Federal Agricultural Mortgage Corp. has a market cap of $194.34 million; its shares were traded at around $19.16 with a P/E ratio of 11.01 and P/S ratio of 0.71. The dividend yield of Federal Agricultural Mortgage Corp. stocks is 1.04%.
Highlight of Business Operations:During first quarter 2010, Farmer Mac completed its efforts to raise additional regulatory core capital and repurchased and retired its previously outstanding mezzanine equity. The retired mezzanine equity (Series B preferred stock) carried an annual dividend of 12 percent that was scheduled to rise to 14 percent during 2010 and to 16 percent during 2011, compared to the tax-effected net annualized cost of the newly issued capital of approximately 5.77 percent. In addition to lowering Farmer Mac s cost of capital, the new capital issuance, which was effected through Farmer Mac s subsidiary Farmer Mac II LLC, significantly increased Farmer Mac s excess capital above its statutory minimum capital requirement. As of March 31, 2010, that excess was $195.0 million, compared to $120.2 million as of December 31, 2009. With the new capital, Farmer Mac believes it is well-positioned to actively partner with agricultural and rural utilities lenders, and that Farmer Mac II LLC is well-positioned to partner with lenders participating in USDA s guaranteed loan programs, to continue to fulfill Farmer Mac s mission to provide capital and liquidity to rural America.
Farmer Mac s net income available to common stockholders for first quarter 2010 was $1.8 million or $0.17 per diluted common share, compared to net income of $33.5 million or $3.31 per diluted common share for first quarter 2009.
Changes in the fair values of financial derivatives and trading assets have historically contributed significant volatility to Farmer Mac s periodic earnings. Consistent with that trend, Farmer Mac s first quarter 2010 loss on financial derivatives was $5.8 million, compared to a gain of $1.7 million during first quarter 2009. Fair value gains on trading assets totaled $3.4 million for first quarter 2010, compared to gains of $31.6 million for first quarter 2009. While these volatile changes in fair values may at times produce significant income, as was the case in 2009, they may also produce significant losses, as was the case in first quarter 2010 and as has been the case in previous reporting periods. Future changes in those values cannot be reliably predicted; however, as of March 31, 2010, the cumulative fair value after-tax losses recorded on financial derivatives was $58.1 million. Over time, Farmer Mac will realize in earnings the net effect of the cash settlements on its interest rate swap contracts, which may on its own produce either income or expense, but is expected to generate positive effective net spread when combined with the interest earned and paid on the assets and liabilities Farmer Mac holds on its balance sheet. This positive effective net spread will continue to build retained earnings and capital over time. Although the unrealized fair value fluctuations experienced throughout the term of the financial derivatives will temporarily impact earnings and capital, those fluctuations will have no permanent effect if the financial derivatives are held to maturity, as is generally expected.
Farmer Mac s first quarter 2009 results benefited from two transactions that were not replicated in first quarter 2010. The first was the sale of a pool of loans with a total principal balance of $354.5 million. The sale resulted in a gain of $1.6 million and a recovery of previously charged off losses of $0.8 million. The second transaction was the sale of Lehman Brothers Holdings Inc. senior debt securities that had been written down to $5.4 million as of December 31, 2008. The sale of those securities during first quarter 2009 for $8.6 million resulted in a $3.2 million recovery of previously written off losses. That recovery was presented as “Gains on sale of available-for-sale investment securities” on the condensed consolidated statements of operations.
Net Interest Income. For first quarter 2010, net interest income was $23.6 million, compared to $23.4 million for first quarter 2009. Net interest income for first quarter 2010 includes the reclassification of guarantee fees of $1.5 million related to Farmer Mac Guaranteed Securities previously reported as off-balance sheet as a result of the adoption of the new consolidation guidance. Excluding the impact of this reclassification, the net interest yield was 157 basis points for the three months ended March 31, 2010, compared to 187 basis points for the three months ended March 31, 2009.
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