Credit Analysis Solutions AGRICULTURE

Transcription

1 Credit Analysis Solutions AGRICULTURE

2 University of Minnesota 130 Ruttan Hall 1994 Buford Avenue St. Paul, Minnesota Phone: (612) Toll-Free: (800) Fax: (612) Online:

3 What does FINPACK do for you? Used by lenders since 1980, FINPACK sets the industry standard for superior credit analysis tools, training and technical support. Simply enter tax returns and balance sheets and FINPACK will generate reports displayed on the following pages. Helps you accomplish your work more efficiently than ever before It is fast and easy to learn. You will be amazed at how much time it can save you. Delivers better information about your customers financial situation Balance sheets, cash flows, consolidations, global cash flow analysis, accrual financial analysis, and historic spreads provide an accurate picture of borrower performance. Lets you do the banking while we do the technical work No need to double check spreadsheet formulas Gives you an edge in building better customer relations Provides financial information your customers can understand and use to manage their businesses Offers you the most cost effective credit analysis available When compared to other systems or maintaining your own spreadsheets, FINPACK saves you money period 1

4 The Flexibility to Meet All Your Customer Needs FINPACK lets you choose the reports you need for each borrower whether it s basic reports for low-risk credit customers or detailed reports to analyze complex customers. About This Book The FINPACK Sample Guide provides an overview of the entire set of tools and reports that FINPACK can give you. If you have wondered what exactly FINPACK does or how it presents financial information, this book will give you the answers. The book gives you a quick overview for each FINPACK tool. Each section includes a short description of the financial tool and then shows you a sample report. Will you ever use all of FINPACK s tools? Probably not, so take a look at the tools that you regularly use. You may also want to look at other tools that you would like to use but haven t had an easy way to implement at your institution. FINPACK has been upgraded annually for over 30 years based on comments from lenders who use the software. With this history of field testing and refinement, we think it will serve your needs well. 2

5 FINPACK Agriculture at a Glance Balance Sheets Detailed Balance Sheet Summary Balance Sheet Balance Sheet Trend Reports Financial Analysis Tax Forms/Income Statement Earned Net Worth Analysis Schedule F Accrual Analysis Global Cash Flow Projections Annual Cash Flow Monthly Cash Flow Credit Analysis Collateral Analysis Credit Decision Scorecard Risk Rating Loan Presentation FSA Forms Package Portfolio Risk Analyst Training and Support Customer Support FINPACK Training FINPACK Commercial About CFFM 3 p. 5 p. 11 p. 13 p. 15 p. 19 p. 21 p. 27 p. 31 p. 41 p. 51 p. 53 p. 55 p. 57 p. 63 p. 67 p. 71 p. 73 p. 75 p. 77

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7 Balance Sheets Balance Sheets Balance sheet data entry is simple and straightforward. Once the first balance sheet is complete, it is easy to copy and revise for the next renewal season. FINPACK provides two balance formats detailed or summary. Detailed Balance Sheet: Generate ratio analysis, including working capital, current ratio, and debt to asset ratio Automatically create trend reports Balance sheet data flows directly into cash flow to minimize data entry Consolidate balance sheets from multiple entities Input forms can be used to gather customer data or use forms with last year s values displayed Or get customer data electronically using FINPACK Lite, a free balance sheet only version of FINPACK available to your customers Summary Balance Sheet: Input simple, single column balance sheets Quick and easy balance sheet format for small or low risk customers Useful to enter historical balance sheets for new customers Both Balance Sheet formats provide data directly to FINPACK s Schedule F analysis, risk rating and the loan presentation manager. 5

8 Balance Sheets 6

9 Current Assets Value Cash and checking (Schd A) 76,500 Prepaid exp. & suppl. (Schd B) 114,438 Growing crops - Accounts receivable - Hedging accounts (Schd E) 5,650 Other current assets - Crops (Schd G) Quantity Value/Unit Corn 100, /bu. 328,742 Corn Silage /ton 23,975 Alfalfa Hay /ton 3,600 Soybeans 18, /bu. 179,997 Current Liabilities Sample Farm 1/1/2017 Balance Accrued interest 32,658 Accounts payable and other accrued expenses - Int P & I Principal Current loans (Schd U) Rate Due Balance 5thNB-Operating ,863 5thNB-Cattle ,951 Principal due within 12 months on term liabilities 69,288 Detailed Balance Sheet Mkt lvst (Schd H) No. Value/Unit Finish Beef /cwt. 780,038 Total Current Assets 1,512,939 Total Current Liabilities 554,760 Intermediate Assets Market Value Breeding livestock - Machinery (Schd J) 1,099,508 Titled vehicles (Schd K) 112,159 Other intermediate assets - Intermediate Liabilities (Schd V) Int Principal P & I Principal Intermed Loan Rate Balance Due Due Balance John Deere Credit-332E ,199 7,260 7, thNB-Mach ,320 23,348 18,499 83,821 Total Intermediate Assets 1,211,667 Total Intermediate Liabilities 84,016 Long Term Assets Market Land (Schd M) Acres Value Home site 15 37,500 SW 80 Ac ,000 New 80 Ac ,800 Long Term Liabilities (Schd W) Int Principal P & I Principal Lg Term Loan Rate Balance Due Due Balance 5thNB-Barn ,576 32,778 15, ,884 5thNB-SW 80 Ac ,450 28,116 11, ,525 5thNB-New 80 Ac ,767 39,831 16, ,599 Bldgs & improve. (Schd N) 514,278 Other long term (Schd O) 2,401 Total Long Term Assets 1,774,979 Total Long Term Liabilities 902,008 Total Farm Assets 4,499,585 Personal Assets (Schd P) 173,812 Total Farm Liabilities 1,540,784 Personal Liabilities (Schd X) 26,534 Total Assets 4,673,397 Total Liabilities 1,567,318 Net Worth 3,106,079 I certify that my statements on this balance sheet are true, complete, and correct to the best of my knowledge and belief. Signature(s) Date 7

10 Sample Farm : 1/1/2017 Detailed Balance Sheet Schedule J: Machinery and equipment Model Year Purchase Pct. Market Make/Model Year Serial No./VIN Purchased Price Ownership Value TRACTOR LOADER % 2,566 SNOWBLOWER % 1,100 SPRAY MONITOR % 367 AUGER 8x % 550 RC 8R % 550 LOADER % 733 Generator % 1,283 BUFFALO ROLLER MILL % 4,398 FEED WAGON % 5,498 RIPPER % 9,163 JD 6430 Tractor % 36,653 SPREADER % 10,996 GRAIN CART % 10,996 SPRAYER SPECIALTIES % 10,996 MONITOR % 2,932 JD 7210 Tractor w loader % 40,318 MOWER 50 BU % 6,231 TRAILER % 1,466 WAGON % 6,231 BLOWER % FT FLEX HEAD % 10,996 20' CHOPPER % 9,530 SPRAYER CONTROL % 3,665 ROUND BALE RACK % 2,932 WAGON % 7,331 10X61 AUGER % 3,665 Wagon % 7, Ton Gear % 1,466 Chopper % 14,661 Hay Buster (33%) % 4,398 Hay Buster % 14,661 Silage Bagger % 10,996 Used Semi % 9,530 Semi Grain Trailer % 8,797 JD % 73,306 JD 9670 STS % 187,336 JD 612C Corn Head % 46,264 Parker Grain Cart % 14,289 JD Loader % 8,247 JD 726 Mulch Finisher % 28,162 Tractor % 149,129 JD 332E Skidloader % 43,653 Westfield Auger % 20,234 Loftness Stalk Chopper % 17,599 Meyer 8865 Manure Sprdr % 24,819 JD Top Air Sprayer , % 59,850 JD Planter , % 132,979 Patz TMR Mixer , % 29,925 Total machinery and equipment 1,099,508 8

11 Sample Farm : 1/1/2017 Schedule Q: Personal vehicles Model Year Purchase Pct. Market Make/Model Year Serial No./VIN Purchased Price Ownership Value Dodge Pickup (25%) % 139 Chev VAN (50%) % 925 Ford Taurus % 3,238 Lexus-Traded % - For Explorer % 29,511 Detailed Balance Sheet Total personal vehicles 33,812 Schedule U: Current loans Interest Principal Accrued Normal Past Due Month Rate Balance Interest P & I P & I Due Balance 5thNB-Operating 6.00 % 87,863 4, ,863 5thNB-Cattle % 364,951 8, ,951 Total current loans 452,814 13, ,814 Schedule V: Intermediate loans Interest Principal Accrued Normal Past Due Month Final Principal Intermed Rate Balance Interest P & I P & I Due Year Due Balance John Deere Credit-332E 3.25 % 7, , , Fifth National Bank-Mach % 102,320 3,292 23, ,499 83,821 Total intermediate loans 109,519 3,410 30,609-25,503 84,016 Schedule W: Long term loans Interest Principal Accrued Normal Past Due Month Final Principal Lg Term Rate Balance Interest P & I P & I Due Year Due Balance Fifth National Bank-Barn 7.50 % 215,576 6,157 32, , ,884 5thNB-SW 80 Ac 5.50 % 278,450 7,133 28, , ,525 5thNB-New 80 Ac 4.95 % 451,767 2,880 39, , ,599 Total long term loans 945,793 16, ,726-43, ,008 9

12 Sample Farm : 1/1/2017 Detailed Balance Sheet Schedule X: Personal loans Accrued interest 29 Personal accounts payable - Personal income taxes payable 2,600 Principal due within 12 months on term loans 4,770 Interest Principal Accrued Normal Past Due Month Final Principal Current Loans Rate Balance Interest P & I P & I Due Year Due Balance Intermediate Ford Credit-Explorer 3.64 % 23, ,352 - monthly ,526 19,135 Long Term Mutual Insurance-House % ,000 - monthly Total personal loans 23, ,352-4,770 19,135 Schedule Z: Ratio analysis Market Current ratio 2.73 Current ratio (business and personal) 2.69 Working capital 958,179 Working capital (business and personal) 950,780 Current percent in debt 37 % Intermediate percent in debt 7 % Long term percent in debt 51 % Personal percent in debt 15 % Total debt to asset ratio 34 % Total equity to asset ratio 66 % Total debt to equity ratio

13 11 Summary Balance Sheet

14 Summary Balance Sheet 12

15 Jan 1, 2014 Jan 1, 2015 Jan 1, 2016 Jan 1, 2017 Average Market Only Market Only Market Only Market Only Current Assets Cash and checking 41, ,548 67,756 76,500 72,365 Prepaid expenses and supplies 109, , , , ,155 Hedging accounts 4,050 27,650 9,150 5,650 11,625 Crop inventory 610, , , , ,517 Livestock held for sale 617, , , , ,302 Total current assets 1,382,531 1,646,465 1,593,917 1,512,939 1,533,963 Sample Farm Balance Sheet Spread Report Balance Sheet Trend Reports Intermediate Assets Machinery and equipment 1,057,185 1,004, ,759 1,099,984 1,040,063 Titled vehicles 28,968 89,519 83, ,159 78,475 Total intermediate assets 1,086,153 1,093,845 1,082,012 1,212,143 1,118,538 Long Term Assets Land 1,258,300 1,258,300 1,258,300 1,258,300 1,258,300 Buildings and improvements 498, , , , ,546 Other long term assets 2,401 2,401 2,401 2,401 2,401 Total long term assets 1,758,912 1,798,930 1,788,166 1,774,979 1,780,247 Total farm assets 4,227,596 4,539,240 4,464,095 4,500,061 4,432,748 Total personal assets 153, , , , ,901 Total assets 4,381,526 4,693,170 4,618,025 4,673,874 4,591,649 Current Liabillities Accrued interest 23,862 27,157 33,785 32,658 29,366 Principal due within 12 months on term loans 94,348 81,594 86,742 69,288 82,993 Current loans 668, , , , ,039 Total current liabilities 786, , , , ,397 Intermediate & Long Term Liabilities Intermediate loans 97,852 54,979 8,267 84,016 61,279 Long term loans 1,025, , , , ,114 Total farm liabilities 1,910,249 1,678,666 1,597,458 1,540,784 1,681,789 Personal liabilities 19,380 14,173 8,666 26,534 17,188 Total Liabilities (including deferreds) 1,929,629 1,692,839 1,606,125 1,567,318 1,698,978 Annual Noncurrent Debt Payments Farm P & I payments 167, , , , ,512 Personal P & I payments 6,000 6,000 6,000 11,352 7,338 Equity Net worth 2,451,896 3,000,331 3,011,901 3,106,556 2,892,671 Net worth change 0 548,435 11,569 94, ,665 Ratio Analysis Current ratio Current ratio (farm and personal) Working capital 595,820 1,009, , , ,566 Working capital (farm and personal) 587,968 1,001, , , ,615 Current & interm. % in debt 36 % 25 % 24 % 23 % 27 % 13

16 Balance Sheet Trend Reports Sample Farm Historic Report: Market Balance Jan 1, 2014 Jan 1, 2015 Jan 1, 2016 Jan 1, 2017 Average Market Only Market Only Market Only Market Only Total debt to asset ratio 44 % 36 % 35 % 34 % 37 % Total debt to equity ratio Loan to value % 57 % 48 % 47 % 49 % 50 % Collateral margin 1,384,325 1,788,747 1,878,219 1,634,212 1,671,376 Collateral coverage ratio 1.8 % 2.1 % 2.1 % 2.1 % 2.0 % 14

17 Tax Forms and Income Statement Tax Forms and Income Statement When you need a quick and easy source of historical financial performance, FINPACK s tax database is the answer. You can enter data for Schedules F, C, E, or Form 1040, Form 1065, Partnerships, Form 1120 Corporate, or Form 1120-S. You can also enter accountant prepared income statements. With Tax Forms and Income Statement, you can: Using any of the tax databases or the income statement, you can spread historical income and expenses Automatically import last year s or the average of several past years historic income and expenses into your cash flow projections Use the Schedule F data to develop cash-to-accrual Schedule F Analysis Consolidate income statements and tax databases from multiple entries 15

18 Tax Forms and Income Statement 16

19 Sample Farm Sch F - Updated Sch F Tax year Average Statement type Tax Return Tax Return Tax Return Tax Return Tax Return Principal product Livestock Livestock Livestock Livestock Livestock Activity code Accounting method Cash Cash Cash Cash Cash PART I: Farm Income -- Cash Method 1a. Sales of livestock and other resale items 2,093,459 2,005,244 2,413,769 2,422,126 1,808,397 2,148,599 1b. Cost or other basis of items on line 1a 1,221,953 1,230,064 1,440,364 1,919,505 1,648,238 1,492,025 1c. Subtract line 1b from line 1a 871, , , , , , Sales of products you raised 498, , , , , ,768 3a. Cooperative distributions b. Cooperative distributions, taxable amount a. Agricultural program payments 11,412 19,433-60,671 26,242 23,552 4b. Agricultural program payments, taxable amount 11,412 19,433-60,671 26,242 23,552 5a. CCC loans reported under election b. CCC loans forfeited c. CCC loans forfeited, taxable amount a. Crop insurance proceeds / Disaster payments ,535 1,604 6,809 19,390 6b. Crop insurance / Disaster payments, taxable amount ,535 1,604 6,809 19,390 6d. Amount deferred from previous year Custom hire income Other income Gross income 1,381,961 1,453,460 1,681,594 1,111, ,734 1,303,433 Tax Forms and Income Statement PART II: Farm Expenses -- Cash and Accrual Method 10. Car and truck expenses Chemicals 34,162 36,884 39,543 34,933 42,398 37, Conservation expenses Custom hire (machine work) 3,850 9,542 9,114 5,810 7,800 7, Depreciation 211, , , ,002 79, , Employee benefit programs Feed 275, , , , , , Fertilizers and lime 91, ,973 96,427 60,888 81,519 86, Freight and trucking 28,516 26,773 25,232 17,272 16,920 22, Gasoline, fuel, and oil 27,212 33,709 38,067 33,470 30,970 32, Insurance (other than health) 33,728 37,058 33,220 28,445 25,966 31,683 21a. Interest, mortgage 43,662 40,494 64,304 62,004 59,552 54,003 21b. Interest, other 67,388 56,434 50,177 37,317 34,579 49, Labor hired 24,939 29,560 31,741 30,252 32,560 29, Pension and profit-sharing plans a. Rent or lease: vehicles, machinery, equipment b. Rent or lease: land, animals, etc. 192, , , , , , Repairs and maintenance 32,677 37,054 61,848 54,630 41,106 45, Seeds and plants 101, , ,043 92, , , Storage and warehousing 2,809 11,481 10,540 1,841 3,751 6, Supplies 27,913 20,945 35,502 10,320 13,547 21, Taxes 1,680 1,680 4,558 5,654 7,472 4, Utilities 6,849 7,872 8,265 8,093 7,688 7, Veterinary, breeding, and medicine 11,647 12,147 13,968 15,900 14,397 13, Other expenses 10,715 14,421 18,663 11,443 15,143 14,077 17

20 Sample Farm Tax Form / Income Statement: Sch F Tax year Average 33. Total expenses 1,229,927 1,152,158 1,254, , ,882 1,119, Net farm profit or loss 152, , , ,145-87, ,726 Tax Forms and Income Statement PART III: Farm Income -- Accrual Method 37. Sales of livestock, produce, grains a. Cooperative distributions b. Cooperative distributions, taxable amount a. Agricultural program payments b. Agricultural program payments, taxable amount a. CCC loans reported under election b. CCC loans forfeited c. CCC loans forfeited, taxable amount Crop insurance proceeds Custom hire income Other income Total, lines Beginning inventory of livestock, produce, grains, etc Cost of livestock, produce, grains, etc. purchased Add lines 45 and Ending inventory of livestock, produce, grains, etc Cost of livestock, produce, grains, etc. sold Gross income Cash Flow for Debt Service Net farm profit or loss 152, , , ,145-87, ,726 + Other non-taxable income Depreciation 211, , , ,002 79, ,992 + Interest (total) 111,050 96, ,481 99,321 94, ,182 -Interest on current debt 54,171 46,266 40,940 33,007 31,462 41,169 - Non-recurring income Non-recurring expense = Cash available for debt service 420, , , ,461 55, ,732 Farm Term Debt Coverage (cash basis) Cash available for debt service 420, , , ,461 55, ,732 + Cull income Personal income 50,400 52,024 53,332 54,681 56,037 53,295 - Family living expense 75,738 81,026 86,863 78,783 83,894 81,261 -Income and social security tax 20,043 20,253 27,637 9,109 29,233 21,255 = Capital debt repayment capacity (cash basis) 374, , , ,250-1, ,511 Term Loan Information Beginning principal balance Interest rate Annual P&I payments 120, , , , , ,662 Term debt coverage ratio (cash basis) Capital debt repayment margin (cash basis) 254, , , , , ,849 Efficiency Ratios Operating expense ratio Depreciation expense ratio Interest expense ratio Net farm income ratio

21 Earned Net Worth Analysis When complete financial statements are unavailable, net worth change is often your best indicator of financial performance. But net worth change on market value balance sheets can have two components: changes in asset valuation and earned net worth change. FINPACK s Earned Net Worth Analysis helps you easily and accurately back out changes in asset valuation to derive true earned net worth change. With Earned Net Worth Analysis, you can: Earned Net Worth Analysis Calculate earned net worth change between any two balance sheets no need for fiscal year balance sheets Derive the term debt coverage ratio for each year plus projected debt coverage based on past repayment capacity and current payment obligations Use a built-in wizard to easily and accurately separate earned net worth change from asset valuation changes. Optionally derive net farm income from earned net worth change with minimal data entry 19

22 Sample Farm Earned Net Worth Analysis Year Trend Projection Earned Net Worth Change Change in net worth (mkt) 224, , , ,435 11,569 94,655 Change in market valuation (-) -4,507 58,696 36,053 45,067 29,472 81,150 Inheritances, gifts, contributed capital (-) , Gifts given, distributed capital (+) Change in earned net worth (=) 229, , , ,368-17,903 13,505 Earned Net Worth Analysis Term Debt Coverage (farm and personal) Change in earned net worth 229, , , ,368-17,903 13,505 Business depreciation (+) 90, , , ,357 99, ,377 Personal asset depreciation (+) ,750 Change in personal accounts payable (+) Interest on term debt (+) 80,523 58,560 53,329 74,355 68,333 62,871 Gain or loss on capital sales (-) - 38, Capital debt repayment capacity (=) 400, , , , , , ,015 Scheduled term debt payments 119, , , , , , ,687 Term debt coverage ratio Net farm income (optional) Change in earned net worth 229, , , ,368-17,903 13,505 Income and social security taxes paid (+) 21,668 20,043 20,253 27,637 19,109 29,233 Family living / Owner withdrawals (+) 91,654 75,738 81,026 86,863 78,783 83,894 Personal income (-) 48,462 50,462 52,024 53,332 54,681 56,037 Personal asset depreciation (-) ,750 Change in personal accounts payable (+) Change in personal income tax payable (+) Net farm income (=) 294, , , ,516 25,287 76,351 Gain or loss on capital sales (-) - 38, Net farm income from operations (=) 294, , , ,516 25,287 76,351 20

23 Schedule F Accrual Analysis At a minimum, most lenders ask borrowers for a balance sheet and a Schedule F tax return each year. The challenge is analyzing these documents to determine credit worthiness. An analysis of Illinois farms found that there is a 66 percent difference between Schedule F cash net income and accrual net income. So how can you use Schedule F information to make informed loan decisions? FINPACK s Schedule F Accrual Analysis makes this job easy. FINPACK s Schedule F Accrual Analysis: Requires only the beginning and ending balance sheets and a Schedule F tax return With a little additional information, FINPACK generates an accrual analysis Spreads the net farm income, financial ratios, and earned net worth change over multiple years Schedule F Accrual Analysis Compares individual farm ratios to industry averages 21

24 Schedule F Accrual Analysis 22

25 Sample Farm Schedule F Cash to Accrual Source Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Income Statement Gross cash farm income 2,204,706 2,603,914 2,683,524 3,121,958 3,030,921 2,536,972 + Inventory change (income items) 86,829 99,947-93, ,131 13,398-91,262 = Gross farm income (accrual) 2,291,535 2,703,861 2,589,728 3,311,089 3,044,319 2,445,710 Total cash farm expense 1,923,352 2,266,087 2,277,104 2,651,830 2,902,560 2,213,369 + Depreciation 90,762 45,407 66,747 59,290 69, ,377 +Inventory change (expense items) -16,856-8,300-10,286-9,614 17,404-4,387 = Total farm expense (accrual) 1,997,259 2,303,194 2,333,565 2,701,505 2,989,561 2,369,359 Net farm income from operations 294, , , ,584 54,758 76,351 Gain or loss from capital sales - 38, Net farm income 294, , , ,584 54,758 76,351 Financial Measures Liquidity (ending) Current ratio (farm) Working capital (farm) 478, , ,820 1,009, , ,179 Working capital to gross revenues 20.9 % 23.2 % 23.0 % 30.5 % 31.2 % 39.2 % Solvency (market) Debt to asset ratio 49 % 42 % 45 % 37 % 36 % 34 % Debt to equity ratio Profitability Measures (market) Net farm income 289, , , ,584 54,758 76,351 Rate of return on assets 11.4 % 12.9 % 6.9 % 14.4 % 2.3 % 2.1 % Rate of return on equity 14.5 % 18.0 % 8.2 % 19.8 % -0.1 % 0.1 % Operating profit margin 33.7 % 38.4 % 24.5 % 41.0 % 12.2 % 9.6 % EBITDA 513, , , , , ,731 Repayment Capacity Term debt coverage ratio (farm) Repl. margin coverage ratio Efficiency Asset turnover rate (market) 33.9 % 33.7 % 28.3 % 35.1 % 18.9 % 22.1 % Operating expense ratio 77.4 % 79.4 % 84.0 % 76.2 % 92.4 % 86.5 % Depreciation expense ratio 4.0 % 1.7 % 2.6 % 1.8 % 2.3 % 6.6 % Interest expense ratio 5.8 % 4.1 % 3.6 % 3.6 % 3.5 % 3.8 % Net farm income ratio 12.8 % 14.8 % 9.9 % 18.4 % 1.8 % 3.1 % Other Term debt coverage ratio (farm & personal) Term debt to EBITDA Schedule F Accrual Analysis Net Worth Growth Earned net worth change 229, , , ,436 11,568 13,505 Market net worth change 428, , , ,435 11,569 94,655 Market net worth change (%) 30 % 21 % 10 % 22 % 0 % 3 % 23

26 Sample Farm : Schedule F Cash to Accrual 2016 Income Statement Income Expense Sale of livestock purchased for resale 1,808,397 Feeder livestock purchases 1,317,314 Sales of raised crops and livestock 695,390 Chemicals 42,398 Government payments 26,242 Custom hire (machine work) 7,800 Cooperative distributions 134 Feed 139,295 Crop insurance proceeds 6,809 Fertilizers and lime 81,519 Freight and trucking 16,920 Gasoline, fuel, and oil 30,970 Insurance (other than health) 25,966 Interest, mortgage 59,552 Interest, other 34,579 Labor hired 32,560 Rent or lease: land, animals, etc. 217,058 Repairs and maintenance 41,106 Seeds and plants 104,334 Storage and warehousing 3,751 Supplies 13,547 Taxes 7,472 Utilities 7,688 Veterinary, breeding, and medicine 14,397 Other expenses 15,143 Gross cash income 2,536,972 Total cash expense 2,213,369 Net cash income 323,603 Schedule F Accrual Analysis Beginning Purchases/ Sales/ Ending Inventory Inventory Changes Inventory Deposits Withdrawals Inventory Change Prepaids and supplies 111, ,438 3,259 Hedging gains or losses 9,150-1,720 5,650-1,780 Crops and feed 562, ,313-26,495 Market livestock 843, ,038-62,987 Other assets 2, ,401 - Accrued interest 33,785 32,658 1,128 Total inventory change -86,875 Net operating profit 236,728 Beginning Ending Depreciation Inventory Purchases Sales Inventory Depreciation Machinery and equipment 998, ,050 71,650 1,042, ,816 Titled vehicles 83,253 38, ,065-18,188 Buildings and improvement 527, ,091-26,373 Total depreciation -160,377 Net farm income 76,351 24

27 3 2.5 Current Ratio Current Ratio The extent to which current farm assets, if liquidated, would cover current farm liabilities Total current farm assets divided by total current farm liabilities Strong Greater than 2 Caution 2 to 1.3 Vulnerable Less than 1.3 FINBIN My Farm 40 Working Capital to Gross Revenues Working Capital to Gross Revenues Measures operating capital available against the size of the business Working capital divided by gross revenues Strong Greater than 30 Caution 30 to 10 Vulnerable Less than 10 FINBIN My Farm 50 Debt to Asset Ratio (mkt) Debt to Asset Ratio (mkt) The proportion of total farm assets owed to creditors Total farm debt divided by total farm assets Strong Less than 30% Caution 30% to 60% Vulnerable Greater than 60% FINBIN My Farm Debt to Equity Ratio (mkt) FINBIN My Farm Debt to Equity Ratio (mkt) The relative amount of money borrowed as a percentage of equity capital. Farm debt divided by equity. Strong Less than 0.43 Caution 0.43 to 1.5 Vulnerable Greater than 1.5 Schedule F Accrual Analysis 25

28 4 Term Debt Coverage Ratio Term Debt Coverage Ratio The ability of the business to generate enough income to cover all scheduled intermediate and long term debt payments Net farm oper income + net nonfarm income + interest on term debt - fam liv & taxes / term debt prin & int. Strong Greater than 1.75 Caution 1.75 to 1.25 Vulnerable Less than 1.25 FINBIN My Farm Replacement Margin Coverage Ra Replacement Margin Coverage Ra A ratio below 1.0 indicates you did not generate enough income to cover term debt payments and unfunded capital purchases. Strong Greater than 1.5 Caution 1.5 to 1.1 Vulnerable Less than 1.1 FINBIN My Farm Asset Turnover Rate (mkt) Asset Turnover Rate (mkt) Measures efficiency of capital invested in the business in terms of the gross revenue generated by each dollar of investment. 20 Value of farm production divided by average farm assets Strong Greater than 45% Caution 45% to 30% Vulnerable Less than 30% FINBIN My Farm Schedule F Accrual Analysis Operating Expense Ratio FINBIN My Farm Operating Expense Ratio The portion of gross revenue used to pay operating expenses. Farm operating expense - interest expense divided by gross income. Strong Less than 60% Caution 60% to 80% Vulnerable Greater than 80% 26

29 Global Cash Flow Global cash flow is important when both business and personal cash flows need to be analyzed to determine a credit s true financial situation. A global cash flow allows a lender to look at the combined sources and uses of cash from multiple business entities along with cash flow from personal sources. The FINPACK Global Cash Flow calculates debt coverage for each individual business entity and for the individuals involved in the business. With Global Cash Flow, you can: Use easy methodology to quickly present the entire cash flow position Analyze repayment ability from multiple businesses, multiple individuals, and guarantors Require only tax returns from each entity Calculate debt coverage ratios for each entity and global debt coverage for the combined entities Easily add projected new or proposed debt payments and income to the analysis 27 Global Cash Flow

30 Sample Farm 2017 Global Cash Flow Global Cash Flow Actual $ Average Sch F - Updated Sch F Net farm profit or loss 301, , ,145-87, ,650 + Other non-taxable income Depreciation 143, , ,002 79, ,387 + Interest (total) 96, ,481 99,321 94, ,215 -Interest on current debt 46,266 40,940 33,007 31,462 37,919 - Non-recurring income Non-recurring expense = Cash available for debt service 495, , ,461 55, ,333 Debt payments 120, , , , ,878 Debt service coverage ratio Debt repayment margin 374, , ,049-94, ,455 Sch C - Trucking Net profit or loss 14,646 15,699 10,328 6,106 11,695 + Depreciation 18,257 18,257 18,257 14,000 17,193 + Interest (total) 1,976 5,186 4,008 3,386 3,639 -Interest on current debt 1, Disallowed meals and entertainment (50%) Depreciation, depletion, interest in COGS Expenses for business use of your home Non-recurring income Non-recurring expense = Cash available for debt service 33,757 38,154 31,790 22,574 31,569 Debt payments 22,021 16,427 16,427 16,427 17,826 Debt service coverage ratio Debt repayment margin 11,736 21,727 15,363 6,147 13,743 Sch E - Houses Net rental real estate and royalty income -3,579 1,640 1,759 2, Depreciation, depletion 6,257 6,257 6,257 6,257 6,257 + Interest (total) 2,839 5,163 4,869 4,557 4,357 -Interest on current debt Non-recurring income Non-recurring expense = Cash available for debt service 5,517 13,060 12,885 13,300 11,191 Debt payments 5,853 9,693 9,693 9,693 8,733 Debt service coverage ratio Debt repayment margin ,367 3,192 3,607 2,458 Global Cash Flow 28

31 Sample Farm Global Cash Flow Analysis: 2017 Actual $ Average Jim & Sarah Total income 365, , ,936-22, ,230 + Other non-taxable income Non-recurring income Non-recurring expense = Recurring total income 365, , ,936-22, ,230 -Federal income tax 33,839 38,038 29,387-25,316 -State, other taxes Living expenses 81,026 86,863 78,783 83,894 82,642 = Cash available for debt service 250, ,076 83, , ,273 Debt payments 6,000 6,000 6,000 6,743 6,186 Debt service coverage ratio Debt repayment margin 244, ,076 77, , , Smith - Guarantor Total income 243, , , , ,704 + Other non-taxable income Non-recurring income Non-recurring expense = Recurring total income 243, , , , ,704 -Federal income tax 48,303 48,236 47,486 48,524 48,137 -State, other taxes Living expenses 75,000 75,000 75,000 75,000 75,000 = Cash available for debt service 120, , , , ,567 Debt payments 48,420 48,420 47,493 47,493 47,957 Debt service coverage ratio Debt repayment margin 71,655 72,062 74,659 76,065 73,610 Global Debt Coverage Business and personal cash available for debt service 905,418 1,212, , , ,932 -Business income included in personal income 312, , ,232-78, ,921 = Net global cash available for debt service 593, , , , ,011 Total debt payments 203, , , , ,579 Total debt coverage ratio Global Cash Flow

32 Sample Farm Global Cash Flow Analysis: 2017 Proposed New Income & Debt Add'n Rental Houses Average Original total debt coverage ratio Adjusted Prior Three Years Business and personal cash available for debt service 1,212, , , ,103 -Business income included in personal income 444, ,232-78, ,771 + Proposed new income 20,000 20,000 20,000 20,000 = Adjusted net global cash available for debt service 788, , , ,331 Existing debt payments 248, , , ,741 + Proposed new debt payments 10,500 10,500 10,500 10,500 = Total debt payments 258, , , ,241 Adjusted total debt coverage ratio Global Cash Flow 30

33 Annual Cash Flow Projection Annual Cash Flow Don t need a monthly cash flow for all of your borrowers? The FINPACK Annual Cash Flow requires less time and data but provides a complete cash flow with pro-forma accrual analysis for the planning year. The Annual Cash Flow is a quick and easy annual cash flow plan that includes: Projected annual cash flow Projected change in working capital Projected debt coverage Pro-forma income statement Pro-forma balance sheet Links to past history for accurate and convenient data entry Ability to generate multi-year plans (up to ten years) Your completed plan can be printed directly on FSA forms, using FINPACK s FSA Forms tool. 31

34 Annual Cash Flow 32

35 Annual Cash Flow Plan Executive Summary Sample Farm 2017 Annual Plan Projected Cash Flow Summary Term Debt Coverage Personal Total operating inflow 2,669,020 Farm and Farm Total operating outflow (-) 2,371,055 Net farm income from operations 63,261 63,261 Capital purchases (-) 97,750 Depreciation (+) 161, ,212 Capital sales (+) 8,000 Personal income (+) 57,425 57,425 New credit (+) 1,349,428 Family living expense (-) 80,000 80,000 Loan payments (-) 1,494,174 Personal interest expense (-) Net cash flow (=) 63,469 Principal payments on personal debt (-) 4,782 - Income taxes accrued (-) 20,000 20,000 Beginning cash balance (+) 76,500 Interest on term debt (+) 59,669 60,485 Change in operating loan (+) -87,863 Capital debt repayment capacity (=) 235, ,567 Ending cash balance (=) 52,106 Term debt payments 131, ,125 Capital debt repayment margin 104, ,441 Beginning operating loan balance 87,863 Term debt coverage ratio Ending operating loan balance 0 Financial Standards Measures Projected Change in Working Capital Liquidity Beginning Ending Change in cash -24,394 Current ratio Change in current inventories (+) 2,524 Working capital 958,179 1,059,235 Change in operating loan balance (-) -87,863 Working capital to gross revenue 36.8 % 40.7 % Change in other current loans (-) -28,722 Solvency (market) Change in princ due on term loans (-) -6,342 Debt to asset ratio 34.2 % 32.3 % Estimated change in working capital (=) 101,056 Debt to equity ratio Profitability (market) Projected Income Statement Net farm income 60,265 Rate of return on assets 2.2 % Gross cash farm income 2,611,595 Rate of return on equity -0.4 % Inventory change - income items (+) -9,047 Operating profit margin 8.8 % Gross revenue (=) 2,602,548 EBITDA 331,493 Repayment Capacity Cash farm operating expense 2,271,055 Term debt coverage ratio (farm) 1.79 Interest expense (+) 118,591 Replacement margin coverage ratio 0.98 Depreciation (+) 161,212 Efficiency Inventory change - expense items (+) -11,570 Asset turnover rate (market) 24.6 Total farm expense (=) 2,539,287 Operating expense ratio 87.3 % Net farm income from operations 63,261 Depreciation ratio 6.2 % Gains or losses on capital sales -2,996 Interest expense ratio 4.1 % Net farm income 60,265 Net farm income ratio 2.4 % Other Projected Earned Net Worth Change Term debt coverage (farm+personal) 1.76 Term debt to EBITDA 2.97 Net farm income 60,265 Personal income (+) 57,425 Shocks to Farm Term Debt Coverage Ratio Family living expense (-) 80,000 Income taxes accrued (-) 20,000 10% decrease in gross income Personal loan interest expense (-) % increase in operating expenses 0.07 Personal asset depreciation (-) 5,072 3% increase in interest rates 1.39 Earned net worth change (=) 11,831 Annual Cash Flow 33

36 Annual Cash Flow Sample Farm Cash Flow Plan: 2017 Annual Plan PROJECTED NET CASH FLOW Cash Inflows Quantity Price Inflow Cash Outflows Outflow Corn 72,500 bu /bu. 252,350 Feeder livestock purchase 1,508,900 Soybeans 28,947 bu /bu. 276,383 Crops purchased 31,626 Finish Beef 547 head /cwt. 931,941 Chemicals 40,969 Fin Yearling 646 head /cwt. 1,133,906 Custom hire (machine work 6,696 Crop government payments 15,113 Feed 92,625 Patronage dividends, cash 150 Fertilizers and lime 77,536 Other farm income 1,751 Freight and trucking 17,350 Personal wages & salary 57,425 Gasoline, fuel, and oil 32,710 Total operating inflows 2,669,020 Insurance (other than hea 24,684 Labor hired 32,000 Capital Sales Rent or lease: land, anim 210,546 Flex Head 8,000 Repairs and maintenance 41,152 Total capital sales 8,000 Seeds and plants 102,182 Storage and warehousing 4,496 New Credit Supplies 12,037 5thNB-Cattle 1,271,278 Taxes 7,621 Fifth National Bank-Disc 47,750 Utilities 7,800 JDCC-Flex Head 30,400 Veterinary, breeding, and 12,925 Total new credit 1,349,428 Other expenses 7,200 Family living/owner draw 80,000 Income & social sec taxes 20,000 Total operating outflows 2,371,055 Capital Purchases VT Disc 59,750 JD Flex Head 38,000 Total capital purchases 97,750 Loan Payments 5thNB-Cattle 1,341,068 John Deere Credit-332E 7,453 Fifth National Bank-Mach. 23,348 Fifth National Bank-Barn 32,778 5thNB-New 80 Ac 39,831 5thNB-SW 80 Ac 28,116 Ford Credit-Explorer 5,352 Mutual Insurance-House 246 Fifth National Bank-Disc - JDCC-Flex Head - Ann. oper. loan interest 15,981 Total loan payments 1,494,174 Total cash inflows 4,026,448 Total cash outflows 3,962,979 Net cash flow 63,469 34

37 Sample Farm Cash Flow Plan: 2017 Annual Plan CROP & LIVESTOCK PRODUCTION Production Per Operator Enterprise Units Unit Share Production Corn Acres bu ,904 bu. Corn Silage 40.0 Acres 21.9 ton ton Soybeans Acres 55.6 bu ,802 bu. Annual Cash Flow Total crops 1,156 Acres CROP INVENTORY SUMMARY Beginning Ending Inventory Produced Purchased Fed Sold Inventory Corn (bu.) 100, ,904-39,656 72,500 96,589 Corn Silage (ton) Hay, Alfalfa (ton) Soybeans (bu.) 18,947 30, ,947 20,802 LIVESTOCK INVENTORY SUMMARY Beginning Purchased / Sold / Ending Inventory Produced Trans In Died Trans Out Inventory Finish Beef (head) Fin Yearling (head) PROJECTED INVENTORY CHANGE Begin Begin Ending Ending Commodity Inventor $/Unit Value Inventory $/Unit Value Change Corn 100, ,742 96, ,266 3,525 Corn Silage , ,575-1,400 Hay, Alfalfa , ,700 2,100 Soybeans 18, ,997 20, ,630 12,634 Finish Beef , ,133-25,905 Accounts receivable Hedging accounts 5,650 5,650 0 Other current assets Total income items 1,322,001 1,312,954-9,047 Prepaid expenses & supplies 114, ,438 0 Growing crops Accounts payable (End) 0 (Beg) 0 0 Accrued interest (End) 21,087 (Beg) 32,658 11,571 Total expense items 135, ,096 11,570 Total inventories 1,457,526 1,460,049 2,524 35

38 Annual Cash Flow Sample Farm Cash Flow Plan: 2017 Annual Plan BALANCE SHEETS ASSETS Projected 1/1/2017 1/1/2018 Current Assets Cash and checking 76,500 52,106 Prepaid exp. & suppl. 114, ,438 Hedging accounts 5,650 5,650 Crops 536, ,171 Mkt lvst 780, ,133 Total current assets 1,512,939 1,479,498 Intermediate Assets Machinery 1,099,984 1,068,064 Titled vehicles 112,159 95,335 Total intermediate assets 1,212,143 1,163,400 Long Term Assets Land 1,258,300 1,258,300 Bldgs & improve. 514, ,564 Other long term 2,401 2,401 Total long term assets 1,774,979 1,749,265 Total farm assets 4,500,061 4,392,163 Personal assets 173, ,741 Total assets 4,673,874 4,560,903 LIABILITIES Current Liabilities Accrued interest 32,658 21,087 Prin due on term loans 69,288 62,946 Operating loan(s) 87,863-5thNB-Cattle 364, ,229 Total current liabilities 554, ,262 Intermediate Liabilities JDCC-Flex Head - 30,400 Fifth National Bank-Disc - 47,750 John Deere Credit-332E Fifth National Bank-Mach. 83,821 65,278 Total inter. liabilities 84, ,428 Long Term Liabilities Fifth National Bank-Barn 199, ,892 5thNB-SW 80 Ac 266, ,350 5thNB-New 80 Ac 435, ,861 Total long term liab. 902, ,103 Total farm liabilities 1,540,784 1,420,793 Personal liabilities 26,534 21,723 Total liabilities 1,567,318 1,442,516 36

39 Sample Farm Cash Flow Plan: 2017 Annual Plan BALANCE SHEETS (cont.) Projected 1/1/2017 1/1/2018 Net worth 3,106,556 3,118,387 Net worth change 11,831 Total debt to asset ratio 33 % 31 % Annual Cash Flow 37

40 Annual Cash Flow Sample Farm Cash Flow Plan: 2017 Annual Plan Income Statement Trends Source Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Proj. Cash Farm Income Corn ,350 Soybeans ,383 Finish Beef ,941 Fin Yearling ,133,906 Crop government payments 13,451 11,412 19,433-60,671 26,242 15,113 Patronage dividends, cash Property insurance income ,535 1,604 6,809 - Other farm income ,751 Gross sales 2,191,164 2,592,411 2,663,970 3,033,197 2,968,468 2,503,787 - Gross farm income (cash) 2,204,706 2,603,914 2,683,524 3,121,958 3,030,921 2,536,972 2,611,595 Cash Farm Expense Feeder livestock purchase 969,630 1,247,574 1,268,403 1,564,797 2,019,291 1,317,314 1,508,900 Interest 126, ,050 96, ,481 99,321 94, ,591 Seed 106, , , ,043 92, ,334 - Fertilizer 87,430 91, ,973 96,427 60,888 81,519 - Crop chemicals 31,056 34,162 36,884 39,543 34,933 42,398 - Storage 2,508 2,809 11,481 10,540 1,841 3,751 - Purchased feed 237, , , , , ,295 - Veterinary 10,884 11,647 12,147 13,968 15,900 14,397 - Supplies 25,941 27,913 20,945 35,502 10,320 13,547 - Fuel & oil 32,301 27,212 33,709 38,067 33,470 30,970 - Repairs 29,913 32,677 37,054 61,848 54,630 41,106 - Custom hire 3,649 3,850 9,542 9,114 5,810 7,800 - Hired labor 26,793 24,939 29,560 31,741 30,252 32,560 - Land rent 159, , , , , ,058 - Real estate taxes 1,650 1,680 1,680 4,558 5,654 7,472 - Farm insurance 28,737 33,728 37,058 33,220 28,445 25,966 - Utilities 6,143 6,849 7,872 8,265 8,093 7,688 - Hauling and trucking 26,123 28,516 26,773 25,232 17,272 16,920 - Miscellaneous 10,548 10,715 14,421 18,663 11,443 15,143 - Total cash farm expense 1,923,352 2,266,087 2,277,104 2,651,830 2,902,560 2,213,369 2,389,646 Net cash farm income 281, , , , , , ,949 Inventory Changes Prepaids expenses and supplies 23,596 7,496 5,966 12,909-10,776 3,259 0 Gain or loss on hedging activities -15,775-16,725 1,808 23, ,780 - Crops and feed 39,951 48, , ,364 54,016-26,495 16,858 Market livestock 62,653 67,865 72, ,895-41,496-62,987-25,905 Accrued interest -6, ,320-3,295-6,628 1,128 11,571 Total inventory change 103, ,247-83, ,746-4,006-86,875 2,524 Net operating profit 385, , , , , , ,473 Depreciation Machinery & equipment -64,179-39,910-54,399-52,859-52, , ,674 Titled vehicles -4,601-5,497-2,180-1,448-6,266-18,188-16,824 Buildings and improvements -21, ,168-4,982-10,765-26,373-25,714 Total depreciation -90,762-45,407-66,747-59,290-69, , ,212 Net farm income from operations 294, , , ,584 54,758 76,351 63,261 38

41 Sample Farm Cash Flow Plan: 2017 Annual Plan Income Statement Trends Gain or loss on capital sales - 38, ,996 Net farm income 294, , , ,584 54,758 76,351 60,265 Annual Cash Flow 39

42 Annual Cash Flow Sample Farm Cash Flow Plan: 2017 Annual Plan Financial Trends Source Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Proj. Income Statement Gross cash farm income 2,204,706 2,603,914 2,683,524 3,121,958 3,030,921 2,536,972 2,611,595 + Inventory change (income items) 86,829 99,947-93, ,131 13,398-91,262-9,047 = Gross farm income (accrual) 2,291,535 2,703,861 2,589,728 3,311,089 3,044,319 2,445,710 2,602,548 Total cash farm expense 1,923,352 2,266,087 2,277,104 2,651,830 2,902,560 2,213,369 2,389,646 + Depreciation 90,762 45,407 66,747 59,290 69, , ,212 +Inventory change (expense items) -16,856-8,300-10,286-9,614 17,404-4,387-11,570 = Total farm expense (accrual) 1,997,259 2,303,194 2,333,565 2,701,505 2,989,561 2,369,359 2,539,287 Net farm income from operations 294, , , ,584 54,758 76,351 63,261 Gain or loss from capital sales - 38, ,996 Net farm income 294, , , ,584 54,758 76,351 60,265 Profitability (market) Rate of return on assets 11.4 % 12.9 % 6.9 % 14.4 % 2.3 % 2.1 % 2.2 % Rate of return on equity 14.5 % 18.0 % 8.2 % 19.8 % -0.1 % 0.1 % -0.4 % Operating profit margin 33.7 % 38.4 % 24.5 % 41.0 % 12.2 % 9.6 % 8.8 % Asset turnover rate 33.9 % 33.7 % 28.3 % 35.1 % 18.9 % 22.1 % 24.6 % Liquidity & Repayment Current ratio (farm only) Working capital (farm only) 478, , ,820 1,009, , ,179 1,059,235 Working capital to gross revenue 20.9 % 23.2 % 23.0 % 30.5 % 31.2 % 39.2 % 40.7 % Term debt coverage ratio Replacement margin coverage ratio Efficiency Measures Operating expense ratio 77.4 % 79.4 % 84.0 % 76.2 % 92.4 % 86.5 % 87.3 % Depreciation expense ratio 4.0 % 1.7 % 2.6 % 1.8 % 2.3 % 6.6 % 6.2 % Interest expense ratio 5.8 % 4.1 % 3.6 % 3.6 % 3.5 % 3.8 % 4.1 % Solvency (market, exclude def liab) Farm assets 3,359,146 3,647,473 4,227,596 4,539,240 4,464,095 4,500,061 4,392,163 Farm liabilities 1,643,158 1,542,122 1,910,249 1,678,666 1,597,458 1,540,784 1,420,793 Total assets 3,513,076 3,801,403 4,381,526 4,693,170 4,618,025 4,673,874 4,560,903 Total liabilities 1,672,143 1,566,441 1,929,629 1,692,839 1,606,125 1,567,318 1,442,516 Net worth 1,840,933 2,234,961 2,451,896 3,000,331 3,011,901 3,106,556 3,118,387 Net worth change 229, , , ,435 11,569 94,655 11,831 Net worth change (%) 30 % 21 % 10 % 22 % 0 % 3 % 0 % Farm debt to asset ratio 49 % 42 % 45 % 37 % 36 % 34 % 32 % Total debt to asset ratio 48 % 41 % 44 % 36 % 35 % 34 % 32 % Other Information Personal income 48,462 50,462 52,024 53,332 54,681 56,037 57,425 Family living expense 91,654 75,738 81,026 86,863 78,783 83,894 80,816 Income and social security tax 21,668 20,043 20,253 27,637 19,109 29,233 20,000 Capital purchases 259, , , ,000 47, ,454 97,750 Capital sales - 68, ,650 8,000 40

43 Monthly Cash Flow Projection Monthly Cash Flow FINPACK makes monthly cash flow planning easy and accurate. The monthly cash flow can project annual operating loan needs and repayment capacity for the year, any portion of a year, or multiple years (up to ten years). Monthly Cash Flow includes: Projected monthly cash flows Projected operating loan transactions and balances Projected debt coverage Pro-forma income statement Pro-forma balance sheets Your completed plan can be printed directly on FSA forms, using FINPACK s FSA Forms tool. 41

44 Monthly Cash Flow 42

45 Sample Farm 2017 Monthly Plan Monthly Cash Flow Plan Executive Summary Projected Cash Flow Summary Term Debt Coverage Personal Total operating inflow 2,669,020 Farm and Farm Total operating outflow (-) 2,371,054 Net farm income from operations 63,412 63,412 Capital purchases (-) 97,750 Depreciation (+) 161, ,212 Capital sales (+) 8,000 Personal income (+) 57,425 57,425 New credit (+) 1,349,428 Family living expense (-) 80,000 80,000 Loan payments (-) 1,494,175 Personal interest expense (-) Net cash flow (=) 63,469 Principal payments on personal debt (-) 4,782 - Income taxes accrued (-) 20,000 20,000 Beginning cash balance (+) 76,500 Interest on term debt (+) 59,589 60,406 Operating loan borrowings (+) 607,610 Capital debt repayment capacity (=) 236, ,637 Operating loan principal payments (-) 695,473 Term debt payments 131, ,126 Ending cash balance (=) 52,106 Capital debt repayment margin 104, ,512 Term debt coverage ratio Beginning operating loan balance 87,863 Peak operating loan balance (Oct) 464,221 Financial Standards Measures Ending operating loan balance - Liquidity Beginning Ending Projected Change in Working Capital Current ratio Working capital 958,179 1,053,129 Change in cash -24,394 Working capital to gross revenue 36.8 % 40.5 % Change in current inventories (+) 2,594 Solvency (market) Change in operating loan balance (-) -87,863 Debt to asset ratio 34.2 % 32.3 % Change in other current loans (-) -28,722 Debt to equity ratio Change in princ due on term loans (-) -165 Profitability (market) Estimated change in working capital (=) 94,950 Net farm income 60,416 Rate of return on assets 2.2 % Projected Income Statement Rate of return on equity -0.4 % Operating profit margin 9.9 % Gross cash farm income 2,611,595 EBITDA 331,564 Inventory change - income items (+) -8,977 Repayment Capacity Gross revenue (=) 2,602,618 Term debt coverage ratio (farm) 1.79 Replacement margin coverage ratio 0.98 Cash farm operating expense 2,271,054 Efficiency Interest expense (+) 118,512 Asset turnover rate (market) 21.8 Depreciation (+) 161,212 Operating expense ratio 87.3 % Inventory change - expense items (+) -11,571 Depreciation ratio 6.2 % Total farm expense (=) 2,539,206 Interest expense ratio 4.1 % Net farm income from operations 63,412 Net farm income ratio 2.4 % Gains or losses on capital sales -2,996 Other Net farm income 60,416 Term debt coverage (farm+personal) 1.76 Term debt to EBITDA 2.97 Projected Earned Net Worth Change Shocks to Farm Term Debt Coverage Ratio Net farm income 60,416 Personal income (+) 57,425 10% decrease in gross income Family living expense (-) 80,000 10% increase in operating expenses 0.07 Income taxes accrued (-) 20,000 3% increase in interest rates 1.32 Personal loan interest expense (-) 788 Personal asset depreciation (-) 5,072 Earned net worth change (=) 11,981 Monthly Cash Flow 43

46 Sample Farm Cash Flow Plan: 2017 Monthly Plan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total CASH INFLOWS Monthly Cash Flow Beg cash bal Corn Soybeans Finish Beef Fin Yearling Crop gov pay Pat dividend Other farm Pers. wages Total inflow CASH OUTFLOWS Feeder lvstk Seed Fertilizer Chemicals Crop insur Drying fuel Crop purch Purch. feed Veterinary Supplies Fuel & oil Repairs Cust hire Labor Land rent RE taxes Farm insur Utilities Marketing Dues & fees Misc Living/Draw Income taxes Min end bal Tot. outflow Opr. surplus

47 Sample FarmCash Flow Plan: 2017 Monthly Plan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total CAPITAL PURCHASES VT Disc F Head Tot. cap pur CAPITAL SALES Flex Head Tot cap sale NEW CREDIT 5thNB-Cattle thNB-Disc JDCC-Flex Tot new cred LOAN PAYMENTS 5thNB-Cattle JDCC-332E thNB-Mach thNB-Barn thNB-New thNB-SW Ford-Explo InsCo-House thNB-Disc JDCC-Flex Tot loan pay Monthly Cash Flow Surp. or def ANNUAL OPERATING LOAN TRANSACTIONS & BALANCES Beg AO bal AO borrowing AO int. pay AO prin. pay End AO bal Accrued int End cash bal

48 Sample Farm Cash Flow Plan: 2017 Monthly Plan BALANCE SHEETS ASSETS Projected 1/1/2017 1/1/2018 Monthly Cash Flow Current Assets Cash and checking 76,500 52,106 Prepaid exp. & suppl. 114, ,438 Hedging accounts 5,650 5,650 Crops 536, ,241 Mkt lvst 780, ,133 Total current assets 1,512,939 1,479,568 Intermediate Assets Machinery 1,099,984 1,068,064 Titled vehicles 112,159 95,335 Total intermediate assets 1,212,143 1,163,400 Long Term Assets Land 1,258,300 1,258,300 Bldgs & improve. 514, ,564 Other long term 2,401 2,401 Total long term assets 1,774,979 1,749,265 Total farm assets 4,500,061 4,392,233 Personal assets 173, ,741 Total assets 4,673,874 4,560,973 LIABILITIES Current Liabilities Accrued interest 32,658 21,086 Prin due on term loans 69,288 69,123 Operating loan(s) 87,863-5thNB-Cattle 364, ,229 Total current liabilities 554, ,438 Intermediate Liabilities JDCC-Flex Head - 30,400 Fifth National Bank-Disc - 47,750 John Deere Credit-332E Fifth National Bank-Mach. 83,821 64,222 Total inter. liabilities 84, ,372 Long Term Liabilities Fifth National Bank-Barn 199, ,936 5thNB-SW 80 Ac 266, ,936 5thNB-New 80 Ac 435, ,031 Total long term liab. 902, ,903 Total farm liabilities 1,540,784 1,420,713 46

49 Sample Farm Cash Flow Plan: 2017 Monthly Plan BALANCE SHEETS (cont.) Projected 1/1/2017 1/1/2018 Net worth 3,106,556 3,118,537 Net worth change 11,981 Total debt to asset ratio 33 % 31 % Monthly Cash Flow 47

50 Sample Farm Cash Flow Plan: 2017 Monthly Plan Income Statement Trends Source Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Proj. Monthly Cash Flow Cash Farm Income Corn ,349 Soybeans ,383 Finish Beef ,940 Fin Yearling ,133,906 Crop government payments 13,451 11,412 19,433-60,671 26,242 15,113 Patronage dividends, cash Property insurance income ,535 1,604 6,809 - Other farm income ,753 Gross sales 2,191,164 2,592,411 2,663,970 3,033,197 2,968,468 2,503,787 - Gross farm income (cash) 2,204,706 2,603,914 2,683,524 3,121,958 3,030,921 2,536,972 2,611,595 Cash Farm Expense Feeder livestock purchase 969,630 1,247,574 1,268,403 1,564,797 2,019,291 1,317,314 1,508,900 Interest 126, ,050 96, ,481 99,321 94, ,512 Seed 106, , , ,043 92, , ,182 Fertilizer 87,430 91, ,973 96,427 60,888 81,519 77,536 Crop chemicals 31,056 34,162 36,884 39,543 34,933 42,398 40,969 Crop insurance ,534 Drying expense ,496 Storage 2,508 2,809 11,481 10,540 1,841 3,751 - Crop purchases ,625 Purchased feed 237, , , , , ,295 92,625 Veterinary 10,884 11,647 12,147 13,968 15,900 14,397 12,925 Supplies 25,941 27,913 20,945 35,502 10,320 13,547 12,037 Fuel & oil 32,301 27,212 33,709 38,067 33,470 30,970 32,710 Repairs 29,913 32,677 37,054 61,848 54,630 41,106 41,152 Custom hire 3,649 3,850 9,542 9,114 5,810 7,800 6,696 Hired labor 26,793 24,939 29,560 31,741 30,252 32,560 32,000 Land rent 159, , , , , , ,546 Real estate taxes 1,650 1,680 1,680 4,558 5,654 7,472 7,621 Farm insurance 28,737 33,728 37,058 33,220 28,445 25,966 9,150 Utilities 6,143 6,849 7,872 8,265 8,093 7,688 7,800 Hauling and trucking 26,123 28,516 26,773 25,232 17,272 16,920 - Marketing ,350 Dues & professional fees ,200 Miscellaneous 10,548 10,715 14,421 18,663 11,443 15,143 5,000 Total cash farm expense 1,923,352 2,266,087 2,277,104 2,651,830 2,902,560 2,213,369 2,389,566 Net cash farm income 281, , , , , , ,029 Inventory Changes Prepaids expenses and supplies 23,596 7,496 5,966 12,909-10,776 3,259 0 Gain or loss on hedging activities -15,775-16,725 1,808 23, ,780 - Crops and feed 39,951 48, , ,364 54,016-26,495 16,928 Market livestock 62,653 67,865 72, ,895-41,496-62,987-25,905 Accrued interest -6, ,320-3,295-6,628 1,128 11,571 Total inventory change 103, ,247-83, ,746-4,006-86,875 2,594 Net operating profit 385, , , , , , ,623 Depreciation Machinery & equipment -64,179-39,910-54,399-52,859-52, , ,674 48

51 Sample Farm Cash Flow Plan: 2017 Monthly Plan Income Statement Trends Titled vehicles -4,601-5,497-2,180-1,448-6,266-18,188-16,824 Buildings and improvements -21, ,168-4,982-10,765-26,373-25,714 Total depreciation -90,762-45,407-66,747-59,290-69, , ,212 Net farm income from operations 294, , , ,584 54,758 76,351 63,412 Gain or loss on capital sales - 38, ,996 Net farm income 294, , , ,584 54,758 76,351 60,416 Monthly Cash Flow 49

52 Sample Farm Cash Flow Plan: 2017 Monthly Plan Financial Trends Source Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Accr Sch F Proj. Monthly Cash Flow Income Statement Gross cash farm income 2,204,706 2,603,914 2,683,524 3,121,958 3,030,921 2,536,972 2,611,595 + Inventory change (income items) 86,829 99,947-93, ,131 13,398-91,262-8,977 = Gross farm income (accrual) 2,291,535 2,703,861 2,589,728 3,311,089 3,044,319 2,445,710 2,602,618 Total cash farm expense 1,923,352 2,266,087 2,277,104 2,651,830 2,902,560 2,213,369 2,389,566 + Depreciation 90,762 45,407 66,747 59,290 69, , ,212 +Inventory change (expense items) -16,856-8,300-10,286-9,614 17,404-4,387-11,571 = Total farm expense (accrual) 1,997,259 2,303,194 2,333,565 2,701,505 2,989,561 2,369,359 2,539,206 Net farm income from operations 294, , , ,584 54,758 76,351 63,412 Gain or loss from capital sales - 38, ,996 Net farm income 294, , , ,584 54,758 76,351 60,416 Profitability (market) Rate of return on assets 11.4 % 12.9 % 6.9 % 14.4 % 2.3 % 2.1 % 2.2 % Rate of return on equity 14.5 % 18.0 % 8.2 % 19.8 % -0.1 % 0.1 % -0.4 % Operating profit margin 33.7 % 38.4 % 24.5 % 41.0 % 12.2 % 9.6 % 9.9 % Asset turnover rate 33.9 % 33.7 % 28.3 % 35.1 % 18.9 % 22.1 % 21.8 % Liquidity & Repayment Current ratio (farm only) Working capital (farm only) 478, , ,820 1,009, , ,179 1,053,129 Working capital to gross revenue 20.9 % 23.2 % 23.0 % 30.5 % 31.2 % 39.2 % 40.5 % Term debt coverage ratio Replacement margin coverage ratio Efficiency Measures Operating expense ratio 77.4 % 79.4 % 84.0 % 76.2 % 92.4 % 86.5 % 87.3 % Depreciation expense ratio 4.0 % 1.7 % 2.6 % 1.8 % 2.3 % 6.6 % 6.2 % Interest expense ratio 5.8 % 4.1 % 3.6 % 3.6 % 3.5 % 3.8 % 4.1 % Solvency (market, exclude def liab) Farm assets 3,359,146 3,647,473 4,227,596 4,539,240 4,464,095 4,500,061 4,392,233 Farm liabilities 1,643,158 1,542,122 1,910,249 1,678,666 1,597,458 1,540,784 1,420,713 Total assets 3,513,076 3,801,403 4,381,526 4,693,170 4,618,025 4,673,874 4,560,973 Total liabilities 1,672,143 1,566,441 1,929,629 1,692,839 1,606,125 1,567,318 1,442,436 Net worth 1,840,933 2,234,961 2,451,896 3,000,331 3,011,901 3,106,556 3,118,537 Net worth change 229, , , ,435 11,569 94,655 11,981 Net worth change (%) 30 % 21 % 10 % 22 % 0 % 3 % 0 % Farm debt to asset ratio 49 % 42 % 45 % 37 % 36 % 34 % 32 % Total debt to asset ratio 48 % 41 % 44 % 36 % 35 % 34 % 32 % Other Information Personal income 48,462 50,462 52,024 53,332 54,681 56,037 57,425 Family living expense 91,654 75,738 81,026 86,863 78,783 83,894 80,817 Income and social security tax 21,668 20,043 20,253 27,637 19,109 29,233 20,000 Capital purchases 259, , , ,000 47, ,454 97,750 Capital sales - 68, ,650 8,000 50

53 Collateral Analysis The FINPACK Collateral Analysis builds from the balance sheets to calculate Loan to Value and the Collateral Margin. Proposed loans and projected collateral can be added to complete the picture. Collateral Analysis can feed directly into Presentation Manager and Risk Rating. With Collateral Analysis, you can: Select loans and collateral from balance sheet Collateral Analysis Enter multiple collateral groups, when applicable Standardize discount percentages (although discount percentages can also be overridden for individual analysis) Link loan to value and collateral margin to the Risk Rating and Presentation Manager components of FINPACK 51

54 Sample Farm Collateral Analysis Principal Market Disc. Discounted Prior Net Loan to Loan Balance Collateral Value Pct. Value Liens Collateral Value Chattels 5thNB-Operating 87,863 Prepaid expenses and supp 114, , ,994 5thNB-Cattle 364,951 Crop inventory 536, , ,604 Fifth National Bank-Mach. 102,320 Livestock held for sale 780, , ,024 Disc Loan 47,750 Machinery and equipment 1,099, ,484 7, ,285 VT Disc 59, ,775-53,775 Total 602,884 2,590,523 1,874,881 7,199 1,867, % Real Estate Fifth National Bank-Barn 215,576 Land 597, , ,000 5thNB-SW 80 Ac 278,450 Buildings and improvement 514, , ,567 Total 494,026 1,111, , , % Collateral Analysis New 80 5thNB-New 80 Ac 451,767 Land 660, , ,640 Total 451, , , , % Total loan to value 1,548,677 3,182, % Collateral coverage margin 2.06 Collateral margin 1,634,212 52

55 Credit Decision Scorecard Use FINPACK s Credit Decision Scorecard to fast track the review and decision making process for smaller loans. With Credit Decision Scorecard, you can: Develop your own customized scorecard using the criteria most important to you Define essential criteria that must be met to make the loan Gather the customer data that you specify Evaluate customer data compared to minimum approval criteria that you establish Provide the flexibility to document reasons to override automatic approvals or rejections Credit Decision Scorecard 53

56 Sample Farm New equipment purchase Scorecard: Sample farm business Pre-qualifying Criteria Must meet ALL criteria for automatic approval Yes Is the requested loan amount less than $50,000? Yes Yes Yes Yes Is this loan to a business, not an individual? Is the purpose of this loan other than a line of credit or for inventory? Has at least one principal personally guaranteed the loan? Has the business generated a positive net profit each of the last three years? Customer Data Applicant credit score 690 Co-applicant credit score 670 Loan amount $35,000 Collateral value $60,000 Financial Criteria Must meet ALL criteria for automatic approval 0.58 Loan to value 0.75 or less 670 Minimum credit score 650 or greater 24 Debt to income 40 or less Credit Decision Scorecard Approval:Yes, meets scorecard criteria By:Ima Lender 54

57 Risk Rating FINPACK s flexible risk rating tool meets the needs of your institution. Risk Rating automatically links to data from client plans and analyses. FINPACK makes risk rating fast and consistent. With Risk Rating, you can: Create your own risk rating model(s) Link to data from the balance sheet, collateral analysis and ratio analysis Include customized external criteria, such as credit score Risk Rating 55

58 Sample Farm 2017 Risk Rating Risk Rating Model: Balance Sheet(s): Loan Scoring, Agriculture January 1, Market Only; January 1, Market Only; January 1, Market Only; January 1, Market Only Earned Net Worth Analysis: 2016,2015,2014,2013 CRITERIA RESULT SCORE x WEIGHT = TOTAL Liquidity Current ratio Solvency Debt to asset ratio (mkt) Net worth growth % (mkt) 8.9 (Average) Repayment Capacity Term debt coverage ratio (projected) Security Analysis Loan to value Overall Rating: 3 -- Good quality, little risk Total Score: 24 OVERALL RATINGS Total Weighted Points From To Rating Recommendation Highest quality, very low risk High quality, minimal risk Good quality, little risk Acceptable risk Average risk Above average risk High degree of risk Low quality Lowest quality - liquidation possible Notes Risk Rating 56

59 Loan Presentations Loan Presentations The FINPACK Presentation Manager provides a consistent and concise loan presentation format customized to your bank s needs. Users of the FINPACK Presentation Manager can: Combine FINPACK data and your narrative into a loan presentation Base loan presentations on a template that can be customized and standardized for the entire institution Take advantage of powerful and familiar word-processing features Select which data to import from balance sheets, collateral analysis, risk rating, and cash flow plans Automatically update linkages to imported data when source data changes from year to year Attach virtually any document as an appendix, such as a balance sheet, historical financial spreads, or an external document 57

60 Loan Presentations Credit Presentation Borrower Information Borrower: Jim Sample Address: 1032 Hwy 21 Cattleford, IA Telephone: Owned Acres: 175 Acres Acres Operated: 1,156 Acres Date: 02/15/17 Loan Officer: Aggie Lender Date of Last Review: 01/28/2016 Risk Rating Score: 24 (3 -- Good quality, little risk) Tax ID# Type of Operation: Crop & Cattle Finishing Customer Since: 1993 Years in Business: 28 Years at Current Location: 28 Nature of Business/Operation Description: Customer raises feeder cattle as well as corn and soybeans. Purpose of Request: Customer is requesting to renew both the cattle and crop operating loans. Customer purchases two groups of cattle during the year. One group in the spring and one in the fall. The cattle are then fed on the farm using homegrown feed. Soybeans and 1/2 or more of the corn crop is sold for cash grain. This request will renew both operating lines of credit. Also, customer is planning to purchase a vertical tillage disc for the operation. Request is to finance 80% of the purchase price. Sources of Repayment: Cattle sales income is the main source of repayment for the cattle operating line of credit. Sales are in the fall and spring. Cash grain sales are the main source of repayment for the crop operating line. A portion of the crop is sold after harvest and the remainder is held for more favorable spring prices. Machinery and real estate payments are made with profits from ongoing business operations. The customer has a history of timely repayment, revolving operating loans, and complying with loan terms. Page 1 58

61 Present and Proposed Loans Loan Present Balance Proposed Balance Int. Rate Fifth National Bank- 215, , Barn 5thNB-Cattle 364,951 1,200, thNB-Operating 87, , Fifth National Bank- 102, , Mach. 5thNB-SW 80 Ac 278, , thNB-New 80 Ac 451, , Disc Loan 0 47, Disc Loan - 47, Rate Formula Term(s) Maturity Date Loan Presentations Collateral Analysis Loan Principal Balance Collateral Chattels 5thNB-Operating 87,863 Prepaid expenses and supplies Discounted Value Prior Liens Net Collateral 102, ,994 5thNB-Cattle 364,951 Crop inventory 348, ,604 Fifth National Bank- 102,320 Livestock held for 507, ,024 Mach. sale Disc Loan 47,750 Machinery and 862,484 7, ,285 equipment VT Disc 53,775-53,775 Totals 602,884 1,874,881 7,199 1,867,682 Loan to value 32% Collateral margin 1,264,798 Real Estate Fifth National Bank- 215,576 Land 478, ,000 Barn 5thNB-SW 80 Ac 278,450 Buildings and improvements 308, ,567 Totals 494, , ,567 Loan to value 63% Collateral margin 292,541 New 80 5thNB-New 80 Ac 451,767 Land 528, ,640 Totals 451, , ,640 Loan to value 85% Collateral margin 76,873 All Collateral Loan to value 49% Collateral margin 1,634,212 Page 2 59

62 Loan Presentations UCC Filing Number: UCC Filing Date: 01/01/2008 Ratio Analysis Current ratio 2.73 Debt to asset ratio (mkt) Debt to equity ratio (mkt) 0.50 Loan to value 48.7 Total assets (mkt) 4,673,874 Total liabilities 1,567,318 Peak AO balance (FINFLO) 793,201 FINAN Rate of return on assets (mkt) 2.1 FINAN Rate of return on equity (mkt) 0.1 FINAN Term debt coverage ratio (accrual) 1.58 Recommendation Strengths: Working Capital, Debt to Asset Ratio, Marketing, Off Farm Income, Proven Performance Weaknesses: Cattle markets and potential affect on business, Vulnerable toincome or expense shocks. Exceptions to Policy: None Conclusion and Recommendation: Jim has been a strong customer for several years. There is little concern about repayment or performance. Recommendation is to approval the renewal. Loan Officer Date Page 3 60

63 Sample Farm Jan 1, 2013 Jan 1, 2014 Jan 1, 2015 Jan 1, 2016 Jan 1, 2017 Average Market Only Market Only Market Only Market Only Market Only Current Assets Cash and checking 43,578 41, ,548 67,756 76,500 66,607 Prepaid expenses and supplies 103, , , , , ,940 Hedging accounts 3,613 4,050 27,650 9,150 5,650 10,023 Crop inventory 778, , , , , ,279 Livestock held for sale 545, , , , , ,053 Total current assets 1,473,655 1,382,531 1,646,465 1,593,917 1,512,939 1,521,901 Loan Presentations Intermediate Assets Machinery and equipment 1,034,389 1,057,185 1,004, ,759 1,099,984 1,038,929 Titled vehicles 31,148 28,968 89,519 83, ,159 69,010 Total intermediate assets 1,065,537 1,086,153 1,093,845 1,082,012 1,212,143 1,107,938 Long Term Assets Land 597,500 1,258,300 1,258,300 1,258,300 1,258,300 1,126,140 Buildings and improvements 508, , , , , ,313 Other long term assets 2,401 2,401 2,401 2,401 2,401 2,401 Total long term assets 1,108,280 1,758,912 1,798,930 1,788,166 1,774,979 1,645,854 Total farm assets 3,647,473 4,227,596 4,539,240 4,464,095 4,500,061 4,275,693 Total personal assets 153, , , , , ,906 Total assets 3,801,403 4,381,526 4,693,170 4,618,025 4,673,874 4,433,600 Current Liabillities Accrued interest 28,182 23,862 27,157 33,785 32,658 29,129 Principal due within 12 months on term loans 68,570 94,348 81,594 86,742 69,288 80,108 Current loans 748, , , , , ,094 Total current liabilities 845, , , , , ,331 Intermediate & Long Term Liabilities Intermediate loans 130,156 97,852 54,979 8,267 84,016 75,054 Long term loans 566,899 1,025, , , , ,471 Total farm liabilities 1,542,122 1,910,249 1,678,666 1,597,458 1,540,784 1,653,856 Personal liabilities 24,319 19,380 14,173 8,666 26,534 18,615 Total Liabilities (including deferreds) 1,566,441 1,929,629 1,692,839 1,606,125 1,567,318 1,672,470 Annual Noncurrent Debt Payments Farm P & I payments 120, , , , , ,769 Personal P & I payments 6,000 6,000 6,000 6,000 11,352 7,070 Equity Net worth 2,234,961 2,451,896 3,000,331 3,011,901 3,106,556 2,761,129 Net worth change 0 216, ,435 11,569 94, ,319 Ratio Analysis Current ratio Current ratio (farm and personal) Working capital 628, ,820 1,009, , , ,570 Working capital (farm and personal) 620, ,968 1,001, , , ,692 Current & interm. % in debt 38 % 36 % 25 % 24 % 23 % 29 % 61

64 Loan Presentations Jan 1, 2013 Jan 1, 2014 Jan 1, 2015 Jan 1, 2016 Jan 1, 2017 Average Market Only Market Only Market Only Market Only Market Only Total debt to asset ratio 41 % 44 % 36 % 35 % 34 % 38 % Total debt to equity ratio Loan to value % 60 % 57 % 48 % 47 % 49 % 52 % Collateral margin 1,315,465 1,384,325 1,788,747 1,878,219 1,634,212 1,600,194 Collateral coverage ratio 1.7 % 1.8 % 2.1 % 2.1 % 2.1 % 1.9 % 62

65 FSA Forms Package FSA Forms The FINPACK FSA Forms Package will generate the required forms to process FSA guaranteed loans, interest assistance, and direct loan applications. The Forms Package links to either the FINFLO monthly cash flow plan or the Annual Plan and automatically extracts the necessary information to fill out the selected application. The resulting forms appear as if they were distributed by FSA. For FSA Interest Assistance, the FSA Forms Package will generate the supporting information for the request. Multiple loans can be selected for consideration so that you can determine which loans qualify for interest assistance and document the results. The following forms are generated: Application of Guarantee Preferred Lender Application for Guarantee Farm Business Plan Worksheets for Direct Loans 63

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67 This form is available electronically. Form Approved OMB No (See Page for Privacy Act and Public Burden Act Statements) FSA-2211 U.S. DEPARTMENT OF AGRICULTURE Position 3 ( ) Farm Service Agency APPLICATION FOR GUARANTEE INSTRUCTIONS TO LENDER: All Loan Applicants will complete Part A. If the Loan Applicant is an entity, they will complete Part B. If the Applicant is an individual, they will complete Part C. All Loan Applicants will complete Parts D, E and F. Lender will complete Parts G through L and attach items in Part P. Co-Applicants and entity members will complete Parts N and O. Note: When both spouses are involved in the operation, and both are applying for the loan, they should be considered a Joint Operation. One spouse completes Part C, the other completes Parts N and O. PART A TYPE OF OPERATION 1. Type of Operation: X Individual Partnership Trust Joint Operation Corporation Cooperative LLC Other (Explain): PART B ENTITY APPLICANT INFORMATION 1. Entity Name 2. Entity Tax ID No. 3. Number of Entity Members FSA Forms 4. Entity Address 5. Entity Headquarters County 6. Entity Telephone No. (Including Area Code) PART C INDIVIDUAL APPLICANT INFORMATION 1. Applicant s Full Legal Name 2. Applicant s 9 Digit Social Security or Tax ID No. 3. Applicant s Birthdate (MM-DD-YYYY) 4. Applicant s Address 5. Residence or Headquarters County 6. Applicant s Telephone No. (Including Area Code) 7. Marital Status: Married Unmarried Divorced Legally Separated Widowed PART D OTHER INFORMATION 1. Have you ever conducted business under any other name(s) YES NO If YES, what name(s)? Voluntary Information for Monitoring Purposes Ethnicity, race, and gender information is requested in order to monitor FSA's compliance with Federal laws prohibiting discrimination against loan applicants and to determine if you qualify for targeted funds. You are not required to furnish this information, but are encouraged to do so. Failure to complete this information may result in you not receiving access to targeted funds for which you may be eligible. Entity applicants should base their answers on the ethnicity, race, and gender of the owners of a majority interest in the entity. 2A. Ethnicity 2B. Race (Choose as many boxes as applicable) 2C. Gender 2D. Veteran Status X Jim Sample /4/ Hwy 21 Cattleford, IA X Hispanic or Latino Not Hispanic or Latino American Indian or Alaskan Native Black or African American X Native Hawaiian or Other Pacific Islander X Asian White X Male Female X Veteran Non Veteran PART E - ELIGIBILITY INFORMATION (Continued on Page 2) 1. Number of Years Operating a Farm: I (including all members, if an entity applicant) have not caused the Farm Service Agency a loss by receiving debt forgiveness through write-down, write-off, compromise, adjustment, reduction, charge-off, payment of a guaranteed loss claim, or bankruptcy. 3. I (including all members, if an entity applicant) am not delinquent on any debt to the United States Government. YES X X NO 65

68 FSA-2211 PART G - TYPE OF ASSISTANCE REQUESTED (Years) X 464, X PART H FUNDS PURPOSE FSA Forms Crop Inputs PART I - PROPOSED SECURITY 464,221 Crop Production First 650, ,000 PART J - ENVIRONMENTAL INFORMATION 6. TOTALS: Based on a site visit to the loan applicant's operation and discussion of the operating plan, answer the following: YES NO HEL/WL Compliance: Land Use: Floodplains: Historical and Archaeological Sites: Hazardous Substances: Endangered Species: Environmental Compliance: State Water Quality Standards: PART K REPAYMENT CAPACITY (inflows - outflows) 650 (number of livestock) Beef cattle (type of livestock) 52,106 X X X X X X X X (inflows - outflows) 66

69 Portfolio Risk Analyst (PRA) You know your borrowers and their individual business risks. But how is your entire portfolio positioned to face the volatility of today s agriculture? PRA creates a database of your borrowers and generates reports that help you see where the stress points are if market conditions change. Stress test individual segments or your entire portfolio Segment your portfolio by farm type, size, performance and leverage position Portfolio Risk Analyst Base stress tests on past or projected financial performance Identify borrowers who contribute most to portfolio risk Generate reports to summarize the financial position and performance of portfolio segments Build customer loyalty by providing them benchmarks of financial performance 67

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71 Portfolio Risk Analyst (PRA) creates a database of your borrowers and generates reports that help you see where the stress points are if market conditions change. Portfolio Risk Analyst Catherine Young Scott Koufax Eric Banks Alice Ripken Peggy Molitor Brendan Blyleven Janis DiMaggio Hunter Aaron Terri Oliva Rachel Carew Teddy Berra Jeremy Bench Natasha Ryan Glenna Gerhig 69

72 Portfolio Risk Analyst Financial Summary - Tim Ted Williams Group Farm Median Count 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Gross cash farm income 993,747 1,322, , , , ,167 1,064,214 1,647,658 1,973,813 2,882,359 6,898,606 8,495,446 Inventory change (income items) 31, , ,657 43,487 67,354 86, , , , , ,919 2,580,471 Gross farm income (accrual) 1,025,210 1,627, , , ,885 1,059,633 1,155,270 2,079,939 2,175,209 3,694,636 7,038,045 10,337,672 Total cash farm expense 702, , , , , , ,735 1,142,447 1,690,656 2,265,241 6,706,802 9,001,627 Depreciation 26,672 61, ,460 26,290 32,526 42,958 58,598 68,238 79, , , ,936 Inventory change (expense items) -24,945-14, , ,076-54,537-32,026-21,156-6,280 1,861 23,208 35, ,051 Total farm expense (accrual) 704,648 1,062, , , , , ,805 1,197,307 1,590,651 2,356,306 6,915,774 8,662,385 Net farm income from operations 320, , ,596 90, , , , , , ,275 1,620,730 2,407,832 Gain or loss from capital sales ,000 Net farm income 320, , ,596 90, , , , , , ,275 1,620,730 2,407,832 Rate of return on assets (mkt) Rate of return on equity (mkt) Operating profit margin (mkt) Asset turnover rate (mkt) Current ratio - ending (farm only) Working capital - ending (farm only) 97, , ,028 98, , , , , ,403 1,370,197 1,868,941 4,684,928 Working capital to gross revenue Term debt coverage ratio Replacement coverage ratio Operating expense ratio Depreciation expense ratio Interest expense ratio End farm assets (mkt) 1,590,935 3,000, ,158,190 1,436,412 1,795,499 2,132,904 2,689,216 3,256,207 4,546,019 5,979,308 8,539,353 15,269,817 End farm liabilities 746, , ,477,010 2,601,826 1,561,646 1,101, , , , , ,981 51,759 Total ending assets (mkt) 1,673,446 3,016, ,297,134 1,532,400 1,836,754 2,354,079 2,767,900 3,433,109 4,687,689 6,211,444 8,539,353 15,382,817 Total ending liabilities 990, , ,645,801 2,704,836 2,217,511 1,408,237 1,109, , , , , ,741 Ending net worth (mkt) 683,430 2,020, , ,543 1,021,045 1,460,930 1,805,992 2,265,916 3,063,119 4,153,103 5,772,793 7,262,569 Net worth change 289, , ,571 77, , , , , , ,376 1,754,273 5,707,175 Market net worth change (%) Farm debt to asset ratio Total debt to asset ratio Personal income ,730 5,642 11,582 22,015 59,237 Family living expense 8,347 70, ,174 33,563 48,452 62,111 76,590 79,660 87,553 99, ,000 Income and social security tax 0 2, ,931 16,620 22,851 78, ,000 Capital purchases 330, , ,603 42,909 96, , , , , , ,282 4,047,527 Capital sales 2,102 2, ,801 2,230 4,073 8,750 18,366 28,449 60,270 70

73 Customer Support The FINPACK team is committed to providing world-class service and technical support. Our qualified technical support professionals are prepared to handle your support needs on a case-by-case basis or in an ongoing partnership. We provide timely, reliable service to ensure every customer s business success. Customer Support 71

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75 FINPACK Training We want you to be able to get up and running quickly. Contact us to learn about: Two-day FINPACK workshops for lenders On-site training for your staff Webinars customized for your institution Online training courses ( ) Periodic webinars on specific FINPACK topics 73 FINPACK Training

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77 FINPACK Commercial FINPACK Commercial A better way to review all your credits FINPACK, the industry standard for ag credit analysis software, offers equally powerful commercial analysis. Like our ag analysis, FINPACK s commercial analysis features a comprehensive set of tools designed to save you time and enhance the quality of your commercial credit analysis. Double your power, not your cost When you have both the ag and commercial versions of FINPACK, you ll maximize the efficiency of your entire lending operation. Our pricing structure is designed to be affordable, whether you have one location or more than 100. See for yourself Call to set up a webinar and find out how FINPACK can increase efficiency and reduce risk in your lending operation. 75

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79 About CFFM About CFFM The Center for Farm Financial Management (CFFM) provides educational programs and software tools that are practical, timely, and applicable to realworld situations. First used by lenders in 1980, FINPACK is the original off-the-shelf agricultural credit analysis tool used broadly by banks FINPACK is used by lenders, farmers and educators throughout the United States and Canada CFFM has over 35 years of experience developing farm financial management software Our dedicated staff knows farm financial management and production agriculture We are committed to the development of practical, fast, and accurate farm financial tools We are committed to outstanding software support and customer service Toll-Free: (800) Fax: (612)