Farmer Mac's third-quarter net income increased 95% over the same period one year ago as the fair value of its investment in financial derivatives increased by $5.4 million.
Net income totaled $16.4 million for the quarter, up from $8.4 million in the third quarter of 2015. The latest results include a $900,000 thousand gain in the fair value of its derivatives and hedged assets versus a $4.5 million reduction for the third quarter last year.
Farmer Mac, whose formal name is the Federal Agricultural Mortgage Corp., also reported a year-over-year increase in its net effective spread — a non-GAAP measure — of $1.2 million after taxes to $32.2 million and an increase in guarantee and commitment fee income of $100,000 thousand after taxes to $4.5 million.
During the quarter, there was $11 billion of new business added to its portfolio, but that was offset by a reduction of $974.6 million due to maturities and principal pay-downs of securities and loans. As of Sept. 30, the portfolio was $17.2 billion, an increase of $131.2 million since June 30.
Among the additions to the portfolio were purchases of $528.2 million of AgVantage securities (including $16 million of Farm Equity AgVantage securities), $282.7 million of newly originated farm and ranch loans; an additional $155.7 million of farm and ranch loans added through long-term standby purchase commitments, $87.3 million of U.S. Department of Agriculture securities and $20 million of rural utility loans. Farmer Mac also issued $31.9 million of guaranteed USDA securities.
The AgVantage purchases included a $500 million security from MetLife. The life insurer turned around and used the proceeds to refinance an AgVantage security of the same amount that matured in the third quarter 2016.
"In particular, agricultural loan purchases within the farm and ranch and USDA guarantees lines of business were very strong, as we are getting to review more opportunities in a market where credit is a bit tighter. We are maintaining our credit requirements and our underwriting discipline, but we believe the relative value that our government-sponsored enterprise model brings to bear is greater when credit becomes more scarce," said President and CEO Tim Buzby in a press release.