AgriBank, FCB Reports 2010 Third Quarter and Nine-Month Financial Results

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Bank Records a 52% Increase in Third Quarter 2010 Net Income to $158.8 Million; Continued Strong Levels of Capital, Liquidity and Credit Quality

AgriBank continues to build a solid financial foundation that facilitates the competiveness of District Associations within their respective markets.

AgriBank, FCB today announced financial results for the third quarter 2010, reporting growth in net income and continued strong levels of capital, liquidity, and credit quality.

“AgriBank has a compelling story to tell. Our financial strength, driven by efficient balance sheet and prudent risk management, has afforded us the opportunity to work collaboratively with District Associations to meet the needs of their customers and rural America,” said Bill York, AgriBank CEO.

Results of Operations
Net income for the third quarter was $158.8 million compared to $104.4 million for the same period last year, a $54.4 million or 52.1% increase. Net income for the nine months ended September 30, 2010 was $442.1 million compared to $295.1 million for the same period last year, a $147.0 million or 49.8% increase. The increase in net income for the third quarter and nine months ended September 30, 2010 resulted primarily from increased net interest income, increased fees and minerals income, decreased impairment on securities and gains on sales of previously impaired securities within the Bank’s liquidity investment portfolio.

Net interest income for the nine months ended September 30, 2010 increased $39.1 million compared to the same period in the prior year. The increase in net interest income was primarily attributable to the Bank’s ability to re-price its outstanding debt in the lower interest rate environment and to its ability to adjust loan pricing to better reflect additional credit risk and market conditions in the current agricultural environment.

Net income for the nine months ended September 30, 2010 was also positively impacted by a $17.4 million increase in minerals income and a $30.2 million increase in fee income.

Impairment charges on investments held for liquidity purposes in the nine months ended September 30, 2010 were $14.5 million, compared to $43.8 million during the same period in 2009. This reflects write-downs on the Bank’s housing related asset-backed and mortgage-backed investment securities. While there continues to be stress in this sector of the investment portfolio, the deterioration has slowed significantly and liquidity continues to improve. Net income was positively impacted in the current year by $7.6 million of gains recognized on the sale of previously impaired investments.

Loan Portfolio
Total loans were $57.0 billion at September 30, 2010, up from $55.7 billion at December 31, 2009 and $54.7 billion at September 30, 2009. Loan growth has moderated compared to seasonally adjusted loan growth in prior years. This is a result of the AgriBank District experiencing softening loan demand due to commodity price changes, stabilizing collateral values, and continued adherence to strong credit underwriting standards.

Loan portfolio credit quality was at 99.50% “acceptable” and “other assets especially mentioned” under the Farm Credit Administration’s Uniform Classification System at September 30, 2010, comparable to 99.44% at June 30, 2010 and 99.53% at December 31, 2009. Nonaccrual loans were $101.0 million at September 30, 2010, compared to $113.9 million at June 30, 2010 and $111.7 million at December 31, 2009. The allowance for loan losses at September 30, 2010 was $14.7 million, compared to $23.9 million at June 30, 2010 and $23.4 million at December 31, 2009, reflecting the impact of changes in risk in the retail portfolio, primarily in the hog and dairy industries, as well as the impact of loan charge-offs.

Credit quality remains stable into the third quarter of 2010. Stabilization is due, in part, once again to the meat complex maintaining positive operating margins while dairy and ethanol are marginally profitable.

Liquidity and Capital
Capital and liquidity levels remain strong and exceed regulatory minimum requirements.

Cash and investments increased to $10.7 billion at September 30, 2010, compared to $9.6 billion at December 31, 2009. The Bank’s liquidity position increased to 131 days coverage of maturing debt at September 30, 2010, compared to 123 days at December 31, 2009, each well above the 90-day minimum established by the Farm Credit Administration, the Bank’s regulator. Capital increased to $3.539 billion at September 30, 2010, from $3.267 billion at December 31, 2009. The increase of $272 million since year-end reflects net income earned and retained and a reduction in other comprehensive loss for the period, reflecting improved market values of housing related securities within the Bank’s liquidity investment portfolio.

“AgriBank continues to build a solid financial foundation that facilitates the competiveness of District Associations within their respective markets,” said York.

About AgriBank
AgriBank, FCB is the largest of five banks within the national Farm Credit System, with over $68 billion in total assets. It facilitates agricultural lending in a District that stretches from Ohio to Wyoming and from Minnesota to Arkansas. AgriBank is committed to fulfilling its mission by providing a stable and reliable source of credit and services to Associations, supporting rural development and maintaining a sustainable model for Farm Credit. From its headquarters in St. Paul, Minnesota, AgriBank serves as a trusted partner, wholesale lender and business-service provider to a 15-state network of Associations.

Additional Information
For more information about AgriBank, including its annual and quarterly reports, visit the Bank’s website at http://www.agribank.com.

Forward-Looking Statements
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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Rebecca Yaklich
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