spotlight FALL 2020
Making Good on
Farm Credit West Supports Customers During a Pandemic PAGE 6
Four Key Tax Considerations for Tree Nut Growers PAG E 10
Appraising a Property PAG E 14
3 President’s Message
4 Financial Highlights
5 Board Update: 2020 Director and
6 Feature Story: Making Good on Our Promise
8 Community Center
Nominating Committee Election Results
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.
10 Guest Article: Four Key Tax Considerations
11 Staff Favorite Recipe:
12 2020 Scholarship Recipients
13 Staff Favorite Recipe:
14 Candid Conversations: Appraising a Property
Mark A. Cook. . . . . . . . . . . . . . . . . . . . . . Willcox, AZ
16 Customer Announcements: Changes at
Catherine Fanucchi . . . . . . . . . . . . Bakersfield, CA
for Tree Nut Growers
Chocolate Avocado Ice Cream
Kristen Tucker's Carmelitas
Farm Credit West Offices | 2020 Holiday Calendar | New Online Banking Platform
17 Dr Kohl's Corner:
Five C's of Operating a Business
18 Tech Watch: Password Security
and Password Management Tools
19 Territory and Office Locations
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 Robert Amarel, Jr. . . . . . . . . . . . . . . . Yuba City, CA Teresa Castanias. . . . . . . . . . . . . . . . . . . . Dixon, 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 email@example.com.
PRESIDENT’S MESSAGE Mark Littlefield, CEO
Standing by Our Customers During Challenging Times You have heard it said before: we are living in unprecedented times. Since the appearance and subsequent spread of COVID-19 in the U.S. earlier this year, restaurants, schools, businesses, facilities and other entities closed nationwide, putting inordinate strain on agriculture-related businesses. Regardless of dozens of economic models published by industry leaders at the beginning of the year predicting strong markets for ag products, many of you now find your businesses in situations vastly different than anticipated with no clear end in sight. Through it all, the fears and risks associated with COVID-19 infections weigh heavy on all of us. Challenging times call for innovative responses, and Farm Credit West has risen to the occasion. The moment it became clear we were in a global pandemic, this institution’s Board of Directors and management team sprang into action to mitigate the harmful economic impacts of the coronavirus and help customer-owners navigate these murky times. For the first time in our association’s history, the Board of Directors approved a mid-year patronage payment, paying a portion of this year’s cash dividends to customers six months ahead of what was anticipated. Our association also distributed $120,000 in cash grants to 30 food banks located throughout our chartered service area. In the early stages of the closures, Farm Credit West staff worked around the clock to provide customer-owners with financing options that would bolster operations during these difficult times. At the first sign of difficulty we introduced the COVID-19 Credit Relief Program, providing six distinct opportunities to assist members experiencing financial hardship as a result of the pandemic and corresponding
closures. Our staff worked tirelessly to provide access to SBA’s Payroll Protection Plan, immediately establishing a relationship with Kabbage.com, which provided opportunity for customers to apply while simultaneously seeking and gaining approval from SBA for Farm Credit West to be an approved lender. Besides work on these big initiatives, our association is continuing to enhance our offerings for customers on the servicing side. Our organization is examining all products — both digital interactions with our customers and our internal processes — to identify ways in which we can improve your experience. Of particular note is our use of DocuSign to obtain electronic signatures, which has grown exponentially since the shutdowns began last April. All of our efforts are directed at providing you with timely and important information while engaging with you on an easy-to-access platform. Of course, on a practical level, Farm Credit West has implemented many new policies and procedures to help keep our customers and staff healthy and safe. This includes social distancing and wearing face masks during all interpersonal communication and directing staff to work from home whenever possible. While the office remains open daily from 10am – 3pm, you can reach any of our staff during regular business hours by phone or email from 8am – 5pm daily. These are indeed difficult times, and with a history of standing by our customers, Farm Credit West’s commitment to that promise is as strong as ever. We look forward to working with each and every one of our members to lessen the impacts of this global pandemic. Please take a look at our cover story for more details on the programs we’re offering, and please stay healthy and safe.
Financial Highlights Farm Credit West reported net income of $151 million for the first six months of 2020. These year-to-date earnings are ahead of our business plan target for the second quarter. Also, during the first six months of 2020 our average earning assets and capital levels increased while we also strengthened our allowance for loan losses.
AVERAGE EARNING ASSETS* (in millions)
MEMBERS’ EQUITY AS A % OF TOTAL ASSETS
Average earning assets increased $491 million, or 4.9%, during the first six months of the year. Farm Credit West is experiencing strong levels of loan growth in 2020; loan growth is expected to continue through the remainder of the year. At the end of the second quarter, average earning assets exceeded the second-quarter business plan target.
NONEARNING ASSETS (in millions)
In the first six months of 2020, total members’ equity increased $104 million, primarily due to net income of $151 million and an increase in preferred stock of $10 million. Partially offsetting these increases was a mid-year patronage declaration of $55 million and preferred stock dividends of $2.5 million.
Our allowance for loan losses totaled $77.6 million (0.71% of loan principal and interest) at June 30, 2020, compared with 0.68% of loan principal and interest at December 31, 2019. 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.
ALLOWANCE FOR LOAN LOSSES AS A % OF LOANS
Nonearning assets (nonaccrual loans plus other property owned) decreased by $15.8 million, or 12.5%, from December 31, 2019, to $110.6 million at June 30, 2020. The decrease was primarily a result of $29.5 million in net repayments and $2.8 million in charge-offs during the first half of 2020 on nonaccrual loans. These decreases were partially offset by transfers to nonaccrual of $16.5 million. The other property owned balance remained unchanged during the first half of 2020.
B O A R D U P D AT E
2020 Director and Nominating Committee
Election Results Board of Directors Congratulations to Mark Cook, Catherine Fanucchi and Douglas Filipponi, who were recently elected to serve on the Farm Credit West Board of Directors. Farm Credit West Board members are the governing voice of the Association, acting to represent the best interests of the Association’s shareholders. Mark Cook
Mark has been reelected to the Farm Credit West Board. He is a managing member of North Bowie Farming and is involved in the production of pecans, pistachios and alfalfa in the Cochise County area in Southeast Arizona.
Catherine has been reelected to the Farm Credit West Board. Her family has a third-generation farming operation and is involved in the production of cotton, carrots, wine grapes, wheat, onions, tomatoes and almonds in the Southern San Joaquin Valley.
Douglas has been reelected to the Farm Credit West Board. He is president of Filipponi-Thompson Drilling and is involved in drilling water wells. He also serves as managing partner of Margarita Vineyards, LLC and is a member of Valor Wine Company, LLC in the San Luis Obispo County area.
Thank you to those who participated in the election process. You play an important role in Farm Credit West’s success. We would like to convey our most sincere appreciation to those who agreed to serve as Board of Director candidates, Nominating Committee members, Nominating Committee candidates and to all those stockholders who cast their ballots.
Nominating Committee Mike Blohm Michael Dias Kim Grizzle Jonathan Lavy Matt Mariani Nicholas Miller Louis Pandol Craig Reade
Alternates for Nominating Committee George Adam Dan Boschma Paul Greidanus Julien Parsons William Plourd James Reamer, Sr. William Terry Shane Tucker
Seeking Qualified Candidates Directors serve on the boards of Farm Credit West, ACA and each of its subsidiaries. If you are interested in running for a board seat in the 2021 Farm Credit West director election, we would like to hear from you. The following regions will have one director seat available: Sacramento Valley | Southern San Joaquin | Southwest
If you are interested, please contact Chris Brumfield at 916.780.1166 no later than October 28, 2020.
F E AT U R E S T O RY
Making Good on Our Promise Farm Credit West Supports Customers During a Pandemic By Sarah Kearbey
The year is not yet over, but already 2020 has been one for the history books. Shortly after the start of the new year, Americans began hearing of a novel coronavirus making its way across the globe, taking lives and overwhelming hospitals in countries like China and Italy. In February, case counts in New York City began to rise, and the West Coast watched our eastern countrymen struggle to contain COVID-19, with its frightening virility, varied symptoms and unpredictable outcomes. By mid-March, with the virus spreading across the continental U.S., most states had closed their schools, restaurants and businesses and issued shelter-in-place orders, bringing to a halt life as we knew it. Overnight, it seemed, we were in the midst of a global pandemic. While the impact was enormous to families adjusting to working and schooling from home, while distancing from their communities and struggling to acquire common goods, the effect on family farms and producers was unprecedented (and most were dealing with both aspects). Without schools, restaurants, businesses and others in the order chain, demand for agricultural products in many commodity markets dipped drastically, and across regions. Within a matter of weeks, innumerable producers in Farm Credit West’s service area were faced with challenges they had never experienced before. As a cooperative lending institution dedicated to the success of its customer-owners, Farm Credit West took immediate and significant action to mitigate these impacts. Recognizing the need for liquidity, in April Farm Credit West implemented several credit relief efforts aimed at quick and easy loan renewal options and temporary payment relief. For borrowers meeting certain criteria, loans were autorenewed for up to one year with minimal effort and paperwork.
For those needing help with upcoming loan payments, Farm Credit West launched the COVID-19 Credit Relief Program to defer and/or re-amortize mortgage and term loan payments for up to a year. These efforts enabled borrowers to focus their energy on keeping their businesses afloat and transition their operations to better succeed in an ever-changing environment. Mark Brawley, Senior Vice President for Credit and Branch Manager in Safford, Arizona, said the program and its options were a huge relief to customers in need. “Our area has a lot of cow-calf producers,” he said. “With the backup in the harvesting plants for livestock, the markets virtually shut down for a while, making it difficult for producers to market their animals. Being able to delay their payments (with no late fees) until they could sell their animals was incredibly important to our customers.” Back at headquarters, Farm Credit West executives and staff worked around the clock to provide its customer-owners access to another important program: the federal Paycheck Protection Plan (PPP). Offered through the Small Business Administration (SBA), the PPP is a forgivable loan aimed at helping business owners keep their employees on payroll.
Recognizing the need for immediate liquidity, Farm Credit West implemented several credit relief efforts aimed at quick and easy loan renewal options and temporary payment relief.
This is the kind of action that sets us apart from commercial or community banks.” LAUREN EVANGELO | VICE PRESIDENT OF CREDIT, HANFORD OFFICE
While Farm Credit West staff worked diligently to complete the process of becoming an approved SBA lender, the Association also partnered with a financial-technology provider, Kabbage, to allow its customer-owners access to the funds before Farm Credit West could offer them. This tactic of working with a third party to fill the gap gave quick relief to customers with loans under $2 million, those most in need. Once SBA lending became a possibility, Farm Credit West built upon technology it had previously invested in to create a web-based portal for customers to input their data remotely. By the time the second round of PPP funding became available in late April, the Association’s online application process was not only fully operative but fine-tuned. As a result, 130 applications were successfully submitted the first day, and many more in the days after. “It was amazing to me how quickly we got things together,” said Lauren Evangelo, Vice President for Credit in the Hanford Office, who serves on Farm Credit West’s internal PPP Strike Team. “There were long hours, but customers were so happy when we called and told them they got a loan. It was a huge morale booster that we were able to help them.” She added that she and other Farm Credit West lenders earned new business as a result of being able to offer the PPP more successfully than other lending institutions, in some cases.
as the larger banks were doing it. But personal service is really the Farm Credit way,” she said. Finally, acknowledging borrower’s need for immediate cash during the crisis, in late June the Farm Credit West Board of Directors voted historically to distribute a mid-year patronage to qualifying borrowers. The dividend is a partial advanced payment of the 2020 end-of-year distribution and is a first in the patronage program’s 20-year history. “[Our customers] truly feel like we’re trying to partner with them,” Evangelo said. “There is a sense of appreciation among our customer base. It may not be enough to make or break someone, but the fact that we’re aware of the need, and able to meet it, has had a positive effect on our customers. This is the kind of action that sets us apart from commercial or community banks.” In the months ahead, the Farm Credit West PPP Strike Team is focused on helping customers navigate the PPP loan forgiveness process, while continuing to use technology to keep customers informed and process their loans quickly and remotely. With the financial tools, technology and ongoing commitment to its borrowers in place, Farm Credit West continues to respond to customer-owner needs and remains an active partner in their businesses — from the start of the pandemic to well beyond.
“We had a high success rate because we submitted them individually as opposed to in bots, or automated batches,
A HISTORIC GESTURE: Offering a Mid-Year Patronage When senior management brought the idea of a mid-year patronage to Farm Credit West’s Board of Directors in May, Board Chair Sureena Thiara knew right away it was something they wanted to do. “We thought it was a really great idea,” Thiara said. “Of course offering the PPP was important, but this was our own personal way of helping. Everybody is trying to hold on right now. This is in alignment with what we’ve always done — stick with our borrowers through thick and thin.” Unlike other forms of pandemic aid, the patronage — an advance payment of the traditional 2020 year-end distribution on qualified average
loan balances — went to all eligible customer-owners, across commodity groups, at a time when many were in harvest. “The message is: We’re going to do as much as we can,” Thiara said. “This wasn’t something anyone had to ask for, like a loan. It was unexpected and turned out to be a great help when folks needed it most.” For Thiara, the mid-year distribution, along with staff’s efforts to facilitate the federal PPP and the COVID-19 Credit Relief Program, reflect Farm Credit West’s unwavering dedication to its customer-owners success and longevity — even in the midst of a pandemic.
“We were thoroughly impressed with the way staff and senior management throughout the entire organization rallied,” she said. “The way we came out as an association to support growers in any way we could — whether through a conversation on the phone or working long hours to secure a loan — I’ve heard overwhelming feedback that the way things were handled was phenomenal. “It’s a proud moment for Farm Credit West.”
Farm Credit West Distributes $120,000 to Food Banks in California and Arizona IN APRIL, as the effects of the COVID-19 pandemic became widespread throughout the country and Farm Credit West lending territory, our association announced a $120,000 cash distribution to food banks throughout California and Arizona. Thirty food banks located in the communities where our staff and customers live and work received a $4,000 grant. Food banks struggled to keep up with the increased demand as a result of the food shortages and economic hardships that
occurred virtually overnight at the onset of the pandemic. Farm Credit West’s commitment to support communities who are the backbone of the Association remains unwavering, and we will continue to provide relief to these communities as needs arise. Above: Farm Credit West staff based out of the Rocklin Administrative office volunteer at the Placer County Food Bank in fall 2019.
Farm Credit and Dairy Industry Partners Help Expand Farm to Family Program Farm Credit partnered with Dairy Farmers of America (DFA) and Hilmar Cheese Company, Inc. to help distribute 37,000 pounds of cheese to families in need. The partnership was an effort to expand California’s Farm to Family Program, which is designed to help food banks meet the large demand caused by the coronavirus pandemic. Farm Credit’s role in the partnership is providing seed money directly to the California Association of Food Banks and will be leveraged to launch a $15 million campaign to support the Farm to Family program through the end of 2020. During the coronavirus pandemic, demand at food banks has increased by 70% while the demand of markets that farmers and ranchers sell in has dropped by 50%. The Farm to Family program is allowing farmers and ranchers to continue to produce, process and distribute their nutritious dairy products to the 41 participating food banks throughout the state of California. 8
Farm Credit Establishes Endowment Fund at Cal Poly San Luis Obispo Farm Credit donated nearly $255,000 to Cal Poly San Luis Obispo to create an endowment fund for the College of Agriculture, Food and Environmental Sciences. This endowment fund will directly impact agribusiness students and allow them to further promote and live out the university’s core philosophy, “Learn by Doing.” Students will be given more opportunities to engage with the industry, work on hands-on projects, and present their findings to clients. The annual proceeds will be used to pay for data and other resources that will enable student projects dealing with agricultural finance and lending, data analytics and risk management. This donation also comes at a time when the state’s university systems are facing significant economic hardships due to the coronavirus pandemic. Farm Credit is one of California’s leading employers of Cal Poly agriculture graduates and has greatly benefited from the knowledge these students bring with them after graduation. Besides Farm Credit West, other contributors to the fund are American AgCredit, CoBank, Fresno Madera Farm Credit, Golden State Farm Credit and Yosemite Farm Credit.
Templeton Annex Open Last fall, Farm Credit West began work on expanding the Templeton branch by adding an 11,109 sq. ft. addition, nearly doubling the size of the original branch. The addition comprises 10 new offices, two large open office areas, a signing room, a large conference room and a large break room. It also features an outdoor courtyard with a built-in barbecue and two additional parking lots. While the project is complete, the Annex is currently occupied by a limited number of staff due to efforts to mitigate the spread of COVID-19.
Junior Livestock Auctions Go Virtual Farm Credit West has a long history of supporting students auctioning off animals at local junior livestock auctions. With the cancellation of auctions statewide as a result of efforts aimed at mitigating the spread of COVID-19, these sales have moved to a digital platform. Many staff from Farm Credit West have logged in to online sales as our commitment to supporting youth in agriculture remains unshaken.
Four Key Tax Considerations
for Tree Nut Growers By Ann Braun
Farmers and growers know the challenges in making a living from the soil — from the weather to the ever-changing consumer markets. On the bright side, some recent changes in the tax code and market trends provide unique benefits for tree nut growers.
1. Expensing Preproductive Costs
The preproductive period of many tree nuts — including almonds, chestnuts, pistachios and walnuts — can be more than two years. During that time, the grower incurs the costs of cultivating, maintaining or developing the planting. Prior to the Tax Cuts and Jobs Act (TCJA), the growing costs incurred during the preproductive period were generally required to be capitalized and depreciated once the crop was in production, rather than expensed as the costs were incurred. Not only did this add an extra tax burden to farmers, but it could also be cumbersome to track all of the relevant costs. Under the tax reform law, farmers with average revenue under $26 million who file for an accounting method change may now be able to deduct those preproductive costs, which include management, irrigation, pruning, soil and water conservation, and other growing and overhead expenses.
2. Taking Bonus Depreciation Benefits for the Cost of Trees and Vines Growers have typically been required to wait to begin depreciation on the cost of trees and vines until the crops were in production. Tree nut farmers can now deduct the cost of planting trees in the year they are purchased and planted by utilizing a 100% bonus deprecation provision. This change is even more significant for farmers required to use ADS depreciation as deductions for the cost of trees and vines are one of the rare instances where they would be eligible for bonus depreciation. The tax reform law also enhanced the types of property that qualify for bonus depreciation to include used property, and it extends the enhanced bonus depreciation benefit (100% of qualifying property placed in service) from after Sept. 27, 2017, to before Dec. 31, 2022.
S TA F F FAV O R I T E R E C I P E
3. Establishing an IC-DISC for Exported Products International demand for tree nuts is causing many tree nut farmers to experience export sales that exceed domestic sales. If your farm product is exported abroad (by your farming operation or by a processor), you may consider establishing an Interest Charge Domestic International Sales Corporation (IC-DISC). The IC-DISC offers federal income tax savings for making or distributing U.S. products for export by permitting U.S. exporters to reduce their overall tax rate and to defer income, with interest charged on the deferred tax. It is worth exploring the option of creating your own IC-DISC rather than joining a group with other exporters. This option may be cheaper, offer more flexibility and the administrative burden may be less than you think.
4. Accounting for the Impact of Federal Tax Conformity Not all states 100% conform to federal tax law. California is one such state that does not follow uniform federal tax conformity, and this will affect the state tax treatment of certain provisions. Some notable tax differences:
Chocolate Avocado Ice Cream
alifornia does not conform to bonus depreciation. C Thus, depreciation on trees will have to wait until the trees are in production.
alifornia does not conform to the IC-DISC rules; C however, because ordinary and dividend income are taxed at the same rate in California, this is not typically an issue.
4 small or 2 large avocados (about 300 grams of flesh)
or years starting on Jan. 1, 2019, or after, California does F conform to the expensing of preproductive costs. This assumes the proper accounting method change regarding UNICAP has been made for federal tax purposes.
⅓ cup cocoa powder
Arizona traditionally did not have a uniform federal tax conformity measure either. That changed in May 2019 when the state passed a uniformity tax law that was retroactive to the 2018 tax year.
Looking at the Big Picture There are several tax provisions and planning strategies that may help tree nut growers reduce their overall tax liability. Working with an experienced tax advisor allows farmers to see the big picture and where your tax approach could be improved. Before making any decisions based on information in this article, please consult your tax advisor or accountant.
Ann Braun is a Managing Director in the Bakersfield office of CBIZ and MHM, one of the nation’s top 10 accounting providers. She is experienced with tax consulting and tax return preparation, as well as succession planning and estate planning for the agriculture industry. She can be reached at firstname.lastname@example.org.
1½ cup granular sweetener (see note below) 2 cups almond milk 1 teaspoon vanilla extract INSTRUCTIONS Add all ingredients to a high speed blender and blend until smooth. Pour into the ice cream maker and freeze according to your ice cream maker directions. NOTE I replace about ½ cup of sugar with about one tablespoon of cream of coconut. Recipe adapted from jenniferbanz.com/almond-milk-ice-cream
RECIPE SUBMITTED BY SANDY CABRAL Sandy Cabral joined Farm Credit West in 1990. She has worn many hats for the association, most recently serving as Senior Credit Support Specialist at the Santa Maria location. When not at work she spends time with her four adopted animals and enjoys camping with longtime friends.
C O NGRATULATIO NS TO OUR 2020 SCHOLARSHIP RECIPIENTS!
Recipients of Farm Credit West college scholarships have demonstrated dedication and significant contributions to their local agricultural communities. Farm Credit West is proud to join local communities and celebrate these outstanding students. Each student will receive a $1,500 scholarship toward higher education for the 2020 – 2021 school year. This scholarship is renewable for up to three years, totaling $6,000, given students continue to maintain academic excellence. Applications for next year will be accepted starting in December 2020 after fall/winter grades become available to students.
Over the past 26 years, Farm Credit West has awarded over
$995,500 in scholarships to 265 students.
Farm Credit West is pleased to provide the financial resources to help students achieve their academic goals. These young people are the future of agriculture, and it is our mission to recognize and support the next generation of farmers and ranchers, especially during unprecedented circumstances.
KARLY DE JONG
SCHOLARSHIP RECIPIENTS Kingsburg, CA Fresno City College Agribusiness
Fresno, CA University of Arizona Agribusiness Economics and Management Hanford, CA Cal Poly, SLO Agricultural Communications
Bakersfield, CA Fresno State University Agricultural Management
Knights Landing, CA University of Michigan, Ann Arbor Nuclear Engineering
Hanford, CA Cal Poly, SLO Agricultural Business/Dairy Science
Tulare, CA Harvard University Government and Linguistics
Tulare, CA Fresno State University Agricultural Education
Lompoc, CA Fresno State University Plant and Animal Science
Templeton, CA Cal Poly, SLO Dairy Science
San Luis Obispo, CA Cal Poly, SLO Agricultural and Environmental Plant Sciences
Winters, CA Chico State University Agricultural Business
Riverdale, CA Texas Tech University Agricultural Communication
Clovis, CA Brigham Young University Environmental Science
Tulare, CA Fresno State University Agricultural Communications
Hanford , CA Cal Poly, SLO Agricultural Engineering
S TA F F FAV O R I T E R E C I P E
Carmelitas Features butter and heavy whipping cream from California or Arizona dairy cows.* Best paired with a cold glass of refreshing milk produced by California or Arizona dairy farmers.
INGREDIENTS *¾ cup butter, melted ¾ cup brown sugar, packed 1 tablespoon vanilla extract 1 cup all-purpose flour 1 cup whole rolled oats (not instant or quick) 1 teaspoon baking soda 35 caramel squares *½ cup heavy whipping cream ½ cup semi-sweet chocolate chips ½ cup white chocolate chips 3 tablespoons love INSTRUCTIONS Preheat oven to 350℉. Grease an 8" x 8" pan. Melt butter in the microwave. Add brown sugar and vanilla, and whisk until smooth. Add flour, oats and baking soda, and stir until combined. Add half the mix to your 8" x 8" pan, and press into a flat layer. Bake for 10 minutes. Combine caramels and RECIPE SUBMITTED BY KRISTEN TUCKER Kristen Tucker joined Farm Credit West in 2019 and is an Underwriter in the Templeton branch. A newlywed as of February 2020, she enjoys spending time with her husband, whether that’s wake surfing on the lake or snowmobiling in the mountains.
cream, and microwave in 60-second bursts, stirring each time, until melted. Add chocolate and white chocolate chips to your 8" x 8" pan. Pour caramel sauce over layer of chocolate chips. Evenly crumble remaining oatmeal and brown sugar mixture across the top. Bake 15 –18 minutes, until edges are lightly brown and center is slightly bubbling. Allow to cool before serving. Enjoy!
C A N D I D C O N V E R S AT I O N S
Appraising a Property:
TAKING LESSONS FROM SHERLOCK HOLMES By Heather Ellingson, Sr. Appraiser, Yuba City, CA & Aaron Herrema, Sr. Appraiser, Tulare, CA
Sherlock Holmes was possibly the world’s greatest fictional detective.
He was known for his keen observational skills, powers of deduction and logical reasoning. Holmes could always be relied upon to ask the right question and make no assumptions.
The detective work of Sherlock Holmes is not unlike the appraisal process. It begins with identifying the problem (figure the market value of a property), developing a plan to solve the problem (determine the scope of work), gathering information (property research, interviews and inspections), employing an appropriate strategy, and using evidence and expertise (market data and approaches) to reach a conclusion. The investigation typically begins with defining the highest and best use of the property. Simply put, this is the legally permissible, physically possible and financially feasible use of the property that produces the greatest residual land value.
A key trait of a Detective Holmes investigation is that he makes no assumptions. Let’s take, for example, an appraiser asking the question, “What rights belong to the property.” The star witness in this scenario would be the Preliminary Title Report, which identifies the property, legal vesting and any legal restrictions. A legal restriction could include easements, land use restrictions, a well-sharing agreement, a signed lease or an environmental restriction. Some of these restrictions are not obvious and are sometimes unknown to the property owners. Solid investigative work is critical to solving the appraisal problem as a legal restriction on a property could potentially have a significant impact on
the use of the property and, therefore, market value. Once the legal use of the property is determined, Detective Holmes would delve deep into the physical characteristics to truly form an opinion on the highest and best use. Once the investigative work into discovering the highest and best use of the property is completed, the appraiser adopts the role of a market participant. The motivations, desires and general boundaries of the market must be considered in determining value. In Farm Credit West’s territory, the typical market participant is concerned with access to irrigation water, soil type, the age and quality of any plantings, etc.
Sherlock Holmes would use investigative techniques to discover who had committed the crime. Appraisers also have proven approaches to concluding a value for the property. Three approaches to value have been recognized by the Appraisal Foundation Board as being technically sound and appropriate. The Sales/Comparison Approach uses sales of comparable properties in the subject’s market area to arrive at a value indication. The appraiser, once again, turns into an investigator, searching for the elusive comparable sale. Many times an appraiser hears about a sale from the land owner, but before the appraiser can rely on that information, the details must be confirmed. For example, the sale price may have been the highest sale ever recorded in the county, but upon investigating, the appraiser discovers that the sale included some equipment and seller financing, which both increased the sale price. If the appraiser did not complete due diligence, the property would not have been valued accurately. The details of the sales are confirmed and are then compared to the subject. Whatever factors the market considers to be most important are compared to the subject. If the subject is similar to the sale property, it is reasonable that it would sell at a similar price per unit. The appraiser’s ability to ask questions and gather information is key here because it is often the small differences between properties that will make a large difference in the value determination. A second method to determining value is the cost approach. This theory states that the value of a property relates to the cost to develop the property. Properly employed, the underlying land is valued and then added to a depreciated cost of any improvements. Appraisers use multiple data sources to establish replacement costs of buildings and plantings. Information provided by the property owner (such as development costs for orchards and irrigation systems) is also given strong consideration in this approach. This approach is most useful to value properties that are recently developed, very specialized or are not frequently exchanged.
The third approach is the income approach. This approach looks for the present value of a future dollar. Multiple factors are measured here, including gross income, expenses, risk and market demand for similar properties. Farms are “for profit” businesses, which would indicate that potential buyers would rely on the income potential of the property when deciding on a purchase price. In some agricultural markets this approach is highly effective. In other markets, the inherent variables in farming weaken this approach. A detective, or appraiser, is only as good as the information they can collect. Incomplete or false information could lead to an incorrect conclusion, leading to a property being over or under valued, which hurts both the customer and the association. Sherlock Holmes would never know when or where the next case would take him. He would study voraciously, observe specifically and question everything. The appraiser begins a valuation with the same approach. Using information gathered over years of experience, constant study and market expertise, there is no better group of people to conduct an asset valuation than the Farm Credit West Appraisal Team.
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. 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 firstname.lastname@example.org.
Responding to a Pandemic: Changes Made at Farm Credit West Offices Farm Credit West has remained open during the COVID-19 pandemic and continues to be fully committed to meeting the financial needs of our customers. In an effort to combat the spread of the virus and ensure the safety of our employees and our customers, we have adjusted the way in which we continue to provide you with excellent service. Effective the week of March 30, our branch hours of operation shortened to 10am to 3pm. Staff continues to be available by phone or email from 8am to 5pm. To protect our staff, many of us are now working virtually to allow for safe social distancing procedures in the office. Employees are now always required to maintain safe distancing in any part of the office with no exceptions. In addition to social distancing procedures, we have
2020 H OLIDAY S CHEDULE (Farm Credit West offices are closed.)
MONDAY, OCTOBER 12, 2020
Veterans Day WEDNESDAY, NOVEMBER 11, 2020
THURSDAY, NOVEMBER 26, 2020
FRIDAY, DECEMBER 25, 2020
encouraged the use of face masks in public spaces, including workplaces visited by members of the general public, on July 1.
locked our doors during business hours, allowing us to monitor who enters the building, including staff, customers, vendors, etc. In case of possible exposure to a positive case, we have stepped up our efforts to log all visitors to our offices. We need to be able to determine who may have been exposed and effectively perform contact tracing.
Outside of the office, when a loan officer, chattel inspector or any other employee is at a customer’s operation, they are required to wear a mask when in the presence of the customer or one of their employees. Whether they are inside or outside, and regardless of what they are doing, it is in the best interest of the health and safety of our customers and employees to adhere to this practice.
When someone has COVID-19, droplets released through normal breathing, talking and coughing hold the virus. Masks help prevent the virus from spreading through the air and onto surfaces. Because of this, face masks are now also required to be worn by any customer or vendor when they enter our buildings and by Farm Credit West employees who are in the presence of a customer. This requirement comes after California’s Governor, Gavin Newsom,
Above all else, Farm Credit West is urging staff and customers to follow local guidelines, practice social distancing and to wear masks responsibly.
A New Online Banking Platform Farm Credit West is investing in your online experience.
Look for a new Online Banking platform featuring an intuitive layout and user-friendly experience. Complementing this
release will be the availability of a mobile banking application in all major app stores.
D R . KO H L’ S C O R N E R
Five C’s of Operating a Business By Dr. David M. Kohl
The five C's of credit have been used for decades in agricultural lending. A twist on these five C’s is very appropriate while operating a business during this black swan event and hopefully in a post-pandemic world. Let's examine these five C's of business in more detail.
Never before has the importance of a marketing and risk management program been more relevant for both the revenue and cost sides of the ledger. Counterbalance is applicable to commodity and valueadded agriculture. As a producer, being able to plan, strategize, execute and monitor results is key in a highly volatile economic environment. An analysis of marketing and supply chains should be included in the marketing and risk management program. The counterbalance of concentration, optimization and efficiency with the possibility of diversification and resiliency on the marketing and supply input side needs to be carefully analyzed in the future.
Cash Flow From Profits
The next “C” is a standard “oldie, but a goodie” of operating a successful business. The importance of cash flow projections and planning with different economic scenarios such as production, price and cost changes will assist in monthly and quarterly sprints, along with long-term viability. One might question the ability to plan for a pandemic like COVID-19. Planning for an unexpected, severe economic shock is difficult, which leads us to the next “C” of operating a successful business.
C ash Backup
and Financial Liquidity
It is apparent that the American public has gotten the word on the importance of a cash backup as the recent savings rate has increased to 33% and consumption is down approximately 13%. At this point, it is unclear how long this pattern of saving and spending will last. In business, the backup for cash flow and earnings is working capital with quickness to cash. Working capital is derived by subtracting current liabilities from current assets. However, one has to examine the type of current assets and their ability to be quickly converted into cash, given current liability obligations due within 90 days. Cash flow, revenue and expense timing relate very closely to the quickness to turn current assets into cash without disrupting normal operations.
The next “C” is the overall competitiveness of the business. Competitiveness is particularly important for the short and long run viability of every business and will determine whether cash flow needs to be supplemented with nonfarm income. The importance of knowing the cost of production, breakeven points, trends in the business and peer benchmarks will be front and center in the post-COVID environment. The knowledge of one's equity, collateral, and borrowing capacity as a bridge in economically troubled waters can also be valuable.
The cranium or business IQ has never been so important in sizing up management capabilities such as the knowledge of cost of production, written goals, the use of financial records and metrics, people skills, and a transition plan. A systematic process will be necessary to examine the business IQ in this type of economic environment. At the center of business IQ is the attitude of the people in the business with a proactive desire to become better. There is an old saying that, “Profitable businesses attract productive people.” Agricultural operations and agribusinesses are still relationship-based industries where good communication and strong character are mainstays for success.
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, VA. 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. Kohl’s personal involvement with agriculture provides a unique perspective into the future trends of the agricultural industry and economy.
T E C H WAT C H
Password Security and Password Management Tools By Michael Levin, CEO/Founder of the Center for Information Security Awareness | cfisa.com
With the COVID-19 crisis, most of us are working from home. This is a perfect time to update and review old, outof-date passwords!
by simply replacing letters like “o” with a zero and “I” with the number 1, or even a “s” with the number 5, can make your password much safer.
Your passwords are the keys to everything you do online. That’s why it’s vitally important to develop strong password practices and to always protect your passwords. When you create and use simple and predictable passwords, you are leaving your account doors wide open to be compromised.
Two-Factor Authentication and Strong Passwords Many organizations and websites including financial institutions and banks are now offering the use of “two factor” authentication also known as 2FA and “multifactor” authentication.
Password Basics Most websites require that passwords must be at least eight characters and contain an upper-case letter, number and special character. The longer your passwords are, the more difficult they will be for a hacker to crack.
Two-factor authentication involves logging into your account with two or more pieces of information. This would include “something you have” like a PIN number that is sent as a text message to your phone and with “something you know” like your password. Authenticator applications are available that can also add an increased layer of security to your accounts.
It is also recommended that you avoid using words found in a dictionary. Using a word or name in your password makes it much easier for the hacker to access your account by cracking your password using a computer program. Using easy-to-guess passwords makes your accounts extremely vulnerable to being hacked. Many security experts recommend avoiding the use of words that are found in a dictionary by simply putting a number or character in the middle of the word. For example,
You should always use two-factor authentication whenever it is offered especially on all financial accounts. Password Managers Password managers are applications or software that are designed to create and keep track of all your passwords. For the average user this is a great way to create and manage your passwords. When you need a new password, the password manager will create a long complex password for you and remember it for you in the application. The password managers are embedded into your device and will integrate with your browser to automatically fill in the new complex password on all the websites you use. With password managers you do not need to remember your passwords because the app does it for you. Some of the top password managers are LastPass, 1Password and Dashlane. Check them out in your app store or on their online website.
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.
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 661.39 9.7360
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
Standing by You
If your operation is experiencing financial hardship as a result of the COVID-19 outbreak and corresponding shutdowns, we are here to help. Contact your loan officer to learn more.