The majority of Yankee’s loans, nearly two-thirds of our portfolio, are dairy loans. While we pride ourselves in being the Northeast’s top dairy lender, we also know that, from a portfolio management perspective, a heavy concentration in any one industry has the potential to negatively affect our earnings and financial strength.

To meet the credit needs of dairy customers and to diversify our portfolio, we purchase parts of loans from CoBank, the national bank for cooperatives, in a variety of other industries.

As "Chart 1: Yankee’s Total Portfolio"

illustrates, purchased loans now account for about 7 percent of our total portfolio or $18 million. Our total loan portfolio is $269 million.

Ken Buzzell, vice president of the Newport branch office, is our participation loan officer. Ken participates in weekly conference calls with Farm Credit loan officers from across the Northeast, as members of the Northeast Association Participation Pool (NEAPP). CoBank in Denver (also our funding source) presents credit packages to NEAPP for the group to discuss and select the participation loans that they will recommend to their association for purchase.

Yankee’s decision to purchase — or not to purchase a participation loan — is driven by credit factors that are very similar to those that we use for local loan decisions. Ken presents a summary of each participation loan’s strengths and weaknesses to the association’s professional loan committee. The committee reviews many of the loan’s criterion, including its financial condition, potential repayment ability, overall risk assessment, yield, commodity type and location.

We participate in a wide range of loans and are interested in diversifying the portfolio even further with additional purchases.

As you can see in "Chart 2: Participation Portfolio," we are involved in a wide range of commodities.

And "Chart 3: Geographic Distribution of
Participation Loans" illustrates that those loans are spread across the country.

By including participation loans in our portfolio mix, we follow a risk management strategy that minimizes the impact on our portfolio from any unexpected economic shock. That is, a decline in profitability for one industry does not necessarily mean that all industries will experience a similar decline. Diversifying the association’s risk over various industries and geographical areas strengthens your cooperative, and improves our ability to pay member patronage and build capital.