Thursday, August 9, 2012
AGRIBANK, FCB REPORTS SECOND QUARTER 2012 AND SIX MONTH FINANCIAL RESULTS
Bank Records Year-to-Date 2012 Net Income of $263.7 Million, including $149.0 Million in Second Quarter 2012, Continued Strong Levels of Capital, Liquidity and Credit Quality
ST. PAUL – AgriBank, FCB announced today its financial results for the second quarter of 2012, reporting continued strong levels of net income, capital, liquidity and credit quality.
“Our primary objective is delivering the financial tools and loan products that enable affiliated Associations to effectively serve farmers, ranchers and rural America. This is especially important today as many Association customers are preparing to deal with the impact of the drought. We are committed to working with affiliated Associations to ensure that we remain a reliable source of solutions in good times and bad. Working closely together with affiliated Associations, AgriBank has built a solid foundation to ensure we are here to meet agriculture and rural America’s needs over the long haul,” said Bill York, AgriBank CEO.
Year-to-Date 2012 Results of Operations
AgriBank reported strong net income of $263.7 million for the first half of 2012 compared to $219.4 million for the same period of 2011. Net interest income for the first half of 2012 was $226.9 million compared to $220.8 million for the same period of 2011 and continues to reflect the positive impact of funding actions and an increase in retail volume, primarily related to equipment financing participations purchased. The Bank continued to take advantage of a favorable interest rate environment and repriced callable debt at lower costs.
The Bank recorded provision for loan losses of $4.1 million in the first half of 2012 compared to $2.5 million for the same period of 2011. The expense primarily related to specific allowances recorded on individual customers in both periods.
Non-interest income was $91.2 million for the first half of 2012 compared to $46.3 million for the same period of 2011. The increase in non-interest income was in part due to $15.0 million of non-recurring refunds from the Farm Credit Insurance Corporation during 2012. Also contributing to non-interest income was mineral income of $40.5 million generated from mineral rights held primarily in North Dakota and Arkansas. The Bank recorded $21.1 million of mineral income during the same period of 2011. Loan prepayment and fee income was $33.4 million compared to $15.2 million for the same period of 2011. The relatively low interest rate environment resulted in strong prepayment and interest rate conversion activity.
Non-interest expense was $50.3 million in the first half of 2012 which primarily consisted of $29.1 million of operating expenses, $12.0 million of loan servicing fees paid to Associations and $7.3 million of investment impairment losses. This compares to $45.2 million of non-interest expense in the same period of 2011 consisting of $30.0 million of operating expenses, $6.7 million of loan servicing fees paid to Associations and $6.2 million of investment impairment losses.
Second Quarter 2012 Results of Operations
Second quarter 2012 net income was strong at $149.0 million compared to $115.2 million for the same period of 2011. The increase over the prior period was primarily due to the non-recurring refunds from the Farm Credit Insurance Corporation, continued strong mineral income and fee income related to strong prepayment and interest rate conversion activity.
Total loans were $64.0 billion at June 30, 2012, an increase of 3% from $62.0 billion at December 31, 2011. AgriBank’s primary business is providing wholesale lending to its affiliated Associations, which represented 88.0% of total loans. Wholesale volume directly reflects the retail marketplace activities at the Associations which are funded through their wholesale lines with the Bank. The increase in loan volume from December 31, 2011 was primarily due to increases in wholesale lines.
AgriBank’s loan portfolio credit quality remains strong at 99.7% “acceptable” and “special mention” under the Farm Credit Administration’s Uniform Classification System at June 30, 2012 and at December 31, 2011.
Nonaccrual loans were $56.2 million at June 30, 2012, a decrease from $62.0 million at December 31, 2011.
The allowance for loan losses at June 30, 2012 was $12.6 million compared to $9.2 million at December 31, 2011, primarily reflecting specific allowances recorded on individual customers.
The Midwest, including most of the AgriBank District is experiencing its worst drought since 1988. With the vast majority of the District’s crop producers utilizing multi-peril crop insurance, we expect the impact to these borrowers to be minimal. Of some concern is the impact of higher prices on crop and feed users, including swine, beef, dairy, poultry and ethanol producers this fall and into 2013.
The United States Department of Agriculture projection for 2012 net farm income of $91.7 billion, is down $6.3 billion from the 2011 forecast and up from 2010 levels, but does not include the impact of drought or increases in crop-related expenses. A further adjustment to this projection is likely once the full impact of the drought, crop insurance indemnification and the rise in feed costs are quantified.
Liquidity and Capital
Liquidity and capital levels remain strong and exceed regulatory minimum requirements.
Cash and investments totaled $11.3 billion at June 30, 2012, compared to $10.4 billion at December 31, 2011. The Bank’s liquidity position was 135 days coverage of maturing debt at June 30, 2012, compared to 138 days at December 31, 2011, each well above the 90-day minimum established by the Farm Credit Administration, the Bank’s regulator. Average liquidity for the quarter ended June 30, 2012 was 142 days. Capital increased to $3.974 billion at June 30, 2012, from $3.806 billion at December 31, 2011. The increase of $167.8 million primarily reflects net income earned and retained.
“AgriBank’s success continues as a result of preparation, collaboration with affiliated Associations and execution. Together, we are not only doing the basic blocking and tackling well, but adding value through services and dedicated staff. Through economic cycles, agriculture globalization and industry consolidations, we have built a strong organization with a foundation that will meet our industry’s needs for today and tomorrow,” said York.
AgriBank, FCB is one of the largest banks within the national Farm Credit System, with over $75 billion in total assets. As agriculture’s borrower-owned financial leader, AgriBank complements the market-facing focus of affiliated Associations to serve rural America in a District that stretches from Ohio to Wyoming and from Minnesota to Arkansas, representing nearly 40% of farmland and over 60% of cropland in the United States. The affiliated Associations and AgriBank are collaborating in successfully shaping the future of agriculture.
For more information about AgriBank, including its annual and quarterly reports, visit the Bank’s website at www.agribank.com.
Any forward-looking statements in this press release are based on current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from expectations due to a number of risks and uncertainties. More information about these risks and uncertainties is contained in AgriBank’s annual report. The Bank undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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