As a cooperative, FCS Financial borrowers are members of FCS Financial. You share in our success through our patronage program. Patronage sets us apart from a traditional lender. The benefits of the patronage program are explained below but if you have additional questions, please contact us.
How FCS Financial’s Patronage Program Benefits the Member-Owner
FCS Financial is a cooperative organization dedicated to our members and their rural communities. We remain financially strong and serve as a local resource vested in our member’s past, present and future
In December 2016, FCS Financial’s Board of Directors made a Patronage Declaration that will return more than $12.5 million to member-owners in cash patronage for the 2016 calendar year. The patronage program allows our member-owners to share in the success of the association. Since 2006, we have returned more than $73 million to our member-owners.
Celebrate Customer Appreciation and pick up your patronage check at your local FCS Financial office on March 21, 2017.
Member-owners are invited to attend a Customer Appreciation Day on March 21 from 10 a.m. – 6 p.m. at their local FCS Financial office (or other location depending on facility) to pick up their patronage check. It is not required to attend to receive your check. Those who do not attend will receive their check by mail after April 3.
Frequently Asked Questions
What is the FCS Financial Patronage Program?
The board has determined that the association’s patronage payments from 2016 net earnings will be in the form of cash and the amount paid will be based on the member-owner’s contribution to net interest margin.
Who is eligible for the 2016 patronage program?
Typically, all member-owner loans that were capitalized in 2016 by stock or participation certificates are eligible for patronage, except in the following circumstances:
• Loan is in non-accrual status and past due at the end of the year;
• Loan has been partially or fully charged off; and/or
• Loan has a dollar or less of average daily balance.
For details on how the 2016 Patronage Program applies to large loan accounts, contact your FCS Financial loan professional.
Do insurance-only member-owners qualify for patronage?
No. Member-owners who only have crop insurance relationships with us do not qualify for patronage. Insurance law prevents us from distributing insurance income directly to the member-owner who generates that income.
Do lease member-owners qualify for patronage?
Leases originated in participation with Farm Credit Leasing do not qualify for the patronage program.
How much will FCS Financial disburse?
We will disburse approximately $12.5 million. Since 2006, we have disbursed more than $73 million.
How much will my patronage check be?
Patronage payments are based on the amount of net interest margin generated on an eligible member-owner’s financing during the calendar year for which the patronage is calculated. So while each eligible member-owner’s payment will be different, those who have more loan volume outstanding for the full calendar year with us will tend to benefit more from the patronage program. However, all eligible member-owners will receive a minimum amount of $20.
Does the patronage program pay out capital that has been earned over a number of years from long-time member-owners?
No. The tax code governing patronage programs requires that current year earnings be distributed to the member-owners who generated the earnings in that year. Capital that has been accumulated from prior years’ earnings cannot be distributed through a tax qualified patronage program.
When will the 2016 patronage checks be distributed?
The 2016 cash patronage checks will be available at the FCS Financial office that services your loan beginning March 21, 2017. Your branch office will host a member appreciation day on March 21, 2017, providing you an opportunity to visit with staff and pick up your patronage check. However, you do not have to attend the member appreciation event to receive your check. Any checks that are not picked up will be mailed by April 3, 2017.
Who will be the payee on the patronage check?
The patronage check will be made payable only to the primary member-owner as reflected in the Association’s records.
Is the cash patronage payment taxable?
Yes. The cash patronage payment is taxable and eligible member-owners should generally include the cash patronage payment in their 2017 taxable income. We encourage you to consult with your tax advisor about your specific situation. Non-corporate member-owners will receive an IRS 1099-PAT form early in 2017 for the cash patronage paid in 2017. IRS regulations do not require distribution of 1099-PAT for corporations.
Why does FCS Financial offer a patronage program?
As a cooperative, the FCS Financial patronage program allows our member-owners to share in our success. In December 2016, the Board of Directors made a Patronage Declaration that will return more than $12.5 million to our members in cash patronage for the 2016 calendar year. Since 2006, we have returned more than $73 million to our member-owners.
Why is FCS Financial paying patronage especially considering the current economic environment?
We pay patronage because we are a cooperative that shares its profits with its members. When you finance through us, you become a member of our cooperative and may be eligible to receive the benefit of patronage.
The economic environment was considered by the board when they made the decision to pay patronage. At the end of each year, the board carefully reviews our financial situation and the business plan projections before deciding to pay patronage. Based on the level of net earnings generated in 2016 and our financial strength, the board determined we could pay patronage for 2016.
Will FCS Financial pay patronage next year from the association's 2017 net earnings?
Our focus is to proactively manage the business for the positive outcome of our member-owners and the organization. Whether that outcome is to pay patronage or to retain those earnings in capital will be a board decision made at the end of 2017 after our financial results for the year are known. Future distributions will continue to balance our growth, earnings and other business conditions. For this reason, we cannot guarantee patronage payments for any given year.
It is apparent that the pace of economic issues surfacing in today’s environment is unparalleled. These issues will certainly be considered and factored into the board’s decision at the end of 2017.
Why doesn't FCS Financial lower interest rates and eliminate the patronage program?
Our board and management look at the financial environment and offer competitive rates. Then if we have strong results, a portion of our earnings may be shared with our member-owners. The patronage program allows the board to determine the amount of cash patronage when the financial results for the year are known.
Additionally, offering below-market rates would be a risk for us. By law, we cannot offer interest rates that are below competitive market rates. Our financial results are not certain at the beginning of the year, and offering below-market rates could have an adverse effect by potentially lowering our ratings from our regulator and district funding bank, which could possibly lead to higher funding costs for our borrowers.
Why doesn't FCS Financial distribute all of its earnings in cash?
Retained earnings not distributed for cash patronage help us build the necessary capital to fund future growth and the development of new products and services our member-owners need to succeed in the future. A strong capital position allows us to continue offering competitive rates and strengthens our ability to withstand the economic cycles in agriculture.
How does the patronage program benefit FCS Financial?
The cash patronage program benefits us by reinforcing our cooperative status, maintaining member-owner relationships, and differentiating us from other competitors in the marketplace.
Will FCS Financial pay cash patronage every year?
We cannot guarantee a patronage payment every year. If a patronage distribution is declared in future years, the amount and specifics of the program will be determined at the end of each year based on a variety of business and economic factors. Future distributions will continue to balance our growth, earnings and other business conditions. It is the board’s intent to run the business soundly for the benefit of all members and rural America.
Have more questions?
Contact the FCS Financial office that services your loan and talk to your loan officer. They’ll be happy to discuss the benefits of patronage distributions.