Farmer Mac Earns Nearly $10M in 4Q12

Farmer Mac had GAAP net income of $9.6 million for 4Q12 and $43.9 million for the full year, compared with $13.3 million and $13.8 million, respectively, for the same periods in 2011. The decline in fourth-quarter income was due to fair value adjustments on loans held for sale plus the severance payment to former CEO Michael Gerber, partially offset by improved results from its financial derivatives and hedging activities.

Timothy L. Buzby was promoted to president and CEO at Farmer Mac in October, replacing Gerber. Gerber received a nearly $2.8 million severance payment during the fourth quarter. In an 8-K filing last year, the company said the effect of this severance payment on its fourth-quarter results is expected to be a net after-tax expense of approximately $968,000.

Farmer Mac’s outstanding business volume, which consists of loans, guarantees and commitments, was $13 billion as of Dec. 31, 2012, up from $11.9 billion one year prior.

During the year, Farmer Mac purchased $570.3 million of newly originated farm and ranch loans and added another $744.1 million of these thought through long-term standby purchase commitments.

It also purchased $601 million of farm and ranch AgVantage securities, $166.1 million of rural utilities loans, $383.4 million of rural utilities AgVantage securities and $484.7 of U.S. Department of Agriculture guaranteed securities.

The combined total of nearly $1.1 billion of farm and ranch loan and USDA securities purchased in 2012 was more than double that of five years ago, when Farmer Mac purchased only $501 billion in 2008.

The credit quality of the farm and ranch portfolio improved, with delinquencies falling to $33.3 million as of Dec. 31, 2012 from $40.6 million on the same day in 2011. There was a $1.7 million charge-off on one loan in 4Q12.

As for the government-sponsored enterprise’s prospects going forward, Buzby CEO said, “We believe that our farm and ranch and rural utilities lines of business have opportunities for growth over the next several years based on expected increases in capital requirements for lenders under new regulatory frameworks, trends toward borrower preferences for longer-term fixed rate loans, and an expected general economic recovery."

Subsequent to the end of the fourth quarter, Farmer Mac raised $60 million in Tier 1 capital through a preferred stock offering.