We put our profits in your pockets.®
As a member-borrower of Farm Credit, one of the most important financial benefits is sharing in the profits of the association through our patronage program. Patronage reduces the cost of borrowing by returning a portion of our net income to our borrowers based on the proportion of interest paid on their loan and total interest earned by the association. Calculate your refund.
Frequently Asked Patronage Questions
- 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 Horizon Farm Credit, you purchase stock – $1,000 or 2% of your loan, whichever is less. That makes you a member-stockholder, which qualifies you to share in any patronage payments.
While we are committed to the cooperative principle of returning patronage, we cannot guarantee a payment. If a loan or other obligation is in default (or otherwise considered in non-accruing status), any part of the patronage distribution due to the member may be applied to that member’s indebtedness to the Association.
- 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 Horizon 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.
- How do patronage returns benefit Farm Credit borrowers?
Patronage returns benefits to member-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. Horizonx 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 do my patronage checks get refunded to me?
Your patronage return may be issued to you by check, direct deposit via ACH, 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.
How to sign up for ACH to get your patronage check directly deposited into your bank account:
Call your local office or your loan officer at 888.339.3334.
You'll still receive a "stub" in the mail to keep for your records, but now you can enjoy your patronage check the same day it's issued!
- When will I get my first refund?
Based upon Farm Credit’s operating results, you may be eligible to receive your first payment the year after you take out a loan.
- 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.
- Definitions to Know
- Cash – the amount of patronage refund that is returned the year it is declared by the board of directors. This amount is taxable the year you receive it.
- Allocated Surplus – the retained portion of each member’s patronage refund used to keep the association’s operation financially sound. It is recorded on the books, or allocated to each member’s equity account. There are two types: Qualified and Non-qualified.
- Qualified Allocated Surplus – the portion that is returned to you when approved by the board of directors. The goal is to revolve these payments in the shortest amount of time. Historically, this has been returned within a five-year period. This, of course, is subject to the current economy and the long-term stability of your cooperative. After all, being here in the long-haul is what’s most important and Qualified Surplus helps us do that. This amount is taxable to you in the year declared.
- Non-Qualified Allocated Surplus – the portion that is returned to you when approved by the board of directors. The goal is to revolve these payments in the shortest amount of time possible. This amount is taxable the year it is returned to you.
- Non-Qualified Retained Allocated Surplus – the portion that is permanently retained by the association to keep it operating financially sound. This amount is not meant to be returned to members.
- How did patronage change in 2021?
Beginning with the March 2021 patronage distribution, we switched to an all cash patronage model. This is a result of your Association's strong financial position and above-threshold capital level. This new model allows us to distribute more to our members earlier in the year and at one time, as opposed to several smaller payments throughout the year.
- What happened to my Non-Qualified Allocated Surplus (NQAS)?
NQAS was issued up until 2015, and has been steadily paid out since that year. As of December 2020, all remaining NQAS was distributed to members who held loans during the timeframe in which the NQAS was retained (up until 2015).
- Patronage is a great benefit of being a Farm Credit member, but are future distributions guaranteed?
Patronage is awesome, but it's important to remember past distributions are not indicators of future ones. All patronage distributions are at the discretion of the Horizon Farm Credit Board of Directors.
Calculate Your Refund
Here is your estimated Patronage Distribution: ESTIMATED PATRONAGE
After receipt of your distribution, patronage effectively lowers your total interest cost for the first year of your loan from $XXXXX to: EFFECTIVE INTEREST EXPENSE
This effectively lowers your interest rate from XXXX to: EFFECTIVE INTEREST RATE
*Results based on 10-year average refund totals. Past performance not a guarantee of future payouts. Calculations do not account for time value of money or distinguish between returns made in cash and in allocated surplus. Talk to a loan officer for details.
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