Building Your Equity - Member Equity Program
What is the Member Equity Program?
The Member Equity Program allows members to share in the operating surplus of Sandhills Credit Union through allocations to their equity account.* The allocation of the surplus earnings will be credited to a Member Equity account and retained as equity.
The Member Equity Program is intended to:
- Allow members to share in the financial success of Sandhills Credit Union through a patronage allocation.
- Increase the sense of member ownership by building a sound, locally owned and controlled financial institution.
- Increase the amount of Sandhills Credit Union's equity to:
- Build member confidence in Sandhills Credit Union
- Continue to provide the products and services that meet our members' needs
- Provide for long term stability
- To build membership share equity to 3% of Sandhills Credit Union assets.
- Contribute to the credit union reaching a 10% equity target in the next ten years.
* based on interest paid on loans and earned on investments.
What type of accounts qualify for the Member Equity Program?
Participation in the Member Equity Program is of significant benefit to members and we are pleased to automatically extend participation in surplus earnings to our members. Personal, trust, farm and business accounts are eligible. Certain classes of loans or deposits may be excluded from participation at the discretion of the Board of Directors. Non-members who do business with Sandhills Credit Union, do not qualify.
Do all Members have to participate?
Members may be excluded from participation in the Member Equity Program under special conditions, for example, tendered accounts or accounts where special quotations are involved. Individual members may also request not to participate and no allocations will be credited to them.
Does all savings, term deposit, RRSP and RRIF interest qualify?
All savings and term deposit interest received during the year qualifies and any allocations made will be credited to a Member Equity account. RRSP and RRIF interest is NOT eligible.
Does all loan interest qualify?
All loan interest paid during the year qualifies, including mortgages and lines of credit.
How will I receive payment?
A Member Equity account will be set up for qualifying members, in which your equity payment will be deposited.
All patronage allocations will be credited to the Members Equity accounts until the total in all Member Equity account reaches 3% of Sandhills Credit Union's assets, and the Credit Union reaches a 10% equity position.
Will allocations be paid each year?
Annual allocations are contingent on the surplus earnings of Sandhills Credit Union each year and will be paid at the discretion of the Board of Directors.
Can a Member withdraw these funds at anytime?
Total Member Equity must reach 3% of Sandhills Credit Union's assets, before any equity will be paid out.
Prior to that time if an individual Member Equity account triggers one of the following exceptions, it will be withdrawn as follows: **
- Once a Member Equity account reaches $10,000, any balance over $10,000 will be automatically paid out.
- When a member reaches age 69, they can apply to have all equity in their Member Equity account paid out monthly or annually over a 5-year period. Once application has been made, subsequent payments will be made in cash.
- Deceased or bankrupt members will receive pay out of equity within 30 days of closing the account.
** Payouts from your Member Equity account are not taxable income.
What type of statements will be received and how often?
Member Equity information will be included on your December consolidated statement.
Are Member Equity funds at risk?
Because these accounts are true equity, they are considered risk capital and, therefore, are not guaranteed. However, it is unlikely that the Member Equity accounts would be called on. Sandhills Credit Union has millions of dollars of retained earnings and reserves. These reserves would have to be depleted first.
What about income tax?
Allocations to members based on interest earned on savings, CAIS or term deposits are taxable. Therefore, any allocation based on savings, CAIS or term deposit interest is included on T5 income tax slips issued by Sandhills Credit Union.
An allocation based on interest paid on a loan or line of credit is only taxable if the loan was for a tax-deductible expense, as in the case of farm and business loans. It is the responsibility of the member to determine whether the allocation is taxable or not and report it on their income tax returns.
However, payouts from your Member Equity account are not taxable income.
Why doesn't the credit union charge less on loans and/or pay more on savings and term deposits so there is no operating surplus?
This would be ideal. However, the Credit Union is subject to fluctuations in interest rates, as the economy changes. Therefore, it is essential that the Credit Union build in a margin of safety to be able to handle these fluctuations. The Member Equity Program helps provide stability by building equity and yet allows the membership to share in the operating surplus.
You can share in the financial success of Sandhills Credit Union.
For more information, contact us at Sandhills Credit Union.