ABA Banking Journal - November/December 2017 - 27

season." Excessive leverage is an additional concern,
Covington adds-"and I am concerned about rising
interest rates and the impact on the leverage on the
balance sheet and ability to repay the debt."
Ed Coates, SVP and agricultural banking manager at
NBT Bank, based in Norwich, N.Y., said his institution
a quarter-century ago became one of the first banks
to use Farmer Mac, particularly Farmer Mac II, which
purchases the guaranteed portion of Farm Service
Agency-guaranteed loans. "When it was initially started,
we used the program from the standpoint of selling
loans on the secondary market and then providing
additional funding for the bank to re-loan funds back
out," explains Coates, who recently became chairman
of ABA's Agricultural and Rural Bankers Committee.
"Probably for the last 10 or 12 years, we've utilized it
not so much from a funding standpoint, but more from
the standpoint to provide long-term, fixed interest rates
to our borrowers." This has provided NBT Bank with
a competitive advantage against Farm Credit System
lenders and generated substantial fee income as well.
This shifting of a bank's uses of Farmer Mac is not
unusual. "The breadth of lenders that we do business
with has expanded tremendously," says Tim Buzby,
Farmer Mac's president and CEO. "We find over
the years that at different times there are different
reasons for lenders to use us. Sometimes it's for
managing capital. Sometimes it's for liquidity purposes.

type of environment, business tends to flow more to Farmer
Mac, so we have seen a pickup in business this year."

Customer service first
Importantly, Buzby points out, "We don't see it as lenders
deciding, 'Oh, these aren't good loans, so I'm going to try
to sell them to Farmer Mac.' It's more just the way lenders
serve their borrowers. They want to sell the real estate
loans, so they can be ready to advance more credit to their
borrowers if they need to. I think as interest rates start to
go up, people will start to convert to fixed rates."
Eighty percent of NBT Bank's $150 million ag portfolio is in
loans to dairy farmers. "They are the ultimate price takers
when it comes to selling their product, selling milk," Coates
says. "When they realize they can lock in an interest rate,
that's one more thing they can control. Their long-term
payments aren't going to be changing anytime soon. That's
something that appeals to a lot of dairy farmers."
Having fixed-rate options at the ready helps ag bankers
serve as "true relationship managers" with their producer
clients, says Coates. "That's one of the ways we try to
differentiate ourselves from some of our competitors. We're
not going to tell people how to run their business, but we do
want to make sure they understand their options and what's
available to them, and try to point out the benefits of each
option versus what's not so great about them. It's been a
good partnership for us and I'm sure we'll continue to grow
that relationship in the future."

"During the 'golden age of agriculture' a few years back, banks needed us
to help them keep up with the demands of their borrowers. Now banks are
coming to us to help them mitigate some of their credit risk."
-Curt Covington, SVP, Farmer Mac
Sometimes it's for credit purposes, such as borrower
exposure limits.
"There's a lot of competition for good loans and that puts
pricing pressure on everyone," he adds. "It's been a
rough couple of years for a lot of farmers. Another year
like that and people start to get worried. I think there's a
little bit of concern about what's going to happen when
this crop comes out and how farmers are going to fare.
That's actually caused a lot of institutions to take a look at
the way they manage their risks and, quite frankly, in that

BRIAN NIXON is an ABA Banking Journal contributing editor and editor of
ABA's Ag Banking Newsbytes email.

LEARN MORE > NATIONAL
AGRICULTURAL BANKERS
CONFERENCE
For more insights on meeting ag producers' credit, liquidity and
risk management needs in challenging times, check out the
ABA National Agricultural Bankers Conference,
Nov. 12-15 in Milwaukee. Register at aba.com/agconference.
aba.com/BankingJournal | ABA BANKING JOURNAL

27


http://www.aba.com/agconference http://www.aba.com/BankingJournal

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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