Since 1953, CoVantage Credit Union ($1.2B, Antigo, WI) has called the north central Wisconsin city of Antigo home. And like its surrounding rural farming and lumbering region located approximately 160 miles northwest of Milwaukee, CoVantage is steeped in tradition.
One of these traditions is an annual patronage payment to members in the form of loan interest rebates and savings bonuses.
CoVantage returned $1.7 million to members in 2014 — marking the 33rd consecutive year the board approved patronage payments. Over the past 10 years, CoVantage has returned $15.05 million to members.
“We had a group of early board members who thought of this as a way to share the success of the credit union with our members,” says Sherry Aulik, the credit union’s senior vice president and chief administrative officer who has been with CoVantage for 28 years. “We stopped the program for a while but revived it in 1982. We have been providing patronage ever since. We have a 33-year track record.”
Incentives for Borrowing and Saving
CU QUICK FACTS
Data as of 06.30.15
HQ: Antigo, WI
12-MO SHARE GROWTH: 6.79%
12-MO LOAN GROWTH: 9.29%
The program has two components — a loan interest rebate for those who borrow and a bonus on dividends earned for those who save. CoVantage started the program as a loan interest rebate for members — to date, 85,446 spread across 21 counties including the Michigan Upper Peninsula — and added the savings bonus in 2008.
Borrowers in 2014 received a rebate of 4.5% of the total interest paid on qualifying consumer, home equity, in-house mortgage, credit card, and commercial loans as well as a 4.5% bonus on interest earned on regular savings, term share certificates, and variable rate accounts.
To illustrate, a member who paid $5,000 in interest on a CoVantage home loan would be eligible for a rebate of $225 on that loan. The member could also earn a return on credit card interest, commercial loan interest, and savings interest. That all adds up to a significant payment at the end of the year.
“It’s a way to encourage our members to place more business with us,” Aulik says. “If they keep more of their loans and shares with us, they have the potential for a large loan interest rebate and a larger savings bonus.”
“They’re loyal to us,” Aulik continues. “That’s why we’re able to provide the patronage.”
According to a 2012 Callahan & Associates study, 215 credit unions in 2012— or 3.1% of the industry — refunded $52.1 million in loan interest rebates. Although savings bonus payments are more difficult to track, they’re definitely the exception rather than the rule.
Aulik says CoVantage’s patronage payout clearly differentiates the institution from area banks, as she’s not aware of any competitor that matches it. And the member testimonials the credit union uses for radio and online ads invariably reference CoVantage’s patronage payments.
“We get a lot of testimonials along the lines of, ‘We get some of the best loan rates in the area from CoVantage and we also love getting our rebate check at the end of the year,’” Aulik recalls. “The rebate checks have been a way to differentiate CoVantage in the marketplace.”
The Check Is In The Mail … Sort Of
Although it has become a tradition, the annual year-end payment is not guaranteed.
“The decision to pay patronage is something our board decides on an annual basis,” Aulik says. “First the board wants to make sure we’ve put enough money into reserves to keep our credit union strong.”
In the past, CoVantage mailed paper checks to members. But the cost to send checks increased with the growing membership, and members complained about having to cash or deposit their checks.
“We now deposit the rebates or bonuses directly into their share accounts,” Aulik notes. “But we want to let members know about the value we’re providing, so we’ve continued to mail letters thanking them for their patronage and letting them know we couldn’t do it without them.”
The Dec. 31 direct deposit gives members the flexibility to decide whether to apply the windfall to their next loan payment, save it, or withdraw it. And the coordinated mailing helps make sure members fully understand the benefit.
Last year, CoVantage mailed 23,000 loan interest rebate letters and 6,000 savings bonus letters — each one containing a non-negotiable check with a personalized “Paid to the order of …” line and a note that “Your loan rebate of ___ has been deposited into your account below.”
The yearly mailing also includes a letter from president and CEO Brian J. Prunty along with an explanation of how the credit union calculated the rebate or bonus.
“We do see the branding value of that physical ‘check’ being in people’s hands, so we’ve held on to that,” Aulik says.
Returning Value to Members
To qualify for the patronage payout, a member's loans and other accounts must be current at year-end and patronage must have totaled at least $5.00. Benefits aren’t eligible for student loans and secondary market mortgages, IRAs, HSAs, checking, and some other types of deposit accounts.
Patronage payouts might be a high-profile member benefit at CoVantage, but according to Aulik, it is just one pillar in the overall program of serving members.
“As a member-owned financial cooperative, we need to find a way to provide value to our members,” she says. “We do that every day by keeping loan rates low, not charging many fees, and paying high rates on deposit accounts. This is just an extra way of returning value to our members.”