Yankee Farm Credit, ACA, the region’s largest agricultural lending cooperative, recently distributed $2.37 million to its members who borrowed from the cooperative.

Dean Moreau, Yankee Farm Credit’s President and Chief Executive Officer, said that Yankee mailed out checks to 1,340 borrowers on March 25, an average of $1,768 per member. The checks represent patronage refunds which, in effect, allow Farm Credit borrowers to share in the cooperative’s 2002 earnings.
Moreau explained, “The patronage refunds which we provide to members are based on the profits that our association generated from loan volume last year. This cash patronage effectively reduced average loan rates to members by approximately one full percentage point.”

Moreau added, “When Yankee Farm Credit has a successful year, patronage refunds represent one of the big advantages of borrowing from your local agricultural cooperative. One of the reasons Yankee has been successful is due to a very high quality loan portfolio because our borrowers have a superior track record in honoring their obligations.”

Yankee Farm Credit, ACA, provides loans and financial services to farmers and other operators of agricultural businesses (e.g., nurseries, orchards, lumber mills) throughout Vermont, much of New Hampshire and northeastern New York.

Yankee offers fixed and variable rates on short- and long-term loans, plus a full range of competitive financial services, including leases, lines of credit, tax planning and preparation, financial record-keeping services, appraisals and credit life insurance.

For more information about Yankee’s patronage program and financial services, call any local office (White River Junction, 802.295.3670; Middlebury, 802.388.2692; St. Albans, 802.524.2938; Newport, 802.334.8050; or Chazy, N.Y. 518.846.7330).

Patronage Refund Fact Sheet

General information
When a customer borrows from Yankee Farm Credit, the borrower becomes a member of the cooperative and a stockholder entitled to share in the financial success of the cooperative.

A patronage refund is similar to dividends paid on other types of stocks. However, because of Yankee's cooperative ownership structure, a patronage refund has two unique features:

• Refunds are based on "patronage." This means that a member’s refunds correspond to the interest earned — or "patronage" — on the member’s loan during the year, not to the value of the member’s stock.
• Patronage refunds are taxed just once — at the member level. Most corporate earnings are taxed twice: first at the corporate level (before dividends are paid out), then at the stockholder level (where stockholders pay tax on their earnings.) Yankee Farm Credit is a cooperative, so it can distribute earnings to stockholders without paying taxes at the "corporate" level. This means that members (who must pay tax on their refunds) receive a larger share of the organization's net income.

Common questions
As a borrower, how do I benefit from patronage refunds?

Your patronage refund reduces the effective cost of borrowing from Yankee. You begin by borrowing at competitive rates, and then you earn money on the interest you pay. In effect, the refund lowers your effective interest rate.

How much can I expect to earn?

Refunds vary, depending upon earnings and the overall financial goals of the organization. It is possible that in some years there may be no patronage refunds. However, Yankee Farm Credit has distributed patronage refunds every year since 1995.

Keep in mind that refunds reduce the effective interest rates on loans. The 2002 patronage refund reduced average member interest rates by about one percentage point.

In recent history, how much has Yankee distributed to its members in patronage refunds?

Since 1995 Yankee Farm Credit has distributed $9.88 million in cash patronage refunds to its members. In fact, we have distributed a patronage refund every year for the past 8 years.

Who receives patronage refunds?

All stock-owning borrowers whose loans accrued interest on the association’s books during the year. (Refunds of $10 or less are not distributed.)

Why doesn’t the association lower interest rates and eliminate the patronage refund program?

Investors, who provide the funds that we lend to borrowers, look at the ability of the association to generate earnings. Earnings are necessary to build and maintain capital and loss reserves sufficient to withstand the down cycles of the ag economy. Our demonstrated ability to generate earnings results in lower cost funds, which we pass on to member-borrowers.

For more information about patronage refunds and other Farm Credit services, contact info@YankeeACA.com.

© 1999-2003 Yankee Farm Credit, ACA. All rights reserved.