Farm Credit System Reports 2006 Second Quarter and Six-Month Net Income.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- --The Farm Credit System today reported combined net income of $607 million and $1.161 billion for the three and six months ended June June: see month. 30, 2006, as compared with combined net income of $519 million and $1.017 billion for the same periods last year. "The System continued to generate a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. level of earnings despite a competitive marketplace that has placed pressure on our net interest spread," remarked Jamie Jamie is a given name, derived as a pet form of James. However, it has been used as an independent given name in English speaking countries for several generations. Though Jamie was originally exclusively male, since the 1950s it has also been used as a female given name, B. Stewart Stewart, river, Canada Stewart, river, 331 mi (533 km) long, rising in the Mackenzie Mts., central Yukon Territory, Canada, and flowing generally W to the Yukon River S of Dawson. , Jr., President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the Federal Farm Credit Banks Federal Farm Credit Bank An institution created by the government with the purpose of uniting the financing activities of the Federal Land Banks, the Federal Intermediate Credit Banks, and the banks for cooperatives. See: Federal Farm Credit System. Funding Corporation. "The increases in net income resulted primarily from growth in earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin . Also, the credit quality of the System's loan portfolio remained healthy, reflecting favorable agricultural economic conditions, which contributed to the ability of System institutions to maintain their strong capital positions." Net interest income increased $76 million and $155 million to $876 million and $1.730 billion for the three and six months ended June 30, 2006, as compared with the same periods of the prior year. These increases in net interest income resulted from higher levels of average earning assets, which grew $17.0 billion to $138.8 billion for the six months ended June 30, 2006, as compared with the same period of the prior year, as a result of the continued growth in the System's loan and investment portfolios. Partially offsetting these increases were decreases in the net interest spread of 28 and 27 basis points for the second quarter and first six months of 2006 to 1.76% and 1.78%, as compared with the same periods in 2005. The decreases in net interest spread were partially due to competitive conditions resulting from a high level of liquidity in bank and capital debt markets and to a rising short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. interest rate environment. Also contributing to the declines in spread was the change in asset mix that generally reduced the risk profile of earning assets. Net interest margins decreased 12 and 10 basis points to 2.48% and 2.49% for the three and six months ended June 30, 2006, as compared with the same periods of the prior year, as the decreases in net interest spread were partially offset by an increase in income earned from higher yields on earning assets funded by capital. The System recognized loan loss reversals of $19 million for the second quarter of 2006 and $14 million for the six-month period ended June 30, 2006, as compared with provisions for loan losses of $4 million and $7 million for the three- and six-month periods ended June 30, 2005. The loan loss reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its for the three months ended June 30, 2006 consisted of $27 million of loan loss reversals recorded by certain System institutions, partially offset by $8 million of provisions for loan losses recorded by other System institutions. The six-month 2006 loan loss reversal consisted of $31 million of loan loss reversals recorded by certain System institutions, partially offset by $17 million of provisions for loan losses recorded by other System institutions. The loan loss reversals for the second quarter and first six months of 2006 reflected improvements in credit quality. Noninterest income increased $17 million and $24 million to $100 million and $192 million for the three and six months ended June 30, 2006, as compared with the same periods of the prior year. The increases resulted from increases in earnings from financially related services, fewer losses recognized on early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, and gains on certain derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. transactions. Noninterest expense increased $26 million and $55 million to $361 million and $718 million for the three- and six-month periods ended June 30, 2006, as compared with the same periods of the prior year. The increases were primarily due to increases in salaries and employee benefit costs resulting from merit and incentive compensation increases and, to a lesser extent, higher staffing levels at certain System institutions. The provisions for income taxes were $27 million and $57 million for the three and six months ended June 30, 2006, as compared with $25 million and $56 million for the three and six months ended June 30, 2005. The effective tax rate decreased from 5.2% for the six months ended June 30, 2005 to 4.7% for the six months ended June 30, 2006 due to increased patronage Patronage See also Philanthropy. Alidoro fairy godfather to Italian Cinderella. [Ital. Opera: Rossini, Cinderella, Westerman, 120–121] Alphonso, Don supports Bias in return for political favors. [Fr. Lit. distributions at taxable System institutions. Cash and investments increased $3.097 billion to $31.524 billion at June 30, 2006, as compared with $28.427 billion at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005. The System's liquidity position was 158 days at June 30, 2006, as compared with 187 days at December December: see month. 31, 2005. Gross loan volume increased $6.493 billion to $112.765 billion at June 30, 2006, as compared with the year-end 2005 loan volume. The growth occurred throughout the System's loan portfolio. The System's accruing loan volume was $112.276 billion at June 30, 2006, as compared with $105.748 billion at December 31, 2005. Nonaccrual loans decreased $35 million from December 31, 2005 to $489 million at June 30, 2006. Nonperforming loans (which consist of nonaccrual loans, accruing restructured loans, and accruing loans 90 days or more past due) were $596 million at June 30, 2006, as compared with $600 million at December 31, 2005. These loans represented 0.53% and 0.56% of the System's loans at June 30, 2006 and December 31, 2005. The allowance for loan losses was $742 million at June 30, 2006, as compared with $755 million at December 31, 2005. The System recorded net loan recoveries of $8 million for the six months ended June 30, 2006, as compared with net loan charge-offs of $31 million for the six months ended June 30, 2005. The allowance as a percentage of loans outstanding was 0.66% at June 30, 2006 and 0.71% at December 31, 2005. The allowance for loan losses was 124% of the System's total nonperforming loans and 152% of its nonaccrual loans at June 30, 2006, as compared with 126% and 144% at December 31, 2005. Total capital increased during the first half of 2006 by $761 million to $23.535 billion at June 30, 2006. This increase was the result of an increase of $799 million in surplus (net income earned and retained) to $19.403 billion at June 30, 2006, as compared with $18.604 billion at December 31, 2005. Accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. other comprehensive loss increased $85 million to $327 million at June 30, 2006, as compared with a loss of $242 million at December 31, 2005, due to increases in the unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. resulting from higher market interest rate levels on certain investments available for sale. Restricted capital, reflecting assets in the Farm Credit Insurance Fund, increased $119 million to $2.181 billion at June 30, 2006. Capital as a percentage of total assets decreased to 15.7% at June 30, 2006 from 16.3% at December 31, 2005 due principally to the growth in cash and investments, and loans. Risk funds (total capital and the allowance for loan losses) totaled $24.277 billion and as a percentage of System loans decreased to 21.5% at June 30, 2006, as compared with $23.529 billion and 22.1% at December 31, 2005. The Farm Credit System is a nationwide network of federally chartered agricultural and rural lending institutions Noun 1. lending institution - a financial institution that makes loans financial institution, financial organisation, financial organization - an institution (public or private) that collects funds (from the public or other institutions) and invests them in cooperatively co·op·er·a·tive adj. 1. Done in cooperation with others: a cooperative effort. 2. Marked by willingness to cooperate; compliant: a cooperative patient. owned by their borrowers. Copies of this press release, as well as other information regarding the System, including its annual and quarterly information statements, are available on the Federal Farm Credit Banks Funding Corporation's website at www.farmcredit-ffcb.com. For further information, or to request copies of annual and quarterly information statements, contact: Daniel M. Bienz, Vice President Financial Analysis and Disclosure Federal Farm Credit Banks Funding Corporation 10 Exchange Place, Suite 1401 Jersey City, NJ 07302 (201) 200-8070 E-mail - DBienz@farmcredit-ffcb.com Certain statements in this press release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are based on current expectations and are subject to uncertainty and changes in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . 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 the System's annual and quarterly information statements.
FARM CREDIT SYSTEM
COMBINED FINANCIAL STATEMENT DATA
(in millions)
STATEMENT OF CONDITION DATA June 30, December 31,
2006 2005
---- ----
(unaudited)
Cash and investments $31,524 $28,427
Loans 112,765 106,272
Less: allowance for loan losses (742) (755)
-------- --------
Net loans 112,023 105,517
-------- --------
Accrued interest receivable 1,618 1,405
Other assets 2,878 2,475
Restricted assets 2,181 2,062
-------- --------
Total assets $150,224 $139,886
======== ========
Systemwide debt securities:
Due within one year $44,768 $40,321
Due after one year 77,488 72,398
-------- --------
Total Systemwide debt securities 122,256 112,719
Other bonds 657 857
Other liabilities 3,776 3,536
-------- --------
Total liabilities 126,689 117,112
-------- --------
Preferred stock 988 1,017
Capital stock 1,290 1,333
Restricted capital 2,181 2,062
Accumulated other comprehensive loss (327) (242)
Surplus 19,403 18,604
-------- --------
Total capital 23,535 22,774
-------- --------
Total liabilities and capital $150,224 $139,886
======== ========
STATEMENT OF INCOME DATA For The For The
Quarter Ended Six Months Ended
June 30, June 30,
-------- --------
(unaudited)
2006 2005 2006 2005
---- ---- ---- ----
Interest income $2,322 $1,693 $4,465 $3,253
Interest expense (1,446) (893) (2,735) (1,678)
------- ------- ------- -------
Net interest income 876 800 1,730 1,575
Loan loss reversal/(provision
for loan losses) 19 (4) 14 (7)
Noninterest income 100 83 192 168
Noninterest expense (361) (335) (718) (663)
------- ------- ------- -------
Income before income taxes 634 544 1,218 1,073
Provision for income taxes (27) (25) (57) (56)
------- ------- ------- -------
Net income $607 $519 $1,161 $1,017
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