MidAtlantic Farm Credit announced an extra patronage distribution of over $10 million in cash to its customers this month.
“Our patronage program is something truly unique to the Farm Credit System,” says Tom Truitt, CEO of MidAtlantic Farm Credit. “We are proud to be able to return over $10 million in cash directly to our customers, their families, and our local communities this month.”
MidAtlantic Farm Credit is a part of the national Farm Credit System. Their territory covers portions of Delaware, Maryland, Pennsylvania, Virginia, and West Virginia. Farm Credit is a member-owned cooperative, comprised of associations that are able to share a portion of their annual profits with their member-borrowers. Each association determines its total income and expenses at the close of each fiscal year. Once all expenses are deducted, the net income remaining can be distributed in accordance with the association’s bylaws.
Historically, MidAtlantic Farm Credit has returned patronage twice a year – once in April, which is determined upon the cooperative’s net income and borrower’s usage from the year prior, and again in December, which is based off of the cooperative’s net income and borrower’s usage from previous years. “With the challenges our industry faced in 2018, and the uncertainty of what is to come, our board of directors voted to return this additional special patronage distribution to help our members position themselves for future success,” adds Truitt.
In 2018, the Association distributed over $37 million in cash to its member-borrowers. For more information about Farm Credit’s structure and patronage program, please visit mafc.com/about/patronage.
Frequently Asked Question:
I have been getting a check in February the last few years. Why does my February Patronage check amount vary with each passing year?
Each year from 2002 until 2014, your Board of Directors paid out member’s annual patronage in both cash and Nonqualified Allocated Surplus (NQAS). The NQAS, was used to build capital for MAFC during a time of loan growth.
(NQAS is essentially an IOU due to you, the member, and has historically has been returned to you in cash at a later date.)
Since 2015, the Board has made annual patronage disbursements to members in the form of cash and has not issued any NQAS.
Each year, the Board evaluates MAFC’s current financial position and, based upon positive financial results and a solid capital position, have been paying out those IOUs by paying out in cash prior year declared NQAS. Historically, these distributions were paid in December. This year, like the past several years, we have been financially sound enough to be in a position to distribute an additional cash payment in February.
The Association still has NQAS from 2012, 2013 and 2014, which is available for future cash distribution, which the Board plans to consider annually going forward for extra distribution. Depending on each’s year’s financial analysis and given the current revolvement projections, all NQAS is expected to be paid out by 2022.
MidAtlantic’s philosophy regarding the percentage of earnings to pay out for cash distributions has been to consider the revolvement of NQAS in tandem with the annual patronage cash distribution. The amount received by each member can and often will vary depending upon the individual’s contributions to the association’s earnings and for that specific year the patronage was declared. Once all the NQAS has been returned, the Association intends to pay out cash patronage once a year in April.