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n. Illinois | Here is the results from 2023 from a regional bank that has some 900 million in Ag loans (Ag loans are not a major asset of this bank)
Avg loans grew 10% in 2023
Net Interest grew 1% in 2023 (wonder why it wasn't 10%)
Net Profit before extraordinary items and income taxes fell 11% (Who hasn't been told by a banker that growing just for growth sake isn't very smart)
On top that they decided that they needed to make a paper loss of 140 million on 1 billion of bonds a real loss by selling the bonds so they could save maybe 39 million in interest costs going forward (It would take over 4 years to earn the 140 million back in lower interest costs, anyone know what interest rates are going to do in the next 4 years? I know I don't nor do they) so why take such a hit to bottom line profit? Someone doesn't understand liquidity or maybe some regulator forced them.. Guess who is going to be wanting to increase their interest rates to make up for this opps.
Liquidity issues in the financial sector are going to get real.
Commercial real estate is just now approaching what we saw happen in Ag Real Estate in the 1980's Massive losses coming to a regional bank near you as they get more and more half leased commercial properties back that doesn't have enough cash flow to cover the interest let alone principal reduction. There was a story in the WSJ this week about a bank in NY that took on the assets of one of the three failed banks from this past March-April. The FDIC would have given them guarantees on those assets (loans) and yet they find the losses are even bigger than they or the FDIC had thought. Couple loan losses along with bond losses and declining liquidity for funding loans and I see something not good on the horizon. | |
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reality check a story about Banks
