AgriBank had stable net income in the second quarter of 2016, it announced last week.
AgriBank is one of the largest banks within the national Farm Credit System, with more than $100 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 in the AgriBank district.
Second quarter highlights:
-Stable net income: Net income grew $18.5 million, or 7.7%, to $260.2 million for the six months ended June 30, 2016, compared to the same period of the prior year. This increase was driven by continued strong net interest income, significantly offset by a decline in mineral income due to continued lower oil prices.
-Sound credit quality: Total loan portfolio credit quality remained sound, as acceptable loans stood at 99.6%. Credit quality of the retail loan portfolio has moderated to 95.5% acceptable as of June 30, 2016, compared to 97.3% at the end of last year. This decline was driven primarily by downgrades in credit quality in equipment finance loans purchased through the AgDirect program.
-Robust liquidity and capital: Cash and investments totaled $15.9 billion at June 30, 2016, compared to $16.2 billion at the end of last year. End-of-the-quarter liquidity was 151 days, well above the regulatory requirement. Capital also remained well above the regulatory minimum and company targets.
"Our key financial measures remained strong, reflecting the enduring strength of borrowers and affiliated Farm Credit Associations even as the outlook for many producers remains challenging," said William J. Thone, AgriBank Interim Chief Executive Officer. "For more than 100 years, financial strength has enabled us to be the reliable, consistent source of credit and financial services that rural communities and agriculture need."
Year-to-date 2016 results
-Net interest income increased to $280.8 million for the six months ended June 30, 2016, compared to $255.3 million for the same period in 2015, primarily due to increased wholesale loan volume compared to the same period of the prior year.
-Provision for loan losses was $4.5 million for the six months ended June 30, 2016, compared to $3.0 million for the same period in 2015.
-Non-interest income decreased to $44.0 million, compared to $48.4 million for the same period in 2015. This decrease was primarily driven by lower mineral income due to continued lower oil prices.
Second Quarter 2016 results
-Second quarter 2016 net income was $135.8 million, an increase of $17.9 million, or 15.2%, compared to the same period of the prior year. This increase was driven by an increase in net interest income and non-recurring gains on sales of available-for-sale investment securities, partially offset by a decline in mineral income driven by continued low oil prices.
-Total loans increased $1.7 billion, or 2%, to $84.5 billion from year-end 2015, primarily due to increases in wholesale loans to affiliated associations, partially offset by repayments received on real estate mortgage loan participations purchased.
-USDA’s Economic Research Service's projects both net cash and net farm income to decline for the third consecutive year in 2016, after reaching a record high in 2013. Net farm income is projected to fall by 3% to $54.8 billion for 2016 compared to 2015, primarily related to feed crops, dairy and most protein sectors. Crop producers may benefit somewhat from a projected increase in direct government farm payments as well as reduced expenses, primarily related to energy cost savings.
-Macroeconomic events of concern to agriculture include the Brexit referendum vote by the British public to begin the process of leaving the European Union and the resulting political and economic fallout from the decision. For U.S. agriculture, the immediate risk is through the impact of the decision on exchange rates and the potential for continued appreciation in the U.S. dollar, which has had a negative impact upon U.S. agricultural exports.
Capital resources and liquidity
-Total capital remains very strong, increasing $92.5 million during the period to $5.3 billion, driven primarily by net income, partially offset by patronage and dividends, and other comprehensive losses.