Why borrow from a cooperative? What are the benefits of a cooperative?
Customer-owners have:
- A voice/vote in governance issues;
- Products and services are customized to meet your needs;
- And most importantly you share in the financial success of the cooperative.
Unlike other lending institutions, when you borrow from AgHeritage Farm Credit Services you become part owner. Therefore, you share in the benefits of ownership.
What is a Patronage Program? And, why has AgHeritage Farm Credit Services adopted this program?
The AgHeritage Farm Credit Services Board of Directors has adopted a program, the Patronage Program, which returns a portion of the association’s net earnings back to our eligible customer-owners.
Because of our long-term commitment to our customer-owners, we have built a financially strong financial institution. We have reached a point in our growth and financial position where we can return a portion of our earnings to our customer-owners while maintaining financial strength. It is the intent of the Board to make payments 100% cash.
To determine the total amount of patronage to be paid, the Board of Directors must fulfill its fiduciary responsibility to retain adequate earnings to assure the financial strength of the association. Earnings above this retained amount will be available for distribution to eligible customer-owners. The AgHeritage Farm Credit Services Board of Directors intends to have a long-term, sustainable patronage program and plans to pay patronage each year unless some significant and unforeseen event occurs.
AgHeritage Farm Credit Services will continue to offer the most competitive rates up front. We will not raise rates to pay for patronage.
What determines Patronage Program payments? Who is eligible?
Patronage Program payments will be based on the amount of net interest income earned on each eligible customer-owner’s loans during the plan year. The more business a customer-owner does with AgHeritage Farm Credit Services, the greater the financial benefit from patronage.
To be an eligible customer-owner, you must have loans which are in good standing as determined by the association. Customer-owners who have only crop insurance business with AgHeritage Farm Credit Services are not eligible for patronage.
Are Patronage Refunds taxable? Will I receive tax notification regarding my qualified Patronage Refund?
Yes, cash patronage refunds are taxable to recipients. Eligible customer-owners should include the patronage payment in their taxable income and should consult with their tax advisor regarding their specific situation.
IRS Form 1099-PATR will be sent to all recipients each January in the year following the actual patronage payment.
How does the Patronage Program benefit AgHeritage Farm Credit Services?
Patronage refunds can help AgHeritage Farm Credit Services reduce its tax expense and preserve a strong capital position. An association with a strong capital position is better able to offer competitive interest rates.
What is the bottom line on patronage refunds?
The bottom line on patronage refunds is “You are paid back for having your loans with AgHeritage Farm Credit Services.” The Patronage Refund is one of the many great benefits to being a customer-owner of AgHeritage Farm Credit Services. Because AgHeritage Farm Credit Services returns a portion of its earnings to you according to the amount of business you do as a stockholder, you see a significant reduction in your effective interest cost. In other words, you save money.
This information is a summary of the program. Customer-owners can receive a copy of the “obligating resolution” passed by the Board of Directors by contacting Chris Hanner, AgHeritage Farm Credit Services, Controller, at 501-210-4000 or 1-800-299-2290.
