2011 Annual Report - Carolina Farm Credit

Carolina Farm Credit, ACA
Carolina Farm Credit 2011 Annual Report
Loss – Assets are considered uncollectible.
The following table presents selected statistics related to the
credit quality of loans including accrued interest at
December 31:
Credit Quality 2011 2010 2009
Acceptable & OAEM 91.79% 94.04% 92.58%
Substandard 8.21% 5.96% 7.40%
Doubtful –% –% 0.02%
Loss –% –% –%
Total 100.00% 100.00% 100.00%
Nonperforming Assets
The Association’s loan portfolio is divided into performing and
high-risk categories. A Special Assets Management Department
is responsible for servicing loans classified as high-risk. The
high-risk assets, including accrued interest, are detailed below:
December 31,
High-risk Assets 2011 2010 2009
(dollars in thousands)
Nonaccrual loans $ 45,805 $ 48,092 $ 49,152
Restructured loans 541 – –
Accruing loans 90 days past due – – 50
Total high-risk loans 46,346 48,092 49,202
Other property owned 6,825 6,188 2,604
Total high-risk assets $ 53,171 $ 54,280 $ 51,806
Ratios
Nonaccrual loans to total loans 3.91% 3.95% 4.17%
High-risk assets to total assets 4.05% 3.97% 3.89%
Nonaccrual loans represent all loans where there is a reasonable
doubt as to the collection of principal and/or future interest
accruals, under the contractual terms of the loan. In substance,
nonaccrual loans reflect loans where the accrual of interest has
been suspended. Nonaccrual loans decreased $2,287 or 4.76
percent in 2011. This decrease is primarily the result of
repayments and transfers to other property owned in excess of
loans transferred into nonaccrual status. Of the $45,805 in
nonaccrual volume at December 31, 2011, $20,404 or 44.55%,
compared to 7,164 and 14.90% at December 31, 2011 and 2010,
respectively, was current as to scheduled principal and interest
payments, but did not meet all regulatory requirements to be
transferred into accrual status.
Loan restructuring is available to financially distressed
borrowers. Restructuring of loans occurs when the Association
grants a concession to a borrower based on either a court order
or good faith in a borrower’s ability to return to financial
viability. The concessions can be in the form of a modification
of terms or rates, a compromise of amounts owed, or deed in
lieu of foreclosure. Other receipts of assets and/or equity to pay
the loan in full or in part are also considered restructured loans.
The type of alternative financing structure chosen is based on
minimizing the loss incurred by both the Association and the
borrower.
The following table presents the activity in the allowance for
loan losses for the most recent three years:
Year Ended December 31,
Allowance for Loan Losses Activity: 2011 2010 2009
(dollars in thousands)
Balance at beginning of year $ 10,291 $ 9,277 $ 10,257
Charge-offs:
Real estate mortgage (1,508) (787) (2,637)
Production and intermediate term (7,316) (1,346) (3,244)
Agribusiness (8,607) (88) (2,228)
Rural residential real estate (156) (68) (45)
Total charge-offs (17,587) (2,289) (8,154)
Recoveries:
Real estate mortgage 78 426 2
Production and intermediate term 168 371 27
Agribusiness 67 – 16
Rural residential real estate 6 5 4
Total recoveries 319 802 49
Net (charge-offs) recoveries (17,268) (1,487) (8,105)
Provision for (reversal of allowance
for) loan losses 12,023 2,501 7,125
Balance at end of year $ 5,046 $ 10,291 $ 9,277
Ratio of net (charge-offs) recoveries
during the period to average loans
outstanding during the period (1.443)% (0.126)% (0.669)%
The allowance for loan losses by loan type for the most recent
three years is as follows:
December 31,
Allowance for Loan Losses by Type 2011 2010 2009
(dollars in thousands)
Real estate mortgage $ 724 $ 806 $ 427
Production and intermediate term 3,449 8,173 6,824
Agribusiness 598 1,252 1,939
Communication 6 2 2
Energy 2 1 1
Rural residential real estate 267 57 84
Total $ 5,046 $ 10,291 $ 9,277
The allowance for loan losses as a percentage of loans
outstanding and as a percentage of certain other credit quality
indicators is shown below:
December 31,
Allowance for Loan Losses as a
Percentage of: 2011 2010 2009
Total loans 0.43% 0.85% 0.79%
Nonperforming loans 10.89% 21.40% 18.85%
Nonaccrual loans 11.02% 21.40% 18.87%
Please refer to Note 4, “Loans and Allowance for Loan Losses,”
of the Notes to the Consolidated Financial Statements, for
further information concerning the allowance for loan losses.
Allowance for Loan Losses
The allowance for loan losses at each period end was considered
by Association management to be adequate to absorb probable
losses existing in and inherent to its loan portfolio.
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2011 Annual Report