CoBank is a cooperative, owned by the customers it serves.  In general, each domestic customer owns a minimum investment in the bank of $1,000 or two percent of their loan, whichever is less. As a patronage paying cooperative bank, your effective cost of borrowing is reduced at year-end through the payment of a patronage refund. 

Annually, CoBank's board of directors reviews our capital adequacy plan, including the bank's capital plans.  At that time, target equity levels and other elements of the capital plan are determined. Your investment is directly tied to the amount of money you have borrowed and is based on an averaging formula. Under the CoBank loan-based capital plan, no equity purchases beyond the initial minimum are required: all additional equity is accumulated from patronage refunds. The required capital level, which is 10.0% of your historical five-year average loan balance through year-end 2007, is accumulated through equity as a patronage refund.

In March, patronage refunds are paid, partially in cash and partially in stock. The minimum cash required to be paid is 20% of the total refund.  One method of measuring the benefit of patronage refunds and the capital plan is by computing the net effective interest rate.