Farm Credit Bank of Texas (FCBT) reported strong mid-year results, highlighted by second quarter net income of $45.8 million, a 67.8 percent increase from the second quarter of last year. Net income for the first six months was $81.0 million, an increase of 84.5 percent over the same period of 2009.
“Once again, the bank’s careful monitoring of its earning assets and debt management strategies resulted in increased earnings for the quarter,” said Larry Doyle, FCBT chief executive officer. “One key factor was a 45-basis-point increase in the bank’s net interest rate spread, which was achieved by calling high-cost debt and replacing it with lower-cost debt.”
The Austin-based bank and its affiliated financing cooperatives make up the Texas Farm Credit District (district) — the largest network of rural lenders serving Alabama, Louisiana, Mississippi, New Mexico and Texas. Together, these lenders reported combined net income of $162.8 million for the six months ended June 30, 2010, an increase of $67.0 million, or 69.9 percent, from the same period of 2009.
The district’s net income for the quarter ended June 30, 2010, was $74.8 million, an increase of 62.7 percent from the second quarter of 2009. This increase was primarily due to a $13.3 million increase in net interest income and a $17.9 million decrease in provision for loan losses, offset by a $1.4 million increase in noninterest expense, a $622 thousand decrease in the benefit from income taxes and a $294 thousand decrease in noninterest income.
District gross loan volume at June 30, 2010, was $15.68 billion, reflecting a 3.0 percent decrease from Dec. 31, 2009, and a 4.9 percent decrease from June 30, 2009.
Nonaccrual loans for the district accounted for 4.1 percent of total loans at June 30, 2010, compared to 3.2 percent at Dec. 31, 2009, and 3.1 percent at June 30, 2009. Credit quality decreased slightly to 93.3 percent of loans rated “acceptable” or “other assets especially mentioned” at June 30, 2010. The decrease in credit quality reflects deterioration in certain agricultural sectors, as well as those borrowers affected by the overall downturn in the general economy.
“We continue to see several segments of the agricultural industry negatively impacted by the volatility in commodity prices. We are carefully managing our financial position and we’re pleased to continue to generate positive earnings for our member-owners,” said Ralph W. Cortese, FCBT board chairman.
District combined assets totaled $19.5 billion at mid-year. Members’ equity totaled $2.69 billion.
Farm Credit Bank of Texas and its 18 affiliated associations are part of the nationwide Farm Credit System, established by Congress in 1916. The cooperatively-owned lenders provide loans and financial services to agricultural producers, agribusiness firms, country homeowners and other rural landowners.
Nationally, the Farm Credit System reported combined net income of $882 million and $1.684 billion for the three and six months ended June 30, 2010, as compared with combined net income of $682 million and $1.297 billion for the same periods last year.