Friday, January 9, 2009

Interest Rates

The following letter is being mailed to members with the next monthly billing statement:

January 9, 2009

Dear Member,

I wrote to you last fall about the current problems in the financial markets. [see here and here] Credit markets are not yet back to normal, but the situation has improved. I want to assure you that the Farm Credit System has plenty of money available to lend. The Farm Credit System as a whole is sound, and Yankee Farm Credit in particular is sound. We continued to do business as usual all through the worst of the financial crisis last fall, and we are still doing business as usual today.

Today I am pleased to write that Yankee decreased its variable interest rates to members by 0.75% effective January 1. This was in response to a 0.75% decrease in the commercial bank prime interest rate following action by the Federal Reserve on December 16. Our variable interest rates are presently the lowest in the history of Yankee (which was formed in 1995). Indeed, I have searched the historical files, and I cannot find a time when Farm Credit’s average variable interest rate to members was lower than it is today, not even in the 1930s.

Let’s hope that we are not about to repeat the 1930s. We know, however, that many of you are facing difficult financial times. Economic conditions in the two main industries that we serve, dairy and timber, are poor. Dairy is likely entering its worst year since 2006, which was the worst year in at least the last 30 years. The timber industry has been suffering for several years along with the housing industry, with no recovery in sight.

If your business is facing financial difficulties, please give us a call to see if we can help. We may be able to consider a variety of options, including additional funds, reamortizations or principal deferments. Each customer is unique, so please call your loan officer to discuss what might be appropriate for your situation.

We understand that balance sheets may temporarily deteriorate during downturns. This is regrettable, but a strong business will bounce back when better economic conditions return. We’ll be here in the good times, too—to help you reach your financial goals, which may include rebuilding equity, enhancing liquidity, improving profitability and growing your business.

Best wishes for 2009, and thank you for your continued support and patronage.


George S. Putnam
President and CEO