Changes in the chart above relate directly to:
Changes in income discussed below
Changes in assets discussed in the Loan Portfolio and Other Investments sections
Changes in capital discussed in the Capital Adequacy section
Changes in Significant Components of Net Income
For the year ended December 31
2017
2016
(in thousands)
Net interest income
Provision for loan losses
Patronage income
Other income, net
Operating expenses
Provision for income taxes
Net income
2015
Increase (decrease) in net income
2017 vs 2016
2016 vs 2015
$93,708
--
19,180
7,219
47,991
1,974 $90,043
1,000
13,438
7,458
47,353
1,020 $86,686
500
11,736
8,613
45,944
8 $3,665
1,000
5,742
(239)
(638)
(954) $3,357
(500)
1,702
(1,155)
(1,409)
(1,012)
$70,142 $61,566 $60,583 $8,576 $983
Net Interest Income
Changes in Net Interest Income
(in thousands)
For the year ended December 31
Changes in volume
Changes in interest rates
Changes in nonaccrual income and other
Net change
2017 vs 2016 2016 vs 2015
$3,934
(293)
24 $7,861
(3,800)
(704)
$3,665 $3,357
Net interest income included income on nonaccrual loans that totaled $612 thousand, $587 thousand, and $1.3 million in 2017, 2016, and 2015, respectively.
Nonaccrual income is recognized when received in cash, collection of the recorded investment is fully expected, and prior charge-offs have been recovered.
Net interest margin (net interest income as a percentage of average earning assets) was 2.5%, 2.5%, and 2.7% in 2017, 2016, and 2015, respectively. We
expect margins may compress further in the future if interest rates continue to rise and competition increases.
Provision for Loan Losses
The fluctuation in the provision for loan losses was related to our estimate of losses in our portfolio for the applicable years. Additional discussion is included
in Note 3 to the accompanying Consolidated Financial Statements.
Patronage Income
We may receive patronage from AgriBank and other Farm Credit Institutions. Patronage distributions from other Farm Credit Institutions are declared
solely at the discretion of each institution’s Board of Directors. Patronage distributions for the programs discussed below are declared solely at the
discretion of AgriBank’s Board of Directors.
Patronage Income
(in thousands)
For the year ended December 31
Wholesale patronage
Asset pool patronage
AgDirect partnership distribution
Other Farm Credit Institutions
Total patronage income
2017 2016 2015
$15,733
3,272
159
16 $9,576
3,819
--
43 $6,940
4,514
--
282
$19,180 $13,438 $11,736
Wholesale patronage income is based on the average balance of our note payable to AgriBank. The patronage rates were 45.0 basis points, 25.6 basis
points, and 26.0 basis points in 2017, 2016, and 2015, respectively. The increase in the patronage rate in 2017 was primarily due to a change in AgriBank’s
capital plan effective July 1, 2017. The capital plan was modified to pay out 100% of net earnings beginning in 2017. Previously 50% of net earnings was
paid. See the Relationship with AgriBank section for further discussion on patronage income.
Since 2008, we have participated in the AgriBank Asset Pool program in which we sell participation interests in certain real estate loans to AgriBank. As part
of this program, we received patronage income in an amount that approximated the net earnings of the loans. Net earnings represents the net interest
income associated with these loans adjusted for certain fees and costs specific to the related loans as well as adjustments deemed appropriate by AgriBank
related to the credit performance of the loans, as applicable. In addition, we received patronage income in an amount that approximated the wholesale
patronage had we retained the volume.
We also received a partnership distribution resulting from our participation in the AgDirect trade credit financing program. The AgDirect trade credit
financing program is facilitated by another AgriBank District association through a limited liability partnership (AgDirect, LLP), in which we are a partial
owner. AgriBank purchases a 100% participation interest in the program loans from AgDirect, LLP. Patronage distributions are paid to AgDirect, LLP,
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