5 Smart Uses for Your Tax Refund

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Nearly eight out of 10 U.S. tax filers will receive a federal tax refund this year.  As millions of Americans await reimbursement from Uncle Sam, the American Bankers Association has highlighted five tips for making the most of their tax refund.

“Smart use of your tax refund can start you on the path to long-term financial security,” said Frank Keating, ABA president and CEO.  “Instead of going on a spending spree, take a moment to evaluate your financial situation and decide on where those dollars will make the most difference.”

ABA recommends the following tips for consumers looking to put their tax refund to good use:

  • Pay off debt. Pay down existing balances either by chipping away at loans with the highest interest rates or eliminating smaller debt first.
  • Save for retirement. Open or increase contributions to a tax-deferred savings plan like a 401(k) or an IRA.  Where can you get one?  Your bank can help set up an IRA, while a 401(k) is employer-sponsored.
  • Put it toward a down payment.  The biggest challenge that most first-time home buyers face is coming up with enough money for a down payment. If you intend to buy a new home in the near future, putting your tax refund toward the down payment is a smart move.
  • Invest in your current home.  Use your refund to invest in home improvements that will pay you back in the long run by increasing the value of your home.  This can include small, cost-effective upgrades like energy-efficient appliances that will pay off in both the short and long term. If you have more substantial renovations in mind, your bank can help with a home equity line of credit.

Article courtesy of the American Bankers Association

Are You Ready to Leave Your Credit Cards at Home … and Pay by Smartphone?

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Paying for purchases by smartphone is becoming increasingly viable. Three major companies now enable consumers to buy goods at participating merchants with their credit or debit card by just waving a smartphone over the payment terminal. In fact, a major smartphone manufacturer recently teamed up with many banks and merchants to make the service available to anyone buying the newest version of its smartphone. What should you know about using your smartphone to pay in a store or a restaurant?

You need the right equipment. Your smartphone must contain a contactless or “NFC” (near field communication) computer chip that allows it to “talk” to the payment terminal via a wireless connection, as well as a digital wallet to store your payment card information. If you are buying a new smartphone, you can ask the salesperson if it has an NFC chip. For a phone you already have, check the “settings” menu and look for “NFC.” Your phone may already have a digital wallet feature. You can also download one through an app store or other online marketplace.

You have to load your credit or debit card information onto the phone. The setup procedure can be as easy as taking a picture of the front and back of the card with the mobile wallet application. The app will then send it to your bank for approval and to confirm that it’s really you. Some mobile wallets may allow consumers to load “loyalty” cards from favorite retailers. You may also receive store or restaurant coupons or other offers through your phone, based in part on your recent purchase history with the company.

Most merchants that accept mobile payments are large national chains, but smaller stores are beginning to sign up. A merchant must first install card terminals that accept contactless payments; they look different than the swipe terminals you are used to and display the symbol shown on the left.

As with any electronic transaction, pay attention to security issues. According to Jeff Kopchik, a Senior Policy Analyst at the FDIC, “Many security experts believe that mobile payments are more secure than swiping your magnetic stripe credit card because the mobile service keeps your credit number in encrypted form and does not transmit it to the merchant. But you still should make sure your phone is protected, such as with a password, so it cannot be accessed by a thief. Some of the newest smartphones use fingerprint readers to control access, which can be secure and convenient.”

Also make sure your phone “times out” and re-locks itself after it isn’t used for a short period of time. If you lose your smartphone, notify the bank or other issuer of any credit or debit cards that may be loaded on the phone.

“Remember that if there is a problem with a transaction, you will receive the same federal protections that otherwise apply to the underlying payment source,” noted FDIC Senior Policy Analyst Elizabeth Khalil. “For example, if the transaction drew on a credit card for payment, you will be protected by the same laws and regulations that cover credit cards.”

To learn more, start by contacting your smartphone service provider or credit card issuer.

Article courtesy of FDIC Consumer News

Celebrate National Ag Day with These Financial Tips for Farmers

National Ag Day 2015

National Ag Day is March 18 and the American Bankers Association (ABA) has provided some financial tips to the next generation of America’s farmers and ranchers. Unlike established farmers, young and beginning farmers may need to learn the basics of creating business relationships and what goes into making financial decisions.

When speaking to a banker, young and beginning farmers should keep the following in mind:

  1. Sweat the small stuff. Keeping accurate and detailed records encourages both short-term and long-term financial planning. Not only does it help you stay organized and make better management decisions, it makes it easier for your lender to assess your financial situation.
  2. Develop a business and marketing plan. You will work smarter and improve your odds when you focus and organize your goals.
  3. Evaluate your capital investments for profitability and payback. Keeping track of how long it will take to generate enough cash flows from a capital investment to justify the investment will help you make better financial decisions for the future.
  4. Know your costs. When you consider your cost of living and expenditures, including depreciation and family living, you’ll have a better understanding of your overall financial situation. Your local banker can provide guidelines to monitor your financial ratios.
  5. Decide on what type of operation you want to run. New farmers and ranchers should either be very efficient, low-cost producers or should add value that someone else will pay for.
  6. Consider supplementing your operation with off-farm income until your operation is large enough to employ you profitably full-time.
  7. Consider renting farm equipment or custom hiring instead of purchasing.
  8. Shop around. Getting price quotes on supplies such as feed, fertilizer and fuel can uncover lower cost sources. Your research might get you a discount from a local, preferred supplier that gives excellent service. Make sure product quality is part of your evaluation.
  9. Ask your banker about how to get access to state and federal credit enhancement programs. Some banks also offer special benefits for first-time schedule F tax filers.
  10. When in doubt, ask for help and guidance from someone you trust–an experienced farmer or rancher, a trusted adviser or your local banker. You don’t have to make these important financial decisions alone.

National Ag Day, now in its 42nd year, is organized by the Agriculture Council of America.

 

Information provided by the American Bankers Association

Common Questions on the New Farm Program

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There have literally been hundreds of farm program information meetings held in the Upper Midwest in recent months, as well print and online articles, spreadsheets, etc., on enrollment in the new farm program.

However, even with all the information available to farm operators and landowners, there are still some recurring questions that seem to keep coming up.

The following are some of the more common, ongoing questions related to sign-up for the new farm program:

Question #1–what are the dates and timelines for enrollment in the new farm program?

The sign-up process for the new farm program at local FSA offices will take place in a three-step process:

Step #1–Now until February 27, 2015: Landowners make final decisions on updating FSA payment yields, and reallocating crop base acres on each FSA farm unit.

Step #2–Now until March 31, 2015: Producers complete the farm program choice on each farm unit, and potentially on each eligible crop. Farm program choices include the Price Loss Coverage (PLC), Agricultural Risk Coverage-County (ARC-CO), or Agricultural Risk Coverage-Individual Coverage (ARC-IC) programs.

Step #3–Mid-April to Summer 2015: Producers enroll in the 2014 and 2015 farm program simultaneously. Even though the farm program choice (listed earlier) is for five years (2014-2018), producers will still be required to make annual enrollment into the farm program at local FSA offices.

Question #2 –who makes the final enrollment choice for the new farm program?

All decisions at local FSA offices on updating FSA program yields and reallocating crop base acres for each FSA farm unit require at least one landowner signature. If a producer is an owner/operator, they could make the decision on that FSA farm unit. However, it is advisable to communicate with all landowners on a FSA farm unit regarding the base acre and payment-yield decision that is chosen, since this decision will be in place for five years (2014-2018).

Producers will make the final, 5-year farm program choice between PLC, ARC-CO, and ARC-IC for the 2014-2018 crop years on each FSA farm unit.

Landowners with crop share rental agreements are considered producers by FSA and must agree with the farm program choice on a farm unit.

Landlords with cash rental agreements will not be required to sign-off on the farm program decision. In cases, where there is a switch of producers from 2014 to 2015, the producer listed at the FSA office on the farm unit at the time of farm program sign-up would make the program choice.

Question #3–what if no choice is made for the updating payment yields, base-acre reallocation, or the farm program option?

If no choice is made for updating FSA payment yields or base acre reallocation, the existing crop-base acres and CC payment yields on a FSA farm unit, as of 2013, will remain in place for 2014-2018.

If no farm program choice is made by the sign-up deadline, the farm unit will be enrolled in the PLC program for 2015-2018, and there will be no farm program payments for the 2014 crop year. Depending on the crop, farm location, and farm program choice, this could be a very costly mistake.

Question #4–why is it important to update FSA payment yields if I am enrolling in ARC-CO?

FSA payment yields for all eligible crops will be used for payment calculations for the new PLC program, but not for the ARC-CO or ARC-IC program options. Even if plans are to choose the ARC-CO or ARC-IC program option, it may still be a wise choice to update the FSA program yields for eligible program crops on FSA farm units where there is an advantage, as these updated yields may be carried forward for future farm programs beyond 2018. The opportunity to update FSA payment yields has not been made available since 2002, and if the program yields were not updated in 2002 (counter-cyclical program), the current payment yields are the “direct payment yields,” which date back to the early 1980s, and may be even lower than the current county “plug yields” for some crops.

Question #5–when and why are “plug yields” used?

A substitute yield or “plug yield” (equal to 75 percent of the county average yield between 2008-2012) will be used in any year that the actual farm yield for a given crop falls below “plug-yield” level, as well as in any year in which a crop was raised, when there is no yield data available.

The county “plug yields” are available from the USDA FSA farm program website, and automatically are entered in to the official FSA payment yield update spreadsheet.

Question #6–what documentation is required to update FSA payment yields?

The FSA form titled: “Price Loss Coverage (PLC) Yield Worksheet” (CCC-859) is used as a worksheet for potentially updating FSA payment yields. On Form CCC-859, the crop yield for each year (2008-2012) that a particular eligible crop was raised is listed. Only the years that the crop was raised on a particular farm unit are considered for the yield update.

For example, if corn was raised in only three of the years, then those years are used in calculations. If crop insurance (RMA) data is from more than one FSA farm unit, the data will need to be prorated accordingly for the CCC-859 forms.

FSA offices will not be verifying the yield data on Form CCC-859. However, the yields reported on that Form will be subject to FSA spot checks at a later date.

Acceptable records for yield verification during “spot checks” will include RMA data that is used for crop insurance APH calculations, production evidence for grain sold or placed in commercial storage, on-farm grain storage records, livestock feeding records, and/or FSA loan records.

Question #7–why is base acre reallocation important?

All farm program payments for the new PLC and ARC-CO programs will be calculated on crop base acres, rather than on a year-to-year planted crop-acre basis.

The last time that crop base acres could be updated was in 2002, and it is possible that the updated crop base acres could continue beyond the current farm program.

The choice is to either keep the existing crop base acres (as of 2013), or to update crop base acres to the ratio of average of planted crop acres on a FSA farm unit from 2009-2012.

Total reallocated crop base acres for 2014-2018 cannot exceed the total crop-base acres that existed in 2013 farm program.

Landowners and producers should have received a listing of existing crop base acres, and the reported planted acres for 2009-2012 from the FSA in late July or early August.

Prevented-planted acres that were properly reported will count as planted acres for base acre reallocation.

Question #8–do I always want to reallocate my crop base acres?

Not necessarily. In some cases, the existing crop base acres may be more desirable than the reallocated base acres, such as in cases where the existing crop base has more corn base acres than the reallocated crop base.

Or possibly, there may be some higher value commodity crops that have a higher likelihood of farm program payments in the next five years (2014-2018), which may be eliminated through base acre reallocation.

Remember: Farm program payments for PLC and ARC-CO are determined by base acres, not planted acres, and you do not have to raise a crop in a given year in order to be eligible for potential farm program payments.

Question #9–is it advisable to maximize my corn base acres in all situations?

Many Midwest farm operators planted higher levels corn from 2009-2012, so there may be an opportunity to increase corn base acres on some FSA farm units.

In most areas of the Midwest, corn base acres tend to offer higher maximum payment potential, and greater payment likelihood (in 2014, and possibly in 2015) than other crops. However, the program payment levels and likelihood of payments may be different in other areas of the U.S., which have lower corn yield levels, or may have other alternative program crops to consider.

Question #10–how are MYA prices calculated?

The “market-year average” (MYA) price for a given crop year is used to calculate any potential payments for the PLC, ARC-CO, and ARC-IC programs. The historical MYA prices are also used to determine the benchmark revenues for both the ARC-CO and ARC-IC program options.

The MYA price for a given commodity is not based on the Chicago Board of Trade commodity prices, or any specific local or terminal grain prices. The MYA price is the 12-month national average price for a commodity, based on the average market price received at the first point of sale by farm operators across the U.S.

The USDA National Agricultural Statistics Service collects grain sales data on a monthly basis, which is then weighted at the end of the year, based on the volume of bushels sold in each month.

The 12-month marketing year for corn and soybeans begins on September 1 in the year that a crop is harvested, and continues until August 31 the following year. For wheat, oats, barley, and small grain crops, the 12-month marketing year begins on June 1 in the year of harvest, and continues until May 31 the following year.

Question #11–where can I find updated MYA price information?

USDA publishes monthly and season average estimated market prices for various commodities, which are available on the FSA farm program website. These average prices are also updated each month in the USDA Supply and Demand Report, which is usually released around the middle of each month. Some universities also update projected MYA prices on a monthly basis for selected crops. Kansas State University offers one of the best monthly updates of MYA prices for corn, soybeans, and wheat. The web site is at: www.agmanager.info/crops/insurance/risk_mgt.

Question #12–why do some experts recommend ARC-CO and others recommend PLC?  

There are several reasons for the difference in recommendations between ARC-CO and PLC for corn and soybeans. The biggest reason is probably future MYA price expectations, along with declining payment potential in future years with ARC-CO in scenarios with lower price expectations. If the average MYA price for corn from 2015-2018 is consistently below about $3.20 per bushel, total PLC payments for 2014-2018 for many Midwest corn producers could likely exceed total ARC-CO payments.

The situation is similar with soybeans, if the MYA price from 2015-2018 is below about $7.20 per bushel.

However, one must remember that there are no PLC payments for corn, if the MYA price is $3.70 per bushel or higher, or for soybeans, if the MYA price is $8.40 per bushel or higher.

In most counties in the southern two-thirds of Minnesota, and adjoining areas of other states, the 2014 ARC-CO payment for corn will be near the maximum payment level for the county ($60-$80 per corn-base acre in many counties), if the 2014 average county yield was at or below the benchmark county yield.

There is also very good 2014 ARC-CO payment potential for soybeans in most Minnesota counties. The ARC-CO payment potential for corn and soybeans in 2014 may not be as favorable in some areas of Iowa, Illinois, Indiana, etc. that experienced extremely high county average corn and soybean yields in 2014.

Payment potential with ARC-CO for both corn and soybeans for the 2015 crop year is also very good, due to the fact that the 2014 benchmark MYA prices of $5.29 per bushel for corn and $12.27 per bushel for soybeans will likely be in place again in 2015.

Question #13–what are situations where ARC-IC might work?

Producers that select the ARC-IC program option must include all eligible farm program crops on a FSA farm unit (2014-2018), with no option for either the PLC or ARC-CO programs on specific crops.

The ARC-IC program operates very similar to the ARC-CO program, but is based on farm-level crop yields, rather than county-average yields. The biggest difference is potential payments in the ARC-IC program are made on only 65 percent of crop base acres, as compared to 85 percent of base acres with the ARC-CO program. Due to this difference, and different calculation methods with ARC-IC than ARC-CO, average farm-level yields probably need to be 25-30 percent higher than comparable ARC-CO yields to consider ARC-IC enrollment.

Question #14–what are the payment limits for the new farm program?

The payment limit for the new farm program is $125,000 per eligible individual for all proceeds from the PLC, ARC-CO, and ARC-IC programs, as well as from LDPs or gains on CCC loans. If there is more than one eligible payment entity for farm program payments, then the payment limit would increase accordingly. For example, if a husband and wife are both eligible, they would have a total payment limit of $250,000. Excluding LDPs and CCC loan gains, it would require approximately 2,500 crop base acres to reach the $125,000 payment limit at an average farm program payment level of $50 per base acre, and about 1,667 base acres to reach the limit at an average payment level of $75 per base acre.

Question #15–What are some strategies to address payment limit concerns?

Some corn and soybean producers with payment limit concerns are varying their farm program choices a bit more. They are putting some farms in ARC-CO to optimize payment potential for 2014 and 2015, when ARC-CO payments are likely to be higher, and putting some farms in PLC, in order to have more price protection in later years (2016-2018). This allows them to capture some of the benefits of both the ARC-CO program and PLC program, without sacrificing significant payment potential. Also, with PLC, farm operators can opt for the supplemental crop option (SCO) (crop insurance alternative), which is not subject to farm program payment limits. Enrollment in the SCO insurance option is done an annual basis through crop insurance agents.

Question #16 — What are the best resources for farm program information?

The USDA Farm Service Agency (FSA) has created a web site with up-to-date information and resources on base acre reallocation, updating payment yields, “plug yields”, ARC-CO yields, updated MYS prices, etc.

The web site is at: www.fsa.usda.gov/arc-plc.

Several land-grant universities have developed spreadsheets and decision tools, in cooperation with FSA, to assist producers and landowners with their farm program decisions. Following are some good web sites for the farm program information, spreadsheets, and other resources:

U of Illinois Farm Bill Toolbox

www.farmdoc.illinois.edu/farmbilltoolbox

Kansas State U Ag Manager Web Site

http://www.agmanager.info/policy/

U of Missouri Food & Ag Policy Center

www.fapri.missouri.edu

Article courtesy of the Independent Community Bankers of Minnesota

Minnesota Bankers Association Honors Citizens Bank Minnesota

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EDEN PRAIRIE, MN – January 22, 2015 – The Minnesota Bankers Association (MBA) recently recognized twenty-one Minnesota banks for their community involvement. Citizens Bank Minnesota was one of twenty-one banks honored for their community involvement. Citizens employees volunteered over 1127 hours on behalf of their bank for organizations such as American Cancer Society, United Way Day of Caring, Adopt-a-Family, Junior Achievement, National Teach Children to Save Day, local school programs, churches and non-profits. Citizens is also proud of being awarded top fundraising team for the American Cancer Society’s Brown County Relay for Life event raising $17,329.70. Citizens continues to support local businesses through its Go Local initiative that encourages its employees to shop locally first for all their purchases.

MBA CEO/President Joe Witt congratulated the recipients and stated “Minnesota banks are the heart and soul of their communities. In addition to providing the capital that helps communities grow and thrive, the banking industry’s record of supporting local programs is simply unmatched. No other industry gives more time, talent and resources back into Minnesota’s communities.”

The Minnesota Bankers Association is the state’s largest trade association devoted exclusively to the representation of commercial banks. The MBA was founded in 1889 and represents 95% of Minnesota’s chartered banks. The MBA is proud to support our member banks as they work to ensure vital communities throughout the state. For more information, please visit our website at www.minnbankers.com.

Citizens Bank Minnesota is pleased to announce the following promotions:

986857 Citizens 075Julia Baumgartner, Senior Vice President

Baumgartner joined Citizens in 1991 as a Vice President and Commercial Loan Officer. She graduated Summa Cum Laude from Kansas State University with a B.S. degree in Finance as well as a B.A. in Spanish. She is also a graduate of the Commercial Lending School at the University of Oklahoma and the Graduate School of Banking at the University of Wisconsin.

986857 Citizens 033Tim Hoscheit, Senior Vice President

Hoscheit joined Citizens in 1986 as an Agricultural Loan Officer and was promoted to Vice President in 1991. He is a graduate of Western Wisconsin Technical College with an Associate Degree in Finance. He is also a graduate of the Graduate School of Banking at the University of Colorado.

Baumgartner and Hoscheit will be assuming senior management roles in the bank previously performed by Bill Brennan, who will be retiring in the spring.

2014 Holiday Random Acts of Kindness

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Citizens Bank Minnesota employees were excited to be able to help out families in need again this Holiday Season by doing Holiday Random Acts of Kindness for the second year in a row!  Our main office in New Ulm and our three branch locations all adopted an area family, with our Lafayette office also bringing gifts to the area nursing home.  Money was donated by employees, and also raised through a bake sale and free-will donation luncheons, bringing in over $1,450.00. The bank then made a match donation of $1,300.00 – making it possible to donate $2,750.00 in gifts for these families!

Shopping was done and numerous household items, clothing, groceries and toys were bought. Employees took pride in wrapping everything up in colorful paper and bows, wanting to make the Holidays as special and memorable as they could for the families, especially the children.

We were happy to help these families who would have had an otherwise difficult time purchasing the needed items themselves.  It was also a great way to remember what the Holidays are about! “Only by giving are you able to receive more than you already have.” – Jim Rohn

By: Sarah Seifert, Marketing Assistant

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