Tuesday, May 20, 1997

Farm Credit Bank reports $22 million first-quarter earnings

By J.T. SMITH / Farm Editor

The Farm Credit Bank of Texas and its affiliated lending associations report combined first-quarter 1997 earnings of $22 million.

That compares with a net income of $27.6 million for the first three months of 1996.

The difference in first-quarter net earnings compared with one year ago is attributed primarily to decreases in net interest income and in gains on the sale of other property owned.

During the first quarter, mortgage loan volume grew by $75.8 million, while production volume experienced a $65.2 million, or a 7.2 percent, decrease in total loans. Total gross loan volume at March 31, 1997 was $3.89 billion, compared with $3.9 billion at year-end 1996.

Meanwhile, member equity grew to $887 million at quarter-end from $879 million on Dec. 31, 1996.

Arnold R. Henson, chief executive officer, said the bank's district performance for the first quarter is on track with targets set by the bank and associations for the period.

"The condition of the bank and affiliated associations in our territory is very strong," Henson said.

Boll weevil question clouds the picture

Henson said the future of the Texas Boll Weevil Eradication Program remains a cause for concern.

"While we are optimistic that 1997 will be another good year, we are evaluating activities of the Texas Boll Weevil Eradication efforts and are concerned about any potential loan loss that may be experienced as a result of the Texas Supreme Court's ruling halting eradication efforts," Henson said.

The bank and seven Production Credit Associations (PCAs) had about $37 million in loans outstanding to the Texas Boll Weevil Foundation at April 30, 1997, on the day when the court ruled that the statute creating the Foundation was unconstitutional.

These loans have been placed in nonaccrual status pending final outcome of this matter, and about $900,000 in interest income recorded in 1997 has been reversed.

Meanwhile, the Foundation, with its state headquarters in Abilene, is pursuing both judicial and legislative remedies to permit continuation of the program.

"We applaud the legislature's efforts to restore the boll weevil program and feel it is critical that a legislative solution include provisions to ensure the repayment of the Foundation's present debt obligations," Henson said.