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The Patronage Program - Commonly Asked Questions
The following are commonly asked questions regarding the Patronage
Program. Click to have each answered.
- What is an Erickson Credit Union share?
- What is a Common Share?
- What is the Common Share Subscription Plan?
- Is there a maximum dollar amount on my Common Share
Account?
- Are there dividends paid on my Common Share Account?
- How do I redeem my Common Shares?
- What is a Non-Redeemable Patronage Shares?
- Is there a maximum dollar amount on my Non-Redeemable Patronage Shares
Accounts?
- Can I purchase additional Non-Redeemable Patronage Shares?
- Are there dividends paid on my Non-Redeemable Patronage Shares Account?
- How do I redeem my Non-Redeemable Patronage Shares?
- Are Common and Non-Redeemable Patronage Shares covered
by Deposit Insurance?
- What is the Patronage Refund?
- How is the Patronage Refund calculated?
- How is the Patronage Refund Paid?
- What are the Tax Consequences?
- Summary
1. What is an Erickson Credit Union Share?
Your shares represent your ownership in the Credit Union. Erickson Credit
Union is owned 100% by our members and as such is responsible to our
member's needs and our members share in our profits (see patronage refund
below). Each member is entitled to one vote at membership meetings held
to elect our board of directors and consider any special resolutions.
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2. What is a Common Share?
Your common share is the $5.00 share you purchase when you open your
membership in addition to the shares you purchase through the common
share subscription plan. The Credit Union will pay the initial $5.00
share for Fat Cat and Headstart Accounts.
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3. What is the Common Share Subscription Plan?
Each month $2.50 is transferred from your account to purchase additional
Common shares to help build the equity of the Credit Union*. A strong
equiy position allows the credit union to take advantage of future business
apportunities to improve service to our members.
*Not applicable to Fat Cat, Headstart, Non-Profit, Trust, Insured Savings
Accounts and Members over the age of 65.
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4. Is there a maximum dollar amount on my Common
Share Account?
Yes, once your Common Share account reaches $200 the $2.50 monthly transfer
stops and your account is capped. You can purchase up to the $200 cap
in Common Shares at any time.
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5. Are there dividends paid on my Common Share
Account?
Yes. Once each year the Board of Directors can declare a dividend on
Common Shares. In the past this dividend has been based on the previous
year's average 5-year term deposit rate and paid in March. The
dividend is used to purchase additional Non-Redeemable Patronage Shares
for the member if the dividend exceeds $0.99.
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6. How do I redeem my Common Shares?
Common Shares are redeemed when all accounts of a member are closed
or when a member reaches age 65 all Common Shares other than the basic
$5.00 share may be redeemed by the member, providing that at least $200
is left with the Credit Union in the form of either Common or Non-Redeemable
Patronage Shares. Such redemption of shares would preclude the member
in participating in future patronage allocations.
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7. What is a Non-Redeemable Patronage Share?
Your Non-Redeemable Patronage Share account accumulates from the following:
1) Dividends paid on Common Shares.
2) Patronage refund based on interest paid or interest earned.
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8. Is there a maximum dollar amount on my Non-Redeemable Patronage Share Account?
No, Non-Redeemable Patronage Shares accounts are unlimited.
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9. Can I purchase additional Non-Redeemable Patronage Shares?
No, Non-Redeemable Patronage Shares can only be earned as indicated above.
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10. Are there dividends paid on my Non-Redeemable Patronage Share
Account?
No, the Non-Redeemable patronage Shares are not currently paid a dividend.
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11. How do I redeem my Non-Redeemable Patronage Shares?
The Board of Directors can approve a redemption annually in December
on Non-Redeemable Patronage Shares in the following instances:
- Completed estate accounts.
- When a member closes their membership and has moved away from the
area.
- After 5 years when a member closes their membership and has not
moved from the area.
- Upon bankruptcy or to satisfy writs of seizure as required by law.
- Upon written requests from charities and other non-profit organizations.
This would preclude participation in any further patronage allocations.
- If member is over age 65 and they leave a minimum of$200.00 in
Common or Non-Redeemable Patronage Shares they can redeem the excess. This will preclude
participation in any further patronage allocations.
- The Board of Directors may also annually declare a general percentage
redemption of Non-Redeemable Patronage Shares depending on the overall equity position
of the Credit Union.
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12. Are Common and Non-Redeemable Patronage Shares covered by Deposit
Insurance?
No, all Credit Union deposits other than Common and Non-Redeemable Patronage Shares are
100% covered with deposit insurance by Credit Union Deposit Guarantee
Corporation.
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13. What is the Patronage Refund?
As an owner of the Erickson Credit Union you are entitled to a share
of the profits of the Credit Union. The Patronage Refund is how we pay
you your share of the Credit Union's profits.
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14. How is the Patronage Refund calculated?
Each year the Board of Directors sets aside a portion of the Credit Union's
profit to be distributed as a Patronage Refund. Each member's share
of the Patronage Refund is based upon the interest earned on deposits
(excluding R.R.S.P.'s and R.R.I.F.'s.) and interest paid on
loans or mortgages. An example will help to clarify:
Example: Interest Paid
In 2007 the Patronage Refund on interest paid was 8.46%. Thus, for every $100 in interest paid, a member would receive $8.46 in patronage refund. If “Member A” had a $50,000 mortgage at 6.25% in 2007, they would have paid approximately $3,125 ($50,000 x 6.25%) in interest. Their Patronage Refund would be $264.37 ($3,125 x 8.46%). ”Member A’s” net mortgage rate after the Patronage Refund would be 5.72% (($3,125 - $264.37)/$50,000). This equates to a 0.53% saving on their mortgage rate!
Example: Interest Earned
In 2007 the Patronage Refund on interest earned was 25.43%. Thus for every $100 in interest earned, a member would receive $25.43 in Patronage Refund. If “Member B” had a $10,000 term deposit at 3.5% they would have earned $350 ($10,000 x 3.50%) in interest. Their Patronage Refund would be $89.00 ($350 x 25.43%) “Member B’s” total return on the term deposit including the Patronage Refund would be 4.39% (($350.00 + $89.00)/$10,000). This equates to a bonus of 0.89% on their interest rate!.
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15. How is the Patronage Refund Paid?
As indicated above, your Patronage Refund is used to purchase additional
Non-Redeemable Patronage Shares for your account.
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16. What are the Tax Consequences?
The dividend on Common Shares as well as the Patronage Refund
on interest earned is taxable as interest income in the year received
and will be included on your T5. The Patronage Refund on interest paid
by a member should be netted out with the interest that is being claimed
as an expense on your tax return. If you do not claim your loan interest
as an expense on your tax return there are no tax consequences to the
Patronage Refund on interest paid.
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17. Summary
Our Patronage Program was set up to earn our members money by returning
a portion of the Erickson Credit Union's profit to our members while
at the same time building the equity of the Credit Union to ensure financial
strength and security. Should you have any questions on how our Patronage
Program works do not hesitate to contact us.
Question List
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