AgriBank, FCB Reports 2011 Third Quarter and Nine-Month Financial Results

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Bank Records 2011 Net Income of $338.4 Million, including $119.0 Million in Third Quarter 2011, Continued Strong Levels of Capital, Liquidity, and Credit Quality

Continued and consistent access to funding doesn't happen in a vacuum.

AgriBank, FCB announced today its financial results for the third quarter 2011, reporting continued strong levels of net income, capital, liquidity, and credit quality.

“AgriBank continues to perform very well with another quarter of strong earnings. Contributing to our strong performance is the strength of most agriculture enterprises. Credit quality remains strong. Bank and District personnel are focused on effective and efficient operations with a heavy emphasis on managing enterprise risk given this volatile market. The strong performance of the District helps to ensure access to ample funding and liquidity to support attractively priced loan products for our customers and rural America.” said Bill York, AgriBank CEO.

2011 Results of Operations
AgriBank, FCB reports net income of $338.4 million for the nine months ended September 30, 2011. Net interest income for the nine months ended September 30, 2011 continues to be very strong and reflects the positive impact of our funding actions. During 2010, the Bank took advantage of a favorable interest rate environment and repriced unprecedented levels of its debt at lower costs at a pace that exceeded the rate at which interest-earning assets repriced. This continued in 2011, although at a slower pace which was expected given the level of activity in 2010. Net income was negatively impacted in 2011 by $15.2 million of provision for loan losses expense, which was primarily related to a single large customer. However, we continue to have strong fee and mineral income.

Third Quarter 2011 Results of Operations
AgriBank, FCB reports net income of $119.0 million for the third quarter 2011. Net income for the quarter ended September 30, 2011 continues to be very strong and reflects the positive impact from our funding actions and fee income generated on repricing assets, albeit to a lesser extent than for the same period of the prior year. Net income was negatively impacted in the third quarter of 2011 due to provision expense of $12.7 million, which was primarily related to a single large customer.

Loan Portfolio
Total loans were $60.2 billion at September 30, 2011, a slight increase compared to $59.5 billion at December 31, 2010 and up from $57.0 billion at September 30, 2010. AgriBank’s primary business is providing wholesale lending to its affiliated Associations. Wholesale volume directly reflects the retail marketplace activities at the Associations which are funded through their wholesale lines with the Bank. Loans increased primarily due to $1.2 billion of loan volume in a new equipment financing program, with wholesale volume being relatively stable due to strong cash positions of retail customers.

AgriBank’s loan portfolio credit quality was at 99.6% “acceptable” under the Farm Credit Administration’s Uniform Classification System at September 30, 2011, compared to 99.5% at June 30, 2011 and December 31, 2010.

Credit quality improved slightly during the third quarter of 2011 and remains strong. This strong credit quality continues, in part, due to cash grain producers experiencing strong profitability, higher milk prices improving dairy profitability, and ethanol producers remaining profitable.

The meat complex remains positive despite narrowing operating margins occurring due to higher feed costs. More specifically, operating margins for some cattle feedlots are negative due to the higher feeder cattle prices and feed costs. However, hog producers have been able to maintain positive margins even with high feed costs due to increased prices for pork and the use of contracting and other hedge instruments. Higher milk prices have made dairy profitable but higher feed costs means that even a small reduction in milk prices could result in unprofitable conditions. Broilers continue to experience stress due to oversupply and the high cost of feed.

Nonaccrual loans were $94.8 million at September 30, 2011 compared to $92.6 million at June 30, 2011, and up from $73.6 million at December 31, 2010. The increase in nonaccrual loans from December 31, 2010 is due primarily to the transfer of a large customer in the poultry industry to nonaccrual status, partially offset by a large asset in the dairy industry moving to accrual status during the first quarter of 2011.

The allowance for loan losses at September 30, 2011 was $23.8 million compared to $14.8 million at June 30, 2011, and $13.0 million at December 31, 2010, reflecting the impact of changes in risk in the retail portfolio, primarily in the dairy industry and the addition of the equipment financing portfolio in 2011.

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

Cash and investments increased to $11.0 billion at September 30, 2011, compared to $10.7 billion at December 31, 2010. The Bank’s liquidity position increased to 165 days coverage of maturing debt at September 30, 2011, compared to 137 days at December 31, 2010, each well above the 90-day minimum established by the Farm Credit Administration, the Bank’s regulator. Average liquidity for the nine months ended September 30, 2011 was 150 days. Capital increased to $3.767 billion at September 30, 2011, from $3.595 billion at December 31, 2010. The increase of $171.4 million primarily reflects net income earned and retained, an increase in capital stock 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.

“Continued and consistent access to funding doesn't happen in a vacuum. AgriBank has been proactive in building and reinforcing our financial foundation. International demand for protein and the commodities that fuel its production is growing. The affiliated Associations of AgriBank and their customers are front and center in supplying that demand. The capital markets understand and appreciate those facts and our role as a strong and reliable conduit of credit to them.” said York.

About AgriBank
AgriBank, FCB is the largest of five banks within the national Farm Credit System, with almost $72 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 54% of cropland in the United States. These affiliated Associations and AgriBank are collaborating in successfully shaping the future of agriculture.

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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