This Dollars and Sense column generally covers financial information, but this time we’re digging into one of the key benefits GreenStone members experience — the Patronage program.
Since GreenStone is a cooperative, owned by the members it serves, we give back a portion of our annual earnings each year to our member-owners in the form of Patronage. This Patronage program makes the cooperative unique in the ﬁnancial services industry — a ﬁnancial institution who is truly competitive in up-front interest rates and gives back a portion of its earnings to customers.
As Patronage Day 2022 is around the corner, Dave Armstrong, former GreenStone Farm Credit Services president and CEO, answered some common questions about the Patronage program, including history, the meaning behind it, and what’s going on for 2022.
What is Patronage?
Patronage is a way for cooperatives to return value back to members. At GreenStone, our customers are members in the co-op. After we pay our bills and put enough away for a proverbial rainy day, we’re able to return the rest of those earnings to our customers.
This way, we’re able to be competitive while keeping our members’ costs as low as possible. This year, Patronage is $115 million being returned in checks to our members on March 17!
Why does GreenStone pay Patronage?
As a co-op, we’re here to provide a dependable, competitive, and responsible source of credit and financial services to our owners. We’ve been focused on that for over one hundred years, and we continue to stay very focused on that today as well.
Anything we can do to reduce our members’ overall cost of borrowing, we will do. Patronage is one of those tools we use to give the most value to our members. We do our very best to price our interest rates competitively upfront; this is another way we can provide even more value to our customers.
Where does my Patronage payment come from?
Patronage comes from GreenStone’s earnings each year — this year, 45% of that earnings is going right back to our members.
We look at our financial positions, what our earnings are going to be, and we project out what we need to retain. Some of those earnings are necessary for the future, for our capital base.
Once we’ve made those assessments, our board of directors determines how much is returned in Patronage. It’s similar to a dividend on a corporate stock, or some other kind of investment relationship.
The earnings come from the interest our customers pay, as well as the fees and financial services revenue. Each member’s Patronage check is unique, because no one's loan is exactly the same as the next customer.
Those patronage payments are customized based on the loan terms and products that are specific to them.
Why doesn’t GreenStone just lower interest rates?
This is a really good question we always appreciate. GreenStone does not have all of the liquidity or all of the cash that we need to loan to our 27,000 customers. So, we borrow about 85 cents of every dollar that we loan, and that money comes from investors both internationally and domestically.
These people are investing their hard-earned money in the Farm Credit System and GreenStone to get a return on that money. They want the companies they invest in to have strong earnings. We first must demonstrate solid earnings each year, and then they really like to see us give Patronage money back after we've met our financial goals.
What’s the plan for Patronage Day this year?
Thursday, March 17, 2022, is Patronage Day, meaning St. Patrick’s Day will feel even luckier this year for our members. The GreenStone board of directors has approved $115 million in Patronage dividends to be paid to its 27,000 member-owners. But it’s not luck, it’s partnership!
Our branches will be hosting festive celebrations with customers throughout the day as we distribute checks and thank our members for their ongoing partnership with GreenStone!
We hope this answers your questions in a way that was meaningful and understandable. If you have any further questions, join us on Patronage Day or contact your local GreenStone representative.
*Written for the Michigan Farm News Dollars and Sense Column