Imperial Valley press., 1941-01-30
Review Of Credit
Agency Operation
Reveals Distress
until the and al 1a37

uDtll Ine en0 O1 1887
That phrase, lifted from the pre-
pared speech made before stock
holders of the FL Centre Production
Credit association this week, pre-
ceded complete review of that
concerns tangled affairs in which
the events leading up TO and the
events after the celebrated walters
case" we're described.
The address was made by r. P.
Coates, president of the Production
Credit corporation, parent organiza-
ton OF the FL Centre association, at
a courthouse meeting Tuesday Text
was released Thursday.
Operations of your association
ran along fairly well until the enc
of 1897" Coates related to stock
holders.
During 1888 and l939-particularly
1938-situations developed that re-
suited in the arrest and subsequent
imprisonment of w. E. Walters, sec
retary-treasurer of the association
from its inception in 1888 to his
dismissal in the spring of 1910.
These situations, Coates out
a concern that in 1887 had loaned
more than a million and a half
that year and amassed reserve earn
ings of more than S27, 900, TO a con-
Germ whose reserves were cut TO
$2566 despite a windfall of S45000
from the bonding company that Gov
cred losses during the Walters re-
gime.
Reserves Reduced
Bluntly, the FL Centre Produc-
ton Credit association IS solvent.
its stock unimpaired but its re-
serves have been cut materially by
loose management Coates told
the stockholders.
The story, as Coates told it, was
this:
''I mention two things particular
ly that happened in 1888 as be-
lieve they both had a significant
bearing on the association affairs
later-the reserve for losses ana
the decided drop in the livestock
business"
In the years 1884, 35, Sc and 81
the association did a gross business
of about four million dollars. In the
peak year of 1887 livestock loans
were 100000 more than twice
the preceding year. and crop loans
were $880000 cup S120000 over the
previous year. Piled up earnings
totaled $4,000.
The year 1888 showed different
picture. Gross business was almost
as much, but the livestock total
was more than cut in half and
the piled up earning remained vir-
tually the same because Of the nee
essity to set aside $50 900 as a re-
serve for weak loans.
Business Drops
In 1859 the "loose operations
frequently mentioned by Coates be-
came apparent in the years state
ment Total business dropped nearly
one third. A credit examination
showed 26 loans, representing an
investment of S32,475, set aside as
loss or partial lossl The board of
directors found it necessary to set
up reserves for losses and estimated I
losses at S51 .285.
This meant that the piled up f.
earnings were reduced TO s12,931 in
stead of more than S27,000-repre-
senting not only a loss of the diff
ference but the profits on the year
as well!
1t was evident that several men,
bers' accounts were very loosely
handled - Coates commented.
AT the January, 1910 stockholders
meeting Coates outlined the situa-
ton. Too many loans were going
sour. Walters, in the same month,
was called to Berkeley for an ac-
counting. Shortly thereafter cred
it examiner reported irregularities
Directors agreed upon a thorough
investigation.
Since practically no irregularities
were reflected on the associations
books, the audit job was a long
and tedious one, taking four months
in ALL Coates declared.
Operations Stymied
That delay, coupled with the STAR
ting facts disclosed by the audit,
explained the stalemate in asso-
citation activities that prevailed for
a period during the year The audit
showed that funds missing and
funds tied up in questionable loans
were sufficient to break the as
sociation-unless there was relief
from some other quarter.
1t was, therefore, necessary for
the directors of your association 10
rely wholly upon one source. if the
association were not to be impaired
and that was the claim filed un-
der bond i. :" Coates continued.
After many weeks of intense ef-
fort the bonding company finally
agreed to pay $4,000. The directors
agreed and the association was
back on a solvent basis. It was SOL
vent. all stock unlmpaired but the
efforts and the earnings Of eight
years had been damaged.
Needs Cooperation
In rebuilding confidence and win
ming back the business OF many who
were antagonized, the association
needs the cooperation of all its
members. Coates declared.
The reserve picture was consider
ably frightened this week when P.
L. Hixon, secretary treasurer, ex-
planned that already several thou
sand dollars have been recovered