Housing Bubble
Farmer Mac posts solid fourth quarter results
The Federal Agricultural Mortgage Corporation (Farmer Mac) today announced it achieved net income for fourth quarter 2002 of $2.8 million, or $0.23 per diluted share, and net income of $21.3 million, or $1.77 per diluted share, for the year. Excluding extraordinary gains and losses, net income was $4.1 million, or $0.34 per diluted share, and $20.4 million, or $1.69 per diluted share for fourth quarter 2002 and the year, respectively. The impact of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), reduced net income by $1.8 million in fourth quarter 2002 and $2.5 million for the year.
Farmer Mac President and Chief Executive Officer Henry D. Edelman stated, "Farmer Mac's solid fourth quarter performance confirms the soundness of its business approach and its financial strength as it fulfills its Congressionally-mandated mission to serve America's farmers, ranchers and rural homeowners. We grew our 2002 new business volume by more than $2 billion, a 38% increase over the previous year and a new annual record.
"We are pleased with our business growth and financial performance during 2002, even though both were dampened by the effects of adverse publicity related to misinformation published in the media and on the internet. Current and prospective customers' interest in our business has picked up and earnings were helped by the receipt of yield maintenance payments that resulted from the declining interest rate environment throughout 2002. As we look forward to 2003, we are seeing slower borrower prepayments which, while representing an expected reduction of income related to the yield maintenance income that accompanies such prepayments, is a positive indicator of a longer-term stream of future interest income.
"Overall, we are gratified by the performance of the portfolio of loans underlying our guarantees and Long-Term Standby Purchase Commitments ("LTSPCs"). As we have noted in the past, Farmer Mac anticipates fluctuations in loan delinquencies, both in absolute dollars and as a percentage of the outstanding portfolio, with higher levels likely at the end of the first and third quarters of each year, due to the semi-annual payment characteristics of most Farmer Mac loans. Consistent with that pattern, delinquencies at the end of the fourth quarter were lower than they were as of September 30, 2002 in both dollar and percentage terms. On a year-to-year basis, the absolute dollar amount of delinquencies increased and the percentage of delinquencies decreased, as expected. These trends resulted from the continued maturation of a significant segment of Farmer Mac's portfolio into its expected peak default years and the growth of the loan portfolio.
"While Farmer Mac's financial condition and business prospects are solid, current circumstances make it too early to comment on the market analyst's current projection for its financial performance in 2003."