Farm Credit System reports 1995 second quarter and six-month net income.

NEW YORK--(BUSINESS WIRE)--Aug. 10, 1995--The Farm Credit System today reported combined net income of $300 million and $594 million for the second quarter and first six months of 1995, respectively, as compared with combined net income of $252 million and $532 million for the same periods of the prior year.

"We continue to be gratified with System's earnings for the second quarter and first six months of 1995," stated James A. Brickley, president and CEO of the Federal Farm Credit Banks Funding Corporation. "The higher earnings levels this year were achieved despite continued competitive pressure on net interest spreads."

Net interest income of $497 million and $995 million for the second quarter and first six months of 1995, respectively, remained relatively stable as compared with net interest income of $493 million and $991 million for the corresponding periods of the prior year. However, the components of net interest income changed between the comparable periods. Even though those portions of earning assets funded with interest-bearing debt were at higher levels in the three and six month periods this year, net interest net interest income attributable to such assets declined from comparable prior-year periods as net interest spreads (i.e., the spreads between the yields on earning assets and the cost of interest-bearing liabilities) fell 36 and 38 basis points to 2.11% and 2.14% in the second quarter and first six months of 1995, respectively. These declines in net interest spreads generally resulted from increased competitive loan pricing pressures experienced by System institutions in the rising interest rate environment of 1994.

On the other hand, as a result of the System's growing capital base and the higher yields on earning assets realized during the second quarter and first six months of 1995, net interest income attributable to the portions of earning assets funded by interest-free funds, primarily equity, increased and more than offset the declines in net interest income attributable to the portions of earning assets funded with interest-bearing debt. As a consequence, net interest margins (i.e., net interest spreads adjusted for the effect of interest-free funds) declined only slightly to 3.03% and 3.04%, for the second quarter and first six months of 1995, respectively, as compared with 3.10% and 3.12% for the same periods in 1994.

The increases in earnings for the three and six months ended June 30, 1995, as compared with the same periods of the prior year, were primarily attributable to decreases in net non-interest expenses of $34 million and $31 million, and decreases in merger-implementation costs of $14 million and $23 million, respectively. The decreases in net non-interest expenses between the periods resulted primarily (i) from losses of $16 million recognized by two Banks during the second quarter of 1994 in connection with the disposition of certain investment securities (no such losses were recognized in the first six months of 1995) and (ii) from decreases in salaries and employee benefits, reflecting the favorable effect of employee reductions attributable to mergers and organizational restructuring programs.

The provisions for loan losses for the three and six months of 1995 remained at relatively low levels, reflecting nominal growth in loan volume as well as continued stability or improvement in the credit quality of most System institutions' loan portfolios.

Gross loan volume rose $1.024 billion to $55.700 billion at June 30, 1995, as compared with year-end 1994 volume of $54.676 billion. This increase resulted principally from seasonal growth in short-and intermediate-term loans to agricultural producers and from an increase in domestic loans to cooperatives due primarily to seasonal fluctuations in inventory and receivables financing provided to cooperatives. These increases were offset in part by declines in long-term real estate loans and loans made in connection with international transactions.

The System's accruing loan volume was $54.752 billion at June 30, 1995, as compared with $53.640 billion at Dec 31, 1994. Nonaccrual loans decreased by $88 million to $948 million at June 30, 1995 from $1.036 billion at Dec. 31, 1994. Nonperforming loans (which consist of nonaccrual loans, accruing restricted loans, and accruing loans 90 days or more past due) were $1.355 billion at June 30, 1995, as compared with $1.476 billion at Dec. 31, 1994. Nonperforming assets (which consist of nonperforming loans and other property owned) were $1.427 billion at June 30, 1995, as compared with $1.576 billion at Dec. 31, 1994. Such assets represented 2.56% of System loans and other property owned at June 30, 1995, a decline from 2.88% at Dec. 31, 1994.

The allowance for loan losses was $1.655 billion at June 30, 1995, as compared with $1.636 billion at Dec. 31, 1994. The allowance as a percentage of loans outstanding was 2.97% at June 30, 1995 and 2.99% at Dec. 31, 1994. The allowance for loan losses was 122.1% of the System's total nonperforming loans and 174.6% of its nonaccrual loans at June 30, 1995, as compared with 110.9% and 157.9%, respectively, at Dec. 31, 1994.

Capital increased during the first six months of 1995 by $568 million to $9.354 billion. The increase in capital resulted primarily from net income earned and retained. Capital as a percentage of total assets was 13.9% at June 30, 1995, as compared with 13.2% at Dec. 31, 1994. The June 30, 1995 balance included restricted assets in the Farm Credit Insurance Fund designated as restricted capital in the amount of $956 million.

The Farm Credit System is a nationwide system of Federally chartered agricultural lending institutions cooperatively owned by their borrowers.

For further information and copies of annual and quarterly information statements, contact:

Daniel M. Bienz, Vice President

Financial Analysis and Disclosure

Federal Farm Credit Banks Funding Corporation

10 Exchange Place, Suite 1401

Jersey City, NJ 07302

[phone] -0-

                         Farm Credit System
                  Combined Financial Statement Data
                          (in millions)

                                    June 30,         December 31,
                                      1995               1994
Statement of Condition Data
Cash, Federal funds and investment
 securities                         $10,058           $10,313

Loans                                55,700            54,676
Less allowance for loan losses        1,655             1,636
Net loans                            54,045            53,040

Accrued interest receivable on
 loans                                1,225             1,083
Other property owned                     72               100
Other assets                            922               949
Restricted assets                       956               891

Total assets                        $67,278           $66,376

Systemwide bonds and notes,
 and bank and other bonds           $56,202           $55,793
Other liabilities                     1,548             1,602
 Total liabilities                   57,750            57,395
Protected borrower capital              174               195
Capital stock and surplus
 (including restricted capital of
  $956 and $891, respectively)        9,354             8,786

Total liabilities and capital       $67,278           $66,376
-0-

                                   For the            For the
                                Quarter Ended     Six Months Ended
                                   June 30,           June 30,
                             1995        1994    1995        1994
Statement of Income Data

Total interest income       $1,391     $1,136   $2,750    $2,224
Total interest expense        (894)      (643)  (1,755)   (1,233)
 Net interest income           497        493      995       991
Net noninterest expense       (152)      (186)    (314)     (345)
Merger-implementation costs               (14)      (5)      (28)
Provision for loan losses      (13)        (7)     (16)      (17)
Income before income taxes     332        286      660       601
Provision for income taxes     (32)       (34)     (66)      (69)

Net income                  $  300     $  252   $  594    $  532

CONTACT: Federal Farm Credit Banks Funding Corp.

Daniel M. Bienz, 201/200-8070