At Cape Fear Farm Credit, you own the bank, so you share in the profits.
The use of patronage refunds makes a significant reduction in your effective interest cost and saves you money. The next time you sit down and write a check to another lending institution, ask yourself, "How much of this interest payment will the bank be returning to me?" If the answer is "None," you should consider doing more of your business where you are a stockholder.
Learn more about Patronage
A patronage refund is a way of distributing the Association's net income to its member-stockholders. A member's refund is paid according to the accrued interest earned on his or her loan. A patronage refund is a way to refund a portion of the interest you paid on your loan.
One of the most important financial benefits of being a Farm Credit customer-owner is having the opportunity to share in the Association's profits. Most businesses return their profits to their owners, not their customers. When you borrow from Farm Credit, you become an owner of the business, and entitled to share in the profits of the Association.
How do patronage refunds benefit Farm Credit borrowers?
Patronage refunds benefit borrowers by reducing their cost of borrowing. Farm Credit charges competitive rates on its loans/rates comparable to those charged by other lenders for similar loans.
However, a major difference between Farm Credit and other lenders is that Farm Credit returns its profits to its borrowers. When you receive a patronage refund from Farm Credit, your effective cost of borrowing is reduced.
Since Farm Credit distributes refunds based on the amount of interest earned on each member's loan, the more business you do with Farm Credit, the larger your potential patronage refund.
How is a patronage refund declared and distributed?
At the end of each fiscal year, Farm Credit determines its total income and expenses. Income remaining after all expenses are deducted (the net income) can then be distributed in accordance with the association's bylaws. The Board of Directors can elect to retain all of the net income to strengthen the Association's capital position, or distribute a percentage of the net income to members by declaring a dividend on stock or declaring a patronage refund.
Once a patronage refund is declared by the Board of Directors, each branch will coordinate their patronage distribution event.