Many credit unions make annual plans to issue patronage dividends, but few follow through with it, according to a new survey by research and consulting firm Callahan & Associates.

The survey of 466 credit union CEOs and CFOs found that about 40% of credit unions make plans annually to issue patronage dividends if they meet certain thresholds, but only one in 10 actually pay out a dividend.

The results highlight an ongoing controversy in the industry over the value of patronage dividends.

“Credit unions see both pros and cons when it comes to patronage dividend payouts,” Callahan stated. “On the positive side, dividends build loyalty, are great publicity, provide value and are a good way to manage net worth and equitably return excess capital. Negatively, they can be open to misinterpretation, difficult to track, and if done once, members are likely to expect them in the future.”

A full 59% of credit unions don't include a patronage dividend in their annual budgets, the study said. The majority (59%) also don't include a patronage dividend FAQ, and 77% don't give members a dividend calculator to determine what a patronage dividend might be.

Of the credit unions that do pay patronage dividends, 91% use direct deposit. However, 90% said they don't discuss paying a dividend with their credit union regulator before implementing their programs.

Credit union CEOs and CFOs most often look to net worth ratio, ROA and ROE before deciding to pay a patronage dividend, the study said. Budget indicators and net worth ratio were the top benchmarks used to determine when to issue those dividends.

When it comes to calculating the amount of the dividend, respondents said the biggest factors are loan interest, relationship levels/number of accounts, first mortgages and auto loans.