SERVICING AGREEMENT among COFINA FUNDING, LLC, as Issuer, COFINA FINANCIAL, LLC, as Servicer, and U.S. BANK NATIONAL ASSOCIATION, as Trustee Dated as of August 10, 2005
as Issuer,
as Servicer,
as Trustee
(continued)
Page | ||||
ARTICLE I DEFINITIONS |
1 | |||
Section 1.01 Definitions |
1 | |||
Section 1.02 Other Definitional Provisions |
1 | |||
ARTICLE II ADMINISTRATION AND SERVICING OF RECEIVABLES AND RELATED SECURITY |
2 | |||
Section 2.01 Appointment of Servicer |
2 | |||
Section 2.02 Duties of Servicer |
3 | |||
Section 2.03 Rights After Designation of New Servicer |
5 | |||
Section 2.04 Servicer Default |
6 | |||
Section 2.05 Servicer Indemnification of Indemnified Parties |
7 | |||
Section 2.06 Grant of License |
8 | |||
Section 2.07 Servicing Compensation |
8 | |||
Section 2.08 Representations and Warranties of the Servicer |
9 | |||
Section 2.09 Reports and Records for the Trustee |
11 | |||
Section 2.10 Reports to the Securities and Exchange Commission |
12 | |||
Section 2.11 Affirmative Covenants of the Servicer |
12 | |||
Section 2.12 Negative Covenants of the Servicer |
15 | |||
Section 2.13 Successor Servicer |
17 | |||
ARTICLE III RIGHTS OF NOTEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS |
18 | |||
Section 3.01 Establishment of Accounts |
18 | |||
Section 3.02 Collections and Allocations |
18 | |||
ARTICLE IV [RESERVED.] |
19 | |||
ARTICLE V OTHER MATTERS RELATING TO THE SERVICER |
19 | |||
Section 5.01 Liability of the Servicer |
19 | |||
Section 5.02 Limitation on Liability of the Servicer and Others |
19 | |||
Section 5.03 Servicer Not to Resign |
19 | |||
Section 5.04 Waiver of Defaults |
20 | |||
ARTICLE VI ADDITIONAL OBLIGATION OF THE SERVICER WITH RESPECT TO THE TRUSTEE |
20 | |||
Section 6.01 Successor Indenture Trustee |
20 | |||
Section 6.02 Tax Returns |
20 |
(continued)
Page | ||||
Section 6.03 Final Payment with Respect to Any Series |
20 | |||
ARTICLE VII MISCELLANEOUS PROVISIONS |
20 | |||
Section 7.01 Amendment |
20 | |||
Section 7.02 Governing Law |
22 | |||
Section 7.03 Notices |
22 | |||
Section 7.04 Severability of Provisions |
22 | |||
Section 7.05 Delegation |
22 | |||
Section 7.06 Waiver of Trial by Jury |
22 | |||
Section 7.07 Further Assurances |
22 | |||
Section 7.08 No Waiver; Cumulative Remedies |
23 | |||
Section 7.09 Counterparts |
23 | |||
Section 7.10 Successors and Assigns |
23 | |||
Section 7.11 Actions by Noteholders |
23 | |||
Section 7.12 Rule 144A Information |
23 | |||
Section 7.13 Merger and Integration |
23 | |||
Section 7.14 Headings |
23 | |||
Section 7.15 Rights of the Trustee |
23 | |||
Section 7.16 No Bankruptcy Petition/Claims |
24 | |||
Section 7.17 No Recourse |
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EXHIBITS |
||||
Exhibit A Form of Daily Servicer Report |
A-1 | |||
Exhibit B Form of Monthly Servicer Report |
B-1 | |||
Exhibit C Form of Annual Servicer’s Certificate |
C-1 | |||
Exhibit D Form of Credit Manual |
D-1 | |||
Exhibit E Form of Accounting Control Procedures and Processing Report |
E-1 | |||
SCHEDULES |
OF RECEIVABLES AND RELATED SECURITY
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
AND APPLICATION OF COLLECTIONS
18
TO THE SERVICER
19
SERVICER WITH RESPECT TO THE TRUSTEE
20
21
22
23
24
COFINA FUNDING LLC, as Issuer |
||||
By: | ||||
Name: | ||||
Title: | ||||
COFINA FINANCIAL, LLC as Servicer |
||||
By: | ||||
Name: | ||||
Title: | ||||
U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity, but solely as Trustee |
||||
By: | ||||
Name: | ||||
Title: | ||||
Form of Daily Servicer Report
DAILY SERVICER REPORT
Reporting Date
Amount | ||||
Opening balance in Collection Account: |
500.00 | |||
Collections received from Receivables |
1,000.00 | |||
Payments made: |
||||
1. Amount of Accrued Facility Costs for sub account- |
1.00 | |||
2. Required Reserve Amount transferred to Spread Maintenance Account- |
1.00 | |||
3. Reduction in principal amount of Notes outstanding transferred to Settlement Account |
1.00 | |||
4. Amount payable to Seller based on Purchase Agreement- (Amount equal to unpaid purchase price) |
1.00 | |||
Total of payments made on this date |
$ | 4.00 | ||
Closing balance in Collection Account: |
$ | 1,496.00 |
Form of Monthly Servicer Report
A-1
MONTHLY SERVICER REPORT — PAYMENTS OUT OF AVAILABLE DISTRIBUTION AMOUNT
Reporting Date:
Settlement Date:
*Information provided in the Base Indenture Article 5
Amount | ||||
Calculation of Available Distribution Amount: |
||||
Collection received during [immediately proceeding monthly period] |
17.00 | |||
Amounts received from interest rate hedge counterparty |
1.00 | |||
Total deemed collections |
1.00 | |||
Receipts from Spread Maintenance Account |
1.00 | |||
Earnings on permitted investments received during [immediately proceeding monthly period] |
1.00 | |||
Total Available Distribution
Amount |
21.00 | |||
Payments to be made: |
||||
1. Indenture Trustee |
||||
Fee |
1.00 | |||
Out of pocket expenses |
1.00 | |||
Maximum
amount $20,000 Total |
2.00 | |||
2. Servicer- |
||||
Fee for current settlement period |
1.00 | |||
Arrears |
1.00 | |||
Total |
2.00 | |||
3. Custodian |
||||
Fee for current settlement period (maximum amount $10.000) |
1.00 | |||
4. Successor Servicer (if appointed) |
||||
Reimbursement of transition costs incurred (maximum amount $50,000) |
1.00 | |||
5. Interest Rate Hedge Provider- |
||||
Current scheduled payments due |
1.00 | |||
Arrears |
1.00 | |||
Total |
2.00 | |||
6. Interest due on Outstanding Notes to Noteholders |
||||
Interest payments on Notes — paid to Settlement Account |
1.00 | |||
Premiums due to Enhancement Provider |
1.00 | |||
Total |
2.00 | |||
7. Scheduled principal payment amount due — paid to Settlement Account |
1.00 | |||
8. Supplemental principal payment amount — paid to Settlement Account |
||||
Warehouse Notes |
1.00 | |||
Notes |
1.00 | |||
Total |
2.00 | |||
9. Interest Rate Hedge Provider- |
||||
All remaining amounts due |
1.00 | |||
10. All other amounts due to: |
||||
Noteholders — paid to Settlement Account |
1.00 | |||
Trustee |
1.00 | |||
Custodian |
1.00 | |||
Servicer |
1.00 | |||
Total |
4.00 | |||
11. Payment to issuer of any remaining Available Distribution Amount |
3.00 | |||
Total Payments Due |
$ | 21.00 | ||
Do Payments equal Available Distribution Amount? |
Y or N? |
A-1
Form of Annual Servicer’s Certificate
COFINA FINANCIAL, LLC., as the Servicer |
||||||
By: | ||||||
Name: | ||||||
Title: |
B-1
Form of Credit Manual
C-1
Form of Accounting Control
Procedures and Processing Report
PROCEDURES AND PROCESSING REPORT
D-1
Policies and Procedures Manual
Table of Contents
Section 1.0 General |
||||
1.01 Board of Directors |
3 | |||
1.02 Loan Committee |
3 | |||
Section 2.0 Credit Administration and Approval |
6 | |||
2.01 Scope of Financing |
6 | |||
2.02 Obligors |
7 | |||
2.03 Loan Application |
8 | |||
2.04 Credit Analysis |
13 | |||
2.05 Collateral Analysis |
29 | |||
2.06 Environmental Analysis |
35 | |||
2.07 Construction Lending |
37 | |||
2.08 LLC Lending |
40 | |||
2.09 Loan Agreement |
42 | |||
2.10 Security Requirements |
49 | |||
Section 3.0 Loan Administration |
54 | |||
3.01 Loan File Organization |
54 | |||
3.02 Asset Classifications |
55 | |||
3.03 Portfolio Monitoring |
62 | |||
3.04 Customer and Loans Servicing |
63 | |||
3.05 Collection Procedures |
69 | |||
3.06 Customer Concentration |
81 | |||
3.07 Reserve Guidelines |
82 | |||
Section 4.0 Legal Documentation |
83 | |||
4.01 Legal Documentation Overview |
83 | |||
4.02 Real Estate Mortgage Documentation |
84 | |||
4.03 Supplemental/Amendment RE Mortgage Documentation |
88 | |||
4.04 Release of Mortgage Documentation |
92 | |||
4.05 Security Agreement Documentation |
96 | |||
4.06 UCC 1 Financing Statement Documentation |
104 | |||
4.07 Assignment of PECFA Proceeds |
106 | |||
4.08 Assignment of Stock Documentation |
108 | |||
4.09 Loan Agreement Waiver Documentation |
110 | |||
4.10 Subordination Agreement Documentation |
112 |
1
Section 5.0 Money Desk Procedures |
115 | |||
5.01 Disbursements |
115 | |||
5.02 Electronic Funds Transfers (EFT) |
118 | |||
5.03 Deposits |
119 | |||
5.04 Cash Management |
120 | |||
5.05 Daily Transaction Sheets |
122 | |||
5.06 Authorized Check Signatories |
123 | |||
5.07 Borrowing Guidelines |
124 | |||
Section 6.0 Accounting, Financial Control, and Reporting |
125 | |||
6.01 Accounting |
125 | |||
6.02 Financial Control |
128 | |||
6.03 Reporting |
132 | |||
6.04 |
||||
Section 7.0 Disaster Recovery Plan |
134 | |||
Section 8.0 Equity Retirements and Patronage Decisions |
136 | |||
8.01 General Equity Retirements |
136 | |||
8.02 Equity Retirements of Liquidating Customers |
138 | |||
8.03 1099PAT Processing |
139 | |||
Section 9.0 Grain Credit Analysis |
140 |
2
1.01 Board of Directors |
||
Under its Articles and By-Laws, Cofina Financial (COFINA) is run by its Board of Directors (the “Board”) | ||
The Board consists of six members; three CFA and three CHS. |
||
Day-to-day running of Cofina is delegated to the management team. Lending authorities for all loan, classification and pricing approvals have been delegated to the Cofina Loan Committee, as per the written authority dated February 24, 2003 (See Sec. 1.03 – Loan Committee). The Board retains all approval authority for loan compromises or loan write-offs. | ||
The Board holds a minimum of four meetings per year at which the management team will report on the operations of the company. The reports include, but are not limited to: | ||
• Financial statements |
||
• Credit quality of loan portfolio |
||
• Credit reviews performed by banks on loan portfolio
that have been received by the Chief Financial Officer |
||
• Annually, the budget for the next financial year, for Board approval |
||
• Annually, the report of the auditors on the
financial statements |
||
1.02 Loan Committee |
||
The Loan Committee is comprised of five members: | ||
• The President of Cofina |
||
• The Chief Financial Officer of Cofina |
||
• Credit Administrator |
||
• Director Wholesale Credit |
||
• Director Retail Credit |
||
• The Member officer rotates on a monthly basis. |
3
Three voting members, one of which must be the President or the CFO, are required for the committee to be quorate. The meetings are also attended by the Legal Administrator and the presenting loan officer. | ||
The Loan Committee is scheduled every Monday at 8:00 a.m. Credit reports and back-up data must be provided to the Legal Administrator on or before noon on the Thursday prior to the Monday meeting. The agenda for the meeting must be distributed by Thursday afternoon. Apologies for absence must be given to the Legal Administrator. | ||
The loan officer responsible for each loan on the agenda must attend the meeting to present his credit. If the loan officer is unable to physically attend the meeting, he must join it by telephone. Credits will be held over to the next meeting if the loan officer is unable to attend. | ||
The Loan Committee meets to consider the following actions: | ||
• Approve new loans |
||
• Approve revised loans |
||
• Approve loan extensions |
||
• Approve annual reviews |
||
• Approve changes to payment schedule |
||
• Approve premium or discount pricing from the pricing matrix |
||
• Approve advances pre-finalization of security |
||
• Approve releases from security |
||
• Approve exceptions to the limitations on advances |
||
• Review loans where there have been violations of the agreement and approve waiver where appropriate. |
||
• Review loans that have failed the Stressed Realizable Value Test |
||
• Review loans that have slipped from an Acceptable, non-criticized asset classification |
||
• Approve loan servicing actions |
||
• Review progress of loan servicing actions |
4
• Approve Loan Service Plans |
||
• Review progress of Loan Service Plans |
||
• Approve issuing Liquidation Notice |
||
• Review discount rates used in Collateral Analysis Worksheet |
||
• Approve loan classifications |
||
• Approve outside attorneys to be used for assisting with security requirements |
||
All decisions must be approved unanimously by those voting members attending the Loan Committee meeting. | ||
All decisions must be minuted by the Legal Administrator. Minutes must be signed by the voting members who made the decision and then presented at the next Loan Committee meeting. | ||
The minutes are filed by the Legal Administrator and held in the offices of Cofina for five years before being archived. |
5
2.0 - Credit Administration and Approval | ||
2.01 — Scope of Financing |
||
Cofina primarily offers three types of loans to cooperatives: | ||
• Operating Loans - These short-term loans
typically finance a portion of the current asset
needs of a customer. Operating loans mature
annually and are reviewed by the loan officers
prior to any extension or renewal. All operating Loan
extensions are to be approved by Loan Committee and are
limited to a loan period of no more than 14-months
beyond the Operating Loan’s initial date of origination. |
||
• Term Loans - These long-term loans typically
supplement equity in financing the permanent capital
needs of a customer. Term loans range in maturity from
thirteen months to ten years. |
||
• PECFA Loans - Used for the purpose of funding the
environmental cleanup process for contaminated
petroleum sites in Wisconsin. The State of Wisconsin
reimburses the Obligor for the periodic interest
charges prior to completion of the project and for the
principal balance of the Loan upon completion of the
cleanup project. These loans are structured and term
loans with four to six-year maturities and, in
addition to recourse to the State of Wisconsin, are
fully collateralized by the assets of the Obligor. |
6
2.02 Obligors |
||
Cofina can make loans to: | ||
• local cooperatives |
||
• retail operations of regional cooperatives |
||
• local or retail cooperative suppliers that benefit
Cofina customers |
||
• joint ventures where local cooperatives maintain
majority ownership. |
7
2.03 Loan Application |
||
Credit process commences with the completion of a loan application. In cases of maturing operating loans, Cofina will mail a loan application to the customer for customer board approval at least 90 days before maturity date. | ||
A copy of an application is attached to this procedure. Each application has three sections that must be completed before Cofina will consider the loan request. | ||
• Resolution of Board of Directors - In this
section, the applicant’s Board approves a resolution
to borrow a maximum amount of money from Cofina. This
amount includes any new term debt, the requested
Operating loan amount, and any other funding
requested. Existing term debt is not included in the
new board resolution. The Board Secretary must certify
that the Board approved this borrowing resolution. |
||
• Application Information - In this section, the
customer, Board, and management specify the amount
applied for, the purpose of the loans, collateral
offered, proposed repayment, and other information
important in the credit decision. All parts of this
section must be completed. |
||
• Signature Page - In this section, all
Board officers and directors must provide signatures for
future reference on other loan documents. The Board
President and Secretary must provide additional
information. |
||
Signed application forms must be submitted along with applicant’s latest audit report and financial planning documents. It is a requirement that the audit report is unqualified. | ||
If the applicant is a prospective new customer, he must submit the last three years’ audit reports. | ||
The financial planning documents should include operating budgets, capital expenditure plans and |
8
equity servicing plans. Feasibility and marketing plans will also be required if the customer is proposing to commence a new project. | ||
As applications are received, they are date stamped, logged in the Maturity Status Report and given to the loan officer for processing. | ||
Completed and processed applications are placed in the customer loan file. |
9
APPLICATION FOR LOAN
10
1. | Amount Applied for: |
Operating: |
$ | (New Money) | ||||||
Term: |
(New Money) | |||||||
TOTAL: |
$ |
2. | Purpose of Loan: Operating: Term: |
|
3. | Collateral Offered: If loan(s) are granted, all property mortgaged, pledged, or assigned by Applicant to Lender as security for loans made before or after such loan(s) shall be security for all loans made by Lender to Applicant. |
|
4. | List all liens presently filed against property offered as collateral: |
|
5. | Proposed method of payments: |
a) | Applicant will pay the principal of the loan(s) as follows: Operating: Term: |
||
b) | Applicant will pay interest monthly on the unpaid balance at the per annum interest rate prescribed by Lender’s board of directors, as provided for in the loan agreement. | ||
c) | Applicant will be billed directly from COFINA FINANCIAL for the monthly principal and interest payments as provided for in 5(a) and 5(b), and to remit the amounts due directly to Lender. |
6. | Is Applicant involved in or threatened with any lawsuit? Yes No (if yes, describe on a separate sheet) | |
7. | Applicant agrees to submit annually to Lender, and at such other times as Lender may require, a statement of condition in form approved by Lender. Applicant further agrees that Lender may, at any time that it is indebted to Lender, examine its books, records, and accounts. | |
8. | If the loan is completed, Applicant agrees to pay to Lender loan set up fees as follows: |
Operating Loan Commitment | Documentation Set Up Fee: | |||
Up to $500,000 |
$ | 250.00 | ||
$500,000 to $1mm |
$ | 500.00 | ||
Over $1mm |
$ | 1,000.00 | ||
New Term Loan |
||||
10 basis points on new commitment, one time fee. |
11
1. | The undersigned are the duly qualified incumbents of the offices as shown opposite the respective names, and that the signatures are true and genuine specimens thereof. | ||
2. | All statements, answers, and representatives are given in connection with this loan application are factual and warranted correct. |
NAME | SIGNATURE | |||
VICE PRESIDENT NAME: |
||||
Address: |
||||
DIRECTOR NAME: |
||||
Address: |
||||
DIRECTOR NAME: |
||||
Address: |
||||
DIRECTOR NAME: |
||||
Address: |
||||
DIRECTOR NAME: |
||||
Address: |
||||
DIRECTOR NAME: |
||||
Address: |
||||
MANAGER’S NAME: |
||||
12
General
|
Cofina credit analysis is differentiated based on the size, complexity, and quality of the customer and the proposed loan package. Differential credit analysis, however, needs to follow a consistent format to streamline and simplify analysis and portfolio monitoring processes. This is achieved by completing a standard format credit report. | |
As the primary customer contact, the loan officer is responsible for completing the credit reports. | ||
Credit Report
|
The following framework explains the credit report outline used to document CFA credit analysis and loan package recommendations. A copy of a credit report is attached to this procedure. | |
• Credit Report Cover Sheet – this page
provides an executive summary of the customer and
requested financing. Customer information on existing
loans and current asset classifications are included.
The Financial Summary helps identify strengths and
weaknesses to be discussed further in the main body of
the Credit Report. |
||
• Uniform Classification Score worksheet -
this page sets out the loan underwriting standards
that guide the relationship with the customer. It
provides a quantitative analysis of the Customer’s
most current, audited financial performance. This
analysis involves a weighted score of key financial
ratios used in determining a foundation of what is
termed a Risk Rating. |
||
The credit report should clearly demonstrate that these
underwriting standards are satisfied, or the loan
officer should identify offsetting financial or
management strengths that justify the loan. Added loan
controls which help minimize credit risk may justify
loans where the underwriting standards are not met. |
||
The interest rate on the loans will be set by matrix
depending on the customer’s classification as to these
loan standards. The |
13
current pricing matrix is attached.
Premium and discount pricing from this pricing matrix
will be permitted upon approval of the Loan Committee. |
||
• Recommendations – This section summarizes the key factors in this loan relationship and makes a specific recommendation. |
||
• Overview – This section should provide the
reader with an executive summary of the financing
request, the financial strengths that support the
loan, and the credit risks inherent in the loan. If
the requested financing involves significant new term
debt for expansion, the economic support or
feasibility of the project should be discussed here.
Key points raised here should be supported and
explained in the main body of the Credit Report. |
||
• Financial Analysis – This section addresses
the financial trends and the liquidity, solvency and
profitability strengths and weaknesses of the
customer. |
||
The following financial guidelines are used in this analysis: |
Measurement | Guideline | |||
• Salaries to Gross Margins (%)
|
<40% | |||
• Distribution Expense to GM (%)
|
£50% | |||
• Local Savings to Sales (%)
|
>2% | |||
• Net Worth to Total Assets (%)
|
50 to 75% | |||
• Local Net Worth to Local Assets (%)
|
>50% | |||
• Accounts Receivable Under 60 Days (%)
|
>85% | |||
• Accounts Receivable Over 1 Year (%)
|
<1% | |||
• Bad Debt to Sales (%)
|
<0.1% | |||
• Inventory to Sales (%)
|
5 to 10% | |||
• Working Capital to Sales (%)
|
7 to 10% | |||
• Return on Assets (%)
|
>10% |
These ratios are guidelines which Cofina uses as a means to communicate the financial position that it believes will allow most local cooperatives to successfully grow in the future. It is recognized that few customers will meet or exceed all of these guidelines. | ||
If weaknesses are apparent, the loan officer |
14
should begin to demonstrate how the customer can and will address issues that raise credit quality problems | ||
Exposure Analysis — This section summarizes risk exposure by presenting key ratios and underwriting standards. This section also addresses capital expenditure and equity retirement plans. | ||
• Security — This section addresses key
issues related to the security filings and security
position held by Cofina. |
||
• Management — This section rates management
capabilities and identifies Board or management issues
that may affect loan risk. |
||
• Attachments – Attachments to the credit
report should include a liquidity/collateral analysis,
comparative financial information, budgets (as
needed), working capital analysis (as needed) and the
proposed loan agreements. |
||
If a customer shows signs of deteriorating credit quality, the credit report should also include a Loan Service Plan. This section should explain the specific steps the loan officer has planned to address the weaknesses identified in the credit report which cause the deteriorating financial performance and asset quality. Although Cofina strives to help customers resolve financial difficulties, the plans must also address how the Cofina position will be strengthened or preserved. | ||
Completed credit reports are then presented to the Cofina Loan Committee. In the case of renewals, the presentation must take place at least 30 days before maturity date. | ||
Loans will not be approved for new customers which, upon the approval of such loans, will receive an Adverse classification (see Sec 3.02 – Asset Classifications). | ||
Additional loans will not be granted to existing customers with less than a Substandard classification. |
15
Date: |
||||||||||||||||||||||||
Cooperative Name: | Coop Name |
Analyst: | ||||||||||||||||||||||
City and State: | City, State |
FYE: | FYE: Date | |||||||||||||||||||||
Manager:
|
Years: | |||||||||||||||||||||||
Credit Score — Current
|
FAMAS: | UCS: | 0.00 | CFA Pricing | 0 | S | #N/A | T | #N/A | |||||||||||||||
Credit Score — Recmd
|
FAMAS: | UCS: | 0.00 | CFA Pricing | 0 | S | #N/A | T | #N/A | |||||||||||||||
Auditor:
|
Scope |
Request | Current | Outstanding | High | Low | Maturity | |||||||||||||
Loan Type | Amount | Commitment | Balance | Point | Point | Date | ||||||||||||
Seasonal |
||||||||||||||||||
Term |
||||||||||||||||||
TOTAL | $0 | $0 | $0 | Term Amortization (Years): |
||||||||||||||
Seasonal | ||||||||||||||||||
Changes
|
Term | |||||||||||||||||
Other | ||||||||||||||||||
Total Commitment:
|
$0 |
USC Rating | CFA Pricing | ||||||||||
1 | Approval of the attached Loan Quality Classification: | 0.00 | 0 | ||||||||
2 | Approval of a | $ — | Seasonal Line of Credit with a | maturity, expiration and maturity date. | |||||||
3 |
Approval of a | $ — | Term Loan. (see terms) | ||||||||
Expiration Date | ||||
Maturity Date | ||||
Monthly Payment | ||||
Date of First Payment |
* Financial Information:
|
Unqualified Annual Audit and monthly Financial Statements | |||
* Local Net Worth of no less than:
|
* Working Capital Minimum of: | |||
* Local Ownership of no less than:
|
* Seasonal Loan Paydown to Zero for: | |||
* Capital Expenditures of no more than:
|
* Equity Retirements of no more than: | |||
* Dividends awarded of no more than: |
Loan Committee Member:
|
Signature: | |||||||
Loan Committee Member:
|
Signature: | |||||||
Loan Committee Member:
|
Signature: |
2002 | 2003 | 2004 | ||||||||||||||||||
Gross Sales ($): | $ | 0 | $ | 0 | $ | 0 | Completed Uniform |
|||||||||||||
Local Savings ($): | $ | 0 | $ | 0 | $ | 0 | Classification |
|||||||||||||
LLC, Subsidiary Profit/(Loss): | $ | 0 | $ | 0 | $ | 0 | UCS Worksheet — PAGE 2 |
|||||||||||||
Ownership (%): | 0 | % | 0 | % | 0 | % | Analysis Reports Attached |
|||||||||||||
Local Ownership (%): |
0 | % | 0 | % | 0 | % | Credit Report Narrative: |
x | ||||||||||||
Local Net Worth ($): |
$ | 0 | $ | 0 | $ | 0 | Ratio Analysis |
x | ||||||||||||
Local Leverage (%): |
0 | % | 0 | % | 0 | % | Net Funds Flow Analysis: |
x | ||||||||||||
Loan Commitment to SRV: |
0 | % | 0 | % | 0 | % | Working Capital Analysis: |
x | ||||||||||||
Loan Balance to SRV: |
0 | % | 0 | % | 0 | % | Collateral Analysis: |
x | ||||||||||||
Net Funds ($): |
$ | 0 | $ | 0 | $ | 0 | FAMAS Report: |
x | ||||||||||||
Current Ratio: |
0.00 | 0.00 | 0.00 | Other: |
x | |||||||||||||||
Working Capital: |
$ | 0 | $ | 0 | $ | 0 |
16
City, State
FYE: Date
Titles & Ratios/Year | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||||||||||
Sales — % Sales Change |
$ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | % Sales Increase | |||||||||||||||||
Margin $ — % of Sales |
$ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | Area Averages | |||||||||||||||||
Salaries as a % of Gross Margin |
$ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | < 40% | |||||||||||||||||
Distribution Expense — % of GM |
$ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | < 50% | |||||||||||||||||
Interest — % of Gross Margin |
$ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | $ | 0 | 0.0 | % | ||||||||||||||||||
Other Income/(Expense) |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||
LLC, Subsidiary Profit/(Loss) |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||
Total Expenses — % of Gross Margin |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | ||||||||||||||||||
Local Savings as a % of Sales |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | 3 - 5% | |||||||||||||||||
Net Worth as a % of Total Assets |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | 50 - 75% | |||||||||||||||||
Local Net Worth — % of Local Assets |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | > 50% | |||||||||||||||||
Loan Covenant Stipulation |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | (Compliance/Waiver) | |||||||||||||||||||||||||
Accounts Receivable Aging |
||||||||||||||||||||||||||||||||||
Under 30 |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | > 80% | |||||||||||||||||
31-60 Days |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | 0.00% | |||||||||||||||||
61-90 Days |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | ||||||||||||||||||
91 Days - 6 Months |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | ||||||||||||||||||
6 Months - 1 Year |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | < 1% | |||||||||||||||||
Over 1 Year |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | 0.00% | |||||||||||||||||
Budget |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | ||||||||||||||||||
Deferred |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | ||||||||||||||||||
Total — % Sales |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | ||||||||||||||||||
Bad Debt as a % of Sales |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | < 0.25% | |||||||||||||||||
Days Outstanding |
0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||||||
Average AR |
||||||||||||||||||||||||||||||||||
Inventory as a % of Sales |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | 5 - 10% | |||||||||||||||||
Inventory Turns |
0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||||||
Working Capital as a % of Sales |
$ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | 7 - 10% | |||||||||||||||||
Current Ratio |
0.00 | 0.00 | 0.00 | 0.00 | > 1.5:1 | |||||||||||||||||||||||||||||
Fixed Asset Expenditures |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | % of Depreciation | |||||||||||||||||||||||||
Loan Covenent Guideline — Fixed Assets |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | (Compliance/Waiver) | |||||||||||||||||||||||||
Stock Retired |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | Board Decision | |||||||||||||||||||||||||
Loan Covenent Guideline — Stock |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | (Compliance/Waiver) | |||||||||||||||||||||||||
Return on Assets |
0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||||||
Local Return on Assets |
0.00 | 0.00 | 0.00 | 0.00 | > 10% | |||||||||||||||||||||||||||||
Gross Margin per Employee |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||
Seasonal Loan Balance at FYE |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||
Other Loan Balance at FYE (PECFA) |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||
Term Loan Balance at FYE |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||
~ Less Current Portion of Term Debt |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||
Local Net Worth to Term Debt |
No Term Debt | No Term Debt | No Term Debt | No Term Debt | ||||||||||||||||||||||||||||||
Local Leverage |
0.00 | 0.00 | 0.00 | 0.00 |
00
Xxxx, Xxxxx
FYE: Date
Basic Working Capital Requirements: |
||||||||
Accounts Receivable |
Lowest Month: | $ | 0 | |||||
Inventory |
Fiscal Year End | $ | 0 | |||||
Basic Working Capital Required: |
$ | 0 | ||||||
Less 90% of Seasonal Inventory: |
||||||||
Fertilizers: |
$ | 0 | ||||||
Chemicals: |
$ | 0 | ||||||
OTHER (Seed & Twine): |
$ | 0 | ||||||
$ | 0 | |||||||
Less: Accounts Payable (10 Day Float) |
$ | 0 | ||||||
Estimated Permanent WC Required (% Sales) |
0.00 | % | $ | 0 | ||||
Working Capital on September 30th: |
$ | 0 | ||||||
Current Portion of Long Term Debt: |
$ | 0 | ||||||
Usable Working Capital (% OF Sales) |
0.00 | % | $ | 0 | ||||
Surplus |
$ | 0 | ||||||
Table 2: Projected Change in Working Capital |
||||||||
Useable Working Capital as of: |
$ | 0 | ||||||
PROJECTIONS |
||||||||
SOURCES: |
||||||||
Local Savings |
$ | 0 | ||||||
Depreciation |
$ | 0 | ||||||
Regional Cash Patronage |
$ | 0 | ||||||
Term Loan |
$ | 0 | ||||||
Regional Stock Retired |
$ | 0 | ||||||
Other |
$ | 0 | ||||||
Total Working Capital Sources |
$ | 0 | ||||||
USES: |
||||||||
Cash Patronage Distributed |
$ | 0 | ||||||
Purchased Investments |
$ | 0 | ||||||
Term Loan Payments |
$ | 0 | ||||||
Stock Retirements |
$ | 0 | ||||||
Fixed Assets |
$ | 0 | ||||||
Other Uses (Taxes) |
$ | 0 | ||||||
Total Working Capital Uses |
$ | 0 | ||||||
Projected Increase (Decrease) in Working Capital: |
$ | 0 | ||||||
Newly Projected Working Capital |
$ | 0 |
00
Xxxx, Xxxxx
FYE: Date
Net Funds Available | ||||||||||||
Add Cash Sources: | 2002 | 2003 | 2004 | |||||||||
Local Savings |
$ | 0 | $ | 0 | $ | 0 | ||||||
Patronage Refunds |
$ | 0 | $ | 0 | $ | 0 | ||||||
Depreciation |
$ | 0 | $ | 0 | $ | 0 | ||||||
Total Sources: |
$ | 0 | $ | 0 | $ | 0 | ||||||
Less Required Cash Uses: |
||||||||||||
Net of Organizations Investments |
$ | 0 | $ | 0 | $ | 0 | ||||||
Cash Patronage Paid (20%) |
$ | 0 | $ | 0 | $ | 0 | ||||||
Other Required Uses (Taxes) |
$ | 0 | $ | 0 | $ | 0 | ||||||
Total Required Uses: |
$ | 0 | $ | 0 | $ | 0 | ||||||
Net Funds Available |
$ | 0 | $ | 0 | $ | 0 | ||||||
3 YR Average |
$ | 0 | ||||||||||
Net Funds Used |
||||||||||||
Fixed Assets Added |
$ | 0 | $ | 0 | $ | 0 | ||||||
Stock Retired |
$ | 0 | $ | 0 | $ | 0 | ||||||
Term Debt Payments |
$ | 0 | $ | 0 | $ | 0 | ||||||
Total Elective Uses: |
$ | 0 | $ | 0 | $ | 0 | ||||||
Net Funds Flow |
$ | 0 | $ | 0 | $ | 0 | ||||||
GUIDELINE: Limit annual Term Debt payment to 50% of 3-Year Average of NFA |
||||||
(Term Debt Capacity) 3-Year NFA (x) 50% =
|
$ | 0 | ||||
(Debt Pmts/NFA) Term Payments / 3-Year NFA =
|
No Term Debt | |||||
Term Debt Capacity (x) 7-Years to Service Debt =
|
$ | 0 | ||||
GUIDELINE: Local Net Worth to Term Debt Ratio should be 2:1 or more |
||||||
FYE 19XX Local Net Worth =
|
$ | 0 | ||||
Term Debt (Less Current Portion) =
|
$ | 0 | ||||
Local Net Worth to Term Debt =
|
No Term Debt | :1 |
19
Year Ending | Classifications | Current | New | |||||||||||||
Account Name | CFA | |||||||||||||||
Location | Wgt UCS Score | #DIV/0! | ||||||||||||||
If Different than Weighted UCS Score — see notes below è |
Rec’d UCS | |||||||||||||||
Ave Volume |
Weight | A1 | A2 | A3 | M4 | Adv. | ||||||||||||||||||||||||||||||||||||||||
Given | Ratio | 1 | 2 | 3 | 4 | 5 | Description | Calculations/Comments | |||||||||||||||||||||||||||||||||||||
Local Leverage | < 35 | % | < 50 | % | < 80 | % | < 100 | % | > 100 | % | Total LTD (Less Current) | Ttl LTD = | $ | 0 | LNW = | $ | 0 | ||||||||||||||||||||||||||||
25% |
#DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | Local Net Worth | Ratio = | #DIV/0! | |||||||||||||||||||||||||||||||||||||
Debt Service | > 2.5 | >2.0 | > 1.5 | > 1.0 | < 1.0 | Net Funds Available | 3-Yr NFA = | $ | 0 | Current LTD = | $ | 0 | |||||||||||||||||||||||||||||||||
15% |
Coverage | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | Current Portion LTD | Ratio = | #DIV/0! | ||||||||||||||||||||||||||||||||||||
Liquidity - | > 2.0 | > 1.5 | > 1.25 | > 1.0 | <1.0 | Current Assets | CA = | $ | 0 | CL = | $ | 0 | |||||||||||||||||||||||||||||||||
10% |
Current Ratio | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | Current Liabilities | Ratio = | #DIV/0! | ||||||||||||||||||||||||||||||||||||
Collateral | < 40 | % | < 60 | % | < 75 | % | > 75 | % | > 90 | % | Total Liabilities | CFA Liabilities = | $ | 0 | Est. Mkt Value= | $ | 0 | ||||||||||||||||||||||||||||
10% |
#DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | Estimated Market Value | Ratio = | #DIV/0! | |||||||||||||||||||||||||||||||||||||
Local Net | > 4.0 | % | > 2.0 | % | > 1.0 | % | > 0.0 | % | < 0.0 | % | Local Net Savings | LNS = | $ | 0 | Gross Sales = | $ | 0 | ||||||||||||||||||||||||||||
25% |
Savings | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | #DIV/0! | Gross Sales | Ratio = | #DIV/0! | ||||||||||||||||||||||||||||||||||||
Management | ç Enter the weight value in the corresponding cell, as determined by the Loan Office. | AR < 60 Days = $ , | AR > 6-Months = $ | ||||||||||||||||||||||||||||||||||||||||||
15% |
(Trends, Environmental) | — | — | — | — | — | Inventory Turns = , Environ Issues: |
• | Approval of the attached Loan Quality Classification Worksheet. A1,2,3,4,5 etc | |
• | Approval of a $ seasonal loan with a / / maturity, expiration and reinstatement date. | |
• | Approval of a $ term loan. |
Expiration Date
|
/ /02 | |||||
Maturity Date
|
/ / | |||||
Monthly Payment
|
$ | |||||
Date of First Payment
|
/ /02 |
• | Limitation on Advances: (If none, list NONE) | |
Advance term prior to seasonal Yes No |
• | Limit seasonal/term advances until receipt of board resolution and loan application authorizing borrowing in the amount of $ . | ||
• | Limit seasonal/term until receipt/completion of: |
◊ | Security interest | ||
◊ | Assignment of Investment in Cenex Harvest States | ||
◊ | Assignment of Investment in Land O’Lakes, Inc. | ||
◊ | Assignment of Other Investment | ||
◊ | Completion of Real Estate Mortgage requirements |
• | $ of the term loan commitment is limited until receipt of an acceptable feasibility study. | |
• | Limit Seasonal/Term until receipt/completion of: |
• | Security Interest | ||
• | Assignment of investment in Cenex Harvest States | ||
• | Assignment of investment in Land O’Lakes, Inc. | ||
• | Assignment of investment in Other Investment | ||
• | Real estate mortgage in the amount of $ , covering: |
• | Loan Agreement Conditions: |
• | Financial information: Unqualified annual audit and monthly financial statements | ||
• | Cash Patronage: % | ||
• | Fixed Assets: $ . | ||
• | Equity Retirements: $ . | ||
• | Local Net Worth of no less than: | ||
• | Local Net Ownership: |
22
• | Capitalization Requirement: | ||
• | Working Capital: | ||
• | Budget/Financial Plan: | ||
• | Seasonal Loan Zero-Out Provision: | ||
• | Account Receivable Aging: | ||
• | Other: |
23
Strong | Improving | Erratic | ||
Consistent | Deteriorating | Poor |
Surplus | Adequate | Inadequate |
Accounts aged less than 60 days:
23
Allowance for doubtful accounts:
Satisfactory | Unsatisfactory |
24
Adequate | Inadequate | |
COFINA Loan Balance/SRV: %. UCS ( ).
Dated: / / Amount: $
Dated: / / Amount: $
Amount at last FYE: $ .
Amount at last FYE: $ .
Very Good
|
Good | Adequate | Unsatisfactory | |||
25
Stipulated | Actual | |||||
Loan Covenant | Performance | Performance | Action | |||
Financials |
Unqualified/Monthly Reporting | |||||
Cash Patronage |
% | % | ||||
Capital Expenditures |
$ | $ | ||||
Stock Retirements |
$ | $ | ||||
Local Net Worth |
$ | $ | ||||
Capitalization |
% | % | ||||
Working Capital |
$ | $ | ||||
Budget/Financial
Projections |
||||||
Seasonal Pay Down |
||||||
Other |
Strengths of the cooperative:
1. List strengths
1. List weaknesses
C | Comparative Financial Information |
26
C | Budgets (as needed) | |
C | Working Capital Analysis (as needed) | |
C | Liquidity/Collateral Analysis | |
C | Formal Loan Servicing Plan on all accounts rated M4 or lower |
27
10/1/03
Base Rate | ||||||||
SEASONAL LOAN RATES | plus/minus | 4.60% | ||||||
Premium 1 |
-0.35 | |||||||
Premium 2 |
-0.75 | |||||||
Large Xxxxx 0 |
-0.00 | |||||||
Xxxxx Xxxxx 0 |
-0.00 | |||||||
Xxxxx Level 2 |
-0.25 | |||||||
Small Xxxxx 0 |
0.00 | |||||||
Large Xxxxx 0 |
0.00 | |||||||
Small Level 3 |
0.25 | |||||||
Large Xxxxx 0-X |
0.00 | |||||||
Xxxxx Xxxxx 0-X |
0.00 | |||||||
Xxxxx Xxxxx 0-X |
2.00 | |||||||
Small Xxxxx 0-X |
2.25 | |||||||
Large Xxxxx 0 |
2.75 | |||||||
Small Level 5 |
3.00 |
Base Rate | ||||||||
TERM LOAN RATES | plus/minus | 4.85% | ||||||
Premium 1 |
-0.60 | |||||||
Premium 2 |
-0.75 | |||||||
Large Level 1 |
-0.50 | |||||||
Small Level1 |
-0.25 | |||||||
Large Xxxxx 0 |
-0.00 | |||||||
Xxxxx Xxxxx 0 |
0.00 | |||||||
Xxxxx Xxxxx 0 |
0.00 | |||||||
Small Level 3 |
0.25 | |||||||
Large Xxxxx 0-X |
0.00 | |||||||
Xxxxx Xxxxx 0-X |
0.00 | |||||||
Xxxxx Xxxxx 0-X |
2.00 | |||||||
Small Xxxxx 0-X |
2.25 | |||||||
Large Xxxxx 0 |
2.75 | |||||||
Small Level 5 |
3.00 |
28
General
|
Repayment capacity represents the first and primary source of repayment for each loan transaction and relationship between Cofina and its customers. Even though collateral is only an alternative source of repayment, analysis of this source is important in determining a sound credit package. | |
Collateral Analysis
|
There are four broad categories of collateral. The ability to convert the assets to cash (their liquidity) is the primary means of distinguishing between the categories. They are presented in the order of liquidity: |
• | Current Assets — This category includes all items that a customer would typically convert to cash in less than one year. Cofina should be able to liquidate these assets in a very short period of time and at minor selling costs. These security items might include marketable securities, accounts receivable, and inventories. | ||
• | Equipment and Rolling Stock — These security items can include all the machinery, equipment, and non-licensed vehicles used in the operation. Most of these assets can be sold to other similar operations, but the time to sale and cost of sales are higher than for current assets. | ||
• | Facilities and Related Real Estate-This category includes all of a customer’s investment in buildings, improvements, and related land. While these collateral items provide sound, stable security for very long- term loans, the value of the collateral is very uncertain. This is particularly true of single use facilities. In addition, the collection and liquidation costs can be quite high. | ||
• | Investments — This category includes investments in other businesses, including cooperatives, where the ability to convert the investment to cash is at best uncertain, and frequently outside of the customer’s control. These assets typically offer uncertain security value, but may represent important customer control aspects of the loan relationship. |
29
The Cofina collateral analysis begins with a worksheet designed to show book value and to estimate the Stressed Realizable Value for each category of secured assets. “Stressed Realizable Value” means, with respect to any Receivable, the value of all Related Security with respect thereto as calculated by Cofina using the customer’s most recent financial statements. The Stressed Realizable Value shall be calculated on a monthly basis. “Book Value” means the value of a customer’s assets as calculated in accordance with the Credit Manual using such customer’s most recent fiscal year end audited financial statements received. The Collateral Analysis Worksheet and related assumptions sheet are attached to this procedure to show the analysis format and to show the discount factors used for asset valuations. The discount rates* used in this worksheet are subject to periodic review by Cofina Loan Committee. | |||
The real property is first matched to real estate
mortgages to assure security coverage, and then
it is evaluated for Stressed Realizable Value. This collateral analysis is included with each credit report. A net realizable value analysis is reviewed by the loan officer, on a quarterly basis, for all adversely classified loans. |
|||
* Audited statements normally report a detailed breakdown of both Inventory and Account Receivable asset categories. Cofina will discount each of the individual asset categories as indicated on page two of the attached Collateral Analysis Worksheet. | |||
However, in the unaudited monthly financial statements utilized in the monthly Stressed Realized Value analysis, such details are not available and are thus discounted per the schedule noted on page one of the attached Collateral Analysis Worksheet under the column entitled “2002”. | |||
The analysis then requires the calculation of the “Loan Balance — Stressed Realized Value” ratio. | |||
The definition of Loan Balance is the amount owed by the customer to Cofina as of the close of the month under review. |
30
The Collateral Management Test indicates the Loan Balance (LB) as compared to the Stressed Realized Value (SRV) must be no more than 60%. | |||
If the cooperative’s LB to SRV exceeds this ratio limit, an additional two-prong test must be implemented and passed in order for Cofina to move forward with any loan consideration. | |||
Test One |
• | The organization’s Debt Service Coverage Ratio must be 2.00 to 1 or greater. |
o | Debt Service Coverage Ratio is determined by the following equation: |
§ | 3-Year Average of Net Funds available (NFA) 1 as compared to the anticipated Current Portion of Long Term Debt |
Test Two |
• | The organization must have a history of positive Local Net Earnings. |
Failure to pass either of the secondary tests
disqualifies prospective patrons from working
with Cofina. Failure by an existing customer requires to be reported directly to the Loan Committee. The existing loan will then become subject to a loan servicing action. |
|||
Should the loan candidate pass the above testing process, additional loan management practices should be put in place to closely monitor’s collateral position. | |||
Such practices may include, but are not limited to, restrictive loan covenants governing cash management practices, minimum Local Net Worth stipulations and/or the execution of additional collateral security measures. | |||
Such collateral security measures may include additional mortgage securities, the assignment of investments to Cofina or third-party guarantees. |
31
Collateral Analysis Worksheet | ||||||||
(Yearly) | ||||||||
FYE 2001 (Prior Year End) | FYE 2002 (Most Recent Year End) | |||||||
Book | Stressed | Book | Stressed | |||||
Value | Realized Value | Value | Realized Value | |||||
Assets: |
||||||||
Cash |
$0 | 100% of Book | $0 | 100% of Book | ||||
Accounts Receivable |
$0 | Discounted per Table listed below |
$0 | Discounted per Table listed below |
||||
Other Receivables |
$0 | 85% of Book Value | $0 | 85% of Book Value | ||||
Prepaids |
$0 | 85% of Book Value | $0 | 85% of Book Value | ||||
Inventory |
$0 | Discounted per Table listed below |
$0 | Discounted per Table listed below |
||||
Real Property |
$0 | $0 | ||||||
REM — Report Prpty Secured |
$0 | 100% of Book Value or | $0 | 100% of Book Value or | ||||
REM — Report Prpty Secured |
$0 | Secured Mortgage | $0 | Secured Mortgage Value | ||||
REM — Report Prpty Secured |
$0 | Value — Lessor of two | $0 | — Lessor of two | ||||
Machinery & Equipment |
$0 | 65% of Book Value | $0 | 65% of Book Value | ||||
Vehicles |
$0 | 0% of Book Value | $0 | 0% of Book Value | ||||
(Less) Other Secured Creditors |
$0 | 100% of Book Value | $0 | 100% of Book Value | ||||
Other Assets |
$0 | 0% of Book Value | $0 | 0% of Book Value | ||||
Investments: |
||||||||
COFINA Equity |
$0 | 100% of Book Value | $0 | 100% of Book Value | ||||
Secured Equity Position |
$0 | 10% of Book Value | $0 | 10% of Book Value | ||||
All Remaining Investments |
$0 | 0% of Book Value | $0 | 0% of Book Value | ||||
Total Secured Assets |
$0 | $0 | $0 | $0 | ||||
Plant, Property, and Equipment Total |
$0 | $0 |
FYE 2001 | FYE 2002 | |||
Liabilities: |
||||
COFINA — Seasonal |
$0 | $0 | ||
COFINA — Term |
$0 | $0 | ||
COFINA — Other |
$0 | $0 | ||
Total |
$0 | $0 | ||
Asset Realization |
$0 | $0 | ||
Cash Remaining |
$0 | $0 | ||
FYE 2001 | FYE 2002 | |||
Investments: |
||||
CHS |
$0 | $0 | ||
Land O’Lakes |
$0 | $0 | ||
Cofina Financial |
$0 | $0 | ||
Other Stock |
$0 | $0 | ||
Total Investments |
$0 | $0 | ||
$0 | $0 | |||
Seasonal Loan Commitment |
||||
Loan Balance to SRV |
0.00% | 0.00% | ||
Loan Commitment to SRV |
0.00% | 0.00% | ||
Local Net Savings |
$0 | $0 |
32
ACCOUNTS | ||||||||||||||||||||||||
RECEIVABLE | Prior Year End | Most Recent Year End | ||||||||||||||||||||||
Book Value | SRV | Book Value | SRV | Multiplier | Discount | |||||||||||||||||||
CURRENT |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 90 | % | 10 | % | ||||||||||||
31 TO 60 DAYS |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 85 | % | 15 | % | ||||||||||||
61 TO 90 DAYS |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
91 DAYS TO 6 MONTHS |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
6 MONTHS TO 1 YEAR |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 50 | % | 50 | % | ||||||||||||
OVER 1 YEAR |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 0 | % | 100 | % | ||||||||||||
DOUBTFUL ACCOUNTS |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 0 | % | 100 | % | ||||||||||||
TOTAL |
$ | 0 | $ | 0 | $ | 0 | $ | 0 |
INVENTORY | Prior Year End | Most Recent Year End | ||||||||||||||||||||||
Book Value | SRV | Book Value | SRV | Multiplier | Discount | |||||||||||||||||||
GRAIN @ .75 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
FEED @ .75 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
SEED @ .90 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 90 | % | 10 | % | ||||||||||||
PETROLEUM @.90 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 90 | % | 10 | % | ||||||||||||
FERTILIZER @ .90 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 90 | % | 10 | % | ||||||||||||
CHEMICALS @.90 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 90 | % | 10 | % | ||||||||||||
BATTERIES @ .65 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
TIRES & TUBES @ .65 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
TWINE @ .65 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
MISC @ .65 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | 65 | % | 35 | % | ||||||||||||
TOTAL |
$ | 0 | $ | 0 | $ | 0 | $ | 0 |
33
Collateral Analysis Worksheet | ||||||||
(Monthly) | ||||||||
FYE 2002 (Most Recent Year End) | Jan. 03 (Most Recent Month End) | |||||||
Monthly | ||||||||
Book | Stressed | Financials | Stressed | |||||
Value | Realized Value | Value | Realized Value | |||||
Assets: |
||||||||
Cash |
$0 | 100% of Book | $0 | 100% of Month End Statement Value |
||||
Accounts Receivable |
$0 | Discounted per Table listed above |
$0 | 85% of Month End Statement Value |
||||
Other Receivables |
$0 | 85% of Book Value | $0 | 85% of Month End Statement Value |
||||
Prepaids |
$0 | 85% of Book Value | $0 | 85% of Month End Statement | ||||
Inventory |
$0 | Discounted per Table listed above |
$0 | 85% of Month End Statement Value |
||||
Real Property |
$0 | $0 | ||||||
REM — Report Prpty Secured |
$0 | 100% of Book Value or | $0 | 100% of FYE Book Value or | ||||
REM — Report Prpty Secured |
$0 | Secured Mortgage | $0 | Secured Mortgage Value — | ||||
REM — Report Prpty Secured |
$0 | Value — Lessor of two | $0 | Lessor of two | ||||
Machinery & Equipment |
$0 | 65% of Book Value | $0 | 65% of FYE Book Value | ||||
Vehicles |
$0 | 0% of Book Value | $0 | 0% of FYE Book Value | ||||
Increase — 0% of Change | ||||||||
Change in PPE from FYE |
$0 | Decrease — 65% of Change | ||||||
(Less) Other Secured Creditors |
$0 | 100% of Book Value | $0 | 100% of FYE Book Value | ||||
Other Assets |
$0 | 0% of Book Value | $0 | 0% Month End Statement Value | ||||
Investments: |
||||||||
COFINA Equity |
$0 | 100% of Book Value | $0 | 100% of FYE Book Value | ||||
Secured Equity Position |
$0 | 10% of Book Value | $0 | 10% of FYE Book Value | ||||
All Remaining Investments |
$0 | 0% of Book Value | $0 | 0% of FYE Book Value | ||||
Total Secured Assets |
$0 | $0 | $0 | $0 | ||||
Plant, Property and Equipment Total |
$0 | $0 |
FYE 2002 | Jan. 03 (Most Recent Month End) | |||||||
Liabilities: |
||||||||
COFINA — Seasonal |
$ | 0 | $0 | |||||
COFINA — Term |
$ | 0 | $0 | |||||
COFINA — Other |
$ | 0 | $0 | |||||
Total |
$ | 0 | $0 | |||||
Asset Realization |
$ | 0 | $0 | |||||
Cash Remaining |
$ | 0 | $0 | |||||
FYE 2002 | Jan. 03 (Most Recent Month End) | |||||||
Investments: |
||||||||
CHS |
$0 | $0 | ||||||
Land O’Lakes |
$0 | $0 | ||||||
Cofina Financial |
$0 | $0 | ||||||
Other Stock |
$0 | $0 | ||||||
Total Investments |
$0 | $0 | ||||||
Seasonal Loan Commitment |
$0 | $0 | ||||||
Loan Balance to SRV |
0.00 | % | 0.00 | % | ||||
Loan Commitment to SRV |
0.00 | % | 0.00 | % | ||||
Local Net Savings |
$0 | $0 |
34
General
|
The purpose of this procedure is to create awareness of the potential liability of the customer and the credit risk to Cofina due to contaminated property. | |
Many Cofina customers utilize hazardous chemicals or other products that produce hazardous wastes in the sound operation of their businesses. These wastes and the customer’s approach in disposing of them, in a legally sound manner, can impact the credit quality of the loan relationship with the customer. | ||
Loan Agreement
|
Each credit report should address environmental issues that have arisen with the customer in the past year and the steps taken or to be taken by Cofina to manage credit risk. Each loan agreement should include the following sections with language to address environmental issues: |
• | Conditions - General insurance coverage, including coverage for environmental problems. | ||
• | Environmental — This section addresses licenses, tank registration, and indemnity requirements for Cofina loans. Also, the customer warrants that it is in compliance with all federal, state, and local environmental laws regarding owned or leased property. |
The loan officer may recommend additional language concerning environmental issues specific to the customer relationship. |
Collateral Loans
|
Contaminated Land - Cofina will not generally secure contaminated property as collateral for a loan unless there is a state fund, where proceeds are available and assignable, which assists in the clean-up of the specific parcel. The loan officer may recommend an exception to this requirement, provided the Cofina loan and collateral are adequately protected. | |
Cofina may enter into loans specifically for the clean up of contaminated property, provided there is state funding available for clean-up expenses. Such |
35
loans will be made separately for specific parcels and contamination. The loan officer should consider and recommend whether assignment of state funds is appropriate given the credit risk of the customer. Contamination loans require documentation of paid expenses (receipts, bills, or canceled checks) prior to advancing funds. |
36
General
|
Loans to new or existing customers undertaking substantial construction projects represent added credit risks to Cofina. Properly managing those risks is important in assuring a sound loan to the customer. This procedure identifies specific risk management tools to be considered when a customer is undertaking a substantial construction project. | |
For the purpose of this procedure, a substantial construction project is one that represents 50% of the customer’s local net worth or $1,000,000, whichever is less. When a construction project undertaken by a customer exceeds this amount, the loan officer should evaluate the customer’s ability to effectively manage the construction process and evaluate the risk management tools appropriate for the loans associated with the project. The evaluation will be included in the credit report, with specific recommendations on construction lending requirements. | ||
The loan officer has the flexibility to utilize these risk management tools, even when the project is less than the amounts prescribed above. | ||
Risk Management Tools
|
The following tools should be considered and evaluated when Cofina finances a substantial construction project: |
• | Feasibility Studies - A feasibility study provides the customer and Cofina with information about construction costs and the customer’s ability to generate the earnings and cash flow to support the project. The market or trade territory information, sales and margin estimates, and anticipated costs should be realistic. The loan officer must critically evaluate the “bottom line” of the project as net income represents a primary source of repayment for related loans. Another key issue is management’s ability to manage the resulting business operation and leverage position. |
37
• | Construction Contract - A construction contract provides the specific details of performance by the contractor (typically a general contractor), the payment requirements and other details concerning the project. This is a vital tool in substantial construction projects and is expected when Cofina provides construction or permanent financing. The loan officer should consider requiring that the customer have the contract evaluated by a third-party construction engineer to assure that the contract is realistic and consistent with the needs of the customer. | ||
• | Performance Bond/Payment Bond — A performance bond provides an insurance policy which assures contractor performance on the construction contract. If the loan officer recommends not requiring a performance bond, the contractor’s financial position and credit references should be evaluated to determine the financial ability to meet contract requirements. The customer’s overall financial strength and project management skills should also be evaluated before waiving the need for a performance bond. | ||
A payment bond provides assurances that the material and labor used in the project will be paid for. It does not provide as much protection for the customer as the performance bond which assures completion of the project as specified in the construction contract. However, this may be an appropriate alternative given a smaller or less complex construction project. | |||
This requirement will not be waived absent evidence of a strong and liquid customer classified as Acceptable. | |||
• | Lien Waivers - A lien waiver is a legal document provided by the general contractor and the sub-contractors to the customer which specifies that the labor and materials provided by the sub-contractor or supplier have been paid for and that no mechanic’s liens can or will be filed on the construction property for the specific work and/or materials covered by the waiver. |
38
• | Comprehensive General Liability/Builders Risk Insurance - This type of insurance coverage is provided by the customer and provides Cofina (as loss payee) with protection against contractor liabilities arising out of the construction project. | ||
• | Title Insurance - A title insurance policy provides the customer and Cofina protection on the security for the loan. |
In some cases, the loan officer may want to establish a separate construction loan, with disbursements tied to a specific contract payments and lien waivers, and with a maturity that matches the expected completion date of the project. These loans are expected to be repaid by other, permanent sources of financing, that may include Cofina. |
39
General
|
Loans to LLC’s may have credit risks and credit considerations unique beyond traditional cooperative lending. Properly managing those risks is important in assuring a sound loan portfolio. This procedure identifies specific additional steps to be followed when lending to LLC’s. | |
Additional LLC Lending Procedures |
When considering loans to LLC’s, the loan officer and loan committee will include consideration of the following criteria: |
• | In lending to a new LLC, a written guarantee is required from each owner. Normally such guarantee is to be offered jointly and severally to the total indebtedness. However, it may be offered severally if each of the owners has an asset classification of no less than Acceptable. As the LLC develops its own operating performance history, the guarantee requirement can be reduced accordingly. | ||
• | The original Loan Agreement to any new LLC shall have, among other covenants, a covenant requiring a minimum net worth to assets in the 35-40% range. If designed as a dollar level of minimum local net worth, it should have the same impact relative to the assets of that LLC. The owners must acknowledge this financial covenant either by countersigning the Loan Agreement or within the guarantee. | ||
• | Each owner shall provide an audit prior to closing on a new loan to the LLC. Such annual audits will be a requirement until a guarantee is no longer required by such owner. | ||
• | An annual asset classification will be completed and established on each owner. This will aid Cofina in evaluating the strength of each of the guarantor’s and therefore the guarantees. |
40
• | In some cases, one or more owners may have a lower asset classification than the LLC. Then it becomes imperative to determine that the LLC asset classification is justified either based on the joint and several structure of the owner guarantees’ or the merits and strengths of the LLC based on its operating history and performance. | ||
• | In measuring the total credit exposure of any owner, it is necessary to add any amount of any guarantee to the LLC offered by that owner to the direct commitment of the owner. |
41
The standard loan agreement used in loans from Cofina is attached to this procedure. The language is standardized to enhance the clarity of the documents. However, the loan officer recommends specific limits and covenants for each customer that address the credit risk management needs of Cofina. | |||
The following identifies key areas in the standard loan agreement where the loan officer recommends language or information that is specific to the customer. |
• | Loan Amounts — This area specifies the new, present, and total loans for the customer in the new loan package. | ||
• | Limitations on Advances — This area specifies any limitations on disbursements for a specific customer. Limitations may require completion of security documents, may require payments directly to third parties, or similar restrictions which assure the proper use and security for Cofina loans. | ||
• | Notes and Security — This area includes standard language as well as customer specific language when new real estate mortgages or security interest are taken. | ||
• | Cash Patronage — This area limits the cash patronage refunds allowed by the cooperative without Cofina consent. The minimum amount is 20 percent, but can be changed to reflect the cash flow position of the customer. | ||
• | Dividends and Retirements of Equities This area, when used, limits the cash dividends and equity retirements to reflect the cash flow position of the customer. | ||
• | Capital Expenditures — This area, when used, limits capital expenditures to reflect the cash flow position of the customer. | ||
• | Repayment — This area specifies the repayment requirements and final maturity for all loans. |
42
• | Expiration — This area specifies the date when the various loans expire and advances are no longer available. | ||
• | Financial Reporting — All new customers are required to have annual independent unqualified audits, as well as internal monthly financial statements and other financial data, such as accounts receivable aging, as requested by Cofina. |
In addition, the loan officer has the ability to recommend additional covenants that contribute to effective customer and loan servicing. | |||
The draft loan agreement is attached to the credit report presented to the Loan Committee for its approval. |
43
BORROWER:
|
# |
NEW LOAN | PRESENT LOAN | TOTAL LOANS | ||||||
$4,000,000.00 — Seasonal
|
$ | 4,000,000.00 | — Seasonal | |||||
$1,279,950.00 — Term (T08) | 1,279,950.00 | — Term (T08) | ||||||
$ | 5,279,950.00 | — Total |
PURPOSE:
|
Advances made under this agreement shall be used only for the purposes specified in the application for loan. | |
DISBURSEMENT:
|
COFINA’s commitment and obligation to disburse the full amount of the loan shall terminate as provided herein, unless earlier terminated by COFINA upon a default by Borrower. | |
To facilitate payments and reborrowings under this agreement, the Borrower is authorized to reborrow all sums paid by Borrower on the seasonal loan up to and including the due date for the loan provided for in this agreement, but the total amount outstanding for the seasonal loan at any time shall not exceed the commitment. | ||
RENEWAL:
|
Funds advanced under this agreement shall be used, first, to repay and refinance any amounts outstanding under any prior loan agreements and notes from Borrower to COFINA unless COFINA has agreed in writing to a different application of such advances. | |
INTEREST:
|
All outstanding loan balances hereunder shall bear interest at the risk-adjusted variable rate determined by applying the COFINA Pricing Matrix to the COFINA Base Loan Rate. Interest on each loan shall be payable on the day of each month as COFINA may specify. The rate of interest charged hereunder shall not be usurious and COFINA agrees to adjust such rates to make the same non-usurious in the event a court of competent jurisdiction determines after exhaustion of all appeals that said rate is usurious. | |
NOTES AND SECURITY: |
Advances made under this agreement shall be evidenced by note or notes acceptable to COFINA and shall be secured to the extent of all security and collateral granted to COFINA. | |
All property mortgaged, pledged, or assigned to COFINA as security for these loans, or as security for any other loans of COFINA to Borrower before or after these loans, shall be security for all loans made by COFINA to Borrower. |
44
NEGATIVE PLEDGE:
|
Without prior written consent by COFINA, Borrower shall not sell, assign, transfer, convey, mortgage, pledge or grant a security interest in any of its assets or enter into any guarantee agreements, except for sales of inventory in the ordinary course of business, whether voluntarily, involuntarily or by operation of law. In the event Borrower shall sell, assign, transfer, convey, mortgage, pledge, or grant a security interest in any of its assets, whether voluntarily, involuntarily or by operation of law, a default shall be deemed to have occurred under this Agreement, and any other agreements executed by the Borrower and COFINA, and COFINA shall be entitled to pursue any and all rights and remedies available to it under this agreement or otherwise. | |
ASSIGNMENT:
|
The Borrower acknowledges and agrees that COFINA may assign directly or indirectly its rights and obligations hereunder, in whole or in part, in its sole and absolute discretion, including, without limitation, to one or more special-purpose companies (an “SPC”) as part of the securitization of certain loans made by COFINA. The Borrower may not assign its rights and obligations under this agreement without the prior written consent of COFINA (or its assignee). | |
SET-OFF WAIVER:
|
All payments required to be made by Borrower hereunder shall be made without set-off, deduction or counterclaim of any kind on the date due in immediately available funds to such account specified by COFINA (or its assignee). | |
NON PETITION AND LIMIATION ON PAYMENTS: |
The Borrower hereby covenants and agrees that if COFINA assigns any of its rights and obligations under this agreement to an SPC, Borrower shall not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law, for one year and a day after the latest maturing indebtedness of the SPC is paid in full. | |
Notwithstanding any provisions contained in this agreement to the contrary, no assignment by COFINA of its rights under this Agreement to a SPC shall constitute a corporate obligation, liability or claim (as defined in the Section 101 of the U.S. Bankruptcy Code) on the part of the SPC or any subsequent transferee from the SPC to make additional advances after the date of the assignment and COFINA shall remain wholly liable for any such future advances. | ||
BORROWING NOTICES AND PAYMENT NOTICES: |
Borrower shall authorize employee(s) and other person(s) to prepare and submit Borrowing Notices for advancing funds and Payment Notices for repaying funds to COFINA, which notices shall be in such form as COFINA shall prescribe from time to time, and COFINA may rely on any such Borrowing Notice or Payment Notice without further inquiry as to the validity or genuineness of such notice. Borrower shall give COFINA prior written notice of each request for advance or repayment of funds by facsimile or e-mail (with digital signature). Any such notice shall be effective, upon receipt by COFINA. Any such notice must be received by COFINA on or before 11:15 AM (Central Standard Time) on the day of the transaction. | |
Borrower acknowledges that there are certain risks inherent in transmitting information over the Internet that are beyond the control of COFINA. Borrower agrees that COFINA, its officers, employees, agents, affiliates, subsidiaries and transferees will not be liable for any losses for any cause over which they have no direct control, including, but not limited to, the failure of utilities, mechanical or electronic equipment or |
45
communications lines, telephone or other interconnect problems; unauthorized access, theft, viruses or operator errors; severe weather, earthquakes or floods; strikes or other labor problems, and any other force majeur. In no event will COFINA, or any of its officers, employees, agents, affiliates, subsidiaries or transferees have any liability for any consequential, incidental, special, indirect or punitive damages (including lost profits, trading losses and damages) that result from inconvenience, delay or loss of the use of the Internet system or COFINA’s access to such system even if COFINA has been notified of the possibility of such damages. COFINA reserves the right to service, repair and upgrade, and deny access to, its e-mail capability at any time without prior notice. |
CORPORATE EXISTENCE: |
Borrower agrees that it will preserve its corporate existence and not, in one transaction or a series of related transactions, merge into or consolidate with any other entity, or sell all or substantially all of its assets, or will not change the state of its incorporation, its corporate name, principal place of business or corporate address without providing COFINA with 30 days’ prior written notice. | |
CONDITION PRECEDENT STOCK INVESTMENT: |
At the inception of this loan Borrower agrees to purchase capital stock of COFINA equal to or in excess of $1,000 at par value if Borrower currently does not hold capital stock of COFINA having a par value equal to or in excess of $1,000. | |
GOVERNING LAW:
|
This agreement, and the relationship between the parties, shall be governed and construed under the internal laws of the State of Minnesota. It is the intention of the parties that the choice of law rules of the State of Minnesota shall not apply, but that all conflicts or controversies arising under or related to this agreement and relationship shall be governed by the procedural rules and substantive law of the State of Minnesota. | |
CONDITIONS:
|
While loans are outstanding under the terms of this agreement, Borrower agrees to comply with the following conditions: |
1. | COOPERATIVE STATUS: Borrower agrees to maintain its status as a cooperative corporation. | ||
2. | STOCK INVESTMENT: No later than three years from the date of COFINA’s first loan commitment, Borrower further agrees to retain total stock investment in COFINA in an amount equal to 3% of its average loan balances for the previous year, or in such amount as may be prescribed by COFINA’s board of directors, and to maintain such stock investment for the existence of any indebtedness to COFINA, an SPC or any affiliate of COFINA. COFINA shall have a first lien and security interest in its capital stock or other equities now owned or hereafter acquired by Borrower and Borrower shall pledge such stock or equities to COFINA as security for all existing and future indebtedness of Borrower, and Borrower acknowledges and agrees that such security interest is registered to COFINA. | ||
3. | INSURANCE: Borrower shall maintain reasonable adequate insurance coverage for the business in which Borrower is engaged for all risks usually insured by business concerns, by reliable insurers, and shall obtain fidelity bonds covering officers and employees in their fiduciary capacities as may be deemed appropriate by COFINA or as COFINA may require. |
46
4. | FINANCIAL INFORMATION: Borrower shall furnish to COFINA unqualified annual audits, within 120 days of fiscal year end, and monthly financial statements, within 35 days of each month end and such other information as COFINA may request relating to its affairs, and permit such examination of its books and records as COFINA may specify. This information may include, but not be limited to, monthly statements of operations and balance sheets, accounts receivable aging analyses, monthly report of goals and projections, reports of plans and procedures to reach the goals, and reports of follow-up plans. | ||
5. | BUSINESS PRACTICES: Borrower will maintain business policies that generally comply with good business practice. This requirement includes development of realistic and complete annual financial plans. Borrower’s board of directors will periodically review progress in carrying out said plans and hold management accountable. | ||
6. | CASH PATRONAGE: Borrower agrees to not declare any cash dividends or other similar distributions above forty percent of its annual net patronage savings (as that term is defined by the Borrower’s current Articles of Incorporation and Bylaws) without consent of COFINA. | ||
7. | APPLICATION OF PAYMENTS: COFINA, at its discretion, may apply payments to the reduction of any indebtedness outstanding between COFINA and Borrower. | ||
8. | PAYMENTS: Borrower agrees to pay to COFINA its monthly principal and interest payments, as specified in Borrower’s monthly billing statements. Borrower shall also have primary responsibility for payment of its COFINA capital stock purchase obligation to COFINA. | ||
9. | ENVIRONMENTAL: Borrower warrants to COFINA that it is in compliance with all federal, state, or local environmental laws relating to or affecting its owned or leased property, which violation would have a material adverse effect on the Borrower’s business or a material adverse effect on the value of the collateral. The Borrower further agrees as follows: |
a. | LICENSES: Borrower shall at all times continue to obtain and maintain all licenses, permits, and other approvals necessary to comply with environmental laws and shall at all times remain in compliance with their terms in all material respects. The Borrower shall at all times continue to exercise due diligence to obtain and maintain all licenses, permits, and other approvals necessary to comply with environmental laws. | ||
b. | STORAGE TANKS REGISTERED: All underground storage tanks have been duly registered with all applicable federal, state, and local government authorities. The Borrower has no knowledge of any leaks from any of its above ground or underground storage tanks. |
c. | INDEMNITY: Borrower agrees to indemnify, hold harmless and defend COFINA, its successors and assigns, against all liens, liabilities, demands, claims, actions, suits, judgments, expenses (including attorneys’ consultants’, and experts’ fees) paid or asserted against COFINA, its successors or assigns, (or any of the Borrower’s property COFINA has taken title to by foreclosure or otherwise) as a direct result of the Borrower’s violation of any |
47
environmental law, including but not limited to the release of any hazardous material, whether or not such violation was caused or within the control of the Borrower. This indemnity shall continue for the benefit of COFINA after the termination of this agreement or other loan documents, including the release of any security interest. |
10. | DIVIDENDS AND RETIREMENTS OF EQUITIES: Borrower will not pay cash capital stock nor retire capital stock or equities for cash, in excess of $350,000, without approval of COFINA. | ||
11. | CAPITAL EXPENDITURES: Borrower shall not enter into contracts for building, remodeling, purchasing, or expanding facilities, nor third party lease agreements for terms over one year covering real or personal property, of more than $2,750,000, without COFINA’s approval. |
REPAYMENT:
|
The indebtedness arising from advances made under this agreement shall be paid as follows: |
1. | SEASONAL REPAYMENT: The seasonal loan of $4,000,000 shall mature on April 1, 2004. | ||
2. | TERM REPAYMENT: The existing term loan shall be repaid by remittance to COFINA of Thirty-Five Thousand Seven Hundred Dollars, due on or before the day of each and every month, as COFINA may specify. All outstanding loan balances shall be repaid in full on April 1, 2006. |
EXPIRATION:
|
The unadvanced portion of any commitment shall be canceled as indicated below: |
DEFAULT PROVISION: |
If Borrower fails to pay any amounts on any of the loans when due, or on any other indebtedness of Borrower secured hereby, files a petition for protection under any bankruptcy law, or fails to observe or perform any of the provisions of this agreement, any security agreement, or any mortgage, or any insolvency or bankruptcy proceeding is commenced against Borrower, then Borrower shall be in default. If Borrower defaults, all such loans and other indebtedness shall, at COFINA’s option, be immediately due and payable and COFINA may exercise any legal or equitable remedy it deems appropriate in its sole discretion under the circumstances, including without limitation making a demand for immediate payment of the entire loan amount remaining unpaid and immediately enforcing its rights against the security if such payment is not made. Notwithstanding the foregoing, in the event that Borrower becomes a debtor under any bankruptcy law or similar law affecting creditors’ rights, all such loan and indebtedness shall become due and payable without any notice, demand or other action on the part of COFINA. | |
Notwithstanding the provisions of this agreement or any promissory notes issued in connection herewith, COFINA shall have the option, in its sole discretion and without any obligation to do so, to make advances to Borrower (or for Borrower’s account) up to the maximum loan commitment hereunder at any time Borrower is in default of any payment obligation hereunder, and such advances shall become an obligation of Borrower and accrue interest under this agreement. |
48
DEFAULT RATE OF INTEREST: |
The Borrower’s interest rate shall be increased by two percent (2%) during the time that any principal or interest payment is unpaid after such payment becomes owing or upon any other default by Borrower hereunder. A fifty dollar ($50) administrative fee shall also be paid each time any payment of interest or principal is not paid when due. | |
FOREBEARANCE NOT WAIVER: |
Any forbearance by COFINA in exercising any right or remedy hereunder or under a security agreement, notes, this agreement or any other loan documents, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy available to COFINA. | |
SEVERABILITY:
|
Except as otherwise provided in the succeeding sentence, every provision of this agreement is intended to be severable, and, if any term or provision of this agreement is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement. Notwithstanding the foregoing, if such illegality or invalidity would cause COFINA to lose the material benefit of its economic substance, then the Borrower and COFINA agree to negotiate in good faith to amend this agreement in order to restore such lost material benefit. | |
ACCEPTANCE:
|
This loan agreement is the full agreement under the terms and conditions of the loan(s). It shall not be modified except in writing. This agreement shall not become effective until it has been signed and delivered in duplicate by Borrower to COFINA, and it has been executed by COFINA. |
ACCEPTED AND AGREED TO: | By Direction of the loan committee the 24th day of February, 2003: | |||||||
COFINA FINANCIAL | ||||||||
By: |
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By: | ![]() |
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By:
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Interim President | |||||||
Approved: 2/24/03 |
General
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Cofina loans are secured by security interests and/or real estate mortgages. Typically, fixed assets secure term loans and current assets secure Operating loans. However, as most lending relationships include short and long-term loans, Cofina normally will cross-collateralize all loans by filing proper real estate mortgages and financing statements, |
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executing security agreements, and obtaining other forms of security. | ||
Obtaining Security
|
The loan officer is primarily responsible for identifying, recommending, and communicating security requirements for loan and customer relationships. This includes: |
• | Evaluating security requirements as part of the credit analysis. | ||
• | Identifying and recommending all security requirements and advance limitations in the credit report and loan agreement. | ||
• | Obtaining legal descriptions and other
information necessary to prepare the loan and security documents. |
For extraordinary security requirements, the Legal Administrator will obtain help from outside attorneys with the necessary expertise. Outside attorneys must be approved by Loan Committee before they can be utilized. | ||
In those limited cases in which Cofina acts as a co-lender, it will enter into a security sharing agreement with the other lender and will ensure sufficient security filings are in place to protect the loan amount at risk through a mortgage and/or other perfected security agreements. | ||
Once the loan officer has obtained the necessary information, and Loan Committee has approved the recommended loan action, the Legal Administrator prepares the security documents and customer instructions for completing security filings. |
Advancing Funds
|
The loan agreement must identify the requirements for advancing funds to the customer. Generally, all security requirements must be completed before funds will be advanced under new loans. | |
Funds may be advanced prior to completion of new security in the following exception: |
• | There are existing real estate mortgages and security interests in place to adequately |
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collateralize the Cofina loans, before the new security. |
Loan Committee must approve all advances prohibited in the limitation on advances portion of the loan agreement and requested prior to completion of required security. | ||
If exceptions to the limitations on advances are requested, the loan officer shall determine the amount of time required to complete the incomplete security from the customer and the attorney working on the security for the customer. The loan officer should have strong assurances that the security can be completed within 90 days. In no event shall exceptions be allowed when there are doubts about Cofina’s ability to properly secure the property. | ||
Security Releases
|
When a customer requests a security release, the loan officer is responsible for obtaining the necessary information, evaluating the request for its impact of the overall security position, and recommending action on the customer request. | |
Loan Committee has sole authority to release Cofina security. | ||
Once approved, the matter is passed to the Legal Administrator to process the release. |
Security Check List
|
Cofina requires a “Security Checklist” to be completed by the Legal Administration prior to the new loan set up. The security checklist identifies the dates required loan documentation and legal documents have been received in order to disburse the new loan(s). | |
The following numbered instructions correspond to the sample Security Check List that follows in this procedure. |
1. | Cofina enters the date of loan approval. | ||
2. | Cofina enters the new loan number(s). | ||
3. | Cofina enters the cooperative name. | ||
4. | Cofina enters the city & state of cooperative. | ||
5. | Cofina enters date the completed application was received. | ||
6. | Cofina enters date the signed security agreement was received (if applicable). |
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7. | Cofina enters date the signed note(s) were received. | ||
8. | Cofina enters date the Guarantee Agreement was received (if applicable). | ||
9. | Cofina enters date the signed loan agreement was received. | ||
10. | Cofina enters date the financing statements (UCC) was filed with the proper state office. | ||
11. | Cofina enters date real estate mortgage was completed (if applicable). | ||
12. | Cofina enters date signed assignments of investments were received (if applicable). | ||
13. | Cofina enters other requirements and date these requirements were completed (if applicable). | ||
14. | Cofina enters initials of personnel checking items. | ||
15. | Cofina enters check off date. | ||
16. | Signed by authorized personnel. | ||
17. | Title of authorized personnel. |
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SECURITY CHECKLIST
Date of Loan Approval:
|
1 | |||
Loan Number(s):
|
2 | |||
Cooperative Name:
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3 | |||
City & State:
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4 |
Application: 5
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Security Agreement: 6 | |
Signed Note(s): 7
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Guarantee Agreement: 8 | |
Signed Loan Agreement: 9
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UCC Filing: 10 | |
Real Estate Mortgage: 11 |
Assignment of Stock: 12
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CHS: | LOL: | OTHER: |
Checked off by: 14
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Check off Date: 15 |
Signature:
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16 | ||
(Loan Officer is not authorized to sign off) | |||
Title:
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17 |
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General
|
Cofina loan files not only serve the needs of its credit staff and management team, but also the needs of many third parties that have a lending or review role. Providing efficient access to important information depends on consistent loan file organization that is documented, used, and maintained by all users. | |
File Organization
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Cofina utilizes a three-part folder to consistently preserve important documents. | |
The three parts are used as follows: | ||
Section I | ||
1. Field Visit Memos (left side) |
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2. Loan Agreement (right side) |
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3. Security Recap (right side) |
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Section II | ||
1. Comparatives (left side) |
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2. Financial Planning Documents (left side) |
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3. Credit Reports (right side) |
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Section III | ||
1. Correspondence (left side) |
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2. Patronage Distribution Notice (right side) |
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Information presented in these sections is arranged in chronological order. |
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General
|
As of January 31, 1998, the Board adopted the Uniform Classification System (UCS — utilized by federal and state regulated financial institutions). UCS was implemented during 1998. The full UCS definitions are presented in the following procedure. | |
Cofina’s loan officers are responsible for analyzing and recommending a UCS Classification for each customer obtaining a loan. The loan officer is also responsible for updating the recommended asset quality as changes take place in the customer’s ability to repay the loan. | ||
Classification Factors
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The Credit Report provides the basis for classifying loans. Documented credit analysis and related memoranda should appropriately document asset classification issues and recommendations. (See Sec. 2.4). | |
The customer’s financial performance and projections are considered in establishing asset classifications. Asset classifications are to be consistent with loan performance status designations. | ||
Other considerations when classifying assets include: | ||
• Industry conditions and outlook at time of
classification. |
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• General economic status of the area. |
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• Adequacy of loan file information. |
Non-adverse Classification Categories
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Non-adverse classification categories are “acceptable” and “other assets especially mentioned” (special mention or OAEM). However, OAEM are considered to be criticized assets. | |
Acceptable | ||
Acceptable credit represents non-criticized assets of the highest quality. They do not fit into any other classification. | ||
The following customer ratings within the Acceptable range are utilized by Cofina and are |
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presented in order, from the highest quality to the lowest quality: | ||
• Customer Rating A1— These customers
are classified Acceptable under UCS, but
additionally meet all loan underwriting
standards generally at the low risk level. Loan
structure and documentation is appropriate. In
addition, Cofina has strong communication with
the customer, which provides the opportunity for
a long-term relationship. These customers would
be readily financed by other lending
institutions. |
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• Customer Rating A2—These customers
are classified Acceptable under UCS, but
additionally meet all loan underwriting
standards at the low to moderate risk level
range. Loan structure and documentation is
acceptable. The customer relationship is
satisfactory, with open communication and
regular exchange of pertinent information.
These customers would be readily financed by
other lending institutions. |
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• Customer Rating A3—These customers
are classified Acceptable under UCS, but may
have some loan underwriting standards at the
higher risk level. Loan structuring and
documentation may include additional covenants.
While the customer relationship is acceptable,
communication issues and/or loan structuring
issues may exist which add credit risk to the
relationship. Trends indicate that the customer
could deteriorate into the “other assets
especially mentioned” classification without
changes in operations and repayment capacity
over the next one to two years. |
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Other Assets Especially Mentioned | ||
Assets in this category are currently protected, but potentially weak. These assets constitute credit risk, but not to the point of justifying a classification of substandard. The credit risk may be relatively minor, yet constitutes an unwarranted risk in light of the circumstances surrounding a specific asset. A special mention classification should not be used as a compromise between adversely classified and non-adversely classified. |
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Special mention loans have potential weaknesses that may, if not checked or corrected, weaken the loan or inadequately protect the institution’s position at some future date. Loans that might be detailed in this category include those that have any deviations from prudent lending practices, including those subject to economic or market conditions that may, in the future, affect the customer. An adverse trend in the customer’s operations or an imbalanced position in the balance sheet that has not reached a point where liquidation is jeopardized may best be handled by this classification. This category should not be used to list loans that bear risks usually associated with the particular type of financing. Any type of loan, regardless of collateral, financial stability, and responsibility of the customer, involves certain risks. A secured loan has a certain risk, but to criticize such a loan, it must be evident that the risk is increasing beyond that at which the loan originally would have been granted. A rapid increase in assets or liabilities without the lender’s knowing the cause, concentrations that lack proper credit support, lack of appropriate collateral analysis or required appraisals, or other similar matters could lead the examiner to question the loan quality and possibly classify the loan as special mention. Loans in which actual, not potential, weaknesses are evident and significant should be considered for more serious classification. | ||
Adverse Classification Categories
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Adverse classification categories are “substandard”, “doubtful” and “loss”. | |
Substandard These assets are marginally protected by the customer’s current sound worth and paying capacity or the collateral pledged. Assets so classified must have a well-defined weakness or weaknesses that jeopardize debt liquidation. They are characterized by the distinct possibility that the lender will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loan assets, does not have to exist in individual loan assets. |
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Substandard assets are usually the largest category of adversely classified loan assets, typically representing the secured adverse assets or portions of assets in a portfolio. Substandard assets may or may not be placed in non-accrual status, depending on the operation’s viability and the asset’s performance. Very weak substandard assets sometimes have specific reserves established which represent holding costs or the difference between net realizable value and collateral value for loss loan accounting. | ||
Characteristics of a Substandard asset include: | ||
• Not performing as agreed, but currently
adequately collateralized. |
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• Pledged collateral marginally supports the
credit, but collateral value may be declining. |
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• Operation marginally provides funds required
for debt service, and current position analysis
indicates a declining trend. |
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• Nonviable operation, but asset is currently
adequately collateralized. |
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Credit weaknesses are usually described as being either significant or serious. Because circumstances vary widely, much of the difference between significant and serious credit weakness depends on the loan officer’s sound judgment. Significant weaknesses have the potential to become serious and thereby impact the loan’s performance. Serious weakness exists because one credit factor is inadequate, or several factors are weak and have affected the loan and/or the customer’s ability to perform in the future. Substandard assets have serious weaknesses, whereas special mention assets have potential weaknesses. | ||
Doubtful An asset classified doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection in full, on the basis of currently existing facts, condition, and values, highly questionable and improbable. The possibility of a loss is extremely high, but because of certain important and |
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reasonable specific pending factors that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status can be determined. Pending factors include proposed merger, acquisition, or liquidation procedures; capital injection; perfecting liens on additional collateral; and refinancing plans. | ||
Doubtful assets generally are not performing as agreed and/or involve a nonviable operation. High probability of loss exists on these assets, but the exact amount is not determinable. (Substandard classification would not communicate the severity of the situation.) | ||
Underlying collateral pledged cannot be assigned specific value because the asset has limited purpose, salability and/or market, or is involved in pending litigation with unknown outcome. Doubtful classification occurs most frequently for unrestructured non-accrual and non-accrual cash-flag restructured assets. Poor credit administration does not justify Doubtful classification. | ||
Loss Assets classified loss are considered uncollectible when their continuance as bookable assets is not warranted. This classification does not mean the loan or asset has absolutely no recovery or salvage value; quite to the contrary. Cofina will aggressively pursue all available recourse in an effort to ensure the full recovery of this asset’s value. However, its has been determined that booking such value is not consistent with Cofina’s approach to conservatively report this particular asset’s valuation. Losses should be taken in the period in which they surface as uncollectible. |
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Charge-offs are recognized and booked when the loss becomes known, not necessarily contemporaneous with liquidation of the asset. When determining the amount of loss, consider unpaid principal, accrual interest, accounts receivable, customer stock and amounts recoverable from secured assets. |
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Split Classifications
|
Split classifications occur when portions of a loan asset can clearly be separated into different classification categories. On split-classified loans, the remaining classes are designated as “secondary class”. The secondary class is the non-primary class which is a fixed dollar amount and remains constant until the loan is reclassified. Portions of loans, which are placed into secondary classes are to be rounded to the nearest $1,000. Quarterly review split-classified loans to determine if amounts in each class are appropriate. | |
Only mention and adverse loans may be classified into more than one class (split). Adverse loans may have a portion classified acceptable only if the loan has a valid guarantee, or collateral meets the cash or near cash condition. | ||
Two or More Loans to One Customer
|
When reviewing multiple loans to a customer, evaluate as one loan unless pertinent facts support a reasonable determination that a particular loan constitutes an independent credit risk. Document facts in the loan file. “Independent credit risk” is an independent income stream (i.e., a guarantee or other source of earnings). The independent income stream must be clearly identifiable, and may not be from entities that are interrelated. Separate collateral positions are not to be considered independent credit risks. This concept generally applies also to loans to one customer from separate lending entities. | |
Loans to entities in which a customer has partial interest, and another loan to that customer, individually, will be considered as separate lines of credit. Separately evaluate credit factors and classify each loan on its own merits. | ||
Participation Loans
|
Cofina may have continuing participation agreements with several other lending entities. Pursuant to these agreements, the participating lender (the “Participant”) will acquire a participation in a negotiated portion of loans approved by the participant. Concentration limits will be based by Cofina on its retained portion of a participated loan. | |
Participation loans are classified based on total credit extended by all lenders involved. The loan |
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amount is the outstanding amount carried by Cofina as of the review date. | ||
Loan Performance Classifications
|
Appropriate loan performance classifications assure proper accounting placement of loans. Credit staff recommends and Loan Committee approves loan performance classifications based on the risk codes and their respective GAAP definitions as presented in the non-performing loan procedure. |
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Portfolio Quality Standards
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Risk can change after a loan is originated, however, the overall level of higher risk, adversely classified loans are kept within the following standards established by the Board. | |
• Non-Adversely classified credit (Acceptable
and OAEM) shall represent no less than 85%
of the outstanding volume of accruing
loans in the COFINA portfolio. |
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• Doubtful and Loss classified credit shall
represent no more than 5% of the outstanding
volume of accruing loans in the Cofina
portfolio. |
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Management shall report on the quality of the asset portfolio on a quarterly basis to the Board of Directors. In addition, if the portfolio falls out of compliance with these standards, management will develop a plan to bring asset quality into compliance with these portfolio standards in a reasonable period of time. Progress on the plan, including current portfolio asset quality, will be reported to the Board on a monthly basis. | ||
Annual Review
|
On an annual basis, Cofina will be reviewed by its banks who will do random checks of classification and servicing compliance in accordance with the guidelines in this manual. | |
Management shall prepare a formal response to the bank reviews for the Board of Directors. |
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General
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Cofina places a strong emphasis on communicating with customers, Board, and management about operating performance and financial position. Critical analysis and positive reinforcement benefit the customer and can have positive effects on the loan relationship. Loan officer’s objectives in customer servicing is to clearly identify expectations, identify, and address problems at their beginning, and counsel customers on solutions before problems affect the quality of the loan relationship. | |
Customer Servicing Tools
|
Cofina utilizes the following tools in its customer servicing, to increase communications, and to document expectations: | |
• A thorough understanding of customer
operations, financial position, and financing
needs through analysis of customers – supplied
financial information. Customers are required to
submit monthly financial statements, including
aging of accounts receivable, within 35 days
following the close of the month. Non-compliance
is a violation of the loan agreement and must be
reported to the loan committee. These reports
are compared to the entities financial
projections for the current year and to the
previous year’s performance. |
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• Regular discussions with customer, Board, and
management about historical operating,
financial, and loan performance, including how
Cofina evaluates operations and financial
strength. Each customer should be visited at
least once every twelve months. |
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• Other customer related contacts for audit
meetings, annual meetings, and
discussions with third parties (auditors, joint
venture partners, other lenders, etc.) with
important relationships with the
customer. |
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• Contemporaneous records of telephone
conversations and customer meetings. |
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• Follow-up letters to customers when meetings
or discussions have an important impact on
expectations for loan performance. These letters
should highlight important points of the customer
discussions and identify customer and Cofina
commitments to action. |
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• Written Loan Service Plans for loans that are
large or with operating or financial problems
which could translate into loan performance
problems. Typically, Loan Service Plans are
prepared in conjunction with loan renewals and
are mandated for those accounts UCS rated M4 or
weaker. (See also Sec 3.05). An example of a
Loan Service Plan is attached to this procedure. |
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Cofina views OAEM classified loans as
transitional. This classification may come about
from an unusual event such as a merger or
consolidation, operational setback, or external
event. The Loan Servicing Plan should be
designed to restore the loan to fully acceptable
classification within one year. Provided such
plan is not achieved, the loan may become an
adversely classified loan. |
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• Tailored Loan Agreements which adequately
covenant for customer weakness to maintain sound
loan administration and which document customer
identified actions to resolve operating,
financial, or loan performance problems
according to a mutually agreeable timetable. |
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When customer-servicing efforts can no longer maintain credit quality or the customer’s long-run viability deteriorates, Cofina must explore its loan servicing options. | ||
Cofina’s objective is to initiate loan servicing efforts before loan repayment is in jeopardy. When loan repayment is doubtful, Cofina’s objective is to maximize its collections. |
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Loan Servicing Alternatives
|
Loan officers must report to the Loan Committee details of loans that no longer justify an Acceptable, non-criticized asset classification as soon as such information becomes available. | |
The Loan Committee must approve the loan servicing action to be taken. | ||
The Loan Committee will also determine the date the loan officer must report back to update it on the progress of the loan servicing action. | ||
Cofina loan servicing alternatives may include the following: | ||
• Customer Actions — Cofina may counsel
customers to seek other financing or structural
options. Options may include a partial or
complete refinancing with another financial
institution or a merger, sale, or liquidation of
a portion or all of its assets (businesses) with
another cooperative, LLC, or private enterprise.
Subsequent loan actions may be predicated on
customer commitments and actions to implement
such agreed upon strategies, offer additional
collateral, or agree to other terms and
conditions as deemed appropriate. |
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• Loan Extensions — Any extension represents a
credit decision that should be supported by
existing or new collateral and a clearly
identified source of repayment that Cofina
controls through existing or new security
filings. |
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• Loan Restructuring — Cofina may choose to
restructure loans with customers to convert
Operating debt to term or lengthen
maturity, provided the restructured loans remain
within the customer’s repayment capacity and
the loans remain well secured. Cofina typically
requires customer actions, which will improve
not only the customer’s operating and financial
position, but will also maintain or improve
asset quality. |
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• Collection – Cofina will pursue legal
collection efforts when appropriate to enforce
customer performance on loan agreements or to
prevent losses on loans. (See Sec 3.05). |
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Documentation
|
Each loan servicing action should be documented in a report or memorandum which explains the customer’s financial position, the credit situation, past customer servicing activities, and the alternatives explored prior to selecting the recommended course of action. The length and detail of the report should correspond to the severity of the recommended loan servicing action and the complexity of the customer relationship. The document should be maintained in the Credit File. |
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Loan Service Plan
Account:
|
UCS Rating: | |||||||||
Loans ~
|
Operating Amt | Term Amt: | ||||||||
Operating Balance | Term Balance: | |||||||||
Attributed Loans
|
||||||||||
Amount in Participation:
|
||||||||||
General Trend
|
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Improving |
|
Static |
|
Declining | ||||||||
Relationship Goal
|
|
Continuing |
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Limited |
|
Collection |
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Loan Officer:
|
|
Date: |
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|||||
Chief Credit Officer:
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Date: | |||||||
Credit and Loan Participation Manager:
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Date: |
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General | In its simplest form, Cofina works toward the collection of its outstanding receivables on a regular basis. The success of all lending institutions can be summarized in its ability to extend funding to patrons and, in turn, collect repayments of such funding on a scheduled and profitable basis. | ||
There are those occasions in which such collection efforts demand a “termination” date; a date in which a specific patron’s outstanding financial obligations to Cofina must be satisfied. | |||
The termination process is driven by Cofina’s priority to ensure the timely collection of all monies owed. If during normal asset quality reviews, Cofina determines the collection of an outstanding receivable may be in question, a “Termination/Collection” process may be initiated. | |||
While the steps are progressive in nature, the termination process is sensitive to, among other factors, the degree and perceived timeline of expected asset deterioration, the asset’s level of cooperation, and the asset’s ability to secure alternative funding to satisfy its obligations to Cofina. | |||
As such, the collection process may or may not involve all the steps outlined below. |
• | Loan Service Plan | ||
• | Collateral Schedule | ||
• | Custodial Agreement(1) – Attached | ||
• | Cash Collection and Distribution Request(1) – Attached | ||
• | Liquidation Notification(1) – Attached |
Guidelines | |||
Loan Service Plan |
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• | Loan Service Plans are required for all accounts UCS rated M4 or weaker. They must be prepared immediately following receipt of information indicating deterioration in the customer’s financial position that would result in a downgrading of its UCS rating. Loan Service Plans are also required when a time specific loan covenant is found to have been violated. | ||
• | A Loan Service Plan is authored by the loan officer and is designed to formally outline a “plan of action” to address such deficiencies. It is then presented to the Loan Committee for its review and approval. | ||
• | Dependant upon the depth of perceived deterioration, any of the following actions may be outlined in the Loan Service Plan. |
1) | Continued internal monitoring of the asset’s performance | ||
2) | An internal review and update of all security filings, to include but not limited to, a listing and investigation of all PMSI filings, mortgages and guarantees. | ||
3) | The scheduling of a meeting with the cooperative’s board and management to discuss the assets deterioration. and give formal notice of corrective action to be taken. |
§ | Loan Covenant violations are to be documented and possible consequences of such violations are to be shared with the asset’s leadership team. |
4) | The scheduling of a visit to the cooperative’s location(s) to review and document the condition of all Cofina secured assets. | ||
5) | Requiring a Business Plan update, outlining both activities and timelines in which actions will be taken to correct financial performance |
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§ | This may include the liquidation of non-performing assets in which all cash received will be forwarded to Cofina to pay down the debt obligation(s) owed to Cofina. |
6) | Establish and communicate a timeline in which the cooperative will secure an alternative source of funding albeit a new lender, a merger partner or full liquidation. |
§ | Instruct both management and the board members that a “Letter of Intent” will be required of the alternative source of funding, addressed to the borrower, outlining the terms of the new funding and timeframes in which such financial arrangements will be executed. Cofina will outline a timeframe in which such a notice must be completed and shared with Cofina. |
7) | Increased monthly reporting requirements which may include a Collateral Schedule – defined below |
8) | The execution of a Custodianship agreement – defined below. |
9) | Outline the execution and implementation of a Cash Collection and Distribution Request process – discussed below |
10) | The Liquidation of the cooperative – also discussed below. |
Collateral Schedule |
• | While Cofina completes an internal Collateral Schedule during the loan review process, the fluid nature of current assets may require increased reporting during periods of increased financial stress. |
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• | The original Collateral Schedule outlines summarized asset and liability totals. Such totals are then discounted and utilized to identify potential Cofina exposure. | ||
• | Subsequent Collateral Schedule(s) call for a more detailed reporting of Current Assets and Liabilities. From this information, Cofina is able to better judge the status of its UCC-1 secured collateral. | ||
• | The timeliness of such additional reporting is directly dependent upon the severity of perceived asset deterioration, as well as, the seasonal and cyclical nature of the asset’s business structure. For example, a stressed account with a heavy agronomy-related inventory base would require close monitoring during both the fall and spring agronomy seasons in order to properly monitor changes in both inventory and account receivable issues. | ||
• | Itemized and discounted assets are compared to the cooperative’s current obligations to determine what excess value, Collateral Cushion, is available to minimize Cofina’s risk exposure. | ||
• | It should be noted that in most cases, Cofina has a superior collateral position when compared to other Obligors. The intent of including subordinated obligations is to better understand working capital needs required for continued operations. |
Custodianship Agreement | |||
• | A Custodianship Agreement is designed to ensure Cofina has an agent in place to both monitor and facilitate the day-to-day financial activities as they directly and indirectly effect Cofina’s security position. This agent monitors all asset transfers and communicates such transfers to Cofina. | ||
• | One tool available to the assigned Custodian is a weekly form called the Cash Collection and Distribution Request worksheet. This is to be completed by the Custodian prior to any cash distributions. The intent of the worksheet is to |
72
outline what cash inputs (sources of cash) and what cash outputs (cash uses) are expected in a given time frame. | |||
• | This worksheet is submitted prior to any cash distributions and may be complemented by a local Cofina signatory bank account in which all cash is deposited, held and, if approved by Cofina, redistributed – the Cofina approved Custodian acting as signatory agent in managing this bank account. |
Full Liquidation |
• | Should the loan officer, with the approval of the Loan Committee, determine it is both feasible and prudent to liquidate the cooperative, a Liquidation Notice will be forwarded to members of the cooperative’s leadership – to include management and the cooperative’s board of directors. | ||
• | Cofina has not found it necessary to force the liquidation of any cooperatives. However, Cofina has reviewed this process with legal counsel and is prepared, in a “worst case” scenario, to execute such a process in order to properly protect Cofina’s business position. |
Throughout this process, the assigned loan officer, along with other members of the Cofina team, may be called upon to attend Board Meetings, Patron Meetings and other such business meetings in which Cofina’s interests are concerned. All such meetings are to be properly recorded in the Asset’s Service File and approved by members of the Loan Committee. | |||
It should be noted, the assigned loan officer will be tasked with ensuring open lines of communication are maintained between the loan officer, members of loan committee and designated members of the cooperative’s leadership team. All such communications will also be recorded in the Assets’ Service File for reference. | |||
If at any point in time the asset’s performance returns to what may be termed by Loan Committee a satisfactory level, the Collection Process may be suspended or terminated |
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1. | COFINA does hereby appoint, and the Association does hereby consent to the appointment of , as Collateral Custodian to have and to exercise the rights, powers, duties and authority contained in this agreement, and the Collateral Custodian does hereby accept said appointment and agrees to perform faithfully the obligations and duties under this agreement. | ||
2. | As deemed advisable and necessary by COFINA or as requested by the Association, the Association does hereby consent to the subsequent appointment of Deputy Collateral Custodian(s) are herein collectively referred to as “Custodian”. |
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3. | The Custodian shall submit to COFINA such reports as COFINA may from time to time request. In addition, the Custodian shall report on any activities which may affect the interests of COFINA. | ||
4. | COFINA may, as it deems advisable to monitor and protect the collateral pledged as loan security, assign to the Custodian new duties or revoke instructions previously given by giving to the Custodian written notice of such suspension or change. | ||
5. | The Custodian shall give bond for the faithful performance of the duties and obligations hereunder in favor of COFINA in such amounts and in such form as may be required by COFINA. All costs and expenses, including bonding expenses, incident to or connected with the services to be performed by the Custodian under this agreement, and the Custodian’s compensation therefore, shall be borne by the Association and shall be matters exclusively between the Custodian and the Association. | ||
6. | The Custodian may, in addition to the duties assigned by COFINA, be at the disposal of the management of the Association and perform such duties as may be required so long as the duties do not conflict with the duties for COFINA. | ||
7. | This agreement shall become effective at the opening of business on the day of , 2001. The Custodian shall continue in office until the appointment shall be terminated by written notice from COFINA to the Custodian or until the Custodian resigns by giving COFINA fifteen (15) days written notice of resignation. The termination of the agreement, however, shall not relieve the Custodian from any liability, which may have previously been incurred, to COFINA or the Association. In case of the absence or incapacity of the Custodian or upon the termination of the services, COFINA may designate a substitute Custodian, and may likewise designate a successor to any such substitute Custodian. COFINA agrees to terminate this agreement at any time all of the Association’s indebtedness to COFINA shall be fully paid or at the discretion of COFINA as such earlier time as requested by COFINA. | ||
8. | COFINA may, at its discretion, establish a deposit account at the Association’s bank of deposit with COFINA and/or Custodian named as creditor of the account. Upon written request of COFINA, the Association shall make daily deposits in said account of all checks and proceeds which are subject to COFINA’s security filings and which are acquired by the Association in its normal course of business. COFINA may then, at its discretion, (1) allow the funds in said account to be directly deposited into the |
75
Association’s account; (2) allow the funds to remain in said account for a reasonable period of time, and advise the Custodian as to the transferring of funds into the Association’s account; or, (3) apply the funds to the Association’s loan with COFINA. In the event alternative (1) or (2) is in effect, the parties agree that the funds will at all times be considered owned by the Association, subject to the security interests of COFINA |
BY:
|
BY: | BY: | ||||||||||
Cofina Financial, LLC | Board Pres. – Typed Name | |||||||||||
Loan Officer . | Its Custodian | Cooperative Name | ||||||||||
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Weekly Operating Budget
Week Ending: |
||||||||
Sources |
||||||||
Normal Cash Sales |
||||||||
Normal Accounts Receivable Collections |
||||||||
Special Sources |
||||||||
~ Describe if Material |
||||||||
Total Sources |
$ | 0.00 | ||||||
Uses |
||||||||
Payroll |
||||||||
Taxes |
||||||||
Utilites |
||||||||
Insurance |
||||||||
Trade Payables |
||||||||
Agronomy Products |
||||||||
Petroleum |
||||||||
C-Store Products |
||||||||
Other |
||||||||
Other Uses |
||||||||
~ Describe if Material |
||||||||
Total Uses |
$ | 0.00 | ||||||
Cash Increase/(Decrease) |
$ | 0.00 | ||||||
Present Cash Balance |
||||||||
Date: |
77
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79
COFINA FINANCIAL, LLC |
||||
By |
Its |
Cooperative Name, City, State |
||||
By |
Its |
The undersigned hereby agrees, |
||
in his personal capacity, that |
||
by paragraphs 4 and 5 of the |
||
foregoing agreement. |
80
General | Cofina sets limits on loan concentrations with individual credit risks. This concentration is measured against the existing risk funds. Risk Funds are defined as the capital plus allowance for loan loss. | ||
Guidelines | Cofina will limit its loan exposure to no more than 25% of its Risk Funds in any single credit exposure. Such exposure will include all commitments to that customer and may include guarantees from that customer to other customers or commitments to another customer in which the first customer owns 50% or more of the second customer. | ||
Cofina will limit its loan exposure, further, as a customer migrates toward a criticized asset with no more than 15% of its Risk Funds in a single credit exposure classified as Other Assets Especially Mentioned or Substandard. | |||
The maximum loan amounts Cofina will originate before participation is required are as follows: |
Customer
Rating A1: |
$ | 10,000,000 | ||||
Customer
Rating A2: |
$ | 8,000,000 | ||||
Customer Rating A3
or below: |
$ | 6,000,000 |
Cofina will secure participation relationships to carry the balance of loans in excess of these amounts. Such participation agreements will be put in place no later than 90-days beyond the loan origination date. Cofina will serve as the servicer of the loans and maintain the relationship with that customer. | |||
Loans in Minnesota and Wisconsin will be limited to no more than 45% of loan volume. All other states will be limited to 35% of total loan volume. New loan relationships to be established outside of Cofina’s current trade territory will be limited to no more than 15% of Risk Funds during the first two years of Cofina’s operation under the SPC agreement and no more than 35% of Risk Funds thereafter. |
81
All new loan relationships will be limited to accounts with evidence of exceptional performance. |
General | Cofina uses UCS classifications, Customer Ratings, and the following general reserve guidelines to arrive at a proper valuation for individual assets in the portfolio and the overall portfolio value. | ||
This procedure identifies the reserve guidelines for each UCS asset classification category. | |||
Loss Reserve Guidelines | Cofina recognizes the importance of building adequate loss reserves. At the same time, accurately estimating future losses is imprecise. Therefore, a 2% loss reserve is applied to the outstanding balance of each of the following asset classifications to determine a target general reserve for losses: |
• | Acceptable assets | ||
• | Other assets especially mentioned | ||
• | Substandard assets | ||
• | Doubtful assets |
For all Obligors classified as “Loss”, the required reserve is 20% of the outstanding Principal Balance or the actual expected loss amount, whichever is greater. | |||
Management will periodically evaluate the adequacy of the general and specific reserves and recommend changes in addition to reserves, as necessary. |
82
General | Sound legal documentation is an important part of credit administration practices as appropriate and accurately prepared legal documents protect the rights of Cofina if issues arise. | ||
The documentation process begins with the Loan Agreement as presented in Section 2.08. The following sections identify other important documents which address specific collateral or other legal needs. |
83
General | Cofina uses a standard real estate mortgage for securing real property offered by customers as collateral for Cofina loans. Even though collateral through acquisition of real estate is seldom necessary in Cofina relationships with customers, it is vitally important that this secondary source of repayment is perfected in a manor that protects the interests of Cofina and its shareholders. | ||
Although the real estate mortgage is drafted by Cofina staff, the customer is responsible for hiring local counsel to update abstracts and issue an attorney’s opinion or obtain title insurance to complete the mortgage filings. | |||
Mortgage Instructions | The following numbered instructions correspond to the sample Real Estate Mortgage that follows in this procedure. |
1. | The customer or mortgagor enters the date the mortgage is made and executed. | ||
2. | Cofina enters the accurate legal name of the customer/ mortgagor. | ||
3. | Cofina enters the state location of the customer/mortgagor. | ||
4. | Cofina enters the post office address of the customer/ mortgagor. | ||
5. | Cofina enters the amount of the real estate mortgage based on the amount specified in the loan agreement as directed by the Loan Committee. | ||
6. | Cofina enters the County and State location of the mortgaged property. | ||
7. | Cofina enters the full legal description of the mortgaged property. | ||
8. | Cofina enters the amount, and types of loan(s) information as specified in the loan agreement. | ||
9. | Cofina enters the name of the customer/mortgagor. | ||
10. | The customer/mortgagor executes the real estate mortgage by having two authorized officers sign the mortgage and their signatures notarized. | ||
11. | Cofina enters the customer/mortgagor name and state location. | ||
12. | The county agent or other official responsible for mortgage recordings certifies that the mortgage has been properly recorded in the county office. |
84
Amount | Interest Rate | |
$[ 8 ] — Operating
|
Variable Rates of Interest as the Mortgagee’s Board of Directors shall from time to time prescribe. | |
$[ 8 ] — Term
|
85
86
(Corporate seal, if any) | [ 9 ] | |||||
Mortgagor | ||||||
By: | 10 | |||||
President | ||||||
By: | 10 | |||||
Secretary |
My Commission expires: |
87
General
|
Cofina uses supplemental or amendment real estate mortgages to supplement the existing mortgage to increase the dollar amount or amend the existing real estate mortgage to add collateral and coverage to the existing mortgage or mortgages. | |
Supplemental Instructions |
The following numbered instructions correspond to the sample Supplemental Real Estate Mortgage that follows in this procedures |
1. | The customer or mortgagor enters the date the supplemental mortgage is made and executed. | ||
2. | Cofina enters the name of the customer/mortgagor. | ||
3. | Cofina enters the post office address and state location of the customer/mortgagor. | ||
4. | Cofina enters the amount of the supplemental mortgage as directed by the loan committee. | ||
5. | Cofina enters the County and State location of the mortgaged property (from the existing mortgage). | ||
6. | Cofina enters the reference to the real estate mortgage which this new one supplements (recording data from existing mortgage). | ||
7. | Cofina enters the real estate mortgage legal description from the existing mortgage. | ||
8. | Cofina enters the customer/mortgagor name. | ||
9. | The customer /mortgagor executes the supplemental real estate mortgage by having two authorized officers’sign the mortgage and their signatures notarized. | ||
10. | Cofina enters the customer/mortgagor name. | ||
11. | The county agent or other official responsible for mortgage recordings certifies that the mortgage has been properly recorded in the county office. |
88
(SEE ATTACHED PAGES FOR LEGAL DESCRIPTIONS)
8 | ||||||
Mortgagor | ||||||
By: | 9 | |||||
Its: President | ||||||
By: | 9 | |||||
Its: Secretary |
State of
|
) | |
) ss. | ||
County of
|
) |
9 |
COFINA FINANCIAL — X. Xxxxxx
XX Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000-0000
89
Amendment Instructions |
The following numbered instructions correspond to the sample Amendment Real Estate Mortgage that follows in the procedures. |
1. | The customer or mortgagor enters the date the supplemental mortgage is made and executed. | ||
2. | Cofina enters the name of the customer/mortgagor. | ||
3. | Cofina enters the name of the post office address and State location of the customer/mortgagor. | ||
4. | Cofina enters the amount of the amended mortgage as directed by the loan committee. | ||
5. | Cofina enters the County and State location of the property to be mortgaged. | ||
6. | Cofina enters the reference to the real estate mortgage which this new amendment mortgage adds as collateral to the existing mortgage (recording data from existing mortgage). | ||
7. | Cofina enters the real estate description of the collateral to be added to existing mortgage. | ||
8. | Cofina enters the customer/mortgagor name. | ||
9. | The customer/mortgagor executes the amendment real estate mortgage by having two authorized officers’ sign the mortgage and their signatures notarized. | ||
10. | Cofina enters the customer/mortgage name. | ||
11. | The county agent or other official responsible for mortgage recordings certifies that the mortgage has been properly recorded in the county office. |
90
(SEE ATTACHED PAGES FOR LEGAL DESCRIPTIONS)
8 | ||||||
Mortgagor | ||||||
By: | 9 | |||||
Its: President | ||||||
By: | 9 | |||||
Its: Secretary |
State of Minnesota
|
) | |
) ss. | ||
County of
|
) |
9 |
COFINA FINANCIAL — X. Xxxxxx
XX Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000-0000
91
General
|
Cofina typically releases collateral covered by a real estate mortgage in two manners. One is a Partial Release of Mortgage where the mortgage is to stay in place, but a specific part of the mortgaged property is released at the request of customer (i.e. customer has sold property, etc.) Such releases represent credit decisions that must be approved by the loan committee. The second release is a Satisfaction of Mortgage. In this case, the loan or loans supported by the mortgage have been repaid and therefore the need for the mortgage has been eliminated. | |
Partial Release of
Mortgage Instructions
|
The following numbered instructions correspond to the sample Partial Release of Mortgage on the following page. |
1. | Cofina enters the County where the property is located to be released. | ||
2. | Cofina enters the State location of the property to be partially released. | ||
3. | Cofina enters the legal description of the property to be partially released. | ||
4. | Cofina enters the date of the original mortgage. | ||
5. | Cofina enters the customer/mortgagor name. | ||
6. | Cofina enters the customer/mortgagor’s city of business and State location. | ||
7. | Cofina enters the original recording data (date, book/libor/volume number of mortgages, page number(s), and document number) from the original mortgage. | ||
8. | Cofina enters the date of the partial release. | ||
9. | Cofina executes the partial release by an authorized officer of Cofina Financial. | ||
10. | Cofina signs the partial release by person attesting to the officer’s signature. | ||
11. | Cofina personnel notarizes the signature of the party executing the partial release. | ||
12. | Affix notary stamp. |
92
COFINA FINANCIAL | ||||||||
Attest:
|
10 | By: | 9 | |||||
State of Minnesota
|
) | |
) ss. | ||
County of Xxxxxx
|
) |
11 |
Cenex Finance Assn. — X. Xxxxxx
Xxxx Xxxxxx Xxx 00000, Xx. Xxxx, XX 00000-0000
93
Satisfaction of Mortgage Instructions |
The following numbered instructions correspond to the sample Satisfaction of Mortgage on the following page. |
1. | Cofina enters the date of the original mortgage. | ||
2. | Cofina enters the customer/mortgagor name. | ||
3. | Cofinaenters the customer/mortgagor place of business and State location. | ||
4. | Cofina enters the county where the original mortgage was recorded. | ||
5. | Cofina enters the original recording data (date, book/libor/volume of mortgages, page number (s) , and document number) from the original mortgage. | ||
6. | Cofina enters the date of the satisfaction of mortgage. | ||
7. | Cofina signs the satisfaction of mortgage attesting to the officer’s signature. | ||
8. | Cofina signs the satisfaction of mortgage by an authorized officer of Cofina Financial. | ||
9. | Cofina personnel notarizes the signature of the party executing the satisfaction. | ||
10. | Affix notary stamp. |
94
Attest: | COFINA FINANCIAL | |||||
By: | 7 | |||||
President |
State of Minnesota
|
) | |
) ss. | ||
County of Xxxxxx
|
) |
9 |
Cenex Finance Assn. — X. Xxxxxx
Xxxx Xxxxxx Xxx 00000, Xx. Xxxx, XX 00000-0000
95
General
|
The security agreement starts the process of perfecting the Cofina security interest in all personal property owned by the customer. The security agreement establishes a claim on this important and liquid collateral for Cofina. The UCC-1 Financing Statement described in the following procedure perfects and files the interest Cofina holds in this personal property. | |
Security Agreement Instructions |
The following numbered instructions correspond to the sample Security Agreement that follows in this procedure. |
1. | The customer/debtor enters the date the agreement is made and executed. | ||
2. | Cofina enters the name of the customer/debtor. | ||
3. | Cofina enters the state in which the customer/debtor is incorporated. | ||
4. | Cofina enters the customer/debtor’s principal place of business. | ||
5. | Cofina enters the language defining the personal property and proceeds covering by the security agreement. Cofina has standard language (shown in the sample document) that is used from most security agreements. Loan officers have the ability to recommend alternative language for loan committee consideration. | ||
6. | Cofina enters the state in which the customer/debtor is incorporated (also in (i) and (ii)). | ||
7. | Cofina enters the customer/debtor name, city, and state. | ||
8. | The customer/debtor executes the security agreement by having two authorized officers sign the security agreement. |
96
1. | GRANT OF SECURITY INTEREST. To secure the payment and performance of the Obligations, the Debtor grants the Secured Party a security interest (“Security Interest”) in, and assigns to the Secured Party, all of the personal property of Debtor, wherever located, and now owned or hereafter acquired (called the “Collateral”), including: | ||
5 |
(i) | Accounts, including health-care-insurance receivables; | ||
(ii) | Chattel paper; | ||
(iii) | Inventory; | ||
(iv) | Equipment; | ||
(v) | Instruments; | ||
(vi) | Investment Property; | ||
(vii) | Documents; | ||
(viii) | Deposit accounts; | ||
(ix) | Letter-of-credit rights; | ||
(x) | General intangibles; | ||
(xi) | Supporting obligations; To the extent not listed above as original collateral, proceeds and products of the foregoing; | ||
(xii) | To the extent not included in the above list of collateral and in amplification of that collateral without limitation, cash and non-cash proceeds, all vehicles, including those that have certificates of title, commodity accounts, commodity contracts, electronic chattel paper, fixtures, goods, payment intangibles, software and all contracts, including L.P. gas lease tank contracts, all being without limitation; and | ||
(xiii) | Investments in other cooperatives, including but not limited to Debtor’s investments in COFINA FINANCIAL, CoBank, Cenex Harvest States Cooperatives, Farmland Industries, Inc., and Land O’ Lakes, Inc.. |
97
98
99
100
101
9.9 | No Marshaling. Secured Party shall have no obligation to marshal any assets in favor of Debtor, or against or in payment of: |
102
[ 7 ] | ||||
Cooperative | ||||
By:
|
8
|
|||
Its: |
||||
ATTEST: | ||||
By:
|
8 | |||
Its:
|
103
General | The UCC 1 Financing Statement is a state specific document that is filed with the appropriate state official to perfect Cofina’s security interest in the personal property offered by the customer as collateral. | ||
1. | Cofina enters the customer/debtor name. | ||
2. | Cofina enters the customer/debtor mailing address. | ||
3. | Cofina enters the customer/debtor city location. | ||
4. | Cofina enters the customer/debtor state location. | ||
5. | Cofina enters the customer/debtor zip code. | ||
6. | Cofina enters the customer/debtor country location (USA). | ||
7. | Cofina enters the customer/debtor federal tax payor identification number (may be obtained from customer). | ||
8. | Cofina enters customer/debtor type of organization (most cases “cooperative”). | ||
9. | Cofina enters the customer/debtor state of organization. | ||
10. | Cofina enters the customer/debtor organization number assigned to the customer/debtor by the state where customer/debtor is incorporated. (this information can be obtained by searching the internet for the specific state’s secretary of state’s office or from the customer/debtor). | ||
11. | Cofina enters “Cofina Financial, Inc”, as secured party. | ||
12. | Cofina enters its mailing address. | ||
13. | Cofina enters its city location. | ||
14. | Cofina enters its state location. | ||
15. | Cofina enters its zip code. | ||
16. | Cofina enters its country location. | ||
17. | Cofina enters the language describing the property to be covered by the financing statement. This language should be consistent with the related financing statement. |
104
![(FORM)](https://www.sec.gov/Archives/edgar/data/823277/000095013709000248/c48645c4864502.gif)
UCC FINANCING STATEMENT |
FOLLOW INSTRUCTIONS rfrontand backl CAREFULLY
A. NAME A PHONE OF CONTACT AT FILER [optional]
B. SEND ACKNOWLEDGMENT TO: (Name and Address!
Print Reset THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY |
1.DEE~OR’S EXACT FULL LEGAL NAME 1 b. INDIVIDUALS LASTNAME FIRST NAME MIDDLE NAME XXXX x. ene\ finance Association, Luc. St. Xxxx jjglfi-Mllim) USA Debtor hereby grants the Secured [’arty a security interest in and Debtor hereby ;m!lii>ri.’r , Secured Party to tile a financing statement and assigns to the Secured Party, nil of the personnl property of Debtor, wherever located, and now owned or hereafter ac(|iiire(l, including Init not limited in accounts, including health-carc-ins lira nee receivables, chattel paper, inventory, equipment, instruments, investment property, documents, deposit accounts, letter-of-credit rights, general intangibles, supporting obligations, to the extent not listed above as original collateral, proceeds and products oliln foregoing, to the extent not included in the above list of collateral and in amplification of that collateral without limitation, cash anil non-cash proceeds, all vehicles, including those that have certificates of title, commodity accounts, commodity contracts, electronic chattel paper, fixtures, goods payment intangibles, software and all contracts, including L.P, gas lease tank contracts, all being without limitation; and investments in other cooperatives, including but not limited to Debtor’s investments in tenc\ Finance Association, Inc., C’oBank, Cene\ Harvest States Cooperatives, Farmland Industries, Inc., and Land ()’ Lake*. Inc. 8. OPTIONAL FILER REFERENCE DATA |
105
General
|
Cofina establishes term special loans for environmental clean up activities of customers in Wisconsin to make use of the Petroleum Environmental Clean up Fund Program (PECFA). As part of these loans, Cofina takes an assignment on the PECFA proceeds due the customer from the State of Wisconsin Department of Industry, Labor and Human Resources. | |
Assignment of PECFA Proceeds Instructions
|
The following numbered instructions correspond to the sample Assignment of Proceeds document that follows in this procedure. | |
1. Cofina enters the name of the customer assigning the proceeds to Cofina Financial | ||
2. Cofina identifies the loan type, number and amount. | ||
3. Cofina enters the name of the contaminated site location. | ||
4. Cofina enters the name, city, and state of the customer. | ||
5. The customer executes the
Assignment of Proceeds by having two authorized officers of the
board sign the document. |
106
Dated: , 2002
|
[ 4 ] | ||||||
[ 4 ] | |||||||
By: | |||||||
By: | |||||||
107
General
|
Cofina frequently takes assignment of Cenex Harvest States Cooperatives and/or Land O’Lakes, Inc. stock as additional security for loans. To perfect that interest, the customer must execute an assignment of stock. | |
Assignment of Stock Instructions
|
The following numbered instructions correspond to the sample assignment of Stock for both Cenex Harvest States Cooperatives and Land O’Lakes, Inc., that follow in this procedure: | |
1. Cofina enters the customer name,
city, and state for the customer providing the assignment. |
||
2. Cofina enters the name of the
regional cooperative in which the customer has investments. |
||
3. The customer enters date agreement is executed. | ||
4. Cofina enters the customer name, city, and state. | ||
5. The customer executes the
document by having two authorized of the board sign the
document. |
108
By: | ||||||
By: | ||||||
109
General
|
Cofina utilizes standard language in waiving specific compliance issues with customers’ loan agreement. Loan officers are responsible for monitoring customer compliance and acting promptly when compliance is an issue. | |
Standard language available for use includes: | ||
• Waiver Letter language for Stock Retirement and Fixed Asset
Expenditure limits. |
||
• Waiver Letter language for Cash Patronage Refunds. |
||
• Waiver Letter language for Working Capital and Local Net
Worth levels. |
||
When compliance issues arise, the loan officer develops a waiver request for loan committee approval. | ||
Waiver Letter Instructions
|
The instructions for all waiver letters are the same. The following numbered instructions correspond to the sample letter that follow in this procedure. Language for specific condition waivers are included to fit the circumstances. | |
1. Cofina enters the customer’s
manager name, customer, address, city, state, and zip code. |
||
2. Cofina references the loan
agreement number and the purpose for the waiver or condition
reference. |
||
3. Cofina enters the condition or
conditions in non-compliance and the specifics of the waiver. |
||
The loan officer has the responsibility to include any language necessary to clarify the waiver or explain the limits of the action taken by the loan committee. |
110
Re:
|
[ 2 ] | |
Loan Agreement Condition # | ||
Loan Agreement No. ___ |
Cofina Financial has agreed to waive non-compliance of Condition “6” of the above referenced loan agreement. COFINA offers no objection to your association’s board of directors declaring 100% cash patronage payment for fiscal year ending October 31, 2001.
[ 3 ]
Cofina Financial has agreed to waive non-compliance of Condition “10” and “11” of the above referenced loan agreements limiting stock retirements and fixed asset expenditures. Further, COFINA offers no objection to your stock retirements in the amount of $88,000 and fixed asset expenditures in the amount of $403,000, for fiscal year ending March 31, 2002.
[ 3 ]
Cofina Financial has agreed to waive non-compliance of Condition “10” requiring minimum working capital of not less than $3.0 million at fiscal year ending December 31, 2001 and further recognizes working capital at $2,728,000 for fiscal year ending December 31, 2001.
Extension:
111
General
|
Cofina uses subordination agreements to clarify collateral positions with other lenders serving a common client. The subordination agreement is between the two or more lenders, rather than with the customer. | |
Subordination Agreement Instructions
|
The following numbered instructions correspond to the sample Subordination Agreement that follows in this procedure: | |
1. Cofina enters the date the
subordination agreement is made and executed. |
||
2. Cofina enters the name or names
of the other lenders involved in the agreement. |
||
3. Cofina enters state location of
other lender. |
||
4. Cofina enters address, city,
state location of other lender. |
||
5. Cofina enters the name of the
customer held in common between the lenders. |
||
6. Cofina enters the specific
language defining the subordination. |
||
7. Cofina enters the name of the
other Lender below its own name with space for authorized
officials to execute the agreement. |
112
2. | COFINA and the Bank will maintain perfected security interests in their respective collateral. Failure by COFINA or the Bank to maintain a perfected security interest |
113
in its collateral shall render this agreement null and void, unless the security interest is re-perfected without loss of priority except as to the other party. | ||
3. | COFINA and the Bank mutually understand and agree that this is a continuing agreement, but that COFINA and the Bank may amend the same in writing at any time and in such manner as they may deem proper. |
COFINA FINANCIAL | ||||||
By: | ||||||
[ 7 ] | ||||||
By: | ||||||
114
Faxed borrowing notices must be received by the Money Desk Administrator before 11:15 a.m. Central Standard Time the day of the requested advance. | ||
The information requirements are set out in a pro-forma borrowing notice, a copy of which is attached to this procedure. The borrowing notice must be signed by an authorized signatory of the Borrower. | ||
The borrowing notice is checked by the Money Desk Administrator for: | ||
• Completeness of information |
||
• Proper authorization |
||
• Confirmation that bank details for payments being made to coop’s account are the same as the repeat codes set up in payment system. | ||
The daily balancing report is checked to ensure that sufficient loan facility is available to make the payment and to ensure the facility has not matured. Payments cannot be made from matured loan facilities and the loan officer must be notified of requests received in these circumstances. | ||
If insufficient facility is available, written approval of the loan officer must be obtained to pay a smaller amount than requested in the borrowing notice. | ||
The majority of payments are made by internet banking system. Access to bank account details is protected by password procedures. Knowledge of the passwords is restricted to the Chief Financial Officer, the Accountant, and the Money Desk Administrator. Access to the payments program is protected further by secure identification codes. The Chief Financial Officer, the Accountant, and the Money Desk Administrator each have their own secure identification codes. Only one of them is |
115
required to authorize a payment using the repeat code method. | ||
Copies of wire transfers prepared in the internet banking system are printed and retained until the bank statement is reconciled. | ||
Wire transfers can also be made by telephone. This will occur when a repeat code has not yet been established. The Chief Financial Officer, the Accountant and the Money Desk Administrator are authorized to make a wire transfer by telephone. The same passwords apply to telephone instructions as are used for internet banking instructions. One authorized person calls the bank with the payment details. The bank will then call back a second authorized person to verify the instructions. | ||
Some payments are made by check. These are held by the Chief Financial Officer. Checks have to be signed out on a sheet indicating the check number and the name of the person taking it to prepare. A check requires two authorized signatures. (See Sec. 5.06 for a list of the current authorized signatories). | ||
All payments are recorded on the Daily Transaction Sheet and entered in the cash book. | ||
CHS cash management are informed of total amount being disbursed to CHS and LOL. | ||
The borrowing notices are filed, initially, by state and maintained in the Accounting Department. They are eventually filed by cooperative. |
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BORROWING & REPAYMENT NOTICE
FROM: |
||
(BORROWER) |
CITY & STATE |
||
PHONE # |
||
ADVANCE:
LOAN# |
||
The Advance Requested Shall Be Made on (Date) |
||
The Aggregate Principal Amount of Advance $ |
||
PLEASE PRINT AMOUNT |
||
YOUR BANKING INFORMATION:
|
Bank Name | |||
Bank Location | ||||
Bank Account # | ||||
Federal Reserve # | ||||
REPAYMENT: LOAN# |
||
The Repayment Shall Be Made On (Date) |
||
The Aggregate Principal Amount of Repayment $ |
||
PLEASE PRINT AMOUNT |
||
PLEASE WIRE FUNDS TO:
|
BANK | |
LOCATION | ||
FEDERAL RESERVE # | ||
ACCOUNT # | ||
CREDIT: COFINA FINANCIAL |
Payment of Invoice to |
||
Comments: |
||
NAME
|
TITLE | |||||
AUTHORIZED SIGNATURE |
||
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EFTs are pulled from Cofina’s bank account by CHS and LOL on Tuesdays and Fridays. | ||
Sheets detailing the amounts to be pulled by EFT are obtained from CHS Corporate Credit Department the afternoon before. | ||
From the sheets, the Money Desk Administrator calculates the total funds being pulled from each customer. The Daily Balancing Report is checked to ensure sufficient facility is available and that the facility hasn’t matured. Appropriate loan officer must be informed if facility has matured. | ||
If not enough funds are available to cover EFT, an Open Item Correction form is prepared to request the overdisbursed funds be wired back to Cofina. The form must be signed by the loan officer and delivered to CHS Corporate Credit by 9:00 a.m. on the day of the EFT. Funds will be returned the same day. | ||
Information from the EFT sheets are entered in the cash book. |
118
Deposits can be received by wire transfer, ACH or by check. | ||
Co-ops should advise of wire transfers by fax, on pro-forma repayment notice, by 11:15 a.m. Central Standard Time on the day of the repayment. | ||
The daily balancing report is checked for balance owed. | ||
During the course of the morning and early afternoon, the bank account is checked via the internet, for receipt of the wire transfers. If funds are not received by 2:30 p.m., the customers are contacted to ensure funds were sent correctly. | ||
Cofina has a PO Box which keeps mail separate from all other mail coming into the building from the post office. Mail is picked up in the mail room by the Money Desk Administrator at 7:45 AM in order to begin processing any checks that may have come in to assure a rapid bank deposit. All requests for funds must be received by ll:15 AM therefore the timing on morning processing is critical. Checks received are reviewed to ensure they are made out correctly. By 11:00 a.m., the bank deposit slip is prepared and delivered to Mail Room for messenger service to the bank. | ||
If a large number of checks are received for xxxx payments, a separate deposit slip may be prepared just for these. | ||
All wire transfers, ACH’s and checks received, other than for billed payments, are entered on the Daily Transaction Sheet. All receipts are entered in the cash book. |
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Cofina has two categories of borrowings – daily loans and fixed loans. The daily loans can be borrowed or paid back on any given day in increments of $500,000. Fixed loans have set maturity dates. While they can, theoretically, be repaid on maturity dates, the usual practice is to roll over these loans. Only the period and interest rate vary. | ||
The amount that needs to be borrowed or could be repaid on any given day can be determined once the borrowings and the deposits are known for the day and the cash book has been updated. Allowance has to be made for checks that have been paid in, but not yet cleared through the banking system. | ||
The Chief Financial Officer authorizes the amount to be borrowed or repaid if the funds transfer does not meet guidelines set forth. | ||
The lender is advised by fax, before noon, using pro-forma notice, of the activity for the day. Repayments to the lender are made using the internet banking system. | ||
The Money Desk Administrator maintains the record of maturity dates of the fixed loans. The Money Desk Administrator also obtains, on a daily basis, the rates being charged by the lenders for various terms of borrowing. | ||
The Chief Financial Officer is advised of any
maturities occurring that day and the range of rates
being charged by the lender. The Chief Financial
Officer then instructs what to do with the fixed
funds rolling over if they do not conform with
guidelines. The lender is notified, by fax, before
noon, using pro-forma notice. The notice must be signed by the Chief Financial Officer if the funds are fixed for a timeframe that exceeds the guidelines or is in excess of the dollar amount set forth in the guidelines. Lender sends a confirmation by fax, which is then checked and filed in the monthly lender file. |
||
All cash management transactions are entered on the Daily Transaction Sheet and cash book. |
120
The Chief Financial Officer reviews and signs off on the daily cash journal. |
121
There are three colored copies of the Daily Transaction sheet. | ||
The white copy is for disbursements going to CHS or LOL and is delivered to CHS Corporate Credit. | ||
The yellow copy is for keying to the loan system. The pink copy is for posting the general ledger journal. Both of these tasks are performed by the Money Desk Administrator. The yellow copy is filed with daily keying. The pink copy is filed in the Cofina posting book. |
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Xxxxxx Xxxxxx Xxxxxx Xxxxxx |
||
M & I Bank |
123
Funds may be placed with CoBank either at a daily rate or fixed rate for a longer period of time. The Money Desk Administrator may sign off on borrowing notice providing the fixed rate is 30 days or less and the dollar amount does not exceed $10,000,000. |
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Loan Set Ups
|
A Loan Set-up Information form is prepared by the Legal Administrator. A pro-forma document is attached to this procedure. The form sets out the basic loan details, such as customer name, amount and terms. The form is signed by the Legal Administrator to indicate completeness prior to passing it on to the Accounting staff. | |
The Money Desk Administrator adds pricing and credit class details to the form and signs it, then enters the details on to the Loan System. | ||
Following the setup of a loan, the Chief Financial Officer will verify pricing and credit class on the Loan System. | ||
If repeat codes are to be used to make payments to the customer, the details are set up in the banking system and authorized by the Chief Financial Officer. | ||
The original Loan Set-up Information form is returned to the Legal Administrator once this process is complete. A copy is retained by the Money Desk Administrator. | ||
General Ledger
|
Cofina operates a computerized general ledger system designed and maintained by Xxxxxxx Financial Solutions (the SPARAK system). Xxxxxxx has created an operating manual, which is subject to regular updates. The operating manual is held in the Accounting Department and is not included within this Policy and Procedures Manual (See also Sec. 7) | |
Reconciliations of
General Ledger Accounts
|
The following general ledger categories are to be reconciled on a daily basis. | |
• Bank accounts, using bank activity reports available from internet banking
system |
||
• Loans receivable accounts |
||
• Loans payable accounts |
125
All general ledger accounts are reconciled at every month-end. The bank accounts are to be reconciled using the statements received from the bank. | ||
All reconciliations are prepared by the Accountant and reviewed by the Chief Financial Officer. Review of month-end reconciliations should be evidenced by initialing by the Chief Financial Officer. |
126
Classification: | ||||
(Note: Change from ) | ||||
UCS Rating: | ||||
(Note: Change from ) |
Seasonal Amt: $
|
Term: $ | |
RT: $N/A |
Security Interest: N/A
|
Real Estate Mtg: N/A | |
Assign. Investments: N/A
|
Supp/Amend Rem: N/A | |
Advance Req’s: NONE
|
Loan Officer Instructions/Comments: | |
Set Up Fees: Charge
New Set Up Fees
|
Federal ID#: | |
Loan Closing Initials:
|
Accounting Initials: |
127
Overhead Expenses
|
Cofina’s main overheads (i.e., personnel costs, office rental, telephones, computer costs) are charged to it centrally by CHS. Management reports are received on a monthly basis from CHS for posting to the general ledger. | |
Individual expense components of the central monthly management charge are analyzed and reviewed for unusual or exceptional movements. | ||
Office Supplies
|
If Cofina requires specific office supplies, a purchase order must be prepared and approved by the Chief Financial Officer before the order is placed (example pro-forma attached). Administrative Assistant is responsible for ordering office supplies and reconciling receipt of goods. | |
Loan Officer
Expense Reports
|
Loan Officers incur expenses as they travel around the country visiting customers. Expenses are reclaimed by completing an expense form (example attached) which is then submitted to the Chief Financial Officer, along with related receipts. | |
Once the Chief Financial Officer has approved the expenses, the claim will be paid by check. | ||
Chief Financial Officer’s
Expenses
|
Expenses incurred by the Chief Financial Officer must be approved by the President of Cofina before payment. | |
Budgets
|
An annual budget of income and expenditure is presented to the Board for its approval in September each year for the next financial year. | |
The process starts with loan officers setting out their expectations for loan receivables in the next financial year. They also prepare a budget for their expenses. | ||
Assumptions are then formulated for interest rate expectations and overhead expenses. | ||
If the Board rejects the proposed budget, a revision must be presented within a timescale determined by the Board. |
128
An approved budget must be in place before the start of the new financial year. | ||
The financial reports presented to the Board must include a comparison of actual against budget for the month under review and for the year-to-date (See also Sec. 6.03). |
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![(IMAGE)](https://www.sec.gov/Archives/edgar/data/823277/000095013709000248/c48645c4864503.gif)
130
![]() |
Date: |
0000 Xxxx Xxxxx Xxxx Xxxxxxxxxx, XX 00000 Main: 000-000-0000 Toll Free: 000-000-0000 |
||
Fax: 000-000-0000 |
Account Name:
|
Cenex Finance Association | Account # | ||||
Phone# | 000-000-0000 | |||||
Contact Nme:
|
Xxxx Xxxxx | Customer PO# | ||||
Quantity | U/M | Item Number | Description | |||||||||||
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Monthly Financial Statements | Monthly financial statements should be prepared for submission to Board members within 15 days of the month end. The reporting package should include: | |||
• | a commentary by the Chief Financial Officer a balance sheet, with comparative figures for the previous financial year |
|||
• | a statement of savings for the month and year-to-date, with comparative figures for the budget and the previous financial year | |||
• | details of loans receivable | |||
• | details of new loan commitments entered into in the month | |||
Monthly financial statements are also required to be submitted to Cofina’s bankers. The Chief Financial Officer is responsible for completing the reporting requirements of each bank group and ensuring they receive the reports within the required timeframe. | ||||
Monthly Statistics | In addition to the monthly financial statements, Cofina prepares a raft of statistics to assist in its review of past performance and developing future budgets. The current statistics requirements are as follows: | |||
Yield calculator report and sub reports: | ||||
Average seasonal receivable | ||||
Average term receivable | ||||
Average total receivable | ||||
Average receivable yield | ||||
Average Cenex payable | ||||
Average CoBank payable | ||||
Average Cofina surplus funds | ||||
Average total payable | ||||
Average payable yield | ||||
Average yield spread | ||||
Monthly stats reports: | ||||
Yearly interest rates and spreads | ||||
Interest rate spreads | ||||
Receivable/payable yields | ||||
Average differential rates by month | ||||
Average differential rate totals | ||||
Association savings |
132
Association savings – budget | ||||
Average daily receivables | ||||
Non-patronage loans YTD interest | ||||
Loan volume by office | ||||
Active accounts by state | ||||
Number of coops by state by month | ||||
Number of coops by month | ||||
Cenex management expense billing | ||||
Detailed operating expense | ||||
Detailed operating expense comparison | ||||
Itemized expenses | ||||
Year-end Financials Statements | Cofina’s year-end is September 30. The audit of the financial statements needs to be completed prior to the Annual Meeting of members. This meeting is usually held late November/early December. | |||
The auditors will attend a Board meeting prior to signing off the accounts in order to present a report of their findings. | ||||
Cofina is not required to file its accounts with any regulatory bodies. |
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Loan Accounting System
|
Cofina uses Sparak (Xxxxxxx) Financial Data Center in Fargo, ND for loan accounting processing. The data is entered in the Cofina office and is processed at Sparak. The Sparak (Xxxxxxx) Financial Data Center is at 0000 00xx Xxx XX, Xxxxx, XX. Data is stored at a remote location. There is a back-up data Center in Jonesboro, Ark. In the event of a disaster the fastest way to access the loan accounting system is to make the 4 hour drive or 45 minute flight to Fargo in order to process data there. The Fargo location runs two tapes at each ‘end of day’. One is kept in their office and the other is stored off-site. Month end, quarter end and year end are stored in the same manner. In house storage is kept for two weeks. | |
Funds Flow
|
Cash Management is currently done through Xxxxx Fargo and M&I Bank. Wire Transfers are processed through the Xxxxx Fargo Bank System and the M&I Wire Transfer System. Balance Reporting is also carried out using these systems. Deposits come into Cofina and are delivered to Xxxxx Fargo by messenger. A Lock Box has been set up at M&I Bank to handle deposits. Cofina will receive an e-mail providing all the information needed to process the checks deposited in the Lock Box. Electronic Funds Transfers move between CHS, Land O’ Lakes, Agriliance and Cofina daily. In the event of a disaster an authorized person would call Xxxxx Fargo and/or the M&I Cash Management Representative, giving name and passwords, in order to receive balance reporting. Wire transfers will also be made by phone. Cofina currently phones in any wire that does not have a repeat code. Repeat codes are stored in both cash management systems and also in the Cofina custody vault file. It is Cofina policy to set up repeat codes for any wire that will be sent more than one time. If carrying out the cash management functions by phone is not feasible the money desk administrator can go to Xxxxx Fargo or M&I Bank to do them. Both banks are within 20 miles of Cofina’s office. |
134
Computer Network
|
Cofina uses the Land O’ Lakes Network for email, and Microsoft products. The laptops and workstations (hardware) are supported by Land O’ Lakes also. Land O’ Lakes is located in Arden Hills, MN about 20 miles from the Cofina office. The network is backed up each night in Arden Hills and remote storage is used. If Cofina had a disaster mid-day it would lose current days data. In the event of a disaster Cofina would need to replace its computers and use the remote dialup to get into email, etc. Remote dialup can be done from anywhere. | |
Notes
|
Original Notes are held in safekeeping at Xxxxx Fargo Bank Asset Backed Securities Custody Vault located at 000 Xxxxxx Xxxxxx, Xxxxx XXX, Xxxxxxxxxxx, XX 00000. Notes can be retrieved within four hours if need be. A copy of each note is kept at Cofina in a fireproof file. Notes and all key original documents will be moved from Xxxxx Fargo Bank to US Bank Custody Vault in St Xxxx, MN. | |
Fax Machine
|
Within four hours Metro Sales (located in Minneapolis) will set up a new fax machine with Cofina’s current fax numbers in order to receive borrowing and repayment notices, which are critical to the operation. | |
Cell Phones
|
All staff members have a cell phone, office numbers will be transferred to cell phones which would be used in case of a disaster. | |
Address and Phone Numbers
|
The Cofina Borrower, Staff, and Board directory along with important contacts are kept in the safekeeping in the bank custody vault. This file can be retrieved within four hours. | |
Personnel
|
The staff of Cofina are employees of CHS. There is a Management Services Agreement between Cofina and CHS which authorizes CHS to provide necessary personnel and services to effectively support the operation of Cofina. CHS is directed to support Cofina in full compliance with the latter’s Articles and By-laws. CHS is reimbursed monthly for all costs incurred by Cofina which include site rental, salaries, and benefits. |
135
General | Cofina operates as a cooperative, adhering to Federal Cooperative Law requirements, complemented by Cofina’s By-Law stipulations, to allocate its earnings (patronage refunds) to customers who have participated in the business operations, by paying interest. Cofina is required by law to pay 20% of these patronage refunds in cash. Ten percent of earnings remain unallocated and are retained in the equity base of Cofina, to support the capital needs of its ongoing and anticipated business. | |||
One of the objectives of the Cofina Board is to have current users providing the capital needs of the business. To accomplish this objective, the Board annually establishes its stock retirement objectives. However, equity retirement decisions are at the sole discretion of the Board of Directors. | ||||
Authority | The Cofina Board of Directors has the sole authority to retire retained equities. Retirements of previously allocated customer stock shall be made consistent with the requirements of this policy. | |||
Criteria | The Board utilizes the following criteria in making equity retirements: | |||
• | No general equity retirement shall be made, unless Cofina has adequate levels of capital to support its existing funding needs. | |||
• | No general equity retirement shall be made when an evaluation of asset quality in the portfolio identifies potential losses that exceed the allowance for loan losses. |
136
• | No general equity retirement shall be made in cash, to a customer/shareholder that has not satisfied the repayment requirements and other conditions of its loan agreement with Cofina. An exception can be made to these criteria if those violations have been documented and waived by Cofina. | |||
The Board of Directors has the authority to change these criteria or use other criteria in making general equity retirement decisions. |
137
General
|
Cofina follows these practices when making equity retirements that would be paid to customers which are liquidating their businesses and assets. Customers receive patronage based on the annual interest on loan(s) they have with Cofina. These investments often represent a significant asset for the customers. | |
Authority
|
The Cofina Board of Directors has sole authority to make equity retirements to customers in liquidation. Liquidation includes both court supervised and customer directed. | |
Criteria
|
In most cases, retirements to customers in liquidation will be part of the general equity retirements that apply to all customers. The annual retirements for liquidating customers/shareholders remain at the sole discretion of the Cofina Board of Directors. | |
In these cases, the loan officer must recommend whether an equity retirement will be applied against Cofina loans or returned to the customer to settle other debts or equity claims. Generally, if there are Cofina loans outstanding, cash paid on retirements should be applied to outstanding loans. |
138
General
|
1099PAT tax forms are mailed out to Cofina customers prior to January 31 each year, which based on the patronage allocation received. 1099PAT is sent via electronic transmission to the IRS. | |
Authority
|
The Cofina Board of Directors approve the patronage allocation which is taxable. | |
Criteria
|
The Xxxxxxx Financial E-Bond modual is used to produce the 1099PAT forms as well as sending the electronic transmission to the IRS. |
139
* | Quantity Comparison of Grain Sales compared to Other Sales of the Cooperative |
||
* | Qualitative Review by the Loan Officer |
Liquidity |
||||
Current Ratio |
>1.1 | |||
Working Capital/(Supply Sales + 20% of Grain Sales) |
7 to 10 | % | ||
Seasonal Loan/Working Capital |
<4.0 | |||
Accounts Receivable Under 60 Days |
>85 | % | ||
Accounts Receivable Over One Year |
<1 | % | ||
Inventory/Sales |
5 to 10 | % | ||
Solvency |
||||
Net Worth/Total Assets |
50 to 75 | % | ||
Local Net Worth/Local Assets |
>50 | % | ||
Local Net Worth/Term Debt |
>1.25 | |||
Term Debt/Local Net Worth |
<80 | % | ||
Term Debt/Fixed Assets + Working Capital |
<75 | % | ||
Loan Balance/SRV |
<75 | % | ||
Profitability |
||||
Local Savings/Sales |
>0.5 | % | ||
Return on Local Net Worth |
>10 | % | ||
Return on Fixed Assets & Working Capital |
>10 | % | ||
Return on Local Assets |
>10 | % | ||
Cash Flow |
||||
Term Debt/Net Funds Available |
<3.5 | |||
CPTD/Net Funds Available |
<70 | % | ||
Net Funds Available/CPTD |
>1.5 | |||
Operation |
||||
Salaries & Benefits/Gross Income |
<40 | % | ||
Distribution Expense/GM |
<50 | % | ||
Bad Debt/Sales |
<0.1 | % |
140
A1 | A2 | A3 | M4 | S5 | ||||||||||||||||
Grain |
>1.50 | >1.30 | >1.15 | >1.0 | <1.0 |
X0 | X0 | X0 | X0 | X0 | ||||||||||||||||
Xxxxx |
>2.0 | % | >1.0 | % | >0.5 | % | >0.0 | % | <0.0 | % |
141