Strong Net Income and Loan Credit Quality
ST. PAUL, Minn., March 1, 2024 /PRNewswire/ -- Today, St. Paul -based AgriBank announced financial results for the fourth quarter and full year of 2023, with strong profitability, credit quality, and liquidity and capital.
Highlights:
- Profitability: Net income remained strong at $873.3 million for the year ended December 31, 2023. AgriBank's year-to-date return on assets (ROA) ratio of 53 basis points was above the target of 50 basis points.
- Credit quality: Total loan portfolio credit quality remained strong, with 99.4 percent of loans classified as acceptable at December 31, 2023.
- Liquidity and capital: End-of-the-quarter liquidity was 161 days, well above the regulatory requirement. Capital also remained well above the regulatory minimums and company targets.
"We are pleased to report that AgriBank completed the year with strong financial performance, which reflects the effectiveness of our business model and the Farm Credit lenders we support," said Jeffrey Swanhorst, AgriBank chief executive officer. "AgriBank shared this financial success by returning over $864 million in earnings to those lenders, our customer/owners, in the form of cash and stock patronage distributions, nearly 12 percent higher than the previous year. Ultimately, those funds benefit the rural borrowers we collectively serve."
2023 Results of Operations
Net interest income was $985.2 million for the year ended December 31, 2023, an increase of $130.7 million, or 15.3 percent, compared to the same period of the prior year. Net interest income increased, primarily driven by the positive impact of the sharp rise in interest rates on the benefit on non-interest bearing funding, growth in the retail portfolio and increased spreads on investment securities.
Non-interest income was $105.5 million for the year ended December 31, 2023, a decrease of $9.6 million, or 8.3 percent, compared to the same period of the prior year, mostly related to a decline in conversion and prepayment fees due to high interest rates, as well as a slight decrease in mineral income.
Non-interest expense was $198.3 million for the year ended December 31, 2023, an increase of $13.6 million, or 7.3 percent, compared to the same period of the prior year. The increase was mainly due to increases in loan servicing expenses related to the growth in participations purchased through AgriBank's asset pool programs in 2023.
Loan Portfolio
Total loans were $148.7 billion at December 31, 2023, an increase of $15.3 billion, or 11.4 percent, compared to December 31, 2022. This increase was primarily attributable to wholesale loan growth and increases in retail loans.
AgriBank's credit quality reflects the overall financial strength of District Associations and their underlying portfolios of retail loans. AgriBank's portfolio was composed of 99.4 percent acceptable loans at December 31, 2023, compared to 99.6 percent at December 31, 2022. Loans classified as acceptable represent the highest-quality assets. The credit quality of AgriBank's retail loan portfolio increased slightly to 96.2 percent classified as acceptable at December 31, 2023, compared to 95.8 percent acceptable at December 31, 2022.
Agricultural Conditions
On February 7, 2024, the U.S. Department of Agriculture's Economic Research Service (USDA-ERS) released its initial forecast of the U.S. aggregate farm income and financial conditions for 2024 and updated its 2023 forecast. The revised 2023 nominal net farm income (NFI) forecast of $155.9 billion represented a $29.7 billion decline from the record-high 2022 level, down 16.0 percent, following three-consecutive years with substantial increases. Although down, when adjusting for inflation, the 2023 real NFI forecast is $41.1 billion, or 34.8 percent, above the 20-year average (2003-2022) net farm income in 2024 dollars. The initial 2024 nominal NFI projection of $116.1 billion would represent a decline of $39.8 billion, or 25.5 percent, from the revised 2023 NFI forecast. Although NFI is forecast to decline significantly for the second-consecutive year, the 2024 forecast, if realized, would be just 1.8 percent, $2.0 billion, below the 20-year average real net farm income.
Despite declines in crop prices and lower net farm income expectations, the farm sector balance sheet remains strong. Many factors, including weather, trade, government and monetary policy, global agricultural production levels, and pathogenic outbreaks in livestock and poultry, may keep agriculture market volatility elevated for the next few years. Implementation of cost-saving technologies, marketing methods and risk management strategies will continue to cause a wide range of results among the respective agricultural producers.
Capital Resources and Liquidity
Total capital remained strong at $8.6 billion as of December 31, 2023, an increase of $1.4 billion compared to December 31, 2022. The increase was driven primarily by strong net income and net stock issuances, consistent with AgriBank's capital plan, which positively impacted shareholders' equity. Additionally, lower unrealized losses on fixed-rate investments positively impacted equity at the end of 2023. AgriBank exceeded all regulatory capital minimum requirements, including additional regulatory buffers.
Through effectively leveraging existing District capital and in supporting the achievement of AgriBank and Associations' business goals through the increased use of pool programs, AgriBank redeemed all its outstanding shares of preferred stock on January 1, 2024.
Cash and investments totaled $25.5 billion and $21.5 billion at December 31, 2023 and December 31, 2022, respectively. AgriBank's end-of-the-period liquidity position represented 161 days coverage of maturing debt obligations, which supports operational demands, and was well above the 90-day minimum established by AgriBank's regulator.
About AgriBank
AgriBank is part of the customer-owned, nationwide Farm Credit System. Under Farm Credit's cooperative structure, AgriBank is primarily owned by local Farm Credit Associations, which provide financial products and services to rural communities and agriculture. AgriBank obtains funds and provides funding and financial solutions to those Associations. AgriBank and those Associations compose the AgriBank District. The District covers a 15-state area stretching from Wyoming to Ohio and Minnesota to Arkansas. For more information, visit www.AgriBank.com.
Forward-Looking Statements
Any forward-looking statements in this press release are based on current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from expectations due to a number of risks and uncertainties. More information about these risks and uncertainties is contained in AgriBank's annual report, which is available approximately 75 days following the end of the year. AgriBank undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
AGRIBANK, FCB | ||
STATEMENTS OF CONDITION INFORMATION | ||
(in thousands) | ||
December 31, | December 31, | |
2023 | 2022 | |
Loans held to maturity | $148,370,212 | $133,470,781 |
Allowance for loan losses | 31,992 | 31,739 |
Net loans held to maturity | 148,338,220 | 133,439,042 |
Loans held for sale | 355,219 | - |
Net loans | 148,693,439 | 133,439,042 |
Investment securities and other earning assets | 25,454,925 | 21,450,899 |
Accrued interest receivable | 1,590,342 | 1,028,153 |
Other assets | 684,297 | 544,674 |
Total assets | $176,423,003 | $156,462,768 |
Bonds and notes | $166,310,329 | $148,228,998 |
Accrued interest payable | 1,027,470 | 644,117 |
Other liabilities | 502,026 | 404,097 |
Total liabilities | $167,839,825 | $149,277,212 |
Shareholders' equity | $8,583,178 | $7,185,556 |
Total liabilities and shareholders' equity | $176,423,003 | $156,462,768 |
AGRIBANK, FCB | ||||
STATEMENTS OF INCOME INFORMATION | ||||
(in thousands) | ||||
For the | For the | |||
three months ended | twelve months ended | |||
December 31, | December 31, | |||
2023 | 2022 | 2023 | 2022 | |
(Unaudited) | (Unaudited) | |||
Interest income | $1,768,910 | $1,129,633 | $6,135,821 | $3,108,460 |
Interest expense | 1,505,622 | 896,430 | 5,150,665 | 2,254,016 |
Net interest income | 263,288 | 233,203 | 985,156 | 854,444 |
Provision for (reversal of) credit losses | 11,000 | (1,000) | 19,000 | (6,000) |
Net interest income after provision for (reversal of) credit losses | 252,288 | 234,203 | 966,156 | 860,444 |
Non-interest income | 32,268 | 28,006 | 105,460 | 115,018 |
Non-interest expense | 57,709 | 47,623 | 198,322 | 184,765 |
Net income | $226,847 | $214,586 | $873,294 | $790,697 |
SOURCE AgriBank
