How Doing Business with Cooperatives Can Benefit You!
Imagine getting a competitive upfront rate on your loans – and then getting 22 cents back on every dollar you paid in interest for the year. Seem impossible? Not with Farm Credit.
Farm Credit operates as a cooperative, which loosely defined means a group of people united to meet a common need through a jointly owned business. For Farm Credit, being a cooperative means our customers own us and are eligible to share in the profits each year. The nationwide Farm Credit System is comprised of 77 member-owned lending institutions called associations. Each association operates independently under the Farm Credit umbrella, and each distributes profits to its members through a profit sharing program known as “patronage.”
In 2016, associations in the AgFirst district – which serves much of the East Coast, including the Carolinas, Alabama and Florida – averaged a 22 percent return to customers from its annual profits. That’s a healthy return of profits – $163 million in cash to be exact – to members that has a profound impact on the communities served by the associations within the AgFirst district.
Patronage “is an example of dollars put to work in our agricultural industry and rural communities as a result of strategic vision and focus on efficiency, with a team of people who care about the customers and communities they serve in a globally competitive environment,” according to Dr. Dr. David M. Kohl, professor emeritus of Agricultural Finance and Small Business Management and Entrepreneurship at Virginia Tech.
Kohl estimates that every dollar Farm Credit returns to its customers has an estimated economic impact of $5-$10 in the communities served by the associations as a result of possible investment, spending and employment. Using those factors, last year’s $163 million cash distribution had an estimated impact of $815 million to $1.63 billion on the Southeastern rural communities served by the associations within the AgFirst district.
The impact of patronage nationwide is enormous. Farm Credit members have come to rely on patronage checks year after year as a means of effectively lowering their already competitive interest rates.
While all associations share profits with their members, because they operate individually, each has its own formula for computing the disbursement of profits. At the end of the fiscal year the Board of Directors of each association analyzes the financial position of the cooperative to determine whether the association is sound enough to pay a patronage dividend. If so, the association retains a portion of its profits from the previous year to keep the association strong and financially healthy and then returns the remainder of the profits to its members.
The results speak for themselves.
Quotes from Actual Customers:
“No other bank refunds part of my interest paid. It means a lot in these tough economic times.” – Dr. Todd Benton
“When you factor in patronage, they (the association) offer a loan package that just can’t be beat. When they say that it pays to do business with [them], they really mean it.” The Tatum Family
“I like doing business with [Farm Credit] because of the patronage program. Every year they put money back into my pocket.” – Mike McCravy
“Getting money back is icing on the cake.” – Jeff Lageman
There is a reason Farm Credit’s trademarked signature is “We put our profits in YOUR pockets!”(R)
When you get a portion of your interest returned to you each year – and then spread that money throughout your community by purchasing goods and services locally – it becomes a never-ending cycle that serves each point it touches. It’s the cooperative way. It’s the Farm Credit way. And YOU reap the benefits of the cooperative way of doing business.