Farmer Mac Loss Due to Derivatives


Farmer Mac lost $23 million in the third quarter due to changes in the fair market value of its financial derivatives. But the company does not include its derivative positions in what it terms its core earnings, which showed a profit of $11 million, up from $8 million for the same period in 2010.

In GAAP terms, Farmer Mac earned $6 million for the third quarter 2010.

During the quarter, Farmer Mac purchased $68 million of Farmer Mac I loans; purchased $1 billion of AgVantage securities, placed $267 million under long-term standby purchase commitments; bought $87 million of U.S. Department of Agriculture-guaranteed portions of loans; and $32 million in rural utilities loans.

The majority of the LTSPC placements came from a single $160 million loan. Farmer Mac said lender interest in LTSPC is increasing as a tool for them to manage their commodity concentration, borrower exposure levels and overall credit risk.

The AgVantage purchases will be on the company’s balance sheet and contribute to net interest income and net yield. These replace $1 billion of maturing AgVantage securities accounted for as off-balance sheet guarantees.

The 90-day delinquency rate in the Farmer Mac I program improved by 25 basis points during the third quarter to $45 million or 1.02%.

Daily Briefing | Thursday, November 10, 2011

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