The Federal Agricultural Mortgage Corporation (Farmer Mac) announced its results for the quarter ended September 30, 2015, which included $498 million in net new business volume growth that brought total outstanding business volume to $15.6 billion.
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Farmer Mac's third quarter 2015 core earnings, a non-GAAP measure, were $13.2 million ($1.17 per diluted common share), compared to $11.6 million ($1.02 per diluted common share) in second quarter 2015 and $9.3 million ($0.82 per diluted common share) in third quarter 2014.
Farmer Mac's net income attributable to common stockholders for third quarter 2015 was $8.4 million ($0.74 per diluted common share), compared to $11.6 million ($1.02 per diluted common share) for third quarter 2014.
The decrease 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 $4.5 million after-tax loss in third quarter 2015, compared to a $2.7 million after-tax gain in third quarter 2014.
This year-over-year decline was partially offset by a decrease in preferred stock dividend expense of $3.5 million after-tax in third quarter 2015 compared to third quarter 2014, due to the redemption of all outstanding shares of Farmer Mac II LLC Preferred Stock on March 30, 2015.
Core earnings in third quarter 2015 were $13.2 million ($1.17 per diluted common share), compared to $11.6 million ($1.02 per diluted common share) in second quarter 2015 and $9.3 million ($0.82 per diluted common share) in third quarter 2014.
The increase in core earnings in third quarter 2015 compared to second quarter 2015 was driven primarily by a $1.0 million after-tax reduction in credit expenses and a $0.4 million dollar after-tax increase in net effective spread.
The year-over-year increase in core earnings was due in part to a $1.8 million after-tax increase in net effective spread excluding the impact of the loss of dividend income resulting from the redemption of $78.5 million of high yielding preferred stock in Farmer Mac's investment portfolio in fourth quarter 2014, which was partially offset by a $0.7 million after-tax increase in operating expenses and a $0.4 million after-tax increase in credit expenses.
The increase in operating expenses was related to consulting fees associated with corporate strategic initiatives and higher compensation costs related to the consolidation of Farmer Mac’s appraisal subsidiary, Contour Valuation Services, LLC.
Also contributing to the year-over-year increase in core earnings is the absence, as compared to third quarter 2014, of $3.5 million after-tax in preferred stock dividend expense resulting from the completion of the capital restructuring initiative and of $1.0 million after-tax in interest expense associated with the completion of the capital management and liquidity initiative. ■