Strong profitability and credit quality
ST. PAUL, Minn., March 2, 2022 – Today, St. Paul-based AgriBank announced financial results for the fourth quarter and full year of 2021, with strong profitability, credit quality, and liquidity and capital.
- Profitability: Net income remained strong at $765.2 million for the year ended December 31, 2021. AgriBank’s year-to-date return on assets (ROA) ratio of 57 basis points was above the target of 50 basis points.
- Credit quality: Total loan portfolio credit quality was strong, with 98.3 percent of loans classified as acceptable at December 31, 2021, compared to 99.3 percent at December 31, 2020.
- Liquidity and capital: End-of-the-quarter liquidity was 158 days, well above the regulatory requirement. Capital also remained well above the regulatory minimums and company targets.
YEAR-TO-DATE 2021 RESULTS OF OPERATIONS
Net interest income was $779.8 million for the year ended December 31, 2021, an increase of $65.4 million, or 9.2 percent, compared to same period of the prior year. Net interest income increased mainly due to continued increases in both wholesale and retail loan volume.
Non-interest income was $145.5 million for the year ended December 31, 2021, a decrease of $44.5 million, or 23.4 percent, compared to the same period of the prior year. The decline was primarily driven by lower conversion fees, which were significantly elevated in 2020, partially offset by increased mineral income.
FOURTH QUARTER 2021 RESULTS OF OPERATIONS
Net interest income was $206.4 million for the quarter ended December 31, 2021, an increase of $40.2 million, or 24.2 percent, compared to the same period of the prior year. These changes were primarily related to increases in loan volume and lower interest expense due to the low interest environment, partially offset by lower interest income on our investment portfolio.
Total loans were $122.0 billion at December 31, 2021, an increase of $12.2 billion, or 11.1 percent, compared to December 31, 2020. This increase was primarily attributable to increased wholesale loans and, to a lesser extent, increases in retail production and intermediate-term and agribusiness loans. Throughout 2021, District Associations experienced loan growth in the real estate mortgage, production and intermediate-term, and agribusiness sectors, contributing to the growth in our wholesale 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 98.3 percent loans classified as acceptable as of December 31, 2021, compared to 99.3 percent at December 31, 2020. Loans classified as acceptable represent the highest-quality assets. The credit quality of AgriBank’s retail loan portfolio increased to 95.4 percent classified as acceptable at December 31, 2021, compared to 94.0 percent acceptable at December 31, 2020. The improvement in the acceptable percentage of the retail portfolio was positively impacted by the participation purchases during 2021. Additionally, continued strong net farm income and strong commodity prices in specific sectors contributed to the overall improvement.
As domestic public health measures have been implemented to limit the spread of the coronavirus, including the availability of vaccines, many restrictions have been lifted across the U.S. While the emergence of COVID-19 variants have negatively impacted certain regions of the U.S., the overall economy continues to recover, and the outlook is positive for many sectors, including agriculture.
Some AgriBank employees, at their discretion and in compliance with established health and safety measures, have periodically voluntarily returned to the office. In January 2022, AgriBank ended its business continuity protocols activation, which had been in place since the start of the COVID-19 pandemic. Collectively, AgriBank’s business continuity responses and ongoing measures have allowed it to continue to serve its mission.
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 2022. Net farm income (NFI) for 2022 is forecast to decline a nominal $5.4 billion, or 4.5 percent, from the revised $119.1 billion 2021 NFI forecast. If realized at $113.7 billion, the 2022 NFI projection would be the third highest level ever in nominal dollars, trailing only 2021 and 2013. After adjusting for inflation, the 2022 NFI forecast equates to a $9.7 billion decline, or 7.9 percent, from the revised 2021 forecast. Despite the projected decline for 2022, the NFI forecast would still be more than $10 billion higher than the 10-year average real NFI if the 2021 and 2022 forecasts are realized.
The outlook for U.S. agriculture remains positive despite the challenges of rising expenses, supply chain disruptions and labor issues that many sectors are facing. However, weather, trade, government policy, global agricultural production levels and the potential for pathogenic outbreaks in livestock and poultry may keep agriculture market volatility elevated for the next twelve 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 $7.0 billion as of December 31, 2021, an increase of $426.4 million compared to December 31, 2020. This increase was driven primarily by net income and net stock issuances, which were substantially 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 $19.7 billion and $19.8 billion at December 31, 2021 and 2020, respectively. AgriBank’s end-of-the-period liquidity position represented 158 days coverage of maturing debt obligations, which supports operational demands, and was well above the 90-day minimum established by AgriBank’s regulator.
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. 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.
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.