6th Annual AGOLOGY Conference, Ag Ventures LLC
About the presenters…..
Ron Markham –
Market President, Sr. Vice President
Ag & Commercial Lender
Ron has over 20 years experience as an agribusiness and commercial
lender. He has a bachelor degree in business/ administration with an
emphasis of management and finance from UW Lacrosse. Ron and his
family live in Monroe.
Kevin Raisbeck -
Market President,
Ag & Commercial Lender
Kevin has over 18 years experience in the agricultural industry, including 7
years of banking experience. He has an associate degree in Agri-business
from Southwest Wisconsin Technical College and a Bachelor Degree in
Business / Administration from Upper Iowa University. Kevin and his family
live in rural Lancaster.





Owned by Heartland Financial USA, Inc.
Independent Board of Directors
Local Decision Making
Superior IDC Rating*
Mid-Market Bank
•
•
•

Personality and high-touch service of a community
bank
Capital and additional funding sources of a midsize, publicly traded financial institution
Backroom resources and expertise of Heartland
Financial
Competitive Advantage
•
•
•
Experienced team that will make bold
recommendations and advocate for their clients
Sophisticated and client-convenient technology
Capabilities and capacity equivalent to the large
banks
• Breadth of products and deep, mature back
room
• Loan capacity of $40 million per borrower
*IDC’s analysis is based on a series of financial ratios. Each ratio, in turn, tells us something important about how well-managed the
institution is and how well they are positioned to deal with potentially adverse economic conditions…or to profit from good times. IDC’s
method of evaluating financial institutions is based on the acronym CAMEL- capital adequacy, asset quality, margins, earnings returns, and
4

Listed on Nasdaq. It’s trading symbol is HTLF

$5.9 billion multibank holding company,
headquartered in Dubuque, IA www.htlf.com

9 independent charters

States of banking operations

•
Illinois, Iowa, Wisconsin, Minnesota, New
Mexico, Arizona, Colorado, Montana,
Kansas and Missouri
•
86 Banking Centers in 62 communities
The Heartland vision is to differentiate itself by
highlighting its uniqueness as a commercial
banking organization supported by a strong retail
delivery system. As one of the top 100 bank
holding companies nationwide, Heartland delivers
high-quality financial products and service to
clients in the Midwestern, Southwestern and
Western United States.
5
Have you identified
your risks?
What are they?
 Production risk
 Price or market risk
 Financial risk
 Institutional risk (Government policy, laws etc.)
 Human & personal risk
More Specifically…
 Lower projected margins in 2015... 2016…
 Steady or higher cropland rents for 2015… 2016…
 Production costs steady or climbing…
 Interest rates – where will they go?
 Land prices…
 Intergenerational transfers
 Etc. Etc. Etc.
 Know your cost of production
 Know your break-even costs
 Accrual accounting
 Year end balance sheets
 Accurate record keeping
 Know your financial ratio’s
 Use the risk management tools available
 Strategies on government programs
 Alternative plans (Plan B)
 Communicate with your lender and team!
o Identify your “TEAM” member for financial risk

http://www.uwex.edu/ces/farmteam/budgets/fieldcrop.cfm

http://www.extension.iastate.edu/agdm/crops/html/a1-20.html

http://www.farmdoc.illinois.edu/manage/

http://www.finbin.umn.edu/

Local supplier
11




Farm record keeping is on a “cash basis”
Need to have an accurate accounting of all transactions,
the more detail the better
December 31 (FYE) balance sheet is needed to analyze your
financial performance.
Yield & production information is also helpful
12
Where
are they?
What should they be?
Why are they important?
13
15
16
17
18






Crop & livestock insurance
Marketing & hedging – price risk management
Government programs
Interest rate risk tools – USDA/FSA/SBA
Life insurance
Other
19
2014
1980
1955
What direction
are rates likely
to go?
Mitigation – Bank and Borrower
 Cash Flow/Recession Friendly Debt
 Committed/Stable Financing (No Balloons)
 Long Term Fixed Rates, NO risk to higher rates.
 Risk
21
Typical asset section of a
balance sheet
Jan
Dec
Poor debt structure
Jan
Dec
Proper debt structure
Jan
Dec
Philosophy: Finance long-term assets with long-term debt
22
Profits
Budgeted Profitability
9
8
7
6
5
4
3
2
1
0
-1
-2
-3
'09
'10
'11
'12
'13
'14
'15
'16
'17
Year Ends
23
Real World Profitability
5
4
Profits
3
2
1
0
-1
'09
'10
'11
'12
'13
'14
'15
'16
'17
-2
-3
Year Ends
24
USDA
If Conv.
Reviewed Reviewed Reviewed Reviewed Reviewed Reviewed
12
12
12
12
12
12
09/30/08 09/30/09 09/30/10 09/30/11 09/30/11 09/30/12
Net Income / (Loss)
139
44
(370)
43
43
778
Add: Depreciation/Amortization
663
702
702
700
700
636
Add: Interest
285
289
238
240
240
178
Less: Distributions
(105)
(16)
(16)
(423)
Cash Flow Available
982
1,035
570
967
967
1,169
Less: Debt Service (Interest + PYCPLTD) 1,028
1,298
1,066
339
1,068
366
Cash After Debt Service
(46)
(263)
(496)
628
(101)
803
Debt Coverage Ratio
0.96
0.80
0.53
2.85
0.91
3.19
25

How sensitive is your operation to interest rates?

Example
$1,000,000 of debt with a 20 year amortization
26
Rate fixed at 5%, 20 year amortization with balloon payment in 5
years.
• Rates increase 1% at the end of the first 5 year maturity. Then stay the
same for the remaining term.
• Payment increases by $5,325 per year.
• Total interest paid $663,500
27
Rate fixed at 5%, 20 year amortization with balloon payment in 5
years.
• Rates increase 2% at the end of the first 5 year maturity. Then stay the
same for the remaining term.
• Payment increases by $10,825 per year.
• Total interest paid $746,120
28
Rate fixed at 5%, 20 year amortization fixed for the full term.
• Rates increase 0% at the end of the first 5 year maturity. Then stay the
same for the remaining term.
• Payment remains the same for the full term.
• Total interest paid $583,760
29
Total interest paid
5 year fixed, rate increase 1%
$663,500
5 year fixed, rate increases 2%
$746,120
Fixed for 20 year term
$583,760
Which option will help you manage
your cash flow & reduce risk?
30







Federal Crop Insurance
Disaster payments
PLC (Price Loss Coverage Program)
ARC (Agricultural Risk Coverage)
MPP
LGM
Other

Keep your lender in the loop!
Open & honest conversation
o Realistic & proactive approach
o

Identify who should be on your team
o How often should you meet?
o What should you discuss?

Do you have a will?

Do you have a living will?

Do you have a farm transfer plan?

Do you understand your contracts?
o Leases, contracts, land contracts, loans

Other

Do you have medical & disability insurance?

Do you have life insurance? How much should you have?

Do you have written goals?

Do you have employees?
o What risks do you have with employees?
AgriBusiness Bankers
Our Team of seasoned AgriBusiness Bankers help you craft unique financial
solutions, while offering educational opportunities on a variety of topics.
Kevin A. Raisbeck
Market President
Platteville, Lancaster
Banking Centers
608.348.1426
Ron Markham
Market President
Monroe Banking Center
608.328.4080
John Edgington
Vice President
Monroe Banking Center
608.328.4022
Tim Hardyman
Senior Vice President,
AgriBusiness Banker
Platteville Banking Center
608.348.1445
Nick Felder
AgriBusiness Banker
Platteville Banking Center
608.348.1465
Shari A. Zenz
Vice President,
AgriBusiness Banker
Lancaster Banking Center
608.723.1400