Credit Analysis Solutions AGRICULTURE

(1)

Credit Analysis Solutions

(2)

FINPACK

University of Minnesota

130 Ruttan Hall

1994 Buford Avenue

St. Paul, Minnesota 55108

Phone

: (612) 625-1964

Toll-Free

: (800) 234-1111

Fax

: (612) 625-3105

Email

: FINPACK@umn.edu

Online

: www.FINPACK.com

(3)

Used by lenders since 1980, FINPACK sets the industry standard for superior

credit analysis tools, training and technical support. Simply enter tax returns

and balance sheets and FINPACK will generate reports displayed on the

following pages.

• Helps you accomplish your work more efficiently than ever before

It is fast and easy to learn. You will be amazed at how much time it can

save you.

• Delivers better information about your customers’ financial situation

Balance sheets, cash flows, consolidations, global cash flow analysis,

accrual financial analysis, and historic spreads provide an accurate picture

of borrower performance.

• Lets you do the banking while we do the technical work

No need to double check spreadsheet formulas

• Gives you an edge in building better customer relations

Provides financial information your customers can understand and use to

manage their businesses

• Offers you the most cost effective credit analysis available

When compared to other systems or maintaining your own spreadsheets,

FINPACK saves you money—period

(4)

FINPACK lets you choose the reports you need for each borrower—whether

it’s basic reports for low-risk credit customers or detailed reports to analyze

complex customers.

The Flexibility to Meet All

Your Customer Needs

The FINPACK Sample Guide provides an overview of the entire set of tools

and reports that FINPACK can give you. If you have wondered what exactly

FINPACK does or how it presents financial information, this book will give

you the answers.

The book gives you a quick overview for each FINPACK tool. Each section

includes a short description of the financial tool and then shows you a sample

report.

Will you ever use all of FINPACK’s tools? Probably not, so take a look at

the tools that you regularly use. You may also want to look at other tools

that you would like to use but haven’t had an easy way to implement at your

institution.

FINPACK has been upgraded annually for over 30 years based on comments

from lenders who use the software. With this history of field testing and

refinement, we think it will serve your needs well.

(5)

FINPACK Agriculture at a Glance

Balance Sheets

Detailed Balance Sheet

Summary Balance Sheet

Balance Sheet Trend Reports

Financial Analysis

Tax Forms/Income Statement

Schedule F Accrual Analysis

Global Cash Flow

Projections

Annual Cash Flow

Monthly Cash Flow

Credit Analysis

Collateral Analysis

Credit Decision Scorecard

Risk Rating

Loan Presentation

FSA Forms Package

Portfolio Risk Analyst

Training and Support

Customer Support

FINPACK Training

p. 5

p. 11

p. 13

p. 15

p. 19

p. 29

p. 33

p. 39

p. 47

p. 49

p. 51

p. 53

p. 61

p. 67

p. 71

p. 73

(6)

(7)

Balance sheet data entry is simple and straightforward. Once the first balance

sheet is complete, it is easy to copy and revise for the next renewal season.

FINPACK provides two balance formats – detailed or summary.

Detailed Balance Sheet:

• Generate ratio analysis, including working capital, current ratio, and debt to

asset ratio

• Automatically create trend reports

• Balance sheet data flows directly into cash flow to minimize data entry

• Consolidate balance sheets from multiple entities

• Input forms can be used to gather customer data or use forms with last

year’s values displayed

• Or get customer data electronically using FINPACK Lite, a free balance

sheet only version of FINPACK available to your customers

Summary Balance Sheet:

• Input simple, single column balance sheets

• Quick and easy balance sheet format for small or low risk customers

• Useful to enter historical balance sheets for a new customers

Both Balance Sheet formats provide data directly to FINPACK’s Schedule F

Balance Sheets

(8)

(9)

Slim Jim Sample 1/1/2008

Current Assets Value

Cash and checking (Schd A) 26,034

Prepaid exp. & suppl. (Schd B) 2,422

Growing crops

-Accounts receivable

-Hedging accounts

-Other current assets

-Crops (Schd G) Quantity Value/Unit

Corn 69,707 4.03/bu. 280,919

Corn Silage 690 25.00/ton 17,250

Alfalfa Hay 7 105.00/ton 756

Soybeans 19,794 11.20/bu. 221,693

Crops under gov't loan

-Mkt lvst (Schd H) No. Value/Unit

Finish Beef 739 115.00/cwt. 599,144

Current Liabilities Balance

Accrued interest 19,359

Accounts payable and other accrued expenses

-Int P & I Principal

Current loans (Schd T) Rate Due Balance

5thNB-Operating 8.00 213,623 207,100

5thNB-Cattle 7.375 608,628 579,513

Government crop loans

-Principal due within 12 months on term liabilities 45,482

Total Current Assets 1,148,218 Total Current Liabilities 851,455

Intermediate Assets Cost Market Value Value Breeding livestock - -Machinery (Schd J) 305,400 502,500 Titled vehicles (Schd K) 1,053 1,450

Other intermediate assets -

-Intermediate Liabilities (Schd U)

Int Principal P & I Principal Intermed

Loan Rate Balance Due Due Balance

FSA-Bin Loan 3.125 43,989 15,586 14,128 29,861

John Deere Credit-7230 7.25 10,282 6,670 5,918 4,364

John Deere Credit-Combine 8.75 48,406 19,038 14,768 33,638

5thNB-Chopper - 12,028 4,009 4,009 8,019

Total Intermediate Assets 306,453 503,950 Total Intermediate Liabilities 75,882

Long Term Assets

Cost Market

Land (Schd M) Acres Value Value

Home site 15 5,000 30,000

Bldgs & improve. (Schd N) 436,476 462,700

Other long term (Schd O) 2,401 2,401

Long Term Liabilities (Schd V)

Int Principal P & I Principal Lg Term

Loan Rate Balance Due Due Balance

Fifth National Bank-Barn 8.75 298,500 32,778 6,659 291,841

Total Long Term Assets 443,877 495,101 Total Long Term Liabilities 291,841

Total Farm Liabilities 1,219,177

Personal Liabilities (Schd W) 43,744

Cost Market

Total Liabilities (d)(e) 1,262,921 1,262,921

Retained Earnings/Contributed Capital [a-d] 789,557

Market valuation equity [b-a] 248,720

Net Worth [b-e] 1,038,277

Total Farm Assets 1,898,548 2,147,269

Personal Assets (Schd P) 153,930 153,930

Total Assets(a)(b) 2,052,478 2,301,199

I certify that my statements on this balance sheet are true, complete, and correct to the best of my knowledge and belief.

Signature(s) Date

Detailed

(10)

Slim Jim Sample Balance Sheet: 1/1/2008 Page 2 1/29/2009 2:15:16 PM

Schedule J: Machinery and equipment

Model Year Pct. Cost Market

Make/Model Year Serial No./VIN Purchased Ownership Value Value

TRACTOR LOADER - 1989 100.00 % - 3,500 SNOWBLOWER - 1990 100.00 % - 1,500 SPRAY MONITOR - 1990 100.00 % - 500 SILO UNLOADER - 1991 100.00 % - 250 1600 GL WATER TANK - 1992 100.00 % - 200 AUGER 8x41 - 1993 100.00 % - 750 BULK BIN - 1994 100.00 % 153 200 RC 8R30 - 1995 100.00 % 264 750 CIH Tractor - 1995 100.00 % 1,728 12,500 LOADER - 1995 100.00 % 167 1,000 Generator - 1995 100.00 % 216 1,750

BUFFALO ROLLER MILL - 1999 100.00 % 2,165 6,000

FEED WAGON - 2001 100.00 % 4,872 7,500 JD 7230 Tractor - 2002 100.00 % 43,752 65,000 RIPPER 2002 2002 100.00 % 8,987 12,500 JD 6430 Tractor 1997 2002 100.00 % 36,647 50,000 SPREADER - 2003 100.00 % 10,487 15,000 GRAIN CART - 2003 100.00 % 10,487 15,000 COMPUTER - 2004 100.00 % 1,469 100 SPRAYER SPECIALTIES - 2004 100.00 % 11,416 15,000 MONITOR - 2004 100.00 % 3,693 4,000 JD 7210 Tractor w loader - 2004 100.00 % 33,872 55,000 MOWER 50 BU - 2004 100.00 % 5,677 8,500 TRAILER - 2005 100.00 % 1,782 2,000 WAGON - 2005 100.00 % 6,075 8,500 BLOWER - 2005 100.00 % 871 1,000 JD 9610 COMBINE - 2005 100.00 % 50,220 85,000 30FT FLEX HEAD - 2005 100.00 % 10,530 15,000 8-30 CORN HEAD - 2005 100.00 % 4,860 19,500 20' CHOPPER - 2005 100.00 % 9,315 13,000 SPRAYER CONTROL 2006 2006 100.00 % 3,716 5,000

ROUND BALE RACK 2006 2006 100.00 % 2,336 4,000

WAGON 2006 2006 100.00 % 2,953 10,000 10X61 AUGER 2006 2006 100.00 % 3,870 5,000 Wagon 2007 2007 100.00 % 3,096 10,000 12 Ton Gear 2007 2007 100.00 % 1,665 2,000 Chopper 2007 2007 100.00 % 13,045 20,000 Hay Buster (33%) 2007 2007 100.00 % 5,700 6,000 Hay Buster 2007 2007 100.00 % 9,315 20,000

Total machinery and equipment 305,400 502,500

Detailed

(11)

Schedule Q: Personal vehicles

Model Year Pct. Cost Market

Make/Model Year Serial No./VIN Purchased Ownership Value Value

Dodge Pickup (25%) 1993 - 100.00 % 150 150

Chev VAN (50%) 2001 - 100.00 % 1,000 1,000

Ford Taurus 2001 2006 100.00 % 3,500 3,500

Lexus 2002 2007 100.00 % 9,280 9,280

Total personal vehicles 13,930 13,930

Schedule T: Current loans

Interest Principal Accrued Normal Past Due Month

Rate Balance Interest P & I P & I Due Balance

5thNB-Operating 8.00 % 207,100 3,762 213,623 - 3 207,100

5thNB-Cattle 7.375 % 579,513 4,184 608,628 - 8 579,513

Total current loans 786,613 7,945 822,251 - 786,613

Schedule U: Intermediate loans

Interest Principal Accrued Normal Past Due Month Final Principal Intermed Rate Balance Interest P & I P & I Due Year Due Balance

FSA-Bin Loan 3.125 % 43,989 83 15,586 - 12 2010 14,128 29,861

John Deere Credit-7230 7.25 % 10,282 69 6,670 - 11 2009 5,918 4,364

John Deere Credit-Combine 8.75 % 48,406 743 19,038 - 10 2010 14,768 33,638

5thNB-Chopper - % 12,028 - 4,009 - 9 2010 4,009 8,019

Total intermediate loans 114,705 895 45,303 - 38,823 75,882

Schedule V: Long term loans

Interest Principal Accrued Normal Past Due Month Final Principal Lg Term Rate Balance Interest P & I P & I Due Year Due Balance Fifth National Bank-Barn 8.75 % 298,500 10,519 32,778 - 8 2026 6,659 291,841

Total long term loans 298,500 10,519 32,778 - 6,659 291,841

Schedule W: Personal loans

Accrued interest 171

Personal accounts payable

FED & STATE TAX DUE 2,600

Principal due within 12 months on term loans 3,815

Interest Principal Accrued Normal Past Due Month Final Principal

Current Loans Rate Balance Interest P & I P & I Due Year Due Balance Intermediate

Long Term

Mutual Insurance-House 5.125 % 40,973 171 6,000 - multiple 2017 3,815 37,158

Total personal loans 40,973 171 6,000 - 3,815 37,158

Detailed

(12)

Schedule Y: Ratio analysis Cost Market

Current ratio 1.35 1.35

Working capital 296,763 296,763

Current percent in debt 74 % 74 %

Intermediate percent in debt 25 % 15 %

Long term percent in debt 66 % 59 %

Personal percent in debt 28 % 28 %

Total debt to asset ratio 62 % 55 %

Total equity to asset ratio 38 % 45 %

Total debt to equity ratio 1.60 1.22

Detailed

(13)

Summary

(14)

Summary

(15)

Slim Jim and Sarah Sample

Summary Balance Sheets (market)

Jan 1, 2006 Jan 1, 2007 Jan 1, 2008 Current Assets

Cash and checking 12,247 9,576 26,034

Prepaid expenses and supplies 44,831 859 2,516

Crop inventory 228,756 223,427 520,618

Livestock held for sale 501,000 569,149 599,144 Total current assets 786,834 803,011 1,148,312

Intermediate Assets

Machinery and equipment 467,100 497,550 502,500

Titled vehicles - 2,600 1,450

Total intermediate assets 467,100 500,150 503,950

Land 5,000 15,000 30,000

Buildings and improvements 60,000 479,000 462,700

Other long term assets 2,231 2,231 2,401

Total long term assets 67,231 496,231 495,101 Total farm assets 1,321,165 1,799,392 2,147,363 Total personal assets 114,550 146,700 153,930

Total assets 1,435,715 1,946,092 2,301,293

Current Liabillities

Accounts payable and other accrued exp. 21,000 -

-Accrued interest 6,728 14,334 19,619

Principal due within 12 months on term loans 32,369 53,509 44,545

Current loans 579,351 646,632 786,613

Total current liabilities 639,448 714,475 850,777

Intermediate & Long Term Liabilities

Intermediate loans 169,443 101,100 76,819

Long term loans 0 293,762 291,841

Total farm liabilities 808,891 1,109,337 1,219,437 Personal liabilities 70,507 47,567 41,140 Total Liabilities (including deferreds) 879,398 1,156,904 1,260,577

Annual Noncurrent Debt Payments

Farm P & I payments 37,366 91,951 78,081 Personal P & I payments 6,000 6,000 6,000

Equity

Net worth 556,317 789,188 1,040,716

Net worth change 0 232,871 251,528

Ratio Analysis

Current ratio 1.23 1.12 1.35

Current ratio (farm and personal) 1.23 1.12 1.35

Working capital 147,386 88,536 297,535

Working capital (farm and personal) 147,386 88,536 297,535

Current pct in debt 81 % 89 % 74 %

Intermediate pct in debt 36 % 20 % 15 %

FINPACK © Center For Farm Financial Management Prepared by: Wynn Richardson

University of Minnesota University of Minnesota

Balance Sheet

Tr

(16)

Slim Jim and Sarah Sample Historic Report: Summary Page 2 1/30/2012 10:56:48 AM

Jan 1, 2006 Jan 1, 2007 Jan 1, 2008

Current & interm. % in debt 65 % 63 % 56 %

Long term pct in debt - 59 % 59 %

Total debt to asset ratio 61 % 59 % 55 %

Total equity to asset ratio 39 % 41 % 45 % Total debt to equity ratio 1.58 1.47 1.21

Loan to value % - - 68 %

Collateral margin - - 603,567

Collateral coverage ratio - - 1.5 %

(17)

When you need a quick and easy source of historical financial performance,

FINPACK’s tax database is the answer. You can enter data for Schedules F, C,

E, or Form 1040, Form 1065, Partnerships, Form 1120 Corporate, or Form

1120-S. You can also enter accountant prepared income statements.

With Tax Forms and Income Statement, you can:

• Using any of the tax databases or the income statement, you can spread

historical income and expenses

• Automatically import last year’s or the average of several past year’s historic

income and expenses into your cash flow projections

• Use the Schedule F data to develop cash-to-accrual Schedule F Analysis

• Consolidate income statements and tax databases from multiple entries

Tax Forms and

Income Statement

Tax Forms and

(18)

Tax Forms and

(19)

Slim Jim Sample

Sch F - Farming

Tax year 2003 2004 2005 2006 2007 Average

Statement type Tax Return Tax Return Tax Return Tax Return Tax Return

Principal product Beef Cattle Beef Cattle Beef Cattle Beef Cattle Beef Cattle

Activity code 112111 112111 112111 112111 112111

Accounting method Cash Cash Cash Cash Cash

PART I: Farm Income -- Cash Method

1. Sales of livestock & other items bought for resale 1,196,356 590,521 570,375 539,937 1,816,151 942,668 2. Cost or other basis of items on line 1 821,701 364,396 407,896 455,051 1,242,063 658,221

3. Subtract line 2 from line 1 374,655 226,125 162,479 84,886 574,088 284,447

4. Sales of livestock, produce, grains, etc. 79,772 329,879 248,157 350,232 42,186 210,045

5a. Cooperative distributions 61 60 648 - 91 172

5b. Cooperative distributions, taxable amount 61 60 648 - 91 172

6a. Agricultural program payments 29,304 24,214 91,972 39,913 20,028 41,086

6b. Agricultural program payments, taxable amount 29,304 24,214 91,972 39,913 20,028 41,086

7a. CCC loans reported under election - - -

-7b. CCC loans forfeited - - -

-7c. CCC loans forfeited, taxable amount - - -

-8a. Crop insurance proceeds / Disaster payments - 24,495 - - - 4,899

8b. Crop insurance / Disaster payments, taxable amount - 24,495 - - - 4,899

8d. Amount deferred from previous year - - -

-9. Custom hire (machine work) income 2,120 - - - - 424

10. Other income - - 3,368 68,700 - 14,414

11. Gross income 485,912 604,773 506,624 543,731 636,393 555,487

PART II: Farm Expenses -- Cash and Accrual Method

12. Car and truck expenses - - -

-13. Chemicals 26,297 24,359 23,983 11,879 15,650 20,434

14. Conservation expenses - - -

-15. Custom hire (machine work) 6,819 2,568 6,395 2,496 2,310 4,118

16. Depreciation 95,572 45,044 141,768 186,691 47,584 103,332

17. Employee benefit programs - - -

-18. Feed purchased 74,832 49,080 31,927 40,070 149,268 69,035

19. Fertilizers and lime 33,730 28,379 38,132 37,640 34,606 34,497

20. Freight and trucking - 2,825 2,658 10,988 23,068 7,908

21. Gasoline, fuel, and oil 10,174 19,898 25,208 23,310 25,405 20,799

22. Insurance (other than health) 10,797 14,648 11,540 13,720 19,877 14,116

23a. Interest, mortgage - - - 8,964 26,707 7,134

23b. Interest, other 34,313 25,148 27,123 27,168 74,075 37,565

24. Labor hired 10,357 6,095 5,918 7,200 11,506 8,215

25. Pension and profit-sharing plans - - -

-26a. Rent or lease: vehicles, machinery, equipment - - -

-26b. Rent or lease: land, animals, etc. 90,543 85,759 86,150 84,384 101,276 89,622

27. Repairs and maintenance 18,516 19,884 15,307 11,779 17,275 16,552

28. Seeds and plants purchased 38,772 80,071 45,322 315 46,128 42,122

29. Storage and warehousing - - -

-30. Supplies purchased 7,279 6,152 4,923 10,261 26,271 10,977

31. Taxes 84 70 84 80 60 76

32. Utilities 4,214 4,246 3,405 3,337 4,078 3,856

33. Veterinary, breeding, and medicine 2,511 6,088 3,781 9,779 8,314 6,095

34. Other expenses 18,072 13,181 8,128 7,627 11,238 11,649

Tax Forms and

(20)

Slim Jim Sample Tax Form / Income Statement: Sch F Page 2 1/31/2012 10:36:27 AM

Tax year 2003 2004 2005 2006 2007 Average

35. Total expenses 482,882 433,495 481,752 497,688 644,696 508,103

36. Net farm profit or loss 3,030 171,278 24,872 46,043 -8,303 47,384

PART III: Farm Income -- Accrual Method

38. Sales of livestock, produce, grains, etc. - - -

-39a. Cooperative distributions - - -

-39b. Cooperative distributions, taxable amount - - -

-40a. Agricultural program payments - - -

-40b. Agricultural program payments, taxable amount - - -

-41a. CCC loans reported under election - - -

-41b. CCC loans forfeited - - -

-41c. CCC loans forfeited, taxable amount - - -

-42. Crop insurance proceeds - - -

-43. Custom hire (machine work) income - - -

-44. Other income - - -

-45. Total, lines 38-44 - - -

-46. Beginning inventory of livestock, produce, grains, etc. - - -

-47. Cost of livestock, produce, grains, etc. purchased - - -

-48. Add lines 46 and 47 - - -

-49. Ending inventory of livestock, produce, grains, etc. - - -

-50. Cost of livestock, produce, grains, etc. sold - - -

-51. Gross income - - -

-Cash Flow for Debt Service

Net farm profit or loss 3,030 171,278 24,872 46,043 -8,303 47,384

+ Other non-taxable income - - -

-+ Depreciation 95,572 45,044 141,768 186,691 47,584 103,332

+ Interest paid on term debt 14,012 13,647 6,669 4,997 38,442 15,553

- Non-recurring income - - -

-+ Non-recurring expense - - -

-= Cash available for debt service 112,614 229,969 173,309 237,731 77,723 166,269

Farm Term Debt Coverage (cash basis)

Cash available for debt service 112,614 229,969 173,309 237,731 77,723 166,269

+ Cull income - - -

-+ Personal income 21,473 25,488 33,201 28,889 46,660 31,142

- Family living expense 74,564 83,312 82,710 77,164 75,382 78,626

- Income and social security tax 53,342 42,684 26,270 19,397 8,167 29,972

= Capital debt repayment capacity (cash basis) 6,181 129,461 97,530 170,059 40,834 88,813

Annual P & I payments on term debt 76,111 91,579 51,641 37,366 91,951 69,730

Term debt coverage ratio (cash basis) 0.08 1.41 1.89 4.55 0.44 1.68

Efficiency Ratios

Operating expense ratio 73 60 62 51 78 65

Depreciation expense ratio 20 7 28 34 7 19

Interest expense ratio 7 4 5 7 16 8

Net farm income ratio 1 28 5 8 -1 8

Tax Forms and

(21)

At a minimum, most lenders ask borrowers for a balance sheet and a Schedule

F tax return each year. The challenge is analyzing these documents to

determine credit worthiness. An analysis of Illinois farms found that there is

a 66 percent difference between Schedule F cash net income and accrual net

income.

So how can you use Schedule F information to make informed loan decisions?

FINPACK’s Schedule F Accrual Analysis makes this job easy.

FINPACK’s Schedule F Accrual Analysis:

• Requires only the beginning and ending balance sheets and a Schedule F

tax return

• With a little additional information, FINPACK generates an accrual

analysis

• Spreads the net farm income, financial ratios, and earned net worth change

over multiple years

• Compare individual farm ratios to industry averages

Schedule F Accrual Analysis

Schedule F

(22)

Schedule F

(23)

Slim Jim Sample

Schedule F Analysis

2005 2006 2007

Analysis type Sch F Sch F Sch F

Income Statement

Gross cash farm income 914,520 998,782 1,878,456 Total cash farm expense 795,035 863,155 1,866,530 Net cash farm income 119,485 135,627 11,926 Inventory change 60,498 32,242 320,893 Depreciation -40,766 -56,378 -56,858 Net farm income from operations 139,217 111,491 275,961 Net farm income 139,217 111,491 275,961

Financial Standards Measures

Liquidity (ending)

Current ratio (farm only) 1.23 1.12 1.35 Working capital (farm only) 147,386 88,536 296,763 Working capital to gross revenues 14.8 % 8.3 % 13.5 % Solvency (market)

Debt to asset ratio 61 % 61 % 56 %

Equity to asset ratio 39 % 39 % 44 %

Debt to equity ratio 1.58 1.57 1.30

Profitability (cost)

Rate of return on assets 11.9 % 8.2 % 18.7 % Rate of return on equity 29.1 % 16.3 % 38.5 % Operating profit margin 26.6 % 24.2 % 41.4 % Net farm income 139,217 111,491 275,961

EBITDA 205,293 211,607 438,627

Repayment Capacity

Capital debt repayment capacity 104,873 99,194 328,422 Capital debt repayment margin 53,232 61,828 236,471 Replacement margin 53,232 47,487 235,097 Term debt coverage ratio 2.03 2.65 3.57 Replacement margin coverage ratio 2.03 1.92 3.52 Efficiency

Asset turnover rate (cost) 44.7 % 33.8 % 45.3 % Operating expense ratio 79.4 % 80.1 % 80.1 % Depreciation expense ratio 4.1 % 5.3 % 2.6 % Interest expense ratio 2.5 % 4.1 % 4.8 % Net farm income ratio 14.0 % 10.5 % 12.5 %

Net Worth Growth

Earned net worth change 59,588 60,005 236,115 Earned net worth change (%) 14 % 16 % 44 % Market net worth change 77,146 274,716 164,039 Market net worth change (%) 22 % 64 % 23 %

Accuracy Checks

Cash discrepancy 454 -2 220

Cash discrepancy to gross revenues 0.0 % 0.0 % 0.0 %

Schedule F

(24)

Slim Jim Sample : Schedule F Analysis Page 2 1/31/2012 9:56:05 AM

2007 Income Statement

Income Expense

Sale of livestock purchased for resale 1,816,151 Feeder livestock purchases 1,269,418

Sales of raised crops and livestock 42,186 Chemicals 15,650

Government payments 20,028 Custom hire (machine work) 2,310

Cooperative distributions 91 Feed purchased 149,268

Fertilizers and lime 34,606

Freight and trucking 23,068

Gasoline, fuel, and oil 25,405

Insurance (other than health) 19,877

Interest, mortgage 26,707

Interest, other 74,075

Labor hired 11,506

Rent or lease: land, animals, etc. 101,276

Repairs and maintenance 17,275

Seeds and plants purchased 46,128

Supplies purchased 26,271

Taxes 60

Utilities 4,078

Veterinary, breeding, and medicine 8,314

Other expenses 11,238

Gross cash income 1,878,456 Total cash expense 1,866,530

Net cash income 11,926

Beginning Purchases/ Sales/ Ending Inventory Inventory Changes Inventory Deposits Withdrawals Inventory Change

Prepaids and supplies 859 2,422 1,563

Hedging gains or losses - 3,000 - - -3,000

Crops and feed 223,427 520,618 297,191

Market livestock 569,149 599,144 29,995

Other assets 2,231 - - 2,401 170

Accrued interest 14,334 19,359 -5,025

Total inventory change 320,893

Net operating profit 332,819

Beginning Ending

Depreciation Inventory Purchases Sales Inventory Depreciation Machinery and equipment 301,794 36,467 - 304,435 -33,826

Titled vehicles 1,158 - - 1,042 -116

Buildings and improvement 448,629 9,697 - 435,410 -22,916

Total depreciation -56,858

Net farm income 275,961

Schedule F

(25)

Profitability Measures

Cost

Market

Statement of Owner's Equity

(A) _{Net farm income from operations} _275,961 _284,905 (a) _{Beginning net worth} _701,284

Rate of return on assets (E/F) _{18.7 %} _{16.8 %}

Rate of return on equity (G/H) _{38.5 %} _{27.7 %} _{Net farm income} _275,961

Operating profit margin (E/I) _{41.4 %} _{42.5 %} _{Personal income} (+) _46,660

Asset turnover rate (I/F) _{45.3 %} _{39.5 %} _{Family living expense} (-) _75,332

Income taxes (-) _8,167

(B) _{Change in market valuation} _- _8,944 _{Change in personal assets} (+) _-3,036 (C) _{Interest expense} _105,807 _105,807 _{Change in nonfarm accounts payable} (+) ₂₉ (D) _{Value of operator labor & mgt} _57,356 _57,356 (b) _{Total change in retained earnings} (=) _236,115 (E) _{Return on farm assets} (A+C-D) _324,413 _333,357

(F) _{Average farm assets} _1,732,516 _1,986,205 _{Change in market value of capital assets} _8,944 (G) _{Return on farm equity} (A-D) _218,605 _227,549 _{Change in deferred liabilities} - _81,021 (H) _{Average farm net worth} _568,258 _821,948 (d) _{Total change in market valuation} = _-72,076 (I) _{Value of farm production} _784,126 _784,126

(e) _{Total change in net worth} (b+d) _164,039

Liquidity Measures

Begin

End

Ending net worth calculated (a+e) _865,323

Ending net worth reported 865,103

(J) _{Current assets} _803,011 _1,148,218 _Discrepancy ₂₂₀

(K) _{Current liabilities} _714,475 _851,455

Current ratio (J/K) _1.12 _1.35

_{Statement of Cash Flows}

Working capital (J-K) _88,536 _296,763

Working capital to gross revenues 4.0 % 13.5 % (f) _{Beginning cash balance (farm & personal)} _9,576

Gross cash farm income 1,878,456

Solvency Measures (Market)

Begin

End

Cash farm expenses (-) _1,866,530

Net cash from hedging transactions (+) _-3,000 (L) _{Total assets} _1,961,092 _2,311,949 (g) _{Cash provided by operating activities} (=) _8,926 (M) _{Total liabilities} _1,259,808 _1,446,846

Net worth (L-M) _701,284 _865,103 _{Sale of capital assets}

-Net worth change 163,819 Purchase of machinery and equipment (-) _36,467

Purchase of farm buildings (-) _9,697

Current debt to assets (K/J) _{89 %} _{74 %} _{Purchase of personal assets} (-) _10,266

Intermediate debt to assets 20 % 15 % (h) _{Cash provided by investing activities} (=) _-56,430

Long term debt to assets 57 % 59 %

Personal debt to assets 32 % 28 % Net money borrowed less repaid (-) _101,021

Total debt to assets ratio (M/L) _{64 %} _{63 %} _{Personal income} (+) _46,660

Family living expense (-) _75,332

Repayment Capacity

(i) _{Cash provided by financing activities} (=) _64,182

Net farm income from operations 275,961 Net change in cash (g+h+i) _16,678

Depreciation (+) _56,858 _{Ending cash balance (farm and personal)} _26,034

Personal income (+) _46,660 _Discrepancy ₂₂₀

Family living expense (-) _75,332

Payments on personal debt (-) _6,000

Interest on term debt (+) _38,442 (N) _{Capital debt repayment capacity} (=) _328,422 (O) _{Scheduled term debt payments} _91,951 (P) _{Capital debt repayment margin} (N-O) _236,471 (Q) _{Cash replacement allowance} _1,374

Replacement margin (P-Q) _235,097

Term debt coverage ratio (N/O) _3.57

Replacement coverage ratio (N/O+Q) _3.52

Schedule F

(26)

Cash Accuracy Check

Beginning cash balance 9,576 Ending cash balance 26,034

Gross cash farm income 1,878,456 Total cash farm expense 1,866,530

Personal income 46,660 Family living expense 75,332

Hedging account withdrawals - Hedging account deposits 3,000

Capital sales - Capital purchases 56,430

Net money borrowed 101,021 Net principal payments

-Gifts and inheritances - Gifts given

-Income taxes 8,167

Total inflows 2,035,713 Total outflows 2,035,493

Discrepancy (inflows - outflows) 220 Discrepancy to gross revenues 0.0 %

Schedule F

(27)

Slim Jim Sample : Schedule F Analysis Page 5 1/31/2012 9:56:05 AM Current Ratio FINBIN My Farm 2002 2003 2004 2005 2006 2007 2 1.5 1 0.5 0

Current Ratio

The extent to which current farm assets, if liquidated, would cover current farm liabilities.

Total current farm assets divided by total current farm liabilities.

Strong

Greater than 1.7

Caution

1.7 to 1.1

Vulnerable Less than 1.1

Working Capital to Gross Revenues

FINBIN My Farm 2002 2003 2004 2005 2006 2007 30 25 20 15 10 5 0

Working Capital to Gross Revenues

Measures operating capital available against the size of the business.

Working capital dividied by gross revenues.

Strong

Greater than 25

Caution

25 to 10

Vulnerable Less than 10

Debt to Asset Ratio (mkt)

FINBIN My Farm 2002 2003 2004 2005 2006 2007 80 60 40 20 0

Debt to Asset Ratio (mkt)

The proportion of total farm assets owed to creditors.

Total farm debt divided by total farm assets.

Strong

Less than 30%

Caution

30% to 60%

Vulnerable Greater than 60%

Debt to Equity Ratio (mkt)

FINBIN My Farm 2002 2003 2004 2005 2006 2007 4 3 2 1 0

Debt to Equity Ratio (mkt)

The relative amount of money borrowed as a percentage of equity capital.

Farm debt divided by equity.

Strong

Less than 0.43

Caution

0.43 to 1.5

Vulnerable Greater than 1.5

Schedule F

(28)

Rate of Return on Assets-cost

FINBIN My Farm 2002 2003 2004 2005 2006 2007 35 30 25 20 15 10 5 0

Rate of Return on Assets-cost

The rate earned on the total business investment, equity and borrowed capital.

Net farm income + interest - value oper labor & mgmt divided by average farm assets.

Strong

Greater than 8%

Caution

8% to 4%

Vulnerable Less than 4%

Rate of Return on Equity-cost

FINBIN My Farm 2002 2003 2004 2005 2006 2007 50 40 30 20 10 0

Rate of Return on Equity-cost

The rate earned on equity capital invested in the business.

Net farm income - value oper labor & mgmt divided by average farm net worth.

Strong

Greater than 10%

Caution

10% to 3%

Vulnerable Less than 3%

Operating Profit Margin (cost)

FINBIN My Farm 2002 2003 2004 2005 2006 2007 50 40 30 20 10 0

Operating Profit Margin (cost)

Measures the operating efficiency of the business in terms of return as a percentage of gross income.

Net farm income + interest - value of labor & mgmt divided by the value of farm production.

Strong

Greater than 25%

Caution

25% to 15%

Vulnerable Less than 15%

Net Farm Income (cost)

FINBIN My Farm 2002 2003 2004 2005 2006 2007 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0

Net Farm Income (cost)

The net income from the farm that is available for owner withdrawals, income taxes and equity growth.

Cash income - cash expense + inventory change - depreciation.

Schedule F

(29)

Term Debt Coverage Ratio

FINBIN My Farm 2002 2003 2004 2005 2006 2007 3.5 3 2.5 2 1.5 1 0.5 0

Term Debt Coverage Ratio

The ability of the business to generate enough income to cover all scheduled intermediate and long term debt payments.

Net farm oper income + net nonfarm income + interest on term debt -fam liv & taxes / term debt prin & int.

Strong

Greater than 1.5

Caution

1.5 to 1.2

Vulnerable Less than 1.2

Replacement Margin Coverage Ratio

FINBIN My Farm 2002 2003 2004 2005 2006 2007 3.5 3 2.5 2 1.5 1 0.5 0

Replacement Margin Coverage Ratio

A ratio below 1.0 indicates you did not generate enough income to cover term debt payments and unfunded capital purchases.

Strong

Greater than 1.4

Caution

1.4 to 1.1

Vulnerable Less than 1.1

Asset Turnover Rate (cost)

FINBIN My Farm 2002 2003 2004 2005 2006 2007 70 60 50 40 30 20 10 0

Asset Turnover Rate (cost)

Measures efficiency of capital invested in the business in terms of the gross revenue generated by each dollar of investment.

Value of farm production divided by average farm assets.

Strong

Greater than 45%

Caution

45% to 30%

Vulnerable Less than 30%

Operating Expense Ratio

FINBIN My Farm 2002 2003 2004 2005 2006 2007 80 60 40 20 0

Operating Expense Ratio

The portion of gross revenue used to pay operating expenses.

Farm operating expense - interest expense divided by gross income.

Strong

Less than 60%

Caution

60% to 80%

Vulnerable Greater than 80%

Schedule F

(30)

Schedule F

(31)

Global cash flow is important when both business and personal cash flows

need to be analyzed to determine a credit’s true financial situation. A global

cash flow allows a lender to look at the combined sources and uses of cash

from multiple business entities along with cash flow from personal sources.

The FINPACK Global Cash Flow calculates debt coverage for each individual

business entity and for the individuals involved in the business.

With Global Cash Flow, you can:

• Easy methodology to quickly present the entire cash flow position

• Analyze repayment ability from multiple businesses, multiple individuals,

and guarantors

• Requires only tax returns from each entity

• Calculates debt coverage ratios for each entity and global debt coverage for

the combined entities

• Easily add projected new or proposed debt payments and income to the

analysis

Global Cash Flow

(32)

(33)

Slim Jim Sample

Global Cash Flow Analysis

Actual $

2005 2006 2007 Average

Sch F - Farming

Net farm profit or loss 24,872 46,043 -8,303 20,871

-+ Depreciation 141,768 186,691 47,584 125,348

+ Interest paid on term debt 6,669 4,997 38,442 16,703

-= Cash available for debt service 173,309 237,731 77,723 162,921

Debt payments 51,641 37,366 91,951 60,319

Debt coverage ratio 3.36 6.36 0.85 3.52

Sch C - Trucking

Net profit or loss 27,729 21,027 22,303 23,686

+ Depreciation - - -

-+ Interest 4,203 3,602 3,465 3,757

- Disallowed meals and entertainment (50%) - - -

-+ Depreciation, depletion, interest in COGS - - -

-+ Expenses for business use of your home - - -

-- Non--recurring income - - -

Debt payments 13,265 13,265 13,265 13,265

Sch E - Houses

Net profit or loss 5,902 7,145 6,229 6,425

+ Depreciation, depletion 2,730 2,730 2,730 2,730

+ Interest - - -

-- Non--recurring income - - -

Debt payments - - -

-Debt coverage ratio - - -

-1040 - Jim & Sarah

Adjusted gross income 100,789 116,288 64,874 93,984

-- Income tax 8,912 9,812 3,500 7,408

- Living expenses 45,000 45,000 45,000 45,000

Debt payments 23,332 23,332 23,332 23,332

Global Debt Coverage

Business and personal cash available for debt service 260,750 333,711 128,824 241,095 - Business income included in personal income 58,503 74,215 20,229 50,982 = Net global cash available for debt service 202,247 259,496 108,595 190,113

Total debt payments 88,238 73,963 128,548 96,916

Total debt coverage ratio 2.29 3.51 0.84 2.22

(34)

Slim Jim Sample Global Cash Flow Analysis: Global Page 2 1/31/2012 9:56:41 AM

Proposed New Income & Debt New building

2005 2006 2007 Average

Original total debt coverage ratio 2.29 3.51 0.84 2.22

Adjusted Prior Three Years

Business and personal cash available for debt service 260,750 333,711 128,824 241,095 - Business income included in personal income 58,503 74,215 20,229 50,982

+ Proposed new income 50,000 50,000 50,000 50,000

= Adjusted net global cash available for debt service 252,247 309,496 158,595 240,113

Existing debt payments 88,238 73,963 128,548 96,916

+ Proposed new debt payments 7,250 7,250 7,250 7,250

= Total debt payments 95,488 81,213 135,798 104,166

Adjusted total debt coverage ratio 2.64 3.81 1.17 2.54

(35)

Don’t need a monthly cash flow for all of your borrowers?

The FINPACK Annual Cash Flow requires less time and data but provides a

complete cash flow with pro-forma accrual analysis for the

planning year.

The Annual Cash Flow is a quick and easy annual cash flow plan that includes:

• Projected annual cash flow

• Projected change in working capital

• Projected debt coverage

• Pro-forma income statement

• Pro-forma balance sheet

• Links to past history for accurate and convenient data entry

Your completed plan can be printed directly on FSA forms, using FINPACK’s

FSA Forms tool.

Annual Cash Flow

(36)

(37)

Slim Jim Sample

2008

Executive Summary

Projected Cash Flow Summary

Term Debt Coverage

Total operating inflow 1,335,008 Net farm income from operations 94,573

Total operating outflow (-) 1,073,745 Depreciation (+) 74,605

Capital purchases (-) - Personal income (+) 48,000

Capital sales (+) - Family living expense (-) 78,000

New credit (+) 515,625 Personal loan payments (-) 6,000

Loan payments (-) 709,578 Income and social security tax (-) 25,000

Net cash flow (=) 67,309 Interest paid on term debt (+) 32,599

Capital debt repayment capacity (=) 140,777

Beginning cash balance (+) 26,034 Term debt payments 78,081

Operating loan borrowings (+) 292,400 Term debt coverage 1.80

Operating loan principal payments (-) 382,789

Ending cash balance (=) 2,954

Farm Financial Standards Measures

Beginning operating loan balance 207,100 Liquidity Beginning Ending

Ending operating loan balance 116,711 Current ratio 1.3 1.5

Working capital 296,763 361,013

Projected Change in Working Capital

Working capital to gross revenue 24.4 % 29.6 %

Change in cash -23,080 Solvency (market)

Change in current inventories (+) -68,501 Debt to asset ratio 56.5 % 51.2 %

Change in operating loan balance (-) -90,389 Equity to asset ratio 43.5 % 48.8 %

Change in other current loans (-) -63,888 Debt to equity ratio 1.3 1.0

Change in princ due on term loans (-) -1,554

Estimated change in working capital (=) 64,250 Profitability (market)

Rate of return on assets 5.7 %

Projected Income Statement

Rate of return on equity 4.1 %

Operating profit margin 18.4 %

Gross cash farm income 1,287,008 Net farm income 94,573

Inventory change - income items (+) -69,108 EBITDA 247,155

Gross revenue (=) 1,217,900

Repayment Capacity

Cash farm operating expense 970,745 Capital debt repayment capacity 140,777

Interest expense (+) 78,583 Capital debt repayment margin 62,696

Depreciation (+) 74,605 Replacement margin 50,049

Inventory change - expense items (+) -606 Term debt coverage 1.80

Total farm expense (=) 1,123,327 Replacement margin coverage ratio 1.55

Net farm income 94,573

Efficiency

Projected Earned Net Worth Change

Asset turnover rate (market) 30.7

Operating expense ratio 79.7 %

Net farm income 94,573 Depreciation ratio 6.1 %

Personal income (+) 48,000 Interest expense ratio 6.4 %

Family living expense (-) 78,000 Net farm income ratio 7.8 %

Income & social security tax (-) 25,000

Personal loan interest expense (-) 2,014

Shocks to Term Debt Coverage Ratio

Personal asset depreciation (-) 1,393

Earned net worth change (=) 36,166 10% decrease in gross income 0.24

10% increase in operating expenses 0.56

3% increase in interest rates 1.33

FINPACK © Center For Farm Financial Management Prepared by: Dale Nordquist

University of Minnesota Center for Farm Financial Mgmt

(38)

Slim Jim Sample Annual Plan: 2008 Page 2 1/30/2009 8:33:52 AM

PROJECTED NET CASH FLOW

Cash Inflows Quantity Price Inflow Cash Outflows Outflow

Corn 35,000 bu. 4.00/bu. 140,000 Feeder livestock purchase 515,625

Soybeans 19,794 bu. 11.20/bu. 221,693 Seed 60,948

Finish Beef 736 head 95.00/cwt. 908,960 Fertilizer 48,330

Direct & CC govt payments 16,094 Crop chemicals 18,216

Patronage dividends, cash 261 Crop insurance 22,248

Personal wages & salary 48,000 Drying expense 6,210

Total operating inflows 1,335,008 Crop purchases 11,425

Purchased feed 53,446

New Credit Veterinary 5,567

5thNB-Cattle 515,625 Supplies 18,558

Total new credit 515,625 Marketing 16,997

Fuel & oil 35,600

Repairs 18,000

Custom hire 3,000

Hired labor 12,000

Land rent 111,400

Real estate taxes 75

Farm insurance 6,000

Utilities 4,300

Dues & professional fees 1,300

Miscellaneous 1,500

Family living/Owner draw 78,000

Income & social sec taxes 25,000

Total operating outflows 1,073,745

Loan Payments

Fifth National Bank-Cattle 612,189

John Deere Credit-7230 6,670

Farm Service Agency-Bin Loan 15,586

Fifth National Bank-Chopper 4,009

John Deere Credit-Combine 19,038

Fifth National Bank-Barn 32,778

Mutual Insurance-House 6,000

Annual operating loan interest 13,308

Total loan payments 709,578

Total cash inflows 1,850,633 Total cash outflows 1,783,323

(39)

CROP AND LIVESTOCK PRODUCTION

Production Per Operator

Enterprise Units Unit Share Production

Corn 414.0 Acres 165.0 bu. 100 68,310 bu.

Corn Silage 42.0 Acres 18.0 ton 100 756 ton

Soybeans 474.0 Acres 48.0 bu. 100 22,752 bu.

Total crop acres 930.0 Acres

CROP INVENTORY SUMMARY

Beginning From To Ending

Inventory Produced Purchased CCC Fed Sold CCC Inventory

Corn (bu.) 69,707 68,310 - - -35,591 -35,000 - 67,426

Corn Silage (ton) 690 756 9 - -905 - - 550

Alfalfa Hay (ton) 7 - 112 - -119 - - 0

Soybeans (bu.) 19,794 22,752 - - - -19,794 - 22,752

LIVESTOCK INVENTORY SUMMARY

Beginning Purchased / Sold / Ending

Inventory Produced Trans In Died Trans Out Inventory

Finish Beef (head) 739 - 750 -3 -736 750

PROJECTED INVENTORY CHANGE

Begin Begin Ending Ending

Commodity Inventory $/Unit Value Inventory $/Unit Value Change

Corn 69,707 4.03 280,919 67,426 3.50 235,991 -44,928

Corn Silage 690 25.00 17,250 550 25.00 13,750 -3,500

Hay, Alfalfa 7 105.00 756 0 105.00 21 -735

Soybeans 19,794 11.20 221,693 22,752 8.50 193,392 -28,301

Finish Beef 739 810.75 599,144 750 810.00 607,500 8,356

Total income items 1,119,762 1,050,654 -69,108

Prepaid exp. & suppl. 2,422 2,422

-Accrued interest (end) 18,753 (beg) 19,359 606

Total expense items 21,175 21,781 606

Total inventories 1,140,937 1,072,435 -68,501

(40)

PROJECTED BALANCE SHEET

Projected

Beginning Ending

Current Assets

Cash and checking 26,034 2,954

Prepaid exp. & suppl. 2,422 2,422

Crops 520,618 443,154

Mkt lvst 599,144 607,500

Total current assets 1,148,218 1,056,030

Machinery 502,500 452,250

Titled vehicles 1,450 1,305

Total intermediate assets 503,950 453,555

Land 30,000 30,000

Bldgs & improve. 462,700 439,565

Other long term 2,401 2,401

Total long term assets 495,101 471,966

Total farm assets 2,147,269 1,981,551

Personal assets 153,930 152,537

Total assets 2,301,199 2,134,088

Current Liabilities

Accrued interest 19,359 18,753

Operating loan(s) 207,100 116,711

Fifth National Bank-Cattle 579,513 515,625

Principal due on term loans 45,482 43,928

Total current liabilities 851,455 695,017

Intermediate Liabilities

John Deere Credit-7230 4,364

-Farm Service Agency-Bin Loan 29,861 15,733

Fifth National Bank-Chopper 8,019 4,010

John Deere Credit-Combine 33,638 18,870

Total intermediate liabilities 75,882 38,613

Long Term Liabilities

Fifth National Bank-Barn 291,841 285,181

Total long term liabilities 291,841 285,181

Total farm liabilities 1,219,177 1,018,812

Personal liabilities 43,744 39,758

Total liabilities 1,262,921 1,058,570

Net worth 1,038,277 1,075,519

Net worth change 37,241

(41)

FINPACK makes monthly cash flow planning easy and accurate. The monthly

cash flow can project annual operating loan needs and repayment capacity for

the year, any portion of a year, or multiple years (up to ten years).

Monthly Cash Flow includes:

• Projected monthly cash flows

• Projected operating loan transactions and balances

• Projected debt coverage

• Pro-forma income statement

• Pro-forma balance sheets

Your completed plan can be printed directly on FSA forms, using FINPACK’s

FSA Forms tool.

Monthly Cash Flow

(42)

(43)

Slim Jim Sample

2008 Cash Flow

Executive Summary

Projected Cash Flow Summary

Term Debt Coverage

Total operating inflow 1,335,062 Net farm income from operations 94,950

Total operating outflow (-) 1,073,685 Depreciation (+) 74,605

Capital purchases (-) - Personal income (+) 48,000

Capital sales (+) - Family living expense (-) 78,000

New credit (+) 515,625 Personal loan payments (-) 6,000

Loan payments (-) 707,647 Income and social security tax (-) 25,000

Net cash flow (=) 69,355 Interest paid on term debt (+) 32,082

Capital debt repayment capacity (=) 140,637

Beginning cash balance (+) 26,034 Term debt payments 78,081

Operating loan borrowings (+) 292,400 Term debt coverage 1.80

Operating loan principal payments (-) 382,789

Ending cash balance (=) 5,000

_{Farm Financial Standards Measures}

Beginning operating loan balance 207,100 Liquidity Beginning Ending

Peak operating loan balance (Feb) 211,644 Current ratio 1.3 1.5

Ending operating loan balance 116,711 Working capital 296,763 360,928

Working capital to gross revenue 24.4 % 29.6 %

Projected Change in Working Capital

Solvency (market)

Change in cash -21,034 Debt to asset ratio 56.5 % 51.2 %

Change in current inventories (+) -68,355 Equity to asset ratio 43.5 % 48.8 %

Change in operating loan balance (-) -90,389 Debt to equity ratio 1.30 1.05

Change in other current loans (-) -63,888

Change in princ due on term loans (-) 722 Profitability (market)

Estimated change in working capital (=) 64,165 Rate of return on assets 5.7 %

Rate of return on equity 4.2 %

Projected Income Statement

Operating profit margin 18.5 %

Net farm income 94,950

Gross cash farm income 1,287,062 EBITDA 248,792

Inventory change - income items (+) -69,126

Gross revenue (=) 1,217,936 Repayment Capacity

Capital debt repayment capacity 140,637

Cash farm operating expense 970,685 Capital debt repayment margin 62,556

Interest expense (+) 78,467 Replacement margin 49,906

Depreciation (+) 74,605 Term debt coverage 1.80

Inventory change - expense items (+) -771 Replacement margin coverage ratio 1.55

Total farm expense (=) 1,122,986

Net farm income 94,950 Efficiency

Asset turnover rate (market) 30.7

Projected Earned Net Worth Change

Operating expense ratio 79.7 %

Depreciation ratio 6.1 %

Net farm income 94,950 Interest expense ratio 6.4 %

Personal income (+) 48,000 Net farm income ratio 7.8 %

Family living expense (-) 78,000

Income & social security tax (-) 25,000

_{Shocks to Term Debt Coverage Ratio}

Personal loan interest expense (-) 2,015

Personal asset depreciation (-) 1,393 10% decrease in gross income 0.24

Earned net worth change (=) 36,542 10% increase in operating expenses 0.56

3% increase in interest rates 1.37

University of Minnesota Center for Farm Financial Mgmt

(44)

Slim Jim Sample Cash Flow Plan: 2008 Cash Flow Page 2 1/30/2009 8:18:49 AM

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

CASH INFLOWS

Beg cash bal 26034 5000 5000 59543 5000 5000 5000 5000 84885 65813 25024 5000 26034

Corn - - 140000 - - - 140000 Soybeans - - 221693 - - - 221693 Finish Beef - - - 909014 - - - - 909014 DCP payments - 5633 - - - 10461 - - 16094 Pat dividend - - 261 - - - 261 Pers. wages 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000 Total inflow 30034 14633 370954 63543 9000 9000 9000 918014 88885 80274 29024 9000 1361096

CASH OUTFLOWS

Seed - - - 41040 19908 - - - 60948 Fertilizer - - - - 48330 - - - 48330 Chemicals - - - - 18216 - - - 18216 Crop insur. - - - 1176 9480 11592 - 22248 Drying fuel - - - 6210 - 6210 Pur. Silage - - - 217 - - - 217 Pur. Hay 384 1154 1211 1260 1311 1359 1410 - - 970 1020 1070 11149 Feeder lvstk - - - 515625 - - 515625 Purch. feed 5321 5321 5321 5321 5321 5321 5321 - - 5400 5400 5400 53446 Veterinary 554 554 554 554 554 554 554 - - 563 563 563 5567 Supplies 1848 1848 1848 1848 1848 1848 1848 - - 1875 1875 1875 18558 L. Marketing - - - 16997 - - - - 16997

Fuel & oil - - - 5933 5933 5933 - - 5933 5933 5933 - 35600

Repairs 720 720 1440 1440 2160 1440 1440 1440 2160 2160 2160 720 18000 Cust hire - - - 1500 - - - 1500 - 3000 Labor - - - 2400 2400 - - - 2400 2400 2400 - 12000 Land rent - - 55700 - - - 55700 - 111400 RE taxes - - - - 38 - - - - 38 - - 75 Farm insur. - 6000 - - - 6000 Utilities 269 269 269 269 269 269 269 269 269 269 806 806 4300

Dues & fees - - 1300 - - - 1300

Misc. 125 125 125 125 125 125 125 125 125 125 125 125 1500

Living/Draw 6500 6500 6500 6500 6500 6500 6500 6500 6500 6500 6500 6500 78000

Income taxes - - 25000 - - - 25000

Min end bal 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000

Tot. outflow 20720 27491 104267 73190 117912 28349 22683 30331 23563 556337 106784 22059 1078685

Opr. surplus 9314 -12858 266686 -9647 -108912 -19349 -13683 887684 65322 -476063 -77760 -13059 282411

(45)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

NEW CREDIT

5thNB-Cattle - - - 515625 - - 515625

Tot new cred - - - 515625 - - 515625

LOAN PAYMENTS

5thNB-Cattle - - - 612189 - - - - 612189 JDCC-7230 - - - 6670 - 6670 FSA-Bin Loan - - - 15586 15586 5thNB-Chop.. - - - 4009 - - - 4009 JDCC-Combine - - - 19038 - - 19038 5thNB-Barn - - - 32778 - - - - 32778 InsCo-House 500 500 500 500 500 500 500 500 500 500 500 500 6000

Tot loan pay 500 500 500 500 500 500 500 645467 4509 19538 7170 16086 696271

Surp. or def 8814 -13358 266186 -10147 -109412 -19849 -14183 242216 60813 20024 -84930 -29145 101765

ANNUAL OPERATING LOAN TRANSACTIONS & BALANCES

Beg AO bal 207100 198286 211644 - 10147 119559 148148 162331 - - - 84930 207100 AO borrowing - 13358 - 10147 109412 28589 14183 - - - 84930 31781 292400 AO int. pay - - - 8740 - - - 2636 11376 AO prin. pay 8814 - 211644 - - - - 162331 - - - - 382789 End AO bal. 198286 211644 - 10147 119559 148148 162331 - - - 84930 116711 116711 Accrued int. 5143 6464 7875 7875 7943 - 988 2070 2070 2070 2070 -

-End cash bal 5000 5000 59543 5000 5000 5000 5000 84885 65813 25024 5000 5000 5000

(46)

CROP & LIVESTOCK PRODUCTION

Production Per Operator

Enterprise Units Unit Share Production

Corn, Feed 414.0 Acres 165.0 bu. 100 68310 bu.

Corn Silage 42.0 Acres 18.0 ton 100 756 ton

Soybeans 474.0 Acres 48.0 bu. 100 22752 bu.

Total crops 930 Acres

CROP & LIVESTOCK SUMMARY

Beg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Corn equivalents Produced bu. - - - 68310 - - 68310 Sold bu. 35000 Corn bu. - - 35000 - - - 35000 Price $/bu. - - 4.00 - - - 4.00 Fed bu. 3158 3406 3690 3939 4185 4431 4680 - - 2448 2700 2953 35591 Inventory bu. 69707 66549 63143 24453 20514 16329 11897 7218 7218 7218 73079 70379 67426 67426 Hay equivalents Purchased ton 4 12 12 13 13 14 14 - - 10 10 11 111 Price $/ton 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - - 100.00 100.00 100.00 100.00 Fed ton 11 12 12 13 13 14 14 - - 10 10 11 119 Inventory ton 7 - - - -Silage equivalents Produced ton - - - 756 - - - 756 Purchased ton - - - 9 - - - 9 Price $/ton - - - 25.00 - - - 25.00 Fed ton 80 87 94 100 106 113 119 - - 62 69 75 905 Inventory ton 690 610 523 429 329 223 110 - - 756 694 625 550 550 Soybeans Produced bu. - - - 22752 - - 22752 Sold bu. - - 19794 - - - 19794 Price $/bu. - - 11.20 - - - 11.20 Inventory bu. 19794 19794 19794 - - - 22752 22752 22752 22752 Finish Beef Purchased head - - - 750 - - 750 Price $/cwt. - - - 110.00 - - 110.00 Sold head - - - 739 - - - - 739 Price $/cwt. - - - 95.00 - - - - 95.00 Inventory head 739 739 739 739 739 739 739 739 - - 750 750 750 750

(47)

PROJECTED INVENTORY CHANGE

Begin Begin Ending Ending

Commodity Inventor $/Unit Value Inventory $/Unit Value Change

Corn equivalents 69707 4.03 280919 67426 3.50 235992 -44927 Hay equivalents 7 105.00 756 0 0.00 0 -756 Silage equivalents 690 25.00 17250 550 25.00 13752 -3498 Soybeans 19794 11.20 221693 22752 8.50 193392 -28301 Finish Beef 739 115.00 599144 0 0.00 0 -599144 Finish Beef 0 0.00 0 750 810.00 607500 607500 Accounts receivable 0 0 0 Hedging accounts 0 0 0

Other current assets 0 0 0

Total income items 1119762 1050636 -69126

Prepaid expenses & supplies 2422 2422 0

Growing crops 0 0 0

Accounts payable (End) 0 (Beg) 0 0

Accrued interest (End) 18589 (Beg) 19359 771

Total expense items 21011 21781 771

Total inventories 1140772 1072417 -68355

(48)

BALANCE SHEETS

Projected 1/1/2008 1/1/2009

ASSETS

Current Assets

Cash and checking 26034 5000

Prepaid exp. & suppl. 2422 2422

Crops 520618 443136

Mkt lvst 599144 607500

Total current assets 1148218 1058058

Machinery 502500 452250

Titled vehicles 1450 1305

Total intermediate assets 503950 453555

Land 30000 30000

Bldgs & improve. 462700 439565

Other long term 2401 2401

Total long term assets 495101 471966

Total farm assets 2147269 1983579

Personal assets 153930 152537

Total assets 2301199 2136116

LIABILITIES Current Liabilities

Accrued interest 19359 18589

Prin due on term loans 45482 46205

5thNB-Cattle 579513 515625

Operating loan(s) 207100 116711

Total current liabilities 851455 697130

Intermediate Liabilities

FSA-Bin Loan 29861 15208

John Deere Credit-7230 4364

-John Deere Credit-Combine 33638 17546

5thNB-Chopper 8019 4009

Total inter. liabilities 75882 36763

Long Term Liabilities

Fifth National Bank-Barn 291841 286570

Total long term liab. 291841 286570

Total farm liabilities 1219177 1020463

Personal liabilities 43744 39759

Total liabilities 1262921 1060222

Net worth 1038277 1075894

Net worth change 37617

Total debt to asset ratio 54 % 49 %

(49)

The FINPACK Collateral Analysis builds from the balance sheets to calculate

Loan to Value and the Collateral Margin. Proposed loans and projected

collateral can be added to complete the picture. Collateral Analysis can feed

directly into Presentation Manager and Risk Rating.

With Collateral Analysis, you can:

• Select loans and collateral from balance sheet

• Enter multiple collateral groups, when applicable

• Standardize discount percentages (although discount percentages can also

be overridden for individual analysis)

• Link loan to value and collateral margin to the Risk Rating and

Presentation Manager components of FINPACK

Collateral Analysis

(50)

Slim Jim Sample

1/1/2008

Collateral Analysis

Principal Market Disc. Discounted Prior Net Loan to

Loan Balance Collateral Value Pct. Value Liens Collateral Value

All Secured Loans

2008 Operating 225,000 Crop inventory 520,618 90.00 468,556 - 468,556 Fifth National Bank-Barn 298,500 Livestock held for sale 599,144 90.00 539,230 - 539,230 5thNB-Cattle 579,513 Machinery and equipment 502,500 75.00 376,875 58,688 318,187

5thNB-Operating 207,100 Titled vehicles 1,450 75.00 1,088 - 1,088

Land 30,000 100.00 30,000 - 30,000

Buildings and improvement 462,700 60.00 277,620 - 277,620 2008 Production 310,000 90.00 279,000 - 279,000

Total 1,310,113 2,426,412 1,972,368 58,688 1,913,680 68.5 %

Total loan to value 1,310,113 1,913,680 68.5 %

Collateral coverage margin 1.46

Collateral margin 603,567

(51)