AUSTIN, Texas – Farm Credit Bank of Texas (FCBT), a cooperatively owned wholesale funding bank, reported increased earnings during the second quarter of 2011.
Net income for the three months ended June 30, 2011, totaled $49.5 million, an 8.0 percent increase from the same quarter a year earlier. Net income for the six months ended June 30, 2011, was $91.3 million, up 12.6 percent from the same six-month period of 2010.
Income growth in both quarters was driven largely by increases in net interest income. For the three- and six-month periods of 2011, the bank’s net interest income was $56.9 million and $116.8 million, respectively, representing increases of 17.2 percent and 18.9 percent, respectively, over the same periods of 2010.
“Farm Credit Bank of Texas has continued to achieve strong earnings this year, largely because of our debt management strategy. By replacing existing debt with lower-cost debt, we have been able to increase our net interest spread,” said Larry Doyle, FCBT chief executive officer. “This has allowed us to continue to provide competitive financing to our affiliated rural lending cooperatives.”
Return on average assets increased to 1.31 percent at midyear 2011 from 1.17 percent at mid-year 2010, while return on average shareholders’ equity decreased to 15.41 percent from 18.92 percent during the same period.
The bank’s gross loan volume totaled $10.3 billion at June 30, 2011, down 1.2 percent from Dec. 31, 2010. The loan volume decrease was attributed to a reduction in the bank’s direct loans to its affiliated financing cooperatives, resulting from scheduled repayments, enhanced credit standards and reduced demand for rural real estate, but was offset by an increase in participation loans.
At midyear 2011, the credit quality of the loan portfolio showed modest improvement, with 94.8 percent of the portfolio classified as “acceptable” or “other assets especially mentioned,” compared to 92.8 percent at year-end 2010.
“This year, the states we serve have faced a wide array of weather-related challenges, from destructive tornadoes and historic flooding to large-scale wildfires and widespread drought,” FCBT Board Chairman Ralph W. Cortese said. “While crop insurance, high commodity prices and off-farm income sources have mitigated much of the negative impact to our district loan portfolio thus far, we will continue to monitor these conditions to assess any long-term potential impact to agriculture and to our customers.”
The Austin-headquartered Farm Credit Bank of Texas is the source of funds for 17 rural financing cooperatives in Alabama, Louisiana, Mississippi, New Mexico and Texas. These lenders, which own the bank, in turn make loans to their owners — farmers, ranchers, agribusiness firms, rural landowners and country homeowners.
Together, the bank and its affiliated lending cooperatives comprise the Texas Farm Credit District. With $15.5 billion in outstanding loans, the district is the largest rural lending network in the five-state region.
The Texas District lenders reported $99.9 million in combined net income for the quarter ended June 30, 2011, a 33.6 percent increase over the same quarter of 2010. District net income for the first six months of this year totaled $190.5 million, up 17.0 percent from the same period last year. These results were driven largely by an increase in net interest income and a decrease in provision for loan losses.
The district is a part of the 95-year-old Farm Credit System, the nation’s largest source of financing for agriculture and rural America. Nationally, the System reported combined net income of $982 million and $1.986 billion for the respective three-month and six-month periods ended June 30, 2011. This compares to combined net income of $882 million and $1.684 billion for the same periods last year.