Farm Credit System's Net Income up 18%
Thursday, August 4th, 2011
The Farm Credit System today reported combined net income of $982 million and $1.986 billion for the three and six months ended June 30, 2011, as compared with combined net income of $882 million and $1.684 billion for the same periods last year.
"The Farm Credit System's results continue to be very positive due to relatively good credit quality and steady net interest margins," remarked Jamie B. Stewart, Jr., President and CEO of the Federal Farm Credit Banks Funding Corporation.
"To date, we are pleased we continue to have access to well-priced debt due to our strong income trend and our conservative balance sheet despite the current uncertainty in the domestic and European debt markets. At June 30, 2011, System capital as a percentage of total assets was 15.2% and the System's liquidity position represented 195 days coverage of maturing debt obligations."
Results of Operations
Combined net income increased $100 million and $302 million for the second quarter and six months ended June 30, 2011, as compared with the same periods in 2010. The increases resulted from increases in net interest income of $134 million and $289 million and decreases in the provision for loan losses of $19 million and $82 million, partially offset by increases in net noninterest expense of $39 million and $49 million and increases in the provision for income taxes of $14 million and $20 million.
Net interest income was $1.563 billion and $3.132 billion for the three and six months ended June 30, 2011, as compared with $1.429 billion and $2.843 billion for the same periods of the prior year.
Provisions For Loan Losses
The System recognized provisions for loan losses of $126 million and $234 million for the three and six-month periods ended June 30, 2011, as compared with provisions for loan losses of $145 million and $316 million for the three- and six-month periods ended June 30, 2010. The decrease in the provision for loan losses reflects a lower level of probable and estimable losses recognized during the comparable periods. However, the loan portfolio continues to be impacted by volatility in certain agricultural sectors and weakness in the general U.S. economy.
The provisions for loan losses recorded during the first six months of 2011 and 2010 reflected credit deterioration primarily in those agricultural sectors that continue to be impacted by the volatility in commodity prices, such as the livestock, ethanol and dairy sectors, as well as those sectors affected by the overall downturn in the general U.S. economy, such as forestry, nurseries and wineries. In addition, the provision for loan losses in 2011 reflected more recent credit stress in the poultry sector, as well as a higher average level of loan volume and commitments to agribusiness customers.
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Federal Farm Credit Banks Funding Corporation