spotlight WINTER 2019
The Business of Beekeeping
Family-Run Company Finds Sweet Recipe for Success PAGE 6
Side-By-Side Customer-Lender Relationship Understanding Crop Insurance
PAG E 18
PAG E 16
Spotlight WINTER 2019
Feature Story: The Business of Beekeeping
rom the Farmer’s Kitchen: F Sarah’s Incredible Honey Caramels arm Credit West Appraisers: F A Wealth of Expertise
14 Changes in the Global Interest Rate
Market: Phasing Out LIBOR
Mission Statement Farm Credit West will ensure the customer comes first by providing superior service at competitive rates in a timely, professional and ethical manner, and by delivering a meaningful return on equity through our patronage program.
Who We Are One of the West’s leading agricultural lenders, Farm Credit West and its wholly owned subsidiaries are cooperatively owned lending institutions providing financial services to farmers, ranchers and agribusinesses. Our offices are located in Arizona and California’s Central Coast, Imperial Valley, South San Joaquin Valley and Sacramento Valley.
Board of Directors Chair of the Board Sureena B. Thiara. . . . . . . . . . . . . . . Yuba City, CA Vice Chair of the Board Douglas C. Filipponi. . . . . . . . . . . . . . . Creston, CA Joey Airoso . . . . . . . . . . . . . . . . . . . . . . . . . Pixley, CA
2019 – 2020 Holiday Calendar
Robert Amarel, Jr. . . . . . . . . . . . . . . . Yuba City, CA
Dr. Kohl’s Corner: Side-By-Side Customer-Lender Relationship
Teresa Castanias. . . . . . . . . . . . . . . . . . . . Dixon, CA
Guest Article: Understanding Crop Insurance
Candid Conversations: Safeguarding Your Funds
Tech Watch: Are You Prepared for Identity Theft?
Territory and Office Locations
Mark A. Cook. . . . . . . . . . . . . . . . . . . . . Willcox, AZ Catherine Fanucchi . . . . . . . . . . . . Bakersfield, CA Craig C. Gnos. . . . . . . . . . . . . . . . . . . . . . . Davis, CA Robert N. Hansen. . . . . . . . . . . . . . . . . Hanford, CA Blake Harlan. . . . . . . . . . . . . . . . . . . . Woodland, CA Tom Ikeda . . . . . . . . . . . . . . . . . . Arroyo Grande, CA Colin Mellon. . . . . . . . . . . . . . . . . . . . . . . . Yuma, AZ Mark Osterkamp. . . . . . . . . . . . . . . . . . Brawley, CA Barry Powell. . . . . . . . . . . . . . . . . . . Sacramento, CA Brian Talley. . . . . . . . . . . . . . . . . Arroyo Grande, CA
Spotlight is produced for the customers, employees and friends of Farm Credit West. Comments and story ideas can be submitted by email to the Marketing Department at firstname.lastname@example.org.
PRESIDENT’S MESSAGE Mark Littlefield, CEO
Financing the Future of Farming Our commitment to our customers is unwavering as we celebrate the conclusion of another successful year. As we reflect on the activities, accomplishments and transitions that occurred within your Association during 2019, a constant theme of providing excellent customer service to you, our customers, is apparent. With every year that passes, Farm Credit West’s Management Team spends significant time reviewing processes, procedures and product offerings to identify ways in which we can increase value to our agricultural customer base. Last year was no exception. Over the summer, Farm Credit West introduced a new state-of-the-art loan origination system and customer relationship management software package to staff. Significant resources were invested in these platforms, resulting in new, innovative ways for staff to collaborate. This allows for improved communication, faster loan servicing times and better overall service to our customers. The introduction of these new technology-based tools has opened the door to additional capabilities, many of which are actively being evaluated for future implementation. Apart from our focus on technology, Farm Credit West also implemented a new Asset Liability Management strategy. This transition in our approach to financing customer loan products will ultimately increase the flexibility of our offerings in addition to ensuring our competitiveness in the marketplace for years to come.
The transformative work implemented this year focused on improving your Association’s operating efficiency will extend into 2020 and 2021, providing exciting new ways for you to interact with our organization. Future technology rollouts such as a new Online Banking product and other online customer tools will allow you to focus more on your farm and less on administrative work. At Farm Credit West, building relationships with our customers is inherent in who we are and providing superior service to you is what drives us. While the world of technology is transitioning at record speed, our core mission to you, our customers, has remained constant for the last 100 years. We maintain our position as a relationship lender, and our expert staff make a point of getting to know you, your operation and your financial needs. We understand the importance of making solid financing decisions right in your local community where our staff can craft individualized solutions for your farm and ranch. As we enter the season of reflection and gratitude, we know that our greatest accomplishment this year has been ensuring that you, our customers, continue to come first. We sincerely thank you for your trust in allowing us to provide for your business needs. We look forward to serving you in the new year. From our family to yours, happy holidays and many blessings for 2020.
Financial Highlights Farm Credit West reported net income of $196 million for the first nine months of 2019. These year-to-date earnings are ahead of our business plan target for the third quarter. Also, during the first nine months of 2019 our average earning assets and capital levels increased, and we strengthened our allowance for loan losses.
AVERAGE EARNING ASSETS* (in millions)
MEMBERS’ EQUITY AS A % OF TOTAL ASSETS
$7,627 18.8% Dec. 31
Average earning assets increased $381 million, or 4%, during the first nine months of the year. Farm Credit West is experiencing a higher level of loan growth in 2019 as compared to the past two years; this level of loan growth is expected to continue through the remainder of the year. At the end of the third quarter, average earning assets exceeded the third-quarter business plan target by $187 million.
19.3% Dec. 31
Nonearning assets (nonaccrual loans plus other property owned) increased by $4.9 million, or 4.4%, to $118 million at September 30, 2019. The increase was primarily due to a $5.9 million increase in nonaccrual loan volume as a result of stress in certain loans in our portfolio. The other property owned balance decreased by $1 million.
Our allowance for loan losses totaled $72.9 million (0.7% of loan principal and interest) at September 30, 2019, compared with 0.61% of loan principal and interest at December 31, 2018. The increase is indicative of increased stress in certain loans, as well as loan growth. The allowance is our best estimate of the amount of probable losses existing in our loan portfolio as of each balance sheet date. We determine the allowance based on a regular assessment of the loan portfolio, which generally considers recent historic charge-off experience, collateral evaluations and adjustments for other relevant economic factors.
*Average earning assets amount for 2017 was adjusted to exclude nonaccrual loan volume for comparison to subsequent years.
$118 Dec. 31
ALLOWANCE FOR LOAN LOSSES AS A % OF LOANS
In the first nine months of 2019, total members’ equity increased $203 million, primarily due to net income of $196 million. Partially offsetting net income during the nine months were preferred stock dividends of $7 million.
NONEARNING ASSETS (in millions)
Customer Announcements Customer Appreciation
DIN N ER S
MARCH 17 Tulare/Dinuba /Hanford · INTERNATIONAL AGRI-CENTER — TULARE MARCH 18 Woodland / Yuba City · HYATT REGENCY — SACRAMENTO MARCH 23 Imperial · STOCKMEN’S CLUB — BRAWLEY
MARCH 24 Yuma · HILTON GARDEN INN PIVOT POINT CENTER — YUMA
Safford · ELKS LODGE — WILLCOX
MARCH 26 Tempe · TEMPE CENTER FOR THE ARTS
MARCH 31 Kern · MARRIOTT CONVENTION CENTER — BAKERSFIELD
Ventura · VENTURA BEACH MARRIOTT
Templeton/Santa Maria · MADONNA INN EXPO CENTER
2020 – 2021 Scholarship Applications Now Available
Farm Credit West is committed to supporting the role of education in agriculture’s future. Since 1994, Farm Credit West has provided scholarships to 249 scholars and committed $899,500 to this program. Recipients are awarded $1,500, and scholarships an be renewed three times for a total of $6,000 in scholarships from Farm Credit West. Scholarship applications are due
February 15, 2020.
Applicants must be an entering or current college student enrolled in agricultural programs and maintain a GPA of 2.7 or higher. They must also be a customer of Farm Credit West or the spouse or dependent of a Farm Credit West customer. The application and guidelines can be found at www.farmcreditwest.com under Community Support. For those who have previously received a Farm Credit West Scholarship, renewal applications will be posted in March and are due to Farm Credit West by July 1, 2020 along with final college transcripts. If you have any questions about the scholarship program, please email email@example.com.
2019 Interest Payments To help you achieve your tax planning objectives, we would like to remind you of your Association’s year-end procedures regarding interest paid on IRS Form 1098. For payments, the date received is the determining factor. ♦♦
ayments received by the Association on or before 2:00 p.m. P on December 31, 2019 will be reported as 2019 interest paid.
ayments received after that date and time, whether or not they P were mailed in 2019, will not be reported as 2019 interest paid.
ayments received after 2:00 p.m. on December 31, 2019 will P be processed on the following business day.
Consult your tax advisor regarding the deductibility of payments in transit. For payments made from your Future Payment Funds account, the date applied is the determining factor. If your taxplanning objectives are better met by having the interest portion of your January 1, 2020 installment reported as 2019 interest paid, you must register an early transfer of Funds Held to pay your installment in 2019. Written requests for early transfer must be received by the Association by Thursday, December 26, 2019.
New Online Banking Platform Coming in 2020, Farm Credit West will be launching a new Online Banking platform for our customers.
Stay tuned for more details. WINTER 2019
F E AT U R E S T O RY
The Business of Beekeeping Family-Run Company Finds Sweet Recipe for Success By Craig W. Anderson
In what other line of work, agricultural or otherwise, does one’s livelihood depend on a worker who only lives for three weeks? Dave and Sarah Sample, proprietors of Sample Family Apiaries and True Gold Honey in Lindsay, California, deal with this situation every 21 days: the average life span of a bee. “We constantly monitor our hives, ensuring they’re healthy, strong and safe, so our bees can focus on pollinating and making honey,” said Sarah, a third-generation beekeeper. From their base in Tulare County, the Samples operate about 4,000 beehives and produce around 400 barrels of honey each year. It’s a family affair, with the couple’s adult children, Tyler and Erin, involved in daily operations, and Tyler’s wife, Janie, and young son, Kayden, also caring for the bees. Besides dealing with the short life spans of their workers, the Samples must factor in another unusual cost of business: They accept, on average, the inevitable death
of about 30 to 40 percent of their hives, with some beekeepers suffering losses of up to 70 percent. Hive death has been an increasing problem for the bee industry in recent years, one that beekeepers and scientists are continually monitoring. Its causes are still being researched, but Dave says the arrival of the Varroa mite in the 1980s is the biggest factor for bee loss. Other threats include viruses, the small hive beetle, pesticides and stress due to inadequate forage. When the initial mite infestation hit, fear-based methods drove attempts to stop the pest’s spread; in Oregon officials confiscated and burned beehives at the state’s borders and millions of honey bees were incinerated, including 800 of the 3,300 hives that Sarah’s parents ran at the time. That loss drove the family to relocate to Modesto, California, a few hours north of where the Samples now reside.
We constantly monitor our hives, ensuring they’re healthy, strong and safe, so our bees can focus on pollinating and making honey.”
Bees may have a short life span, but their importance to crops everywhere is unparalleled. They pollinate 75 percent of the world’s food crops and 80 percent of the nation’s crops grown for human consumption, according to the United Nations Food and Agriculture Organization.
most of the state’s 500,000 bee colonies with their first natural source of food each spring, according to the Almond Board of California. Throughout the year, bees are moved to different yards based on crop pollination, seasonal changes, honey production and hive health.
“Some scientists estimate that one out of every three bites of food we eat exists because of animal pollinators like bees,” Sarah said.
Sarah says Tulare County’s central location in California makes it ideal for beekeeping. “We can conveniently reach eight different counties, and for most of the 100 sites where our bees work, we’re only two hours away from multiple types of farmland,” she said.
Sweet Endeavors Pollination may be paramount, but what most people are interested in is the liquid gold the bees create as a byproduct. The Samples’ burgeoning honey business is uniquely simple: they harvest completely by hand to maintain the sweet nectar’s nutritional integrity and never cook it. They offer five enticing varieties: Wild Buckwheat, Avocado, Coastal Mountain Sage, Orange Blossom and Summer Valley Flowers. “Honey contains a wide array of vitamins, minerals, enzymes (proteins and amino acids), live antibodies and antioxidants. High heat destroys these beneficial components,” Sarah explained, adding that True Gold Honey is also unfiltered. “It’s straight from our hives to your table.” The pollination and honey-making process begins in January with almond orchard pollination, which provides
In working their territory in Tulare and surrounding counties, the Sample bees perform on two levels: pollinating cherry, avocado and almond orchards; and gathering honey-producing nectar from alfalfa, oranges, cotton, corn and wildflowers. October is usually the end of honey production and when the bees are moved back to Tulare County for the winter, where they benefit from the area’s Mediterranean-like climate.
A Family Affair Growing up, Sarah worked and learned every aspect of the bee business from her parents starting at a young age. “My earliest memories are of reading or playing in our truck after school or on weekends while my parents worked the bees of our small apiary in Ashland, Oregon” she said. Continued on next page
Continued from previous page
It was Sarah and Dave’s dream to work their own bees, and their success is directly related to fulfilling that dream. “We give our bees the same love and care we give our family,” Sarah said. “We’ve done so from the start.” That includes making sure the non-hibernating insects have a nice, calm off-season so they can live up to two months instead of only 21 days. One of the couple’s favorite sites is near Woodlake, where two arteries of Lake Kaweah divide to create ideal conditions for wintering bees. During the pollinating seasons, the couple also avoids placing their bees in crops that cause them to work harder and wear out sooner. Besides caring for their bees, Dave and Sarah are dedicated to caring for their human community. They have a special concern for people with disabilities and donate one percent of their True Gold Honey sales to families impacted by disabilities. “We want to ensure every member of our human hive thrives, too,” Sarah said.
The Silver Lining Challenging circumstances in recent years have created new opportunities for the Sample family, many of which are being spearheaded by Tyler. As a fourth-generation beekeeper, co-owner and marketing director for True Gold Honey, Tyler’s skills have been honed by years of beekeeping. When he was 13 and working for his grandfather, he was paid in hives. It wasn’t before long he was bottling and selling honey to friends, family members and a local health food store. After a period working in the Los Angeles music industry, Tyler joined the family business in 2012, a move that thrilled his parents. When Tyler’s son Kayden was born later that year, the future looked bright. But that brightness was dimmed three years later when Tyler was seriously injured in an automobile accident and left with debilitating back pain. Sadly, the injury prevented him from doing the physical work required by beekeeping.
Family ties you together. We’re wild about life and turning negatives around…” S AR AH S AM PLE
SAMPLE FAMILY APIARIES & TRUE GOLD HONEY
After some soul-searching and deliberation, the family came up with a solution, which would launch the family business into its next chapter: separating the honey-making operation from the apiary and creating True Gold Honey.
“We are immensely grateful, and we’re equally passionate about developing and maintaining relationships that have carried us through drought and other challenging times,” Dave said.
“We asked ourselves: “What if we added a new division to the family business that would allow Tyler to stay connected to the family, the bees and the honey, but wouldn’t cause him daily pain?” explained Sarah.
From the beginning, Farm Credit West has played an important role in the family’s business. Dave says when the company was working to grow in its earlier days, Farm Credit West Vice President Leslie Herrema, their loan officer, was instrumental in helping the family secure the funds needed to purchase freightliner trucks for moving the bees.
For Tyler, and the whole family, it was the perfect solution. “We wouldn’t have True Gold without that accident — there’s the silver lining for you,” Tyler said. “When I worked with my dad in the fields, I was focused on the bees. Now, I’m focused on the honey and making a legacy for my son.”
Relationships Matter As the company moves into its next chapter of producing and marketing honey, its foundation of family and relationships remains strong. A sign hanging in plain sight in their home reminds them to slow down and find balance.
“[Leslie] took the time to get to know our company and what our needs were, and her efforts delivered the funds,” he said. “Sarah and I share the feeling that we’re not just a budget line item to Farm Credit West.” The lender also recently helped the family purchase 23 acres at the former Lindsay Airport to plant pistachios. Why pistachios? “This area’s infested with beekeepers,” said Dave playfully. “We wanted to diversify.” Continued on next page
F R O M T H E FA R M E R’ S K I T C H E N Continued from previous page
“It’s wonderful to be associated with a professional who understands agriculture, farming and the financial requirements we need to move ahead,” Sarah added. For her part, Leslie praised the Samples’ business savvy and dedication. “Sarah’s positive attitude and the family’s work ethic, coupled with their desire to be successful, are admirable qualities. We are honored to partner with them in their entrepreneurial ventures,” she said. Maintaining good relationships with landowners has been another critical aspect to the business, because year-round, hive sites are always needed. Tyler and Sarah visit landowners personally to acquire spaces for their bee yards, with excellent success. Today, True Gold Honey is stocked in 33 Save Mart grocery stores and was included in the Backstage Creations Celebrity Gift Bags at the 2019 MTV Video Music Awards. Their Wild Buckwheat Honey took first place at the 2017 California Honey Festival, and the company’s other varieties have fared well in several major competitions. The Samples certainly aren’t alone in the Tulare County pollination and honey production industry, which reached a gross value of $79 million in 2017, according to the county’s annual crop report. But with their eye on the future and a focus on family, business, relationships and bees, the Sample family will undoubtedly continue carving out a sweet niche for themselves in an invaluable industry.
Do you have a great recipe to share? Email your recipe to firstname.lastname@example.org and it could be featured in our next issue.
Sarah’s Incredible Honey Caramels By Sarah Sample, True Gold Honey
2 cups TRUE GOLD Coastal Mountain Sage honey
½ teaspoon vanilla
¾ cup evaporated milk
Pinch of salt
3 tablespoons butter
M AT E R I A L S
Candy Thermometer P R E PA R AT I O N
Mix all ingredients in a 4-quart saucepan. Cook over medium heat, stirring constantly. Mixture will bubble and foam as it cooks; use a long-handled spoon to protect your hand. Keep stirring until the caramel reaches 250°F on a candy thermometer. Carefully pour into a well-buttered square pan. Let cool. Cut caramels into 1-inch pieces and wrap in wax paper.
This recipe may also be used for caramel apples.
Farm Credit West Appraisers: A Wealth of Expertise By Heather Ellingson, Sr. Appraiser, Yuba City, CA and Aaron Herrema, Sr. Appraiser, Tulare, CA
EVERY FARMER, BUSINESS OR HOMEOWNER
who has secured a loan for real estate has had firsthand experience with an appraisal. When evaluating a property, appraisers are tasked with determining the status of water rights, deed restrictions, legal access, potential environmental complications, allowed legal uses, permitting requirements and so much more. Appraisals provide in-depth market data and serve as a risk management tool that can help you protect your investment. However, for as often as appraisals are needed, little seems to be known about the profession and the extensive training and expertise these professionals bring to the table. Appraisers are often asked what, exactly, they do. How is an appraiser different from a tax assessor? A surveyor? A real estate agent? Is “appraisal” a major in college? How does one stumble into this elusive profession? The answers are simple, but the process is the opposite. In California and Arizona, there are four levels of appraisal licensing: Trainee, Licensed Residential, Certified Residential and Certified General. The various levels are not stepping stones to one another—a person may apply for any license or certification depending on what they want to do. A Trainee License is for someone working under a supervising appraiser who signs their reports. A Licensed Residential Appraiser can appraise all non-complex 1-4 unit residential units with a value under $1,000,000. A Certified Residential Appraiser can appraise non-complex 1-4 unit residential units with no value limit. A Certified General Appraiser, which currently describes every appraiser at Farm Credit West, can appraise any real property, as long as they are knowledgeable to do so. The path to becoming a Certified General Appraiser is somewhat arduous; however, it is necessary to develop competent, unbiased, critically thinking appraisers. To start, an aspiring appraiser must have a bachelor’s degree in any discipline. Then, the candidate must complete 3,000 hours of appraisal specific experience working alongside a licensed Certified General Appraiser, followed by 300 hours of appraisal
specific coursework (typically ten 30-hour classes each culminating in an exam). Once these steps are accomplished, the candidate completes an application process that involves submitting work samples to the state regulatory agency for review. Finally, the most difficult step of all, a candidate must pass an eight-hour, two-part examination. However, an appraiser’s education does not end when they pass the exam. Once certified, an appraiser must reapply for a license renewal every two and four years. The two-year renewal, referred to as a “USPAP renewal”, is in place to ensure that every appraiser is up-to-date and familiar with the current standards of practice. The four-year renewal requires the appraiser to provide evidence of 56 hours of appraisal specific education. Some appraisers choose to increase their level of expertise and education by gaining a “designation,” which means that the appraiser has become a member of an association and proven their expertise in the appraisal field. Some common appraisal associations and designation titles are: the American Society of Farm Managers and Rural Appraisers (ARA), The Appraisal Institute (MAI) and the American Society of Appraisers (ASA). Farm Credit West encourages its appraisers to achieve a designation, with nine staff appraisers having earned theirs. Rest assured, when you are working with Farm Credit West you are in good hands. Every appraiser at Farm Credit West has shown they have what it takes to be a certified appraiser.
Aaron Herrema is a Senior Appraiser based out of Farm Credit West’s Tulare branch. Aaron has been employed with Farm Credit West for six years. He can be reached at aaron.herrema@FarmCreditWest.com Heather Ellingson is a Senior Appraiser based out of Farm Credit West’s Yuba City branch. Heather has been employed with Farm Credit West for almost three years and has worked in the appraisal industry for seven years. She can be reached at email@example.com
At left: Fresno State Ag One Foundation and Farm Credit West staff posing with the Borba family and their birdhouse won at the Ag One Foundation auction this fall.
Birdhouse Donations Raise Over $12,000 for Student Programs and Scholarships
ormer Farm Credit West employee of 35 years and Hanford branch staff member David Hill passed away this July. Prior to his passing, David made two birdhouses for local charity event auctions, the Riverdale Spring Festival Fundraiser and Ag One Fundraiser for Fresno State. This fall, one of David’s birdhouses raised $6,000 and will go toward a scholarship fund
that Riverdale High School is starting in his honor. At the Ag One Foundation Fundraiser, David’s second birdhouse also raised $6,000 in addition to a donation by Farm Credit West and will benefit students and programs of Fresno State’s College of Agriculture. David will be missed and remembered fondly by all who knew him.
All Hands on Deck at the Yolo County Fair FFA Livestock Auction For over 25 years, Woodland Farm Credit West branch staff have supported the Yolo County Fair FFA Livestock Auction with an “all hands on deck” attitude. The annual livestock auction is sponsored by the Woodland Rotary and underwritten by Farm Credit West. Farm Credit West staff carry out the actual auction, bill the buyers for the animals sold, collect the proceeds from the buyers and provide short-term loans to allow kids to be paid while the sale proceeds are collected from the buyers. Chuck Moore, Farm Credit West’s Sr. VP Portfolio Manager in Woodland, serves as Chairman of the of Rotary FFA Livestock Auction Committee and provides leadership to the auction year-round. The 2019 Auction held in August was another success for the books — 180 animals were sold, raising over $305,000 for the youth participants.
Farm Credit West Woodland Branch staff Nicole Swanson and Stephanie Borba volunteering at the 2019 Yolo County Fair FFA Livestock Auction held in August.
Agricultural Heritage Club Honors Pioneers in Business Over 100 Years The California Agricultural Heritage Club, established in 1948, recognizes the perseverance of the agriculture industry and the pioneers who made it possible. The mission of the club is to honor families, businesses and special interests that have worked in California agriculture for over 100 years. Farm Credit West was honored to serve as a sponsor for this year’s induction ceremony and breakfast held in July during the California State Fair. Longtime Farm Credit West member Thornhill Companies was inducted this year and recognized for over 125 years of continuous operation. Established on California’s Central Coast in 1871, the Miller Family’s Thornhill operations have grown and thrived for five generations. Today, they farm wine grapes, lemons, avocados, blueberries and strawberries. The Miller Family Wine Company owns acclaimed national wine brands including J. Wilkes, Ballard Lane, Barrel Burner and Smashberry. Thornhill Companies joins an esteemed group of agricultural pioneers, including 15 other Farm Credit West customers inducted between 1981 and 2018 that have served the industry for over 100 years and will continue serving for years to come.
Pictured receiving the award are Marshall Miller, his wife, Amy, and their children, Elenora and Ernest, along with California Department of Food and Agriculture Undersecretary, Jenny Moffitt, and California State Fair Board of Directors Rina DiMare (chair) and Rex Hime. Not pictured are Marshall’s brother, Nicholas Miller, who is a member of Farm Credit West’s Local Advisory Committee, and their father, Stephen Miller.
Yuba and Sutter Community Cleanup This July Farm Credit West’s Yuba City branch partnered with SayLove, a local nonprofit organization supporting the Yuba-Sutter community, to sponsor a community-wide cleanup event. Local volunteers and Farm Credit West staff spent a Saturday cleaning up trash illegally dumped throughout Sutter and Yuba counties. Following the cleanup, Farm Credit West hosted lunch for the event volunteers at the Yuba City office.
Another Great Year for the West Coast Junior Rodeo Association The West Coast Junior Rodeo Association (WCJRA) held its last rodeo event of the year in Parkfield, California on September 7th and 8th. The Parkfield Rodeo is one of the year’s highlights for youth participants who spend the weekend camping with their families while participating in fun rodeo activities with friends. The event culminates on Sunday with a year-end awards celebration. Thanks to sponsors like Farm Credit West, the WCJRA can provide fun and fair rodeo competitions for young people throughout the year. By participating in several rodeo events during the year, youth develop good sportsmanship skills, learn how to care for their animals, build new friendships and learn responsibility. Above: Junior Rodeo participants McKinley Twisselman and Emmit Bourdet enjoying the last rodeo event of the year.
Farm Credit West staff joined local volunteers for a cleanup event benefiting Yuba and Sutter counties.
Changes in the
Global Interest Rate Market:
P HA S ING OUT LIBOR
A discussion of the global rate index, its transition and what it means to Farm Credit West customers By Kevin Spangler, Sr. VP Treasurer, and Pete Huffine, Regional VP Capital Management
About Farm Credit West Rates
Farm Credit West offers attractive variable rate options to customers in two primary ways. The first and most common offering is our administered variable rate, which is managed by Farm Credit West and based on our cost of funds. The second, and less frequently used rate option, is a variable rate indexed to The London Interbank Offered Rate (LIBOR).
Due to a lack of confidence and transparency in the index, LIBOR is being phased out at the end of 2021. This change in public opinion is primarily the result of a scandal in 2012 involving manipulation of the index by the global banks who set the rate. More recently, the amount of daily LIBOR trading volume between banks has decreased significantly, forcing banks to frequently estimate their borrowing costs with each other.
LIBOR is a benchmark interest rate and represents the rate that banks pay to borrow from each other. Globally, it underpins approximately $350 trillion of transactions and is currently the market standard for indexing variable rate loans. It is used to determine the cost of borrowing for everything from home mortgages to bank institutional financing.
Banks and Farm Credit Institutions have much to consider as the industry transitions away from LIBOR as a key reference rate. Finding an index that is secure and accurately reflects our borrowing costs is the primary objective.
Has a Replacement Been Identified?
How Will This Impact Me?
In 2014, the U.S. Federal Reserve formed the Alternative Reference Rate Committee comprised of banks, asset managers, insurers, industry trade organizations and regulatory officials. The committee’s primary objective is to establish an index that accurately reflects banks’ borrowing costs. As a result of their work, the Secured Overnight Financing Rate (SOFR) was developed as a potential replacement for LIBOR. SOFR is based on overnight repurchase transactions where investors offer banks overnight loans and hold U.S. Treasuries as collateral. The transactions are intended to represent a “risk free” or low risk cost of borrowing. While SOFR has been published daily by the Federal Reserve Bank of New York since April 3, 2018, it is still relatively new and is currently only an overnight rate that changes daily. Longer-term borrowing on SOFR, such as for 30, 60 or 90 days, has not been developed yet.
Understanding the need to provide a stable and reliable source of credit to the agriculture industry, Farm Credit West has developed a transition plan to address this change including modifying internal processes and systems in addition to developing new product offerings. LIBOR-indexed borrowing has been the primary funding source for the Association due to its lower cost, availability and flexibility. Recently, as LIBOR phases out, there has been more volatility in the cost and less availability to fund the Association on this index. As a result, Farm Credit West has begun to diversify its funding with alternative indexes that can meet our customers’ diverse needs. Customers using our administered variable rate will not see a significant impact as the result of the phaseout. For customers currently using the LIBOR variable rate, Farm Credit West will continue to communicate and identify a successor rate index that will meet the needs of our borrowers, with the goal of smoothing the transition and reducing volatility in the rate index.
Questions? Farm Credit West is committed to providing our customers with a consistent and reliable source of credit for all their agricultural financing needs. We will continue to monitor unfolding developments related to the LIBOR phaseout and provide updates to customers. For customers that would like to know more about their rate alternatives — and the transition plan from LIBOR — our loan officers are standing by and ready to help.
2019 – 2020 HOLIDAY SCHEDULE (Farm Credit West offices are closed)
Christmas Day 2019
New Year’s Day
Christmas Day 2020
Martin Luther King Jr. Day
WEDNESDAY, DECEMBER 25, 2019 WEDNESDAY, JANUARY 1, 2020 MONDAY, JANUARY 20, 2020
MONDAY, FEBRUARY 17, 2020
MONDAY, MAY 25, 2020 MONDAY, SEPTEMBER 7, 2020
THURSDAY, NOVEMBER 26, 2020 FRIDAY, DECEMBER 25, 2020
MONDAY, OCTOBER 12, 2020 WEDNESDAY, NOVEMBER 11, 2020
D R . KO H L’ S C O R N E R
Side-By-Side Customer-Lender Relationship By Dr. David M. Kohl
A new decade in agriculture is upon us with many challenges, but also opportunities. The future of agriculture, agribusiness and agricultural lending will require a side-by-side relationship as one navigates through the economic white waters.
his decade will see more change than the previous 70 years of agriculture. Technology, consumer changes and the evolution of better managers with high business IQs will be the fulcrum propelling profits, cash flow and business success. The future will be very data-driven, from production to finance and business efficiency metrics. The next 10 years will be knowledge-based as information and education will be the differential edge. Next, the decade will be described as one that is people-driven. The producer of the future will be interdependent rather than independent, working through a network of individuals enhancing business and life. An advisory team that includes individuals such as a lender, crop or livestock consultant, and other specialists will be analogous to assistant coaches providing insight from the sidelines or the skyboxes. Finally, the reality is that the next decade will be described as economically volatile. The proactive managers will be able to capitalize on volatility, seeing it as an opportunity. Reactive managers will be challenged, lacking the proper data points and metrics to make objective versus emotional decisions.
Financial Statements: A Communication Tool Vital financial statements such as the cash flow statement, income statement and balance sheet can be the starting point for lenders and producers to have crucial conversations to generate ideas and periodically assess financial wellbeing. A projected cash flow with key price, cost and production assumptions along with interest rate sensitivity can provide both producers and lenders the “guardrails” of the financial road. Meeting monthly or quarterly with your lender or advisory team to review variance analysis reports that compare projected versus actual results can provide a mechanism for business strategy adjustments as game conditions change. These meetings can result in deeper customer-lender relationships. Once a year “drive-by” financials for tax reasons is not sufficient for agricultural producers, particularly for young producers and larger businesses with more zeros and commas on the financial statements. Close monitoring of the financial statements while attempting to become five percent better in a few areas can provide a competitive edge.
It Is More Than Interest Rates!
As a practicing businessperson myself, one of the best practices in working sideby-side with our lender has been the development of a financial dashboard of key ratios and metrics.
Old-timers used to discuss the cheapest interest rates at the local coffee shop or feed store. In challenging times, though, the discussion becomes less about interest rates and more about the attributes lenders can provide. More lenders and agribusinesses are providing young farmer and rancher education programs. The topics at these events vary but commonly include leadership, financial education, personal finance, human resources, marketing and many other areas of interest. These programs require commitment and engagement by the producers for an optimal outcome.
Our agricultural lender has provided a value-added service by assisting in conducting a year-over-year analysis of key ratios. However, a major benefit has been to benchmark our business with our peers. Financial metrics on the dashboard include working capital to expenses ratio, debt to asset ratio, operating margin ratio, rate of return on assets, and the term debt and lease coverage ratio. After 18 years in business, it is amazing to observe how the ratios in our business and our peersâ€™ ratios have changed over the years.
Often lenders take the time to learn about the industry and business with which they are working. In many cases, agricultural lenders provide their customers high-tech
Dr. David Kohl energizes agricultural lenders, producers and business professionals with his keen insight into the agricultural industry through extensive travel, research and networking around the globe. He is a Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship at Virginia Tech, Blacksburg, Virginia.
tools to access information. However, these same lenders, when meeting faceto-face, shut off the technology and are in the moment listening to provide a customized solution. An agricultural lender recently sized up the future very succinctly. She indicated that many young producers were actually doing better financially and emotionally than many of the established farmers. When asked, she elaborated on the secret sauce. Regardless of age, these successful producers were adaptive, innovative and exhibited a high business IQ. She said it was very rewarding to work with these individuals as they grow their business, family and personal lives. This is what a side-by-side relationship is all about!
Dr. Kohl has traveled over 9 million miles in his career and conducted over 6,000 workshops and seminars for a variety of agricultural audiences. Additionally, Dr. Kohlâ€™s personal involvement with agriculture provides a unique perspective into the future trends of the agricultural industry and economy.
Understanding Crop Insurance By Sureena Thiara
Agriculture is a rewarding yet challenging industry and farmers need many tools in their tool belts to weather the ups and downs. Crop insurance is one risk management tool that provides farmers a way to protect themselves financially when their crop experiences a loss.
PRIVATE PRODUCTS VS. FEDERAL CROP INSURANCE
Crop insurance policies vary depending on the crop and where it is grown. The most common policy is based on a crop’s production — in the event there is a reduction in yield, insurance covers the loss. However, there are certain crops, like cherries, that are covered instead based on their annual revenue, so if the market price is low, insurance covers the revenue loss. Policies may change year to year, so it’s important to always be aware of the options available.
THE APPLICATION PROCESS
Many types of policies are available to farmers but not all of them provide the best protection at the best price, which makes understanding crop insurance a challenge. However, a farmer’s business can benefit greatly when they are able to navigate the ins and outs of crop insurance policies and claims processes.
Insurance policies include both private and federal products. Federal products are government overseen and funded, while private products are funded by an insurance provider and overseen by individual state insurance departments. MultiPeril Crop Insurance (MPCI) is an example of a frequently used federal product that protects against multiple kinds of natural disasters, like rain, freeze and heat. Private products cover more specific losses and are used to fill any gaps in federal crop insurance. Most crops can only be covered by one policy.
To apply for crop insurance, a grower will provide their agent with general business information and four years of production history. The applicant and agent will select a level of coverage that best fits the grower’s needs. The Risk Management Agency (RMA) is the governing body for federal crop insurance and every year releases a list detailing all the options and prices of crop insurance offered to growers. The agent should be aware of all options available to provide their insureds the best-fitting plan. Once an application is accepted, an agent enters the grower’s four-year production history into an online calculator and a yield average ratio calculates the rate for a grower’s insurance
guarantee and per acre cost to have the insurance. A guarantee is the lowest yield amount, per acre, that a crop falls to before it qualifies for insurance coverage. If a grower doesn’t have enough production history, agents are able to get the yield average ratio from the RMA or from one year of production history. Additionally, every year the RMA sets a loss ratio for the location where a specific crop is grown by looking at other fields in the nearby area and determining what their loss is based on past records. Both the yield average and loss ratio help determine the guaranteed amount for each grower. The guaranteed price on the insurance policy is only based on what it costs a grower to grow the crop and does not include the additional costs to bring a crop to market, like harvesting, hauling or processing. This is why the market price is higher than the insurance price a grower will receive after a loss. Crop insurance is intended to help cover a grower’s bills and make it to the next season. THE CLAIMS PROCESS When a loss occurs, a grower can file a claim with their agent after the sales closing date up until harvest. Once a claim is filed, a crop insurance adjuster will appraise the crop that has reported damage to estimate how much loss occurred. During the appraisal process an adjuster will determine the damage and may submit the claim depending on whether the claim is above the guaranteed amount. Regardless of whether a grower plans to harvest, it is important to ensure the crop isn’t touched before an adjuster comes out to appraise it. For fields where a grower still plans to harvest but believes their production will be below their guarantee, the adjuster will appraise the crop but will require production records after harvest to determine the actual loss. Depending on the crop grown and policy type, an adjuster may request additional records, such as production records,
to complete the claim. Claims can be submitted for review once all appraisals and paperwork are complete. Filing a claim one year doesn’t impact a grower’s insurance premium for the next year. Growers are encouraged to harvest their crops regardless of perceived loss because market prices are almost always more economically advantageous to the grower. With production yields subject to the whims of Mother Nature, crop insurance mitigates the negative yield outcomes due to bad weather events. A GREAT RISK MANAGEMENT TOOL Producers farm hundreds of commodities every year, but not all of them are insurable and not all insurable commodities have the same protections available to them. In addition to MPCI, there are other policies available, including: Apiculture Pilot Insurance (API), Pasture, Rangeland, and Forage (PRF), and Rain on Tomatoes. Any questions a grower has about their policy or insuring a crop should be directed to their insurance agent. Crop insurance is a great risk management tool for all operations to have in their toolbox. It creates peace of mind for growers, helps protect their operation and helps ensure they can continue farming for years to come despite a loss.
Sureena Thiara Sureena Thiara is a crop insurance agent and partner at Far Horizon Insurance with over 21 years of experience. As a grower herself, Sureena understands the dynamics of the agriculture industry. Her farming operation consists of prunes, walnuts, peaches, almonds, fresh market persimmons, a prune dehydration facility and walnut huller.
Crop insurance is intended to help cover a grower’s bills and make it to the next season.
C A N D I D C O N V E R S AT I O N S
Safeguarding Your Funds How We Manage Risk and Mitigate the Potential for Fraud By Camrion Davis
It’s been one of those mornings. You’re rushing around, gathering up your things from around the house, moving as quickly as possible to avoid being late. You jump into your truck, put your foot on the brake and press the start button. Just as you shift into drive, it happens — the check engine light comes on. With a groan, you pull out of your driveway, knowing that with that tiny light appearing, you’ve now lost an hour or two out of your already jam-packed day.
Maintaining your vehicle is one of those responsibilities you simply cannot ignore. Although it’s time consuming, expensive and can be a nuisance, the consequences for ignoring the warning light can be serious. Managing risk internally at Farm Credit West is not all that different. Farm Credit West takes risk management very seriously and implements internal controls to ensure transactions are recorded accurately and with proper authorization so your money remains protected. Internal controls are procedures Farm Credit West has in place to provide reasonable assurance on the integrity of financial information while promoting accountability and working to prevent fraud. Appropriate control design is critical when determining where a control should exist, where it would be most effective and that the control is performed consistently. Prior to implementing a control, Farm Credit West identifies where there are risks, such as data transferring from one system to another, and that appropriate authorizations are received before disbursing funds on an account. For each risk identified, Farm Credit West requires a review to be in place to check for accuracy, among other things.
INTERNAL CONTROLS /ɪnˈtɜrn(ə)l/ /kənˈtroʊl/
Procedures Farm Credit West has in place to provide reasonable assurance on the integrity of financial reporting information while promoting accountability and preventing fraud.
Formal approval, via phone, in writing or secured email, for Farm Credit West to transact on behalf of a borrower or a borrower’s delegate.
Farm Credit West implements three different types of Internal Controls: Detective, Preventative, and Corrective. DETECTIVE CONTROLS are designed
to identify discrepancies after they have occurred, acting as part of a checks and balances system such as identifying inconsistencies in money transfer requests.
REVENTATIVE CONTROLS are in place P to avoid errors and discrepancies from happening in the first place. These controls occur daily and include activities such as employees properly securing all physical paperwork and information that could compromise you and your operation. CORRECTIVE CONTROLS correct an error when identified, such as training programs educating employees on how to prevent similar errors from occurring again in the future.
Camrion Davis is a junior at Claremont McKenna College, majoring in economics with a minor in legal studies. Camrion is the captain for the CMS varsity football team. Prior to working as an intern at Farm Credit West, Camrion was a member of the Del Oro FFA Chapter and worked at the
Segregation of duties is one of the major controls that Farm Credit West implements to ensure the safety of financial information. No single employee can complete every process of a loan action. For example, lending staff determine loan approvals, but only accounting staff can disburse funds. Just like maintaining your car, some controls can — at times — be an inconvenience. However, it takes just one phone call to you from Farm Credit West accounting staff to confirm a wire transfer that you did not authorize to understand and appreciate the necessity of controls. In this case, calling to confirm whether you authorized the wire transfer before Farm Credit West sent the wire protected you and your money from falling victim to a fraudulent situation. Controls like these are put in place to protect both you and the Association. As a member-owned association, we will always ensure that every security measure necessary is taken to protect you, your data and your money all while providing superior customer service.
Bureau of Water Reclamation as an Economics Summer Analyst. While at Farm Credit West, Camrion had the opportunity to work with the Credit, Risk Management and Marketing departments. Camrion hopes to pursue a career in finance following the completion of his undergraduate degree.
T E C H WAT C H
Are You Prepared for Identity Theft? By Michael Levin, CEO/Founder of the Center for Information Security Awareness | cfisa.com
Let’s face it — we are all stuck with the probability that information about our identity has already been stolen and is sitting on the “dark web” or on some hacker’s hard drive. We see in the news almost weekly that there has been another breach of customer data somewhere. Most Americans have no idea what to do about identity theft, but we must have a plan to protect ourselves.
Seven basic tips to protect yourself from identity theft: 1 Monitor your financial accounts including credit cards
and bank accounts. Start with turning on notifications on your financial accounts. Make sure you are receiving immediate text and email notifications for any changes in your account or increased balances or transactions. This will help you to respond immediately if you are being victimized so you can notify the bank and stop the crime.
2 Turn on two-factor authentication (2FA) for all accounts.
Two-factor authentication adds a second level of authentication to an account login that goes beyond the initial username and password. Turn on 2FA for all your financial accounts.
3 Phishing email messages are your biggest daily risk.
Slow down when handling email messages. Stop automatically clicking on every email link and attachment you get. Instead of clicking on links and attachments in email messages, go independently to the website outside of the email message. When you receive an email that you were not expecting from a name you recognize, consider contacting the sender independently before you click on any links or attachments.
Michael Levin is a nationally known cyber security professional who spent over 22 years in the U.S. Secret Service protecting presidents and heads of state. Michael retired from the U.S. Department of Homeland Security — as the Deputy Director of the National Cyber Security Division in Washington, D.C. He enjoyed a distinguished 30-year career in public service and law enforcement.
4 Strong passwords — consider changing all your
passwords. Develop strong passwords and protect them. Use different passwords for your accounts.
5 Shred personal documents. Thieves can easily find your
personal information in the trash. Be sure to shred all financial documents and non-junk mail before throwing them away. If you don’t have a shredder, many office supply stores offer shredding services for a small fee. Check with your local police department and see if they offer a free shredding service.
6 Limit online sharing. The more information you put out
online, the easier it is for criminals to figure out the answers to your security questions, confirm your identity and guess your passwords. Try not to share your address, birthdate, phone number or other specifics on social media sites.
7 Lock or freeze your credit, or consider subscribing to
a credit monitoring service. The quickest way to be notified that your credit is compromised is through a credit monitoring service. A credit freeze or credit lock are two additional protections that block access to your credit report, preventing hackers from using your credit report to open a new account in your name. Locking or freezing your credit is a great option for everyone so you can sleep at night.
Understanding the ongoing identity theft risk is a great first step to protect you and those you care about from being victimized. By consistently following these tips you can reduce your risk. Don’t wait until you are a victim. Get proactive today and take action to protect your identity.
CFISA has been providing online and in-person security awareness training since 2007. CFISA security awareness training stresses the importance of educating employees to help reduce company risk and protect against these types of crimes.
Territory and Office Locations Yuba City Woodland
Farm Credit West Administrative Office
Tulare Paso Robles Templeton Kern County Santa Maria Ventura
Tempe Imperial Valley
ADMINISTRATIVE OFFICE 3755 Atherton Road Rocklin, CA 95765 916.780.1166
Rural Arizona/ Safford
PASO ROBLES 1446 Spring Street Suite 201 Paso Robles, CA 93446 805.237.0998
KERN COUNTY 19628 Industry Parkway Drive Bakersfield, CA 93308 661.399.7360
DINUBA 940 W. El Monte Way Dinuba, CA 93618 559.591.9378
RURAL ARIZONA / SAFFORD 1120 S. 20th Avenue Safford, AZ 85546 928.348.9571
TEMPLETON 175 Cow Meadow Place Paso Robles, CA 93446 805.434.3665
WOODLAND 440 Pioneer Avenue Woodland, CA 95776 530.666.3333
HANFORD 1111 W. Lacey Boulevard Hanford, CA 93230 559.584.2681
SANTA MARIA 1178 Tama Lane Santa Maria, CA 93455 805.922.7991
TULARE 200 E. Cartmill Avenue Tulare, CA 93274 559.684.1478
YUBA CITY 1800 Lassen Boulevard Yuba City, CA 95993 530.671.1420
IMPERIAL VALLEY 485 Business Park Way Imperial, CA 92251 760.355.0291
TEMPE 3003 S. Fair Lane Tempe, AZ 85282 602.431.4100
VENTURA 2031 Knoll Drive Ventura, CA 93003 805.477.1020
YUMA 2490 S. 5th Avenue Yuma, AZ 85364 928.344.3200
3755 Atherton Road Rocklin, CA 95765
Happy Holidays Wishing you peace, joy and prosperity. We sincerely thank you for your trusted partnership and look forward to serving you in the new year.