ABA Banking Journal - November/December 2017 - 26

FEATURE > AGRICULTURAL BANKING

Choices and Options
Down on the Farm
As interest rates move up and commodity prices
stay low, bankers' use of the secondary market is
evolving to focus on fixed-rate products.
BY BRIAN NIXON

ith interest rates expected to continue their way
up-and with an overhanging risk of volatility-
Northwest Financial Corporation President and
CEO Jeff Plagge knew his agricultural customers
would be looking for solutions.
"We really started looking at these interest rate cycles and
saying, 'Shame on us if we don't have a good solution to
recommend to our farmers who really need or want a fixedrate funding mechanism,'" he says.
Like many ag banks around the nation, Northwest
Financial's two banks-$1.5 billion Northwest Bank of
Spencer and $240 million First National Bank of Creston,
serving customers in Iowa and Nebraska-have seen ag
customers experiencing some stresses on their cash flow
as a result of low commodity prices. Providing an option
to structure longer-term credit at fixed rates can help put
producers in a better position to weather these challenging
conditions in the ag economy, Plagge decided.
To meet these anticipated needs, Sharon Hotz-an ag and
commercial lender based in Northwest Bank's Fort Dodge,
Iowa, office-found an option in Farmer Mac's fixed-rate
solutions. "What we've done here is create a centralized
process to provide our ag bankers the resources available
and to understand the Farmer Mac products," she says.
"We work directly with Farmer Mac at the centralized
desk for onboarding the information and underwriting the
credit application."
"If we're going to restructure something in order
to give them liquidity and working capital, this is an
opportunity to give them a structure that really guarantees
their interest rate for a long time," says Plagge, who served
26

ABA BANKING JOURNAL | NOVEMBER/DECEMBER 2017

as ABA's chairman
in 2013-14. "It allows
them at least that option.
We can sleep at night knowing
that we gave them several options to consider."

The evolution of the secondary market
Curt Covington has seen both sides of what Farmer Mac can
do for ag lenders and their producer clients as an ag banker,
including a stint at Bank of the West, and more recently
as Farmer Mac's SVP for agricultural finance. "During
the 'golden age of agriculture' a few years back, banks
needed us to help them keep up with the demands of their
borrowers," he says. "Now banks are coming to us to help
them mitigate some of their credit risk."
Working capital is the first defense against commodity
price volatility. "However, you're starting to see working
capital dwindle," he notes. "That's a looming problem,
particularly for midwestern farmers, as we move into
harvesting the 2017 crop and the 2018 loan renewal



Table of Contents for the Digital Edition of ABA Banking Journal - November/December 2017

Chairman’s View
Upfront
Legal Briefs
Economic Outlook
Power Up Profile
Pitching In
Choices and Options Down on the Farm
Eager or Not, Every Board Needs an M&A Strategy
Adapting to Survive
More Than Just a Drink
Operations
Payments
Small Business Lending
Human Resources
ABA Compliance Center Inbox
From the States
Corporate Social Responsibility
Index of Advertisers
From the Vault
ABA Banking Journal - November/December 2017 - Intro
ABA Banking Journal - November/December 2017 - ebelly1
ABA Banking Journal - November/December 2017 - ebelly2
ABA Banking Journal - November/December 2017 - cover1
ABA Banking Journal - November/December 2017 - cover2
ABA Banking Journal - November/December 2017 - 3
ABA Banking Journal - November/December 2017 - 4
ABA Banking Journal - November/December 2017 - 5
ABA Banking Journal - November/December 2017 - 6
ABA Banking Journal - November/December 2017 - 7
ABA Banking Journal - November/December 2017 - Chairman’s View
ABA Banking Journal - November/December 2017 - 9
ABA Banking Journal - November/December 2017 - Upfront
ABA Banking Journal - November/December 2017 - 11
ABA Banking Journal - November/December 2017 - 12
ABA Banking Journal - November/December 2017 - 13
ABA Banking Journal - November/December 2017 - 14
ABA Banking Journal - November/December 2017 - 15
ABA Banking Journal - November/December 2017 - Legal Briefs
ABA Banking Journal - November/December 2017 - 17
ABA Banking Journal - November/December 2017 - Economic Outlook
ABA Banking Journal - November/December 2017 - Power Up Profile
ABA Banking Journal - November/December 2017 - Pitching In
ABA Banking Journal - November/December 2017 - 21
ABA Banking Journal - November/December 2017 - 22
ABA Banking Journal - November/December 2017 - 23
ABA Banking Journal - November/December 2017 - 24
ABA Banking Journal - November/December 2017 - 25
ABA Banking Journal - November/December 2017 - Choices and Options Down on the Farm
ABA Banking Journal - November/December 2017 - 27
ABA Banking Journal - November/December 2017 - Eager or Not, Every Board Needs an M&A Strategy
ABA Banking Journal - November/December 2017 - 29
ABA Banking Journal - November/December 2017 - Adapting to Survive
ABA Banking Journal - November/December 2017 - 31
ABA Banking Journal - November/December 2017 - 32
ABA Banking Journal - November/December 2017 - 33
ABA Banking Journal - November/December 2017 - More Than Just a Drink
ABA Banking Journal - November/December 2017 - 35
ABA Banking Journal - November/December 2017 - Operations
ABA Banking Journal - November/December 2017 - 37
ABA Banking Journal - November/December 2017 - Payments
ABA Banking Journal - November/December 2017 - 39
ABA Banking Journal - November/December 2017 - Small Business Lending
ABA Banking Journal - November/December 2017 - 41
ABA Banking Journal - November/December 2017 - Human Resources
ABA Banking Journal - November/December 2017 - 43
ABA Banking Journal - November/December 2017 - 44
ABA Banking Journal - November/December 2017 - ABA Compliance Center Inbox
ABA Banking Journal - November/December 2017 - From the States
ABA Banking Journal - November/December 2017 - 47
ABA Banking Journal - November/December 2017 - Corporate Social Responsibility
ABA Banking Journal - November/December 2017 - Index of Advertisers
ABA Banking Journal - November/December 2017 - From the Vault
ABA Banking Journal - November/December 2017 - cover3
ABA Banking Journal - November/December 2017 - cover4
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