Outperforming Through a Targeted Market
By David Zaslawsky
Photography by Robert Fouts
It was during the lean years that what is now called Alabama Ag Credit not only survived, but thrived.
During the financial crisis in 2008-2010, Alabama Ag Credit made a decision to continue lending while other firms stopped. “We continued to build relationships and continued to finance loans that other people wouldn’t, and I don’t mean to imply a lender as last resort in any way,” said Doug Thiessen, president and CEO of Alabama Ag Credit.
He said that if the financial institution had decided to stop lending, “we’re out of business,” but instead, has “grown our business every single year.”
From 2010 to 2015, total loans have grown from $675.3 million to about $850 million. First of all, the firm, which has nine branches in Alabama in addition to its headquarters on the fourth floor of the Lakeview Center at EastChase, expanded its products in 2010.
Growth prospects are excellent because new products were added just five years ago. “We believe our opportunity to grow in the pure agriculture space is very significant because we didn’t have any of that volume in 2010,” Thiessen said. “As we’re out aggressively talking to the agricultural producer, we believe that to be a market that can help us grow for many, many years.”
Thiessen said that it’s the employees who make the firm successful. “Everybody always says the greatest asset is your people – I agree with that,” Thiessen said, “but it’s more than that. It’s the right people and we have a culture here that people can passionately get behind what they do.
“Think of it this way: The people we help put food on our plates; clothes on our backs; shelter over our heads with timber; and even impact energy. Those are the people we help. That’s an easy thing for employees to get passionately behind because it affects everybody one way or another.”
The organization, which is part of the nationwide Farm Credit system that is celebrating its 100th anniversary next year, has a focused mission as its name implies. Alabama Ag Credit loans money to farmers, ranchers, rural real estate buyers and rural homeowners. The list includes timber products and aquaculture. The Ag in the name is short for agriculture – it’s not short for attorney general, but some people do get confused.
“When we decided on our name, we wanted people to know that we’re headquartered in Alabama,” Thiessen said. “We’re from Alabama. Our board is from Alabama. At the same time, we needed (people) to know that we’re making ag loans, farm loans and land loans. We want people to know that’s who we are.”
That focused mission of lending to a select group sets Alabama Ag Credit apart from other financial institutions. Its borrowers are also required to become shareholders, which is what Thiessen called “a distinguishing factor.” Borrowers must either buy $1,000 worth of stock or 2 percent of their total loan – whichever is less. “Therefore, when we make profits one of the key benefits for those stockholders is they get to share in those profits,” Thiessen said.
And those annual patronages have risen from $3 million in 2010 to $7 million-plus this year – an all-time high and about $1 million more than the 2014 total of $6.1 million.
The patronage is determined by the institution’s board of directors and reflects the average amount of borrowing for the year. Some of the borrowers have received tens of thousands of dollars, according to Thiessen. The more you borrow, the greater the patronage. “If you’re going to borrow that money from someone – and make sure you understand I am a big supporter of the financial industry – (our firm) will share profits with a borrower at the end of the year and other institutions won’t,” Thiessen said. “Why wouldn’t you leverage that?”
He estimated that the $7 million-plus in patronages this year was the equivalent of a 1 percent reduction in borrowing costs.
Those interest rates naturally vary by product, terms and individuals. A borrower may have a one-year variable-rate operating loan while someone else may have a 20-year fixed rate loan “or anything in between,” Thiessen said.
Because Alabama Ag Credit only handles loans for farmers, ranchers as well as rural real estate borrowers, it has a knowledgeable staff and that makes a difference because they routinely deal with such loans. Thiessen said that a potential borrower “can talk to another lender that may be willing to make the loan, but the relationship down the road will be built upon the experiences and expertise of who they’re working with.”
The organization operates in 40 Alabama counties from as far north as Tuscaloosa to the Gulf Coast and has increased its presence by expanding its staff from 38 in 2007 to the current 67.