Managing risk in the Texas panhandle

First State Bank is an agricultural bank located in Stratford, Texas, which has $51 million in assets and loans totaling more than $33 million. These loans are primarily for pasture cattle and farming operations. One concern of the bank is interest rate risk, not only from an income position, but also from a capital standpoint. The bank uses the GENOA management firm. Another major business risk comes in the form of loan quality, as agricultural loans are very cyclical. To manage these risks, the bank must start with good operators. Along with good management and proper margins, the opportunity to use commodity futures is one of the most important tools the bank's customers have.