Coffee Talk: Quarterly Report – Q1 2018

Bill Coffee

Bill Coffee, Chief Executive Officer, Stockman Bank

Last year, my Annual Report letter was captioned “Progress” and centered on change.

My message ponders the challenge of adopting new ways versus holding on to the tried and true.

I wrote about developments in technology changing our daily lives, particularly service delivery and communication.

This year I continue that theme by letting you know Stockman will no longer print or publish an Annual Report.

Instead, we are starting to produce a Quarterly Report. This Report will be included in our blog which is available to read on our website.

It will be shorter than our 12-page Annual Report and will focus on timely topics from Stockman Bank, Stockman Wealth Management and Stockman Insurance, and our recent community involvement.

An update four times a year, as opposed to just after year-end, allows for more current topics, better relevance and timeliness. Plus, its concise nature will allow for easy review.

Since Stockman is a privately held Montana community bank, we are not required to publish an annual report. However, we began preparing an Annual Report over 20 years ago to better communicate with our customers.

Today, our website and active social media presence give us, our customers, and our communities immediate and direct access to communication.

Similarly, we were the first bank in Montana to adopt eStatements and have for many years encouraged our customers to “Go Green” by using this more convenient, paperless solution. The Quarterly Report furthers our Go Green initiative.

Going forward, please watch for our new Quarterly Report and let us know your thoughts on this more efficient, modern way to communicate.

Looking back on 2017, I would personally like to thank our customers for their continued trust and support and thank our employees for their focus on customer service and commitment to making Montana a better place.

2017 was an exciting year for Stockman in many ways. We enjoyed growth in virtually all areas of the company, had record earnings and record capital, with a Montana-wide team of 709 strong!

2018 is our 65th Anniversary! Our Montana focus has uniquely positioned us to serve more neighbors across the state every day.

We hold true to our founding principles, centered upon customer service and strong community commitment with our local employees, state-of-the-art, efficient buildings and cutting-edge, convenient technology.

Sincerely,

Bill Coffee
Chief Executive Officer

Bank disclosures

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The Down Payment Low Down

Renae HarrisPost written by Renae Harris, Belgrade Lender

Have you dreamt of buying your own home, but didn’t think it was possible because you don’t have 20% of the purchase price to contribute as a down payment?

You may be surprised to learn that while 20% down used to be a common requirement for purchasing a home, there are several available home loan options that allow for little or no down payment.

One of my favorite loan programs is the Single Family Housing Guaranteed Loan provided by USDA/Rural Development through approved partner lenders like Stockman Bank.

This loan program, commonly referred to as the RD Loan, allows for $0 down payment for approved borrowers purchasing a primary residence in eligible rural areas.

Another great $0 down program is the VA-guaranteed loan. These loans are available to eligible Veterans for the purchase of their primary residence.

They offer competitive interest rates with no requirement for monthly mortgage insurance. Like the RD loan, the VA home loan is provided by private lenders, like your local Stockman Bank.

If you’re not a Veteran and not shopping in a rural area, you might be a great candidate for an FHA loan. This type of loan is insured by the Federal Housing Administration and provided by FHA approved lenders.

A homebuyer can get an FHA loan with as little as 3.5% down. The 3.5% can come from a variety of sources including your own savings, a gift from a family member or from a down payment assistance program.

downpayment 600x 450 Contrary to popular belief, government-backed loans aren’t the only options for low down payment mortgages.

In fact, the conventional loan is available to qualified borrowers with as little as 3% down.

With the conventional loan, homebuyers may be able to avoid high, upfront funding fees and permanent (life of the loan) mortgage insurance.

While private mortgage insurance is still required for borrowers with less than 20% down, it’s cancellable at your request when the loan balance reaches 80% of the home value or will drop off automatically when the balance reaches 78%. Contact your lender for additional details or to submit a request for removal.

In addition to these great loan programs, many lenders are partnered with local organizations that offer a variety of down payment assistance options, usually in the form of a second mortgage with low or no monthly payments.

At Stockman Bank, we’re proud to offer several down payment assistance options through our partnerships with local organizations like Montana Board of Housing, Human Resource Development Council (HRDC), and NeighborWorks Montana.

So, you may not have a 20% down payment sitting in your savings account, but now you know that you may not need it.

With the many low down and no down payment programs available, you’re likely closer to owning your own home than you thought. Contact your Stockman Bank real estate lender today to discuss your homeownership goals and find out if you qualify.

Bank Disclosures

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A Sharing Economy. Vacation Rental.

 Kelin JohnsonPost written by Kelin Johnson, Producer/Agent Stockman Insurance

In recent years we’ve seen the rise of the phenomenon known as the sharing economy or collaborative consumption. Collaborative consumption allows consumers to share access to products or services, rather than having individual ownership.

Whether you’ve participated or not, you’re likely familiar with some of the bigger names in this industry: Airbnb, FlipKey, HomeAway, VRBO. The impact is vast and, for perspective, Airbnb now boasts of 2 million listings in 34,000 cities across 191 countries.

In 2015 the market’s potential growth was underscored by Expedia’s acquisition of HomeAway, at a cost of $3.9 billion. The industry has made such a significant impact that politicians are getting involved.

They’re citing concerns such as communities and consumers being at risk through violations of sensible health, safety and zoning regulations under state and local law. Among the issues being debated is the topic of insurance coverage.

Insurance is the allocation of risk for a specified financial compensation. The challenge for insurance companies is determining the propensity for loss and an appropriate premium to offset the risk. Without prior data, the majority of insurance companies stay as far away as possible and exclude any related activity. Thus, the market for residential sharing insurance products is very narrow.

By definition, a short-term/vacation rental is defined as any residential structure that is rented on terms less than 30 days.

With respect to the owner of the property

The property owner is exposed to the risk of their property being damaged and also liability for personal negligence. The tenant could cause damage to the property or commit theft of the owner’s personal belongings. Many of the short-term rental companies offer coverage for these situations but have significant limitations such as property damage caps of $50,000 (and differ greatly across each platform).

In the event of a total loss, a coverage cap of that size will force the owner to look at their primary insurance for indemnification. That assistance will only be applicable if the home is insured properly. Though the market for this type of policy is narrow and likely has additional costs, they are available.

In terms of liability, there are numerous preceding cases of discrimination and bodily injury. In terms of cost, liability claims can far exceed property damage claims and settle well into the millions. A standard home or landlord policy won’t cover these types of claims. Even if the owner has a personal liability umbrella policy, the claim will be denied because the risk has converted to commercial exposure.

It’s important for a homeowner to understand that their standard home insurance ceases to provide coverage as soon as any revenue is generated. A landlord/rental policy will deny coverage when the terms change to less than 30 days. Claims representatives are searching the web as soon as a claim is submitted and denials are immediately issued if the address comes up on any vacation rental site.

With respect to the short-term renter

Bed with tray and flowersWhether you’re a homeowner or renter, the good news is that the liability associated with your homeowners or renters insurance will likely extend to the short-term rental, but is your coverage enough?

If an individual has a renter’s policy with a $300,000 liability limit and they’re negligent for a fire that takes a $1,000,000 home, clearly there’s a significant gap.

The owner may submit a claim and have their home rebuilt, but this situation would be far from over. The owners’ insurance company is likely to subrogate or file a lawsuit against that negligent renter. That’s not a good position to be in.

The positive is that insurance companies want and need to adapt to accommodate this market as it is only going to grow from here.

Emerging risks are often opportunities for companies to step in and be the leader in a new product. They’re accumulating data and research on necessary coverages and prior claims so they know what consumers need and what premium to charge to maintain profitability.

Over the last couple weeks, I’ve been reaching out to some owners of short-term rentals in Missoula. I went on one of the popular sites and contacted 20 people who were renting out either a room in their home or the entire home.

Of the 20 people contacted, only three had discussed the issue with their agent and made changes to their standard home insurance. 85% of the sampled audience is putting themselves and their tenants at risk.

I’ll end this with some questions that should be considered when using a vacation rental. These are questions you may be facing without even knowing it.

  • If the property owner’s insurance denies a claim and you don’t have any insurance that applies, who pays the damages?
  • If you don’t have home or renters insurance and are negligent for a fire in one of these rented properties, how do you pay for it?
  • What if you rent out your primary or secondary residence for a weekend and there’s a crime that takes place there. Who’s liable?
  • Lastly, if you rent out your home for a week and the tenant burns down the house but you’ve neglected to adjust your insurance, who pays to rebuild? What if the tenant can’t pay the judgement?

If you hear of anyone who may be renting their property on this platform, I’m certain they would be happy to get more information. We want to help you enjoy your life by not taking a step backward but by being prepared for the unexpected.

Insurance Disclosure

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CD’s – The New Comeback Kid!

Janine Merrill Post written by Janine Merrill, Marketing Officer

Remember back in the day (and let me define “back in the day” as prior to the recession of 2008) when bank customers were more than happy to open a CD (Certificate of Deposit) as a safe and meaningful tool to invest their hard earned savings?

Well, lo and behold, CD’s are making a comeback! Once shunned by consumers enamored with higher-yielding investments, deposit rates have slowly risen and are making the CD an attractive and safe savings vehicle once again.

A certificate of deposit (CD) is a savings certificate with a fixed maturity date, specified interest rate and yield, and can be issued in any denomination based on bank policy.

The theory is that a customer invests his/her excess liquidity for a higher rate of return. Because an individual is forgoing the opportunity to utilize funds for a period of time, he/she is compensated by earning more interest than say a passbook savings or money market account. Under typical market conditions, longer-term CD’s have higher interest rates compared to a shorter term.

CD’s are a good place to put extra money for relatively short periods of time or perhaps longer, depending on the terms. They’re considered one of the safest investments you can make.

The rate of interest is determined ahead of time and you’re guaranteed to get back what you put in plus interest once the CD matures. Financial institutions more often than not have a specific opening balance to open a CD such as $500 or $1000. In addition, your deposit at a bank insured by FDIC will most likely be insured for up to $250,000. (Always verify insurance overage with your bank!).

Although possible to withdraw funds from a CD prior to its’ maturity date, this action may incur a penalty resulting in a forfeiture of interest based on the term of it, and perhaps other fees depending on the institution. Most early withdrawal penalties are equal to an established amount of interest.

Here are the most common types of bank-offered CD’s:

woman holding piggy bank isolated on orange background

Traditional CD:  the consumer receives a fixed rate over a specific period of time. When the term ends, the funds can be withdrawn or rolled into another CD.  Withdrawing before maturity can result in a penalty.

Bump-Up CD:  this CD allows the consumer to swap his/her original interest rate for a higher one, if the rate on new CD’s of similar duration rise during the investment period. Most institutions that offer this type of CD allow a bump up once during the term and the interest rate remains at the new rate for the remainder of the original term.

FLEX CD:  a flexible CD allows the consumer to add funds or possibly withdraw funds during the duration without penalty.

STEP UP CD:  the interest rate on this particular type of CD increases at specified intervals. For example, on a 28-month term, the interest rate may increase at 7, 14, and 21 months.

As with all investments, make sure that the type, terms, penalties, fees (if applicable) of the CD are explained in detail. Education is the key to investing wisely.

There are hundreds of investment options out there to choose from, and sometimes the enormity of that is overwhelming. But if you’re looking for a safe, simple and secure place to put your hard earned dollars – then a CD might just be the ticket!

Welcome back CD – we’ve missed you!!Bank Disclosures