Continued Strong Net Income and Loan Credit Quality
ST. PAUL, Minn., Aug. 9, 2024 /PRNewswire/ -- Today, St. Paul -based AgriBank announced financial results for the second quarter of 2024, with strong profitability, credit quality, and liquidity and capital.
Highlights:
- Profitability: Net income remained strong at $406.6 million for the six months ended June 30, 2024. AgriBank's year-to-date return on assets (ROA) ratio of 46 basis points was below the target of 50 basis points, with the targeted ROA level expected to be met by year-end.
- Credit quality: Total loan portfolio credit quality remained strong, with 99.5 percent of loans classified as acceptable at June 30, 2024.
- Liquidity and capital: End-of-the-quarter liquidity was 157 days, well above the regulatory requirement. Capital also remained well above the regulatory minimums and company targets.
"AgriBank is pleased to report a robust second quarter with continued strong levels of profitability, credit quality, and liquidity and capital," said AgriBank CEO Jeffrey Swanhorst. "We continue to successfully navigate through a challenging interest rate environment, resulting in financial resilience and loan growth that reflects the strong loan growth and financial performance of the Farm Credit lenders we support."
2024 Results of Operations
Net interest income was $461.3 million for the six months ended June 30, 2024, a decrease of $6.2 million, or 1.3 percent, compared to the same period of the prior year. Net interest income decreased slightly when compared to the same period of the prior year. AgriBank's ability to generate income through funding actions has been limited and has contributed to the decline in spread due to the shape of the yield curve in the current interest rate environment, coupled with the product mix of underlying Association loan originations driving recent wholesale portfolio growth. Offsetting these decreases is higher spread income on retail loans, when compared to the prior year, in AgriBank's asset pool portfolio due to the purchase of significant number of additional loan participations in the second half of 2023. Additionally, offsetting the decrease in net interest income is an increased benefit of equity financing from higher interest rates compared to the same period of the prior year. Equity financing represents the benefit of non-interest bearing funding.
Non-interest income was $57.3 million for the six months ended June 30, 2024, an increase of $6.3 million, or 12.4 percent, compared to the same period of the prior year, mostly related to an Allocated Insurance Reserve Accounts (AIRAs) distribution received from the Farm Credit System Insurance Corporation (FCSIC) during the second quarter of 2024. Additionally, mineral income increased for the six months ended June 30, 2024, compared to the same period of the prior year, related to a rise in gas and oil production, a result of an increase in new well activity during the first quarter of 2024.
Non-interest expense was $104.0 million for the six months ended June 30, 2024, an increase of $11.0 million, or 11.8 percent, compared to the same period of the prior year. The increase was mainly due to expected increases in loan servicing fees related to expansion in AgriBank's asset pool programs in the second half of 2023 and continuing into the first half of 2024.
Loan Portfolio
Total loans were $154.5 billion at June 30, 2024, an increase of $5.8 billion, or 3.9 percent, compared to December 31, 2023. This increase was primarily attributable to wholesale loan growth.
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 99.5 percent acceptable loans at June 30, 2024, compared to 99.4 percent at December 31, 2023. Loans classified as acceptable represent the highest-quality assets. The credit quality of AgriBank's retail loan portfolio increased slightly to 96.3 percent classified as acceptable at June 30, 2024, compared to 96.2 percent acceptable at December 31, 2023.
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, or $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 $8.7 billion as of June 30, 2024, an increase of $160.9 million compared to December 31, 2023. The increase was driven primarily by AgriBank's net income and capital stock issuances during the first half of 2024. Additionally, unrealized gains in AgriBank's derivative portfolio added to the overall increase. Offsetting these were the redemption of $250 million of perpetual preferred stock, as well as cash patronage declared, consistent with AgriBank's capital plan. Unrealized losses in AgriBank's investment portfolio also contributed to the offset. 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 $25.3 billion and $25.5 billion at June 30, 2024, and December 31, 2023, respectively. AgriBank's end-of-the-period liquidity position represented 157 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) | ||
June 30, | December 31, | |
2024 | 2023 | |
(unaudited) | ||
Loans held to maturity | $154,313,387 | $148,370,212 |
Allowance for credit losses on loans | 36,776 | 31,992 |
Net loans held to maturity | 154,276,611 | 148,338,220 |
Loans held for sale | 218,185 | 355,219 |
Net loans | 154,494,796 | 148,693,439 |
Investment securities and other earning assets | 25,251,171 | 25,454,925 |
Accrued interest receivable | 1,673,655 | 1,590,342 |
Other assets | 447,887 | 684,297 |
Total assets | $181,867,509 | $176,423,003 |
Bonds and notes | $171,634,342 | $166,310,329 |
Accrued interest payable | 1,153,889 | 1,027,470 |
Other liabilities | 335,243 | 502,026 |
Total liabilities | $173,123,474 | $167,839,825 |
Shareholders' equity | $8,744,035 | $8,583,178 |
Total liabilities and shareholders' equity | $181,867,509 | $176,423,003 |
AGRIBANK, FCB | ||||
STATEMENTS OF INCOME INFORMATION | ||||
(in thousands) | ||||
For the | For the | |||
three months ended | six months ended | |||
June 30, | June 30, | |||
2024 | 2023 | 2024 | 2023 | |
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |
Interest income | $1,867,240 | $1,456,305 | $3,669,068 | $2,732,904 |
Interest expense | 1,641,539 | 1,211,912 | 3,207,774 | 2,265,436 |
Net interest income | 225,701 | 244,393 | 461,294 | 467,468 |
Provision for credit losses | 7,000 | 6,000 | 8,000 | 3,000 |
Net interest income after provision for credit losses | 218,701 | 238,393 | 453,294 | 464,468 |
Non-interest income | 28,648 | 24,325 | 57,278 | 50,948 |
Non-interest expense | 52,481 | 47,595 | 103,985 | 92,995 |
Net income | $194,868 | $215,123 | $406,587 | $422,421 |
SOURCE AgriBank
