The following table presents the activity in the allowance for loan losses for the most recent three years:
RESULTS OF OPERATIONS Net Interest Income
Allowance for Loan Losses Activity: Balance at beginning of year
$
Charge-offs: Real estate mortgage Production and intermediate term Agribusiness Rural residential real estate Total charge-offs
Year Ended December 31, 2014 2013 2012 (dollars in thousands) 23,730 $ 17,853 $ 11,075 (285) (399) – (85) (769)
Recoveries: Real estate mortgage Production and intermediate term Agribusiness Rural residential real estate Total recoveries
47 325 1,484 12 1,868
Net (charge-offs) recoveries
1,099
Provision for loan losses Balance at end of year
$
24,954
(1,499) (1,391) (1,765) (156) (4,811)
488 763 156 15 1,422
197 667 1,713 12 2,589
(190)
125
Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period
(951) (538) – (123) (1,612)
(2,222)
6,067 $
0.05%
23,730
9,000 $
(0.01%)
17,853
(0.10%)
The net loan charge-offs in 2014 were not concentrated in any particular sector.
Net interest income was $67,835, $67,926 and $67,635 in 2014, 2013 and 2012, respectively. Net interest income is the difference between interest income and interest expense. Net interest income is the principal source of earnings for the Association and is impacted by volume, yields on assets and cost of debt. The effects of changes in average volume and interest rates on net interest income over the past three years are presented in the following table: Change in Net Interest Income: Volume*
Rate
Nonaccrual Income
Total
(dollars in thousands)
12/31/14 - 12/31/13 Interest income Interest expense Change in net interest income 12/31/13 - 12/31/12 Interest income Interest expense Change in net interest income
$ 4,628 1,741 $ 2,887
$ (4,259) (1,639) $ (2,620)
$
$
$ (5,635) (3,644) $ (1,991)
$ 1,167 (830) $ 1,997
$
827 542 285
$
(638) (280) (358)
$ $
(269) (178) (91)
$ (3,641) (3,932) $ 291
* Volume variances can be the result of increased/decreased loan volume or from changes in the percentage composition of assets and liabilities between periods.
Noninterest Income The allowance for loan losses by loan type for the most recent three years is as follows: Allowance for Loan Losses by Type Real estate mortgage Production and intermediate term Agribusiness Energy Communication Rural residential real estate Total allowance
December 31, 2013 2012 (dollars in thousands) 6,306 $ 5,894 $ 4,854 16,778 15,798 11,867 1,321 1,218 725 9 11 31 100 119 62 440 690 314
Noninterest income for each of the three years ended December 31 is shown in the following table:
2014
$
$
24,954
$
23,730
$
17,853
The allowance for loan losses as a percentage of loans outstanding and as a percentage of certain other credit quality indicators is shown below: Allowance for Loan Losses as a Percentage of:
2014
Total loans Nonaccrual loans
1.10% 99.78%
December 31, 2013 1.08% 88.83%
2012 0.83% 39.90%
Please refer to Note 3, Loans and Allowance for Loan Losses, of the Notes to the Consolidated Financial Statements, for further information concerning the allowance for loan losses.
Noninterest Income
For the Year Ended December 31, 2014 2013 2012
Percentage Increase/(Decrease) 2014/ 2013/ 2013 2012
(dollars in thousands)
Loan fees $ 1,244 $ 1,400 $ 1,496 Fees for financially related services 2,510 1,494 1,825 Patronage refund from other Farm Credit Institutions 34,179 38,066 18,890 Gains (losses) on sales of rural home loans, net 871 1,184 1,716 Gains (losses) on sales of premises and equipment, net 124 128 124 Gains (losses) on other transactions 93 299 (411) – – 3,813 Insurance Fund refund Other noninterest income (expense) 350 741 599 Total noninterest income
$ 39,371 $ 43,312 $ 28,052
(11.14%)
(6.42%)
68.01
(18.14)
(10.21)
101.51
(26.44)
(31.00)
(3.13)
3.23
(68.90) 0.00
172.75 (100.00)
(52.77)
23.71
(9.10%)
54.40%
Noninterest income in 2014 included Special Patronage declaration from AgFirst in late 2014. The Association’s share of the Special Patronage, which was received in early 2015, was $20,609. Noninterest income in 2013 included Special Patronage of $23,236 declared by AgFirst in late 2013 and received in early 2014. Other noninterest income (expense) in 2012 includes a $500 accrual for estimated losses on loan commitments. Fees for financially related services are related principally to the crop insurance program and the Association’s income will vary depending upon product usage and commissions earned, and in 2014 includes an increase in the Association’s fees earned from other Farm Credit Associations relative to the equipment financing program.
MidAtlantic Farm Credit, ACA 19