AUSTIN, Texas – Farm Credit Bank of Texas (FCBT), a wholesale funding bank and a member of the Farm Credit System, announced today that it intends to issue perpetual noncumulative subordinated preferred stock. Such offerings have previously been authorized by FCBT’s board of directors and shareholders up to but not to exceed an amount of $1 billion outstanding at any one time, subject to the approval of the terms of the offerings by the bank’s regulator, the Farm Credit Administration.
To date, FCBT has issued a total of $200 million in issuances of Class A cumulative preferred stock in November 2003 and September 2005, and $300 million of Class B perpetual noncumulative subordinated preferred stock in August 2010. The bank also issued $50 million of subordinated debt in September 2008.
FCBT estimates that for the three and six months ended June 30, 2013, the net interest margin was 1.47% and 1.50%, respectively, compared to 1.59% and 1.61%, respectively, for the three- and six-month periods in the prior year. FCBT believes that the decrease in net interest margin was largely due to repricings on retail loans combined with spread compression on participation loans and investment assets.
Non-interest expenses are estimated to increase $3.0 million to approximately $17.8 million and $3.9 million to approximately $34.6 million, respectively, for the three and six months ended June 30, 2013. FCBT believes that the increases for the three- and six-month periods include increases in professional and contract services totaling $1.3 million and $1.9 million, respectively (primarily related to information and technology projects) and increases in FCSIC insurance premiums of $0.8 million and $1.7 million, respectively (due to a premium rate increase from 5 basis points in 2012 to 10 basis points in 2013).
FCBT estimates that it will recognize provisions for credit losses of $4.3 million and $5.1 million, respectively, for the three and six months ended June 30, 2013, as compared with $6.2 million and $20.8 million, respectively, for the same periods in the prior year. The provision for loan losses as of June 30, 2013, is believed to be primarily related to one dairy facility which had been on FCBT’s credit watch list. The allowance for loan losses is estimated to be $17.6 million at June 30, 2013, as compared with $17.3 million at December 31, 2012. The estimated allowance is considered by FCBT to be adequate to address estimated losses inherent in the loan portfolio at June 30, 2013.
FCBT estimates that total assets at June 30, 2013, total approximately $15.39 billion, an increase of $10.8 million, or 0.07%, from total assets of $15.38 billion at December 31, 2012. FCBT believes that the increase in total assets was due to an $18.8 million increase in net loans and a $10.6 million increase in other assets, collectively, offset by a $12.7 million decrease in other property owned and a $5.9 million decrease in cash and investments.
FCBT estimates that as of June 30, 2013, 97.5% of its total loans outstanding were classified as Acceptable and 0.2% were classified as Other Assets Especially Mentioned. Adverse loans, rated “Substandard” under the Farm Credit Administration’s Uniform Loan Classification System, are estimated to be 2.3% at June 30, 2013, and were 2.5% at December 31, 2012. Nonaccrual loans for FCBT are estimated to be $44.5 million, or 0.4%, of total outstanding loans at June 30, 2013, which is a decrease of $19.2 million, or 0.2%, of total outstanding loans from the $63.7 million, or 0.6%, of total outstanding loans at December 31, 2012. FCBT estimates that it had formally restructured loans of $9.7 million at June 30, 2013, and $12.0 million at December 31, 2012.
FCBT’s total outstanding loans are estimated to be $11.36 billion at June 30, 2013, an increase of $19.2 million, or 0.17%, from outstanding loans of $11.34 billion at December 31, 2012. FCBT believes the increase is due primarily to an increase in FCBT’s capital markets portfolio, offset by reductions in direct notes and loans to OFIs. The reductions in direct notes and loans to OFIs reflect the sale of $250 million in direct notes and $23.1 million in loans to OFIs to another System bank in the second quarter of 2013. FCBT believes there were no major changes in the diversification of commodities in FCBT’s capital markets portfolio or geographical concentrations since December 31, 2012.
As of June 30, 2013, FCBT estimates that it has sufficient liquidity to fund all debt maturing within 284 days.
FCBT is owned by 17 rural financing cooperatives in Alabama, Louisiana, Mississippi, New Mexico and Texas, which in turn are owned by their customers — farmers, ranchers, agribusinesses, country homeowners and other rural landowners. Together, FCBT and its affiliated lenders comprise the Texas Farm Credit District, the largest rural lending network in the five-state region.
FCBT is one of four banks that, together with 82 affiliated associations, make up the federally chartered network of borrower-owned lending institutions and related service organizations known as the Farm Credit System. FCBT and the other institutions in the Farm Credit System are instrumentalities of the federal government intended to further U.S. governmental policy concerning the extension of credit to or for the benefit of agricultural producers in the United States. The Farm Credit System is the oldest of the government-sponsored enterprises. The unaudited financial information discussed in this press release only pertains to the financial results of FCBT and is not intended to be indicative of the financial results of the Farm Credit System for the three months ended June 30, 2013, which are scheduled to be released publicly by the Federal Farm Credit Banks Funding Corporation on August 2, 2013.
This press release may contain forward-looking statements. Such forward-looking statements are based on FCBT management’s current expectations and involve certain risks and uncertainties which could cause actual results to differ materially from those expressed in forward-looking statements. Factors that might cause such a difference include, but are not limited to: (i) political, legal, regulatory, and economic conditions and developments in the United States and abroad; (ii) economic fluctuations in the agricultural, rural utility, international and farm-related business sectors; (iii) weather-related, disease and other adverse climate or biological conditions that periodically occur that impact agricultural productivity and income, including the impact of drought in many parts of the United States which may negatively affect certain customer sectors; (iv) changes in the United States government support of the agricultural industry; and (v) actions taken by the Federal Reserve System in implementing monetary policy. Other than the extent required by applicable law, FCBT does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
The financial information set forth above as of June 30, 2013, and for the three- and six-month periods then ended is unaudited and is derived from our unaudited financial statements as of such date and for such periods prepared for internal management purposes. FCBT has not yet finalized or publicly released our unaudited financial statements as of June 30, 2013, and for the three- and six-month periods then ended. Such unaudited financial statements are prepared in accordance with U.S. generally accepted accounting principles. Certain estimates and assumptions used in the preparation of the unaudited financial statements prepared for internal management purposes may differ from those that are utilized in the unaudited financial statements as of June 30, 2013, and for the three- and six-month periods then ended as finally released.