Credit Analysis Solutions AGRICULTURE

Credit Analysis Solutions AGRICULTURE

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

What does FINPACK do for you? 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 1

The Flexibility to Meet All Your Customer Needs 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. About This Book 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. 2

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 FINPACK Commercial About CFFM 3 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 p. 75 p. 77

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Balance Sheets Balance Sheets 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 analysis, risk rating and the loan presentation manager. 5

Balance Sheets 6

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 - Current Liabilities Slim Jim Sample 1/1/2008 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 Detailed Balance Sheet Mkt lvst (Schd H) No. Value/Unit Finish Beef 739 115.00/cwt. 599,144 Total Current Assets 1,148,218 Total Current Liabilities 851,455 Intermediate Assets Intermediate Liabilities (Schd U) Cost Market Int Principal P & I Principal Intermed Value Value Loan Rate Balance Due Due Balance Breeding livestock - - FSA-Bin Loan 3.125 43,989 15,586 14,128 29,861 Machinery (Schd J) 305,400 502,500 John Deere Credit-7230 7.25 10,282 6,670 5,918 4,364 Titled vehicles (Schd K) 1,053 1,450 John Deere Credit-Combine 8.75 48,406 19,038 14,768 33,638 Other intermediate assets - - 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 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 Bldgs & improve. (Schd N) 436,476 462,700 Other long term (Schd O) 2,401 2,401 Total Long Term Assets 443,877 495,101 Total Long Term Liabilities 291,841 Total Farm Assets 1,898,548 2,147,269 Personal Assets (Schd P) 153,930 153,930 Total Farm Liabilities 1,219,177 Personal Liabilities (Schd W) 43,744 Total Assets (a)(b) 2,052,478 2,301,199 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 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 7

Detailed Balance Sheet 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 8

Slim Jim Sample Balance Sheet: 1/1/2008 Page 3 1/29/2009 2:15:16 PM 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 Detailed Balance Sheet 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 9

Detailed Balance Sheet Slim Jim Sample Balance Sheet: 1/1/2008 Page 4 1/29/2009 2:15:16 PM 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 10

11 Summary Balance Sheet

Summary Balance Sheet 12

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 Slim Jim and Sarah Sample Summary Balance Sheets (market) Balance Sheet Trend Reports 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 Long Term Assets 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 University of Minnesota Prepared by: Wynn Richardson University of Minnesota 13

Balance Sheet Trend Reports Slim Jim and Sarah Sample Historic Report: Summary Page 2 1/30/2012 10:56:48 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 % FINPACK Center For Farm Financial Management University of Minnesota 14 Prepared by: Wynn Richard University of Minnes

Tax Forms and Income Statement Tax Forms and Income Statement 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 15

Tax Forms and Income Statement 16

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 Tax Forms and Income Statement 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 FINPACK Center For Farm Financial Management Prepared by: Wynn Richardson University of Minnesota University of Minnesota 17

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 Tax Forms and Income Statement 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 FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 18

Schedule F Accrual Analysis 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. Schedule F Accrual Analysis 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 19

Schedule F Accrual Analysis 20

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 % Schedule F Accrual Analysis 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 % FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 21

Slim Jim Sample : Schedule F Analysis Page 2 1/31/2012 9:56:05 AM 2007 Income Statement Income Expense Schedule F Accrual Analysis 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 FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 22

Slim Jim Sample : Schedule F Analysis Page 3 1/31/2012 9:56:05 AM 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 Income taxes (-) 8,167 Repayment Capacity (i) Cash provided by financing activities (=) 64,182 Schedule F Accrual Analysis 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 Income taxes (-) 8,167 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 FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 23

Slim Jim Sample : Schedule F Analysis Page 4 1/31/2012 9:56:05 AM 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 Accrual Analysis FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 24

Slim Jim Sample : Schedule F Analysis Page 5 1/31/2012 9:56:05 AM 2 1.5 Current Ratio Current Ratio The extent to which current farm assets, if liquidated, would cover current farm liabilities. 1 Total current farm assets divided by total current farm liabilities. 0.5 0 2002 2003 2004 2005 2006 2007 Strong Greater than 1.7 Caution 1.7 to 1.1 Vulnerable Less than 1.1 FINBIN My Farm 30 25 Working Capital to Gross Revenues Working Capital to Gross Revenues Measures operating capital available against the size of the business. 20 15 10 5 0 80 60 40 2002 2003 2004 2005 2006 2007 FINBIN My Farm Debt to Asset Ratio (mkt) Working capital dividied by gross revenues. Strong Greater than 25 Caution 25 to 10 Vulnerable Less than 10 Debt to Asset Ratio (mkt) The proportion of total farm assets owed to creditors. Total farm debt divided by total farm assets. Schedule F Accrual Analysis 20 0 2002 2003 2004 2005 2006 2007 Strong Less than 30% Caution 30% to 60% Vulnerable Greater than 60% FINBIN My Farm 4 Debt to Equity Ratio (mkt) Debt to Equity Ratio (mkt) The relative amount of money borrowed as a percentage of equity capital. 3 2 Farm debt divided by equity. 1 0 2002 2003 2004 2005 2006 2007 Strong Less than 0.43 Caution 0.43 to 1.5 Vulnerable Greater than 1.5 FINBIN My Farm FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 25

Slim Jim Sample : Schedule F Analysis Page 6 1/31/2012 9:56:05 AM 35 30 25 20 15 10 5 0 Rate of Return on Assets-cost 2002 2003 2004 2005 2006 2007 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% FINBIN My Farm 50 Rate of Return on Equity-cost Rate of Return on Equity-cost The rate earned on equity capital invested in the business. 40 30 20 Net farm income - value oper labor & mgmt divided by average farm net worth. Schedule F Accrual Analysis 10 0 50 40 30 20 2002 2003 2004 2005 2006 2007 FINBIN My Farm Operating Profit Margin (cost) Strong Greater than 10% Caution 10% to 3% Vulnerable Less than 3% 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. 10 0 2002 2003 2004 2005 2006 2007 Strong Greater than 25% Caution 25% to 15% Vulnerable Less than 15% FINBIN My Farm 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Net Farm Income (cost) 2002 2003 2004 2005 2006 2007 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. FINBIN My Farm FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 26

Slim Jim Sample : Schedule F Analysis Page 7 1/31/2012 9:56:05 AM 3.5 3 2.5 2 1.5 1 0.5 0 Term Debt Coverage Ratio 2002 2003 2004 2005 2006 2007 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 FINBIN My Farm 3.5 3 2.5 2 1.5 1 0.5 0 70 60 50 40 30 20 10 0 Replacement Margin Coverage Ratio 2002 2003 2004 2005 2006 2007 FINBIN My Farm Asset Turnover Rate (cost) 2002 2003 2004 2005 2006 2007 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) 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% Schedule F Accrual Analysis FINBIN My Farm 80 Operating Expense Ratio Operating Expense Ratio The portion of gross revenue used to pay operating expenses. 60 40 Farm operating expense - interest expense divided by gross income. 20 0 2002 2003 2004 2005 2006 2007 Strong Less than 60% Caution 60% to 80% Vulnerable Greater than 80% FINBIN My Farm FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 27

Schedule F Accrual Analysis 28

Global Cash Flow 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 Global Cash Flow Easily add projected new or proposed debt payments and income to the analysis 29

Global Cash Flow 30

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 + Other non-taxable income - - - - + Depreciation 141,768 186,691 47,584 125,348 + Interest paid on term debt 6,669 4,997 38,442 16,703 - Non-recurring income - - - - + Non-recurring expense - - - - = 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 - - - - + Non-recurring expense - - - - = Cash available for debt service 31,932 24,629 25,768 27,443 Debt payments 13,265 13,265 13,265 13,265 Debt coverage ratio 2.41 1.86 1.94 2.07 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 - - - - + Non-recurring expense - - - - = Cash available for debt service 8,632 9,875 8,959 9,155 Debt payments - - - - Debt coverage ratio - - - - 1040 - Jim & Sarah Adjusted gross income 100,789 116,288 64,874 93,984 + Other non-taxable income - - - - - Income tax 8,912 9,812 3,500 7,408 - Living expenses 45,000 45,000 45,000 45,000 - Non-recurring income - - - - + Non-recurring expense - - - - = Cash available for debt service 46,877 61,476 16,374 41,576 Debt payments 23,332 23,332 23,332 23,332 Debt coverage ratio 2.01 2.63 0.70 1.78 Global Cash Flow 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 FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 31

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 Global Cash Flow FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 32

Annual Cash Flow 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. 33 Annual Cash Flow

Annual Cash Flow 34

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 University of Minnesota 35 Prepared by: Dale Nordquist Center for Farm Financial Mgmt Annual Cash Flow

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 Net cash flow 67,309 Annual Cash Flow 36

Slim Jim Sample Annual Plan: 2008 Page 3 1/30/2009 8:33:52 AM CROP AND LIVESTOCK PRODUCTION Production Per Operator Enterprise Units Unit Share Production Corn 414.0 Acres 165.0bu. 100 68,310 bu. Corn Silage 42.0 Acres 18.0ton 100 756 ton Soybeans 474.0 Acres 48.0bu. 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 37 Annual Cash Flow

Slim Jim Sample Annual Plan: 2008 Page 4 1/30/2009 8:33:52 AM 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 Intermediate Assets Machinery 502,500 452,250 Titled vehicles 1,450 1,305 Total intermediate assets 503,950 453,555 Long Term Assets 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 Annual Cash Flow Net worth 1,038,277 1,075,519 Net worth change 37,241 Debt to asset ratio 55 % 50 % 38

Monthly Cash Flow Monthly Cash Flow 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. 39

Monthly Cash Flow 40

Projected Cash Flow Summary Executive Summary Term Debt Coverage Slim Jim Sample 2008 Cash Flow 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 Monthly Cash Flow 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 FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Dale Nordquist Center for Farm Financial Mgmt 41

Monthly Cash Flow Slim Jim Sample Cash Flow Plan: 2008 Cash Flow Page 2 1/30/2009 8:18:49 AM CASH INFLOWS Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 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 42

Slim Jim Sample Cash Flow Plan: 2008 Cash Flow Page 3 1/30/2009 8:18:49 AM NEW CREDIT Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 5thNB-Cattle - - - - - - - - - 515625 - - 515625 Tot new cred - - - - - - - - - 515625 - - 515625 Monthly Cash Flow 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 43

Monthly Cash Flow Slim Jim Sample Cash Flow Plan: 2008 Cash Flow Page 4 1/30/2009 8:18:49 AM 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 44

Slim Jim Sample Cash Flow Plan: 2008 Cash Flow Page 5 1/30/2009 8:18:49 AM 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 Monthly Cash Flow 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 45

Monthly Cash Flow Slim Jim Sample Cash Flow Plan: 2008 Cash Flow Page 6 1/30/2009 8:18:49 AM BALANCE SHEETS ASSETS Projected 1/1/2008 1/1/2009 Current Assets Cash and checking 26034 5000 Prepaid exp. & suppl. 2422 2422 Crops 520618 443136 Mkt lvst 599144 607500 Total current assets 1148218 1058058 Intermediate Assets Machinery 502500 452250 Titled vehicles 1450 1305 Total intermediate assets 503950 453555 Long Term Assets 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 % 46

Collateral Analysis Collateral Analysis 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 47

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 Collateral Analysis 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 48

Credit Decision Scorecard Use FINPACK s Credit Decision Scorecard to fast track the review and decision making process for smaller loans. With Credit Decision Scorecard, you can: Develop your own customized scorecard using the criteria most important to you Credit Decision Scorecard Allows you to define essential criteria that must be met to make the loan Gathers the customer data that you specify Evaluates customer data compared to minimum approval criteria that you establish Provides the flexibility to document reasons to override automatic approvals or rejections 49

Sam & Pat Dunn New equipment purchase Scorecard: Sample small business Pre-qualifying Criteria Must meet ALL criteria for automatic approval Yes Is the requested loan amount less than $50,000? Yes Yes Yes Yes Is this loan to a business, not an individual? Is the purpose of this loan other than a line of credit or for inventory? Has at least one principal personally guaranteed the loan? Has the business generated a positive net profit each of the last three years? Customer Data Applicant credit score 690 Co-applicant credit score 670 Loan amount 35,000 Collateral value 60,000 Credit Decision Scorecard Financial Criteria Must meet ALL criteria for automatic approval 0.58 Loan to value 0.75 or less 670 Minimum credit score 650 or greater 24 Debt to income 40 or less Approval:Yes, meets scorecard criteria By:Ima Lender FINPACK Center For Farm Financial Management University of Minnesota Prepared by: Wynn Richardson University of Minnesota 50

Risk Rating FINPACK s flexible risk rating tool meets the needs of your institution. Risk Rating automatically links to data from client plans and analyses. FINPACK makes risk rating fast and consistent. With Risk Rating, you can: Create your own risk rating model(s) Link to data from the balance sheet, collateral analysis and ratio analysis Include customized external criteria, such as credit score Risk Rating 51

Slim Jim Sample 2007 Rating Risk Rating Model: Loan Scoring, Agriculture Balance Sheet(s): January 1, 2008; January 1, 2007; January 1, 2006 Earned Net Worth Analysis: 2007 CRITERIA RESULT SCORE xweight = TOTAL Liquidity Current ratio 1.4 4 2 8 Solvency Debt to asset ratio (mkt) 62.9 5 2 10 Net worth growth % (mkt) 50.2 (Average) 1 2 2 Repayment Capacity Term debt coverage ratio (projected) 2.16 1 3 3 Security Analysis Loan to value 68 3 3 9 Overall Rating: 4 -- Acceptable risk Total Score: 32 OVERALL RATINGS Total Weighted Points From To Rating Recommendation Risk Rating 65.00 72.00 9 Lowest quality - liquidation possible 58.00 64.99 8 Low quality 51.00 57.99 7 High degree of risk 44.00 50.99 6 Above average risk 37.00 43.99 5 Average risk 30.00 36.99 4 Acceptable risk 23.00 29.99 3 Good quality, little risk 16.00 22.99 2 High quality, minimal risk 12.00 15.99 1 Highest quality, very low risk Notes 52

Loan Presentation The FINPACK Presentation Manager provides a consistent and concise loan presentation format customized to your bank s needs. Users of the FINPACK Presentation Manager can: Combine FINPACK data and your narrative into a loan presentation Base loan presentations on a template that can be customized and standardized for the entire institution Take advantage of powerful and familiar word-processing features Select which data to import from balance sheets, collateral analysis, risk rating, and cash flow plans Automatically update linkages to imported data when source data changes from year to year Attach virtually any FINPACK document as an appendix, such as a balance sheet or historical financial spreads 53 Loan Presentation

Loan Presentation 54

Credit Presentation Borrower Information Borrower: Slim Jim Sample Address: 1032 Hwy 21 Cattleford,IA 51555 Telephone: 712-555-1234 E-mail: Owned Acres: 15 Acres Operated: 930 Type of Operation: Beef finishing Years in Business: 24 Years at Current Location: 24 NatureofBusiness/Operation Description: Date: Loan Officer: Aggie Lender Date of Last Review: 02/23/2007 Risk Rating Score: 32 (4 -- Acceptable risk) Tax ID# Customer Since: 1993 Produces corn and soybeans and finishes 750 steers per year. Purpose of Request: Sources of Repayment: 55 Loan Presentation

Present and Proposed Loans Loan Present Balance Proposed Balance Int. Rate Rate Formula Term(s) Maturity Date 2008Operating 0 225,000 8.000 Base -1.00 LOC 12/31/2008 Fifth National 298,500 298,500 8.750 Base -1.25 Fixed 08/15/2026 Bank-Barn 5thNB-Cattle 579,513 579,513 7.375 Base -1.00 Var 08/31/2008 5thNB-Operating 207,100 207,100 8.000 Base -1.00 LOC 02/1/2008 1,085,113 1,310,113 7.894 Collateral Analysis Loan Principal Collateral Discounted Prior Liens Net Collateral Balance Value 2008Operating 225,000 Crop inventory 468,556-468,556 Fifth National Livestockheld for 298,500 Bank-Barn sale 539,230-539,230 5thNB-Cattle 579,513 Machinery and equipment 376,875 58,688 318,187 5thNB-Operating 207,100 Titled vehicles 1,088-1,088 Land 30,000-30,000 Buildings and improvements 277,620-277,620 2008 Production 279,000-279,000 Totals 1,310,113 1,972,368 58,688 1,913,680 Loan tovalue 68% Collateral margin 603,567 UCC Filing Number: UCC Filing Date: Ratio Analysis Loan Presentation Current ratio 1.3 Debt to asset ratio (mkt) 62.9 Debt to equityratio (mkt) 1.69 Loan tovalue 68 Totalassets (mkt) 2,301,199 Total liabilities 1,262,921 Peak AO balance (FINFLO) 211,644 FINAN Rate ofreturn on assets (mkt) 12.2 FINAN Rate ofreturn on equity (mkt) 20.2 FINAN Term debt coverage ratio (accrual) 3.57 56

Recommendation Strengths: Weaknesses: Exceptions to Policy: None Conclusion and Recommendation: Loan Officer Date 57 Loan Presentation

Slim Jim Sample Balance Sheets at Market Jan 1, 2004 Jan 1, 2005 Jan 1, 2006 Jan 1, 2007 Jan 1, 2008 Current Assets Cash and checking 9,631 4,147 12,247 9,576 26,034 Prepaid expenses and supplies 6,042 46,704 44,831 859 2,422 Crop inventory 331,861 197,543 228,756 223,427 520,618 Livestock held for sale 364,396 451,109 501,000 569,149 599,144 Total Current Assets 711,930 699,503 786,834 803,011 1,148,218 Intermediate Assets Machinery and equipment 329,450 388,720 467,100 497,550 502,500 Titled vehicles - - - 2,600 1,450 Total Intermediate Assets 329,450 388,720 467,100 500,150 503,950 Long Term Assets Land 5,000 5,000 5,000 30,000 30,000 Buildings and improvements 62,000 62,000 60,000 479,000 462,700 Other long term assets 1,777 1,777 2,231 2,231 2,401 Total Long Term Assets 68,777 68,777 67,231 511,231 495,101 Total Farm / Business Assets 1,110,157 1,157,000 1,321,165 1,814,392 2,147,269 Total Personal Assets 99,000 97,400 114,550 146,700 153,930 Total Assets 1,209,157 1,254,400 1,435,715 1,961,092 2,301,199 Current Liabillities Accrued interest 3,021 8,542 6,728 14,334 19,359 Accounts payable and other accrued exp. - - 21,000 - - Current Loans Fifth National Bank-Operating 45,000 124,000 124,300 86,400 207,100 Fifth National Bank-Cattle 366,612 412,859 455,051 552,633 579,513 Farmers Coop-Feed - - - 7,599 - Total Current Loans 411,612 536,859 579,351 646,632 786,613 Principal due within 12 months on term loans 77,932 44,972 32,369 53,509 45,482 Total Current Liabilities 492,565 590,373 639,448 714,475 851,455 Intermediate Loans JD Combine 10,219 - - - - Mach&Equip. 33,886 - - - - John Deere Credit-6430 29,314 19,875 10,328 128 - Fifth National Bank-M & E 9,027 5,878 2,755 - - Farm Service Agency-Bin Loan 84,099 71,417 57,983 44,086 29,861 John Deere Credit-7230-24,067 17,321 8,465 4,364 John Deere Credit-Combine - - 81,056 48,421 33,638 Fifth National Bank-Chopper - - - - 8,019 Total Intermediate Loans 166,545 121,237 169,443 101,100 75,882 Long Term Loans Fifth National Bank-Barn - - - 293,762 291,841 Total Long Term Loans 0 0 0 293,762 291,841 Loan Presentation Total Farm Liabilities 659,110 711,610 808,891 1,109,337 1,219,177 Personal liabilities 122,614 73,932 70,507 47,567 43,744 Deferred liabilities 116,820 118,984 129,750 102,904 183,681 Total Liabilities (including deferreds) 898,544 904,526 1,009,149 1,259,808 1,446,602 FINPACK Center For Farm Financial Management University of Minnesota 58 Prepared by: Dale Nordquist Center for Farm Financial Mgmt

Slim Jim Sample Historic Report: Balance Sheets at Page 2 1/29/2009 2:21:11 PM Jan 1, 2004 Jan 1, 2005 Jan 1, 2006 Jan 1, 2007 Jan 1, 2008 Equity Retained earnings 383,533 417,244 474,986 551,620 789,557 Market valuation equity -72,920-67,370-48,420 149,664 65,040 Net worth 310,613 349,874 426,566 701,284 854,597 Net worth change 0 39,261 76,692 274,718 153,312 Ratio Analysis Current ratio 1.4 1.2 1.2 1.1 1.3 Working capital 219,365 109,130 147,386 88,536 296,763 Current pct in debt 69 % 84 % 81 % 89 % 74 % Intermediate pct in debt 51 % 31 % 36 % 20 % 15 % Current & interm. % in debt 63 % 65 % 65 % 63 % 56 % Long term pct in debt - - - 57 % 59 % Total debt to asset ratio 74 % 72 % 70 % 64 % 63 % Total equity to asset ratio 26 % 28 % 30 % 36 % 37 % Total debt to equity ratio 2.89 2.59 2.37 1.80 1.69 Loan to value % - - - - 69 % Collateral margin - - - - 591,539 59 Loan Presentation

Loan Presentation 60

FSA Forms Package FSA Forms The FINPACK FSA Forms Package will generate the required forms to process FSA guaranteed loans, interest assistance, and direct loan applications. The Forms Package links to either the FINFLO monthly cash flow plan or the Annual Plan and automatically extracts the necessary information to fill out the selected application. The resulting forms appear as if they were distributed by FSA. For FSA Interest Assistance, the FSA Forms Package will generate the supporting information for the request. Multiple loans can be selected for consideration so that you can determine which loans qualify for interest assistance and document the results. The following forms are generated: Application of Guarantee Preferred Lender Application for Guarantee Farm Business Plan Worksheets for Direct Loans 61

FSA Forms 62

Slim Jim Sample Cash Flow Plan: 2008 Cash Flow FSA Page 2 1/30/2009 1:34:00 PM FSA Cash Flow and Interest Assistance Needs Analysis - 2008 W/Out IA With IA With IA Inflows 2008 Annual Opr 5thNB-Cattle Beginning cash 26034 26034 26034 Gross cash income 1389062 1389062 1389062 Nonfarm income 48000 48000 48000 Borrowing, term loans - - - Borrowing, annual operating 189834 189834 189834 Borrowing, other current 515625 515625 515625 Capital sales - - - Total inflow 2168555 2168555 2168555 FSA Forms Outflows Cash farm expenses 1048586 1045705 1027027 Capital purchases - - - Principal, term loans 47481 47481 47481 Principal, beg annual opr 207100 207100 207100 Principal, new annual opr 189834 189834 189834 Principal, other current 579513 579513 579513 Family living 78000 78000 78000 Income taxes 25000 25000 25000 Nonfarm interest expense 2186 2186 2186 Total outflow 2177700 2174819 2156141 Net Cash Flow -9145-6264 12414 Loans Selected for FSA Interest Assistance Needs Analysis Beginning P & I Average Interest Estimated Principal Payment Principal Assistance Payment With Loan Balance Due Balance Amount Assist Annual Opr 207100 393599 72022 2881 390718 5thNB-Cattle 579513 612189 466956 18678 593511 63

FSA Forms This form is available electronically. Form Approved OMB No. 0560-0155 FSA-2211 U.S. DEPARTMENT OF AGRICULTURE Position 3 (09-03-10) Farm Service Agency APPLICATION FOR GUARANTEE INSTRUCTIONS TO LENDER: LOAN APPLICANT WILL COMPLETE PARTS A AND B. LENDER WILL COMPLETE PARTS C THROUGH I. NOTE: According to the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 0560-0155. The time required to complete this information collection is estimated to average 3.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. RETURN THIS COMPLETED FORM TO YOUR COUNTY FSA OFFICE. PART A LOAN APPLICANT INFORMATION 1. APPLICANT S NAME 2. CO-APPLICANT S NAME 3. APPLICANT S TELEPHONE NO. Jim Sample (Include Area Code) Laura (712) 555-1234 4. APPLICANT S ADDRESS 5. APPLICANT S 9 DIGIT SSN OR TAX ID NO. 2159 Hwy 30 Currie, MN 56123 123-45-6789 6. APPLICANT S BIRTH DATE 5/4/1962 7. CO-APPLICANT S BIRTH DATE 10/8/1964 8. CO-APPLICANT S 9 DIGIT SSN 234-56-7890 9. TOTAL NUMBER OF HOUSE- HOLD MEMBERS 2 10. TYPE OF OPERATION: 11. ACRES OWNED INDIVIDUAL PARTNERSHIP TRUST JOINT OPERATION 15 12. ACRES RENTED CORPORATION COOPERATIVE L.L.C OTHER (Explain) 926 13. MARTIAL STATUS: MARRIED SEPARATED UNMARRIED (INCLUDING SINGLE, DIVORCE, AND WIDOWED) 14. Have you ever conducted business under any other name? If ''YES'', what name? YES NO 15. Have you or any member of the entity obtained a direct or guaranteed loan from USDA? 16. If "YES" to Item 15, was the loan paid in full? If not paid in full, please explain: 17. Have you or any member of the entity ever been in receivership, been discharged in bankruptcy, or filed a petition for bankruptcy? 18. If "YES" to Item 17, provide details: 19. Are you or any member of the entity delinquent on any debt to the United States Government? 20. Are you (or members holding a majority interest if an entity applicant) a United States citizen? 21. If "NO" to Item 20, are you a non-citizen national, or a qualified alien? (Please provide documentation) 22. Are you a veteran? If "YES", indicate branch and dates of service: 23. Are you an employee, related to an employee, or an associate of an employee, of the Lender or Farm Service Agency? 24. Are you farming or ranching now? If ''YES", number of years experience: 25. If ''NO'' to Item 24, but you have operated a farm in the past, list dates: Voluntary Information for Monitoring Purposes Ethnicity, race, and gender information is requested in order to monitor FSA's compliance with Federal laws prohibiting discrimination against loan applicants and to determine if you qualify for targeted funds. You are not required to furnish this information, but are encouraged to do so. Failure to complete this information may result in you not receiving access to targeted funds for which you may be eligible. Entity applicants should base their answers on the ethnicity, race, and gender of the owners of a majority interest in the entity. 26. ETHNICITY Hispanic or Latino Not Hispanic or Latino FSA USE ONLY: 27. RACE (Choose as many boxes as applicable) American Indian or Alaska Native Asian Black or African American Native Hawaiian or Other Pacific Islander White 29A. DATE RECEIVED 29B. DATE COMPLETED 28. GENDER MALE FEMALE The U.S. Department of Agriculture (USDA) prohibits discrimination in all of its programs and activities on the basis of race, color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion, sexual orientation, political beliefs, genetic information, reprisal, or because all or part of an individual s income is derived from any public assistance program. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA s TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of discrimination, write to USDA, Assistant Secretary for Civil Rights, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, S.W., Stop 9410, Washington, DC 20250-9410, or call toll-free at (866) 632-9992 (English) or (800) 877-8339 (TDD) or (866) 377-8642 (English Federal-relay) or (800) 845-6136 (Spanish Federal-relay). USDA is an equal opportunity provider and employer. 64

FSA-2211 (09-03-10) Page 3 of 5 PART C - TYPE OF ASSISTANCE REQUESTED 32. REQUESTED NO. 33. LOAN TYPE 34. LOAN AMOUNT OR LOC CEILING 1 OF 1 FO OL OL/LOC CL $ 298,500 35. INTEREST RATE 36. INTEREST ASSISTANCE REQUESTED 8.750 % FIXED VARIABLE YES 38. SUBSEQUENT LOAN IN SAME OPERATING CYCLE YES NO PART D FUNDS PURPOSE Barn remodel NO 39. REPAYMENT TERMS 40. PURPOSES FOR WHICH FUNDS WILL BE USED 37. REPAYMENT PERIOD (Years) 15 41. AMOUNT $ 300,000 FSA Forms $ $ $ $ PART E - PROPOSED SECURITY Barn 42. ITEM DESCRIPTION 1st 43. LIEN POSITION 44. ESTIMATED VALUE 45. AMOUNT OF PRIOR LIEN $ 46. COLLATERAL VALUE $ 480,000 $ 0 $ 360,000 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ TOTALS: $ 480,000 $ 0 $ 360,000 PART F - ENVIRONMENTAL INFORMATION Based on a site visit to the loan applicant's operation and discussion of the operating plan, answer the following: (If "YES" please YES NO explain and attach to this form): 47. Floodplains: If the loan will be secured by real estate, does the property contain any existing structures (i.e. farm dwellings or service buildings) or does the proposal involve development (i.e. construction, channeling, or other alteration) located within the 100-year floodplain as defined by FEMA floodplain maps, NRCS soil surveys, or other documentation? 48. State Water Quality Standards: Did the investigation indicate the operation may violate State Water Quality Standards? 49. Historical and Archaeological Sites: Does the property contain structures over 50 years old, structures with significant architectural features, or does the property have any historical significance which may make it eligible for the National Register of Historic Places? 50. Wetlands and Highly Erodible Land: Will loan funds be used for any purpose that may contribute to the erosion of Highly Erodible Land or the Conversion of Wetlands; OR will loan funds be used to drain, dredge, fill, or otherwise manipulate any land or reduce the flow, circulation, or reach of water? 51. Hazardous Substances: If the loan will be secured by real estate, did the ''due diligence'' investigation in respect to underground storage tanks and contamination from hazardous substances indicate contamination? 65

FSA Forms 66

Portfolio Risk Analyst (PRA) Portfolio Risk Analyst You know your borrowers and their individual business risks. But how is your entire portfolio positioned to face the volatility of today s agriculture? PRA creates a database of your borrowers and generates reports that help you see where the stress points are if market conditions change. Stress test individual segments or your entire portfolio Segment your portfolio by farm type, size, performance and leverage position Base stress tests on past or projected financial performance Identify borrowers who contribute most to portfolio risk Generate reports to summarize the financial position and performance of portfolio segments Build customer loyalty by providing them benchmarks of financial performance 67

Portfolio Risk Analyst 68

Financial Standards Measures (Farms Sorted By Net Farm Income) Avg. Of All Farms Low 20% 20-40% 40-60% 60-80% High 20% Number of Farms 51 10 10 10 10 11 Liquidity Measures Current ratio 2.38 2.12 2.81 2.58 2.11 2.42 Working capital 709,277 356,209 448,615 453,780 559,715 1,635,449 Working capital to gross revenues 35.9 % 22.8 % 45.1 % 45.9 % 30.5 % 38.4 % Solvency (market) Farm debt to asset ratio 31 % 33 % 24 % 32 % 32 % 31 % Farm equity to asset ratio 69 % 67 % 76 % 68 % 68 % 69 % Farm debt to equity ratio 0.44 0.50 0.32 0.47 0.48 0.45 Portfolio Risk Analyst Profitability (cost) Rate of return on assets 14.3 % -1.2 % 7.9 % 12.3 % 14.3 % 23.0 % Rate of return on equity 20.8 % -5.3 % 9.6 % 17.2 % 21.2 % 34.8 % Operating profit margin 24.6 % -2.2 % 17.5 % 29.6 % 27.4 % 31.5 % Net farm income 380,920-19,817 156,835 235,895 363,629 1,096,499 EBITDA 475,921 61,093 223,979 314,529 465,920 1,237,887 Repayment Capacity Capital debt repayment capacity 387,031 15,642 169,165 244,731 367,324 1,069,995 Capital debt repayment margin 308,446-54,284 114,818 180,381 288,368 948,902 Replacement margin 285,489-69,969 95,489 159,625 263,988 915,329 Term debt coverage ratio 4.93 0.22 3.11 3.80 4.65 8.84 Replacement margin coverage ratio 3.81 0.18 2.30 2.88 3.55 6.92 Efficiency Asset turnover rate (cost) 58.0 % 54.0 % 45.3 % 41.4 % 52.0 % 73.0 % Operating expense ratio 83.7 % 104.5 % 88.9 % 81.0 % 83.4 % 76.3 % Depreciation expense ratio 3.0 % 3.2 % 4.6 % 4.8 % 3.2 % 2.1 % Interest expense ratio 1.8 % 1.9 % 2.1 % 3.1 % 2.4 % 1.2 % Net farm income ratio 20.1 % 1.3 % 18.9 % 24.3 % 20.0 % 25.7 % Portfolio Risk Analyst Center For Farm Financial Management University of Minnesota Prepared by: OIT University of Minnesota 69

Portfolio Risk Analyst Financial Summary - Ted Williams Farm Group Median Count 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Gross cash farm income 993,747 1,322,218 18 436,424 581,975 733,293 943,167 1,064,214 1,647,658 1,973,813 2,882,359 6,898,606 8,495,446 Inventory change (income items) 31,463 135,016 18-590,657 43,487 67,354 86,710 117,770 170,105 263,626 341,639 902,919 2,580,471 Gross farm income (accrual) 1,025,210 1,627,036 18 491,936 698,113 863,885 1,059,633 1,155,270 2,079,939 2,175,209 3,694,636 7,038,045 10,337,672 Total cash farm expense 702,921 962,696 18 221,984 375,145 556,746 696,297 870,735 1,142,447 1,690,656 2,265,241 6,706,802 9,001,627 Depreciation 26,672 61,807 18 20,460 26,290 32,526 42,958 58,598 68,238 79,831 103,215 119,937 189,936 Inventory change (expense items) -24,945-14,631 18-365,150-167,076-54,537-32,026-21,156-6,280 1,861 23,208 35,407 141,051 Total farm expense (accrual) 704,648 1,062,195 18 225,706 451,471 609,949 698,707 955,805 1,197,307 1,590,651 2,356,306 6,915,774 8,662,385 Net farm income from operations 320,561 298,292 18-757,596 90,784 153,465 256,136 272,808 333,349 568,856 838,275 1,620,730 2,407,832 Gain or loss from capital sales 0 0 18 0 0 0 0 0 0 0 0 0 11,000 Net farm income 320,561 300,577 18-757,596 90,784 153,465 256,136 278,308 333,349 568,856 838,275 1,620,730 2,407,832 Rate of return on assets (mkt) 19.4 14.8 18 1.9 4.8 8.1 12.2 14.4 16.0 19.5 29.2 40.1 110.2 Rate of return on equity (mkt) 51.1 27.0 18 2.1 6.3 13.5 22.9 25.4 28.6 38.3 51.1 66.4 129.7 Operating profit margin (mkt) 35.0 34.5 18 4.5 10.3 16.7 25.6 32.9 35.8 39.1 47.0 113.6 344.6 Asset turnover rate (mkt) 55.5 45.1 18 19.8 28.6 32.8 35.8 43.1 45.8 54.5 75.3 83.2 90.9 Current ratio - ending (farm only) 2.67 2.43 18 1.31 1.49 1.81 2.10 2.40 2.55 4.15 13.32 29.04 34.18 Working capital - ending (farm only) 97,240 836,591 18 81,028 98,764 294,080 491,175 674,623 913,742 989,403 1,370,197 1,868,941 4,684,928 Working capital to gross revenue 9.5 37.1 18 9.5 11.6 16.0 25.3 34.2 38.2 48.2 61.5 96.1 179.4 Term debt coverage ratio 6.16 4.90 18-10.29 2.10 3.12 4.09 4.40 5.68 6.60 12.94 17.83 35.70 Replacement coverage ratio 6.16 4.33 18-10.29 1.64 2.21 2.52 3.31 5.68 6.40 7.03 8.93 12.35 Operating expense ratio 62.2 62.0 18 108.6 89.6 83.3 72.3 62.2 60.7 58.8 53.7 43.4 34.7 Depreciation expense ratio 2.6 3.4 18 10.6 8.8 6.5 4.9 3.6 3.2 2.5 1.9 1.7 0.3 Interest expense ratio 3.9 1.8 18 4.8 3.7 3.2 2.8 1.9 1.6 0.9 0.7 0.4 0.0 End farm assets (mkt) 1,590,935 3,000,245 18 1,158,190 1,436,412 1,795,499 2,132,904 2,689,216 3,256,207 4,546,019 5,979,308 8,539,353 15,269,817 End farm liabilities 746,538 740,876 18 7,477,010 2,601,826 1,561,646 1,101,101 757,134 713,933 673,929 320,586 117,981 51,759 Total ending assets (mkt) 1,673,446 3,016,009 18 1,297,134 1,532,400 1,836,754 2,354,079 2,767,900 3,433,109 4,687,689 6,211,444 8,539,353 15,382,817 Total ending liabilities 990,017 955,106 18 10,645,801 2,704,836 2,217,511 1,408,237 1,109,202 896,757 755,624 638,247 488,824 226,741 Ending net worth (mkt) 683,430 2,020,752 18 376,938 684,543 1,021,045 1,460,930 1,805,992 2,265,916 3,063,119 4,153,103 5,772,793 7,262,569 Net worth change 289,677 291,446 18 32,571 77,310 160,603 219,717 275,479 387,722 783,835 948,376 1,754,273 5,707,175 Market net worth change (%) 73.6 25.1 18 2.1 8.3 11.8 16.0 22.2 25.8 48.7 69.0 93.0 366.9 Farm debt to asset ratio 62 44 18 77 66 56 49 45 39 31 23 13 5 Total debt to asset ratio 59 44 18 71 64 54 48 45 39 31 23 13 4 Personal income 0 846 18 0 0 0 0 0 2,730 5,642 11,582 22,015 59,237 Family living expense 8,347 70,438 18 0 4,174 33,563 48,452 62,111 76,590 79,660 87,553 99,388 300,000 Income and social security tax 0 2,813 18 0 0 0 0 780 8,931 16,620 22,851 78,699 121,000 Capital purchases 330,975 215,950 18 16,603 42,909 96,898 111,775 194,205 236,037 270,595 311,902 618,282 4,047,527 Capital sales 2,102 2,343 18 0 0 429 1,801 2,230 4,073 8,750 18,366 28,449 60,270 Portfolio Risk Analyst Center For Farm Financial Management University of Minnesota Prepared by: OIT University of Minnesota 70

Customer Support The FINPACK team is committed to providing world-class service and technical support. Our qualified technical support professionals are prepared to handle your support needs on a case-by-case basis or in an ongoing partnership. We provide timely, reliable service to ensure every customer s business success. Customer Support 71

Customer Support 72

FINPACK Training We want you to be able to quickly use FINPACK powerful capabilities, so we offer a number of training opportunities to help you learn how to fully use FINPACK. Contact us to learn about: Two-day FINPACK workshops for lenders On-site training for your staff Webinars customized for your institution Online training courses Periodic webinars on specific FINPACK topics FINPACK Training 73

FINPACK Training 74

FINPACK Commercial A better way to review all your credits FINPACK, the industry standard for ag credit analysis software, offers equally powerful commercial analysis. Like our ag analysis, FINPACK s commercial analysis features a comprehensive set of tools designed to save you time and enhance the quality of your commercial credit analysis. Double your power, not your cost When you have both the ag and commercial versions of FINPACK, you ll maximize the efficiency of your entire lending operation and receive a 50% discount on the commercial version. Our pricing structure is designed to be affordable, whether you have one location or more than 100. See for yourself Call 800-234-1111 to set up a webinar and find out how FINPACK can increase efficiency and reduce risk in your lending operation. FINPACK Commercial 75

FINPACK Commercial 76

About CFFM About CFFM The Center for Farm Financial Management (CFFM) provides educational programs and software tools that are practical, timely, and applicable to realworld situations. First used by lenders in 1980, FINPACK is the original off-the-shelf agricultural credit analysis tool used broadly by banks FINPACK is used by lenders, farmers and educators throughout the United States and Canada CFFM has over 30 years of experience developing farm financial management software Our dedicated staff knows farm financial management and production agriculture We are committed to the development of practical, fast, and accurate farm financial tools We are committed to outstanding software support and customer service Toll-Free: (800) 234-1111 Fax: (612) 625-3105 email: finpack@umn.edu www.finpack.com 77

About CFFM 78

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 12 13