Horizon Farm Credit joins with The Food Bank of Delaware to fight hunger during the holidays with a $25,000 donation.

“As a cooperative, our Association is deeply connected to our local communities,” said Tom Truitt, CEO of Horizon Farm Credit. “Our farmers have committed their lives to feeding people and serving the needs of others; supporting the great work being done by the Food Bank of Delaware is an additional way for us to honor those commitments,” Truitt continued. “We want to do all we can to ensure that our friends and neighbors have access to fresh, local, and nutritious food, especially this holiday season.”

The need for monetary and food donations is typically high during the winter months, but this year, the need is expected to be especially elevated. “We are so thankful for the support of Horizon Farm Credit,” said Food Bank of Delaware President and CEO Cathy Kanefsky. “This gift represents a commitment to the community, especially during this holiday season. We know so many in our community are struggling to make ends meet, while also thinking about where they will get resources to celebrate the holidays with family,” Kanefsky said, “this gift will give hope to so many families and allow them to enjoy this special time.”

Information about The Food Bank of Delaware can be found at fbd.org.

Horizon Farm Credit partnered with Feeding Pennsylvania, a statewide network of food banks, by donating $110,000 to fight hunger during the holidays and beyond.

“As a cooperative, our Association is deeply connected to our local communities and customers,” said Tom Truitt, CEO of Horizon Farm Credit.  “Our farmers have committed their lives to feeding people; they’re producing high quality, nutritious food and are doing so more efficiently than ever,” he said. “Despite the tireless work of our farmers, too many Pennsylvanians struggle with access to fresh, local food,” Truitt continued. “We want to do all we can to further support those facing food insecurity.”

The need for monetary and food donations is typically high during the winter months, but this year, the need is expected to be especially elevated. “With the inflation rate at its highest in 40 years, many Pennsylvanians are facing impossible choices between buying food and paying for other necessities, like rent and medicine,” said Jane Clements, CEO of Feeding Pennsylvania. “And when difficult times hit, food can be the first thing people forego to make ends meet.”

Clements went on to thank Farm Credit for being attuned to the community’s needs within its service area and for its commitment to combating food insecurity. “This generous donation from Farm Credit will support Feeding PA and our member food banks in our mission to ensure that no one in Pennsylvania goes without nutritious food, especially as we head into the holiday season."   

In today’s increasingly digital world, nearly everything in our lives exists within a phone, computer, TV, or tablet. Even kitchen appliances such as refrigerators these days now have their own digital or “smart” component. Whether we run from it or embrace it, technology is there and seems to be advancing by the day.

With all of these new tools and our increasing use of digital methods comes an increase in cyber attacks, identity theft, and hacking of information stored online. Using these exciting new technologies can be fun and make our lives easier, but when they are used to store important data and personal information, it is crucial to keep that information safe and secure.

Jeff McKay, Information Security Manager for Farm Credit, advises that today’s cybersecurity landscape is largely dominated by two things: social engineering and ransomware. Social engineering is when someone tries to manipulate you into performing an action or sharing confidential information. Cybercriminals use social engineering to access computer systems, gather information, or make money. Three of the most common methods of social engineering are malicious links, fake web pages, and impersonations.

“Social engineering is always present with criminals trying to get you to reveal confidential information through seemingly legitimate interactions,” says Jeff.

Ransomware is equally as dangerous and tends to be the leading threat users face in today’s environment. It can be delivered using multiple channels including email, pop-ups, or suspicious websites.

“At Farm Credit, we utilize firewalls within different levels of infrastructure. Traffic coming in and out of Farm Credit’s systems are continuously monitored for any kind of suspicious activity that could indicate a bad actor is trying to gain access or compromise an internal system,” explains Jeff.

Farm Credit also requires all staff to complete regular cybersecurity training and tests them to ensure they are aware of many different threats they could encounter.

Some general everyday practices and tips for keeping your data safe include:

• Double (or triple!) check links before clicking them – this can be done by hovering over a link or entering the URL directly into a separate browser. If it seems suspicious, it probably is.
• Create strong passwords…and don’t re-use. A password that is unique, and at least 12 characters long and a combination of lowercase and uppercase letters, numbers, and symbols is a smart place to start. Your passwords should be as long, complex, and random as possible.  You should avoid using the same passwords across multiple websites.
• Use multi-factor authentication, if it’s an option. This requires multiple forms of authentication such as a password or code sent to your phone via text message that you then must enter as part of the login process before you are allowed into your account. 
• Choose your own settings for data tracking when browsing the web. Most websites will ask you permission to track your activity through cookies. You can opt-out of or block most third-party cookies. If you want to only allow certain permissions, you can adjust your web browser’s settings.
• Avoid oversharing on social media. Guard your personally identifiable information by limiting what you share online. This includes being aware of subtle methods of information gathering such as quizzes that ask for personal details like your mother’s maiden name or your date of birth. Over time, cybercriminals could collect enough details to hack your accounts or steal your identity.

While cybersecurity threats are ever-present and have come to be almost routine or expected, it’s still important to stay alert – you can never be too cautious when it comes to your personal identity and information.

For more information on keeping your data secure, the Federal Trade Commission provides resources on what to do if you think your data was exposed, as well as identity theft safety and prevention tips.

For more information about Farm Credit’s privacy and security policies, visit horizonfc.com/privacy-security.

Horizon Farm Credit has announced the 2022 third quarter financial results. Net accruing loan volume for the first nine months of 2022 was $5.8 billion, an increase of 98.4 percent compared to the same 2021 period. Net interest income for the third quarter of 2022 was $42.8 million, a 119.3 percent increase from the same time period in 2021. Net income for the quarter was $34.7 million, a 152.0 percent increase compared to the third quarter of 2021, principally related to the favorable impact of the merger with legacy AgChoice Farm Credit.

“We at Horizon Farm Credit are pleased to be seeing continued growth, diversity, and investment in agriculture, which in turn, drives the financial success of our Association,” said Tom Truitt, Horizon Farm Credit’s Chief Executive Officer.  “Our performance is reflective of our members’ performance as well as our commitment to serve the farmers in our region. We are continually inspired and humbled by our mission to help members of the agriculture community secure the capital they need to build, expand, or improve their operations.” 

Nonaccrual loans decreased $2.0 million in the third quarter of 2022 to $35.6 million, compared to $37.6 million at December 31, 2021 and $40.3 million at September 30, 2021. The association’s nonaccrual loans as a percentage of total loans decreased to 0.60 percent at the end of the third quarter of 2022, compared to 1.24 percent at the end of 2021 and 1.34 percent at the end of the third quarter of 2021.

Members’ equity at September 30, 2022 totaled $1.1 billion, up 66.9 percent from December 31, 2021, and the Total Capital Ratio was 17.23 percent. That number is compared with the 10.5 percent minimum mandated by the Farm Credit Administration (FCA), the Association’s independent regulator. MidAtlantic Farm Credit distributed a record-breaking $83.9 million in cash patronage distribution to its members in March 2022, based on 2021 earnings. AgChoice Farm Credit paid a record-breaking $50.2 million in cash patronage distribution based on its 2021 earnings, meaning Horizon Farm Credit member-borrowers received over $134 million in combined patronage.

Farm Credit recently announced the 10 recipients of their 2022 Farmers on the Rise program, awarding $100,000 in prizes to young, beginning, small, minority, and/or veteran farmers in their territory. The following agriculturalists received this year’s honor:

• Michael and Marion Alway of Boyce, Virginia
• Kristi and Devin Barto of Landisville, Pennsylvania
• Ryan Brown of Mechanicsburg, Pennsylvania
• Tyler Butts of Hedgesville, West Virginia
• Ariel Herrod of Clear Spring, Maryland
• Shawn Lawrence of Littlestown, Pennsylvania
• Nia Nyamweya of Damascus, Maryland
• Josh Smith and Amanda Fabi of Greenwood, Delaware
• Robert Todd of Downingtown, Pennsylvania 
• Renee Wilson of Parkton, Maryland

“This year, we received over 120 applications from producers located across our 100 county footprint,” says Tom Truitt, CEO of Horizon Farm Credit. “It’s truly inspiring to hear their agricultural stories and learn about their future plans. We’re honored to support this year’s recipients as they look to grow their businesses and expand their local impact.”

The contest was open to applicants that identify with at least one of the following categories: 18 to 35 years of age, a minority farmer, a veteran farmer, small farm operator with annual gross ag income less than $250,000, or a beginning farmer with at least two years of farming experience, but no more than 10 years of farming experience. To learn more about the program, visit farmersontherise.com.

Farm Credit has announced that registration for the AgBiz Masters, the nationally recognized learning series for young and beginning farmers, is open now until December 23, 2022.

“Farmers and agriculturalists are, by nature, lifelong learners,” says Tom Truitt, CEO of Horizon Farm Credit. “We’re proud of the additional educational opportunities our AgBiz Masters program offers those looking to either break into the industry or expand their business knowledge.”

The two-year educational program is available to young, beginning, and small producers who are interested in refining their business management, financial, and marketing skills to help them as they launch or grow their businesses.

This year, Year 1 is being offered virtually. It will focus on trends in agriculture, strategic business planning, financial management, and constructing both a balance sheet and income statement. Year 2 is being offered both virtually and in-person. This class features learning modules centered on understanding lending decisions, growth and transition management, personal financial management, and leadership skills.

“To date, we’ve had 708 students graduate from our AgBiz Masters program,” says Johanna Rohrer, Horizon Farm Credit’s Member Education & YBS Program Specialist. “Agriculture is a constantly changing industry, and we encourage young and beginning farmers to sign-up for the course to help them develop their business skills, as the continue expanding their farming efforts.”

The next AgBiz Masters class begins in January 2023 and will run through April. The registration fee is $225, with full reimbursement available to those who successfully complete their registered year.

For more information about the AgBiz Masters educational program, please visit agbizmasters.com, or call Johanna Rohrer at 888.339.3334, extension 5277.

Not everyone enjoys doing taxes, but they are an annual requirement for most of us. If you are a farmer or small business owner, tax time can be especially challenging!

Have you been maximizing your tax deductions? Are there items that are falling through the tax cracks? As a farm tax accountant, I highly encourage you to look at these common items that you may need to analyze every year.

Take control over your tax plan

Annual tax planning is a proactive way to minimize tax liabilities and ensure all available allowances, deductions, exclusions, and exemptions are working together in the most tax-efficient way. This can reduce your total income tax paid each year. We’ve seen increased commodity prices and unexpected twists and turns in the industry this year. Items like equipment trades, timber sales, and even a large business loss can affect your bottom line and tax return this year, but may also prevent an unexpected tax bill in future years.

Decrease taxable income

Common expenditures to reduce taxable income include:

• Prepaying inputs and other allowed items, capital expenditures, and retirement contributions. Depending on your entity structure, retirement plan contributions can be significant, especially for self-employed individuals via a Simplified Employee Pension (SEP) or other qualified plan. Having a diversification of retirement assets outside of farming is a good thing!
• Healthcare deductions: create an employee benefits deduction to allow for business deduction of these expenses. A common way that farmers do this is farm income averaging. This is a way to average all or some of your farm income using rates from the three prior years.

Increase taxable income 

If a farm loss is inevitable, common ways to increase income include:

• IRA distributions
• IRA to ROTH IRA conversions. In the pathway of an IRA to ROTH IRA conversion, this can generate taxable income on the tax return, but the earnings are tax free. If you have a farm loss, this income that is generated by the conversion and no income taxes would be owed on the money rolled into an IRA.
• Selling of non-farm capital assets
• Are your repair bills high this year? You can make an election to capitalize repairs rather than expensing them. This can be adjusted on an annual basis.

Before tax planning, review the following items:

1. Update your balance sheet and profit/loss statement.
   Having your records up-to-date is important because the balance sheet gives a financial snapshot of your business at that time. Comparing your profit and loss year-end statement aids you in measuring your business’ success. This means you have to dig deep into reconciling your bank accounts and cleaning up the check register. If you aren’t sure where to start with these items, contact us – we have a few templates for you to use!
2. Review your budget and examine your cash reserves.
   This process is important to know how much cash you'll have available between now and yearend. Did you purchase or plan to purchase any fertilizer, feed, chemicals, etc. that are considered a prepay? These were purchased at a discount, but are usually stored and used in the next coming year. It's important to identify the prepaid expenses to possibly move these items to the balance sheet. These prepays can increase your expenses, but may take your profit into a loss. A rule of thumb is to use 50 or 100 percent of the prepays andmove those into the next year.
3. Do you have dead assets? Be sure to review your depreciation schedule for all of your current livestock buildings, machinery, and equipment. Clearing out old items that are no longer on the farm is important to update on the depreciation schedule.

Last, but not least, start tabulating your amounts for 1099 filings and wrapping up your fourth quarter payroll filings. Soon, it will be time to file 1099s and distribute your employee’s W2s. This year’s tax deadline for entity filers is March 15, 2023 and individual filers is April 15, 2023.

Keep these items on your to-do list for tax preparation to save some money or spark your interest to get last year’s tax filing amended and save you tax dollars. Call your tax accountant and business financial team to schedule an appointment for more guidance and to discuss these options. 

Financing equipment is a great tool to keep working capital in your hands. Loans and leases are both viable options, but what is the difference between the two, and which will work best for your operation?

Most people are familiar with a loan, but leasing is another way for customers to obtain the equipment they need to get back in the field. A lease is an agreement between the equipment owner (lessor) and a customer (lessee) to pay for the use of the equipment in the form of rental payments for a specific amount of time with an option to return or purchase the equipment at the end. At the end of the lease term, you then have the option to purchase the equipment you have been using.

An important term to understand when it comes to leasing is residual value, which is the value of the equipment at the end of the lease (and the stated purchase price that the lessee would pay should they choose to purchase the piece at the end of the lease). The residual value helps determine what payments will be. A higher residual means lower lease payments.

Let’s look a little closer at the differences between loans and leases, then look at an example.

Let’s walk through an example:

A customer is looking to acquire a $100,000 tractor. He’d like to work with Farm Credit for a loan or lease and is comparing the two options.

In this case for leasing, the lessor or owner of the equipment would be Farm Credit. The lessee is the customer. The residual value of the tractor after 60 months of use is 51% ($51,000), which was determined by several factors including how many hours of use, term length, and what the customer wants to do at the end of the lease (walk away, renew the lease, or purchase the tractor). In this case, the customer planned to renew the lease or purchase the piece, and that new contract would work off the $51,000.

It is important to note that when leasing a piece of equipment, the customer is also responsible for all insurance, maintenance, taxes (if applicable), and all other costs of ownership (example: fuel).

Most customers are comfortable with a loan, but less familiar with leasing. Why would someone lease?

• Leases offer 100% financing, with no down payment required. However, the first payment is required at signing.
• Leasing can save money. Your payments accrue on a smaller balance, with the residual acting like a balloon payment at the end, rather than the full cost of the equipment. Talk to your lender for more specifics on this.
• Leasing helps preserve working capital for other purposes, as you are only paying for the portion used, rather than the full value of the piece.
• Cash flow can be improved since the flexibility of leasing allows for the payment schedule to be extremely customized.  
• When leasing, equipment can be replaced faster to keep up with current technology, ease the difficulties of equipment obsolescence, and ensure access to reliable, low maintenance equipment with the newest options at all times.  
• There is less ownership risk - the lessor bears the risk on the residual value (ex: equipment values are extremely high now, and if they fall, that is the lessor’s problem, not the customer’s).
• Leasing is a great tax management strategy. Payments can be deducted as operating expenses to lower taxes. Larger deductions over a shorter period accelerate the write-off.
• Leasing is also predictable expensing, rather than “one and done” with bonus depreciation and Section 179.
• Leasing is a great estate planning tool. Leased equipment is easily transitioned to the next generation at the end of the lease term.

Always consult with your CPA or tax professional to make sure you are choosing the best financing option for you and your business.

It is no secret that the current market for equipment is unlike it’s ever been before. Availability is still an issue, although better than this time last year. Prices have certainly increased, and there are a number of other reasons customers site for caution with their equipment acquisitions. Let’s assume that most pieces are 20% more than they were two years ago. On a big purchase, like a forage harvester, that is extremely significant. A lease can be much more palatable, especially with high residual, thus creating lower lease payments.

To learn more about leasing, talk to one of our ag lending experts today at 888.339.3334.

This article was written by Emily Snyder, Farm Credit EXPRESS Relationship Manager.