Credit Union and Cooperative Patronage Refunds - Filene ...

As we visited with Hanson, it was difficult to ignore the institutional
tone that is created from paying a patronage refund to members.
Patronage refunds championed by the board and management make
member ownership feel more real for members. Hanson emphasized
that, aside from the issue of being accountable to members, the
important thing to note is that patronage refunds are a differentiator
and distinguish the credit union from IOF firms.
Wright-Patt Credit Union, Inc.
Our conversation with Tim Mislansky, senior vice president and
chief lending officer, may have been the most exciting because the
payment of patronage refunds is a relatively new practice at Wright-
Patt Credit Union, Inc. Mislansky told us that patronage refunds
were not necessarily top of mind at Wright-Patt until its management
determined that they were a mechanism for managing the
credit union’s capital growth.
Management had been trying to control the credit union’s growth in
capital by lowering service fees and other rates. But as fees and rates
were lowered, the credit union’s capital and its success continued to
grow, which prompted some directors to tease whether management
had solved Wright-Patt’s issue of excess capital.
Wright-Patt management requested that Callahan consultants
provide information about patronage refunds for management’s
consideration. Management had already developed a sophisticated
stakeholder model including (1) members, (2) employees, and
(3) the Credit Union. Management proposed that Wright-Patt dovetail
patronage refunds into its stakeholder model, and the Board of
Directors reviewed and adopted management’s recommendation.
Wright-Patt is not identified in the Callahan 27 credit unions,
and Mislansky brought to our attention that not all credit unions
separately account for patronage refunds from dividends in the call
reports that are submitted to the NCUA. Wright-Patt reports its
patronage refund with the dividends it pays on shares.
Wright-Patt is located in Fairborn, Ohio, and operates 24 branch
offices. As of December 31, 2010, Wright-Patt had over 202,320
members (15% of potential members), 428 full-time employees,
total assets of nearly $2.0B, and total loan volume of $1.12B. Membership
grew by 8.59% in 2010. Douglas Fecher is Wright-Patt’s
chief executive officer.
Wright-Patt’s average annual cash patronage refund over the last
three years was $3,751,478, and its earnings (including the refund)
averaged $19,867,464 during that time. So over the past three years,
Wright-Patt has paid an average of 18.88% of its earnings in cash on
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