AgriBank Reports First Quarter 2021 Financial Results

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AgriBank announced its first-quarter 2021 financial results, reporting a robust net income of $193 million, with a return on assets (ROA) of 60 basis points, exceeding its target. The loan portfolio grew to $110.9 billion, boosted by a rise in wholesale volume and strong credit quality, with 99.4% of loans classified as acceptable. However, net interest income fell by 5.3% year-over-year to $181 million, influenced by reduced spreads. Overall liquidity remained strong at 169 days coverage of maturing obligations, and capital resources stood at $6.7 billion.

Positive

• Net income of $193 million, strong performance.
• Loan portfolio increased by $1.1 billion (1.0%) to $110.9 billion.
• Credit quality improved, with 99.4% of loans classified as acceptable.
• Liquidity coverage of 169 days, exceeding regulatory requirements.
• Strong capital resources of $6.7 billion, well above minimums.

Negative

• Net interest income decreased by $10.1 million (5.3%) compared to last year.
• Non-interest income dropped by $20.4 million (29.6%) due to lower conversion fee income.

ST. PAUL, Minn., May 7, 2021 /PRNewswire/ -- Today, St. Paul-based AgriBank announced financial results for the first quarter of 2021, with strong profitability, credit quality, and liquidity and capital.

Highlights:

• Profitability: Net income remained strong as AgriBank's year-to-date return on assets (ROA) ratio of 60 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 compared to 99.3 percent at December 31, 2020.
• Liquidity and capital: End-of-the-quarter liquidity was 169 days, well above the regulatory requirement. Capital also remained well above the regulatory minimums and company targets.

First Quarter 2021 Results of Operations

Net income was strong at $193.0 million for the three months ended March 31, 2021.

Net interest income was $181.0 million for the quarter ended March 31, 2021, a decrease of $10.1 million, or 5.3 percent, compared to $191.2 million for the same period of the prior year. Net interest income was positively impacted by increased loan volume, which was more than offset by the impact of changes in rates. AgriBank intentionally reduced the spread charged, primarily on wholesale loans, in 2021, consistent with its business model. Additionally, spreads on investments compressed. The decline in asset yields slightly outpaced the reduction in debt yields year-over-year, reflecting significant call activity in first quarter 2020.

Non-interest income was $48.6 million for the quarter ended March 31, 2021, a decrease of $20.4 million, or 29.6 percent, compared to $69.1 million for the prior year. This decrease was primarily driven by lower conversion fee income. AgriBank experienced significant conversion activity in the prior year due to steep decline in interest rates coupled with the uncertainty of the COVID-19 pandemic. While conversion activity continues, it has slowed as interest rates have begun to increase.

Loan Portfolio 

Total loans were $110.9 billion at March 31, 2021, an increase of $1.1 billion, or 1.0 percent, compared to December 31, 2020. This increase was primarily due to a rise in wholesale volume which was driven by growth in real estate mortgage volume at District Associations, as targeted marketing efforts have stimulated growth during the first quarter of 2021. Also contributing to the overall increase in wholesale loans were draws on agribusiness loans at District Associations resulting in increased funds disbursed to borrowers to help meet liquidity needs related to increases in commodity prices.

AgriBank's credit quality reflects the overall financial strength of District Associations and their underlying portfolios of retail loans, which generally have been supported by improved commodity prices and government payments. AgriBank's portfolio was composed of 99.4 percent loans classified as acceptable as of March 31, 2021, compared to 99.3 percent acceptable as of December 31, 2020. Loans classified as acceptable represent the highest-quality assets. The credit quality of AgriBank's retail loan portfolio (accounting for approximately 10 percent of the total loan portfolio) increased to 94.5 percent classified as acceptable at March 31, 2021, compared to 94.0 percent acceptable at December 31, 2020. The improvement in the acceptable percentage of the retail portfolio was primarily the result of upgrades in lower quality real estate volume and increases in higher quality agribusiness volume, when compared to the year ended 2020.

COVID-19 Pandemic

The COVID-19 pandemic has persisted into 2021 and continues to adversely impact some sectors of the worldwide economy. However, as public health measures have been implemented to limit the spread of the virus, including the availability of vaccines, many locations across the United States have been able to lift some restrictions. The overall economy has begun to recover, and the outlook is positive for many sectors, including agriculture. AgriBank continues to operate in a remote capacity without interruption to business operations.

Agricultural Conditions

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 2021 on February 5. The release also contained the revised estimates for 2020. Net farm income for 2021 is forecast to decline for the first time in five years to $111.4 billion, down $9.8 billion, or 8.1 percent, from the latest 2020 estimate of $121.1 billion. If realized, the 2021 forecast would still mark the second-highest net farm income level in the past seven years in nominal terms, and would surpass the 20-year average-inflation-adjusted net farm income level of $94.6 billion by $16.8 billion, or 17.8 percent.

The outlook for agriculture has improved remarkably since the second quarter of 2020. A recovering economy and supportive market fundamentals are driving prices higher for many commodities. However, COVID-19 infection rates (including potential outbreaks in animal processing plants and new, more virulent strains) along with weather, trade, government policy and global agricultural production levels may keep agriculture market volatility elevated for the next 12 months. Adoption of cost-saving technologies, marketing methods and risk management strategies will continue to cause a wide range of results among the respective producers.

Capital Resources and Liquidity

Total capital remained very strong at $6.7 billion as of March 31, 2021, an increase of $148.1 million compared to December 31, 2020. This increase was driven primarily by net income and net stock issuances, which was reduced by cash patronage distributions declared, consistent with AgriBank's capital plan. AgriBank exceeded all regulatory capital minimum requirements, including additional regulatory buffers.

Cash and investments totaled $19.8 billion at March 31, 2021 and December 31, 2020. AgriBank's end-of-the-period liquidity position represented 169 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 14 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. The AgriBank District covers a 15-state area stretching from Wyoming to Ohio and Minnesota to Arkansas. For more information, please 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 no later than 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)
	March 31,	December 31,
	2021	2020
	(Unaudited)
Loans	$110,858,068	$109,785,695
Allowance for loan losses	37,068	39,850
Net loans	110,821,000	109,745,845
Investment securities, federal funds and cash	19,811,690	19,847,121
Accrued interest receivable	470,921	495,635
Other assets	196,657	219,533
Total assets	$131,300,268	$130,308,134
Bonds and notes	$124,091,047	$123,029,564
Accrued interest payable	231,813	273,685
Other liabilities	249,804	425,368
Total liabilities	$124,572,664	$123,728,617
Shareholders' equity	$6,727,604	$6,579,517
Total liabilities and shareholders' equity	$131,300,268	$130,308,134

 

AGRIBANK, FCB
STATEMENTS OF INCOME INFORMATION
(in thousands)
	For the
	three months ended
	March 31,
	2021	2020
	(Unaudited)
Interest income	$481,395	$726,110
Interest expense	300,354	534,941
Net interest income	181,041	191,169
(Reversal of) provision for credit losses	(1,000)	1,000
Net interest income after (reversal of) provision for credit losses	182,041	190,169
Non-interest income	48,615	69,053
Non-interest expense	37,625	36,097
Net income	$193,031	$223,125

 

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SOURCE AgriBank

FAQ

What were AgriBank's net income results for Q1 2021?

AgriBank reported a net income of $193 million for the first quarter of 2021.

How did AgriBank's loan portfolio change in Q1 2021?

The loan portfolio increased by $1.1 billion, reaching $110.9 billion as of March 31, 2021.

What is the status of AgriBank's credit quality?

As of March 31, 2021, 99.4% of AgriBank's loans are classified as acceptable, indicating strong credit quality.

What were the changes in net interest income for AgriBank?

AgriBank's net interest income decreased by $10.1 million, or 5.3%, to $181 million compared to the previous year.

What is AgriBank's liquidity position?

AgriBank had a liquidity coverage of 169 days, significantly above the regulatory minimum.