We lived up to our promise

You voted for the new charter so ... a better deal is on the way to you!

by Dean W. Moreau, president and CEO, Yankee Farm Credit

First, I’ll bring you up to date on progress with the ACA* holding company.

Thanks to your overwhelming stockholder approval in October, the Farm Credit Administration granted new federal charters for Yankee PCA and Yankee FLCA. These subsidiaries became effective December 1, 2000. All mortgage loans plus other appropriate assets were transferred from Yankee ACA to Yankee FLCA on January 1, 2001. We are now fully up and running with an ACA/FLCA, while the PCA is on the shelf in case we ever need it.

Some of you have wondered with a chuckle whether or not this holding company stuff was just going back to the old PCA/FLBA days. Here’s my answer: While it looks like that from a distance, this new model is like the former PCA/FLBA on steroids!

The new structure — three different companies under one roof — lets us use the best characteristics of each corporation in a coordinated way to maximize consolidated value to shareholders. I know that is a mouthful, but here is an example. Never before have we been able to combine the tax savings of member patronage along with nontaxable retained earnings for the benefit of each ACA member. In the past, we had PCA advantages and FLBA advantages, but never a way to have all members get maximum benefits from both.

"The last stock retirement checks are coming, plus next year we will: Cash out your 1995 allocated surplus and pay allour 2002 patronage in cash ."

I promised in my last message that if you OK’d the restructuring, we would get a better deal for you. The better deal is on the way. The last stock retirement checks are coming (over $2 million this September), plus next year we will:

1. Cash out your 1995 allocated surplus (you’ll see this in September 2002)
2. Pay all our 2002 patronage in cash (you’ll see this in April 2003).

The net result is roughly 1.5 percent of average loan balances back in cash to the membership.

You’d be interested to know that the board recently poured concrete around my promise of a better deal for members. Our 2001 Business Plan has two important new objectives:

1. Yankee’s return on assets will increase from 1.50 percent to 1.70 percent
2. Yankee’s return on member equity will increase from 9 percent to 11 percent

We’ve been pretty happy with our 9 percent return on equity in 1999 and 2000 because it compared favorably with the profitability of other supply cooperatives. As we raise the bar with the new standard of 11 percent ROE, we begin comparing ourselves against the best — the U.S. equities markets. From 1926 to 2000, U.S. domestic stocks averaged an 11 percent return for investors.

Local farmer ownership, on-farm service, competitive rates, talented loan officers, skilled tax and record experts and stock market returns on your cooperative equity. Sounds like a better deal to me.

*ACA is Agricultural Credit Association. FLBA is Federal Land Bank Association. FLCA is Federal Land Credit Association. PCA is Production Credit Association.

This letter appeared in the Winter 2001 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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