Helping You Meet Today's
Financial Challenges

by George Putnam, acting president and CEO, Yankee Farm Credit

Many of you are facing more challenging financial circumstances in 2006 than you did in 2005. This is particularly true in the dairy industry, but it is also true for others as well. How can we at Yankee Farm Credit help?

Unfortunately, we do not control the general level of interest rates, and when market interest rates increase, we must also increase our rates to keep the association viable. But we try to reduce the burden. For example, you may recall that we did not follow one of last year’s 0.25 percentage point market increases. Plus when we do follow market rate increases, we generally wait until the first of the following month. This makes our interest rates more competitive. Our average variable interest rate in 2004 was 0.05 percentage points above commercial bank prime. In 2005, it was 0.15 percentage points below prime. And it is 0.27 percentage points below prime to date in 2006.

"We will redeem two years of allocated surplus again in 2006.  This will mean $2.2 million of cash to members, in addition to the $2.6 million in cash patronage refunds that we paid in March."

You may also recall that about a year ago we redeemed two years of allocated surplus, rather than our normal one-year redemption. Because the association is strong, we will redeem two years of allocated surplus again in 2006. This will mean $2.2 million of cash to members this year, in addition to $2.6 million in cash patronage refunds that we paid in March.

We will pay allocated surplus from 2000 at the end of August and allocated surplus from 2001 at the end of September, which will be the last of the allocated surplus. We will have no more allocated surplus redemptions after this year. We plan, however, to continue our cash patronage refund program, with payments of about 1.0 percent of average loan volume each year.

We can also work with many borrowers who are experiencing financial difficulty by restructuring their debt. If you are experiencing financial difficulty, here are two suggestions to consider that will help us help you:

• Communication: Keep your loan officer informed of your financial challenges. Like you, we don’t like negative surprises, and are much more likely to be able to help if we are consulted early, before a small problem becomes a crisis.

• Records: Keep good records, and incorporate them in your communications with your loan officer. Good records show us that you know what’s going on in your business. If you need assistance with your records, we can certainly help. Ask your loan officer about our record-keeping service.

I want to note that many of you are already very good at communications and records, and we thank you.

Whatever your circumstances, all of us at Yankee enjoy working with you to meet your current financial needs and fulfill your plans for the future.   

This letter appeared in the Summer 2006 issue of Financial Partner (F.P.) magazine, Yankee Farm Credit's customer publication. Click here if you would like to start receiving F.P. magazine in the mail.

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