Farm visits are an opportunity to review financial and discuss capital needs

As an ag banker, one of the most informative and enjoyable requirements is to do farm visits with my customers. While financial statements and profit and loss sheets are required to analyze a farming operation’s economic viability accurately, I contend the on-site visit is at least as important as the financial documents and maybe more so. In my 40 years of banking, I have witnessed some customers who look strong on paper, but you discover a train wreck when you visit the farm: poorly maintained equipment, pastures and livestock. 

How the farmstead is maintained is also a strong indicator of commitment to the success of the farm. A wise old farmer once told me you could judge a farmer by the way he maintained his fence rows.

Farm visits have changed a lot over the four decades of my banking career. When I started in 1980, interest rates were in the low 20s and farms were failing right and left. Usually, farm visits were adversarial. Farmers believed we did not trust them and were largely resentful we had come to visit. Cattle numbers were carefully determined and equipment serial numbers were compared to the bank’s collateral documents. Way too frequently, farm visits in the 1980s would eventually lead to liquidating the farm. During those years, I experienced some farm visits where a deputy sheriff accompanied us to do the collateral inspections, or we did collateral inspections because of a bankruptcy court order. Now, let us fast forward 35 to 40 years. Farm visits are often more social events than collateral inspections. Farmers are much more welcoming now and see farm visits as an opportunity to review financials, discuss capital needs, and topics such as succession planning and retirement. One of my banking colleagues admits he schedules farm visits around the lunch hour, so he gets invited in to share lunch with his customer. Customers often ask when I am going to be out to see them. You will also see more and more bankers bringing trainees and interns with them for farm visits. This certainly was not the case during the farm crisis days.

As bankers, we try to give the customers a couple of weeks’ notice when visiting. We prepare for the visit by reviewing the current financial information and then comparing it to past details to see any trends we might need to have clarified. For instance, we might determine from financials that a farmer’s cowherd had increased, but we did not see any new loans. We would ask if he was retaining replacement heifers for stock cows, or had he just been able to purchase more cows out of cash flow? We might see a new loan on his financial statement to another lender and we could ask why he chose that other lender rather than giving us a chance at the financing? We still compare the collateral we find on the farm to our security documents, but farm visits are also often the source of opportunity for the bank to discuss new services or products with the farmer. 

One of the challenges of farm visits is when the collateral is scattered over several different farms. It is always helpful when the customer has helped organize the visit to get down to business efficiently.

In conclusion, farm visits are far different today than in the high-interest rate times of the 1980s farm crisis. They provide a valuable opportunity for the banker and their customer to discuss future needs while also providing the banker with the chance to analyze the management ability visually and the pride of ownership of the farmer. In addition, farm visits are valuable training opportunities for new lenders and interns to get to know the bank’s customers and establish relationships. So, when the banker calls and tells you that it’s time for the visit, please be prepared to discuss with them any questions, concerns, or needs you might have. Lenders want farm visits to be mutually beneficial and improve the overall financial experience for their customers.

Kim Light is the chief executive officer/president at Heritage Bank of the Ozarks


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