The Federal Agricultural Mortgage Corporation (Farmer Mac) announced its results for the second quarter ended June 30, 2015.
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Its results included continued strong asset quality in the portfolio and $470 million in net business volume growth that brought total outstanding business volume to $15.1 billion.
Farmer Mac's second quarter 2015 core earnings, a non-GAAP measure, were $11.6 million ($1.02 per diluted common share), compared to $9.1 million ($0.80 per diluted common share) in first quarter 2015 and $23.2 million ($2.05 per diluted common share) in second quarter 2014.
Farmer Mac's net income attributable to common stockholders for second quarter 2015 was $22.2 million ($1.94 per diluted common share), compared to $20.2 million ($1.78 per diluted common share) for second quarter 2014.
The increase compared to the previous year's quarter was primarily attributable to the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $10.4 million after-tax gain in second quarter 2015, compared to a $3.1 million after-tax loss in second quarter 2014.
In addition, preferred stock dividend expense decreased by $2.8 million after-tax primarily as a result of the redemption of all outstanding shares of Farmer Mac II LLC Preferred Stock on March 30, 2015.
Second quarter 2014 included an $11.6 million tax benefit related to Farmer Mac's cash management and liquidity initiative (commenced in second quarter 2014 and completed in fourth quarter 2014) with no similar effect in second quarter 2015.
The year-over-year increase in net income attributable to common stockholders was also offset by Farmer Mac's provision for losses in second quarter 2015 of $0.8 million after-tax, compared to a release from the allowance for losses of $1.7 million after-tax in second quarter 2014.
Core earnings in second quarter 2015 were $11.6 million ($1.02 per diluted common share), compared to $9.1 million ($0.80 per diluted common share) in first quarter 2015 and $23.2 million ($2.05 per diluted common share) in second quarter 2014.
The increase in second quarter 2015 core earnings compared to first quarter 2015 was primarily due to the elimination of $3.5 million after-tax in dividend payments as a result of the completion of the capital restructuring initiative and an increase in after-tax net effective spread of $0.3 million.
The increase was offset in part primarily by a $1.3 million after-tax increase in credit expenses and a $0.4 million after-tax increase in operating expenses. The increase in operating expenses was primarily attributable to legal fees incurred for the preparation of comment letters that were finalized and submitted in June 2015 in response to the FCA's proposed rule on Farmer Mac's corporate governance.
The year-over-year decrease in core earnings was primarily due to the absence in second quarter 2015 of the $11.6 million tax benefit realized in second quarter 2014 related to the cash management and liquidity initiative.
A number of other factors combined to largely offset each other for the year-over-year comparison, including a $2.5 million after-tax increase in credit expenses and a $2.8 million after-tax decrease in preferred dividend expense resulting from the redemption of Farmer Mac II LLC Preferred Stock netted against the incremental preferred dividend costs incurred as part of the capital restructuring initiative. ■