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1ST QTR: FAMER MAC'S VOLUME INCREASES 3%, EARNINGS UP 2%
Source: Famer Mac news release

To view complete report, click here.

The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today announced that it grew its total outstanding business volume to a new high of $13.4 billion as of March 31, 2013, compared to $13.0 billion as of December 31, 2012 and $12.1 billion as of March 31, 2012. New business volume for first quarter 2013 was $904.1 million, including the purchase of $425.0 million in AgVantage securities. Farmer Mac's first quarter 2013 results also included solid GAAP net income and non-GAAP core earnings and the continuation of good credit quality in the portfolio.

Core earnings, a non-GAAP measure, was $11.3 million ($1.01 per diluted common share) for first quarter 2013, compared to $11.8 million ($1.08 per diluted common share) for first quarter 2012. First quarter 2013 core earnings benefited from higher net effective spread in dollars, which grew to $26.3 million in first quarter 2013, up from $25.6 million in first quarter 2012.

However, that increase was offset by an increase in net provisions to the allowance for losses of $1.2 million in first quarter 2013, up from net provisions of $0.5 million in first quarter 2012, as well as a modest increase in non-interest operating expenses, which resulted in lower core earnings for first quarter 2013 compared to the prior year's first quarter.

Farmer Mac had GAAP net income attributable to common stockholders for first quarter 2013 of $16.2 million ($1.45 per diluted common share), compared to net income of $22.2 million ($2.04 per diluted common share) for the same period in 2012. This decrease was almost entirely attributable to the effects of fair value changes on financial derivatives.

Because Farmer Mac's financial derivatives were not designated in hedge relationships for accounting purposes prior to third quarter 2012, changes in the fair values of these instruments were recorded in earnings without offsetting fair value adjustments on the corresponding hedged items being recorded in earnings as well. For the three months ended March 31, 2013, Farmer Mac recorded unrealized fair value gains on financial derivatives and hedging activities of $8.8 million, compared to $15.7 million for the three months ended March 31, 2012.

Because Farmer Mac expects its fair value hedge relationships to remain highly effective through maturity, a substantial portion of the volatility caused from changes in the fair values of financial derivatives is expected to be eliminated in future periods, especially once comparisons are no longer made to periods before the adoption of hedge accounting.

"Farmer Mac had a good first quarter. We had new business volume of $904 million spread across our three lines of business, continued strong portfolio credit quality, solid earnings, and a growing equity base to support future growth," stated Farmer Mac President and Chief Executive Officer Timothy Buzby. "We are optimistic about new business growth opportunities.

With prepayments and paydowns expected to slow for the rest of this year consistent with seasonal trends, we expect continued growth in outstanding business volume, which should drive corresponding increases in core earnings. Our confidence in our business and its potential is further reflected in our recent dividend increase."


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