Continued strong net income and loan credit quality
ST. PAUL, Min., November 7, 2024 /PRNewswire/ — Today, Saint Paulbased AgriBank announced financial results for the third quarter of 2024. with strong profitability, credit quality and liquidity and capital.
AgriBank (PRNewsfoto/AgriBank)
Highlights:
Profitability: Net income remained strong at $685.0 million for the past nine months September 30, 2024. AgriBank’s year-to-date return on assets (ROA) of 51 basis points is above the target of 50 basis points.
Credit quality: The overall credit quality of the loan portfolio remains strong, with 99.4 percent of loans classified as eligible at September 30, 2024.
Liquidity and Capital: Liquidity at the end of the quarter was 155 days, well above regulatory requirements. Equity also remained well above regulatory minimums and company targets.
“Against a continued volatile interest rate environment, AgriBank is able to report another successful quarter with consistent profitability, credit quality and liquidity and capital,” said AgriBank’s CEO Geoffrey Swanhorst. “We look forward to continuing to collaborate with the farm credit associations we support to improve their financial performance as we together meet the credit needs of farmers, ranchers and other rural borrowers.”
2024 Results of operations
Net interest income was $768.5 million for the past nine months September 30, 2024increase of $46.6 millionor by 6.5 percent compared to the same period of the previous year. The increase was mainly due to higher retail loan spread income in AgriBank’s asset portfolio compared to the previous year due to the purchase of a significant number of loan participations in the second half of 2023. In addition, the benefit of capital financing from higher interest rates compared to the same period of the previous year also contributed to the increase in net interest income. Equity financing is the benefit of interest-free financing. AgriBank typically experiences mild net interest margin compression as fixed rate assets age, typically offset by margin from new volume. However, with the current inverted yield curve, new volume margins do not provide the typical offset. In addition, investment securities spread income decreased compared to the same period in the prior year due to a combination of investment securities and reduced spreads on money market instruments.
Non-interest income was $85.9 million for the past nine months September 30, 2024increase of $12.7 millionor 17.3 percent, compared to the same period of the previous year, primarily related to the distribution of Allocated Insurance Reserve Accounts (AIRA) received by the Farm Credit System Insurance Corporation (FCSIC) in the second quarter of 2024. In addition, mineral revenues increased for the nine months ended September 30, 2024compared to the same period of the previous year, related to an increase in oil production, as a result of an increase in new drilling activity in the first quarter of 2024.
Non-interest expenses were $158.4 million for the past nine months September 30, 2024increase of $17.8 million, or 12.6 percent, compared to the same period of the previous year. The increase is primarily due to expected increases in loan servicing fees related to the expansion of AgriBank’s asset pooling programs in the second half of 2023 and continuing into 2024.
Credit portfolio
Total loans were $159.0 billion at September 30, 2024increase of $10.3 billion, or 6.9 percent, compared to December 31, 2023. This increase was mainly due to growth in wholesale loans.
AgriBank’s credit quality reflects the overall financial strength of regional associations and their core retail loan portfolios. AgriBank’s portfolio consists of 99.4 percent eligible loans at September 30, 2024and December 31, 2023. Loans classified as eligible represent assets of the highest quality. The credit quality of AgriBank’s retail loan portfolio declined slightly to 96.0 percent, classified as acceptable at September 30, 2024compared to 96.2 percent acceptable at December 31, 2023.
Agricultural conditions
The United States Department of Agriculture’s Economic Research Service (USDA-ERS) has updated its forecast for 2024. on aggregate US farm income and financial conditions of September 5, 2024. The release also recasts forecasts for 2023. in forecasts. The 2023 US Net Farm Income (NFI) Forecast $146.5 billion it was 9.4 billion dollars below the previous forecast for early 2024. due to higher-than-projected costs more than offsetting higher-than-projected cash receipts for crops and livestock and animal products. USDA-ERS estimates that the 2023 NFI decreased by $35.6 billionor 19.5 percent, relative to the 2022 level in nominal terms due to declining cash receipts and rising expenditures. Although NFI declined in 2023, it followed the record high of 2022. Adjusted for inflation, the US NFI estimate for 2023 was still 21.1 percent ($26.1 billion) above the ten-year average level.
Many factors, including weather, trade, government and monetary policy, global agricultural production levels, and pathogen outbreaks in livestock and poultry, could keep the agricultural market volatile over the next few years. The implementation of cost-saving technologies, marketing methods and risk management strategies will continue to produce a wide range of outcomes among relevant farmers.
Capital resourcesand liquidity
Total capital remained strong at $9.2 billion to September 30, 2024increase of $586.1 million compared to December 31, 2023. The increase was mainly due to AgriBank’s net income and equity share issues. Offsetting this was a declared cash patronage, in line with AgriBank’s capital plan and the repurchase of 250 million dollars of perpetual preferred stock. AgriBank exceeded all minimum regulatory capital requirements, including additional regulatory buffers.
By effectively leveraging District’s existing capital and to support the achievement of AgriBank’s and the Association’s business objectives through increased use of pool programs, AgriBank repurchased all of its remaining shares of preferred stock of January 1, 2024.
Total cash and investments $25.3 billion and $25.5 billion on September 30, 2024and December 31, 2023, respectively. AgriBank’s liquid position at the end of the period represents 155 days of maturing debt coverage, which supports operational needs, and is well above the 90-day minimum set by AgriBank’s regulator.
About Agribank
AgriBank is part of a customer-owned, national agricultural credit system. Under Farm Credit’s cooperative structure, AgriBank is primarily owned by local farm credit associations that provide financial products and services to rural communities and agriculture. AgriBank receives funds and provides financing and financial solutions to these associations. AgriBank and these associations make up the AgriBank District. The district covers an area of 15 states extending from Wyoming to Ohio and Minnesota to Arkansas. For more information visit www.AgriBank.com.
Forward-looking statements
All forward-looking statements in this press release are based on current expectations and are subject to uncertainties and changes in circumstances. Actual results may differ materially from expectations due to a number of risks and uncertainties. More information on these risks and uncertainties is contained in AgriBank’s annual report, which is available approximately 75 days after the end of the year. AgriBank undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
AGRIBANK, FCB
STATEMENTS OF INFORMATION ABOUT CONDITION
(in thousands)
September 30,
December 31,
2024
2023
(unedited)
Held-to-maturity loans
$158,980,740
$148,370,212
Allowance for credit losses on loans
31,516
31,992
Net loans held to maturity
158,949,224
148,338,220
Loans held for sale
—
355,219
Net borrowings
158,949,224
148,693,439
Investment securities and other income-generating assets
25,330,463
25,454,925
Charge for accrued interest
1,890,486
1,590,342
Other assets
463,400
684,297
Total assets
$186,633,573
$176,423,003
Bonds and notes
$175,837,914
$166,310,329
Accrued interest due
1,204,315
1,027,470
Other liabilities
422,034
502,026
Total liabilities
$177,464,263
$167,839,825
Equity
$9,169,310
$8,583,178
Total liabilities and equity
$186,633,573
$176,423,003
AGRIBANK, FCB
INCOME INFORMATION STATEMENTS
(in thousands)
For
For
three months are over
nine months are over
September 30,
September 30,
2024
2023
2024
2023
(unedited)
(unedited)
(unedited)
(unedited)
Interest income
$2,035,362
$1,634,007
$5,704,430
$4,366,911
Interest expense
1,728,182
1,379,607
4,935,956
3,645,043
Net interest income
307,180
254,400
768,474
721,868
Provisions for credit losses
3000
5000
11,000
8000
Net interest income after allowance for credit losses
