Ep. 87 Mid-Year Insights with Brian Ricker

Main Topics Covered

1. Ag Credit's Performance: Overview of the first half of 2025, including growth, credit quality, and net income.
2. Milestones and Achievements: Surpassing $3.5 billion in loans, successful conferences, and patronage returns.
3. Challenges: Lower commodity prices and higher inputs affecting members, restructuring loans, and dealing with financial stress.
4. Future Outlook: Impact of weather and crop conditions, expected growth slowdown, and strategic initiatives.
5. Strategic Initiatives: Focus on technology upgrades, including loan origination systems and digital banking apps.
6. Community Engagement: Open house events and office upgrades to enhance member services.
7. Adaptation to Market Changes: Emphasis on fundamentals, agility, and financial health to navigate changes.
8. Succession Planning: Developing future leaders within Ag Credit and ensuring the right people are in place.

 

Transcription

Speaker 1 (00:08):Welcome to AgCredit Said It, your go-to podcast for insights on farm finance and maximizing your return on investment. Join us as we talk to industry leaders, financial experts, and area farmers, bringing you skillful advice and strategies to grow your farm's financial future AgCredit Said It, where farm finance goes beyond the balance sheet.

Kendra Heffelfinger (00:38):Welcome back to another edition of AgCredit Said It. I'm your guest host, Kendra Heffelfinger, sales and marketing director for the association. And with me today I have our president and CEO. So Brian Ricker, welcome back.

Brian Ricker (00:49):Hey, it's great to be back.

Kendra Heffelfinger (00:51):Thanks, Brian. Really appreciate you being on with us today. We're about midway through 2025 and there's a lot to get to association health, the financial situation for our members and just the overall economy that we're seeing here in northwest Ohio. So with that, we're going to go ahead and get started. Brian, can you give us kind of a brief overview of Ag credits performance as we look at the first half of this year?

Brian Ricker (01:13):Sure. Yeah. We have about five months in to the year already. Our fiscal year of course is calendar year and it's going really well. Just a couple things that come to mind. Growth is one of those things and 10% growth from a year ago till now, so that's actually a little more than what we were thinking, but that's good credit quality on our loans. As far as being acceptable. Loans that are out there, we're at 95%, which is a really good number. It's a strong number. It is a little lower than what it was a year ago, but that's just a reflection of lower commodity prices in corn and soybeans. Net income is tracking just a little bit behind. A year ago, we have placed some funds into our allowance account, so I think last year it was about 28 million the first five months and we're at 27 million, so not too much different, and then our capital remains strong. That's definitely one of the strengths of our association is just our strong capital position and then efficiency as well. And we are always one in the top third or so of all the farm credit institutions that are out there in the efficiency area, so we're off to a great start.

Kendra Heffelfinger (02:34):Good. Yeah. It sounds like overall ag credit's performance has hit the mark. What are some major milestones or achievements beyond that we've hit recently?

Brian Ricker (02:42):Yeah, I kind of touched earlier about growth and we did surpass 3.5 billion in total loans here recently, and that number is important just to have the size and the scale that's needed just to cover overhead and those types of things. A few months ago we had a very successful Emerge conference and that was held in Perrysburg. I think we had over 200 of our members there, multi-generational families there, and so it was great, a lot of good speakers and that was really, really good. We had a really strong patronage return. Again, we distributed it around 22 million a few months ago, and so that was great and 38 years now of returning patronage to our borrowers, so that's exciting.

Kendra Heffelfinger (03:39):That's great.

Brian Ricker (03:39):Yeah, we continue to be a leader as well with Ag Link loans. That's a program through the state of Ohio through the treasurer's office, and about the last three or four years now, we just continue to grow that and I think we're around 17 to 1800 link loans in our portfolio now, and especially in the times we're in right now with interest rates higher and of course operating expenses for a lot of our farm operations being hired too, being able to get two and a half to maybe almost 3% off of your operating loan interest, it all adds up and all those little things can add up over time. And then the last thing is something that I'm pretty proud of, I guess to report on as our mission fund and over, I think it was 2018 when we started that mission fund. And since then we've given out around $702,000 in grants to just some really, really good organizations and groups across Northern Ohio to help them to further what they're doing. So that's really a good news story too.

Kendra Heffelfinger (04:55):Yeah, it's a great way for Ag Credit to give back to the community. A lot of those projects are community service oriented, so we're seeing fire departments, local junior fair boards, you name it. We're kind of giving back to those education in the classroom, so that's a wonderful program that we do have.

Brian Ricker (05:11):It sure Is.

Kendra Heffelfinger (05:12):Appreciate the board's support of that and Ag Link. We had the state treasurer on our podcast about a month or so ago and proud of the work that we've been doing with that, helping our members save the interest that we can through that program. I know he was very excited of our participation in that as a lender. So with that, those are the good things. Those are the milestones, right?

Brian Ricker (05:34):That's right.

Kendra Heffelfinger (05:34):Just like our members, there are challenges out there this year. What are some challenges that ag credit's facing this first half of the year?

Brian Ricker (05:41):So I touched upon it earlier that we are seeing in our portfolio, like in the corn in soybean area, lower prices and higher inputs. And so that's been going on for a few years now. And I know over the last five months or so we've had to work with more of our members in that area, maybe doing some restructuring on some loans and just trying to look at some different alternatives because there is definitely some stress out there with some farm operations. And so we are there for them and just trying to structure things to get 'em through the cycle that we're in. And it is a cycle if you're around agriculture long enough, you see the cycles and we're in one of those right now. We've had four or five really good years in the last couple in certain commodities especially. It's been a little more difficult.

Kendra Heffelfinger (06:40):And for our members that are out there listening, what's some ways that they can face this challenge with ag credit and how can we office services to them?

Brian Ricker (06:48):Sure. One of the things is if you're a member and you start to feel that maybe you're not going to be able to make a payment coming up, you're going to struggle with it, you're starting to see some of the liquidity that you have on your balance sheet, dry up, let your account officer aware of that. And it just seems like the earlier that we know about something, more options are available and we can do different things. It could be deferring a payment to just extending the terms of a loan a little longer to give you a little more time to maybe make that payment just depending on when you're going to sell grain. The earlier the better is the best thing I can say.

Kendra Heffelfinger (07:37):Yeah, it's with anything communication's key, right? And we can't emphasize that enough as we look towards second half of the year for ag credit. What does that look like? I know the farmers are having challenges here with a wet season this spring. In fact, I was talking to a couple members this morning and they're still trying to get some replant done. How does that impact ag credit as we go into the second half of the year?

Brian Ricker (08:00):Yeah, there's obviously a lot of unknowns with weather, just crop conditions and where all that's going to sort out. And I think uncertainty is definitely there. I do see, I mentioned growth earlier. I definitely see growth or feel like growth will probably slow a little bit as the year goes on, but I'm real optimistic that based on where we're at today, five months into the year, we're going to continue to ride the current good performance for the rest of the year. I often say that as our members do well and as whatever their performance is, there's a direct reflection on how we're going to perform as well as an association. And so again, I think that that weather and hopefully our yields are good, and maybe these prices start to go up a little bit by the end of the year and early into 2026, and we start to see a little bit of relief there, and that'll just give everybody a little bit more momentum to push forward.

Kendra Heffelfinger (09:08):Good. As we look at those challenges as we look at the second half of the year, the things that you just mentioned, obviously we can poise ourselves as an association with some strategies and some initiatives that we're looking forward not just in the next six months, but as we look beyond. And so what are some of those strategic initiatives or projects that members should be aware of that acred is working on?

Brian Ricker (09:28):Yeah, I think technology, when you look at initiatives that we're working on would cover a good part of that and a couple of things. And these initiatives are expensive too. They cost money and fortunately a lot of money it seems. But little things like we're going to be updating our loan origination system, and that's more of an internal thing that of course many of our members will not really see that once it is implemented in 2026, but it should improve our internal efficiency in getting a loan closed. It will help us to where we won't be entering numbers more than once, and there's just some added efficiency there. So we're looking forward to that. And again, that is a districtwide AG first district-wide initiative and not just ag credit. And then along those lines too, we just updated our digital app, digital banking app. And so we have a lot more options now for our members when they're in there to make payments and it's a little more simplified and easier to understand.

(10:42):And so those things, they just take time to make happen, and we're finally there with that. And then I think little things with technology too that we're working on. And here's where I think hopefully our members are going to see some benefit down the road too, and that's with electronic signatures and something. We use DocuSign more and more on our loan documents, and we're hoping someday that even a mortgage can be DocuSigned to, we're not there yet. It's not our issue. It's more of just the state of Ohio and some laws and so forth there. But just imagine today, it's here today I guess, with some of our loans when you're in the tractor and you're closing a loan right in your tractor or in your combine. So we want to do more and more of that and just make sure our members are aware of those efficiency options that are there.

(11:39):And I know internally for us too, we're looking at other automation type things. So just our process in general and looking for time savers. Just one quick example, personal example for me, it was just a few days ago actually that it occurred to me that there's this report that I like to put together myself, and it's a monthly report and I'm getting data from about two or three different spreadsheets, and I've been doing that for about two years now. And it occurred to me, well, why am I doing this and spending maybe 20 minutes a month doing it? So I contacted one of in our business analyst group and told them what I was doing, and now through their automation, I get that report emailed to me every month, and it's right there for me rather than me spending the 20 minutes of putting it together every month. So you take that 20 minutes times 12 months, and it's a small example, but we've got a lot of other examples where we've got teams of people, 30 people doing something, and we're saving them an hour, maybe a month. And so that type of thing adds up. And so that's really where automation can really help and we're trying to leverage that.

Kendra Heffelfinger (13:05):Yeah, we hear about AI constantly. We also have bi, which is that business intelligence, how can we draw the data into report fashions and things? And we're really making strides on that as an association. And like you said, that little bit of efficiency that we have gives us more time to spend with our members. That's right. More time to spend with our borrowers.

Brian Ricker (13:21):That's right.

Kendra Heffelfinger (13:22):Also, I mean, there's some things that are coming down the pipe too. In fact, I think in the next week or so, we've got an open house at a Fremont office. So not only technology changes, but making our services more convenient for members, giving them a location that makes more sense and gives them the services that they need. So you can talk a little bit more about that.

Brian Ricker (13:41):So it actually started last year. We saw an opportunity in the Fremont area to upgrade our office location there. And so we were able to negotiate on the building and purchased it. And then a few months ago we moved in to a new office there in Fremont and have pretty good upgrade for us. And so here in the near future, we're going to have an official open house and looking forward to that. And it's exciting. And then there's been several other buildings and offices that we've done some remodeling and maybe some minor things too, but just to kind of keep things looking good. And you're right, those buildings we still have a lot of traffic in. Of course, we need a good place for our team to work from. That's important too. But the buildings are, well, there's a lot of traffic in those buildings. And even with all the technology that we just talked about, we're kind of at that 50 50 level where there's just sometimes you got to meet and you got to talk and go through things that way. And then there's other times where automation and that type, those signatures, that convenience can be the better option too. So it's good.

Kendra Heffelfinger (15:05):Yeah, absolutely. Lending local means different things to different people, right? That's right. So part of it is that bricks and mortar, having the convenience of coming in, also maybe getting off the farm to have those discussions because you feel more confident in those discussions in those closed doors, or like you said, from the cab of the tractor or the combine.

Brian Ricker (15:22):That's right.

Kendra Heffelfinger (15:23):Lending local means different things to different people. So the fact that Ag credit can adjust and be agile to that just means more benefit to our members. Market changes all the time, right? Environment changes, market changes, the economy changes. How does AG Credit continue to adapt to that? How do we look at the future? What can we do?

Brian Ricker (15:44):Well change, it just keeps on going and just got to accept that as number one to expect change to continue. But I think just sticking to the fundamentals of what you do is important. You can get lost pretty easily, pretty easy in just the confusion of what's happening and what's going on out there. Just the whole tariff thing that's happened in the past few months that could really rattle somebody pretty easily. But you got to stick with the fundamentals. And I think you mentioned the word agile before. That is key for us too, is to just be willing to be flexible at times when needed. And I think we've done that just with some of the link loans and a few years ago too with when COVID hit and we were doing special programs then with PPP and some government programs there. And just being willing to go that extra mile for our members to help them through whatever time they're going through, I think is just so important.

(16:57):I think too, when it comes to change, being financially healthy, whether as an association and having the capital, just having the earnings and having some dry powder back and keeping some of that in reserve for the next cycle, that may not be very good. Or you got to withstand that storm. And so ultimately it is our mission. We have to focus on our mission, and that mission is just supporting agriculture and supporting our rural communities. We got to have that reliable and that consistent credit, and we have to do that today and tomorrow. We have to be here for the future. So that just kind of all wraps up the different things that we have to be aware of and that change and how you got to handle that, it's not easy. But keeping that mission frontline and frontline and center there is kind of what helps us to navigate. And it's that barometer, I guess, the compass a little bit of how we need to go and why we need to go this direction. That mission definitely helps us with that direction.

Kendra Heffelfinger (18:17):And part of that is Ag Credit being a cooperative, right? You mentioned before with our members, success comes our success and the fact that we're a cooperative just drives that mission even further. Other things that you see coming down the road for Ag Credit? Any major changes? Obviously employees are continuing to get new technology, various ways of doing business to meet our members' demands. Anything else that you see coming for Ag Credit in the near future?

Brian Ricker (18:42):Well, a lot of times we are asking our members about their succession plan within their business, and that is something that we as an association are always working on as well. Do we have the people in the right places? Do we have that next generation of leaders? So developing those individuals to be future leaders within ag Credit is definitely something that we've been working on more and more and talking about more and being more open about that as well. So I think that's one of the neat things that I guess we can both relate to, whether it's Ag Credit or our members, that succession plan and just having the right people in their place is very, very important.

Kendra Heffelfinger (19:34):Great. Brian, I appreciate you taking time out of your busy schedule to sit down with us on another edition of AgCredit Said It.

Speaker 1 (19:47):Thank you for listening to AgCredit Said it. Be sure to subscribe in your favorite podcast app or join us through our website at AgCredit.net so you never miss an episode.