Episode 31 Cooperative News and Patronage Refunds
Join Caleb Sadler as he sits down with President and CEO, Jonathan Noe, and Vice President and CLO, Richard Medley. Patronage and Customer Appreciation Day are always a highlight for Ag Credit. Learn more about the Ag Credit cooperative system and how patronage gives back to the customer.
- View Transcript
[00:00:01.210] - Caleb Sadler
Welcome to Beyond Agriculture, the podcast that takes you beyond the scope of AG and into the real-life stories, conversations, and events taking place in our community. Who we are and what we do is Beyond Agriculture. Hello. Welcome in to Beyond Agriculture. Caleb Sadler back with you today, joined with two special guests, as well as Ben Robin, behind the scenes, running our tech. He's actually going to join us a little bit today as well. But today we're joined with our CEO, Jonathan Noe, and our Chief Lending Officer, Richard Medley. How are you all doing today?
[00:00:44.900] - Jonathan Noe
Doing Great, Caleb.
[00:00:46.090] - Richard Medley
Good. Caleb, glad to be here.
[00:00:49.050] - Caleb Sadler
We just finished up some pretty good activities that we've had going on, one of those being our annual meetings. Jonathan, I'll let you tell us a little about our annual meetings and how those work, okay?
[00:01:02.480] - Jonathan Noe
Okay. Well, the annual meetings, it really comes down to that's the period where we elect our board member. That's an annual meeting because each year, we're required to have an election, have one of our directors run for re-election unless there's actually a spot open. But either way, we're electing directors during that meeting, and we still do it. The the old way, which is we bring our members out. We have a couple of sectional meetings, bring our members out, feed them, and actually conduct an election at that meeting, casting ballots, taking votes and counting those by the end of the night on the second meeting. It's a fun process. It could be a difficult process because it requires us to bring enough membership to have a quorum each year. But we like the process, the old-school process, so to speak. We do what it takes to make it happen and make a good event for our members.
[00:02:10.880] - Caleb Sadler
I will say it is the staff, one part that you left out of that is the staff does cook a really nice steak, and that's always a highlight. I always tell people when we're signing loan documents, when we get to the membership application, I call that the invitation to our annual steak dinner. So the staff always cooks for that. It's always normally at the end of February, first part of March. That's awesome. Tell us a little bit about who was reelected as well as who ran for our open board of director seat.
[00:02:43.680] - Jonathan Noe
Okay. Well, Lee Blandford, Washington County, was reelected. She ran against some tough competition, Jonathan Shepherd from Franklin County. Lee has been on our board now eight years. She served two terms as a board member, serves as our vice chair. It was obviously going to be tough to knock her out of that seat after doing such a good job. But Jonathan, you really came, spoke well to the membership, did a really good job. But in the end, Lee maintained her seat on the board. When we have these meetings, you know you have to bring the very best. Our nominating committee does a really good job of that, of finding candidates who are highly qualified to serve on our board. That's not an easy job either because our board members represent our membership, and so we want to provide them with the very best and our nominating committee did a good job again this year in providing good candidates. In the end, it was Lee Blandford that won the election.
[00:04:01.970] - Caleb Sadler
How many, and this is probably going back a long time, have we always held annual meetings or how far back would you think?
[00:04:09.910] - Jonathan Noe
We always have, but they have looked differently. It's my understanding if you go back far enough. I've been with the association 23 years, and they've always looked the same over those 23 years. But they've been held since the very beginning. The process of electing directors who serve our members. While the elections and the meetings may look a little different over time, that process hasn't changed. It's always given our members the chance to make sure that they're well-represented and they choose who runs this organization.
[00:04:49.460] - Caleb Sadler
That's awesome. Well, Richard, I know we've got some big upcoming events. Those are some of the things that have happened just recently. I know May is coming up, which that's exciting month because that's definitely beef month. That's probably one of our number one things that we do at Central Kentucky Ag Credit is beef cattle. Tell us a little bit about some of the upcoming events we've got coming, and hopefully, maybe some other stuff in the pipeline as well, even sooner than May.
[00:05:18.270] - Richard Medley
All right, Caleb. Well, I appreciate you asking me the tough questions. These are the fun ones. But the theme we have is we like to have in-person events, like our annual meeting. We like to be out amongst our membership and really do things that make a difference. I'll say a couple of years ago, since coming to Lexington participating in the May event over there in Madison County, I finally know what it feels like to work at McDonald's serving hamburgers. That's true. I never thought that I could make it in fast food, but I walked away after 2 hours with a hurt back and barely being able to stand up because I think me and Joe Goggin, I had to watch over what he was doing. But we were in charge of slapping cheese on maybe 750 hamburgers, and that was quite the task.
[00:06:10.640] - Caleb Sadler
We only have like two hours to serve.
[00:06:12.950] - Richard Medley
Two hours, I said, there's no way this will work. But Chris and the guys over there, the crew in Richmond, really got that down to a well-oiled machine to where it's truly a community event, it feels like. A lot of the local partners that put that on with extension and Farm Bureau and stock yards. We all work together very well to accomplish to go. The ultimate thing is we want to support our beef farmers, and I think we do a good job of that, and along with just recognizing that in the local community. With 750 people showing up to get a hamburger, I think it went over well. That's awesome. It's always a great event. Another one we got going on is the Bourbon County Beef Day. And maybe Ben, one of our Bourbon County people, can shed a little light on that one more than I can be. I haven't had to work that one.
[00:07:08.930] - Ben Robin
Yeah, we've cooked there the last few times. Yeah, it's been a while. I guess they put that on the last at least four or five years that I've been involved with it, but similar to other beef days, just trying to bring awareness to the industry.
[00:07:24.860] - Ben Robin
And usually a good crowd, and they have hamburgers and hot dogs. So pretty good event.
[00:07:35.880] - Caleb Sadler
They do another one down in Cynthiana, too, and they have a really big turnout, just like over in Richmond. We partner with the Cattlemen's Association down there, and I think they serve pretty close to a thousand people as well. So it's pretty impressive. So one new one, though, that's coming up this year is that we're going to partner with Bluegrass Stock yards in Mount Sterling, and we're going to host a beef day over there one day. So stay tuned to that. That'll be, I think, maybe the first week or so of May, or be looking for the date on that. I don't know that it's finalized yet, but it'll be coming up pretty soon. But more importantly, probably more quicker than May is our Customer Appreciation Day here at Ag Credit. You all tell us a little bit about that one and some of the highlights that our customers are going to be able to walk away with there.
[00:08:19.950] - Jonathan Noe
Well, that's coming up soon here, April third. One of the other things that come from our annual stockholder meetings is we get to reveal how much patronage that we're going to be paying our stockholders for the year. I know they're excited to hear that news when they come out to the meetings. April third, on our Customer Appreciation Day, is when we get to hand those checks out. That's a big day. We open up our branches, we serve food, we take time to fellowship with our customers when they come in. The big thing is they get to come in and pick up their patronage check. Those are substantial financial checks for our membership. It's just a chance for us to say thank you to our customers, get to spend a little time with them, and then hopefully, as they pick up that check, really feel the value of what it means to be a member of Central Kentucky Ag Credit.
[00:09:17.080] - Caleb Sadler
Awesome. Well, I'll piggyback off that. A lot of our listeners probably don't know the difference truly between Ag Credit and a regular commercial bank. I know we've alluded to it a little bit, Richard, tell us a little bit about how Ag Credit compares to a commercial bank and how we're different on that aspect of it.
[00:09:38.140] - Richard Medley
Well, that's what I was going to say, Caleb. We have a very few similarities to an actual bank. The Farm Credit System was founded for basically one mission is to serve financing for the Ag industry. At a time, whenever, Ag financing was hard to come by. Several, several years ago, probably longer than a lot of us put together during our age in the room here that the Farm Credit Act was passed. But it was very specific legislation to set up the program for farmers, basically, to provide them a clear, consistent access to credit to be able to ultimately run their farms and provide the food that feeds our country. It was a good... The founding fathers, when they set that up, they had a lot of foresight to do that. Not a lot of organizations make it that long run in there. At the core of our business, we're set up to basically just make loans. We're not set up to be a deposit institution. We're there to serve the ag market in all facets of the ag market we basically can provide financing for anything in the ag realm, whether it be a commercial grain operation, a greenhouse operation, moving forward to, obviously, with beef month coming up, we finance a lot of those four-legged animals you see on every hill and holler in central Kentucky.
[00:11:10.520] - Caleb Sadler
I can tell you right now, they're worth a lot of money.
[00:11:12.780] - Richard Medley
I know. It's like seeing black gold on the hills driving around. That's exactly right. It's very interesting. But the sole purpose of being an ag cooperative for financing is that's what we do. That's our mission, and we try to stick to that mission. We take our job very serious.
[00:11:33.920] - Jonathan Noe
I would add to that, too, Caleb. Richard mentioned the forefathers there who came up with the farm credit system and that idea. The fact that they made it as a cooperative, I think, has kept the system strong for a long time. That's a big differentiating factor, too, between us and your typical commercial bank, and that is that we're owned by our members. Each member has stock and each Farm Credit Associate across the nation. The same with the funding banks that fund us, associations like us have ownership in those banks, and so we're a large cooperative, and we're able to really return value to our customers through that cooperative model and decrease the cost of financing their operations. If you've been in ag very long, and I'm sure a lot of our listeners are very. Are you familiar with this? IT can be a tough industry at times. Our members need to keep the cost at a minimum, and being a part of a cooperative is vital to that.
[00:12:43.340] - Caleb Sadler
Awesome. I guess one question that I would ask, too, is, do you have to be a farmer to be a member of Ag credit? Which obviously, I know the answer, but I'd like you all to tell our listeners at that point in time. Hit on, too, because our Home Loan Department, I think, does a lot, too, and they're not your traditional farmer.
[00:13:03.470] - Richard Medley
Right. That's a good question, Caleb, and I'll take a stab at it here. But we have two different facets of our business. We have the Rural Home Loan division that serves basically homeowners in the country. We're not looking to go. We cannot go into downtown Lexington and make a home loan. But if somebody wants to live in the country, even without farming, that's something we can finance to a limited degree. But basically, anything ag related, part-time farmers, full-time farmers, the whole gamut, we finance that, and they're fully eligible to do. We can finance about anything that they want to do, from vehicle loans to buying that farm, buying cattle, building a barn. You name it. It takes a lot of capital to do anything these days, and we're set up to do that.
[00:13:56.800] - Caleb Sadler
In terms of Ag credit, I'll ask We're going to skip around a little bit here. But in terms, how do you explain to our listeners how our interest rates and things like that work and how our loans are priced on the market?
[00:14:11.050] - Jonathan Noe
Well, I mentioned this just a few minutes ago. We have a funding bank that funds our loans just like every other association across the Farm Credit System. There's four funding banks to fund all of those associations. To obtain the funds that they use, bonds are sold, just like treasuries that are sold, that are in turn used to finance all the loans that go out to our farmers across the nation. They tend to run consistent with treasuries. If you keep up with that, if you look at the 10-year treasury, that's a good indicator. As it moves, a lot of times they're longer term interest rates move. When it comes to variable rates, most everything that we price is off of the prime rate. There's been some movement in that rate as of late, and I think a lot of our members and interested folks keep up with that. If you're keeping up with the prime rate, you know what our variable rates are doing. But our rates are very much tied to the market, very much tied to the market. As the market moves, we move quickly with the market. If you're keeping up with that in the news and you hear, hey, rates are going up this week, very likely that ours have gone up, too.
[00:15:39.220] - Jonathan Noe
It's not hard to keep up with the market and the way that our rates are moving because we're hand in hand. We've heard a lot. You all have talked a lot today about the cooperative model. I'm going to circle back up to one question here. The cooperative model with Ag Credit, we return portion of our profits back in the form of that patronage refund. But does every customer eligible for a patronage refund on that end of it?
[00:16:10.020] - Jonathan Noe
If you are a true stockholder and you have C-stock with the association, meaning you have some involvement in farming, even if it's a part-time, small scale, if you have some involvement in farming and have C-stock, then you're going to receive patronage. Well, the only folks, and Richard mentioned this, the rural home customers, all of them do not receive patronage. It's not totally across the board, but typically a true rural home customer, which is a customer who we financed a rural home for them, but they have no involvement in farming. A lot of the way those loans are priced and handled do not receive patronage. But otherwise, pretty much across the board, patronage is received.
[00:17:13.620] - Caleb Sadler
Perfect. There's one other thing that I was going to think of, but Ben, I can't think of it now in regards to that.
[00:17:22.110] - Jonathan Noe
I will say this about patronage. It's very much if you want to try to quantify the value of patronage and how we view it. I've talked about pricing, how we price loans to the market, and that's what we always do. When we come to the market, we don't want to be above it. We don't want to be below it. We want to be right at the market. As a customer, you're going to get a market rate that hopefully you'll be satisfied with. Then at the end of the day, that patronage is the differentiator. It's the difference between doing business with us as a cooperative and just any other lender. If we have a good year and we're profitable, and hopefully we are, we've fortunately paid patronage now each year since 1997, so almost 30 years of paying patronage. We've been profitable enough to do that. As a member, you receive that patronage, that brings your cost to borrow down. You started out with a market rate. That patronage is the differentiator. Certainly, the more patronage we can afford to pay, the less you're borrowing cost as a member. That's what a cooperative does.
[00:18:49.500] - Jonathan Noe
That's how we return true value to our membership.
[00:18:54.160] - Caleb Sadler
Well, believe it or not, that's exactly what I was getting ready to ask and bring up. I knew that's where you were going. Yeah, and the The reason I say that is because most of our lending staff use that patronage tool when we're trying to price loans and things like that, because we try to estimate that side of it. Truly, if you sign that check over and applied it onto your loan, it is true interest savings on your loan. We try to factor that in when we price our loans and to those eligible customers. That is one tool in the toolbox that is really nice about the cooperative model.
[00:19:29.000] - Richard Medley
Yeah, this time of year is the time that people really like to track you down and visit with you and get that check. A lot of people do a lot of good things with those. It means a lot to them whenever you can hand them that check and they feel part of a bigger system.
[00:19:42.960] - Jonathan Noe
I could tell you this, too, Caleb and Richard's right. Our loan officers, our staff, they love to get out, distribute those checks, love to see our members come in the office and pick those up because we hope that the customers see the value in it, and they're excited to get that check. But I can tell you we take pride in returning that money to our customers. It's a feel good for the customer, I'm sure, but it's a feel good for us, too, because we want them to know that we've done a good job. We've been able to do well with the resources that we have. We've been able to generate a return and give it back to them. That's a job that we all take very seriously.
[00:20:31.110] - Caleb Sadler
I'll ask the both of you to see your all's opinion on this, but where do you see Ag credit moving forward in that next 5-10 year period?
[00:20:41.970] - Jonathan Noe
Well, I feel like we still have lots of opportunity for growth, first of all. We're very much a customer service-oriented lender. We feel like folks in agriculture appreciate that. They appreciate having a trusted lender who's also a lot of times a trusted advisor. And so that relationship model that we have is still very valuable, very important. We know times are changing. Technology becomes more and more of how we do business. But relationships in AG are still very important, and I expect that they will be in the next 5 to 10 years as well. So we're going to keep working with the model that we have, keep trying to not only add value through patronage, but I think we haven't... We've been talking patronage here in cooperatives, but we also feel like we have a lot of other value-added possibilities for our customers that come through the knowledge and experience of our staff. Again, if we're truly a trusted advisor to our membership, we offer more than just money. It's that relationship and it's that trust that our customers have with our staff. There's additional value in that that hopefully comes from being a member of Ag Credit.
[00:22:19.220] - Jonathan Noe
That's going to continue to be our focus over the next 5-10 years. We still feel like there is a real market for what we have offer out there, and they'll continue to be in the future.
[00:22:37.220] - Caleb Sadler
It's crazy how fast time goes by, though, because I started 10 years ago, and I think about that question, I'm going, 10 years, I'll be here 20 years. At that point, I'm like, Gosh, time really does fly.
[00:22:49.640] - Richard Medley
Well, they say it flies when you're having fun, Caleb.
[00:22:52.020] - Caleb Sadler
Well, I will say it is fun. Most days. Anyway, well, I want to thank you all for joining me today with Ben as well, behind the scenes. So thank you all for joining us on Beyond Agriculture. I look forward to having you all back on in the future and to make sure that you go out and like, share, and subscribe to our podcast, Beyond Agriculture. Thank you.
[00:23:14.940]
This episode of Beyond Agriculture is brought to you by Central Kentucky Ag Credit. Thanks for listening to the podcast. Be sure to visit agcreditonline.com/beyondagriculture. Access the show notes and discover our fantastic bonus content. Also, don't forget to hit the subscribe button so you can join us next time for Beyond Agriculture.