"We Put Our Profits In Your Pockets"

As an agricultural credit cooperative, AgCarolina Financial is owned by the member-borrowers who purchase stock/participation certificates in the cooperative. After each fiscal year, our board of directors may choose to retain the net income of the association to strengthen our capital position or distribute some or all of the net income to members by declaring a dividend on stock or a patronage refund.

The distribution of profits to our members effectively reduces the cost of borrowing money. Our members own the bank, and thus, share in the profits.

Frequently Asked Questions

What are the benefits of being a Farm Credit member?

One of the most important financial benefits of being a member-borrower with AgCarolina Financial 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 AgCarolina Finanical, you become an owner of the business and are therefore entitled to share in the profits of the association.

At the end of each fiscal year, AgCarolina Financial 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 portion of, or all of the net income to members by declaring a dividend on stock or declaring a patronage refund.

What is a patronage refund?

A patronage refund is a way of distributing the association's net income to its member-stockholders. A member's refund is based on the proportion of interest earned on his or her loan to the total interest earned by the association. Patronage refunds are paid in cash. A patronage refund is a way to get back a portion of the interest you paid on your loan.

How do patronage refunds benefit AgCarolina Financial borrowers?

Patronage refunds benefit borrowers by reducing their cost of borrowing. AgCarolina Financial charges competitive rates on its loans/rates comparable to those charged by other lenders for similar loans.

However, a major difference between AgCarolina Financial and other lenders is the return of profits to its borrowers. When you receive a patronage refund your effective cost of borrowing is reduced.

Since AgCarolina Financial distributes refunds based on the amount of interest earned on each member's loan, the more business you do, the larger your potential patronage refund.

How do patronage refunds benefit your local Farm Credit association?

Patronage refunds can help your local Farm Credit association reduce its tax expense and maintain a strong capital position. This helps the entire membership because an association with a strong capital position is better able to offer competitive interest rates and ensure a constant supply of credit.

Unlike other corporations where profits are taxed twice (when earned by the corporation and when distributed to owners as dividends), a cooperative's profits are taxed only once when they are distributed as a patronage refund.

AgCarolina Financial is allowed a tax deduction for the amount of net income that it distributes in the form of a qualified patronage refund. Therefore, to effectively manage the association's tax expense and maintain a strong capital position, the board of directors may elect to distribute taxable earnings to members as a qualified patronage refund. A qualified patronage refund is one in which at least 20 percent of the total net income is paid in cash.

What is nonqualified retained surplus?

The association may elect to issue a portion of net earnings as nonqualified retained surplus. These equities are also recorded in each members name in the records of the association. The association's board of directors considers nonqualified retained surplus as earnings permanently invested in the association. As such, there is no plan to revolve or redeem nonqualified retained surplus. If the association were to liquidate, any outstanding nonqualified retained surplus would be subject to distribution in accordance with the association's bylaws.

How is my patronage refund issued?

Each time a patronage distribution is issued, AgCarolina Financial will notify eligible members of their patronage refunds. Your patronage refund may be issued to you by check or recorded on the association's books in a special account.

Your board of directors may elect to set a minimum check amount as a means of controlling expenses. Cash distributions below the minimum check amount are recorded in a special account called patronage payable. On notification of patronage refund, refunds placed in patronage payable appear under "Not Distributed."

Members may request a check for monies in their patronage payable accounts, request that these amounts be applied to their loans, or leave these distributions "on account" with the association.

Will I receive a tax notification regarding my patronage refund?

Yes. In January, AgCarolina Financial will send you an IRS Form 1099. This form will show the total of all taxable patronage refunds issued to you during the previous year.

What is the bottom line on patronage refunds?

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 a question: "How much of this interest payment will this bank be returning to me?" If your answer is "none," then maybe you should consider doing more of your business where you are a stockholder - AgCarolina Financial. Remember, you own the bank and you share in the profits.

Click here to review our patronage refund history.