AUSTIN, Texas – Farm Credit Bank of Texas (FCBT), a wholesale funding bank, reported an increase in earnings for the first quarter of 2011.
Net income for the quarter ended March 31, 2011, was $41.8 million, an increase of $6.6 million over the same period of 2010. The 18.7 percent increase was due largely to a $10.3 million increase in net interest income and a $1.5 million decrease in noninterest expense, offset by a $4.7 million increase in provision for credit losses and a $457,000 decrease in noninterest income. Net interest income for the first quarter of 2011 totaled $59.98 million, up 20.7 percent over the first quarter of 2010.
“The bank continued to experience strong earnings growth due to an increase in its net interest spread, which was achieved in part by replacing debt with lower cost debt in this low interest-rate environment,” said Larry Doyle, FCBT chief executive officer. “The bank’s earnings allow us to provide our affiliated rural lending cooperatives with competitive financing, which they in turn provide to farmers, ranchers and other rural landowners.”
Return on average shareholders' equity was 14.45 percent, a decrease from the 16.94 percent reported for the first quarter of 2010.
The bank's gross loan volume totaled $10.4 billion at March 31, 2011, down 0.6 percent from Dec. 31, 2010. This slight decrease in the loan portfolio was due largely to decreases in the bank’s direct loans to associations and other financing institutions, offset by growth in the bank's participations loan portfolio.
Credit quality remained stable, with 92.9 percent of the bank's loans classified as “acceptable or other assets especially mentioned,” compared to 92.8 percent at Dec. 31, 2010. Impaired loans constituted 1.7 percent of gross loan volume at March 31, 2011. The allowance for loan losses as a percentage of impaired loans was 20.8 percent at quarter-end, compared to 23.8 percent at year-end 2010.
“As a result of economic conditions, our affiliated retail lenders experienced limited growth, as credit standards were enhanced and the demand for rural real estate declined. This was reflected in a slight decrease in loan volume over the winter and spring,” said Ralph W. Cortese, FCBT board chairman. “Still, the quality of our loan portfolio remains stable, and 2011 holds promise for being a strong year in many agricultural sectors.”
Farm Credit Bank of Texas 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, the Austin-based bank and its affiliated lenders comprise the Texas Farm Credit District, the largest rural lending network in the five-state region. Collectively, the district lenders reported $90.6 million in net income for the first quarter of 2011, a 2.9 percent increase from the first quarter of 2010.
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 $1.004 billion for the quarter ended March 31, 2011, as compared with combined net income of $802 million for the same period last year.