Academic journal article ABA Banking Journal

Standards for Analysing Farm Customers Released

Academic journal article ABA Banking Journal

Standards for Analysing Farm Customers Released

Article excerpt

Standards for Analyzing Farm Customers Released

The first industry-wide guidelines for collecting, reporting, and analyzing farm financial data for credit purposes have been completed and published by the Farm Financial Standards Task Force.

"The need for the standards came about because of the recognition of the wide disparity of reporting by farm borrowers," says Jay T. Godwin, chairman, president, and CEO, First State Bank of Canadian, Canadian, Tex. "Historically, creditors have been more reluctant to require more formal, sophisticated financial information from farm and ranch borrowers than they have from other customers, such as retail merchants," says Godwin, who is also chairman of ABA's Agricultural Bankers Division.

Godwin figures this reluctance comes from bankers' roots of lending on a handshake and looking at the collateral for a farm loan, and not requiring profit analyses and cash flow information. "Creditors are more aware of the need for cash flow and other credit information," Godwin says. "The regulatory oversight experience more and more has had some influence in our wanting cash flow information."

Godwin says bankers have also recognized the need to have some standard reporting of farm financial information. Up until now, each bank or other credit organization has had its own form and its own questions about asset/liability information and other criteria.

The 50-member task force included agricultural producers, commercial bankers, and representatives from the Farm Credit System, Farmers Home Administration, the Economic Research Service and the Extension Service of the U.S. Department of Agriculture, various service and supply industries, regulators of financial institutions, and leading agricultural universities. …

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