AgTexas Farm Credit Services

The stable outlook reflects our expectation that the company will maintain its very strong RAC ratio, good loan performance, and access to low-cost funding from FCBT over at least the next two years. We could lower the ratings if AgTexas' RAC ratio declines below 15% for what we expect will be a sustained basis, if asset quality deteriorates meaningfully, or if the company loses its access to the low-cost funding FCBT provides, which we do not expect. While less likely, we could raise our ratings if AgTexas expands its geographic reach and further diversifies its loan portfolio while maintaining its very strong RAC ratio. Our starting point (or anchor) for our rating is 'bb+', in line with other U.S. nonbank

...AgTexas Farm Credit Services, an agricultural lender operating within the Farm Credit Bank of Texas (FCBT) district, has a long history of stable operating performance. The company has a record of low credit losses, stable earnings, strong capital ratios, and access to low-cost funding from FCBT. AgTexas has very limited geographic diversity and concentrated loan exposures in the agricultural industry. The association's district is limited to certain regions in Texas, and its loan exposure is largely in the livestock and dairy sectors. We view these factors negatively because they create additional risk and could threaten stable loan performance due to cyclicality. Our ratings on AgTexas incorporate the benefits it receives as a member of the Farm Credit System, including ready access to stable low-cost funding. However, we believe the likelihood the U.S. government would provide extraordinary support directly to AgTexas, if it were in financial distress, is low. In our view, AgTexas' role...

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