The Federal Agricultural Mortgage Corp.'s earnings fell in the fourth quarter to $8.9 million, down from $13.4 million during the same period in 2013, the rural mortgage lender reported Monday.
The company, which is more commonly known as Farmer Mac, also saw its annual income drop by roughly 36% to $48.1 million in 2014 from $75.3 million the year prior, according to its earnings release. The negative change in net income stemmed for both the fourth quarter and full fiscal year stemmed from the effects of unrealized fair value changes on financial derivatives and hedged assets.
During the fourth quarter of 2014, these fair-value changes represented a $3.5 million after-tax loss as compared with the $8 million after-tax gain they bought Farmer Mac during the same time the previous year. For the full fiscal year, the changes led to a $6.5 million after-tax loss.
Other factors that fueled the drops in profit further include a decrease in the net effective spread, the loss of tax benefits due to the October 2014 redemption of CoBank preferred stock and the lack of a federal income tax benefit in 2014.
Despite the disappointing results, the company did manage to grow its net interest income slightly in the fourth quarter to $14.1 million from $13.3 million the year before. This was largely due to a 140% increase in revenue from loans to $27.8 million during the three months ended Dec. 31, 2014, from just $11.4 million in 2013.
Farmer Mac also grew its outstanding business volume by $647.4 million in 2014, according to company president and CEO Tim Buzby.
"We strive to continuously innovate for our customers and to help them problem-solve, all with the goal of delivering lower-cost capital for the benefit of their customers in rural America," Buzby added in the earnings release.
"This year, our customization of an existing product to offer the Farm Equity AgVantage product, a financing vehicle for investors in agricultural assets plus growth in funding to the rural utilities industry within our institutional credit line of business helped lead to particularly strong net growth in the fourth quarter of nearly $600 million."
Looking ahead to 2015, the company noted that it was monitoring the drought occurring throughout the Western region of the U.S., which could ultimately hurt its delinquency rates or loss experience.
