Kennedy & Coe: Advice about Working with Your Banker
Chuck Marshall, of Kennedy and Coe's Financial Institutions Group, provides the following perspective for agricultural producers.
What are your bankers facing these days?
Bankers are telling us that their Ag loans and lines of credit are in the best shape in quite some time. Although the Ag sector is performing well for most community banks, bank regulators are bringing increased scrutiny to your bankers. Regulators see high land values and increasing input costs as cautionary indicators. The same regulatory agencies that are dealing with declining real estate prices and shrinking collateral margins across the country are supervising banks in our markets as well. And remember, the heads of most of these agencies were field examiners during the 80's (Ag difficulties) and 90's (commercial real estate difficulties), and they would like to avoid a repeat of some of those problems. Therefore, these regulators are applying lessons they learned "back in the day." As a result, your bankers are experiencing very thorough scrutiny in all areas of their operations.
What can you expect from your bankers in the near future?
Your banker is going to be pretty traditional.
- Expect the bankers to stay pretty close to their policies and internal guidelines. Every bank has a Board-approved loan policy that outlines desirable and undesirable credit. Regulators expect bankers to follow their internal policies or provide strong explanations when they do not. This means you should expect more requests for collateral, current financial statements and tax returns, and more visits from your bankers.
- Expect your banker to be pro-active. They need to stay in touch with their customers, both to keep the good ones and to stay on top of situations that may have some signs of weakness.
- Expect your banker to hold the line on interest rates. While they will negotiate for a good deal, they will be more inflexible in exception, problem, or troubled situations.
What can you do to have a better relationship with your banker?
It's important to manage the relationship with your banker.
- Keep the lines of communication open. Don't just call him or her when you need to borrow. Maintain a good working relationship with your banker. You'll want that the next time you need cash for an expansion, or when you experience difficulty in your operation. Take some time to deliver substantial payments in person.
- Provide information when and as requested. Your banker needs to document his advocacy for your borrowing in various documents, meetings and committees in the bank. Bankers see customers who are untimely or reluctant to provide information as difficult or perhaps symptomatic of a problem in the loan itself.
- Finally, help your banker understand your business. Invite him to a walk-through of the operation, and spend time helping him or her understand what's unique about your business. He can use that first-hand knowledge when he presents your case to the bank's loan committee.
This information was provided from the Agriculture Group of Kennedy and Coe, LLC. It was originally published on Oct. 1, 2008. You can learn more by visiting their Web site, http://www.kcoe.com/index.php.
