SANTA ROSA -- American AgCredit reported $111.2 million in net income in 2013, a 3.7 percent annual increase largely attributed to new loan demand and improved asset quality.
The Santa Rosa-based agriculture lender reported $6 billion in loans at year-end, up 3.9 percent from the end of 2012. That loan volume was up 37.7 percent from a portfolio of $4.4 billion in 2011.
Winery and vineyard loans totaled $1.1 billion at year-end, equivalent to 19 percent of American AgCredit's loan portfolio. It is the lender's largest commodity concentration. That portion grew 29.4 percent from the end of 2011, outpacing the annual growth rate of the overall portfolio by more than 11 percent.
New borrower relationships were the primary driver of that increase, said Chief Executive Officer Byron Enix. American AgCredit focuses primarily on the super- and ultrapremium segments of the wine market, in which borrowers have benefitted from a return of consumer demand in an improving economy, according to the lender's annual report.
Overall loans in the "central" region of Sonoma, Napa, Marin, Mendocino and Lake counties totaled $773 million at year-end, or 13 percent of American AgCredit's loan portfolio.
"It was a very good year on a profit standpoint, and we were able to pay a very strong dividend," Mr. Enix said.
The member-owned financial institution distributed 33.2 percent of its income as dividends in 2013, or $37 million.
Loans considered "substandard" represented 2.2 percent of the overall portfolio, down from 4.2 percent in 2012. The lender had a 0.18 percent loss allowance versus total loans -- less than half of the allowance in 2010 -- and a capital reserve equaling 21 percent of risk-weighted assets.
It is perhaps the strongest balance sheet in the institution's history, one that has executives feeling comfortable amid enduring questions about the implications of a long-term drought in California, Mr. Enix said.
"Definitely, our eyes have been on the drought situation and the impact it will have on our customers," said Mr. Enix, a long-time veteran of the farm credit system who became CEO in January. "This bank couldn't be any better prepared for stress than it is now."
Drought concerns among borrowers have also helped fuel more activity for the institution's growing crop insurance division, which acquired Petaluma-based Chris Maloney Crop Insurance Services in September. The division was responsible for $4.8 million in income in 2013, up 45.5 percent from 2012.
A series of acquisitions have helped American AgCredit realize an increasingly diverse commodity portfolio and geographic distribution in recent years, an attribute that Mr. Enix said has a significant benefit in hedging risk. The lender grew to the sixth-largest in the farm credit system after the acquisition of Colorado's Farm Credit Services of the Mountain Plains in 2012, the most recent of six mergers since 2000.
Field crops represent the second-largest commodity concentration at 14 percent, followed by dairy, 12 percent; beef, 11 percent; forest products, 10 percent; tree and nuts, 10 percent; vegetables, 5 percent; and "other," 19 percent. The lender serves California, Nevada, Arizona, Utah, Colorado, New Mexico, Kansas and Oklahoma.
Real estate mortgage loans represent 60 percent of the portfolio, with production and intermediate-term loans at 18 percent and agribusiness loans also at 18 percent. Remaining loans constitute communication, energy and "other" categories.