Form 10-K/A 051231
As
filed
with the Securities and Exchange Commission on
December
20, 2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A
Amendment
No. 2 to Form 10-K
(Mark
One)
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[X]
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the
fiscal year ended December 31, 2005.
or
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[
]
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the
transition period from _____ to _____.
Commission
File Number 0-17440
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FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
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(Exact
name of registrant as specified in its charter)
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Federally
chartered instrumentality
of
the United States
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52-1578738
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
employer identification number)
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1133
21st Street, N.W., Suite 600,
Washington,
D.C.
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20036
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(Address
of principal executive offices)
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(Zip
code)
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(202)
872-7700
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(Registrant’s
telephone number, including area
code)
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Securities
registered pursuant to Section 12(b) of the Act:
Title
of Each Class Exchange
on Which Registered
Class
A
voting common stock New
York
Stock Exchange
Class
C
non-voting common stock
New
York
Stock Exchange
Securities
registered pursuant to Section 12(g) of the Act: Class B voting common
stock
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.
Yes [
] No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes [
] No [X]
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 12 months (or for 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
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (17 C.F.R. §229.405) is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K/A or any amendment to this Form 10-K/A. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer
[
] Accelerated
filer [X] Non-accelerated
filer [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes [
] No [X]
The
aggregate market values of the Class A voting common stock and Class C
non-voting common stock held by non-affiliates of the registrant were
$16,904,792 and $214,324,765, respectively, as of June 30, 2005, based upon
the
closing prices for the respective classes on June 30, 2005 reported by the
New York Stock Exchange. For purposes of this information, the outstanding
shares of Class C non-voting common stock owned by directors and executive
officers of the registrant were deemed to be held by affiliates. The aggregate
market value of the Class B voting common stock is not ascertainable due to
the
absence of publicly available quotations or prices for the Class B voting common
stock as a result of the limited market for, and infrequency of trades in,
Class
B voting common stock and the fact that any such trades are privately negotiated
transactions.
As
of
March 1, 2006, the registrant had outstanding 1,030,780 shares
of
Class A voting common stock, 500,301 shares of Class B voting common stock
and 9,596,336 shares of Class C non-voting common stock.
FEDERAL
AGRICULTURAL MORTGAGE CORPORATION
FISCAL
YEAR 2005 FORM 10-K/A
AMENDMENT
NO. 2
EXPLANATORY
NOTE
This
Amendment No. 2 on Form 10-K/A (“Amendment 2”) to the Annual Report on Form
10-K of the Federal Agricultural Mortgage Corporation (“Farmer Mac”) for the
fiscal year ended December 31, 2005 (“2005 Form 10-K”), initially filed with the
Securities and Exchange Commission on March 16, 2006 (the “Original Filing”), as
amended by Amendment No. 1 on Form 10-K/A filed with the Securities and
Exchange Commission on November 9, 2006 (“Amendment 1”), is being
filed solely to add the name of Deloitte & Touche LLP, Farmer Mac’s
independent registered public accounting firm, to the attestation report
prepared by Deloitte & Touche LLP on management’s assessment of Farmer Mac’s
internal control over financial reporting. The corrected attestation report,
which is being filed under Item 9A (Controls and Procedures) in this Amendment
2, was previously filed under Item 8 (Financial Statements and Supplementary
Data) of Amendment 1.
Except
as
described above, no other changes have been made to the 2005 Form 10-K, as
amended by Amendment 1, and this Amendment 2 does not amend, update or change
the financial statements or disclosures in the 2005 Form 10-K, as amended by
Amendment 1. Therefore, this Amendment 2 does not reflect events occurring
after
the filing of the Original Filing or Amendment 1 or amend or update those
disclosures, or related exhibits, affected by subsequent events. Accordingly,
this Amendment 2 should be read in conjunction with Farmer Mac’s other
filings with the SEC subsequent to the filing of the Original Filing and
Amendment 1.
Item
9A. Controls
and Procedures
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
(AS
REVISED)
The
management of Farmer Mac is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in Exchange
Act
Rule 13a-15(f). Internal control over financial reporting is a process designed
under the supervision of Farmer Mac’s Chief Executive Officer and Chief
Financial Officer to provide reasonable assurance regarding the reliability
of
financial reporting and the preparation of the Corporation’s financial
statements for external purposes in accordance with accounting principles
generally accepted in the United States of America.
Farmer
Mac’s internal control over financial reporting includes those policies and
procedures that: (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of
the
assets of the Corporation; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts
and
expenditures of the Corporation are being made only in accordance with
authorizations of management and directors of the Corporation; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Corporation’s assets that could have a
material effect on the consolidated financial statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. All control systems have inherent limitations
so that no evaluation of controls can provide absolute assurance that all
control issues are detected. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
With
the
participation of the Corporation’s Chief Executive Officer and Chief Financial
Officer, Farmer Mac’s management assessed the effectiveness of the Corporation’s
internal control over financial reporting as of December 31, 2005. In making
this assessment, the Corporation’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal
Control¾Integrated
Framework.
Based
on its initial evaluation under the COSO criteria, management believed that
the
Corporation’s internal control over financial reporting as of December 31, 2005
was effective. Subsequently in October 2006, management concluded that the
Corporation did not maintain effective controls over the accounting for
financial derivatives as defined by Statement of Financial Accounting Standards
No. 133, Accounting
for Derivative Instruments and Hedging Activities
(“SFAS
133”). On October 4, 2006, the Corporation’s Board of Directors authorized
management to restate the Corporation’s financial results from 2001 to eliminate
the use of hedge accounting under SFAS 133. Accordingly, management has
concluded that the ineffective controls over the accounting for financial
derivatives constituted a material weakness as of December 31, 2005. Solely
as a
result of this material weakness, management has revised its earlier assessment
and now has concluded that Farmer Mac’s internal control over financial
reporting was not effective as of December 31, 2005.
Farmer
Mac’s independent registered public accounting
firm, Deloitte & Touche LLP, has audited management’s assessment of the
effectiveness of the Corporation’s internal control over financial reporting as
of December 31, 2005, as stated in their report appearing
below.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
Federal
Agricultural Mortgage Corporation
Washington,
DC
We
have
audited management’s assessment, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting (as
revised),
that
the Federal Agricultural Mortgage Corporation and subsidiary (“Farmer Mac”) did
not maintain effective internal control over financial reporting as of December
31, 2005, because of the effect of the material weakness identified in
management’s assessment based on criteria established in Internal
Control — Integrated Framework issued
by
the Committee of Sponsoring Organizations of the Treadway Commission. Farmer
Mac’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion
on
management’s assessment and an opinion on the effectiveness of Farmer Mac’s
internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.
A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by
the
company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented
or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In
our
report dated March 16, 2006, we expressed an unqualified opinion on management’s
assessment that Farmer Mac maintained effective internal control over financial
reporting and an unqualified opinion on the effectiveness of internal control
over financial reporting. As described in the following paragraph, Farmer Mac
subsequently identified a material misstatement related to its
accounting treatment for derivative transactions under Statement
of Financial Accounting Standards No. 133, Derivative
Instruments and Hedging Activities, (“SFAS
133”),
which
caused the consolidated financial statements to be restated. Management
subsequently revised its assessment due to the identification of a material
weakness, described in the following paragraph, in connection with the financial
statement restatement. Accordingly, our opinion on the effectiveness of Farmer
Mac’s internal control over financial reporting as of December 31, 2005,
expressed herein, is different from that expressed in our previous
report.
A
material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weakness has been identified and included
in
management’s revised assessment: Farmer
Mac did not maintain effective controls over the application of SFAS 133.
This
material weakness resulted in the restatement of Farmer Mac’s previously issued
consolidated financial statements for the fiscal year ended December 31, 2005,
as more fully described in Note 15 to the consolidated financial statements.
This material weakness was considered in determining the nature, timing, and
extent of audit tests applied in our audit of the consolidated financial
statements as of and for the year ended December 31, 2005, of Farmer Mac and
this report does not affect our report on such financial
statements.
In
our
opinion, management’s revised assessment that Farmer Mac did not maintain
effective internal control over financial reporting as of December 31, 2005,
is
fairly stated, in all material respects, based on the criteria established
in
Internal
Control —Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Also
in
our opinion, because of the effect of the material weakness described above
on
the achievement of the objectives of the control criteria, Farmer Mac has not
maintained effective internal control over financial reporting as of December
31, 2005, based on the criteria established in Internal
Control — Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We
have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of
and
for the year ended December 31, 2005, of Farmer Mac and our report dated March
16, 2006 (November 9, 2006 as to the effects of the restatement described in
Note 15 to the Consolidated Financial Statements) expressed an unqualified
opinion on those consolidated financial statements and includes an explanatory
paragraph relating to Farmer Mac’s restatement as described in Note
15.
Deloitte
& Touche LLP
McLean,
Virginia
March
16,
2006 (November 9, 2006 as to the effects of the material weakness described
in
Management’s Report on Internal Control Over Financial Reporting (as
revised))
Management’s
Evaluation of Disclosure Controls and Procedures.
Farmer
Mac maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in the Corporation’s periodic filings under
the Securities Exchange Act of 1934 (the “Exchange Act”), including this report,
is recorded, processed, summarized and reported on a timely basis. These
disclosure controls and procedures include controls and procedures designed
to
ensure that information required to be disclosed under the Exchange Act is
accumulated and communicated to the Corporation’s management on a timely basis
to allow decisions regarding required disclosure. Management, including Farmer
Mac’s Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the design and operation of the Corporation’s disclosure
controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of
the
Exchange Act) as of December 31, 2005. Based on management’s reassessment, the
Chief Executive Officer and the Chief Financial Officer have concluded that
Farmer Mac’s disclosure controls and procedures were not effective as of
December 31, 2005 because of the material weakness in internal control over
financial reporting related to the accounting for financial derivatives as
defined by Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities
described in Management’s Report on Internal Controls over Financial Reporting
(as revised) set forth above.
Changes
in Internal Control Over Financial Reporting.
There
was no change in Farmer Mac’s internal control over financial reporting during
the quarter ended December 31, 2005 that has materially affected, or is
reasonably likely to materially affect, Farmer Mac’s internal control over
financial reporting.
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
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/s/
Henry D. Edelman
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December
20, 2006
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By: Henry
D. Edelman
President
and
Chief
Executive
Officer
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Date
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