Farmer Mac makes new business gains, sees spike in delinquencies
The Federal Agricultural Mortgage Corp. reported gains in new business volume, but also realized a big jump in 90-day delinquencies.
Farmer Mac reported $1.6 billion in net new business volume, bringing total outstanding business volume to $19 billion by the end of 2017. The company's net income attributable to common stockholders for 2017 rose to $71.3 million, up from $64.2 million in 2016.
In its farm and ranch portfolio, 90-day delinquencies spiked to $48.4 million in 2017, up considerably from $21 million as of the end of 2016. The 2017 delinquencies were made up of 51 delinquent loans, compared to 38 delinquent loans in 2016.
Though the annual increase in 90-day delinquencies was due primarily to borrower-specific factors, the company anticipates macroeconomic trends and the cyclical nature of the agricultural economy to raise its 90-day delinquency rate closer to, and possibly above, Farmer Mac's historical average.
The company's core earnings for 2017 were $65.6 million, up from $53.5 million in 2016. Net interest income grew to $157.6 million in 2017, increasing from $140.3 million from the year prior.
"2017 was a remarkable year for Farmer Mac. Our success was driven by our team's disciplined execution on our strategy, successful business development efforts, and industry conditions that continue to play to our strengths. Outstanding business volume grew $1.6 billion in 2017 and earnings grew double digits," said Lowell Junkins, Farmer Mac chairman of the board, acting president and CEO.
"Our strong capital position and earnings potential has allowed us to increase our first-quarter common stock dividend by 61% and remain on track with our targeted 30% core earnings payout for 2018. The business opportunities in front of Farmer Mac are robust, and we continue to make significant investments in our people, technology, and infrastructure to maintain our leadership position in financing rural America," he continued.
Farmer Mac plans to continue expanding investments in human capital, technology and business infrastructure, which should put its operating expenses above historical norms over the next several years. The company also expects to see a 15% increase in aggregate compensation and employee benefits and general and administrative expenses this year, which should remain elevated in 2019.
At the end of last year, Farmer Mac terminated its President and CEO Timothy Buzby for violating company policies unrelated to its financial and business performance.