTEREST INCOME 527 267 OTHER INCOME: Guarantee fees 303 307 Miscellaneous 35 17 TOTAL OTHER INCOME 338 324 OTHER EXPENSES: Compensation and employee benefits 531 465 Professional fees 157 85 Insurance 51 57 Rent 41 42 Regulatory fees 71 92 Board of Directors fees and meeting expenses 88 78 Administrative 84 79 TOTAL OTHER EXPENSES 1,023 898 NET LOSS $ (158) $ (307) NET LOSS PER SHARE $ (0.06) $(0.13) See accompanying notes to consolidated financial statements.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Three Months Ended March 31, March 31, 1996 1995 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Loss from Operations $ (158) $ (307) Adjustments to reconcile net loss to cash provided by operating activities: Amortization of premium on Farmer Mac I and II portfolio 942 1,403 Discount Note amortization 2,309 1,719 Decrease in guarantee fees receivable 240 124 Decrease in interest receivable 5,988 5,161 Increase in Farmer Mac I and II payments receivable (6,031) (3,536) Increase in prepaid expenses and other assets (113) (93) Amortization of debt issuance costs 45 50 Decrease in accounts payable and accrued expenses (25) (43) Decrease in accrued interest payable on Medium-Term Notes (1,731) (595) Provision for losses on Farmer Mac I Program 27 29 Other (20) (10) Net cash provided by operating activities 1,473 3,902 CASH FLOWS FROM INVESTING ACTIVITIES: Farmer Mac II purchases (15,033) (8,007) Purchases of investments (11,645) (19,002) Proceeds from maturity of investments 994 - Proceeds from Farmer Mac I and II principal repayments 30,190 18,465 Purchases of office equipment (3) (2) Net cash provided (used) by investing activities 4,503 (8,546) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of Medium-Term Notes - 9,989 Payments to redeem Medium-Term Notes (29,280) (7,185) Proceeds from issuance of Discount Notes 371,505 306,525 Discount Notes redeemed (282,000) (307,500) Net cash provided by financing activities 60,225 1,829 Net increase (decrease) in cash and cash equivalents 66,201 (2,815) Cash and cash equivalents at beginning of period 8,336 73,129 Cash and cash equivalents at end of period $ 74,537 $70,314 Supplemental disclosures of cash flow information: Cash paid during the three-month period for: Interest $ 7,800 $ 6,577 See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ACCOUNTING POLICIES. (a) Principles of Consolidation Financial information at and for the three months ended March 31, 1996 is consolidated to include the accounts of Farmer Mac and its two wholly owned subsidiaries, Farmer Mac Mortgage Securities Corporation and Farmer Mac Acceptance Corporation. All material intercompany transactions have been eliminated in consolidation. (b) Reclassifications Certain reclassifications of the 1995 information were made to conform with the 1996 presentation. NOTE 2. OFF-BALANCE SHEET FARMER MAC GUARANTEED SECURITIES. Farmer Mac is a party to transactions involving financial instruments with off-balance sheet risk. These transactions include guarantees by Farmer Mac of securities not held in its portfolio. Farmer Mac issues guarantees in the normal course of business to fulfill its statutory purpose of increasing liquidity for agricultural mortgage lenders. Farmer Mac guarantees the timely payment of principal and interest on securities issued under the Farmer Mac I and Farmer Mac II Programs. The following table sets forth the outstanding principal balances of Farmer Mac Guaranteed Securities issued under the Farmer Mac I and Farmer Mac II Programs and not held in its portfolio. March 31, 1996 December 31, 1995 (In Thousands) Farmer Mac I............... $ 82,392 $ 94,763 Farmer Mac II.............. $ 4,544 $ 4,810
NOTE 3. SUBSEQUENT EVENT. On April 10, 1996, Farmer Mac sold 320,000 newly issued shares of Class A Voting Common Stock to Zions First National Bank ("Zions") at a price of $8.00 per share. This transaction generated $2.6 million in new capital and increased the outstanding shares of Class A Voting Common Stock to 990,000 shares, of which Zions owns approximately 33%. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RERSULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Farmer Mac's primary sources of liquidity are issuances of debt obligations, and principal and interest payments received on mortgages underlying securities purchased by Farmer Mac under the Farmer Mac I and Farmer Mac II Programs. Farmer Mac's Board has authorized the issuance of up to $1.5 billion of Discount Notes and Medium-Term Notes. Funds from the borrowings may be used in the Farmer Mac I and Farmer Mac II Programs to cover transaction costs, guarantee payments and the costs of purchasing Guaranteed Portions, Qualified Loans and Securities (including Farmer Mac Guaranteed Securities backed by Guaranteed Portions and/or Qualified Loans). Funds from the borrowings also may be used for liquidity purposes. At March 31, 1996, Farmer Mac had $554.1 million of Discount Notes and Medium-Term Notes (net of unamortized debt issuance costs, discounts and premiums) outstanding, a $62.6 million increase from December 31, 1995. During the first three months of 1996, Farmer Mac issued $371.5 million of Discount Notes (net of discount) and redeemed $282.0 million of Discount Notes and $29.3 million of Medium-Term Notes. Farmer Mac did not issue any Medium-Term Notes during the first three months of 1996. The $66.2 million increase in cash and cash equivalents, comprised largely of short-term commercial paper, from December 31, 1995 to March 31, 1996, was attributable primarily to Farmer Mac's Discount Note issuance strategy. As a result of the uncertainty associated with the legislative initiative at year end 1995, Farmer Mac lowered the amount of its Discount Notes outstanding at December 31, 1995. Following the enactment of the legislation in the 1996 first quarter, Farmer Mac increased its Discount Note issuances to reestablish its presence in that market, resulting in a corresponding increase in its short-term investment portfolio. The $10.5 million increase in investments, comprised of investment securities and other investments, from December 31, 1995 to March 31, 1996, primarily resulted from principal and interest payments received on mortgage-backed securities previously issued under the Corporation's Linked Portfolio Strategy, and held in anticipation of payments due on the related Notes. The payments received on the mortgage-backed securities also largely accounted for the $16.1 million net reduction in Farmer Mac I and II Securities and the $6.0 million decrease in interest receivable. Proceeds of any future Note issuances are expected to be used by the Corporation primarily to fund purchases of Qualified Loans, Guaranteed Portions and Securities under the Farmer Mac I and Farmer Mac II Programs and to maintain Farmer Mac's liquidity position. At March 31, 1996, Farmer Mac's total loss allowance was $414 thousand. Farmer Mac I and II Securities are shown net of the applicable allowance of $296 thousand at March 31, 1996, representing an increase of $16 thousand from year-end 1995; the allowance for Farmer Mac Guaranteed Securities not held by Farmer Mac was $118 thousand at March 31, 1996, representing an increase of $6 thousand from year-end 1995. Future additions to this allowance will be charged to earnings and the amounts in the allowance account will be used to cover payments of claims under Farmer Mac guarantees. Farmer Mac considers the amounts in the allowance account to be adequate to cover its exposure to guarantee payments in existing Farmer Mac I Guaranteed Securities. Before Farmer Mac is required to make a guarantee payment on those securities, full recourse must be taken against a reserve or subordinated interest initially established in an amount equal to at least ten percent (10%) of the initial pool balance. Under the new legislative authorities provided for in the 1996 Act, Farmer Mac may issue "first loss guarantees" and thus be subject to greater credit risk. Farmer Mac is evaluating the appropriateness of its loan loss reserve policy, particularly as a result of its new status as a first loss guarantor. At March 31, 1996, a total of five loans aggregating $4.9 million were 90 days or more past due, four loans totaling $1.5 million were in foreclosure and title to two loans with an outstanding principal balance of $709 thousand had been acquired by the trust in the Farmer Mac I Program. The 11 loans combined represent 2.2% of the aggregate principal amount of outstanding Farmer Mac I Securities at March 31, 1996. Management believes that no losses will be incurred by Farmer Mac as a result of the loans in foreclosure or the real estate owned by the trust. No loss allowance has been made specifically for the Farmer Mac II Program because the Guaranteed Portions are backed by the full faith and credit of the United States and are not exposed to credit losses. At March 31, 1996, Farmer Mac's regulatory required minimum capital was $6.5 million and its actual capital level was $11.4 million. At December 31, 1995, Farmer Mac's regulatory required minimum capital was $4.7 million, and its actual capital level was $11.7 million. As previously reported, the 1996 Act phases in higher capital requirements over a three-year transition period following the enactment of the 1996 Act. Certain levels of enforcement are given to the FCA depending upon Farmer Mac's compliance with these capital levels. See "Recent Legislative Revisions to Farmer Mac's Statutory Charter _ Summary of Statutory Changes _ Capital" and "Government Regulation of Farmer Mac _ Regulation _ Capital Standards" in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1995. If the fully phased-in (highest) standard under the 1996 Act had been in effect at March 31, 1996, Farmer Mac's actual capital would have been less than the total minimum capital required by $5.0 million. In the opinion of management, Farmer Mac has sufficient liquidity and capital for the next twelve months. Results of Operations Overview. As previously reported, Farmer Mac is in the process of implementing its new legislative authorities by following a two-phased approach. Work on Phase I -- development of an "economic risk model" for pricing loans to be acquired either for cash (through its "cash window") or in exchange for Farmer Mac-guaranteed securities (through its "swap" program) -- is nearing completion. This economic risk model consists of several interrelated "modules," including a loss (guarantee fee) module, securitization module, operating expense module and capital module. The model is currently being evaluated, tested and verified by an independent consultant and is expected to be available for Farmer Mac's use during the 1996 second quarter. Phase II of the implementation planning process -- development of new policies and procedures necessary to implement a direct pooling (individual loan commitments, rate locks and loan purchases) program -- also is underway and is targeted for completion prior to the commencement of the fall agricultural lending season. Farmer Mac anticipates closing the first transaction under its new authorities during the 1996 second quarter. That transaction is expected to involve the purchase from AgFunding (Western Farm Credit Bank's "National AgriMortgage Funding" program) of approximately $100 million in loans, which Farmer Mac would use as collateral to support the issuance soon thereafter of guaranteed securities to be sold to capital markets investors. In addition to preparing for the foregoing loan purchase, Farmer Mac is pursuing swap transactions with portfolio holders of agricultural loans. While Farmer Mac believes there are many benefits to holders through the exchange of loans for Farmer Mac- guaranteed securities, there is no assurance that any such portfolio swap transactions actually will be consummated. Although Farmer Mac's new authorities give it the statutory flexibility to devise programs that operate under guidelines similar to those of Fannie Mae and Freddie Mac, that flexibility does not ensure the success of Farmer Mac's programs. As previously reported, a number of factors have constrained participation in Farmer Mac's programs to date and caused its core business activities to be unprofitable. Those factors have included: the excess liquidity of many agricultural lenders; the attractiveness of loans (otherwise qualified under the Farmer Mac programs) as investments for their originators; the disinclination of many lenders to offer intermediate-term adjustable rate and long-term fixed rate agricultural real estate loans, as a result of the higher profitability associated with short-term lending; the lack of borrower demand for intermediate- term and long-term loans due to the lower interest rates generally associated with shorter term loans; various restrictive provisions in Farmer Mac's charter; and the unfavorable regulatory capital treatment afforded banks and System Institutions holding subordinated securities created in Farmer Mac transactions. Even though the 1996 Act has removed those charter provisions that Farmer Mac had concluded were constraining the operation of the secondary market, most of the other enumerated factors, over which Farmer Mac has little, if any, control, may continue to exist as Farmer Mac seeks to implement its new authorities. If those factors persist, they will affect Farmer Mac's ability to generate the volume of business necessary to achieve profitability and ultimately comply with the requirement to raise capital to higher levels by February 1998. Several positive developments have come from the legislation, including significant increases in AgFunding's loan volume and lender network, as well as the purchase of a substantial portion of Farmer Mac's Voting Common Stock by Zions First National Bank during the 1996 second quarter. Despite these positive developments, and Farmer Mac's ongoing efforts to implement its new authorities under the 1996 Act, Farmer Mac's ability to operate profitably in the future remains uncertain. Profitability will be affected not only by guarantee volume, but also by any payments Farmer Mac must make on its guarantees; payments it must make on its Notes; the income it earns on its investment securities, its mortgage portfolio and other funds it is holding; and its administrative expenses. Losses, if any, on guarantees will be affected by many circumstances, including agricultural growing conditions, agricultural market conditions, changes in government agricultural support policies and the economy, both domestic and international. Farmer Mac's future is still dependent upon continued, more effective and significantly increased utilization of its programs by its Class A and Class B stockholders. General. Farmer Mac reported a net loss for the three months ended March 31, 1996 of $158 thousand, a decrease of $149 thousand from the $307 thousand loss reported for the three months ended March 31, 1995. The decrease in loss is largely attributable to an increase in net interest income, due to a decrease in the cost of interest-bearing liabilities over the comparable period in 1995. Average Balances, Income and Expense, Yields and Rates. The following table presents, for the periods indicated, information regarding interest income on average interest-earning assets and related yields, as well as interest expense on average interest- bearing liabilities and related rates paid. The average balances were calculated by averaging month-end balances. Three Months Ended March 31, (Dollars in Thousands) 1996 1995 _________________________ __________________________ (Dollars in Thousands) Average Income Average Average Income/ Average Balances Expense Rate Balances Expense Rate ASSETS: Earning assets: Farmer Mac I and II Securities $ 411,025 $ 7,452 7.25% $ 370,210 $ 6,702 7.24% Investments and cash equivalents 106,441 1,469 5.52% 93,776 1,328 5.66% Total earning assets 517,466 8,921 6.90% 463,986 8,030 6.92% Other assets 14,838 11,220 $ 532,304 $ 475,206 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities Debentures, notes and bonds, net $ 513,960 $ 8,394 6.53% $ 456,572 $ 7,763 6.80% Other liabilities 6,771 6,594 Stockholders' equity 11,573 12,040 $ 532,304 $ 475,206 Net interest income/ spread $ 527 0.37% $ 267 0.12% Net yield on interest earning assets 0.41% 0.23%
Rate/Volume Analysis. The table below sets forth certain information regarding the changes in the components of Farmer Mac's net interest income for the periods indicated. For each category, information is provided on changes attributable to (a) changes in volume (change in volume multiplied by old rate); (b) changes in rate (change in rate multiplied by old volume); and (c) the total. Combined rate/volume variances, a third element of the calculation, are allocated based on their relative size. Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995 Increase or (Decrease) Due to Rate Volume Total (in thousands) Income from interest-earning assets: Farmer Mac I and II Securities $ 10 $ 740 $ 750 Investments and cash equivalents (33) 174 141 Total income from interest-earning assets (23) 914 891 Expense on interest-bearing liabilities (289) 920 631 Change in net interest income $ 266 $ (6) $ 260
PERIOD ENDED MARCH 31, 1996 COMPARED TO PERIOD ENDED MARCH 31, 1995 Net Interest Income. Net interest income totaled $527 thousand for the three months ended March 31, 1996, a $260 thousand increase from the three months ended March 31, 1995. The increase in net interest income is attributable to the 25 basis point (0.25%) increase in the net interest spread, primarily a result of the decrease in the cost of interest- bearing liabilities from the three months ended March 31, 1995 to the three months ended March 31, 1996. Interest Income. Interest income totaled $8.9 million and $8.0 million for the three months ended March 31, 1996 and 1995, respectively. The $891 thousand increase is attributable to the increase in the average balance of interest-earning assets which more than offset the slight decline in the average rate of interest-earning assets. The increase in the average balance of interest-earning assets is attributable to the increases in the average balance of Guaranteed Portions and Securities issued under the Farmer Mac II Program and the average balance of investments. Interest Expense. Interest expense for the three months ended March 31, 1996 and 1995 totaled $8.4 million and $7.8 million, respectively. The $631 thousand increase in interest expense is attributable to the increase in the average balance of interest-bearing liabilities, offset by the decrease in the average cost of those liabilities. The average balance of interest-bearing liabilities increased $57.4 million from $456.6 million at March 31,1995 to $514.0 million at March 31, 1996. Other Income. Other income totaled $338 thousand and $324 thousand for the three months ended March 31, 1996 and 1995, respectively. Guarantee fee income, the principal component of other income, decreased $4 thousand from $307 thousand for the three months ended March 31, 1995 to $303 thousand for the three months ended March 31, 1996, a result of the reduction in total Guaranteed Securities outstanding from the comparable period in 1995. Miscellaneous income, composed primarily of transaction fees generated from the Farmer Mac II Program, increased $18 thousand from $17 thousand for the three months ended March 31, 1995 to $35 thousand for the three months ended March 31, 1996. The increase in transaction fees resulted from the increased level of issuances under the Farmer Mac II Program. Farmer Mac issued $15.0 million of Farmer Mac II Securities in the three months ended March 31, 1996, as compared to $4.4 million of Farmer Mac II Securities and $3.5 million of Guaranteed Portions purchased during the three months ended March 31, 1995. Other Expenses. Other expenses totaled $1.0 million for the three months ended March 31, 1996, an increase of $125 thousand from the three months ended March 31, 1995. The increase in other expenses is attributable to the increases in professional fees and compensation and employee benefits, which were partially offset by the decrease in regulatory fees. Professional fees, comprised of fees for legal, accounting and consulting services, increased $72 thousand from the three months ended March 31, 1995 to the three months ended March 31, 1996. These increases were largely the result of legal and consulting fees incurred during the 1996 first quarter. Farmer Mac incurred legal fees in connection with negotiating the documentation to effect the purchase by Zions First National Bank of Class A Voting Common Stock. Farmer Mac utilized consultants to assist with the Corporation's legislative initiative, to develop the economic risk model and to advise the Board of Directors on executive compensation. Regulatory fees decreased $21 thousand from the three months ended March 31, 1995 to the three months ended March 31, 1996, a result of the decrease in Farmer Mac's assessment from $368 thousand for the 1994-95 FCA fiscal year to $285 thousand for the 1995-96 FCA fiscal year. Compensation and employee benefits increased $66 thousand from the three months ended March 31, 1995 to the three months ended March 31, 1996, a result of an increase in staffing from the comparable periods in 1995, and a change in the officer compensation structure. Farmer Mac added two additional employees, one in the second quarter of 1995 and one in the fourth quarter of 1995, to assist with the Farmer Mac II Program and portfolio analysis. The Board of Directors worked with a compensation consultant to establish a new compensation structure for officers, which included incorporating the former initial level of targeted annual incentive compensation into annual base salary and devising a long-term incentive compensation program involving the use of non-qualified stock options. No options have been granted under this new structure, although target levels have been established. Dividends. Farmer Mac has not paid and does not expect to pay dividends on its common stock in the near future. Dividends on the common stock are subject to determination and declaration by the Board. In February 1992, the Board adopted a policy stating that no dividends would be paid on Farmer Mac Voting or Non-Voting Common Stock until such time Farmer Mac's stockholders' equity is at least equal to $22 million (the amount of gross proceeds raised by Farmer Mac in its initial common stock offering). Thereafter, up to 50% of accumulated net earnings may be paid out as dividends, provided that stockholders' equity remains at least equal to $22 million. No preference between holders of the Voting Common Stock and Class C Non-Voting Common Stock has been established relating to dividends. The ratio of dividends paid on each share of Class C Non-Voting Common Stock to each share of Voting Common Stock, however, will be three-to-one. Dividends paid to holders of Class A and Class B Voting Common Stock will be equal. PART II - OTHER INFORMATION Item 1. Legal Proceedings. The registrant is not a party to any pending legal proceedings. Item 2. Changes in Securities. Not applicable. Item 3. Defaults upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Stockholders. Not applicable. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Description * 3.1 - Title VIII of the Farm Credit Act of 1971, as most recently amended by the Farm Credit System Reform Act of 1996, P.L. 104-105 (Form 10-K filed March 29, 1996). ** 3.2 - Amended and restated Bylaws of the Registrant. +* 10.1 - Stock Option Plan (Previously filed as Exhibit 19.1 to Form 10-Q filed August 14, 1992). ____________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. +* 10.1.1 - Amendment No. 1 to Stock Option Plan Previously filed as Exhibit 10.2 to Form 10-Q filed August 16, 1993). +* 10.2 - Employment Agreement dated May 5, 1989 between Henry D. Edelman and the Registrant (Previously filed as Exhibit 10.4 to Form 10-K filed February 14, 1990). +* 10.2.1 - Amendment No. 1 dated January 10, 1991 to Employment Agreement between Henry D. Edelman and the Registrant (Previously filed as Exhibit 10.4 to Form 10-K filed April 1, 1991). +* 10.2.2 - Amendment to Employment Contract dated as of June 1, 1993 between Henry D. Edelman and the Registrant (Previously filed as Exhibit 10.5 to Form 10-Q filed November 15, 1993). +* 10.2.3 - Amendment No. 3 dated as of June 1, 1994 to Employment Contract between Henry D. Edelman and the Registrant (Previously filed as Exhibit 10.5 to Form 10-Q filed November 15, 1994). +* 10.2.4 - Amendment No. 4 dated as of February 8, 1996 to Employment Contract between Henry D. Edelman and the Registrant (Form 10-K filed March 29, 1996). +* 10.3 - Employment Agreement dated May 11, 1989 between Nancy E. Corsiglia and the Registrant (Previously filed as Exhibit 10.5 to Form 10-K filed February 14, 1990). +* 10.3.1 - Amendment dated December 14, 1989 to Employment Agreement between Nancy E. Corsiglia and the Registrant (Previously filed as Exhibit 10.5 to Form 10-K filed February 14, 1990). +* 10.3.2 - Amendment No. 2 dated February 14, 1991 to Employment Agreement between Nancy E. Corsiglia and the Registrant (Previously filed as Exhibit 10.7 to Form 10-K filed April 1, 1991). ___________________ * Incorporated by reference to the indicated prior filing. + Management contract or compensatory plan. +* 10.3.3 - Amendment to Employment Contract dated as of June 1, 1993 between Nancy E. Corsiglia and the Registrant (Previously filed as Exhibit 10.9 to Form 10-Q filed November 15, 1993). +* 10.3.4 - Amendment No. 4 dated June 1, 1993 to Employment Contract between Nancy E. Corsiglia and the Registrant (Previously filed as Exhibit 10.11 to Form 10-K filed March 30, 1994). +* 10.3.5 - Amendment No. 5 dated as of June 1, 1994 to Employment Contract between Nancy E. Corsiglia and the Registrant (Previously filed as Exhibit 10.12 to Form 10-Q filed August 15, 1994). +* 10.3.6 - Amendment No. 6 dated as of June 1, 1995 to Employment Contract between Nancy E. Corsiglia and the Registrant (Form 10-Q filed August 14, 1995). +* 10.3.7 - Amendment No. 7 dated as of February 8, 1996 to Employment Contract between Nancy E. Corsiglia and the Registrant (Form 10-K filed March 29, 1996). +* 10.4 - Employment Agreement dated June 13, 1989 between Thomas R. Clark and the Registrant (Previously filed as Exhibit 10.6 to Form 10-K filed April 1, 1990). +* 10.4.1 - Amendment No. 1 dated February 14, 1991 to Employment Agreement between Thomas R. Clark and the Registrant (Previously filed as Exhibit 10.9 to Form 10-K filed April 1, 1991). +* 10.4.2 - Amendment to Employment Contract dated as of June 1, 1993 between Thomas R. Clark and the Registrant (Previously filed as Exhibit 10.12 to Form 10-Q filed November 15, 1993). +* 10.4.3 - Amendment No. 3 dated June 1, 1993 to Employment Contract between Thomas R. Clark and the Registrant (Previously filed as Exhibit 10.16 to Form 10-K filed March 30,1994). _________________ * Incorporated by reference to the indicated prior filing. + Management contract or compensatory plan. * 10.4.4 - Amendment No. 4 dated as of June 1, 1994 to Employment Contract between Thomas R. Clark and the Registrant (Previously filed as Exhibit 10.17 to Form 10-Q filed August 15, 1994). +* 10.4.5 - Amendment No. 5 dated as of June 1, 1995 to Employment Contract between Thomas R. Clark and the Registrant (Form 10-Q filed August 14, 1995). +* 10.4.6 - Amendment No. 6 dated as of February 8, 1996 to Employment Contract between Thomas R. Clark and the Registrant (Form 10-K filed March 29, 1996). +* 10.5 - Employment Agreement dated April 29, 1994 between Charles M. Lewis and the Registrant (Previously filed as Exhibit 10.18 to Form 10-Q filed August 15, 1994). +* 10.5.1 - Amendment No. 1 dated as of June 1, 1995 to Employment Contract between Charles M. Lewis and the Registrant (Form 10-Q filed August 14, 1995). +* 10.5.2 - Amendment No. 2 dated as of February 8, 1996 to Employment Contract between Charles M. Lewis and the Registrant (Form 10-K filed March 29, 1996). +* 10.6 - Employment Agreement dated October 7, 1991 between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.16 to Form 10-K filed March 30, 1992). +* 10.6.1 - Amendment to Employment Contract dated as of June 1, 1993 between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.17 to Form 10-Q filed November 15, 1993). +* 10.6.2 - Amendment No. 2 dated June 1, 1993 to Employment Contract between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.21 to Form 10-K filed March 30, 1994). +* 10.6.3 - Amendment No. 3 dated June 1, 1994 to Employment Contract between Michael T. Bennett and the Registrant (Previously filed as Exhibit 10.22 to Form 10-K filed August 15, 1994). __________________ * Incorporated by reference to the indicated prior filing. + Management contract or compensatory plan. +* 10.6.4 - Amendment No. 4 dated as of June 1, 1995 to Employment Contract between Michael T. Bennett and the Registrant (Form 10-Q filed August 14, 1995). +* 10.6.5 - Amendment No. 5 dated as of February 8, 1996 to Employment Contract between Michael T. Bennett and the Registrant (Form 10-K filed March 29, 1996). +* 10.7 - Employment Agreement dated March 15, 1993 between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.17 to Form 10-Q filed May 17, 1993). +* 10.7.1 - Amendment to Employment Contract dated as of June 1, 1993 between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.19 to Form 10-Q filed November 15, 1993). +* 10.7.2 - Amendment No. 2 dated June 1, 1993 to Employment Contract between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.25 to Form 10-K filed March 30, 1994). +* 10.7.3 - Amendment No. 3 dated as of June 1, 1994 toEmployment Contract between Christopher A. Dunn and the Registrant (Previously filed as Exhibit 10.26 to Form 10-Q filed August 15, 1994). +* 10.7.4 - Amendment No. 4 dated as of June 1, 1995 to Employment Contract between Christopher A. Dunn and the Registrant (Form 10-Q filed August 14, 1995). +* 10.7.5 - Amendment No. 5 dated as of February 8, 1996 to Employment Contract between Christopher A. Dunn and the Registrant (Form 10-K filed March 29, 1996). * 10.8 - Lease Agreement, dated September 30, 1991 between 919 Eighteenth Street, N.W. Associates Limited Partnership and the Registrant (Previously filed as Exhibit 10.20 to Form 10-K filed March 30, 1992). __________________ * Incorporated by reference to the indicated prior filing. + Management contract or compensatory plan. * 10.9 - Strategic Alliance Agreement, dated November 15, 1994 between Western Farm Credit Bank and the Registrant, as amended January 1, 1995 (Previously filed as Exhibit 10.28 to Form 10-K filed March 31, 1995). * 10.9.1 - Amendment No. 2 dated as of December 15, 1995 to Strategic Alliance Agreement between Western Farm Credit Bank and the Registrant (Form 10-K filed March 29, 1996). ** 10.9.2 - Amendment No. 3 dated as of March 15, 1996 to Strategic Alliance Agreement between Western Farm Credit Bank and the Registrant. 21 - Subsidiaries. 21.1 - Farmer Mac Mortgage Securities Corporation, a Delaware Corporation. 21.2 - Farmer Mac Acceptance Corporation, a Delaware Corporation. * 99.1 _ Map of U.S. Department of Agriculture (USDA) Regions (Previously filed as Exhibit 1.1 to Form 10-K filed April 1, 1991). (b) Reports on Form 8-K. The Registrant filed a report on Form 8-K on February 10, 1996 to report the amendment of its charter through the enactment of the Farm Credit System Reform Act, P.L. 104-105, 110 Stat. 162 (1996). The charter, as amended, was included with the Registrant's Form 10-K filed March 29, 1996 as Exhibit 3.1. ___________________ * Incorporated by reference to the indicated prior filing. ** Filed herewith. + Management contract or compensatory plan. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERAL AGRICULTURAL MORTGAGE CORPORATION May 15, 1996 By: /s/ Henry D. Edelman _____________________________________ Henry D. Edelman President and Chief Executive Officer (Principal Executive Officer) /s/ Nancy E. Corsiglia ___________________________________ Nancy E. Corsiglia Vice President - Business Development, Treasurer and Chief Financial Officer (Principal Financial Officer) Securities and Exchange Commission Washington, D.C. 20549 Exhibits to Form 10-Q under The Securities Exchange Act of 1934 Federal Agricultural Mortgage Corporation Exhibit Description ** 3.2 Amended and restated Bylaws of the Registrant. ** 10.9.2 Amendment No. 3 dated as of March 15, 1996 to Strategic Alliance Agreement between Western Farm Credit Bank and the Registrant. ___________________ ** Filed Herewith. EXHIBIT 3.2 EXHIBIT 10.9.2 EX-1 2 EX-3.(II)-BYLAWS BY-LAWS OF THE FEDERAL AGRICULTURAL MORTGAGE CORPORATION ("FARMER MAC") as amended by the Board of Directors on May 11, 1995 Table of Contents ARTICLE I NAME AND LOCATION OF OFFICES Section 1. Name..................................... 1 Section 2. Principal Office and Other Offices........1 Section 3. Seal......................................1 Section 4. Service of Process........................1 Section 5. Fiscal Year...............................1 ARTICLE II PURPOSES Section 1. Statutory Purposes........................1 Section 2. Ancillary Purposes........................2 ARTICLE III OFFICERS AND EMPLOYEES Section 1. Number and Type...........................2 Section 2. Appointment and Confirmation..............2 Section 3. Removal...................................2 Section 4. Vacancies.................................2 Section 5. The President.............................3 Section 6. The Secretary.............................3 Section 7. The Treasurer.............................3 Section 8. The Controller............................3 Section 9. Employee Conduct..........................4 Section 10. Outside or Private Employment.............4 ARTICLE IV BOARD OF DIRECTORS Section 1. Powers....................................4 Section 2. Number and Type of Directors..............5 Section 3. Meetings and Waiver of Notice.............6 Section 4. Meetings by Telephone.....................6 Section 5. Quorum....................................6 Section 6. Action Without a Meeting..................6 Section 7. Compensation..............................7 Section 8. Chairman and Vice Chairman................7 Section 9. Standing Committees.......................7 (a) Audit Committee......................7 (b) Compensation Committee...............8 (c) Executive Committee .................8 (d) Finance Committee....................9 (e) Program Development Committee.......10 (f) Public Policy Committee.............10 Section 10. Ad Hoc Committees........................10 ARTICLE V SHAREHOLDERS Section 1. Special Meeting..........................10 Section 2. Annual Meeting...........................11 Section 3. Notice...................................11 Section 4. Waiver of Notice.........................11 Section 5. Record Date..............................11 Section 6. Voting Lists.............................12 Section 7. Quorum...................................12 Section 8. Proxies..................................12 Section 9. Organization.............................13 Section 10. Voting of Shares.........................13 Section 11. Inspectors of Votes......................14 ARTICLE VI SHARES OF STOCK Section 1. Issuance and Conditions..................14 Section 2. Common Stock.............................14 Section 3. Redemption...............................15 Section 4. Dividends on Voting Common Stock and Non-Voting Common Stock..................15 Section 5. Preferred Stock..........................15 Section 6. Dividends, Redemption, Conversion of Preferred Shares.........................16 Section 7. Preference on Liquidation................16 Section 8. Purchase of Own Shares...................16 Section 9. Consideration for Shares.................16 Section 10. Stated Capital...........................16 Section 11. No Preemptive Rights.....................17 Section 12. Liability of Shareholders................17 ARTICLE VII CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. Certificates.............................17 Section 2. Contents.................................18 Section 3. Transfer.................................18 Section 4. Records..................................19 ARTICLE VIII INDEMNIFICATION Section 1. Authorization............................19 Section 2. Procedure................................20 Section 3. Advance Payments.........................20 Section 4. Other Rights to Indemnification..........20 Section 5. Indemnification Insurance................20 ARTICLE IX CONTRACTS, LOANS, CHECKS, DEPOSITS AND INVESTMENTS Section 1. Contracts................................21 Section 2. Loans....................................21 Section 3. Checks, Drafts, etc......................21 Section 4. Deposits.................................21 Section 5. Investments..............................21 ARTICLE X FACSIMILE SIGNATURES.................21 ARTICLE XI AMENDMENTS....................22 ARTICLE I NAME AND LOCATION OF OFFICES Section 1. Name The Corporation shall do business as the Federal Agricultural Mortgage Corporation. Section 2. Principal Office and Other Offices The principal office of the Corporation shall be located in Washington, D.C. The Corporation may establish ther offices in such other places, within or without the District of Columbia, as the Board of Directors shall, from time to time, deem useful for the conduct of the Corporation's business. Section 3. Seal The seal of the Corporation shall be of such design as shall be approved and adopted from time to time by the Board of Directors, and may be affixed to any document by impression, by printing, by rubber stamp, or otherwise. Section 4. Service of Process The Corporate Secretary or any Assistant Secretary of the Corporation shall be agents of the Corporation upon whom any process, notice or demand required or permitted by law to be served upon the Corporation may be served. Section 5. Fiscal Year The fiscal year of the Corporation shall end on the thirty-first day of December of each year. ARTICLE II PURPOSES Section 1. Statutory Purposes The Corporation is organized pursuant to its governing statute, Title VIII of the Farm Credit Act of 1971, as amended, to provide a secondary market for agricultural real estate mortgage loans and to enhance the ability of individuals in small rural communities to obtain financing for moderate-priced homes and to undertake such other activities authorized by such Act as may be necessary and appropriate to further the availability of funds for agricultural real estate mortgage loans and housing in small rural communities. Section 2. Ancillary Purposes The Corporation is further organized to engage in such other related activities that are not prohibited and as the Board of Directors shall from time to time determine to be in the furtherance of its statutory purposes. ARTICLE III OFFICERS AND EMPLOYEES Section 1. Number and Type The officers of the Corporation shall be a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Secretary, a Treasurer, and a Controller, each of whom shall be appointed by the Chairman of the Board of Directors subject to confirmation by resolution of the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be appointed by the Chairman subject to confirmation by resolution of the Board of Directors. Any of the above offices may be held by the same person, except the offices of President and Secretary. Section 2. Appointment and Confirmation The initial officers of the Corporation shall be appointed and confirmed at such time as may be appropriate. Thereafter, the officers shall be appointed and confirmed annually at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the selection of officers is not held at such meeting, such selection shall be held as soon thereafter as practicable. Each officer shall hold office until his successor shall have been duly appointed and confirmed or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Section 3. Removal Any officer may be removed by a majority of the Board of Directors, whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the persons so removed. Appointment or confirmation of an officer shall not of itself create contract rights. Section 4. Vacancies A vacancy in an office because of death, resignation, removal, disqualification or otherwise, may be filled by the Chairman of the Board of Directors, subject to confirmation by the Board of Directors at the meeting next following the appointment, for the unexpired portion of the term. Section 5. The President The President shall be the principal executive officer of the Corporation and, subject to the control of the Board of Directors, shall in general supervise and control all of the business and affairs of the Corporation. He may sign, singly or with the Secretary or any other proper officer of the Corporation authorized by the Board of Directors, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation, or shall be required to be otherwise signed or executed, and in general shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time. Section 6. The Secretary The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-laws; (c) be the custodian of the corporate records and of the seal of the Corporation and see that the Seal of the Corporation is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized; (d) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the President, certificates for shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general control of the stock transfer books of the Corporation; and (g) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. Section 7. The Treasurer The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation, receive and give receipts for monies due and payable to the Corporation from any source whatsoever, and deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with a resolution of the Board of Directors; and (b) in general, perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. Section 8. The Controller The Controller shall: (a) keep full and accurate accounts of all assets, liabilities, commitments, receipts, disbursements, and other financial transactions of the Corporation; (b) certify vouchers for payment by the Treasurer or his designee, and designate, with the written concurrence of the Chairman of the Board, such other officers, agents, and employees, severally, who may so certify; and (c) in general, perform all the duties ordinarily incident to the office of Controller and such other duties as may be assigned to him by the Board of Directors or by the Chairman of the Board. Section 9. Employee Conduct No officer or employee shall engage, directly or indirectly, in any personal business transaction or private arrangement for personal profit which arises from or is based upon his official position or authority or upon confidential information which he gains by reason of such position or authority, and he shall reasonably restrict his personal business affairs so as to avoid conflicts of interest with his official duties. No officer or employee shall divulge confidential information to any unauthorized person, or release any such information in advance of authorization for its release, nor shall he accept, directly or indirectly, any valuable gift favor or service from any person with whom he transacts business on behalf of the Corporation. Section 10. Outside Private Employment No officer or employee shall have any outside or private employment or affiliation with any firm or organization incompatible with his concurrent employment by the Corporation and he shall not accept or perform any outside or private employment which the President of the Corporation determines will interfere with the efficient performance of his official duties. Any officer or employee who intends to perform services for compensation or to engage in any business shall report his intention to do so to the President of the Corporation prior to such acceptance or performance. ARTICLE IV BOARD OF DIRECTORS Section 1. Powers Except as otherwise provided in these By-Laws, the powers of the Corporation shall be exercised by the Board of Directors, which shall have all powers granted to it by the Corporation's governing statute, as may be amended from time to time, and such other powers including, but not limited to, the power: a. to determine the general policies that shall govern the operations of the Corporation; b. to issue stock in the manner provided in Section 8.4 of TitleVIII of the Farm Credit Act of 1971, as amended; c. to adopt, alter and use a corporate seal, which shall be judicially noted; d. to provide for a president, one or more vice presidents, secretary, treasurer, and such other officers, employees and agents, as may be necessary and define their duties and compensation levels, all without regard to title 5, United States Code, and require surety bonds or make other provisions against losses occasioned by acts of the aforementioned persons; e. to provide guarantees in the manner provided under Section 8.6 of Title VIII of the Farm Credit Act of 1971, as amended; f. to have succession until dissolved by law enacted by the Congress; g. to prescribe such standards as may be necessary to carry out Title VIII of the Farm Credit Act of 1971, as amended; h. to enter into contracts and make payments with respect to the contracts; i. to sue and be sued in its corporate capacity and to complain and defend in any action brought by or against the Corporation in any state or federal court of competent jurisdiction; j. to make and perform contracts, agreements, and commitments with persons and entities both inside and outside the Farm Credit System; k. to acquire, hold, lease, mortgage or dispose of, at public or private sale, real and personal property, purchase or sell any securities or obligations, and otherwise exercise all the usual incidents of ownership of property l. to conduct its business, carry on its operations, and have officers and exercise the power granted by the governing statute in any state without regard to any qualification or similar statute in any such state; m. to accept gifts or donations of services, of property, real, personal or mixed, tangible or intangible; and n. to exercise such other incidental powers as are necessary to carry out the powers, duties, and functions of the Corporation in accordance with the governing statute. Section 2. Number and Type of Directors The Board of Directors shall consist of those directors appointed or elected as provided in Section 8.2 of Title VIII of the Farm Credit Act of 1971, as amended. Section 3. Meetings and Waiver of Notice The Board of Directors shall meet at the call of the Chairman or a majority of its members. Notice shall be given to each member by the Secretary at the direction of the calling authority. Such notice shall be by letter, telegram, cable, or radiogram delivered for transmission not later than during the third day immediately preceding the day of the meeting or by word of mouth, telephone, or radio phone, received not later than during the second day immediately preceding the day of the meeting. Notice of any such meeting may be waived in writing signed by the person or persons entitled thereto either before or after the time of the meeting. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. Section 4. Meetings by Telephone Any meeting of the Board of Directors or any meeting of a Board committee may be held with the members of the Board or such committee participating in such meeting by telephone or by any other means of communication by which all such members participating in the meeting are able to speak to and hear one another. Section 5. Quorum The presence, in person or otherwise, in accordance with Section 6 of this Article, of eight of the then incumbent members of the Board of Directors or of a majority of the then incumbent members of a Board committee, as applicable, at the time of any meeting of the Board or such committee, shall constitute a quorum for the transaction of business. The act of the majority of such members present at a meeting at which a quorum is present shall be the act of the Board of Directors or committee, as applicable,unless the act of a greater number is required by these By-Laws. Members may not be represented by proxy at any meeting of the Board of Directors or committee thereof. Section 6. Action Without a Meeting Any action required to be taken by the Board of Directors at a meeting, or by a committee of the Board at a meeting can be taken without a meeting, if a consent in writing, setting forth the actions so taken, is later signed by a majority of the directors, or a majority of the members of the committee, as the case may be. Such consent shall have the same effect as a majority vote of the Board of Directors or committee, as the case may be. Written notice of any action taken pursuant to this section by a majority of the directors, or members of a committee, as the case may be, shall, within 10 days of such action, be given to all directors or members of a committee not consenting to the action. Section 7. Compensation Each director shall be paid such compensation as may be fixed from time to time by resolution of the Board of Directors, and each director shall also be reimbursed for his or her travel and subsistence expenses incurred while attending meetings of the Board of Directors or committees thereof. Section 8. Chairman and Vice Chairman Under the authority of the Corporation's governing statute, the President of the United States shall designate one director from among those directors appointed by the President as provided in Section 8.2 of the Farm Credit Act of 1971, as amended, to be Chairman of the Board of Directors. The Chairman shall preside over meetings of the Board of Directors. The Board of Directors shall select a Vice Chairman from among the directors appointed by the President of the United States who shall have all the rights, duties and obligations of the Chairman at any time when the incumbent Chairman is absent, unable or unwilling so to act, and at any time when there is a vacancy in the office of Chairman. The Vice Chairman shall serve at the pleasure of the Board and shall be selected no less frequently than annually for a term expiring on December 31 of each year. Section 9. Standing Committees The Standing Committees described in this Section shall have such responsibilities and authority as are set forth herein, together with such other responsibilities and authority as may from time to time be provided in resolutions adopted by the Board of Directors. The Board of Directors shall designate members of the Standing Committees from among its members. (a) Audit Committee The Audit Committee shall select and engage independent accountants to audit the books, records and accounts of the Corporation and its subsidiaries, if any, and to perform such other duties as the Committee may from time to time prescribe. The Committee shall review the scope of audits as recommended by the public accountants to ensure that the recommended scope is sufficiently comprehensive. The Audit Committee's selection of accountants shall be made annually in advance of the Annual Meeting of Stockholders and shall be submitted for ratification or rejection at such meeting. The Audit Committee shall receive a special report from the independent accountants, prior to the public accountants' report on the published financial statements. The special report shall, among other things, point out and describe each material item affecting the financial statements of the Corporation which might in the opinion of the independent public accountants receive, under generally accepted accounting principles, treatment varying from that proposed for such statements. The Committee shall decide in its discretion upon the treatment to be accorded such items and shall take such other action in respect of the special report as the Committee may deem appropriate. A copy of the special report shall be transmitted to the Compensation Committee, together with the Audit Committee's decision. (b) Compensation Committee The Compensation Committee shall make recommendations to the Board on the salaries and benefit plans of all corporate directors and officers. The Committee shall recommend a framework to the Board for all compensation plans and shall have authority to act within the framework approved by the Board. The Committee shall have exclusive jurisdiction on behalf of the Corporation to make recommendations to the full Board to approve, disapprove, modify or amend all plans to compensate employees eligible for incentive compensation. The Compensation Committee shall review and approve, prior to implementation, any employee benefit plan and any amendment or modification thereof submitted to the Board to the extent such plan or amendment or modification affects employees under its jurisdiction. (c) Executive Committee The Executive Committee shall, during the intervals between meetings of the Board, have and may exercise the powers of the Board, other than those assigned to the Audit and Compensation Committees, and except that it shall not have the authority to take any of the following actions: * the submission to stockholders of any action requiring stockholders' authorization; * the filling of vacancies on the Board of Directors or on the Executive Committee; * the fixing of compensation of directors for serving on the Board or on the Executive Committee; * the removal of any director, the President or any Vice President, except that vacancies in established management positions may be filled subject to ratification by the Board of Directors; * the amendment or repeal of the By-Laws or the adoption of new by-laws; * the amendment or repeal of any resolution of the Board which, by its terms, is not so amendable or repealable; * the declaration of dividends; and any action which the Chairman or Vice Chairman of the Board of Directors (in the event that the Vice Chairman is the Chairman of the Board due to the absence, inability or unwillingness of the Chairman so to act) the President shall, by written instrument filed with the Secretary, designate as a matter which should be considered by the Board of Directors; and it is further The Executive Committee shall include the Chairman of the Board (or the Vice Chairman, who shall be deemed a member of the Committee at any time when the incumbent Chairman is absent, unable or unwilling so to act), who shall be the Chairman of the Committee, and one representative from each of the Corporation's two elected classes of directors. The designation of such Committee and the delegation thereto of authority shall not relieve any director of any duty he or she owes to the Corporation. The Executive Committee shall meet at the call of its chairman or a majority of its members and all three members of the Committee shall constitute a quorum. The action of the majority of the members of the Committee present at a duly convened meeting shall be the action of the Committee. Members of the Committee may not be represented by proxy at any meeting of the Committee. In connection with each regular meeting of the Board of Directors, the minutes of all meetings of the Executive Committee since the last meeting of the Board shall be distributed to the Board, and the Board shall take such action, if any, as the Board may deem appropriate, to approve, alter or rescind actions, if any, previously taken by the Committee, provided that rights or acts of third parties vested or taken in reliance on such action prior to any such alteration or rescission shall not be adversely affected thereby. (d) Finance Committee The Finance Committee shall be responsible for determining the financial policies of the Corporation and managing the Corporation's financial affairs, except those financial policies and affairs that are assigned to the Audit and Compensation Committees. Board, who shall be chairman of the Committee. During the intervals between meetings of the Board, the Committee shall have and may exercise the powers of the Board, except those assigned to the Audit and Compensation Committees, in the determination of the financial policies of the Corporation and in the management of the financial affairs of the Corporation. The guarantee fee policies of the Corporation shall be reviewed and approved by the Finance Committee and recommended to the Board for its approval. All capital expenditures of the Corporation shall be approved by the Committee, except that it may authorize the President to approve expenditures which do not involve the Corporation in a new line of business. All action taken by the Finance Committee shall be reported to the Board and shall be subject to revision by the Board, provided that no acts or rights of third parties shall be affected thereby. (e) Program Development Committee The Program Development Committee shall have primary responsibility for reviewing and approving all policy matters relating to changes, additions or deletions to the Securities Guide, including the forms and appendices thereto and any other forms or documents used in the Corporation's programs. The Committee shall make recommendations to the Board with respect to commencement of new programs and modification or discontinuance of existing programs. (f) Public Policy Committee The Public Policy Committee shall consider matters of public policy referred to it by the Board or the Chairman including: (i) the Corporation's relationship with and policies regarding Borrowers; (ii) the Corporation's relationship with and policies regarding Congress and governmental agencies and instrumentalities; and (iii) matters which generate actual or apparent conflicts of interest between the Corporation and one or more of its directors. The Committee shall report the outcome of its evaluation of matters under preceding clause (iii) within a reasonable time after reference is made. Section 10. Ad Hoc Committees The Board of Directors may, by resolution adopted by a majority of its members, designate from among its members one or more ad hoc committees, each of which to the extent provided in the resolution and in these By-Laws shall have and may exercise all the authority of the Board of Directors. No such ad hoc committee shall have the authority of the Board of Directors in reference to any powers reserved to the full Board of Directors by the resolution or these By-Laws. ARTICLE V SHAREHOLDERS Section 1. Special Meeting Special meetings of the shareholders shall be held upon the call of either the Chairman or a majority of the directors of the Corporation, and shall be called by the Chairman upon the written request of holders of at least one-third of the shares of the Corporation having voting power. A special meeting may be called for any purpose or purposes for which shareholders may legally meet, and shall be held, within or without the District of Columbia, at such place as may be determined by the Chairman or a majority of the directors of the Corporation, whichever shall call the meeting. Section 2. Annual Meeting An annual meeting of the shareholders shall be held each year at such date and at such time as designated by the Board of Directors. At the meeting, the shareholders entitled to vote shall elect directors and transact such other business as may properly be brought before the meeting. Section 3. Notice Written or printed notice stating the place, day and hour of any meeting and, in the case of a special meeting, the purpose for which the meeting is called, shall be delivered not less than 10 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board, or the Secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation or such other address as the shareholder has in writing instructed the Secretary. Section 4. Waiver of Notice Attendance by a shareholder at a shareholders' meeting, whether in person or by proxy, without objection to the notice or lack thereof, shall constitute a waiver of notice of the meeting. Any shareholder may, either before or after the time of the meeting, execute a waiver of notice of such meeting. Section 5. Record Date For the purpose of determining shareholders entitled to notice or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors shall fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days, in the case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the Board of Directors fails to designate such a date, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividends is adopted, as the case may be, shall be the record date for such determination of shareholders. When a date is set for the determination of shareholders entitled to vote at any meeting of shareholders, such determination shall apply to any adjournment thereof. Section 6. Voting Lists The officer or agent having charge of the stock transfer books for shares of the Corporation shall make a complete record of the shareholders entitled to vote at each meeting of the shareholders or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. Such officer or agent shall also prepare two separate lists of such shareholders, one indicating in alphabetical order which shareholders are financial institutions not members of the Farm Credit System and another indicating in alphabetical order which shareholders are member institutions of the Farm Credit System. Such records shall be produced and kept open at the time and place of the meeting and shall be subject to nspection by any shareholder during the whole time of the meeting for the purposes thereof. Section 7. Quorum A majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn a meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Shares of its own stock belonging to the Corporation shall not be counted in determining the total number of outstanding shares at any given time. Section 8. Proxies At all meetings of shareholders, a shareholder entitled to vote may vote by proxy executed in writing by the shareholder or by its duly authorized attorney in fact. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provisions, as the board of directors of such corporation may determine. All proxies shall be filed with the Secretary of the Corporation before or at the time of the meeting, and shall be revocable, if such revocation be in writing, until exercised. No proxy shall be valid after eleven months from the date of its executions unless otherwise provided in the proxy. The Board of Directors may solicit proxies from shareholders to be voted by such person or persons as shall be designated by resolution of the Board of Directors. The Corporation shall assume the expense of solicitations undertaken by the Board. Any solicitation of proxies by the Corporation shall contain the names of all persons the Corporation proposes to nominate for directorships to be filled at the next meeting, their business addresses, and a brief summary of their business experience during the last five years. Each proxy solicitation shall be accompanied by a copy of the most recent annual report of the Corporation which report, to the satisfaction of the Board of Directors, shall reasonably represent the financial situation of the Corporation as of the time of its preparation. If any shareholder entitled to vote at a meeting of shareholders shall seek a list of shareholders for the purpose of soliciting proxies from any other shareholders, the Corporation may, at its option, either (a) provide the soliciting shareholder with a complete and current list containing the names of all shareholders of the Corporation entitled to vote at such meeting; and their addresses as they appear on the transfer books of the Corporation; or (b) mail such proxy solicitations on behalf of the soliciting shareholders, upon being furnished the material to be mailed and the reasonable cost of the mailing. Section 9. Organization Meetings of the shareholders shall be presided over by the Chairman of the Board of Directors. The Secretary of the Corporation shall act as secretary of every meeting and, if the Secretary is not present, the meeting shall choose any person present to act as secretary of the meeting. Section 10. Voting of Shares Except as provided in this Section, at every meeting of the shareholders, every holder of common stock entitled to vote on a matter coming before such meeting shall be entitled to one vote for each share of common stock registered in its name on the stock transfer books of the Corporation at the close of the record date. At each election of directors, the Chairman of the meeting shall inform the shareholders present of the persons appointed by the President of the United States to be the appointed directors of the Corporation. The shareholders entitled to vote for the election of directors which are institutions of the Farm Credit System shall constitute a single class and shall then proceed to elect five directors. Following the election of directors by shareholders which are institutions of the Farm Credit System, the shareholders entitled to vote for the election of directors which are financial institutions and are not institutions of the Farm Credit System shall constitute a single class and shall proceed to elect five directors. Every holder of common stock entitled to vote for the election of directors shall have the right to cast the number of votes that is equal to the product of the number of shares owned by it multiplied by the number of directors to be elected of the class for which it may vote, and it may cast all such votes for one person or may distribute them evenly or unevenly among any number of persons not greater than the number of such directors of such class to be elected, at its option. Shares of its own stock belonging to the Corporation shall not be eligible to vote on any matter. Section 11. Inspectors of Votes The Board of Directors, in advance of any meeting of shareholders, may appoint one or more Inspectors of Votes to act at the meeting or any adjournment thereof. In case any person so appointed resigns or fails to act, the vacancy may be filled by appointment by the Chairman of the meeting. The Inspectors of Votes shall determine all questions concerning the qualification of voters, the validity of proxies, the acceptance or rejection of votes and, with respect to each vote by ballot, shall collect and count the ballots and report in writing to the secretary of the meeting the result of the vote. The Inspectors of Votes need not be shareholders of the Corporation. No person who is an officer or director of the Corporation, or who is a candidate for election as a director, shall be eligible to be an Inspector of Votes. ARTICLE VI SHARES OF STOCK Section 1. Issuance and Conditions The Board of Directors shall have the power in accordance with the provisions of the governing statute to authorize the issuance of voting common, non-voting common and preferred shares of stock. The Board of Directors may by resolution impose a stock purchase requirement as a prerequisite to participation in any program of the Corporation. Any stock purchase requirement shall not apply to any participant who is prohibited by law from acquiring stock of the Corporation, provided such participant undertakes to make such purchase when such legal restrictions are alleviated, or to such otherwise eligible participants as the Board may by resolution provide. Section 2. Common Stock The Corporation shall have voting common stock having such par value as may be fixed by the Board of Directors, which may only be issued to institutions which are authorized to be issued such shares pursuant to Title VIII of the Farm Credit Act of 1971, as amended. The Corporation may issue non-voting common stock having such par value as may be fixed by the Board of Directors, which may be issued without limitations as to the status of the holders thereof. The aggregate number of shares of non-voting common stock outstanding shall at no time exceed one hundred and ten percent (110%) of the aggregate number of shares of voting common stock then outstanding, each as recorded in the Corporation's books and records (after giving effect to any changes in the Corporation's capital structure, including but not limited to any stock splits or reverse stock splits). Except as otherwise provided in these By-Laws, the powers, preferences and relative and other special rights and the qualifications, limitations and restrictions applicable to all shares of common stock, whether voting common stock or non-voting common stock, shall be identical in every respect. Except as provided in this Section, the voting common stock and the non-voting common stock of the Corporation shall be fully transferable, except that, as to the Corporation, they shall be transferred only on the books of the Corporation. Section 3. Redemption Whenever the Corporation shall determine that any shares of the voting common stock of the Corporation are held by a person, including a partnership, joint venture, trust, corporation or any other association, not eligible to acquire such shares under the provisions of Title VIII of the Farm Credit Act of 1971, as amended, the Corporation shall notify such person in writing that such shares are to be disposed of to a person eligible to acquire such shares within a period of not more than 30 days. If the Corporation determines that the shares have not been transferred within 30 days of such notice, the Corporation may redeem such shares at the lesser of the fair market value thereof or the book value thereof at the date established for such redemption. The power to redeem voting common stock found to be held by ineligible persons granted by this Section shall not be deemed to limit the right of the Corporation, at its discretion, to pursue any other lawful remedy against such ineligible person. Section 4. Dividends on Voting Common Stock and Non-Voting Common Stock To the extent that income is earned and realized, the Board of Directors may from time to time declare and the Corporation shall pay, dividends on the voting common stock and the non-voting common stock, except that no such dividends shall be payable with respect to any share that has been called for redemption after the date established for such redemption. No dividend shall be declared or paid on any share of voting common stock or non-voting common stock at any time when any dividend is due on the shares of preferred stock and has not been paid. The ratio of any dividends paid on each share of non-voting common stock to any dividends paid on each share of voting common stock shall be three-to-one. Dividends to the holders of the non-voting common stock and the voting common stock are to be paid concurrently. Such ratio may be decreased only by the affirmative vote of the holders of two-thirds of the outstanding shares of the non-voting common stock. Section 5. Preferred Stock The Corporation may issue shares of preferred stock having such par value, and such other powers, preferences and relative and other special rights, and qualifications, limitations and restrictions applicable thereto, as may be fixed by the Board of Directors. Such shares shall be freely transferable, except that, as to the Corporation, such shares shall be transferred only on the books of the Corporation. Section 6. Dividends, Redemption, Conversion of Preferred Shares The holders of the preferred shares shall be entitled to such rate of cumulative dividends, and such shares shall be subject to such redemption or conversion provisions, as may be provided for at the time of issuance. Such dividends shall be paid out of the net income of the Corporation, to the extent earned and realized. Section 7. Preference on Liquidation In the event of any liquidation, dissolution, or winding up of the Corporation's business, (a) the holders of shares of preferred stock shall be paid in full at par value thereof, plus all accrued dividends, before the holders of the voting common stock and non-voting common stock receive any payment; and (b) the ratio of any distributions to the holders of non-voting common stock to any distributions to the holders of voting common stock shall be three-to-one. Such ratio may be decreased only by the affirmative vote of the holders of two-thirds of the outstanding shares of the non-voting common stock. Section 8. Purchase of Own Shares The Corporation shall have the right, pursuant to resolution by the Board of Directors, to purchase, take, receive or otherwise acquire its own shares, but purchases, whether direct or indirect, shall be made only to the extent of unreserved and unrestricted earned or capital surplus available therefor. Section 9. Consideration for Shares The Corporation shall issue shares of stock for such consideration, expressed in dollars, but not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. That part of the surplus of the Corporation which is transferred to stated capital upon issuance of shares as a share dividend shall be deemed to be the consideration for the shares so issued. The consideration for the issuance of shares may be paid, in whole or in part, in cash or other property acceptable to the Board of Directors, except that a promissory note shall not constitute payment or partial payment for the issuance of shares of the Corporation. Section 10. Stated Capital The consideration received upon the issuance of any share of stock shall constitute stated capital to the extent of the par value of such shares and the excess, if any, of such consideration shall constitute capital surplus. The stated capital of the Corporation may be increased from time to time by resolution of the Board of Directors directing that all or a part of the surplus of the Corporation be transferred to stated capital. The Board of Directors may direct that the amount of the surplus so transferred shall be deemed to be stated capital in respect of any designated class of shares. The Board of Directors may, by resolution from time to time, reduce the stated capital of the Corporation but only in the amount of the aggregate par value of any shares of the Corporation which shall have been reacquired and canceled. Any surplus created by virtue of a reduction of stated capital shall be deemed to be capital surplus. Section 11. No Preemptive Rights No holder of the shares of the Corporation of any class, now or hereafter authorized, shall as such holder have any preemptive or preferential rights to subscribe to, purchase, or receive any shares of the Corporation of any class, now or hereafter authorized, or any rights or options for any such shares or any rights or options to subscribe to or purchase any such shares or other securities convertible into or exchangeable for or carrying rights or options to purchase shares of any class or other securities, which may at any time be issued, sold or offered for sale by the Corporation or subjected to the rights or options to purchase granted by the Corporation. Section 12. Liability of Shareholders A holder of shares of the Corporation shall be under no obligation to the Corporation with respect to such shares other than the obligation to pay to the Corporation the full consideration for which such shares were or are to be issued. Any person becoming a transferee of shares in good faith and without notice or knowledge that the full consideration thereof had not been paid shall not be personally liable to the Corporation for any unpaid portion of such consideration. ARTICLE VII CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. Certificates The interest of each shareholder of the Corporation shall be evidenced by certificates representing shares of stock of the Corporation, certifying the number of shares represented thereby, and shall be in such form not inconsistent with the governing statute of the Corporation as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by the President and by the Secretary or Assistant Secretary and sealed with the corporate seal or an engraved or printed facsimile thereof. The signatures of such officers upon a certificate may be facsimile if the certificate is manually signed on behalf of a transfer agent or a registrar other than the Corporation itself or one of its employees. In the event that any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such before such certificate is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to be such at the time of the issue. Each certificate or share shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation. All certificates surrendered to the Corporation for transfer shall be canceled, and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in the case of a lost, destroyed or mutilated certificate, a new certificate may be issued upon such terms and with indemnity to the Corporation as the Board of Directors may prescribe. Section 2. Contents Each certificate representing shares shall state: a. That the Corporation is organized pursuant to an Act of Congress; b. The name of the person to whom issued; c. The number and class of shares, and the designation of the series, if any, which such certificate represents; d. The par value of each share represented by such certificate; e. The provisions by which such shares may be redeemed; and f. That the shares represented shall not have any preemptive rights to purchase unissued or treasury shares of the Corporation. Each certificate representing shares of preferred stock shall state upon the face thereof the annual dividend rate for such shares, and shall state upon the reverse side thereof the powers, preferences and relative and other special rights and the qualifications, limitations and restrictions applicable to such shares of preferred stock. No certificate shall be issued for any share until such hare is fully paid. Section 3. Transfer Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of the authority to transfer, or by his attorney thereto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes. Section 4. Records The Corporation shall keep at its principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number of shares held by each. Any person who shall be the holder of at least five percent of the aggregate number of shares of any class of common stock of the Corporation shall upon written demand stating the purpose therefor, have the right to examine, in person, or by agent or attorney, duly authorized in writing, at any reasonable time or times, for any proper purpose, the Corporation's record of shareholders and minutes of meetings of the shareholders and the Board of directors, and to make extracts therefrom. ARTICLE VIII INDEMNIFICATION Section 1. Authorization The Corporation shall, to the extent permitted by law, indemnify any person who was or is a party, whether as a plaintiff acting with the approval of the Board of Directors or as a defendant, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Any such person shall be indemnified by the Corporation to the extent he or she is successful in the action, suit or proceeding. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding, had reasonable cause to believe that his or her conduct was unlawful. Section 2. Procedure Any indemnification under this Article shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification is proper in the circumstances because the officer, director, employee or agent has met the applicable standard of conduct set forth in this Article. Such determination shall be made by a majority vote of the members of the Board of Directors who were not parties to such action, suit or proceeding. If all members of the Board of Directors were parties to such action, suit or proceeding, such determination shall be made either (a) by legal counsel or (b) by the shareholders at the next meeting of shareholders. In any case under this Article, the Board or shareholders are authorized to obtain the opinion of independent legal counsel. Section 3. Advance Payments Expenses, including attorneys' fees, incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding, whether formal or informal, shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided in section 2 of this Article upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount only if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation. Section 4. Other Rights to Indemnification The indemnification provided in this Article shall not be deemed exclusive of any other rights to which the director, officer, employee or agent may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise. The indemnification provided by this Article shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. Section 5. Indemnification Insurance The Corporation, pursuant to a resolution of the Corporation, may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her in any such capacity or arising out of his status as such whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article. ARTICLE IX CONTRACTS, LOANS, CHECKS, DEPOSITS AND STATEMENTS Section 1. Contracts The Board of Directors may authorize the Chairman or officers of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. Loans No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. Section 3. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidence of indebtedness issued in the name of the Corporation shall be signed by the Chairman or officers of the Corporation and in such manner as shall from time to time be determined by a resolution of the Board of Directors. Section 4. Deposits All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation at such banks, trust companies or other depositories as the Board of Directors may select. Section 5. Investments The Board of Directors may authorize the Chairman or officers of the Corporation to invest the funds of the Corporation in such securities and in such manner as shall from time to time be determined by a resolution of the Board of Directors. ARTICLE X FACSIMILE SIGNATURES The Board of Directors may by resolution authorize the use of facsimile signatures in lieu of manual signatures. ARTICLE XI AMENDMENTS These By-Laws may be altered, amended or repealed and new by-laws, consistent with the governing statute, may be adopted by the majority vote of the Board of Directors. EX-2 3 AMENDMENT NO. 3 to STRATEGIC ALLIANCE AGREEMENT between FEDERAL AGRICULTURAL MORTGAGE CORPORATION and WESTERN FARM CREDIT BANK Dated as of March 15, 1996 AMENDMENT NO. 3, dated as of March 15, 1996, to Strategic Alliance Agreement, dated as of November 15, 1994, as amended by Amendment No. 1 thereto dated as of January 1, 1995, and Amendment No. 2 thereto dated as of December 15, 1995 (the "Strategic Alliance Agreement"), between the FEDERAL AGRICULTURAL MORTGAGE CORPORATION, a federally chartered instrumentality of the United States ("Farmer Mac") and the WESTERN FARM CREDIT BANK, a federally chartered farm credit bank ("WFCB"). RECITALS WHEREAS, Farmer Mac and WFCB have entered into the Strategic Alliance Agreement providing, among other things, for the establishment and operation by WFCB of the Business in order to facilitate further the development of a secondary market for agricultural real estate loans; WHEREAS, under the Strategic Alliance Agreement, WFCB has the right to sell to Farmer Mac from time to time up to an aggregate of $1.5 million of its Notes, the proceeds from the sale of which are to be used by WFCB to pay or reimburse itself and Farmer Mac for expenses incurred in operating the Business; WHEREAS, under the Strategic Alliance Agreement, the interest rate to be borne by the Notes is determined by a reference to interest rates on certain treasury bills, WHEREAS, WFCB and Farmer Mac desire to amend the Strategic Alliance Agreement to simplify the calculation of the Discount Rate applicable to the Notes and to correct an error in the reference to 30 day treasury bills contained in the Strategic Alliance Agreement; WHEREAS, capitalized terms used but not defined herein have the meanings given to them in the Strategic Alliance Agreement. NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, and intending to be legally bound hereby, Farmer Mac and WFCB hereby agree as follows: Section 1. Certain Definitions. The definition of "Discount Rate" in Article 1 of the Strategic Alliance Agreement is hereby replaced with the following new definition: "Discount Rate" with respect to any quarterly interest period commencing on each February 1, May 1, August 1 and November 1 during the Term shall mean the per annum rate (expressed on a bond equivalent basis and applied on a daily basis) for 91- day treasury bills determined at the first treasury auction held during such quarterly interest period as published by the Board of Governors of the Federal Reserve System or as reported by the Department of the Treasury. Section 2. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be duly executed on its behalf as of the day and year first above written. FEDERAL AGRICULTURAL MORTGAGE CORPORATION /s/ Henry D. Edelman __________________________________________ By: Henry D. Edelman Its: President and Chief Executive Officer WESTERN FARM CREDIT BANK /s/ James M. Cirona ____________________________________________ By: James M. Cirona Its: President and Chief Executive Officer EX-27 4
5 1000 3-MOS DEC-31-1996 MAR-31-1996 74,537 463,156 20,887 0 0 572,867 59 0 572,926 286,696 274,857 0 0 2,477 8,896 572,926 9,259 9,259 0 0 1,023 0 8,394 (158) 0 (158) 0 0 0 (158) (.06) (.06)
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