Farmer Mac's second-quarter net earnings increased 46% year-over-year, driven by a boost in net interest income that was enhanced by its growing loan and securities portfolio.
The government-sponsored enterprise had net income of $17.5 million, compared with $12 million for the same period last year.
"Despite certain sectors of the agricultural economy remaining under pressure, our credit quality remains favorable and within our expectations despite showing signs of the expected normalization related to the current agricultural credit cycle," said Farmer Mac President and CEO Timothy Buzby.
"We believe our financial outlook is strong as we continue to expand our customer base and innovate our product set to meet the needs of our customers in a more challenging environment."
Net interest income was $39.7 million, up from $34.4 million one year ago. The increase was driven by growth in farm and ranch loans, U.S. Department of Agriculture securities and AgVantage Securities kept on its balance sheet.
During the quarter, Farmer Mac's business volume (consisting of loan purchases and securities issuances) totaled $1.9 billion.
This included the purchase of $1.3 billion of AgVantage securities for its balance sheet. Most of that came from a purchase during April of $1 billion in securities issued by MetLife.
MetLife used the proceeds from the purchase to refinance a maturing $1 billion AdVantage security. Farmer Mac had $30 million of that maturing security on its balance sheet with the other pieces sold to multiple investors.
But it is holding the entire $1 billion purchased in April — a $500 million one-year security callable in six months, a $250 million two-year security and a $250 million three-year security — on its balance sheet. Farmer Mac expects to earn 42 basis points of weighted average net effective spread income on an annual basis.
Farmer Mac also purchased $312 million of newly originated farm and ranch loans, $116 million of USDA securities and $25 million of Rural Utility loans. It issued $54 million of its own securities and added another $56 million of farm and ranch loans through long-term standby purchase commitments.
Offsetting this was $14 billion of maturities and principal pay downs, bringing the outstanding business volume to a record $18.3 billion as of June 30.