AUSTIN, Texas – Farm Credit Bank of Texas (FCBT) reported strong asset growth and credit quality in the third quarter of 2015.
Total assets were a record $19.4 billion at Sept. 30, 2015, compared with $18.0 billion at the end of 2014, reflecting growth in the bank’s loan and investment portfolios. Total loan volume of $14.4 billion reflected an increase of $470.6 million, or 3.4 percent, in the quarter and $1.1 billion, or 8.6 percent, in the first nine months of the year.
Credit quality remained strong, with 98.7 percent of the bank’s loans classified as acceptable or special mention at the end of the quarter. Nonaccrual loans totaled $2.6 million, a 65 percent decrease year over year. As a result of the strong credit quality, the provision for credit losses was reflected as a loan loss reversal of $1.6 million for the first nine months of the year.
The bank provides funding and operational support to retail lending cooperatives that serve farmers, ranchers, agribusinesses and rural homeowners and landowners. It also provides capital and liquidity for food, agribusiness, energy and rural infrastructure companies. Both portfolios saw loan growth in the third quarter.
The bank reported net interest income of $56.2 million and $172.4 million for the three months and nine months ended Sept. 30, 2015, compared with $59.6 million and $167.7 million for the same periods in 2014. Net income was $46.7 million and $144.9 million for the three months and nine months ended Sept. 30, 2015, compared with $55.1 million and $146.4 million for those periods in 2014. Although the bank experienced growth in its loan and investment portfolios, the effects of compressed interest rate spreads on the bank’s earning assets, a decrease in loan loss reversals and an increase in noninterest expenses resulted in a decrease in net income.
The bank’s strong capital and liquidity levels exceed the requirements set by its federal regulator, the Farm Credit Administration. As of Sept. 30, 2015, the bank had a 17.7 percent permanent capital ratio and $1.6 billion in shareholders’ equity. Cash and investments totaled $4.8 billion, providing 195 days of liquidity.
Agricultural producers in the bank’s five-state territory had adequate moisture due to late spring and early summer rains. Improved pasture and range conditions and historically strong cattle prices contributed to the first increase in cattle inventory since 2006. In addition, livestock, dairy and poultry producers benefited from reduced feed prices. Despite hot and dry summer conditions in some areas, crops were in fair to good condition during the harvest at the end of the third quarter. Crop and livestock producers continue to use risk management tools that provide protection from volatility in the weather, production costs and commodity markets.
“While there was some variation in crop and ranching conditions in the third quarter, producers are doing a good job of meeting the challenges,” said Jimmy Dodson, FCBT board chairman. “Growth in the diversified loan portfolios of the bank and our affiliated lenders demonstrate our continued dedication to serving agriculture.”