AgTexas Farm Credit Services

Although our rating incorporates the funding benefit AgTexas receives as a member of the Farm Credit System, we believe the likelihood the U.S. government would provide extraordinary support directly to AgTexas, if it were in financial stress, is low. In our view, AgTexas' role is of limited importance to the government, and another entity could assume AgTexas' business should it come under significant stress. Additionally, there is no history of the government providing direct support to associations like AgTexas, which limits the link AgTexas has to the U.S. government, in our view. Therefore, we do not include any rating uplift for potential government support. The stable outlook reflects our expectation that the company will maintain a strong capital position, including

...We expect AgTexas Farm Credit Services, an agricultural lender operating within the Farm Credit Bank of Texas (FCBT) district, to maintain its stable operating performance The association has a record of low credit losses, stable earnings, strong capital ratios, and access to low-cost funding from the FCBT. AgTexas has very limited geographic diversity and concentrated loan exposures to the agricultural industry, in our view. The association's district is limited to certain regions in Texas, and its loan exposure is substantially in the livestock and dairy sectors. It is also one of the smaller associations in terms of total assets, at around $3.1 billion at June 30, 2023. We view these factors negatively because they create additional risk that could threaten stable loan performance due to cyclicality and loan concentrations. Nevertheless, asset quality measures have been good, with adjusted nonperforming assets averaging well below 1% over the past five years....

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