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What is the bottom line on patronage returns?
The use of patronage returns makes a significant reduction in your effective interest cost and saves you money. Since MidAtlantic Farm Credit distributes returns based on the amount of interest earned on each member's loan, the more business you do with us, the larger your potential patronage return. Remember, you are an owner of the association, and you share in the profits.
What is a patronage return?
A patronage return is a way of distributing the association's net income to its member-stockholders. A member's return is based on the portion of interest earned on his or her loan and the eligible interest earned by the association.
How do I qualify?
When you receive a loan with MidAtlantic Farm Credit, you purchase stock - $1,000 or 2% of your loan, whichever is less. That makes you a customer-owner, which qualifies you to share in any patronage payments.
How do patronage returns benefit Farm Credit borrowers?
Patronage returns benefit borrowers by reducing their cost of borrowing.
As an example, if you paid $10,000 in interest and we declare a 20% patronage distribution, $2,000 will be distributed to you. This lowers your effective interest rate and gives you cash back.
If you'd like to see an example, call 888.339.3334. We have a patronage calculator app that will allow you to plug in the information on the loan you are looking at based on last years' results.
How do patronage returns benefit your Farm Credit association?
- Reduce tax expenses - The cooperative's profits are only taxable when distributed among member/borrowers as a patronage return. MidAtlantic Farm Credit has an allowable tax deduction based on the total amount of its net income. Profit is then distributed in a qualified form called a patronage return.
- Maintain a strong capital position - effectively managing the association's taxes helps to manage the association's capital position. This ensures the association can offer competitive rates, with a dependable supply of credit.
How is my patronage return issued?
Your patronage return may be issued to you by check or recorded on the association's books in a special account. Each time a patronage distribution is issued, Farm Credit will notify eligible members of their patronage returns. The notification will include a breakdown of the amount paid in cash and the amount paid in allocated surplus.
What's the difference between cash and allocated surplus?
Cash is the (taxable) amount of patronage to be returned each year declared by the board of directors while the allocated surplus is each member's retained portion of patronage, used to keep the association financially sound. Check out our Patronage FAQ page for more definitions!
When can I get started?
Based upon Farm Credit's operating results, you may be eligible to receive your first payment the year after you take out a loan.