Farm Credit Systems Reports Lower Net Income For 2009

USAgNet reports that the Farm Credit System has reported combined net income of $2.850 billion for the year ended Dec. 31, 2009, as compared with combined net income of $2.916 billion for the prior year. Combined net income increased $286 million to $832 million for the fourth quarter of 2009, as compared with $546 million for the fourth quarter of 2008.

Combined net income decreased $66 million or 2.3% for the year ended Dec. 31, 2009, as compared with 2008. This decrease resulted from an increase in the provision for loan losses of $517 million, an increase in non-interest expense of $142 million and an increase in the provision for income taxes of $42 million, largely offset by an increase in net interest income of $690 million.

Net interest income was $5.392 billion for 2009, an increase of $690 million or 14.7%, as compared with $4.702 billion for the prior year. The increase in net interest income resulted from an increase in net interest spread and, to a lesser extent, a higher level of average earning assets. Average earning assets grew $8.623 billion or 4.4% to $203.455 billion for 2009, as compared with 2008.

The net interest margin increased 24 basis points to 2.65% for 2009, as compared with 2.41% for 2008. Positively impacting the net interest margin was an increase in the net interest spread of 44 basis points to 2.43% for 2009, as compared with a net interest spread of 1.99% for 2008.

The increase in the net interest spread was primarily attributable to System Banks’ ability to more quickly reprice their outstanding debt in the lower interest rate environment and to adjustments in loan pricing to better reflect credit risk and market conditions in a more difficult agricultural economic environment. During 2009, the Banks called debt totaling $63.6 billion and were able to lower their cost of funds relative to the interest rate earned on their assets, which did not change as quickly.