spotlight Fall 2016
2016 BOARD OF DIRECTOR ELECTION RESULTS Page 5
MITIGATING DROUGHT RISK Page 14
100 YEARS IN BUSINESS: HONORING FELLOW CENTENARIANS Page 6
spotlight WHO WE ARE
TA B L E O F C O N T E N T S
One of the West’s leading agricultural lenders, Farm Credit West and it’s wholly owned subsidiaries are cooperatively-owned lending institutions providing financial services to farmers, ranchers, and agribusinesses with offices located in Arizona, California’s Central Coast, Imperial Valley, Southern San Joaquin Valley and Sacramento Valley.
President’s Message. . .................................... 3
SPOTLIGHT is produced for the customers, employees and friends of Farm Credit West. Comments and story ideas can be submitted to the Marketing Department, Farm Credit West, 1478 Stone Point Drive, Suite 450, Roseville, CA 95661.
BOARD OF DIRECTORS Joey Airoso, Chairman of the Board......................................Pixley, CA Sureena B. Thiara, Vice Chair of the Board................ Yuba City, CA Robert Amarel, Jr........................................................ Yuba City, CA Alben F. Barkley............................................................. Oxnard, CA Mark A. Cook.................................................................Willcox, AZ Gregory O. (Butch) Dias, Jr............................................. Visalia, CA
Financial Highlights........................................ 4 2016 Election Results........................................ 5 100 Years in Business...................................... 6 Farm Credit Testifies Before Senate Ag Committee..................................... 8 Farm Credit 100 Week.................................. 8–9 Farm Credit Structure...................................... 9 Your First Farm Loan...................................... 11 Community Center.................................. 12–13 2016 Renewal Scholarship Recipients............ 13 Mitigating Drought Risk........................... 14–15 Recruiting Veterans to FCW.......................... 16 The Sunny Side of Agriculture....................... 17 Tech Watch: Social Media Security................ 18 Territory and Office Locations........................19
J. Dick Eastman...............................................................Powell, WY Catherine Fanucchi....................................................Bakersfield, CA
Mission Statement
Douglas C. Filipponi...................................................... Creston, CA Adam B. Firestone......................................................... Buellton, CA Craig C. Gnos....................................................................Davis, CA Robert N. Hansen......................................................... Hanford, CA Blake Harlan.............................................................. Woodland, CA Colin Mellon......................................................................Yuma, AZ Barry Powell............................................................. Sacramento, CA Brian Talley......................................................... Arroyo Grande, CA
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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.
Fall 2016
PRESIDENT’S MESSAGE Mark Littlefield, CEO
Achieving Success in Today’s Environment More than a century has passed since Farm Credit West began financing agriculture and supporting rural communities. Our 100 year legacy is built on excellent service, competitive rates, and a belief in the power of relationships over transactions. It is only through this commitment to you, our customers, that Farm Credit West is more effective today than ever before. Our unique position as a customerowned cooperative is at the core of our innovative spirit, as we seek to deliver on our mission that the CUSTOMER COMES FIRST. While farming today brings many unique pressures and challenges, Farm Credit West remains dedicated to providing reliable and trustworthy financing to each of our customers. Adversity is the constant companion for agriculturalists in rural America. Farmers in California and Arizona have responded to the current drought, to a strengthening dollar, to softening commodity prices, and to increasing input costs by applying new methods and technology that enable increased yields with less water and fertilizer inputs while maintaining product quality. In addition, they have united to provide thoughtful responses to minimize the impacts of demands from both state and federal regulators for more control and oversight which adds additional costs to already burdened budgets. Responsible communication and active involvement with State and Federal Regulators is critical to Farm Credit West as well. It is certainly true that Farm Credit West is subject to many of the same economic and regulatory challenges which increase our cost of doing business. It is more important to note, however, that since our success depends largely on our farmer stockholders ability to succeed that Farm Credit West is compelled to speak on behalf of all of our interests.
Yes, it is true that Farm Credit West is regularly confronted with challenges, but we are cut from the same cloth as our farmer customers, so our response is different than many other financial institutions. We follow the example that the American Farmer sets by finding ways to implement new ideas and technology to increase efficiency and to more effectively deliver products without sacrificing the quality of our service. By following your example, Farm Credit West has weathered the storms of the last 100 years, becoming a more effective institution, ultimately providing better service and value to you, our customers. In simple terms, we are a customer-owned cooperative focusing exclusively on agricultural enterprises; we understand the need for a strong, reliable, and trusted institution to provide low cost financing through every economic cycle. To achieve this objective, Farm Credit West makes it a priority to provide excellent value to you as a customer and a stockholder/owner. By providing both competitive rates on our loan products and an excellent rate of return on our equity through our patronage program, our customer-owners recognize Farm Credit West as a strategic value proposition. In fact, 2015 marked both continued reductions in our interest rate margins and the largest patronage payment in the history of Farm Credit West, with $67 million being returned to you, our customers, at year-end. Looking beyond our current challenges, it is obvious that both our farmer customers and Farm Credit West have an incredible story of success and perseverance to tell, and we recognize the need to share this story with others. During the last year we have leveraged our 100 year anniversary as a platform to engage lawmakers on the importance of agriculture to our nation and the need for a reliable lending institution to support this industry. Through increasing involvement through agriculture coalition groups, commodity negotiating associations, and the Farm Credit national team, we can get the attention of key decision makers. It is only through relaying our message that we can begin to enact change. But we need to do more to tell your story, the story of how hard work, creativity and devotion to the land has fed, clothed, and housed this hungry nation. Years past have taught the agriculture industry some important lessons. However, farming today is not without challenges. With 100 years of experience supporting the agricultural industry, Farm Credit West helps mitigate challenges for you, our customerowners, by providing superior service at competitive rates with a robust return on member equity. By uniting together to face the challenges of the day, we will survive and become stronger.
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spotlight Financial Highlights Farm Credit West reported net income of $110 million for the first half of 2016. These year-to-date earnings are ahead of our business plan targets. Also during the first six months of 2016, our average earning assets and capital levels increased and we strengthened our allowance for loan losses. Average Earning Assets (in millions)
Average earning assets increased $1.4 billion, or 18.1%, during the first six months of the year. The full impact of the Southwest merger and significant loan growth during 2015 was recognized in the average 2016 earning assets calculations. Additionally, Farm Credit West is experiencing steady loan growth in 2016.
Nonearning Assets (in millions)
Nonearning assets (nonaccrual loans plus other property owned) increased by $19 million or 16% to $139 million as of June 30, 2016. The increase was primarily due to a $22 million increase in nonaccrual loan volume as a result of stress in certain loans in our portfolio. The other property owned balance decreased by $2 million.
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Members’ Equity as a % of Total Assets
In the first half of 2016, total members’ equity increased $111 million, primarily due to the net income of $110 million and an increase in the preferred stock balance of $4.7 million. Partially offsetting net income during the year were preferred stock dividends of $3.5 million.
Allowance for Loan Losses as a % of Loan
Our allowance for loan losses totaled $52 million (0.57% of loan principal and interest) at June 30, 2016, compared with 0.50% of loan principal and interest at December 31, 2015. 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 evaluation of the loan portfolio, which generally considers historic charge-off experience and is adjusted for other relevant economic factors.
Fall 2016
2016 Election Results 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. Board of Directors Congratulations to Mark Cook, Robert (Bob) Hansen, Colin Mellon, Brian Talley and Sureena Thiara who were recently elected to serve on the Farm Credit West Board of Directors. The current Farm Credit West Board of Directors is made up of 14 stockholder-elected directors and two appointed directors. Farm Credit West Board members are the governing voice of the Association, acting to represent the best interests of the Association’s shareholders. Farm Credit West Board members regularly participate in director development programs and training in addition to attending scheduled Board and committee meetings throughout the year. Much of Farm Credit West’s success is attributed to the contributions of the many customers who have served as directors over the years and we extend our utmost appreciation to each of them for their leadership, insight and many years of dedicated service. Mark A. Cook Mark is a new member to the Farm Credit West Board. He has been farming pecans, pistachios and alfalfa in Cochise and Graham County, Arizona. He also operates a small vineyard and winery in Willcox, Arizona. Robert (Bob) Hansen Bob has been reelected to the Farm Credit West Board. His family has a custom feeding operation along with a cow calf, stocker and Holstein replacement program in the Corcoran, California area. Colin Mellon Colin has been reelected to the Farm Credit West Board. His family has a fourth generation farm operating in the Yuma Valley, Gila Valley, Dome and Wellton Mohawk areas. They grow winter vegetables, grains, cotton, alfalfa, Sudan grass, cantaloupe, vegetable seed and various other crops.
Brian Talley Brian is a new member to the Farm Credit West Board. Talley Farms is a grower, packer and shipper of vegetables in the Coastal region of California. They also grow lemons, avocados and operate a direct to consumer harvest box program. Talley Vineyards specializes in estate grown chardonnay and pinot noir wines. Sureena B. Thiara Sureena has been reelected to the Farm Credit West Board. She is a second generation farmer in the Sacramento Valley region growing almonds, prunes, peaches, walnuts, persimmons and operating two prune dehydration facilities. She is also a partner in a family owned crop insurance agency. 2017 Nominating Committee Robert L. (Roy) Gill, Matt Mariani, Nicholas Miller, Dana Merrill, Louis Pandol, Michael Dias, Doug Westmoreland, Mike Blohm. 2017 Alternates for Nominating Committee Sam Nevis, Paul Squires, Jeffrey Yong, Mike Richardson, Julien Parsons, William Tos, Jr., Bill Plourd, Mark McBroom.
Retiring Director JOHN O. GRIZZLE This year John Grizzle retired from the Farm Credit West Board. John represented Farm Credit West and Farm Credit Services Southwest stockholders with the utmost integrity. We thank him for his dedicated service and wish him well in all future endeavors. John Grizzle started on the Farm Credit Services Southwest board in 1997 and joined the Farm Credit West board in November 2015 as part of the merger.
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spotlight 100 Years in Business: Honoring Fellow Centenarians On July 16, Farm Credit West celebrated 100 years of service. In honor of this occasion, we reached out to a handful of our customers who have been operating for as long, if not longer. Below are their reflections on what it means to be a centenarian, and what techniques they have implemented to maintain a successful operation today. The Milo C. Webb Homestead began in the Tonto Basin in 1886, trailing a herd of cattle from Sedan, Kansas to Arizona. “During my time working on the ranch, my father helped me start my own operation. Phil Ogden, University of Arizona professor in Range Science, had the idea of monitoring our grass annually when we bought the Slash S Ranch in 1976. As a result, we have the longest continually monitored range in Arizona. This has really helped us to focus on our range condition and stay ahead of the curve during this drought that began in 2000. We try to have our calves shaped up and in good condition so buyers want to buy them repeatedly. The real key is having good ranch managers like Morty Van Haren on the Slash S who have been with me for over 30 years. Ultimately, our family was frugal and worked hard. I enjoy seeing the cow herd improve from year to year and the challenges of doing so economically. Farm Credit in its various forms has always been our family’s lender. My father, Jim Webb and Alvin Lann monitor soil, Milton D. “Bud” Webb, cover and vegetation at Slash S Ranch served on the Board of in October, 1983 the Arizona Livestock PCA for 25 years. Farm Credit has given my operation the flexibility to grow the cow herd and adapt to the changing conditions of ranching in the modern day.” – Jim Webb
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Pictured from left to right, Wallace Jr., Wallace Sr., and Walter Weishaar
The Weishaar Ranch was founded in 1912 by Ezra Heinze when he began farming cotton on a small piece of ground in Shafter, CA which is still part of the operation today. Today, Weishaar Ranch still farms cotton in addition to permanent tree crops. “We’ve always kept the operation small (currently 160 acres) and we’ve always had partners on the ranch with careers outside the operation to help stabilize the ebbs and flows of farming income. As I grow older I really look forward to the time spent with my father and brother working the ground that our parents, grandparents and great grandparents dedicated much of their lives to. We’ve been a loyal Farm Credit customer since they opened for business in 1916. Through the years we’ve resisted the temptation to chase “greener grass.” That loyalty has always been returned in the form of secure operating capital as the operation changed hands from generation to generation. The next 50 – 100 years will see much change in the way we do business; water will play the largest role in shaping our futures. However, we’re already well into developing the passion that will sustain the operations in the 5th generation of Weishaar’s currently growing up on the ranch.” – Walt Weishaar
Fall 2016
J. Albert Brown Ranches, Inc. is located in the south central part of Apache County, Arizona and consists of a beef cattle ranch together with an alfalfa and grass hay farm. Extended family members of the Brown’s and Whiting’s settled in Northeast Arizona in the late 1870’s. “As long as I can remember, nearly six decades, our family has utilized the Farm Credit system for funding which has enabled us to grow and continue producing great beef. It is rewarding to use The Brown family tends their herd
Standing by you for 100 years www.farmcreditwest.com 800.909.5050
the natural resources that God generously provides to be able to sustain ourselves and, at the same time, serve others by helping to feed them. We hope and plan to continue enjoying life here in the small community of St. Johns while carrying on traditions of raising our families and enjoying our neighbors. It is a privilege to help care for the land and use it wisely. I have enjoyed striving to use our natural resources conservatively and observing how productive this good earth can be.” – Norman Brown
We’ve spent the last century focused exclusively on agriculture with low rates, unmatched expertise and the best customer service around. The way we look at it, we’re just getting started.
spotlight Farm Credit Testifies Before Senate Ag Committee Agriculture and Rural Communities’ Need for Reliable and Consistent Credit Highlighted in Testimony Earlier this year, Farm Credit participated in the Senate Committee on Agriculture, Nutrition and Forestry’s full committee hearing titled, “The Farm Credit System: Oversight and Outlook of the Current Economic Climate.” During this hearing, Farm Credit Services of America CEO Doug Stark testified about the importance of Farm Credit’s broad mission to serve rural communities and agriculture and how Farm Credit is working with customers during the current downturn in the agricultural economy. The Committee also heard from Michigan farmer and U.S. Army veteran Jed Welder, Farm Credit Administration board members Kenneth Spearman, Dallas Tonsager and Jeffery Hall, along with representatives of the commercial banking industry. In addition to those testifying in-person, nearly 80 groups representing farmers, ranchers, farmer-owned cooperatives and other agribusinesses, rural infrastructure providers and rural communities submitted statements for consideration by the committee. “Farm Credit exists to serve agricultural and rural communities in good times and bad. Unfortunately, there are challenging economic indicators ahead,” said Stark. “It’s times like these that highlight the importance of Farm Credit — to remain that financial partner to producers and rural communities when the times get tough. We’ve been in our rural communities preparing our borrowers to weather the storm, and we’ll be here to see them through to the other side.” Low commodity prices coupled with high input costs are putting pressure on farmers and ranchers. Farm Credit has been working to make sure its customers have accurate information about the situation and are able to make good business decisions. Helping to somewhat offset the current price squeeze, debt-to-asset ratios on U.S. farmers are below the 30-year average and well below the levels seen in the mid-1980s. Also in contrast to the devastating downturn agriculture experienced 30 years ago, interest rates — and therefore debt costs — remain low. “Farm Credit’s philosophy on credit today is this: we know our customers well, understand and respond to their needs and work cooperatively with them to analyze and structure our transactions to give them the best chance to succeed,” said Stark. Michigan farmer and U.S. Army veteran Jed Welder also weighed in on the current economic conditions in agriculture and the value of Farm Credit. “This is a challenging time for farmers like me across the country. Right now, we are planting corn and soybeans with
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prices very near breakeven,” said Welder. “Having a lender that works with me, that knows my farm and the challenges I face, is more important than ever.” Welder explained how he relied on Farm Credit, saying “They understood what I wanted to do and what I needed to run my operation, they made good, solid recommendations and over time became a trusted partner.” Farm Credit’s mission beyond agriculture is just as important. Rural homebuyers face obstacles unknown in more urban settings and Farm Credit provides loans tailored to these unique circumstances. Farm Credit also provides financing for companies that provide vital infrastructure to rural communities, helping bring clean water to rural families, reliable energy to farms and rural towns, and modern, high-speed telecommunications that connect rural America to the rest of the world. Modern infrastructure makes rural communities competitive, provides jobs, and helps improve the quality of life for rural families. The complete hearing can be viewed at http://www.agriculture.senate.gov/hearings.
Legislative Visits
From left to right, FCW Director Bob Amarel, FCW Board Vice Chair Sureena Thiara, Senator John McCain (AZ), FCW Board Chairman Joey Airoso
Farm Credit West Board Chairman Joey Airoso, Vice Chair Sureena Thiara, and Farm Credit West Director Bob Amarel traveled to Washington D.C. with Farm Credit West General Counsel Chris Brumfield to meet with California and Arizona Legislators. During these meetings, the delegation spoke to the need for a reliable, trustworthy financing institution for the agriculture industry and the part Farm Credit West has played in filling this role over the last 100 years. As the commercial banking industry increases lobbying efforts to eliminate the Farm Credit Systems’ GSE status, meetings such as these become all the more critical.
Fall 2016
Fresh Perspectives Luncheon
Debbie Raven is recognized at the Farm Credit 100 Fresh Perspectives Luncheon in Washington D.C.
During Farm Credit 100 week in Washington D.C., Farm Credit representatives gathered together to honor the top 100 visionaries who are positively shaping the future of rural communities and agriculture. These individuals and organizations were selected through a competitive process over the last year during the Fresh Perspectives national search. Farm Credit West joined together with CoBank, Golden State Farm Credit, and Fresno-Madera Farm Credit to sponsor Debbie Raven, President and CEO of Valley Small Business Development Corporation (Valley), to attend this event to be recognized. Valley delivers mobile financial literacy education to underserved rural communities and socially disadvantaged farm populations in five California counties.
Farm Credit Structure Farm Credit consists of a group of financial cooperatives that serve local and regional agricultural markets throughout the U.S. and Puerto Rico. As cooperatives, each Farm Credit association, like Farm Credit West, is owned by its customers, governed by a board of directors elected by its customers, and shares profits with its borrower-owners through patronage distributions. This unique structure keeps Farm Credit West connected to the local communities we serve, and contributes to the strength and stability we’ve enjoyed for 100 years. MEMBER BORROWERS The Systems 74 Farm Credit associations receive funding through one of four regional wholesale banks: AgFirst, AgriBank, CoBank and Farm Credit Bank of Texas. Farm Credit West receives funding RETAIL ASSOCIATIONS from CoBank along with 23 other Farm Credit Associations. Farm Credit’s funds are raised by the Federal Farm Credit Banks Funding Corporation, who issues highly rated notes and bonds on behalf of the four wholesale WHOLESALE BANKS banks in the Farm Credit System. These bonds are sold on Wall Street in the public market. Investors purchase our bonds and the price we receive directly affects $ the rates we are able to offer our FEDERAL FARM CREDIT customer owners. BANK S FUNDING CORPOR AT ION Through good times, tough times, and everything in between, we have been here, providing financial services focused exclusively on agriculture, standing with our customers, working for them with DOMESTIC AND honesty, dedication, and personal INTERNATIONAL INVESTORS attention. We’ve been serving agriculture this way for 100 years, KEY and we’ll keep doing it this way FUNDS OWNERSHIP as long as there is agriculture to serve.
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spotlight Serving Agriculture Since 1916 •
Farm Credit West provides a reliable source of credit and financial services to farmers, ranchers, dairymen and agribusinesses of every size and revenue range
• $9 billion loan and lease program as of June 2016
• Over $429 million in returned patronage payments made to our member-borrowers since the program’s inception in 2002 • Approximately 12,700 loans and leases to over 5,400 customer-owners
Loan Portfolio by Commodity Loan Portfolio Diversification
Patronage
As of 12/31/15 OTHER 10.9%
RICE 1.9% TABLE GRAPES 3.1% FLOWERS/NURSERY 1.9% DAIRY 14.5% LIVESTOCK 2.4%
CITRUS/AVOCADOS 3.5% EDIBLE TREE NUTS 15% TREE FRUIT 4.2%
$33
FARM-RELATED BUSINESS 6%
WINE AND WINE GRAPES 9.3% FIELD/FEED CROPS 7.1%
PROCESSING AND MARKETING 1 5.2%
$51
$53
$57
$67
50
75
75
75
75
BPS
BPS
BPS
BPS
BPS
2011
2012
2013
2014
2015
VEGETABLES 5%
(in millions)
Products and Services LENDING
LEASING
FINANCIAL SERVICES
Real Estate Loans
Equipment
Cash Management
Lines of Credit
Facilities
Future Payments Funds
Development & Construction Loans
Machinery
Online Banking
Solar
Preferred Stock
Equipment Loans
Vehicles (tax advantages)
Letters of Credit
Fixed interest rates for mortgage loans are at a historically low level. With volatility in global financial markets, now is the perfect time to consider the security of longer-term fixed rates. Contact your loan officer to hear how low rates are today.
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Fall 2016
Your First Farm Loan What You Need to Know By David Penney, V.P. Key Relationship Manager, Tempe, AZ
Applying for your first farm loan may seem like a daunting task. Although underwriting requirements have been strengthened following the last recession, obtaining credit is still very possible. Having been an agricultural loan officer for more than twenty years, I have compiled the following list of tips and recommendations to make navigating the process easier. 1. Know your financials: The days of lenders making decisions strictly based on a customer having adequate collateral are over. It is extremely important that a borrower understands his/her financial position. This includes understanding both the balance sheet (a summary of what you own and what you owe) and the earnings statement (identifies profit and loss performance). This knowledge is important so you can demonstrate that you have both the equity to support an economic downturn and the earnings to make your debt payments. 2. Have accurate numbers: It is impossible for Farm Credit West to make a good loan decision if the financial information you provide is inaccurate. For loan approval, Farm Credit West must show adequate capital (equity) and capacity (repayment) position for any customer. This cannot be done if the information is not of good quality. If you struggle in this area, take an accounting course or work with an accountant who understands agriculture. 3. Take a look at your credit report: It is almost guaranteed that Farm Credit West will run your credit report, and what it shows could impact their credit decision. If you take a look at it beforehand, you will know if there are any issues or if there is incorrect information. If there are negative issues with your credit, be proactive and talk with your loan officer up front. If there is inaccurate information, dispute it with the credit reporting agency. You are entitled to a free copy of your credit report annually from each of the three nationwide consumer credit reporting companies. You can request your free report at www.annualcreditreport.com.
4. Prepare a budget, and be realistic: In most cases, Farm Credit West will require an income and expense budget for the coming year. Make sure you account for all projected income and expenses, including debt payments and family living expenses. Also, be realistic with your budget items. Many times, budgets will show income that is too high to be realistic, or expenses that are too low. There are some good resources on the web to help with budgeting, and your potential lender can also be a source for some historical benchmark information to see if your assumptions are realistic. 5. Have adequate liquidity: Liquidity is cash or assets that can be quickly converted to cash to meet short-term obligations. When the unexpected happens, such as equipment breaking down, vendors not paying on time or a crop that didn’t yield as expected, it is crucial to have liquidity to fall back on. Liquidity is a safety cushion when the unexpected occurs and is crucial for any size operation. 6. Be flexible: When running any kind of business, things never go exactly as you planned. That’s why it is important to have contingency plans and to be able to make changes to your business plan if things don’t happen the way you initially envision. Farm Credit West prefers when customers think about these possibilities beforehand and are flexible enough to make important changes if necessary. 7. Have a mentor: There are many successful farmers and ranchers in the West, and probably quite a few that are located not too far from you. If you become friendly with one, see if they will be willing to mentor you as you build your business. These people have a wealth of knowledge and experience which most will be willing to share. Take advantage of their expertise! Applying for a farm loan isn’t a difficult process, but if you can incorporate some of these tips, it should make it a smooth experience. Should you have any questions or comments on any of the above, please do not hesitate to call your nearest Farm Credit West branch.
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spotlight Community Center Kern County’s Farm Day
2016 Young Cattlemen’s Conference Trever Hall, Vice President based in the Tempe, AZ branch, recently participated in the 2016 Young Cattlemen’s Conference (YCC). This program is organized by The National Cattlemen’s Beef Association with the intention of developing the next generation of industry leaders. Farm Credit is a large supporter of this event, sponsoring approximately 60 young cattle producers from across the country in a four state tour, educating them on best practices and legislative
(Left to right) Mindy Mello from the Kern County branch, Amanda Boschma from CA Women for Agriculture, Mishael Tarbell from the Dairy Council of CA, and Cheryl Mendoza from Kern County branch
Earlier this year, Farm Credit West staff from the Kern County branch volunteered at the dairy booth for Kern County’s Farm Day in the City. Farm Day is organized by the Kern County Farm Bureau where hundreds of second and third graders learn about agriculture. The booth had a movable dairy classroom, where the instructor described the cow from head to hoof.
Santa Barbara Agriculture Awards Farm Credit West recently sponsored the Agriculture Recognition Awards banquet for the Santa Barbara Fair. Congratulations to George and Debbie Adams, Farm Credit West customers who received the Farmer of the Year award. In addition, the five Teixeira Brothers (also Farm Credit West customers) were recognized as the Agri-businessmen of the Year.
New Office in Dinuba Opens On March 16, Farm Credit West moved into their new building in Dinuba, CA. Now located at 940 W. El Monte Way, Farm Credit West is able to continue meeting the growing needs of our customers in the South San Joaquin Valley and provide superior service to our local farmers and ranchers. The Dinuba Branch will host an open house for customers to tour the new facility on Friday, September 9.
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The 2016 attendees of the Young Cattlemen’s Conference pose in front of the Capitol in Washington D.C.
priorities in the cattle industry. Attendees to this conference are selected through a competitive process. Two Farm Credit West customers also attended this conference, Jason Glenn, a cattle rancher from Paso Robles and Jeff McKee, Ranch Manager of Santa Margarita Cattle Company near San Luis Obispo.
Fall 2016
Community Center FFA Arizona Raises $298,000
2016 Renewal Scholarship Recipients Congratulations to all of our 2016 renewal scholarship recipients. These students continue to maintain academic excellence in an agricultural related major. Scholarship recipients are eligible to renew their scholarship for up to three years after their initial award. This year’s students renewing their scholarships will each receive $1,500 towards their education. Students renewing their scholarship include:
Guests enjoy the live auction and dinner at the Arizona FFA Foundation event in Tucson earlier this year
Mark Brawley, Senior Vice President based in the Safford branch, currently serves as a board member and treasurer of the Arizona Agricultural Education/FFA Foundation. As in many other states, the Arizona FFA does not receive state funding. To raise funds, an annual foundation dinner and live auction is hosted on the final day of the State Leadership Conference at the University of Arizona in Tuscon. As sponsors of this event, employees from the Farm Credit southwest region had a front row seat as Mark presented a check for just over $298,000 in funds raised over the last year to Student State President of the FFA, McKenna Mellon.
Farm Credit West Celebrates 100 Years of Service On July 15, Farm Credit West celebrated the 100 year anniversary of the Farm Credit System. Employees gathered together over lunch to reflect on our legacy of excellent customer service and always placing relationships over transactions. We look forward to serving you, our customer-owners, for another 100 years!
Bridget Adam Santa Maria, CA
Hattie Jameson Visalia, CA
Justin Adam Santa Maria, CA
Audra Jones Orland, CA
Aaron Brown Hanford, CA
Cory, Kasbergen Woodland, CA
Gavin Chohan Yuba City, CA
Maggie Madden Paso Robles, CA
Jason Couto Jr. Riverdale, CA
Matt McCue Fairfield, CA
Sarah Dreyer Exeter, CA
Elena Montemagni Visalia, CA
Kristen Droogh Lemoore, CA
Matt Pandol III Delano, CA
Eleanor Harlan Woodland, CA
William Pearce Yuba City, CA
Foster Hengst Woodlake, CA
Lauren Reade Santa Maria, CA
Anna Hinrichs San Miguel, CA
Kavin Sihota Selma, CA
2016 HOLIDAY SCHEDULE LABOR DAY — Monday, September 5 COLUMBUS DAY — Monday, October 10 VETERANS DAY — Friday, November 11 THANKSGIVING DAY — Thursday, November 24 CHRISTMAS DAY — Monday, December 26 The Ventura Branch celebrates Farm Credit’s 100 year anniversary
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spotlight Mitigating Drought Risk By John Barcelos, Chief Risk Officer, Roseville, CA The current drought situation is well-understood by our customers. Drought is nothing new — you are all very aware of the issues and the impacts it presents to your individual operations. Thankfully, 2016 proved to be a wetter year than 2015. However, we are still a far way off from celebrating an end to the drought. The water situation in California is complicated — to say the least. Even in years with abundant rainfall there is no guarantee that surface water deliveries can be counted on due to Federal and State regulations which control the timing and amount of water deliveries. The combination of dry years and heavily regulated water policies create a very real and direct risk to Farm Credit West customers. Just as you must consider water risks in your own operation, Farm Credit West must manage water risk across the entire loan portfolio — similar to how we would manage credit risk, or commodity risk. This article will provide some perspective on what the drought means to Farm Credit West, and what we are doing to address this risk to ensure that Farm Credit West remains a reliable source of financing for agriculture. Overall, Farm Credit West has a very well-diversified portfolio with our largest two commodity groups being Nut Crops (15%) and Dairy (14%). Geographically, our loan volume is primarily
centered in California (93%) and Arizona (5%). Farm Credit West has regional diversification within these states which gives us some limited protection from the impacts of the drought.
Despite the severity of the drought, the impacts on Farm Credit West credit quality have been limited.”
Certain areas of California and Arizona have better water availability than other regions. Northern California has better access to both surface and groundwater, whereas the southern San Joaquin Valley and Central Coast have a higher dependence on groundwater. As a result of the consolidation with Farm Credit Services Southwest, our territory extends into California’s Imperial Valley and Yuma, Arizona. Both areas have senior water rights on the Colorado River that ensure
U.S. Drought Monitor Source: Eric Luebehusen, U.S. Department of Agriculture http://droughtmonitor.unl.edu/
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Fall 2016
priority access to surface water. The balance of the Arizona territory does not enjoy the same rights as these areas, and as a result, is more susceptible to drought conditions. The August 9th U.S. Drought Monitor estimates that 21% of California is experiencing “Exceptional Drought”. While this is down considerably from a year ago, the San Joaquin Valley and Central Coast regions (where a majority of Farm Credit West’s volume is centered) still retain the Exceptional Drought rating. Arizona remains in better shape than California overall. Given that most of our volume is centered in areas that are routinely faced with dry conditions, Farm Credit West has always been proactive in assessing the adequacy of customer water sources when making loans. Two years ago, Farm Credit West enhanced existing efforts to verify customer water sources via water questionnaires. In addition, Farm Credit West has offered a Water Stewardship program which provides financing at reduced rates for water infrastructure improvements to help customers improve their water management capabilities.
Despite the severity of the drought, the impacts on Farm Credit West credit quality have been limited. This is due largely to adjustments that producers have made within their own operations to manage through dry conditions. Potential implications of the Sustainable Groundwater Management Act are being monitored closely, as the mandates established in the sustainability plans will determine how water is to be allocated within a basin. If certain groundwater basins are not able to be brought into balance, acreage curtailments and/or higher water costs may be the new norm. Over the longer term, this is where the real risk lies for you and for Farm Credit West. Rest assured that Farm Credit West will continue to stay on top of this important issue to ensure that we are appropriately managing risk. Managing risk is only one part of the equation. Farm Credit West’s value proposition calls for us to provide “Sustained Value” to our customers. As such, know that we will continue to look for opportunities to add value to our relationship with programs and products to help you manage your way through these uncertain times. Feel free to reach out to your loan officer or branch manager with any questions.
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Recruiting Veterans to Farm Credit West Viable Career Opportunities After Military Service As we celebrate the Farm Credit Centennial, it is important to reflect on our support of America’s military veterans in the agricultural community. Our military veterans demonstrate strong personal values, such as team work, ownership, commitment, and integrity, all of which align with Farm Credit West’s core values and mission. Farm Credit West is committed to providing reliable financing, career and promotional opportunities, and support to veteran groups both now and in the future. Retired Farm Credit West employee, Len Monaco, serves as our Association Veterans Coordinator. In addition to his 30 year career with Farm Credit, Len served six years in the Marine Corps Reserve and was a Sergeant in a Marine attack squadron. Most recently, Len has worked with the Farmer Veteran Coalition on various projects and focused his efforts on recruiting veterans to open positions at Farm Credit West.
• Campus Outreach: Len continues to strengthen relationships with instructors and Student Veteran Organizations (SVO) at multiple universities. He routinely attends SVO events to meet with students and discuss career opportunities at Farm Credit West. He also provides mentorship to students that will soon be entering the workforce. •
Staff Awareness: Farm Credit West’s managers and senior leadership are aware of the significance of recruiting veterans and the value that their military experience brings. They seek out and consider qualified veteran candidates for open career opportunities.
In the past twelve months four military veterans have been added to the Farm Credit West staff. Farm Credit West would like to honor our military veterans, please join us in thanking them for their service to America and Farm Credit.
Farm Credit West’s current veteran recruiting strategy includes the following components: • Campus Job Fairs: Farm Credit West staff attends campus career fairs and related recruiting events at universities throughout our territory.
HERE ARE A FEW OF OUR MILITARY VETERANS: Bob Cox (36 years with Farm Credit) is a Senior Vice President in the Templeton, CA office. Bob served six years in a National Guard artillery unit and reached the rank of Specialist 4th class. Bill Hiler (21 years with Farm Credit) is a Vice President — Technology in the Rocklin, CA admin office. Bill served six years in the Navy submarine service as a sonar technician, reaching the rank of Petty Officer 2nd Class. He did eight deployments at sea and last served on the USS George C. Marshall which is a ballistic missile submarine. David Guilmette (17 years with Farm Credit) is a Vice President — Technology in the Tempe, AZ office. For the past 23 years, David has been a Marine, currently serving as a First Sergeant in a Marine Corps Reserve engineering unit. Gary Helin (12 years with Farm Credit) is a Senior Appraiser in the Tulare, CA office. Gary did a four year tour in the US Air Force as an avionics technician. He later served 10 years as an officer in the National Guard, lastly as a Captain in an infantry battalion.
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Steve McPhetridge (4 years with Farm Credit) is a Senior IT Specialist in the Tulare, CA office. Steve was a shipboard damage control specialist in the Navy, doing two deployments at sea, lastly holding the rank of Petty Officer 3rd Class. Lorena Lievanos (1 year with Farm Credit) is a Credit Analyst in the Bakersfield, CA office. Lorena was a logistics specialist in the National Guard, serving eight years, reaching the rank of Staff Sergeant. She had one deployment to Iraq. Adam Cox is a 2016 Summer Intern in the Templeton, CA office. Adam did a four year tour with the US Navy, working in flight operations in a Navy fighter/attack squadron, lastly aboard the aircraft carrier USS Ronald Reagan. He still serves in the Navy reserve in a Public Affairs Unit. Chris Moore (10 months with Farm Credit) is a Vice President in the Imperial, CA office. Chris is a former United States Marine who served from 1989 to 1993 and is a Persian Gulf War veteran.
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The Sunny Side of Agriculture Dr. David M. Kohl Professor Emeritus, Virginia Tech Today, there is considerable worldwide economic turbulence; including “Brexit,” wide-swinging equity markets, commodity prices, as well as a pervading worry in many agricultural sectors. Amongst these factors, the brighter side of the industry is often overlooked. Recently, in front a group of inquisitive youth learning about the industry, a national agricultural reporter asked me, “Is there truly a bright side to the agriculture industry?” Well, let’s take a journey on the “cup half-full” side of the agriculture industry. The current economic reset in agriculture claims a large share of the news headlines; however, the long-term outlook for the industry is indeed positive. By the year 2050, world population growth and the changing global income dynamics will demand 70 percent more food, feed, fiber and fuel. Because of technology and other innovations, producers will meet this demand with only 70 percent of the water, land and air used today. The philosophy of future agriculture will be efficiency or in a phrase, “better is better before bigger is better.” Speaking of technology and innovation, integrating these components into management plans for production, and marketing as well as daily operations will be critical for success. This will be one area in particular where well-trained young people can mesh their strengths in technology with the experience of the senior generation. Together, they will usher in a new dawn for the agriculture industry. Another aspect on the bright side of agriculture is changing demographics. Young people will continue to be attracted to the industry because of the entrepreneurial opportunities. Particularly, those young people who align with the changing demographics of the domestic and global marketplaces will be a positive for agriculture. More women, minorities, and youth outside the traditional agriculture mode will add a new energy to all sides of the industry from production to agribusiness. However, monitoring consumer, social and political trends of a world population that could be 70 percent urbanites presents a specific challenge for the millennial generation, as they assume leadership from the baby boomer and veteran generations.
Regarding farm transition, the current economic downturn in agriculture will accelerate this evolution in the industry. Some say up to 60 percent of farm ground will change hands, either by sale or lease, by 2030. Additionally, over 20 percent of agricultural producers will not have a family member to take over the business, thus creating real opportunity for those outside a traditional farm family. In the years ahead, there will be a widening gap of profitability in agriculture. Despite today’s economic challenges, the top 40 percent of businesses in the farm record system databases nationwide continue to realize profits, in the range of 4 to 8 percent return on assets. However, the bottom one-third of farms generate a small or negative profit, even during positive economic cycles. Economically, how does one position a business toward the sunny side of agriculture? First, a good set of written, short and long-term goals is a start to provide focus in your business strategy. Next, develop that business strategy into tactics. This will require planning, execution and monitoring of production, marketing, operation and finance systems. A good set of financial records with projected cash flows, which are compared to actual results is critical. This process of thinking through your operations on paper is extremely valuable. In addition, it helps you measure progress more accurately. Finally, one of the most positive aspects of farming is family. Often, I hear phrases from producers like, “The best crop I ever raised was my kids.” Life on a farm is special. Whether or not they ever learn to drive a tractor, children that grow up on a farm gain emotional intelligence and a heightened sense of responsibility and accountability. Sometimes it is difficult to put a monetary value on this aspect of agriculture, but it is undoubtedly valuable. Regardless of the economic cycle, there are numerous positives in agriculture today. The industry is integral to global economics, innovation and sustainability, and will continue to present promising opportunity. Requiring strength of body, mind and heart, agriculture is truly the world’s lifeblood, providing food, feed, fiber and fuel across the globe.
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spotlight Tech Watch Social Media Security By Michael Levin, CEO/Founder of the Center for Information Security Awareness Today’s Internet-connected world makes creating and sharing information easier than ever. Connectivity no longer stops when leaving your home or office. It continues wherever you travel. Wherever they are, millions of Americans participate daily in a growing “Internet of Things.”
is in turn sold to advertisers or even organized crime.
Safe Practices on Social Media • Be aware of your audience. Know
LACK OF AWARENESS • Be selective with the services you join. Learn about and adjust all security settings as soon as you sign up.
Our personal who in your network may access and work lives your content and restrict who can intersect across see information you post. multiple devices • Know the limits between personal and networks. and professional use. Self-assess your online activity • Think carefully about what a photo and regularly or location check-in may reveal. review your • Be mindful of your opinions. security settings. Realize that anything you say on Consider how the Internet can be saved, even your social if you delete the original post. media accounts • Avoid divulging personal or work- could impact place information that would not your personal otherwise be publicly available. and professional reputation. Create standards for yourself when creating a new post or sharing a photo/video on social media. In addition, keep in mind that publicly shared personal information could be the same data that allows a hacker to gain entry into a workplace account.
•
Finally, be aware that announcing on social media sites that you are on vacation may give a thief the perfect opportunity to burglarize your home. Every year thousands of families are victimized as a result of poorly timed social media posts.
Social media is highly accessible. We trust its convenience. It’s easy to use on any device, from any location. Strong network and device controls provide reliable security. Yet these controls cannot reduce risk if we expose ourselves to breaches in security when posting to public sites. Social media (Facebook, Twitter, LinkedIn, Snapchat, etc.) can be a double-edged sword. While these sites provide useful tools to reach a wide audience, it also creates risks including identity theft, loss of intellectual assets, financial data, reputational damage and more. No individual or business is safe from the potential risk and threats associated with social media. With proper diligence, you can safeguard your activities and protect your workplace and personal information.
Common vulnerabilities and threats Safe use of social media begins with understanding the risks. Here are the two most frequent user weaknesses:
Keep security and privacy settings strong and be aware of privacy policy changes. Many users either do not adjust their privacy settings or set them incorrectly. Check for updates over time as your old settings become obsolete.
• Always follow safe password practices. Safeguard your passwords and other sensitive data and don’t share or exchange this information on social media sites. • Be selective with invitations. Verify friend requests or unfamiliar inquiries by other means. • Be aware that clicking on a link/photo/video on any Social Media site could infect your computer with a virus. SHARING TOO MUCH Anything you share can negatively impact yourself, others and your place of business. This can be compounded by default settings broadcasting your information to a larger audience than you intend. Data mining programs use this common user error to their advantage, constantly searching publicly-available material to build profiles about people and organizations. This information
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When using social media, it’s best to err on the side of caution and increased security. A single location check-in or post may not compromise your data. Over time, however, your activities and behavior paint a picture to those that view your information. As we increasingly use social media, we expose more attack points as our “Internet of Things” expands. ABOUT MICHAEL LEVIN In 2007, Michael retired from the United States Department of Homeland Security after a distinguished thirty year career in law enforcement. Following his retirement, Michael founded the Center for Information Security Awareness, an organization committed to exploring ways to increase security awareness among consumers, employees, businesses and law enforcement.
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Territory and Office Locations
Administrative Office 1478 Stone Point Drive Suite 450 Roseville, CA 95661 916.780.1166
Yuba City Woodland
« Roseville
Farm Credit West Administrative Office
Capital Markets 1446 Spring Street Suite 201 Paso Robles, CA 93446 805.237.0998
Hanford
Dinuba
Tulare Capital Markets Templeton Kern County Santa Maria
Carpinteria 1135 Eugenia Place, Suite A Carpinteria, CA 93013 805.684.8771
Carpinteria Ventura
Dinuba
Santa Maria
940 W. El Monte Way Dinuba, CA 93618 559.591.9378
1178 Tama Lane Santa Maria, CA 93455 805.922.7991
Hanford
Tempe
1111 W. Lacey Boulevard Hanford, CA 93230 559.584.2681
3003 S. Fair Lane Tempe, AZ 85282 602.431.4100
Imperial Valley
Templeton
Woodland
485 Business Park Way Imperial, CA 92251 760.355.0291
175 Cow Meadow Place Paso Robles, CA 93446 805.434.3665
440 Pioneer Avenue Woodland, CA 95776 530.666.3333
Kern County
Tulare
Yuba City
19628 Industry Parkway Drive Bakersfield, CA 93308 661.399.7360
200 E. Cartmill Avenue Tulare, CA 93274 559.684.1478
900 Tharp Road Yuba City, CA 95993 530.671.1420
Rural Arizona Safford
Ventura
Yuma
1120 S. 20th Avenue Safford, AZ 85546 928.348.9571
2031 Knoll Drive Ventura, CA 93003 805.477.1020
2490 S. 5th Avenue Yuma, AZ 85364 928.344.3200
Tempe Imperial Valley Yuma
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Rural Arizona Safford
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1478 Stone Point Drive Suite 450 Roseville, CA 95661
Standing by you for 100 years www.farmcreditwest.com 800.909.5050
We’ve spent the last century focused exclusively on agriculture with low rates, unmatched expertise and the best customer service around. The way we look at it, we’re just getting started.