Ag Banker Cultivates Savvy Borrowers

By Alaina Webster

“I’m always amazed — a lot of kids come out of college, and they don’t understand balance sheets, income statements, cash flows, sensitivity analyses like they should, and it’s like, you’re going to run a business that depends on that stuff.” That’s Nate Franzén, president, agri-business division, discussing why his institution, First Dakota National Bank in Yankton, S.D., has built such a robust portfolio of educational opportunities for farmers and ranchers in the region, whether they’re First Dakota customers or not.

The $1.7 billion community bank, with 19 locations throughout South Dakota and Nebraska, services “a little over $1 billion in ag loans to farmers and ranchers,” according to Franzén, who says that roughly half of those are traditional ag loans on the bank’s balance sheet and half are loans sold into the secondary market.

“We’ve always been an ag bank — it’s important to us,” Franzén says. “Certainly we cater to all types of businesses, but agriculture is a significant part of what we do, and we know we have to bring something different to the market than just the color of our money.”

Which is why First Dakota has invested so heavily in educating farmers and ranchers, both before and after they become business owners. For starters, Franzén and other bank employees work with South Dakota State University, Brookings, speaking in classrooms to reach agriculture students before they return to the farm. It’s part marketing tool, part recruitment initiative and part effort to create better, more informed potential clients.

“I go out and talk to ag students so as they get out of school and get back to their farm or ranch, we’re a familiar name,” Franzén says. “They know who First Dakota is, and we’ve maybe stood out because we provided some value and some things for them to think about during their educational experience.

“I try to talk about what I do during the day and what our team does during the day, and how rewarding it is and how we’re highly respected people in our communities most of the time because we’re out there every day trying to help people with something that’s very important to them — their financial wherewithal and their financial growth over time.”

Franzén points out commonalities among farms that are performing well and asks students to consider why a particular organization might be doing better than peer businesses. He encourages future farmers and ranchers to embrace communication and change.

“Farmers and ranchers are generally independent people,” he says, “that’s a strength in many ways, but where it tends to be a weakness for them is that they’re so independent they’re not always the best communicators.”

Creating a system in which communication flows freely among all stakeholders is important, Franzén believes, because decisions need to be made with all available input. “You owe it to your employees or your family members to share what’s on your mind every once in a while and not just keep it in your head.”

As for change, “Technology is changing fast,” Franzén says. “Our ability to do things is changing fast, and you really need to keep up and implement those things that make sense in your operation to keep you competitive.”

Franzén is put on high alert when he hears customers say: “Hey, this is what Grandpa did, this is what Dad did, this is how we’re going to do it.” So does learning that business owners seem to be changing just to change.

“Make sure the change is going to improve your business and not just be change because ‘I like it; it’s cool technology,’” he tells students. “With technology, there’s a cool factor sometimes, and we get lost in that cool factor, and it really doesn’t make as much financial sense as it should.”

Beyond the classroom, Franzén and First Dakota have created a bi-yearly beginning farmer program that accepts 22 to 25 young producers, their spouses and families. The group convenes for multiple-day meetings four times a year, with First Dakota arranging for nationally recognized speakers to address attendees.

“We don’t get into agronomy or animal science,” says Franzén. “Those things they learn on their own on the farm or in colleges or universities. We focus on what we see as real differentiators from a management standpoint … financial management, marketing and risk management, strategic planning, succession planning, family business dynamics, communication, behavioral styles, strengths finder-type stuff … things that we think really separate high-producing, high-performing farms and ranches from the others.”

While the bank pours $70,000 to $80,000 into the program by Franzén’s estimate, attendees are only required to submit a $1,000 security deposit. For each session they attend, farmers and ranchers are refunded $250, provided they participate and engage throughout the session.

“It’s our way of making sure they have skin in the game but trying to keep the financial barrier to entry really low,” Franzén shares. “We have young producers who maybe aren’t in the financial position today to pay what the value of the program is, but to have access to it really makes them better prepared for the future.”

Because of Franzén’s certainty that farming and ranching are two of the toughest careers a person can commit to, he’s committed to ensuring ag professionals associated with First Dakota are positioned to take their best shot at the game.

“Not only do you have to know your business, you have to have the financial skills and marketing skills, risk management skills,” he says. “And it’s not just selling a certain type of product, it’s about agronomy, being a mechanic with machinery and equipment. It’s about livestock husbandry and [being a] veterinarian and nutrition … it’s complex.”

Franzén believes banks should step in and invest in educating their ag production customers because “a lot of them have grown up on farms and ranches, but they’ve grown up doing chores, right? They’ve grown up driving a tractor. They’ve grown up doing some of the work, but in most cases, they haven’t been as involved in the decision making and the analysis and the record keeping and studying the markets to make the best marketing decisions. They haven’t been involved in enough of that to realize just how complex and how challenging it is to be a really well run farm or ranch.”

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