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What is an Agricultural Bank?

An agricultural bank, also known as an AG bank, is a type of financial institution that provides specialized financial services to farmers, agribusinesses, and other rural clients to help them manage their finances, invest in their operations, and grow their businesses. In comparison to other types of banks, Agricultural banks often have a more specialized understanding of the unique risks and opportunities of associated with the agricultural sector.

We recently spoke with Brandt Hutchcraft and Steve Taets, who are loan officers with Farmers National Bank in Illinois to better understand the services and differences agriculture banking offers.

Agricultural Loans offered by Farmers National Bank.

Brandt Hutchcraft

Brandt Hutchcraft

Agriculture & Commercial Lender
Vice President

Steve Taets

Agriculture & Commercial Lender
Vice President

Steve Taets

Farmers National Bank – Podcast Transcript “What is an Agricultural Bank”

[00:00:00.410] – Neal Rabogliatti

What is AG banking? How does it differ from other types of banks? And what should a business, a farm or an individual in the agriculture industry know about AG lending institutions? To help us better understand what AG banking is and how it helps the community, we’re talking with Brandt Hutchcraft and Steve Tates who are loan officers with Farmers National Bank in Illinois to help us better understand what AG banking offers and how they work with the agriculture community. Today on this episode of small business Talks. Today we’re going to be talking about agriculture banking or AG banking and agricultural loans. And to help us with that discussion, we have Brant Hutchcraft and Steve Tates who are loan officers with Farmers National Bank. Gentlemen, welcome to the podcast. How are you doing today?

[00:00:57.330] – Brandt Hutchcraft

Doing well, Neal. Good.

[00:00:58.960] – Steve Taets

Thanks for having us, Neal.

[00:01:00.460] – Neal Rabogliatti

Glad to have you. Let’s start off by what exactly is AG banking and how is it different from other types of banking?

[00:01:09.510] – Steve Taets

I would say AG Banking is providing financial services and products to agriculture customers to the bank, which can range anywhere from grain farmers, livestock farmers, specialty crops, chickens and all things agriculture and helping our customers kind of navigate. The economy, the AG economy and figuring out how they can be more efficient in their business and helping them manage profits and cash flows and things alike.

[00:01:46.610] – Brandt Hutchcraft

Just to touch to that? Neal, I guess just to compare it to anything we really only have maybe on the I guess conventional banking or commercial banking. To compare it to that when as AG lenders or AG bankers we’re dealing with customers that are raising a product that is dependent on weather. And once they successfully do that, then they’re selling that product that’s dependent on pricing that is affected by a wide range of things, both domestic and foreign. And so it’s our job to work with our customers and like Steve said, navigate, help navigate through those peaks and valleys and then meet their needs with with the wide array of our banking products that we have here at Farmers National Bank.

[00:02:44.870] – Neal Rabogliatti

I was going to ask you about that. Could you describe some of maybe the different types of farm loans that are available?

[00:02:52.950] – Brandt Hutchcraft

Yeah, we got operating lines of credit. So those are our seasonal loans, basically, that farmers would use throughout the growing season that would ultimately be paid off at harvest. And once they would sell either their livestock or their grain, then we have machinery or equipment purchase loans, livestock loans, which could be anything from in our area, anywhere from livestock excuse me, hogs, cattle and then really our larger one probably is farm real estate purchase loans.

[00:03:33.750] – Steve Taets

Brand kind of brought up the big three there. Neal. And not to get ahead, but we also offer those big three types of loans to commercial borrowers, although we are much heavier in agriculture than we are commercial and industrial loans. But those options are available for those other businesses and other industries as well.

[00:03:58.570] – Neal Rabogliatti

Okay. Do you notice there’s a preference on any one of them? Or have you noticed a trend towards one type or another? Or is it more specific to what the need is of the customer?

[00:04:10.350] – Steve Taets

Very specific to the need of the customer. Not everyone needs all three of those types of loans, whether it be operating equipment or real estate. Some of our borrowers are real estate only, some are operating only. It specifically boils down to the need of the customer and what products we have to serve them.

[00:04:32.550] – Neal Rabogliatti

Which brings up an interesting question. What types of farming operations do you deal with? What type of AG business do you typically work with?

[00:04:40.620] – Steve Taets

Well, I kind of brought it up in the beginning, Neal, when I mentioned grain farmers, livestock, specialty crops, chickens, vegetables, produce. Those are our main agriculture businesses here in our areas. And we do mix in pretty heavily with some agri related businesses such as grain elevators, trucking companies, farm equipment dealers, custom applicators, greenhouses, input providers, all things related to AG. It’s just the nature of where we live and where we are and just the bank being ingrained in that industry.

[00:05:21.550] – Neal Rabogliatti

So if I was a new customer, what information would I commonly need to provide to approach getting an AG loan?

[00:05:31.850] – Brandt Hutchcraft

Well, whenever I get a phone call from a new customer, actually had one this morning, I call it the foundation of information. So typically what that’s going to consist of is a year end balance sheet and we like to have three previous years of tax returns. And then probably most importantly, I guess it’s all important, but we like to get a projection of either the current marketing year or the next marketing year for that specific farm. If it is a farmer that we’re dealing with, there’s obviously additional or other information that we may or may not require depending on who we’re dealing with. And that could be marketing plans, proof of insurance, things of the like.

[00:06:19.500] – Steve Taets

I’ll just kind of add on to that a little bit, Neal. When you initially meet with the customer and we collect financial information, in my opinion the historical financial information is good, but you’re more building a file with that based on what you need for bank regulations and things. But really when you meet with a customer, it kind of boils down to more budgeting and figuring out what their cost layout might be for, say, the next year or two years and kind of working with them to figure out what products might work best and what timeline for those products would fit. But for me, it really boils down to what’s your budget for the year? What are your costs? And we can build the revenue structure from there.

[00:07:07.450] – Neal Rabogliatti

I’m going to ask about how loan decisions are made within the bank. Are they done via committee or are they an individual lenders just walk us through a little bit of the decision making process and how that works.

[00:07:21.710] – Brandt Hutchcraft

Well, it’s probably dependent on the size, but it really all starts with the lender. So either someone that we’ve already been working with or if it’s a new borrower, depending on what we’re discussing. But each of us have a certain dollar amount that we’re allowed to approve with each individual customer. So anything above and beyond that is when we would go to our to our oversight committee here internally at the bank. But, yeah, it’s it’s more dependent on size, but it it starts with us, you know, myself, Steve, and the other lenders here at F and B.

[00:08:07.610] – Neal Rabogliatti

What kind of a time frame are you looking at between coming in and getting a decision from starting the process to getting a decision?

[00:08:15.470] – Steve Taets

That’s a good question, Neal, because it offers us a chance to promote the bank and the fact that we are rather quick in decision making because all of our decisions are made locally. Brandt alluded to the size of the operation or the borrower and how that’s handled. And if that needs to go to a committee of people above and beyond the lender, the good thing is, a lot of times you don’t have to wait. It can be a very quick process that can be done digitally through email. Loan borrower has a loan request, and it can be sent out electronically to those committee members, and they can respond within a relatively short amount of time. A lot of times, if it’s smaller borrower, smaller loan request, the loan officers, typically, if the need is there, the loan could happen as soon as the same day as the request. An advantage for us and the bank as a whole to be able to offer that.

[00:09:21.170] – Neal Rabogliatti

I think that is, if you want to touch base on any other things you would say was an advantage that you have, being a small, more community bank than you are, let’s say, like a multinational. You’re not the chase that you feel you offer compared to, like yeah, I.

[00:09:39.530] – Brandt Hutchcraft

Mean, I think the promptness is where we even try to strive to differentiate ourselves, at least in the area. Even every year, there seems to be greater competition for a number of reasons, whether there’s just not as many banks in the AG industry or farms. Farms are getting larger, but the number of farms is shrinking. So when we have our clientele, that our potential clientele drinking, we have to do something either better or different than the other guys. And I think that the quickness or the turnaround time with any of our loan decisions puts us ahead of everybody else.

[00:10:33.360] – Neal Rabogliatti

And how much can be loaned out to any one customer?

[00:10:36.140] – Steve Taets

Right now? Today, that number is $10 million to any one borrower or what we would consider a relationship, which typically is an individual or a group of individuals that are connected via legal entities such as corporations or LLCs. If all of those entities, including the individual or group of individuals tied together, is above 10 million, that’s kind of our limit where we would make a cut off.

[00:11:08.470] – Neal Rabogliatti

I think we’ve already covered this, but I’m going to ask it anyway. Walk us through the approval process again.

[00:11:16.390] – Brandt Hutchcraft


[00:11:16.790] – Steve Taets

I can start there. Neal okay, the first thing is it takes a phone call or somebody to even stop in the bank or an email. And really the first part of the process is meeting that customer. We take pride in sitting face to face in most cases, not all cases. If the borrower doesn’t want to sit face to face, they don’t have to. They can reach us email, text, or phone pretty simply. And we have some handy tools on our website where people can submit information to us electronically and securely. So that helps from time to time. But the majority of us lenders here at Farmers Bank are meeting with the customers initially, which you could almost call somewhat of an interview to figure out their business. And as much as you can about it, whether it be the background or the financials kind of front to back what the business is and what the request out of the borrower might be. Beyond the initial interview, brant kind of touched on it before it’s collecting financial information. Usually the regulation, there is two or three years of federal and state income tax returns and a personal financial statement which would lay out all your assets, which is everything that somebody owes versus all your liabilities, which is what you owe.

[00:12:41.900] – Steve Taets

I meant to say assets are what you own. But the financial statement, the bank may do a credit check if we need to. Those don’t play all that important when you talk about AG banking in itself. But once we’ve collected those financials, we will analyze those, whether it be the lender on our own analyzing the financials, or we have a group of what you would call a credit analyst. We have a group of three folks of those that if the request has any size to it, they have to kind of get in and help us out with that. So we appreciate having that group with us. Beyond that, we also kind of touched on the approval process. It’ll boil down to the size of the request, whether the individual loan officer can give it the green light or not. Beyond a certain limit, it will become an approval by committee. And if the request is so great to where it involves board credit approval, that can sometimes come into play as well, those would be your largest borrowers.

[00:13:51.610] – Brandt Hutchcraft

Additionally, too, we don’t necessarily force or expect everybody to come to us. We communicate beforehand, but oftentimes we’ll go on site onto the farm. I think that’s just a nice added touch in doing so. And then in particular, the last few years and going forward, technology has really helped us be able to do that.

[00:14:23.330] – Neal Rabogliatti

We’re going to switch the conversation a little bit more to about Farmers National Bank. I think I want to ask, how long has Farmers National Bank been an AG bank?

[00:14:36.230] – Brandt Hutchcraft

Well, we’ve existed for 120 years. I guess we’re in our 121st year and starting in Profitstown, Illinois. So I would say for all of those 120 years, farmers National Bank would.

[00:14:52.030] – Steve Taets

Be an AG bank.

[00:14:54.590] – Neal Rabogliatti

How do you keep your identity and remain in the business as an AG lending institution?

[00:15:03.170] – Steve Taets

Well, Neal, I think it boils down to where we live and where we’re all banking, and it just kind of comes with the territory. Most of the economy in our markets is driven by agriculture or businesses related to agriculture. So it just naturally comes into play when we’re in the markets that we’re in. Profitstown, Geneseel, Morrison, all are heavily driven by agriculture, so it comes along with the territory. And I think the bank does a good job of staying in contact with whether it be grandpa to father son, just kind of keeping in touch with the generational farmers in the area to kind of keep the history of the bank going.

[00:15:48.670] – Neal Rabogliatti

That actually lends me into my next question, which is going to be, how do you typically form and maintain these relationships for the time frame? You’re talking over years with a customer.

[00:16:00.370] – Steve Taets

Right? It’s just continuing to communicate with them, whether it be the older generation or younger generation, finding ways to connect with people who want to meet face to face and people who may not want to meet face to face. And every business and every customer, even farmers are different. They may be similar in some respects, but they are very different. So just staying in contact with them and being available really by phone, email or text. And the bank does a pretty good job of staying responsive. A lot of times our lenders are doing business on weekends and things at nights and we try and do the best we can to stay available.

[00:16:46.210] – Neal Rabogliatti

And I think leading up, kind of following up on that question, what does Farmers National Bank do to keep up with all the different AG customers that you work with and how do you navigate this rather volatile industry with your customers?

[00:17:02.310] – Brandt Hutchcraft

Kind of piggybacking on what Steve just said. Consistent contact. Everyone’s different. We’re not here to pester anybody. I mean, everybody’s busy, we’re busy. But I think knowing a good time to call someone and that could just be reflective of something’s going on in a certain industry. And maybe we’re checking in on that. But I guess in answering, what do we do? There’s a number of things. I mean, the bank provides us, obviously, a wealth of information and knowledge at our disposal, different articles, publications. The Internet obviously is a great tool. Then there’s also learning opportunities that the bank allows us to seek out whether that’s through our local universities, particularly University of Illinois here. And then, I guess, our banking coalitions, I don’t know what you call them we have Illinois Bankers Association, the Community Bankers Association. They’ll put on various learning opportunities where they’ll bring in speakers or professors, and then we try to get to those as much as we can, particularly now. And going forward, COVID kind of put a halt to some of that. And then, with the exception of myself, some of us actually farm. And that’s important. So obviously when they’re doing it, like Steve, for instance, they’re in it so they know what’s going on.

[00:18:39.300] – Brandt Hutchcraft

So that’s very important to a lot of our customers.

[00:18:43.110] – Neal Rabogliatti

What do you see is the future of both Farmers National Bank and of AG lending in general?

[00:18:53.150] – Steve Taets

I think the future of the bank would be to remain committed to agriculture. The saying around here is, it’s who we are and what we do. You may have heard that before. And in terms of AG banking, it’s about navigating the cycles of agriculture. So on the good years, how do you manage those profits to remain liquid for bad years and things like that. But if you can navigate those ups and downs with your customers, you’re going to go a long way, especially in agriculture. Borrowers appreciate that. And if you can kind of walk them through how to handle their ups and downs, it goes a long way. The bank has a long reputation of being able to do that, sticking it out with customers who may be having a down year. Things like that has been a huge reputation for the bank over the years.

[00:19:54.290] – Brandt Hutchcraft

Our customers. They know farmers. National bank knows AG. It’s 85% of what we do, that’s 85% of our loans are AG related. So obviously, as the AG industry goes, so does Farmers National Bank. But the most important thing is the bank’s reputation within the area. It’s our job, myself and Steve and others, we’ve been successful for the past 120 years. So it’s our job to not only maintain that success, but try to grow it and grow it in the right way and maybe do it for the next 120 years. Not saying I’m going to be here for 120 years. Maybe I have to I don’t know.

[00:20:46.690] – Neal Rabogliatti

Go ahead.

[00:20:47.700] – Steve Taets

I can add one more thing to that and the history of the bank. The bank has always made a strong commitment to succession planning. Everything is well thought out ahead of time. So if you have a borrower who may be somewhat attached to a certain lender, there’s a certain time frame, typically, where the bank likes to introduce new people before just passing them off, so people can get comfortable with each other and their operations. And Brandt mentioned it, we’ll go out onto your farm site and introduce any new people that way and just try and stay in touch. But the bank has done a good job of keeping the succession going. And we have a nice group of young lenders here that are kind of the next in line, and there will be another line after that. And so the bank has always been proactive in making sure that the customers could be served and if it has to be with somebody else, that there’s a warm up time frame for those folks to get acclimated to each other.

[00:21:53.030] – Neal Rabogliatti

I really like what you just talked about, the succession plan, because that, I think, is really important. This is an important part of people’s lives, and I think that helps differentiate you. And I think that shows the commitment that you have to your customers to even go that far and think that through for them. I think that’s a great idea. We’re coming up towards the end here, and what I like to do is turn it over to both of you to give me your final thoughts, anything you’d like to impart into the conversation. And then also how do we get in touch with you and what’s the best way of doing that?

[00:22:27.650] – Brandt Hutchcraft

Well, I guess any final thoughts I may have may just be rehashing what I’ve already touched upon. But I know we’re here, we’re talking about Farmers National Bank, but I think the 120 years, whatever the success that we may have, is a reflection on our customers. There’s different areas. It’s not like the state of Illinois has great farming abilities above and beyond, north, southeast and west, but in this area, in our locations where we operate, we have good quality farming customers and we have a good majority of those here at this bank. So that’s just a pure reflection on them. So as they go, we go, and we really hope to partner with them going forwards.

[00:23:29.750] – Steve Taets

Yeah, I agree with Brant, Neal and anyone looking to get a hold of us. I mentioned it earlier. Our branches are in Genesee, Illinois. Profitstown Illinois, and Morrison, Illinois. And we have a group of eight lenders across those branches. And we can be reached in a number of ways. I mean, you can go online to our website, Farmersnationalbank Bank, or you could call any of the branches, stop into any of the branches, and a lot of times you could send an email or a text if you have a lender’s phone number, which we can get to you if the request is there. And we also have, again, a secure portal through our website to coordinate financial information and things.

[00:24:21.030] – Neal Rabogliatti

Excellent. Steve Brandt, I want to thank you very much for enlightening us about what AG banking and AG lending is and for telling us a lot about Farmers National Bank. We’re going to put the link to the website in the show notes on the podcast so people can also go down there and be able to link directly to be able to get in touch with you. So again, thank you guys very much for your insight and for giving us a little bit more information about the area. And again, thank you for your time today.

[00:24:52.510] – Steve Taets

Thanks, Neal.

[00:24:53.810] – Brandt Hutchcraft

Thanks for having us.

[00:24:56.750] – Neal Rabogliatti

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