Patronage Program

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. Scroll to learn more and read frequently asked questions.

Patronage Example

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.

How do patronage returns benefit Farm Credit borrowers?

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.

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 NON-taxable when distributed among member-borrowers as a patronage return. Horizon 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 will I receive my patronage?

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 our Customer Care team 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!

I'm not sure how I chose to receive my patronage. How can I find out?

Those who would like to confirm the method by which their payments will arrive may do so by calling 888.339.3334.

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 if I chose to receive patronage via ACH deposit and the checking account information on file for me is out of date?

If the ACH deposit cannot be received by the account on file, a hard copy check will be issued to you and sent through the mail.

I have signed up for ACH deposit and am seeing an empty deposit of zero dollars. What is this?

Members who have elected to receive patronage through ACH deposit will often notice a test of the system, which appears as a zero deposit and occurs several days prior to the actual deposit. Please don’t worry if you see this activity; it’s an indication that your deposit is on its way!

What types of transactions do not qualify for patronage distributions?

Leases, consumer purpose loans; insurance sales; loans with unique pricing or risk characteristics that the Association designates, in advance, as not eligible for patronage.

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.
  • Special Patronage – special patronage from AgFirst has been included in patronage disbursements to members, comprising as little as 17% to as much as 70% of their total patronage payment in the last ten years. Special patronage reflects the bank's earnings. Decisions on special patronage are made by the bank. AgFirst has the option to retain these earnings to fund future growth, return them in the form of cash to HFC, or to return them to HFC in the form of bank stock. Many factors, including market conditions and interest rates, play a significant role in earnings by both the Association and the funding bank, which, in turn, may impact the patronage being distributed. Past patronage distributions are not a guarantee of future disbursements. 
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 Board of Directors, whose objectives are to ensure financial stability, fund future growth, and maximize returns to members.

Patronage distributions for the last two years have been at all-time highs, due to the strong performance of both legacy Associations as well as Horizon Farm Credit's funding bank, AgFirst.

Many factors, including market conditions and interest rates, play a significant role in earnings by both the Association and the funding bank, which, in turn, may impact the patronage being distributed. Past patronage distributions are not a guarantee of future disbursements.

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 of distribution totals. Past distributions are not a guarantee of future distributions. Calculations do not account for time value of money or distinguish between returns made in cash and in allocated surplus. Please contact us for additional details.

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