- Net Income Totaled $266.6 million for the First Half of the Year
- Non-Adverse Loans Stood at 99.8%
Yesterday St. Paul-based AgriBank announced financial results for the second quarter of 2014.
- Net income: Net income remained strong at $266.6 million for the first half of 2014. This is a slight decline from the first half of 2013 primarily attributable to the absence of non-recurring items that benefited 2013 results, as discussed below, and an increase in provision for loan losses of $4.0 million.
- Credit quality remains strong: Overall loan portfolio credit quality remains strong and non-adverse loans stood at 99.8%.
- Capital and liquidity remain robust: A first quarter amendment to our capital plan was the primary driver of the decrease in capital of $140.7 million from December 31, 2013 to $4.8 billion as of June 30, 2014. Cash and investments totaled $14.8 billion as of June 30, 2014 compared to $13.5 billion as of December 31, 2013.
"AgriBank continued to have strong performance through the second quarter of 2014, with continued strong credit quality and a slight decline in net income primarily attributable to non-recurring factors," said Bill York, AgriBank CEO. "Favorable growing conditions are expected to result in strong yields throughout our District. Lower crop prices, as compared to the prior year, will result from these strong yields but should have a positive impact on producers who use these crops as inputs."
YEAR-TO-DATE 2014 RESULTS OF OPERATIONS
Net income decreased to $266.6 million for the six months ended June 30, 2014 from $281.3 million during the same period in 2013. Excluding the impact of non-recurring items in 2013 and an increase in provision for loan losses of $4.0 million, net income remained essentially flat.
Net interest income remained relatively flat at $258.3 million for the six months ended June 30, 2014 compared to $258.4 million for the same period in 2013.
Non-interest income decreased to $63.4 million for the six months ended June 30, 2014 from $75.6 million during the same period in 2013. The decrease was primarily due to fewer loan conversions and prepayments in the first half of 2014 and one large non-recurring loan prepayment fee of $10.0 million in 2013. These decreases were partially offset by an increase in mineral income of $9.9 million in the first half of 2014 driven by relatively high gas prices resulting in continued demand for exploration rights and production activities.
Non-interest expense decreased to $52.6 million during the six months ended June 30, 2014 from $54.2 million during the same period in 2013. The decrease was primarily due to the non-recurring loss on debt extinguishment of $4.0 million during the six months ended June 30, 2013. There has been no debt extinguishment in 2014.
SECOND QUARTER 2014 RESULTS OF OPERATIONS
Second quarter 2014 net income was strong at $135.5 million, but down from $141.3 million for second quarter 2013. The decrease was primarily due to an increase in provision for loan losses of $4.0 million.
Total loans declined slightly to $73.0 billion as of June 30, 2014 from $73.7 billion as of December 31, 2013. The decrease was primarily due to seasonal paydowns occurring during the first quarter of the year, substantially offset by increases in operating lines funded by wholesale loans to Associations during the second quarter. The strong liquidity and equity positions of many borrowers are reflected in the continued favorable credit quality of AgriBank's loan portfolio. The portfolio remained at 99.8% non-adverse loans as of June 30, 2014; unchanged from December 31, 2013. Nonaccrual loans as of June 30, 2014 declined slightly to $38.4 million from $39.7 million as of December 31, 2013. The allowance for loan losses increased to $12.0 million as of June 30, 2014 from $10.1 million as of December 31, 2013.
The U.S. Department of Agriculture's initial projection of 2014 net farm income indicates a decrease, compared to 2013, of 26.6% to $95.8 billion. The 2014 projection is the lowest level since 2010, but $8 billion above the previous 10-year average and still one of the highest levels of net farm income on record. The forecasted decrease is largely driven by expected lower crop revenues due to lower crop prices.
The 2014 District crop production growing season started with colder temperature and excess precipitation in the northern region, resulting in a higher than normal abandonment rate. The central, southern and eastern regions, however, experienced near ideal planting conditions followed by very favorable growing conditions. This has resulted in expectations for record yield levels for corn and soybeans, and above average yields for many of the other crops grown in these areas of the District. The resulting reduction in crop prices and feed cost should continue to have a positive impact on livestock, poultry, dairy and ethanol producers, but could potentially have an adverse effect on crop producers.
CAPITAL RESOURCES AND LIQUIDITY
Total capital decreased $140.7 million during the period to $4.8 billion, driven primarily by reduced capital stock and participation certificates of $232.4 million and patronage to Associations of $158.2 million, substantially offset by net income of $266.6 million. The decrease in capital stock and participation certificates was primarily due to the first quarter amendment to our capital plan which reduced the base required stock investment for all affiliated Associations and other financial institutions from 2.50% to 2.25% effective March 31, 2014. The capital plan amendment was made possible by the issuance of $250.0 million in non-cumulative perpetual preferred stock in the fourth quarter of 2013.
Cash and investments totaled $14.8 billion as of June 30, 2014, compared to $13.5 billion as of December 31, 2013.
AgriBank is one of the largest banks within the national Farm Credit System, with more than $85 billion in total assets. Under the Farm Credit System's cooperative structure, AgriBank is 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. More than half of the nation's cropland is located within the AgriBank District, providing the Bank and its Association owners with exceptional expertise in production agriculture. For more information, visit www.AgriBank.com.