Farmer Mac Feels Freddie, Lehman's Pain

Farmer Mac, the country cousin to mortgage giants Fannie Mae and Freddie Mac, took a beating from its investments in Fannie and investment bank Lehman Brothersin the third quarter.

The company's misfortunes illustrate how the demise of some of the United States' biggest financial giants has reverberated throughout the financial world.

Farmer Mac, a District-based government sponsored entity that buys U.S. farm loans, said in September that it had $50 million worth of preferred shares in Fannie and $60 million of Lehman Brothers debt in its investment portfolio.

On Monday, Farmer Mac said the worth of those investments was nearly wiped out by troubles at the two financial giants that month. Farmer Mac took charges totaling $97.1 million related to its investments in the two companies.

The company's stock price has fallen 85 percent since the second week of September, after the government's announcement that it would take over Fannie and Freddie. A week after the two mortgage giants were put into conservatorship, which is akin to bankruptcy, investment titan Lehman Brothers filed for bankruptcy protection.

Farmer Mac's shares continued to fall on Tuesday as investors digested the news that Farmer Mac had lost $106.1 million for the quarter ended Sept. 30, which the company attributed largely to the Fannie and Lehman hit. The company's loss of $106.1 million, or $10.55 per share, compared with a loss of $8.6 million (82 cents) in the third quarter of 2007.

Shares for Farmer Mac closed at $4.40 on Tuesday.

Farmer Mac is required by the federal government maintain a minimum amount of core capital on its books. The company said on Monday that it had $212.3 million worth of core capital, or $30 million above the required minimum. The company issued preferred shares worth $65 million in September, which helped it meet those requirements.

In other earnings news, the Dulles company GeoEye preliminarily reported relatively flat earnings, which it attributed to the delayed launch of its GeoEye-1 satellite. GeoEye said that the delay lead to reduction in orders from the National Geospatial Agency, which is the company's largest client.

GeoEye's net income for the third quarter was $32.4 million (or $1.47 per share), compared with $34 million ($1.54) in the third quarter of 2007. The company reported revenues of $35.9 million compared to $53.7 million a year ago.

By Alejandro Lazo  |  November 11, 2008; 5:05 PM ET  | Category:  Earnings , Economy Watch
Previous: Morning Brief: BearingPoint Focuses on Debt | Next: Morning Brief: Fannie, Freddie Attack Foreclosures


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