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SW MN | I just read the footnotes of their financials. They implemented this CECL change January 1, 2023, so this increase in allocation is not at all directly related to a recent change, but instead a deterioration of credit quality and following the CECL guidelines.
Another thing I found interesting in the footnotes:
1. At FYE they have $1.1 billion in adversely classified loans (23.8% of its total capital)
2. Of this $1.1 billion, $388,748,000 is on Non-accrual - meaning they are not recognizing interest income on these loans, and there is a high likelihood of not being paid in full.
3. Of this $1.1 billion, $38,103,000 is more than 90 days past due which is likely headed to Non-Accrual soon.
They have $1.2 billion of additional guaranteed loans that are used to lower the exposure of loss not reported in the above number.
They have the $2.2 billion in unrealized losses on investments like I mentioned before. If you combine this loss, along with the adversely classified credits you stand at nearly $3.3 billion of known issues at FYE. That is 58.3% of their equity is at risk, and with only generating $400 million in income, they would need to find equity partners for injection to remain solvent.
Also reading the footnotes, they mention several different partnerships and collaborations they are a part of and specifically mention that Agribank's financials dictate a lot of their own financial health. I will have to dig into their financials to see if we glean any nuggets of information. While it is understandable how intertwined they are with the other FCS in the system, that also creates a lot of counter party risk if somewhere something goes haywire.
Maybe more to come in future posts for when I am bored at home.
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Compeer Financials
