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 …