Montana Analytics

The Q4 2023 Report on the Farm Credit System (FCS) Conditions was recently released by the Farm Credit Administration (FCA). Key takeaways: 1.    The FCS loan portfolio growth declined almost 7% YoY, but total portfolio increased: •       total assets climbed 6.5% to $508B and total loans increased 6.7% to $398B •       Rural infrastructure loans, the smallest loan type at 14% of total portfolio, increased most in 2023 at a 23% rate 2.    Portfolio credit risk remained low, but nonaccruals and less than Acceptable loans increased 0.45% in non-performing assets to $1.8B total 3.    System capital increased $4.7B (6.9% YoY), with capital-to-assets ratio at 14.4% 4.    FCA expects a challenging operating environment moving forward for several reasons: •       Declining net farm income and margin compression (especially for cash grains) resulting from lower commodity prices •       Increased stress in certain industry segments including swine, dairy, tree nuts, and poultry •       Higher interest rates during a period of declining liquidity and increased reliance on operating lines  #FarmCredit #AgLender #AgricultureLoans #FarmCreditSystem #GSEs #Agsystems  #farmlending  #Economy #finance  #interestrates #liquidity #liquidityrisk #creditrisk https://lnkd.in/g2zxGv3d

Various sectors of the CRE market have been in distress for a few years, but very few credit losses have materialized. Most CRE models will underestimate credit losses as delinquency rates increase since they are largely built on low losses. Montana Analytics presents approaches to rapidly generate higher credit losses without model redevelopment in our latest technical briefing. #CRE #CREmarket #finance #creditrisk #capitalmarkets #financialinstitutions #riskmanagement #financialservices #riskanalytics #interestrates #banking #economics #finance #loans #riskmanagement #analytics

FDIC released the Q2 2024 Quarterly Business Profile. Some key observations: 1.       FDIC insured institutions reported a net income of $71.5 billion, an increase of $7.3 billion (11.4 percent) from Q1. The increase was driven by a few factors: a decrease in noninterest expense (down $3.6 billion), higher noninterest income (up $1.2 billion), and higher gains on the sale of securities (up $937 million). 2.       The overall industry’s NIM declined 1 basis point to 3.16 percent in the second quarter from the first quarter as the growth in funding costs slightly exceeded the growth in earning asset yields. However, the NIM increased quarter over quarter for all size groups except for the largest banks (those with more than $250 billion in assets), which experienced a decline of 4 basis points. 3.       Provisions for credit losses totaled $23.3 billion in the second quarter 2024, up $2.7 billion from the first quarter. This marks eight straight quarters where the provision expenses have been higher than the pre-pandemic average. The increase occurred despite the percentage of noncurrent loans, remaining unchanged from the prior quarter at 0.91 percent of total loans. This stands well below the pre-pandemic average of 1.28 percent. 4.       Domestic deposits decreased by $198 billion, or 1.1 percent, which is below the pre-pandemic average second-quarter growth rate of 0.2 percent. The largest Banks drove the quarterly decline in deposits.  #creditrisk #capitalmarkets #financialinstitutions #riskmanagement #financialservices #riskanalytics #interestrates #banking #economics #finance #loans #deposits #riskmanagement #analytics #interestraterisk #IRR #fdic https://lnkd.in/eyGNvn72

FDIC released the Q1 2024 Quarterly Business Profile. Some key observations: 1.       Total loan and lease balances increased $205.2 billion (1.7 percent) from the previous year with almost 85 percent of banks reporting annual loan growth. 2.       Domestic deposits increased $190.7 billion (1.1 percent) from fourth quarter 2023, the second consecutive quarterly increase. Growth in transaction accounts led the increase, offsetting a decline in savings deposit balances. 3.       Provisions for credit losses totaled $20.6 billion in the first quarter 2024, down $4.3 billion from the previous quarter. Provision expenses have been higher than the pre-pandemic average (2015-2019) for the past seven quarters. 4.       The share of loans and leases that were 90 days or more past due or in nonaccrual status increased to 0.91 percent, up 16 basis points from the year-earlier quarter. ·       The noncurrent rate for non-owner occupied CRE loans of 1.59 percent in first quarter 2024 was at its highest level since fourth quarter 2013, driven by office portfolios at the largest banks.  5.       The industry’s net charge-off rate of 0.65 percent was 24 basis points higher than a year ago and this ratio remains 17 basis points above the pre-pandemic average #creditrisk #capitalmarkets #financialinstitutions #riskmanagement #financialservices #riskanalytics #interestrates #banking #economics #finance #loans #deposits #riskmanagement #analytics #interestraterisk #IRR #fdic https://lnkd.in/ePc6Xzmx

The Q4 2023 Report on the Farm Credit System (FCS) Conditions was recently released by the Farm Credit Administration (FCA). Key takeaways: 1.    The FCS loan portfolio growth declined almost 7% YoY, but total portfolio increased: •       total assets climbed 6.5% to $508B and total loans increased 6.7% to $398B •       Rural infrastructure loans, the smallest loan type at 14% of total portfolio, increased most in 2023 at a 23% rate 2.    Portfolio credit risk remained low, but nonaccruals and less than Acceptable loans increased 0.45% in non-performing assets to $1.8B total 3.    System capital increased $4.7B (6.9% YoY), with capital-to-assets ratio at 14.4% 4.    FCA expects a challenging operating environment moving forward: •       Declining net farm income and margin compression (especially for cash grains) resulting from lower commodity prices •       Increased stress in certain industry segments including swine, dairy, tree nuts, and poultry •       Higher interest rates during a period of declining liquidity and increased reliance on operating lines  #FarmCredit #AgLender #AgricultureLoans #FarmCreditSystem #GSEs #Agsystems  #farmlending  #Economy #finance  #interestrates #liquidity #liquidityrisk #creditrisk https://lnkd.in/g2zxGv3d

The FHFA-OIG disclosed that the FHFA inspected several nonbank seller/servicers (to Fannie and Freddie) in the past few years. The reviews focused on the following: (1) risk management framework, (2) underwriting and quality control processes to ensure loans adhered to the Enterprises’ selling guides, and (3) adequacy of liquidity and funding sources. FHFA is developing an Operating Procedures Bulletin (OPB) for reviews of nonbank seller/servicers with an expected completion date of June 30, 2024. #HousingFinance #RealEstate #HousingMarket #Economy #compliance #bankingindustry #banks #mortgage #fhfa #gse #finance #housing #interestrates #liquidity #liquidityrisk https://lnkd.in/ez-9Nwhq

SIFMA estimates the U.S. fixed income markets outstanding totaled $44.3 trillion at the end of Q4 2023, up 6.8% y-o-y  o  Treasuries led the yearly increase, up 10.2% y-o-y  o  The other categories of fixed-income securities were up slightly over 2022, with Corporates increasing the most at 3.0% y-o-y  #SIFMA #municipalbonds #bonds #corporatebonds #bondmarket #fixedincome #treasuries #mbs #PLS #MBS #RMBS  #ABS #securitization #structuredfinance #credit #structuredproducts #capitalmarkets #banking https://lnkd.in/eYKnSueB

FDIC released the Q4 2023 Quarterly Business Profile. Some key observations: 1.) Full-year 2023 net income, in aggregate, fell 2.3 percent from 2022 *The decrease was caused by higher noninterest expense (9.7 percent), increased provision expense (67.2 percent), and significantly higher realized losses on securities (194.3 percent) 2.) The industry’s net charge-off rate increased 29 basis points from the prior year to 0.65 percent, 17 basis points above its pre-pandemic average 3.) Domestic Deposits, led by growth in time deposits, increased for the first time in seven quarters #creditrisk #capitalmarkets #financialinstitutions  #riskmanagement  #financialservices  #riskanalytics #interestrates #banking #economics #finance  #loans  #deposits #riskmanagement #analytics  #interestraterisk #IRR #fdic https://lnkd.in/eJ8uwCZv

The Fall 2023 edition of the OCC's Semiannual Risk Perspective was recently released. A few highlights: 1.) Retail credit performance remains satisfactory with asset quality indicators have largely returned to pre-pandemic levels and remain in line with long-term averages. 2.) CREDIT RISK is increasing due to higher interest rates, increasing risk in commercial real estate lending (majority driven by the Office sector), prolonged inflation, declining corporate profitability, and potential for slower economic growth. 3.)Competition for deposits and higher interest rates are raising deposit rates. Deposit and liquid asset trends stabilized in the latter half of 2023, but these levels were supported by increased reliance on wholesale funding. Deposit competition has pushed rates higher and resulted in increasing usage of higher cost CDs, brokered deposits, and borrowings. #riskmanagement #banks #financeandeconomy #liquiditymanagement #creditrisk #interestrates  #banking #economics #finance #marketrisk #deposits https://lnkd.in/eArZwqTq