Farmer Mac reported third-quarter net income of $15 million, down from $16 million one year ago as spreads compressed driven by repayments of higher-margin farm and ranch program loans. The government-sponsored enterprise also had to refinance some of its floating rate assets at a higher cost.
In 2Q13, Farmer Mac had
There was an increase in non-interest income as guarantee and commitment fees from new business improved year-over-year.
Farmer Mac will benefit from expectations of rising interest rates as the trend of farmland owners seeking longer-time financing to offset those rate increases is expected to continue.
Outstanding business on its books increased 10% year-over-year to $14 billion helped by new business volume of $821 million during the quarter. Farmer Mac purchased $250 million in Rural Utilities AgVantage securities and $193 million of farm and ranch loans plus there it added $199 million of long-term standby purchase commitments. It also bought $70 million of U.S. Department of Agriculture guaranteed securities.
There is some spread compression but the new business it generated during 3Q13 was at or above its average spreads, says CEO Timothy Buzby. Furthermore, many of the newly acquired assets are longer-term in nature.
The net effective spread for 3Q13 was 83 basis points, down from 95 bps in 3Q12.
