Farm Credit Bank of Texas (FCBT), a wholesale funding bank, reported solid financial results highlighted by a significant increase in earnings for the first quarter of 2010.
Net income of $35.2 million for the quarter ended March 31, 2010, was more than double the $16.6 million reported for the same period of 2009. The 112 percent increase was due largely to a $13.9 million increase in net interest income, combined with a $1.3 million decrease in provision for loan losses and a $3.7 million decrease in noninterest expense.
Net interest income for the first quarter of 2010 totaled $49.7 million, up 38.7 percent over the first quarter of 2009. “The increase was largely attributable to a widening in the net interest rate spread between the bank's cost of funds and its lending rate, which was achieved by replacing higher-cost debt with lower-cost debt,” said Larry Doyle, FCBT chief executive officer. “This situation, combined with a low interest-rate environment, has allowed the Farm Credit Bank of Texas to provide our affiliated rural lending cooperatives with competitive financing for agriculture and rural real estate.”
Return on average shareholders' equity increased to 16.94 percent for the first quarter of 2010 from 8.89 percent for the first quarter of 2009.
The bank's gross loan volume totaled $10.9 billion at March 31, 2010, down 1.7 percent from Dec. 31, 2009. This decrease in the loan portfolio was due largely to lower loan demand by the bank's affiliated lenders, offset by limited growth in the bank's capital markets loan portfolio.
Credit quality remained strong, with 95.0 percent of the bank's loans classified as “acceptable or other assets especially mentioned,” up slightly from Dec. 31, 2009. Impaired loans constituted 1.4 percent of gross loan volume at March 31, 2010. The allowance for loan losses as a percentage of impaired loans was 21.8 percent at quarter-end, compared to 28.1 percent at year-end 2009.
“Adverse economic circumstances, widespread drought and weak agricultural markets last year affected many farmers and ranchers who do business with our affiliated lending cooperatives. 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 strong, and with the prospect of improved livestock prices and commodity markets, we are optimistic that 2010 will be a successful year for the agricultural sector.”
Farm Credit Bank of Texas is owned by 19 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 $88.1 million in net income for the first quarter of 2010, a 76.6 percent increase from the first quarter of 2009.
The district is a part of the 94-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 $802 million for the quarter ended March 31, 2010, as compared with combined net income of $615 million for the same period last year.