AgriBank Reports Third Quarter 2024 Financial Results
Continued Strong Net Income and Loan Credit Quality
ST. PAUL, Minn., Nov. 7, 2024 /PRNewswire/ -- Today, St. Paul-based AgriBank announced financial results for the third quarter of 2024, with strong profitability, credit quality, and liquidity and capital.
Highlights:
Profitability: Net income remained strong at $685.0 million for the nine months ended September 30, 2024. AgriBank's year-to-date return on assets (ROA) ratio of 51 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 September 30, 2024.
Liquidity and capital: End-of-the-quarter liquidity was 155 days, well above the regulatory requirement. Capital also remained well above the regulatory minimums and company targets.
"Amid 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 CEO Jeffrey Swanhorst. "We look forward to continuing to collaborate with the Farm Credit Associations we support to bolster their financial performance as, together, we meet the credit needs of farmers, ranchers and other rural borrowers."
2024 Results of Operations
Net interest income was $768.5 million for the nine months ended September 30, 2024, an increase of $46.6 million, or 6.5 percent, compared to the same period of the prior year. The increase was primarily driven by higher spread income on retail loans in AgriBank's asset pool portfolio, when compared to the prior year, due to the purchase of a significant number of loan participations during the second half of 2023. Additionally, the benefit of equity financing from higher interest rates compared to the same period of the prior year has also contributed to the increase in net interest income. Equity financing represents the benefit of non-interest bearing funding. AgriBank typically experiences slight net interest margin compression as fixed-rate assets age, usually offset by the margin from new volume. However, with the current inverted yield curve, new volume margins are not providing the typical offset. Additionally, spread income on investment securities has declined compared to the same period of the prior year due to the mix of investment securities and reduced spreads on money market instruments.
Non-interest income was $85.9 million for the nine months ended September 30, 2024, an increase of $12.7 million, or 17.3 percent, compared to the same period of the prior year, primarily 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 nine months ended September 30, 2024, compared to the same period of the prior year, related to a rise in oil production, a result of an increase in new well activity during the first quarter of 2024.
Non-interest expense was $158.4 million for the nine months ended September 30, 2024, an increase of $17.8 million, or 12.6 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 2024.
Loan Portfolio
Total loans were $159.0 billion at September 30, 2024, an increase of $10.3 billion, or 6.9 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 99.4 percent acceptable loans at September 30, 2024, and December 31, 2023. Loans classified as acceptable represent the highest-quality assets. The credit quality of AgriBank's retail loan portfolio decreased slightly to 96.0 percent classified as acceptable at September 30, 2024, compared to 96.2 percent acceptable at December 31, 2023.
Agricultural Conditions
The U.S. Department of Agriculture's Economic Research Service (USDA-ERS) updated its 2024 forecast of the U.S. aggregate farm income and financial conditions on September 5, 2024. The release also converted the 2023 forecasts ...
