FFCB banks redeem $47.7 billion of debt in first nine months of 2009

By Angela McDaniels

Tacoma, Wash., Nov. 4 - Federal Farm Credit Banks Funding Corp. said that system banks called debt totaling $47.4 billion during the nine months ended Sept. 30.

Net interest margin increased by 17 bps to 2.59% for the first nine months of 2009 from 2.42% in the prior-year period, according to an agency news release. It increased by 22 basis points to 2.63% for the third quarter from 2.41% for the same quarter of 2008.

FFCB said the net interest margin was positively impacted by an increase in the net interest spread to 2.41% for the third quarter from 2.01% a year earlier and to 2.36% for the nine months ended Sept. 30 from 1.99% for the first nine months of 2008.

The increases in the net interest spread were primarily attributable to the system banks' ability to more quickly reprice their outstanding debt in this lower-interest-rate environment, according to the release.

FFCB also attributed the increases to the ability of system institutions to increase pricing on loans as a result of the less competitive market that has emerged as many of the system's competitors reduce lending to the agricultural sector.

Negatively impacting the net interest margin for the three and nine months ended Sept. 30 was a decline in income earned on earning assets funded by noninterest-bearing sources, the agency said, as yields on average earning assets declined in this low-interest-rate environment.

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