Delivering Cooperative Value
Why does AgCountry offer a Patronage Program?
Patronage is one of the special benefits of doing business with a customer-owned financial institution. Also, AgCountry is able to offer a cash patronage program because of the financial strength we have achieved. This strength helps us remain financially strong to overcome unexpected changes in the agricultural economy while supporting future business growth.
What is patronage based on, and how is it calculated?
Patronage will be distributed for patronage eligible business in proportion to the average daily balance during the year for each patronage eligible loan. Generally speaking, patronage eligible business are loans in good standing which are originated by AgCountry. This was specifically defined by the Board of Directors in the resolution that created the patronage program.
Recognizing that our existing “Consumer Home Loans” have been originated through a separate program with special pricing, underwriting and compliance requirements, the patronage calculation for such loans also takes into account an adjustment whereby the patron’s dividend is arrived at by multiplying the ADB amount by a percentage (not to exceed 100%) corresponding with the 2018 year-end return on assets for the Consumer Home Loans. The Board approved this mechanism to better ensure an equitable contribution to retained earnings from these loans while still paying patronage to our patrons based on the value and volume of business. Consumer Home Loans includes only those patronage eligible consumer loans secured by a dwelling originated pursuant to the AgCountry Consumer Home Loan Program and the United FCS Consumer Home Loan Program.
How and when will patronage for a given year be determined?
At the end of each calendar year, the Board of Directors will assess, among other factors, the association’s capital position, earnings, and asset growth outlook, and will determine if a patronage distribution is to be made and set the amount to be distributed.
How will the patronage program affect my interest rates?
Your Board’s stated intent is to not increase interest rates in order to pay patronage. In keeping with this philosophy, AgCountry will first and foremost maintain a competitive pricing program and distribute patronage from any earnings in excess of those needed to maintain a strong capital position and financially sound business.
Will patronage payout be consistent year-to-year?
No. Patronage will likely vary as the earnings and capital needs of the cooperative change.
Do I have to pay taxes on patronage payments?
Yes. Patronage distributions are taxable and eligible customers should generally include the patronage payment in their taxable income. We encourage you to consult with your tax advisor about your specific situation.
Will I receive a tax notification regarding my patronage?
Yes. Each January, AgCountry will send an IRS Form 1099-PATR to you. This form will show the total of all patronage issued to you during the previous calendar year.