AgriBank, FCB Reports 2010 Fourth Quarter and Year-End Financial Results

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Bank Records a 41% Increase in 2010 Net Income to $580.9 Million, Including an 18% Increase in Fourth Quarter 2010 Net Income; Continued Strong Levels of Capital, Liquidity and Credit Quality

We will continue to sustain our strength to be agriculture’s borrower-led, customer-focused capital partner for generations to come.

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

“Together, AgriBank and our affiliated Associations created tremendous value for agriculture across the District in 2010. Agriculture looks to us as its reliable partners through all economic cycles. We—AgriBank and our affiliated Associations—were instrumental this past year in helping to mitigate risk, facilitate customer operating flexibility and provide the sustainable strength and dependability that rural America demands and deserves,” said Bill York, AgriBank CEO.

2010 Results of Operations
Net income for the year-ended December 31, 2010 was $580.9 million compared to $412.5 million for the same period last year, a $168.4 million or 40.8% increase. The increase in net income resulted primarily from:

  • Increased net interest income, plus
  • Increased mineral and fee income, and
  • Decreased impairment on securities and gains on sales of previously impaired securities within the Bank’s liquidity investment portfolio.

Net interest income for the year-ended December 31, 2010 increased $18.4 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. Net income for the year-ended December 31, 2010 was also positively impacted by a $28.5 million increase in mineral income and a $40.3 million increase in fee income.

Impairment charges on investments held for liquidity purposes in the year-ended December 31, 2010 were $16.0 million, compared to $51.8 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.

Fourth Quarter Results of Operations
Net income for the fourth quarter of 2010 was $138.8 million compared to $117.3 million for the same period last year, representing a $21.5 million or 18.3% increase. The increase in net income resulted primarily from a combination of:

  • Increased mineral and fee income, plus
  • Decreased loss on debt extinguishment and decreased impairment on securities, offset by
  • Decreased net interest income.

Net income for the quarter-ended December 31, 2010 was positively impacted by an $11.1 million increase in minerals income, and a $10.1 million increase in fee income.

Net income for the quarter-ended December 31, 2010 was also positively impacted by a $11.4 million decrease in loss on debt extinguishment. Impairment charges on investments held for liquidity purposes in the quarter-ended December 31, 2010 were $1.5 million, down from $8.0 million during the same period in 2009.

Net interest income for the quarter-ended December 31, 2010 decreased $20.7 million compared to the same period in the prior year. The decrease in net interest income was primarily attributable to the amount of benefit generated from the Bank’s ability to re-price its outstanding debt in the lower interest rate environment had slowed considerably by the fourth quarter of 2010.

Loan Portfolio
Total loans were $59.5 billion at December 31, 2010, an increase of $3.8 billion or 6.9% from $55.7 billion at December 31, 2009. 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. The increase in loan volume from December 31, 2009 resulted primarily from the Associations’ loan portfolio growth with their traditional customers reflecting successful marketing strategies, continued competitive interest rates and high volume of land purchases financed during the fourth quarter of 2010. In addition, the rapid acceleration in corn and soybean prices during the fourth quarter drove strong demand for grain inventory financing of grain merchandisers, including cooperatives.

AgriBank’s loan portfolio credit quality was at 99.11% “acceptable” under the Farm Credit Administration’s Uniform Classification System at December 31, 2010, comparable to 93.89% at September 30, 2010 and 90.52% at December 31, 2009.

Nonaccrual loans were $73.6 million at December 31, 2010, down from $101.0 million at September 30, 2010 and $111.7 million at December 31, 2009. The decrease in nonaccrual loans is due primarily to the transfer of a large customer in the pork industry to accrual status during the fourth quarter of 2010.

The allowance for loan losses at December 31, 2010 was $13.0 million, compared to $14.7 million at September 30, 2010 and $23.4 million at December 31, 2009, reflecting the impact of changes in risk in the retail portfolio, primarily in the pork and dairy industries, as well as the impact of loan charge-offs.

Credit quality remained stable into the fourth quarter of 2010. This strong credit quality continues, in part, due to cash grain producers experiencing strong profitability, the meat complex maintaining positive operating margins and dairy and ethanol producers remaining 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 December 31, 2010, compared to $9.6 billion at December 31, 2009. The Bank’s liquidity position increased to 137 days coverage of maturing debt at December 31, 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. Average liquidity for the year was 149 days. Capital increased to $3.595 billion at December 31, 2010, from $3.267 billion at December 31, 2009. The increase of $329 million primarily 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.

“We are, and we will continue to be, a reliable partner for growth in good times and its safety net in bad. We will continue to sustain our strength to be agriculture’s borrower-led, customer-focused capital partner for generations to come,” said York.

About AgriBank
AgriBank, FCB is the largest of five banks within the national Farm Credit System, with $71 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 50% 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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