One of the most important benefits of being a Farm Credit of Florida member-borrower is having the opportunity to share in the Association’s profits. Most businesses return profits to their investors, not their customers. Farm Credit of Florida returns its profits to its customers. That is the cooperative way of doing business, because our customers own the business. At the end of each fiscal year, Farm Credit determines its net income and distributes these earnings to its member owners in accordance with the Association’s bylaws.
The board of directors can elect to:
- Retain a sufficient portion of the net income to strengthen and preserve the association’s capital position, or
- Distribute the remaining net income to borrowers by declaring a patronage refund.
AgFirst Farm Credit Bank and the Farm Credit of Florida board of directors can elect to retain all of the net income to strengthen the Association’s capital position, or distribute some, or all, of the net income to members by declaring a patronage refund, otherwise known as dividends.
How Does Patronage Distribution Work?
Let’ say that you borrowed $100.000.00 on January 1, 2005 with an interest rate of 7.0%, to mature one year later, with interest due of $7000. Assume that patronage is paid at a rate of 30% of interest accrued on the loan, and that 30% of your patronage was paid in cash on March 1, 2006. If the Board of Directors approved payment of the remaining 70% in surplus allocated on February 1, 2013, your effective interest rate would have been reduced to 5.95%.
Payment of patronage refund and surplus allocated are subject to annual Board of Director approval. Actual effective rate may vary according to individual fees, stock purchases and your income tax rates. Since 1988, patronage distribution has ranged from 6.83% to 48.35% of interest accrued during the year. Farm Credit of Florida pays a patronage refund every year.