John, you got to read these things very carefully. Note that in the "exposed" class of loans (post 1996), AGM has been extremely careful, unlike Ameresco and First Capital, the loan to value ratio (see table) is very conservative, meaning that even if delinquencies increase drastically, the collateral is there to cover the debt, even if we have a 30% decline in the value of the underlying asset. Note that only 2% of these loans are in the 70% to 80% range (in the case of high risk financing of the failed "mortgage" institutions, often the lending got to the 100% to 125% of underlying values).
Distribution of Post-1996
Act Delinquencies (1) by
UPB as of Mar. 31, 2002
---------------------------------------------------------------------
(original loan-to-value ratio)
0.00% to 40.00% 8%
40.01% to 50.00% 13%
50.01% to 60.00% 36%
60.01% to 70.00% 41%
70.01% to 80.00% 2%
-------------
Total 100%
Note also that the delinquency rate is quite an acceptable average of 1.7% (the excursion to around 2.3% in the March quarter (and a bump up in the September quarter), are due to many loans having semi annual payments, but delinquency is counted at 90 days outstanding. Actually this year peak of 2.32% is lower than last year's peak at 2.62%.Yes, there is a creeping up of the delinquency rate, but that is due to the current weakness in the agricultural economy, and the recent farm bill will inject an additional $10 B or so into that market. I think you and Gotham are overstating the "problems".
Farmer Mac I Delinquencies (1) (2)
----------------------------------------------------------------------
Post-1996 Act Pre-1996 Act Total
---------------- --------------- ---------
As of:
March 31, 2002 2.32% 5.83% 2.37%
December 31, 2001 1.70% 7.00% 1.79%
September 30, 2001 2.16% 4.66% 2.21%
June 30, 2001 1.72% 3.69% 1.77%
March 31, 2001 2.62% 5.83% 2.72%
December 31, 2000 1.25% 6.49% 1.44%
September 30, 2000 1.80% 5.55% 1.96%
June 30, 2000 1.25% 4.12% 1.41%
March 31, 2000 1.45% 4.89% 1.65%
Reserves for charge offs are growing much more rapidly than experienced losses due to liquidation of delinquent accounts. I the last quarter the increase in reserves was $2 MM, but charge offs was $.883 MM, current reserves stand at $17 MM, enough for 10 quarters at twice the current charge off rate, if no additional reserves were added. I would say that is quite a conservative approach. Gotham is trying to manipulate the stock, and so far has done it quite successfully (and by using TA, those in AGM were not impacted by that raid negatively), I think that they have done their deed and are going to move to another target, but the technical behavior of the stock in the next 4 weeks will be a better judge. My own assessment is that a major buying opportunity will be presented in that stock in those four weeks, I don't know if it is going to be in the $23/$26 area, or in the $15/18 area, so all those looking at AGM as a potential core position, just watch the TA.
Zeev |
