PATRONAGE REFUNDS

What are the benefits of being a Farm Credit member?
One of the most important benefits of being a Farm Credit of South Florida, ACA member-borrower is that you stand to share in the Association's profits. Most businesses return profits to their investors, not their customers. Farm Credit of South Florida, ACA 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.

What is a patronage refund?
A patronage refund is a way of distributing the association's net income to member-borrowers. A borrower's refund is based on the proportion of interest earned on his loan to the total interest earned by the association. This refund may be paid in cash, allocated surplus, stock, or any combination of these items.

How do patronage refunds benefit Farm Credit borrowers?
Patronage refunds benefit borrowers by reducing the cost of borrowing and other financial services such as insurance. Farm Credit charges competitive rates on its loans, i.e., rates comparable to those charged by other lenders for similar loans. When you receive a patronage refund from Farm Credit, your effective cost of borrowing is reduced. Farm Credit distributes refunds based on the amount of interest earned on each member's loan, therefore, the more business you do with Farm Credit, the larger your potential patronage refund.

How is a patronage refund issued?
Refunds are most frequently in cash but may also be in allocations that may be redeemed by the board at some future date. The cash portion of a patronage refund may be issued by check or recorded to each member's equity account as Patronage Payable. Members may request a check for monies in their Patronage Payable account, request that these amounts be applied to their outstanding loan, or leave these distributions "on account" with the association. Patronage refunds issued in the form of allocated surplus can only be retired, or paid to members, upon approval of the board. Each time a patronage distribution is issued, Farm Credit will notify eligible members of their patronage refunds. Each January, Farm Credit will send each member an IRS Form 1099 for the total of all taxable patronage refunds issued during the previous year. This amount will include both the cash and allocated surplus portions of the patronage refund.