Agriculture is always subject to unknowns and unpredictables. Farmers have been dealing with low commodity prices and trade disputes. With spring comes the potential for unfavorable weather; flooding is forecasted in the northern Plains and western Corn Belt. And, as of the day this article is being written, COVID-19 is expected to hit rural communities and their healthcare systems hard. Any one of these circumstances could put borrowers in the agriculture industry under financial pressure. Combined, these conditions could result in financial distress.
The already-known conditions have had an impact on banks’ agriculture loan volume. Agriculture lending was up due to an increase in the size of loans, but there was a slight decline in the total number of loans.
Given the serious impact the unknowns can have the risks of agriculture loans, banks are responding in several ways.
Prior to COVID-19 being upgraded to pandemic status, interest rates were slightly increasing. As of this writing, those increases were on hold and rates dropping.
Smaller banks are gravitating toward USDA loan guarantees, as well as engaging in loan participations with bigger banks.
Banks are upgrading or implementing credit risk management software. While initially expected to help banks mitigate risk associated with agriculture loans, credit risk software simultaneously brings the added benefit of improving credit and loan staff’s efficiency.
Whether using a legacy system developed in-house, a different out-of-the-box system or no credit risk software at all, the Square 1 Credit Suite meets bankers’ needs and their teams’ workflows.
Powerful tools are built into the Square 1 Credit Suite to successfully manage a loan’s lifecycle while ensuring bankers are managing risk at the highest level possible.
Square 1 Credit Suite analysis and underwriting tools involve industry standard spread formats with customizable templates for:
- Detailed financial spread analysis with RMA comparisons
- Global Cash Flow analysis for complex entities
- Integration with loan committee presentation packages
- Agricultural (plus commercial) projections
- Transaction stress testing to identify changing economic variable
- Configurable scoring based on industry
- Covenant monitoring
- Custom ratios and calculations
Data interfaces reduce frustration from redundant data entry. Credit risk software, like Square 1, moves common data between critical software systems. Customers, loans and deposits are uploaded into the system and updated on a nightly basis.
Workflow efficiencies improve via Square 1’s loan portfolio management and document imaging capabilities:
- Loan portfolio documentation and exception tracking, management and work outs
- Document imaging and storage that meets or exceeds FDIC requirements across your entire organization
Since risk stems from unknowns and unpredictable events, and inefficiency is rooted in disparate processes and systems, banks can mitigate both with credit risk software that is a scalable end-to-end solution. Learn more about our commercial loan software, Square 1 Credit Suite. A demo can show you quickly how it could fit within your lending processes to save time, reduce risk and increase efficiency.
