By TIM THORNBERRY
Kentucky Correspondent

LOUISVILLE, Ky. — Christmas was more than a month ago, but customers of Farm Credit Services of Mid-America (FCS) received a late gift in the form of interest rate reductions.

The announcement, made last week, detailed a decrease approved by FCS’ board of directors and management, of 0.35 percent on all existing loans, creating an annual savings to customers of $43 million, according to information from the agency. The reduction will take place on Feb.1 and will include rates on all new loans, as well.

“This is a special and unique action that we are able to take because of the fundamental strength of our cooperative,” said Paul Bruce, senior vice president of Finance and chief financial officer. “We are able to pass along this savings because of some extraordinary earnings events and because our cooperative has performed well financially over the last several years.

“These rate adjustments will provide additional flexibility for our customers to withstand market volatility. This is something we’re pleased to do, and this is the right time to do it.”

FCS spokesperson Randy Barbee said the unusual move was in direct relationship to the kind of lender FCS is and its connection to customers. “We had some extraordinary earnings and what we are is a cooperative, so that all went into capital and this is just managing a capital position. It was a good year,” she said.

“The board manages that capital and wants to keep it at a certain threshold. It was going over that threshold because of all the earnings, so that’s why they reduced the rate.”

Barbee added this isn’t the first time a rate reduction has taken place, the last coming about 10 years ago. She also said the reaction from customers has been one of disbelief, since they have to do nothing but enjoy the rate reduction.

“There’s no refinance, there are no fees, this will just occur automatically,” Barbee said. “For the most part we operate on the co-op’s principles that say our stockholders are the people who are our customer-members, and we want to put money in their pockets.”

FCS serves more than 92,000 farmers, agribusinesses and rural residents in Kentucky, Ohio, Indiana and Tennessee, providing loans for all farm and rural living purposes including real estate, operating, equipment and housing and related services such as crop and life insurance and vehicle, equipment and building leases. Bruce said the action is an example of the company’s dedication to its members.

“This rate rollback and the future adjustment of interest rates is just one more tangible benefit in a long line of actions by Farm Credit over the last 25 years to provide lower interest rates to farmers and rural America, and build a cooperative with capital strength,” said Bruce. “It’s also an indicator of our commitment to both current and future members.”

FCS board Chair Ed Yanos of Cambridge City, Ind., echoed those sentiments and said this rate drop, along with the last one, indicates the difference between FCS and banks.

“When you realize how we operate differently than a bank, that we focus on the member and not the stockholders, the rate reduction that we offered in 1999 where we were able to save every member on their existing loans and the rate reduction we are going to offer this February, taking 35 basis points off of every loan, really differentiates us and saves our customers millions of dollars,” he said.

“It gives (customers) an incentive to be members of our association. It’s something I’m really proud of.”

For more information about Farm Credit, call 800-444-FARM (3276) or go online to www.e-farmcredit.com