AUSTIN, Texas – Farm Credit Bank of Texas (FCBT), a cooperatively owned wholesale funding bank that serves agriculture and rural America, reported strong earnings, loan volume and credit quality in the second quarter of 2015.
The bank reported net income of $47.2 million and $99.3 million for the three months and six months ended June 30, 2015, compared with $46.5 million and $91.3 million for the same periods in 2014. Net interest income rose to $58.3 million and $115.0 million for the three months and six months ended June 30, 2015, compared with $56.1 million and $108.1 million for the same periods in 2014. The 3.8 percent and 6.4 percent increases in net interest income were due primarily to increased loan demand.
Total loan volume grew 5.1 percent during the first half of 2015 to $13.9 billion at June 30. This reflects increases both in direct notes to the bank's affiliated lending cooperatives and other financing institutions, and in capital markets loans that provide capital and liquidity for food, agribusiness, energy and rural infrastructure companies. At mid-year the bank held total assets of $18.8 billion, compared with $18.0 billion at the end of 2014. Credit quality remained strong, with 98.7 percent of the bank's loans classified as acceptable or special mention.
The bank continued to maintain strong capital and liquidity levels, exceeding regulatory requirements set by its independent regulator, the Farm Credit Administration. As of June 30, 2015, the bank had a permanent capital ratio of 17.3 percent and shareholders' equity of $1.6 billion. Cash and investments totaled $4.7 billion, providing 223 days of liquidity.
"We continue to have very consistent earnings year over year and quarter over quarter, meeting one of our major long-term objectives," said Larry Doyle, FCBT chief executive officer. "It is our expectation to have steady, positive results."
Overall, agricultural producers in the bank's five-state territory benefited from favorable economic and weather conditions in the second quarter. Spring rains brought much-needed soil moisture, resulting in almost no drought in the district for the first time in five years. Crop, pasture and range conditions were generally very healthy districtwide, although isolated heavy rains and cool temperatures affected planting and yields in some areas. While commodity prices on average were lower than they were the prior year, prices should allow profitability in most sectors.
"Diversification in the bank's portfolio acts as a hedge against volatility in commodity prices," said Jimmy Dodson, FCBT board chairman. "While we are thankful for the rain, excessive rainfall in parts of our territory demonstrates the value of a diversified portfolio to mitigate weather risk, as well."
The bank is owned by 14 rural financing cooperatives in Alabama, Louisiana, Mississippi, New Mexico and Texas, which in turn are owned by their customers — farmers, ranchers, agribusinesses, and rural homeowners and landowners. Together, the Austin-based bank and its affiliated lenders compose the Texas Farm Credit District of the Farm Credit System.
Strong loan activity contributed to growth in net interest income on the district level. Collectively, the bank and its affiliated lenders reported $171.7 million and $341.0 million in net interest income for the three months and six months ended June 30, 2015, which increased 5.8 percent and 6.7 percent compared with the same periods in 2014. The district's net income totaled $104.5 million and $210.8 million for those periods in 2015, compared with $117.2 million and $223.4 million in the same periods in 2014. The decrease in net income is attributable in part to noninterest expense related to employee compensation, retirement expenses and other expenses associated with increased loan activities.
District loan volume totaled $20.0 billion at June 30, 2015, compared with $19.3 billion at year end 2014. Credit quality remained strong, with 98.6 percent of district loans classified as acceptable or special mention.
The results discussed herein are preliminary and unaudited. The bank's financial statements and the combined statements of the Texas District for the quarter ended June 30, 2015, are expected to be available on or about Aug. 7, 2015.
The district is a part of the Farm Credit System, the nation's largest source of financing for agriculture and rural America. Nationally, the System reported combined net income of $1.1 billion and $2.3 billion for the three-month and six-month periods ended June 30, 2015, compared with $1.2 billion and $2.3 billion for the same periods in 2014.