Farm Credit System Reports First Quarter Financials

USAgNet - 05/04/2021

The Farm Credit System reported that combined net income increased 18.2% to $1.7 billion for the first quarter of 2021, as compared with $1.4 billion for the same period of the prior year.

Net interest income was $2.4 billion for the first quarter of 2021, as compared with $2.2 billion for the first quarter of 2020. The increase in net interest income primarily resulted from an increase in the net interest spread and higher average earning assets, driven by increased loan volume. Average earning assets grew $36.5 billion or 10.3% to $390.7 billion for the first quarter of 2021, as compared with the first quarter of 2020.

The net interest margin decreased two basis points to 2.45% for the quarter ended March 31, 2021, as compared with 2.47% for the same period of the prior year. The decline in the net interest margin for the period resulted from an 18 basis point decrease in income earned on earning assets funded by noninterest-bearing sources (principally capital) due to the lower interest rate environment. The decrease in the net interest margin was substantially offset by an increase in the net interest spread of 16 basis points to 2.32%, as compared with the first quarter of 2020. The increase in the net interest spread was primarily due to lower debt costs as a result of the significant volume of debt called during 2020 and in the first quarter of 2021 that generated interest expense savings in excess of the decrease in yield on earning assets.

The System recognized a provision for loan losses of $28 million for the first quarter of 2021, as compared with $57 million during the first quarter of 2020. The provision for loan losses for the first quarter of 2021 primarily reflected a higher level of overall agribusiness lending activity and, to a lesser extent, the adverse impact of a severe weather event affecting a limited number of rural power customers.


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