about Patronage Refunds
When a customer borrows from Yankee Farm Credit, they become an owner and member of the cooperative. As stockholders, borrowers are entitled to share in the financial success of the cooperative.
A patronage refund is similar to a dividend paid on other types of stock. However, because of Yankee's cooperative ownership structure, a patronage refund has two unique features:
- Refunds are based on “patronage” — the amount of business that the member does with the cooperative. Patronage refunds correspond to the interest earned on the member’s loan, not to the value of the member’s stock.
- Refunds are taxed just once — at the member level. Most corporate earnings are taxed twice: first at the corporate level (before dividends are paid out), and again at the stockholder level (where stockholders pay tax on dividends received). Because Yankee is a cooperative, we can distribute earnings to stockholders without paying taxes at the “corporate” level, thus allowing our members (who must pay tax on their patronage refund) to receive a larger share of the Association’s net income.
As a borrower, how do I benefit from patronage refunds?
Your patronage refund reduces the effective cost of borrowing from Yankee. You begin by borrowing at competitive rates, and then you earn money on the interest you pay. In effect, the refund lowers your effective interest rate.
How much can I expect to earn?
Refunds vary, depending upon earnings and the overall financial goals of the organization. In some years, no refunds may be awarded. Keep in mind that refunds reduce the effective interest rates on loans. The 2013 patronage refund, for example, reduced average member interest rates by about 26%.
In recent history, how much has Yankee distributed to its members in patronage refunds?
Since 1995, Yankee Farm Credit has distributed more than $53 million in patronage refunds to its members. In fact, we have distributed a patronage refund every year for the past 23 years.
Are patronage refunds paid in cash?
Cooperatives may pay a portion of patronage refunds in cash and a portion in allocated equities. Since 2002, Yankee has paid patronage refunds 100% in cash.
Who receives patronage refunds?
All stock-owning borrowers whose loans generated interest income for Yankee Farm Credit during the year. (Refunds of $10 or less are not distributed.)
For more information about patronage refunds and other Farm Credit services, contact any local office (White River Junction, 802.295.3670; Middlebury, 802.388.2692; St. Albans, 802.524.2938; Newport, 802.334.8050; or Chazy, N.Y. 518.846.7330).