AgriBank Reports First Quarter 2024 Financial Results

Continued Strong Net Income and Loan Credit Quality

ST. PAUL, Minn., May 9, 2024 /PRNewswire/ -- Today, St. Paul-based AgriBank announced financial results for the first quarter of 2024, with strong profitability, credit quality, and liquidity and capital.

Highlights:

• Profitability: Net income remained strong at $211.7 million for the three months ended March 31, 2024. AgriBank's year-to-date return on assets (ROA) ratio of 49 basis points was just below the target of 50 basis points.
• Credit quality: Total loan portfolio credit quality remained strong, with 99.5 percent of loans classified as acceptable at March 31, 2024.
• Liquidity and capital: End-of-the-quarter liquidity was 165 days, well above the regulatory requirement. Capital also remained well above the regulatory minimums and company targets.

"The Farm Credit lenders we support continue to excel at meeting the needs of farmers, ranchers and other rural customers, which translates into strong financial performance for AgriBank," said Jeffrey Swanhorst, AgriBank chief executive officer. "We have begun the year just as we completed the last one—with strong profitability and credit quality, and capital and liquidity that are well above regulatory requirements. Borrowers have sound reasons to depend on Farm Credit."

2024 Results of Operations

Net interest income was $235.6 million for the three months ended March 31, 2024, an increase of $12.5 million, or 5.6 percent, compared to the same period of the prior year. Net interest income increased, primarily driven by the continued positive impact of the rise in interest rates on the benefit on non-interest bearing funding and growth in the retail portfolio when compared to the same period of the prior year. These factors were partially offset by decreased spread income on investment securities.

Non-interest income was $28.6 million for the three months ended March 31, 2024, an increase of $2.0 million, or 7.5 percent, compared to the same period of the prior year, mostly related to an increase in mineral income due to a rise in gas and oil production, a result of added wells during the first quarter.

Non-interest expense was $51.5 million for the three months ended March 31, 2024, an increase of $6.1 million, or 13.4 percent, compared to the same period of the prior year. The increase was mainly due to increases in loan servicing fees related to expansion in AgriBank's asset pool programs in the second half of 2023.

Loan Portfolio

Total loans were $149.3 billion at March 31, 2024, an increase of $616.6 million, or 0.4 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 March 31, 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 96.5 percent classified as acceptable at March 31, 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, $2.0 billion, below the 20-year average real net farm income.

The declining 2024 nominal income forecast is largely driven by an expected $21.2 billion decline in cash receipts, or 4.2 percent, combined with a $16.7 billion increase, or 3.8 percent, in total expenses compared to 2023. The lower cash receipts forecast is largely due to the expectation of a $16.7 billion, or 6.3 percent, decrease in crop cash receipts driven by lower prices for corn and soybeans, while animal and animal product cash receipts are forecast to decline $4.6 billion, or 1.9 percent, with mixed changes across the various sectors. On the expense side, USDA-ERS forecasts that higher intermediate product expenses, including seed, pesticides, fertilizer, livestock and marketing costs, along with rising labor expenses, are the main contributing factors behind the higher production cost expectations for 2024. The decline in sector income is forecast to reduce working capital levels by 16.6 percent in 2024 compared to the year prior on a nominal basis, but at $101.7 billion, the 2024 working capital forecast remains above the recent 2016 through 2018 lows when adjusting for inflation. The lower sector income is forecast to have a minimal impact on the farm sector balance sheet. The USDA-ERS forecasts a 5.2 percent nominal increase in total farm debt, which is met with a 4.7 percent increase in farm sector assets, resulting in only fractional increases in the debt-to-asset and debt-to-equity solvency ratios.

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 Resourcesand Liquidity

Total capital remained strong at $8.5 billion as of March 31, 2024, a decrease of $111.1 million compared to December 31, 2023. The decrease was driven primarily by the redemption of AgriBank's perpetual preferred stock. Additionally, cash patronage declared, consistent with AgriBank's capital plan, contributed to the overall decrease. Offsetting these decreases were AgriBank's net income and unrealized gains in their derivative portfolio during the first quarter of 2024. These unrealized gains were partially offset by unrealized losses in AgriBank's investment portfolio. 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 $25.7 billion and $25.5 billion at March 31, 2024 and December 31, 2023, respectively. AgriBank's end-of-the-period liquidity position represented 165 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.

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SOURCE AgriBank