Net income was $362.8 million and acceptable credit quality stood at 99.7 percent
ST. PAUL, Minn., November 9, 2015 – Today St. Paul-based AgriBank announced financial results for the third quarter of 2015 with continued strong net income and credit quality, and robust liquidity and capital.
- Stable net interest income: While net interest income from the core lending business remained relatively stable, net income decreased $59.5 million, or 14.1 percent, to $362.8 million for the nine months ended September 30, 2015. The decrease was primarily driven by lower mineral income due to continued low oil prices and reduced mineral leasing activity.
- Strong credit quality: Loan portfolio credit quality remained strong. Acceptable loans stood at 99.7 percent.
- Robust liquidity and capital: Cash and investments totaled $15.6 billion at September 30, 2015, compared to $16.4 billion at the end of last year. End-of-the-quarter liquidity was 153 days, well above requirements established by the Farm Credit Administration (FCA), the Bank’s independent regulator. Regulatory capital ratios also remained above FCA minimums, with capital of $5.1 billion.
“While U.S. net farm income is expected to decline in 2015 compared to last year, AgriBank’s continued strong credit quality in the third quarter reflects the strong liquidity and equity positions of many borrowers,” said Bill York, AgriBank CEO. “In the current agriculture efficiency cycle — marked by lower commodity prices — AgriBank and affiliated Farm Credit Associations are well-positioned to continue supporting rural communities and agriculture, just as we have for nearly 100 years.”
YEAR-TO-DATE 2015 RESULTS OF OPERATIONS
Net income decreased $59.5 million, or 14.1 percent, to $362.8 million for the nine months ended September 30, 2015.
Net interest income remained stable at $386.1 million for the nine months ended September 30, 2015, compared to $390.6 million for the same period in 2014. The decrease in net interest income was primarily attributable to increased interest expense on System-wide debt securities and, to a lesser extent, lower interest rates earned on our retail loan portfolio due to increased competitive pressures. These impacts on net interest income were substantially offset by growth in loan volume year-over-year.
Provision for loan losses was $5.0 million for the nine months ended September 30, 2015, compared to $2.5 million for the same period in 2014.
Non-interest income decreased to $70.5 million for the nine months ended September 30, 2015, compared to $114.5 million for the same period in 2014. This decrease was primarily driven by lower mineral income due to continued low oil prices and a reduction in mineral leasing activity and, to a lesser extent, a decrease in non-recurring gains on sales of available-for-sale investment securities during 2015.
THIRD QUARTER 2015 RESULTS OF OPERATIONS
Third quarter 2015 net income was $121.1 million, down from $155.8 million for third quarter 2014. Net interest income was stable, but net income was negatively impacted primarily by a reduction in mineral income and a decrease in non-recurring gains on sales of available-for-sale investment securities.
Total loans increased to $80.0 billion, primarily due to increases in loans to affiliated Associations, partially offset by paydowns on real estate mortgage loans purchased through the Asset Pool program. The strong liquidity and equity positions of many borrowers are reflected in the continued favorable credit quality of AgriBank’s loan portfolio. The portfolio had 99.7 percent acceptable-rated loans at September 30, 2015, unchanged from December 31, 2014. Acceptable loans represent the highest quality assets. Credit quality has been steadily improving since 2009 and remains consistent with December 31, 2014; however, these strong positions are expected to revert to more normal levels over time as the commodity price outlook remains challenging.
The U.S. Department of Agriculture’s (USDA) Economic Research Service projects U.S. aggregate net farm income (NFI) to significantly decline from the revised final estimate of $91.1 billion in 2014 to a forecasted $58.3 billion in 2015. The overall decline in 2015 NFI is driven by lower receipts for both crops and livestock primarily due to lower expected prices. Despite the expected significant decline in 2015 farm incomes, the U.S. farm sector entered 2015 in perhaps its strongest financial condition in over 50 years.
Relative to recent history, the outlook for most crop producers looks challenging over the next five years, with most forecasters projecting corn and soybean prices staying at or near break-even levels. Producers may benefit from USDA commodity title programs under the Agricultural Act of 2014 which could be triggered by lower commodity prices. These programs, combined with disciplined risk management practices and the generally strong financial condition of borrowers comprising the District’s crop portfolio, are expected to help mitigate the impact of lower margins.
CAPITAL RESOURCES AND LIQUIDITY
Total capital increased $185.9 million during the period to $5.1 billion, driven primarily by net income, partially offset by patronage and dividends.
Cash and investments totaled $15.6 billion at September 30, 2015, compared to $16.4 billion at the end of last year. The Bank’s end-of-the-period liquidity position represented 153 days coverage of maturing debt obligations which supports our operational demands and is well above the 90-day minimum established by AgriBank’s regulator.
AgriBank is one of the largest banks within the national Farm Credit System, with more than $95 billion in total assets. Under the Farm Credit System’s cooperative structure, AgriBank is primarily owned by 17 affiliated Farm Credit Associations. The AgriBank District covers America’s Midwest, a 15-state area stretching from Wyoming to Ohio and Minnesota to Arkansas. About half of the nation’s cropland is located within the AgriBank District, providing the Bank and its Association owners with expertise in production agriculture. For more information, visit 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.