Farmer Mac Posts 1Q Profit; Bad-Loan Concerns Mount

Federal Agricultural Mortgage Corp. (AGM), better known as Farmer Mac, reversed a prior-year loss caused by derivative losses, but core results slumped on loss provisions as loans in danger of going bad continued to rise.

Chief Executive Michael Gerber also said the company's capital surplus exceeds $67 million, compared with $13 million at year's end. "As we look ahead, we expect any credit losses to remain within manageable levels," he noted.

Farmer Mac was created by Congress in 1988 to buy mortgages and other loans that banks make to farmers and ranchers in rural America. Farmer Mac then repackages the loans into asset-backed securities. That business model came under pressure as credit markets seized up. The government-chartered company was rescued by a lending group's $65 million capital injection in October.

Farmer Mac reported profit of $33.5 million, or $3.31 a share, reversing a year-earlier loss of $8.3 million, or 84 cents a share. Core earnings, which exclude investment gains and losses, fell to 47 cents from $1.06. The drop came as the company set aside $6.1 million in the first quarter and nothing a year earlier.

Farmer Mac's 90-day delinquencies were 1.9% of its portfolio as of March 31, or 0.61% excluding ethanol loans. That industry has suffered amid volatile commodity prices. The fourth-quarter rates were 1.35% and 0.36%, respectively.

source: wsj