spotlight Young, Beginning, Small Farmer Issue
Planning for Success ‘Trust and Respect’ at Core of Emigh Family Estate Planning PAGE 8
Preparing for the Future PAG E 16
The Journey of Transition and Succession PAG E 18
Spotlight FALL 2021
3 President’s Message
4 Financial Highlights
5 Board Update
6 Program Highlight: Building From the Ground Up
7 Customer Announcements
8 Feature Story: Planning for Success
13 F rom the Farmer’s Kitchen: Grilled Lamb Loin Chops
& Tri-colored Mini Sweet Peppers and Cherry Tomato Medley with Chimichurri Sauce
14 Community Center
16 Preparing for the Future
18 Dr. Kohl’s Corner: The Journey of Transition and Succession
20 Candid Conversations: Succession Planning Begins with Character
22 Tech Watch: Avoiding Fraud Fatigue
23 Territory and Office Locations
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 S. Bains 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. . . . . . . . . . . . . . . . . Ivins, UT 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
ON THE COVER Dick Emigh and daughter Christine Mahoney share a moment outside their family homestead in Rio Vista, California. Read more about the Emigh family on page 8.
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.
Spotlight FALL 2021
PRESIDENT’S MESSAGE Mark Littlefield, CEO
Building a Plan for the Future Thomas Edison once said, “Good fortune is what happens when opportunity meets with planning.” His point: success in business is not happenstance. In reality, successful businesses and farming operations that we see around us are a result of years of hard work and commitment, often spanning multiple generations and leadership transfers. Each generation builds on the work of the previous, resulting in a strong organization that can stand the test of time. And yet, hard work alone does not guarantee a successful outcome. Rather, meticulous planning and constant evaluation of future objectives is the key to knowing when the right opportunity presents itself and should be acted upon. With the average age of all U.S. farm producers at 57.5 years, it is critical that agricultural businesses include succession planning in their roadmap for the future. While the process is never easy, identifying a path for the senior generation to transition leadership is critical to ensuring success in the long run. Just as our customers engage in difficult conversations as they plan for the future, Farm Credit West also actively engages in succession planning. Understanding our employees are our most valuable asset, your Management Team and Farm Credit West’s Board of Directors meet annually for a multiple day strategy session to design a high-level plan for the future.
This includes contingencies, offering multiple avenues the Association could follow to achieve the best possible result when outside factors beyond our control present themselves. From these sessions, future objectives are identified, and the path forward becomes clear. Beyond succession planning, your association also actively monitors changing trends in the market that have the potential of impacting the way in which we deliver credit in the future. The Management Team meets regularly with our Local Advisory Committee (LAC) members to receive feedback and share industry news, carefully and purposefully responding to anticipated long-term trends. Planning, particularly the kind described above, takes time — time away from the day-to-day business operations, critical projects, and immediate needs. While difficult to carve out portions of your day to think at a higher level, the results of careful planning are clear. After all, a goal without a plan is just a dream. It is through methodical and thoughtful discussions that this Association has positioned itself for a bright future, building an organization that will be there to provide a reliable and consistent source of credit to your children, and your children’s children. We are thankful you have trusted Farm Credit West with your business and we look forward to working with you for many years ahead. ■
Financial Highlights Farm Credit West reported net income of $166.6 million for the first six months of 2021. These year-to-date earnings are ahead of our business plan target for the second quarter. Also, during the first six months of 2021 our average earning assets and capital levels increased while our allowance for loan losses decreased.
Average earning assets increased $763 million, or 7%, during the first six months of the year. Farm Credit West is experiencing modest levels of loan growth during the first half of 2021; loan growth is expected to increase through the remainder of the year. At the end of the second quarter, average earning assets exceeded the second-quarter business plan target.
MEMBERS’ EQUITY AS A % OF TOTAL ASSETS $ 11,651
AVERAGE EARNING ASSETS* (in millions)
In the first six months of 2021, total members’ equity increased $111.4 million, primarily due to net income of $166.6 million, partially offset by a decrease in preferred stock of $55.8 million.
Nonearning assets (nonaccrual loans plus other property owned) decreased by $9.4 million from December 31, 2020, or 9.4%, to $90.2 million at June 30, 2021. The decrease was a result of $9.4 million in net repayments on nonaccrual loans during the first half of 2021. The other property owned balance remained unchanged during the first half of 2021.
Spotlight FALL 2021
Our allowance for loan losses totaled $73.2 million. This was 0.63% of loan principal and interest at June 30, 2021, compared with 0.66% of loan principal and interest at December 31, 2020. 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.
0.66 % $ 90
NONEARNING ASSETS (in millions)
ALLOWANCE FOR LOAN LOSSES AS A % OF LOANS
B O A R D U P D AT E
2021 Director and Nominating Committee
Election Results Board of Directors
Congratulations to Sureena S. Bains Thiara, Robert (Bob) Hansen and Colin Mellon, who were recently elected to the Farm Credit West Board of Directors for the 2021–2026 term. Sureena S. Bains Thiara Sureena has been reelected to the Farm Credit West Board. She is the managing partner in Manseena Orchards Partnership and Four Leaf Farms LLC and is involved in the production of prunes, walnuts and almonds in the Sacramento Valley. She is also in the crop insurance business as managing partner of Far Horizon Insurance Partnership. Robert (Bob) Hansen Bob has been reelected to the Farm Credit West Board. He is a partner in 3H Cattle Co. and Hansen Farms, a custom feeding feedlot operation along with a cow/calf operation in the Southern San Joaquin Valley.
Colin Mellon Collin has been reelected to the Farm Credit West Board. He is the president and CEO of Mellon Farms and is involved in the production of winter vegetables, grains and forage crops in Yuma, Arizona.
Thank you to those who participated in this year’s election process. We extend our utmost appreciation to those who agreed to serve as director candidates, Nominating Committee members/candidates and to those who cast their ballots. You play an important role in Farm Credit West’s success.
The Nominating Committee plays an integral part of the success of the Farm Credit West Board of Directors. This group of customers is elected by voting stockholders to serve a term of one year. Their responsibilities include screening, interviewing and selecting director candidates to appear on the ballot in each director election.
Nominating Committee Sacramento Valley Region Matt Mariani | Blake Vann Southern San Joaquin Valley Region Jared Fernandes | Mike Frey Coastal Region William Terry | Nicholas Miller Southwest Region Mike Blohm | Kim Grizzle 2021–2022
Alternates for the Nominating Committee David W. Lanza Anthony Laney Ron Denner Fred Van Wingerden
Louis Pandol John Gardiner Dan Boschma William Plourd
For more information on 2021 Board Election Results, please visit farmcreditwest.com/about-us/in-the-news/2021-board-election-results.
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 2022 Farm Credit West director election, we would like to hear from you. The following regions will have one director seat available:
If you are interested, please contact Chris Brumfield at 916.780.1166 no later than October 25, 2021.
Sacramento Valley | Coastal
BUILDING FROM THE GROUND UP Farm Credit West’s Micro-Loan program jump-starts credit-worthy young, beginning and small farmers.
] It’s been said
before that agriculture is not just a job, it’s a lifestyle.
It’s a lifestyle that some are born into, growing into the role of operator with strong support from their parents and grandparents, continuing their family’s legacy. Others enter the industry without a rich history of a family business to bolster them. The learning curve is steep, and the barriers to entry can be staggering. It’s for that reason Farm Credit associations across the country proactively identify and support young, beginning and small (YBS) farmers and ranchers. At Farm Credit West, this unique subset of growers is supported in a variety of ways: access to education coordinated by leaders in the industry and networking opportunities to connect with others in a similar situation, to name a few. Yet, when the shovel hits the ground, the needs of the YBS farmer extend beyond just knowledge transfer. Access to a consistent and reliable source of credit is critical. It’s at this point YBS growers often hit roadblocks. Many financing institutions
Spotlight FALL 2021
are hesitant to lend to individuals with limited experience and financial backing as they often need flexible terms to help facilitate a sustainable and successful future. Introducing Farm Credit West’s Micro-Loan Initiative. This newly formed program is built to meet YBS growers where they are — offering moderate flexibility and unique credit offerings designed to set these individuals up for future success. “Young, beginning, or small farmers are crucial to the sustainability and long-term success of the agriculture community and many rural towns in Farm Credit West’s territory,” said Pete Huffine, Chief Lending Officer at Farm Credit West and coordinator of the Micro-Loan program. “We recognize that and worked to build a customized program to help kick-start micro loan candidates into a career in agriculture.” If approved, qualified borrowers can receive up to a $75,000 loan or lease, eligible to be
We take the need to support the next generation of farmers very seriously. As the barriers to entry increase for YBS growers, Farm Credit West is increasing our efforts to support this community. PETE HUFFINE CHIEF LENDING OFFICER
Customer Fall Socials As a token of our appreciation of your loyalty to our Association, Farm Credit West is hosting Fall Customer Socials throughout our territory. We hope you will save the date and join us for your branch’s event.
Santa Maria Friday, September 10, 2021
Dinuba Thursday, September 23, 2021
Tempe Wednesday, September 29, 2021
Imperial Thursday, September 30, 2021
Yuma Friday, October 1, 2021
Tulare Thursday, October 14, 2021
Ventura Thursday, October 21, 2021
Yuba City Tuesday, October 26, 2021
Woodland Thursday, October 28, 2021
Templeton Thursday, November 4, 2021 Hanford Tuesday, November 9, 2021
Kern Wednesday, November 10, 2021
used as working capital or for other operating needs, equipment purchases, or even as a down payment for certain other loans, like FSA, VA or other government-sponsored loan programs. Farm Credit West staff visits the farm site and meets with the prospective customer, working with them to build a unique solution that suits their needs. “We take the need to support the next generation of farmers very seriously,” said Huffine. “As the barriers to entry increase for YBS growers, Farm Credit West is increasing our efforts to support this community. We see the Micro-Loan program as a fantastic tool for individuals who’ve demonstrated a strong work ethic and high character to access the credit they need to turn their dreams into reality.” If you would like additional information regarding Farm Credit West’s Micro-Loan program, contact your local branch. ■
Learn how Farm Credit West supported customers through the hardships of 2020 by watching a short Financial Highlights video at farmcreditwest.com/about-us/financial-highlights.
2021 Holiday Schedule
FARM CREDIT WEST OFFICES ARE CLOSED
Columbus Day Monday, October 11, 2021
Veterans Day Thursday, November 11, 2021
Thanksgiving Day Thursday, November 25, 2021
Christmas Day Friday, December 24, 2021
F E AT U R E S T O RY
Planning for Success
‘Trust and Respect’ at Core of Emigh Family Estate Planning By Sarah Kearbey
Spotlight FALL 2021
ON A MILD JUNE MORNING in downtown
Rio Vista, California, Ryan Mahoney sits around a conference table with his mother and grandfather and reflects on his recent experience taking over his family’s business.
“I think it comes down to trust and respect,” he states. “Without those things, it’s really hard.” Ryan, 36, is a fifth-generation farmer in the Emigh family and has worked for the family livestock business for more than a decade. Emigh Livestock runs mother cattle and sheep on land in Solano County that has been owned by three, four and, in some cases, five generations of Emighs. Ryan’s grandfather, Richard (Dick) Emigh, started the livestock business in 1972, and his mother, Christine Mahoney, has tirelessly helped manage the company for 40 years. “I’ve done just about everything, marketed some of the cattle,bought corn and sold cattle,” says Christine. “I was excited to have Ryan come along and say he was interested. We said, Yes!” Ryan wasn’t always interested in working the family business. Though he grew up on his family’s farm, he took other jobs around town and left the area to attend college, including one in Oregon where he played football, before returning to California and settling down to work for the family business. “As a religious studies major my junior year, I looked around at my job opportunities and decided to take the only one I had: this one,” he recalls jokingly. After years of working for Emigh Livestock, Ryan recently purchased his family’s shares of the company and now owns and manages the operation. He leases land from a separate family entity, Emigh Land. Christine says Ryan joining the company was an important step in the evolution of her family’s business. “I didn’t know if I could keep doing this forever,” she laughs. “He came on board and just ran with it.” Ryan comes from a long line of farmers. His great-greatgrandfather, Jerome Emigh, came to the Sacramento-San Continued on next page
Continued from previous page
Joaquin Delta in the mid-1800s and purchased a ranch in Rio Vista. He and his wife, Eudora, began dryland farming and cultivating wheat and cereal grains, as well as sheep and a few hogs. They homesteaded, growing most of what they needed on their own land, in order to feed their 10 children. By the time he passed, Jerome had amassed about 1,000 acres in Solano County. Ryan’s great-grandfather, Arthur Emigh, purchased the farm from his family. When Dick and his brother were of age, they worked the farm with their father, expanding the ranch to add both dry and irrigated land to their holdings — a move that has paid dividends today in the drought. Eventually, the brothers went their separate ways, and Dick further expanded his land holdings, and began raising sheep. “My father was in the grain business,” Dick explains. “But my brother and I expanded the sheep. Then I expanded the sheep even more on my own. That worked really well.” The family has moved away almost entirely from growing grain now, except occasionally for pasture soil health. Throughout the 1970s and 1980s, Dick was one of the largest sheep growers in California. Then, when the market began to shrink, he reduced his sheep numbers and expanded into cattle. Today, Emigh Livestock runs both sheep and cattle, using the crops to complement one another and improve yields. “When I expanded into cows, my neighbor questioned me,” Dick recalls. “But the cows eat stuff the sheep don’t like. The two work better than one.” Ryan echoed his grandfather’s observation. “It’s been really fun getting the opportunity to work for Grandpa, and move into what we’re now doing,” Ryan says. “We’ve run these multiple species forever, but there’s more and more research being done on the benefits of multispecies grazing, which we already knew. It breaks parasitic life cycles: a cow worm can’t regenerate in a sheep and vice versa. They select different feeds. The way the seeds process through the manure, different plants regenerate differently.
ON RUNNING BOTH SHEEP AND CATTLE…
“We run both species as a way to increase revenues and mitigate risks of markets. And it’s a healthier pasture with two animals.” RYAN MAHONEY | EMIGH LIVESTOCK
Spotlight FALL 2021
“It’s pretty fun to be able to say we were a part of something up front on a lot of this stuff,” he said. Another benefit to running multiple species is their different responses to drought conditions. Like most farmers, the current drought has had a major impact on Ryan’s operations. Typically, he runs around 1,400 mother cows and a similar number of sheep. But earlier this year, he was forced to destock, and is down around 20–30% of his cows and about 50% of his sheep. The irrigated pasture is the biggest drought mitigation Ryan has. He is currently running 400 cows on irrigated pasture, a move typically reserved for special circumstances. “A sheep is a lot more drought-resistant than a cow,” Ryan explains. “Its daily water demand and daily forage demand is a lot less, whereas a cow has to have volume of roughage to fill rumen (a cow’s first stomach) every day, and they drink a lot of water. With sheep, you’re able to go out on a lot of grain stubbles. So the dependency on the water systems and the amount of hay you have to feed is substantially higher on a cow than a sheep. “We run both species as a way to increase revenues and mitigate risks of markets,” he continues. “And it’s a healthier pasture with two animals.” The ratios between the two is something the family is always working on and considering, Dick adds. “I tell Ryan that he needs more cows and he tells me he needs more sheep,” he chuckles. In addition to running livestock, Emigh Land has contracts for wind energy and natural gas. According to Christine, the area’s first natural gas well was found on Emigh property in 1935 when Arthur and Lena Emigh made a gas lease. “They discovered a huge natural gas patch in Rio Vista, and that kind of bolstered the town economically,” Christine says, adding that the explorers were originally looking for oil. “It brought a lot of jobs to the area and improved the economic activity of the town.” Today, gas production is minimal, but a number of wind turbines dot the Emighs’ land throughout the Montezuma Hills. In a family business with substantial land and livestock holdings, it comes as no surprise that succession planning is something they’ve been working on for quite some time. In fact, it’s at the heart of everything they do. “When I started my company, I went down to Mr. McCormack at the Bank of Rio Vista,” Dick says. “He said, ‘When you need an operating loan you come here, but when you buy land you go to the Federal Land Bank.’ So Land Bank (now Farm Credit West) has always been a source of longterm financing for us.” The Federal Land Bank and Production Credit Association — specializing in operational loans — were both part of the Farm Credit system and among the early credit bodies in Solano County lending to farmers. These relatively
ON THE IMPORTANCE OF PROACTIVE ESTATE PLANNING…
When the decisions are made, you trust and respect, and go with them. RYAN MAHONEY | EMIGH LIVESTOCK
small associations eventually merged into Farm Credit West. Today, the Emighs’ land loans are with Farm Credit West, and the family’s decades-long loan paper trail is a unique look into the historical formation of the Association. Like Farm Credit West, the Emigh family businesses have undergone a number of organizational transitions. In 1972, Dick formed R. Emigh Livestock, Incorporated, and, later, Emigh Limited, a family partnership and early attempt at estate planning. In recent years, after a few other transitions, the family has divided the business into two entities: Emigh Land, which holds the real estate assets, and Emigh Livestock, which leases from Emigh Land. Dick notes that the family has preemptively divided the land business assets between Christine and his son, Martin Emigh.
“We’ve hopefully eliminated some potential arguments by taking Emigh Land and all that it owned and creating two additional partnerships: my brother and his family, and me and my family,” Christine says. “So, basically, it’s already split between us. We recently transitioned and are operating that way now. We look at it as a proactive step.” “This goes back to trust,” Ryan adds. “Grandpa now trusts that he’ll be taken care of, since he’s given away all his assets.” Elaborating on his earlier point, Ryan underscores the importance of trusting and respecting the people he works with — especially because it’s family. “That doesn’t mean you don’t disagree, or aren’t strong in your opinions,” he says. “But when the decisions are made, you trust and respect, and go with them.” Continued on next page
Continued from previous page
ON STARTING THE CONVERSATION…
“It’s not a one-day, sit-downand-figure-it-out kind of thing. It’s part of the operation and business plan. No one wants to talk about death, but it’s reality.” CHRISTINE MAHONEY | EMIGH LAND
Spotlight FALL 2021
Ryan remembers a lesson he learned in college while on a gardening job, when he was fired for doing what his boss had repeatedly asked him to do: prune a pear tree. “It turns out, he wanted it topped, not pruned — he just didn’t know it,” Ryan recalls. “When you go into the workforce, including family, you’re going to have bosses who make poor decisions. And they might take it out on you. Don’t take it personally. Have confidence. Do your job the best you can, and trust and respect that it will work out eventually.” From a business perspective, the Emighs have worked hard to maintain liquidity for unexpected needs that arise, and have kept a reasonably low debt profile to allow for the option to take on more debt during estate planning.“Our perspective has always been pretty conservative,” Christine says. “We don’t want to over-borrow; we’re always trying to be aware, calculated and controlled.” Ryan says surrounding himself with good advisers has been important to him both personally and professionally. The relationships he has with his accountants, attorney and lender have made him a better businessperson. His best piece of advice, though, is to tackle estate planning sooner rather than later. “Ask yourself, ‘What happens if I get in a plane crash and die tomorrow? What’s the company going to do? How will it go forward?’ So much of estate planning is business planning,” he says. Christine wholeheartedly agrees. “It’s not a one-day, sitdown-and-figure-it-out kind of thing,” she says. “It’s part of the operation and business plan. No one wants to talk about death, but it’s reality.” When asked the million-dollar question on how they’ve managed to keep their family relationships strong while running a large and complex family business, there is a moment of quiet while three generations of Emighs consider what has held them together. Christine offers the first insight. “We’ve always been able to sit around a table and ask everyone’s opinion,” she reflects. “We don’t always agree, but we’re able to go home and have Christmas dinner together. We realize this is business and that’s family. “Keep the big picture in mind that family’s important and you can’t hold grudges,” she advises. Dick, who will celebrate 69 years of marriage to his wife, Faye, this year, nods in agreement. “While it’s hard to do, I recommend doing your work at work, and going home and leaving the work behind,” he says. “It’s hard to do in a small family farm. But in a larger farm you’ve got to do that. Do all the tough things, wear all the hats, do the hard jobs, and when you go home, be nice and hug your family.” ■
F R O M T H E FA R M E R’ S K I T C H E N
Grilled Lamb Loin Chops
& Tri-colored Mini Sweet Peppers and Cherry Tomato Medley with Chimichurri Sauce ING REDIENTS
D I R ECT I O N S
Cilantro Parsley Chimichurri Sauce
Cilantro Parsley Chimichurri Sauce
¼ cup olive oil 4 garlic cloves, minced 1 tsp kosher salt 1 small jalapeño, seeds removed, finely chopped ¼ cup fresh lime juice 1 cup fresh cilantro, chopped 1 cup fresh Italian parsley, chopped
Heat the olive oil in a small pan over medium heat. Add the minced garlic and remove from heat; let stand for a few minutes, allowing to cool. Stir in the salt and jalapeño. In a small bowl, combine the cilantro, parsley, lime juice and garlic oil mixture; set aside.
Roasted Tri-colored Mini Sweet Peppers and Cherry Tomato Medley
Roasted Tri-colored Mini Sweet Peppers and Cherry Tomato Medley
1 lb bag tri-colored mini sweet peppers, rinsed and dried 12 oz multi-colored cherry tomato medley, rinsed and dried 1 tbsp olive oil ½ tsp kosher salt ¼ tsp black pepper
Grilled Lamb Loin Chop 8 1 ½ ¼
lamb loin chops (4–5 oz each, bone-in) tsp olive oil tsp kosher salt tsp black pepper
Preheat the grill over high heat. In a medium bowl, combine the sweet peppers and cherry tomatoes; toss with the olive oil, salt and pepper. Cook the vegetables on the grill for about 5–10 minutes, turning the vegetables a few times to prevent burning and allowing to cook on all
sides. Remove the vegetables from the grill and place them on a platter.
Grilled Lamb Loin Chop Preheat grill over high heat. Lightly brush olive oil on grill grates. Pat lamb dry with paper towels. Rub both sides of chops with salt and pepper. Grill lamb chops about 4–5 minutes per side or until cooked to 145°F for medium rare. Transfer the lamb chops to the serving platter with the grilled vegetables. Top the platter with the reserved Cilantro Parsley Chimichurri Sauce and serve.
Recipe courtesy of Nourish with Lamb, on behalf of the American Lamb Board
At Farm Credit West, giving back to the communities we serve is part of our DNA. Along with our focus on stewardship, we invest in the future of agriculture with reliable financial products, and our employees proudly serve our communities through volunteer programs and donations. Since the beginning of 2021, Farm Credit West has received public messages of gratitude from organizations doing tremendous work in the communities we serve. We are honored to support these associations who help our students, industries and the future of agriculture every day.
From 805 Ag Kids A huge THANK YOU to Farm Credit West for their 2021 Corporate Sponsorship! Farm Credit West is a longtime supporter of our local Ag Kids.
From Petite Sirah I Love You A new season, a new reason, to thank our generous sponsor: Farm Credit Alliance
From Arizona FFA Foundation Thank you to Farm Credit West for being a Team Sponsor of Bustin’ Clay for FFA!
This group services many wine grape growers, among other agricultural farms and entities. This includes non-profit organizations, including Petite Sirah I Love You. It’s through their generosity and the generosity of our members that we’re able to continue educating and sharing with you stories about how wonderful Petite Sirah truly is. Thank you, Farm Credit Alliance for your continued support of all things agricultural in the US, including Petite Sirah I Love You. We really couldn’t do it without you! The organizations that contribute to this are: American AgCredit, CoBank and Farm Credit West.
Spotlight FALL 2021
Lucas Espircueta organizes donated vegetables for the farmers market
6th Annual Charity Farmers Market Hosted at Farm Credit West On a warm day in the middle of July, the Kern County Young Farmers and Ranchers, a nonprofit group affiliated with the Kern County Farm Bureau, organized their Charity Farmers Market. Each year, this event raises money for local schools and youth organizations to support building gardens and other agricultural educational programs. After canceling the event in 2020 due to the pandemic, the 6th Annual Charity Farmers Market was hosted on July 10 at its inaugural location, the Farm Credit West parking lot in Bakersfield.
This event exemplifies the generosity of the agricultural community and the stewardship mindset inherent in the next generation of farmers and ranchers. Farm Credit West is proud to have been a part of this annual event and the important impact it has on the Kern County community.
Lucas Espircueta, a Farm Credit West Loan Officer and organizer of the fundraiser, developed the idea of the farmers market in 2015. Through this event, Lucas wanted to highlight the generous nature of local farmers and give back to the Kern County community. All produce at the farmers market is donated by local agricultural businesses, and all proceeds raised are on a donation basis. At the conclusion of the event, leftover food is given to the community food bank to assist those experiencing food insecurity. Over the years, Espircueta estimates that over $20,000 in charitable funds has been raised by the farmers market. This year, money generated from the event was donated to Norris Middle School in Bakersfield, helping add a shed and tools to their gardening program.
Donated produce fills the Farm Credit West parking lot the morning of the Charity Farmers Market.
PREPARING FOR THE FUTURE
Estate Planning Through the Eyes of the Next Generation Transitioning the farm to the next generation is never easy. Difficult conversations must be had, and decisions impacting the long-term future of everyone involved must be made. Farm Credit West caught up with two young farmers and ranchers, both graduates of Farm Credit West’s Young Farmer and Rancher Executive Institute, to learn more about their experiences.
“[Estate planning] is like anything else in agriculture; if you don’t have a plan, you don’t have much.”
Will Terry TERRY FARMS INC. | VENTURA, CA
s a young farmer in Ventura County, Will Terry
understands the importance of planning for the future on a daily basis. When it came time to discuss with his family his desire to take on a larger role at their farm, the conversation came naturally. “My dad was very supportive,” Terry said. “Our family has a history of being proactive in estate planning, and our business structure is fairly straightforward. While there were several uncomfortable family discussions, we found a way to make it work for all parties involved.” For Terry, the process of settling how the farm would transfer to the next generation occurred roughly 10 years after graduating college. As with most family owned businesses, he had a great deal of face time with his family. The challenge, Terry noted, was changing the discussion point.
Spotlight FALL 2021
“We see each other every day at work and talk about a great deal of things. Topics typically revolve around the day-to-day business activities, so it was a shift for us to start discussing succession planning,” Terry recalled. “Simply starting the discussion was the first step to planning for the future. From that point forward, conversations — even if uncomfortable — began happening.” When asked to comment on what advice he would give the next generation starting to think about succession planning and transition of ownership of the family farm, Terry paused for a moment. “Your family has put their heart and soul into the business, and you have to prove that you will too. Before you do anything, you have to get out there and show that you can play ball.”
Kelli Evans EVANS FARMING | LIVE OAK, CA
elli E vans is no stranger to estate planning. She’s watched for years as friends and neighbors worked though the process, some making it through successfully while others lost everything. When it came time for her and her brother to start the discussion at her own family’s operation, she was well prepared.
“Every farm handles it different. Seeing how some farms really struggled with the transition, one generation to another, really helped guide us,” Evans noted. When the Evans family began talking about transitioning the farm, Kelli was careful to make sure her father understood it wasn’t a power grab. Rather, she was working to secure the farm so his vision for the future would be executable. To make sure this was the case, the Evans family brought together all outside parties involved in their business to help form a rock-solid plan. “It’s so important to share with all parties involved in the business (accountant, attorney, banker). Doing something incorrectly could mean serious tax consequences or the plan is overturned later on down the road,” Evans said. “It’s a little scary, but important to know you’re making the right decisions.”
“When approaching the older generation about succession planning, you’ve got to communicate you’re not trying to push them out — you’re hoping to execute their vision for how the next generation will take over.”
Evans went on to note the devil is in the details. She and her brother worked to leave no stone unturned, for example ensuring more signers were added to the business’ depository bank account so bills would continue to be paid in the event of an untimely death of the primary account holder. What advice does she have for the next generation? “Don’t be scared to bring up the subject. Really make sure you’re thinking of what’s best for your parents or grandparents and you’re achieving their ideal goal.” Evans concluded by noting family dynamics are very important to consider when estate planning. “It’s a really hard thing to do,” she said, “but, it’s really important. Government regulations are constantly changing, inheritance tax laws are updated, and it’s critical to ensure your timeline of making the transition coordinate with the best outcome possible.”
D R . KO H L’ S C O R N E R
of Transition and Succession By Dr. David M. Kohl
Whether you are starting from scratch, transitioning into a family business or pivoting to agriculture in a midlife shift, the transitioning process can be a daunting task. My decades of working with farm and ranch families have brought insight and wisdom to the process. Every situation is unique, but following a process and using a checklist can place the odds on your side. If one is aspiring to enter an existing business, either a family or non-family business, make a candid assessment of whether the business has historically been profitable. Be careful of using tax records because the objective is often to minimize taxes through revenue, cost, depreciation and other adjustments. Ideally, one would use accrual adjusted income statements with three to five years of trend analysis to determine profitability. If you are operating a startup, a profitable situation most likely will not occur out of the gate. Startups often require non-farm revenue or outside capital during the first three to five years. Once the business is profitable, it generally requires $40,000 to $70,000 in net income for the business to stand on its own, satisfy debt service, meet living needs and pay tax obligations.
Spotlight FALL 2021
The journey of transition and succession requires a written business plan. The first call to order is to outline the short- and long-term goals of the various owners and managers. In this goal setting exercise, establish the necessary balance between goals for your business, family and personal life. This will provide focus and assist in building upon synergies and working through possible differences. The business plan should also consider the entry and exit plans, the roles of siblings, possible bench strength and backups if plans A, B and C do not materialize. Sometimes a good succession and business growth plan requires a team of advisors including a crop or livestock consultant, agricultural lender, accountant or financial advisor. These individuals can provide valuable insight, guidance and ask the tough questions while assuring that the process continues. An objective resource assessment needs to be conducted before any transition. In some cases, the excitement of wanting to own and operate a business can cause one to turn a blind eye to some of the limitations or resource constraints that may hinder the long-term success of the business. For example, are the equipment and facilities in ill repair or obsolete for competitiveness? Will a major capital infusion be required to make the resources viable? Examine the markets, competition, management philosophy and management’s acceptance of new ways to conduct business. These are critical questions and topics for crucial conversations during transition.
An assessment of skill sets is a major part of mapping out your succession journey. Are the talents of key people complementary or competitive? Where do people’s passions and energies lie? Will your abilities be a productive fit in the overall culture of the business? In the future, agriculture businesses will move from being independent and not wanting to deal with people to interdependent, which will build upon the strengths and the talents of people both inside and outside of the business.
The preceding points and perspectives are analogous to preparing for a trip or journey. Time and thought in the planning process and critically thinking about the various components in a dynamic environment can be important to getting you to your destination in the journey of business and life. ■
One of the critical elements in your journey of succession is the family-living budget. Personal family-living budgets are just as important as farm and ranch budgets. In many cases, too many people are attempting to make a living out of the business. This can stifle the cash flow necessary to grow and operate the business in a competitive manner. A startup business or venturing into an entrepreneurial agriculture enterprise may require sacrificing draws from the business initially.
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 nearly 10 million miles in his career and conducted over 7,000 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.
C A N D I D C O N V E R S AT I O N S
Succession Planning Begins With
CHARACTER By Mark Satterberg | Senior Vice President, Ventura Office
You can’t start too early when it comes to succession and estate planning. In fact, it’s at the very beginning — when a farm business is started — that the most planning and documentation should be completed. At Farm Credit West we monitor our customers’ succession plans as they serve an important role in the ongoing viability of the operation. As the person or entity responsible for repaying an existing Farm Credit West loan changes during a time of succession, we like to stay informed about our customers’ future plans for their business. This is particularly true when a change in management seems imminent. Succession is an inevitable part of every business and brings with it the potential for change in the character of the borrower, which is a risk a lender needs to access before, during and after an event of succession takes place. In addition to financial strength, repayment ability, collateral and loan structure, the character of a borrower is one of the main risks a lender considers when making a loan. At Farm Credit West, we define character as honesty, openness, integrity, self-discipline and management ability. Prior to making a loan we ask ourselves, “Does this person or entity demonstrate the willingness and
Spotlight FALL 2021
determination to repay the loan, regardless of unforeseen adversity?” The ability of the customer to withstand many different sources of stress simultaneously and still make careful business decisions is vital to loan performance. Assessing the customer’s ability to manage adversity — including through ownership succession — is an important part of the credit decision. As such, succession planning is a key part of nearly every new lending decision made by Farm Credit West. As a lender, the risk present when there is no succession plan in place creates uncertainty over the future quality of management and viability of the farming operation, which in turn impacts the risk in our loan. For this reason we encourage our customers to have frank conversations early on, preparing for a potential transition in management long before an event occurs. We want to see the farming operations they’ve worked so hard to build, thrive well into the future, and remain valued customers of this Association. By involving Farm Credit West early in your plans, we have opportunity to work with you to structure your financing in a way that works
to your best advantage, achieving your goals while reducing your risk. Also, your existing loans have covenants that prohibit changes to ownership without our written prior approval, which is another reason to contact us early in the process. Our expert staff want to work with you to ensure your wishes for the future of your operation are honored, and the transition to the next generation — at least from a financing perspective — goes smoothly. Over many years, I’ve seen several farms transition ownership to the next generation. Some, with detailed plans in place prior to a life event, successfully manage the change. Others, who had no plan in place, incurred additional taxes and expense, or worse, deteriorated as infighting among the next generation ensued. It’s important to remember every situation is unique, and there is no one-size-fits-all solution. While estate planning discussions can sometimes be challenging and uncomfortable, the benefits of being proactive significantly outweigh the negatives. It’s also important to note that just because you create a plan now, it does not need to be implemented immediately. However, having no plan in place will leave you
Succession planning is a key part of nearly every new lending decision made by Farm Credit West.
unprepared — and worse — unable to implement a successful transition. In the end, the most critical component of succession planning is character; specifically, the character of the current generation to plan for the future, and the character of the next generation of operators and managers who will carry on the farm operation. As a relationship lender, our commitment is to you and helping your operation succeed. By tackling these issues head-on, we can work with you to stay ahead of potential problems. ■
Mark Satterberg joined Farm Credit in 1985 and currently serves as Senior Vice President/Portfolio Manager in Ventura. After growing up on a raisin grape vineyard in Kingsburg, CA, Mark attended U.C. Davis where he graduated with a degree in Agricultural Economics. He enjoys spending time with his wife and family, including three granddaughters, and playing Ultimate Frisbee on the weekends.
T E C H WAT C H
Avoiding Fraud Fatigue By David Guilmette | Farm Credit West Chief Information Security Officer
It has been a long day, and you are responding to a few more emails before you close down your computer for the evening. The next email in your inbox is from a colleague requesting you update payment information for a company subscription. You click the link within the email and type your name and credit card number as requested. Relieved to have finished one more task before calling it a night, you press submit and respond to your colleague.
Two hours later you receive a phone call from your credit card company telling you that thousands of dollars have been charged to your card. What you thought was simply checking off one more item on your to-do list has turned into a financial nightmare. Cyberhackers are becoming more sophisticated and sending hundreds of thousands of emails to unsuspecting victims every day. Staying alert to fraudulent attempts can be exhausting. By adopting a few daily habits, you can help protect yourself, your business and your information. 1⃞■ Check your email when you are the most alert and have time to focus. This varies from person to person, so find the time that is best for you. 2⃞■ Utilize automatic email filters to assist in separating trusted messages from the bad. These filters don’t guarantee that everything delivered to your inbox is safe, but should help in sorting which emails are valid. 3⃞■ Be very selective to whom and to which sites you are disclosing your information.
Spotlight FALL 2021
When going through your inbox, keep the following in mind: 1⃞■ If you don’t know the email sender, the message should usually be deleted. 2⃞■ Ensure the sender’s email is not spoofed. This can be done by clicking ‘Reply To’ and checking what email address is in the ‘To’ field. Does it match the email address that it came from? If not, the email is fraudulent. 3⃞■ If you know the sender but were not expecting any correspondence from them, validate that the email was intended for you. You can do this by confirming with the sender through an alternative communication channel (text, phone call). 4⃞■ Never click suspicious links or give your personal information until you confirm it’s a legitimate source. Depending on the amount of email you receive, it may seem like an overwhelming task to monitor each message for potential fraud. Just remember, all it takes is one moment of oversight and you will be spending more time and energy trying to repair the damage that was done. ■
Territory and Office Locations Yuba City Woodland
Farm Credit West Administrative Office
Templeton Kern County Santa Maria Ventura
Tempe Imperial Valley Yuma
Rural Arizona/ Safford
ADMINISTRATIVE OFFICE 3755 Atherton Road Rocklin, CA 95765 916.780.1166
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
FARM CREDIT WEST TREATS ME AS
Who you are matters to us. That’s why most lending decisions are made at the branch level. We take the time to get to know your business so you can get back to what matters most to you — running your operation.
Cattle Rancher Colorado River Reservation, AZ
Farm Credit West Customer
Committed. Experienced. Trusted.