Patronage Refund FAQ
- What is a patronage refund?
- How do patronage refunds benefit AgSouth Farm Credit customers?
- How do patronage refunds benefit AgSouth Farm Credit as an association?
- What is allocated surplus?
- How can I find out more about my allocated surplus?
- How is my patronage refund issued?
- Why can’t I receive all of the patronage refund in cash at one time?
- What is the bottom line on patronage refunds?
What is a patronage refund?
A patronage refund is one of the great benefits of doing business with a cooperative. As customers and as stockholders, members share in the association’s profits. A customer’s refund is based on the proportion of interest earned on his or her loan to the total interest earned by the association. A patronage refund may be paid in cash, allocated surplus, stock or any combination of these methods.
How do patronage refunds benefit AgSouth Farm Credit customers?
Patronage refunds benefit customers by reducing their costs of borrowing. The more business a member does with AgSouth Farm Credit, the larger the member's potential patronage refund.
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How do patronage refunds benefit AgSouth Farm Credit as an association?
Patronage refunds help AgSouth Farm Credit manage its tax expense and maintain a strong capital position. A strong capital position helps all customers because it enables the association to offer competitive interest rates while ensuring a constant supply of available credit.
Unlike corporations, where profits are taxed twice - once when earned by the corporation and again when distributed to owners as dividends - a cooperative’s profits are taxed only once, when they are distributed as a patronage refund.
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What is allocated surplus?
The board of directors, which is elected by the stockholders of the association, usually opts to hold a portion of the patronage refund in the cooperative to help keep its operation on a sound financial basis. The retained portion of each customer’s patronage refund is recorded on the books of the association in each customer’s individual equity account. This retained patronage refund is called allocated surplus.
AgSouth Farm Credit’s goal is to operate efficiently and maintain a strong permanent capital base. It is the board’s responsibility to continually monitor the financial position of the association. The board then determines if and when to retire allocated surplus, and the oldest series of allocated surplus must be retired first.
The Patronage Refund History chart reflects a six-year history of allocated surplus revolvements. During those six years, over $65 million has been revolved or retired in cash. Remember, however, that all revolvements are determined by the board of directors and are based upon the board’s assessment of the financial performance and future capital needs of the association.
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How can I find out more about my allocated surplus?
If you want to know the details about any allocated surplus on your account - such as amount or year it was issued - you can contact your local branch office. Also, in January of each year, customers receive member’s equity statements that detail the amounts.
You may also want to sign up for ACCOUNT ACCESS. ACCOUNT ACCESS is an Internet-based method for you to view not just the detail of your equity with the association, but also principal and interest balances and payment due dates. To sign up for ACCOUNT ACCESS visit our home page.
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How is my patronage refund issued?
The cash portion of your patronage refund may be issued to you by check or recorded on the association’s books in a special account called patronage payable. The board sets a minimum check amount as a way of controlling expenses. Cash distributions below the minimum are set up in the patronage payable account.
Members may request the monies in their patronage payable account in the form of a check, have the funds applied to their loans or leave these amounts “on account” with the association.
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Why can’t I receive all of the patronage refund in cash at one time?
Patronage refunds issued in the form of allocated surplus can only be retired or paid to members upon approval of the board. Under the association bylaws, the association cannot honor requests from members to retire the individual allocated surplus accounts, and no retirements may occur sooner than five years after the initial issue date.
Each time a patronage refund is issued, AgSouth Farm Credit will notify eligible members of their patronage refunds. The notification will include a breakdown of the amount paid in cash (by check or patronage payable entry) and the amount paid in allocated surplus.
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What is the bottom line on patronage refunds?
The patronage refund program is one of the great benefits of doing business with AgSouth Farm Credit, as it reduces a member's overall cost of borrowing. The next time you sit down to write a check to another lending institution, ask yourself a question: “How much of this interest payment will this bank be returning to me?” If your answer is “NONE,” then you should consider doing more of your business where you are a stockholder - AgSouth Farm Credit. Remember, you own the Association, and you share in the profits.
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