Question: "Then, tell me about the '80s. What happened? What was the situation that brought on the difficult times in your estimation?"
   Kelly: "Well it was partially the bankers' fault and partially the operators' fault. The bankers were doing what we call collateral lending. And if you had a piece of ground and it was worth X number of dollars, we'd loan you 60 per cent and let you buy another piece of ground. And that just kind of snowballed. We didn't look at cash flow lending. All of a sudden when the cash flow stopped, they couldn't make their payments – nobody could make their payments – so the value of the land went way down... Bankers were really hated by a lot of people. [It was] really vicious. And that was probably the toughest time in my banking career was about five years in the early – First half of the '80s was about as tough as it was to live in an agricultural community and go to church with these people. See them at school events and still have to make some tough decisions...
   "We've had some tough years here in the last two or three years, but the value of land has stayed up because, now, most financial institutions are doing what we call cash flow lending. So while you may be in trouble this year, you're not losing your land, you're not in jeopardy of losing your land and therefore forcing the value of land down."
   Question: "How does cash flow lending work? I think people will understand how the collateral [works] – if you've got something that's worth something that's that what you use as collateral against the loan."
   Kelly: "We have to have collateral. But when you come in and you're a farmer and you say, 'I need $200,000 to operate this year. I need $50,000 worth of equipment. I'll pay you back over five years and I want to buy a piece of land for $200,000, I'll pay you that over 20 years.' So, okay, at the end of this year, we want you to have enough money to pay off the $200,000 operating, one-tenth of your machinery, and one-twentieth of the land. If you've got cash flow to do all that, you're in good shape to do the same thing next year. But if you run short, then what do you do? Maybe you can't make the land payment. Maybe you can't make the equipment payment. Well, if you've got enough collateral, maybe you can spread it out and borrow some more money. You can do that for two or three years. But if your cash flow year after year doesn't pay the bill, then you better take a look at your operation and do something different. But you've got a little more time when you do it on cash flow lending, because we know within a year that you're having a problem."
   Question: "Okay. Do you have to know almost as much about farming as the farmer in order to make a good decision?"
   Kelly: "We really do. We have to have some experts on our staff that really understand all the chemical issues, the seed issues, the agronomy. They kind of speak a language all their own. And I was born and raised on a farm, but I can not talk that language because it's changed so much."

Kelly Holthus – Cash Flow Lending, Now


Other Excerpts from Kelly Holthus' Interview:

Pearl Harbor
Effect of the War
War to a 10-year-old
Bomber Crash
School Consolidation
Wartime Labor Shortage
Postwar Boom
Banking in the 40s
Importance of Irrigation
Water Contamination
Split Brakes
Victory Gardens