When you turn on the TV, open a newspaper, or surf the internet you hear that interest rates are at an all-time low. If you haven’t refinanced yet, now may be the time to do so.
I never thought of myself as the “Blogging” type and I am sure my three teenagers would concur with my self-assessment, but yet here I am, writing my first blog.
Headlines! The banking world has certainly been in the mix of the headlines for the last handful of years; locally, nationally, and internationally. From 2007 to 2011, the national economy struggled, which trickled down to every part of our local economy for large and small businesses, individuals, and families, to the banks that help manage the loans for all of these groups.
In central Iowa, many of us feel the recession has, at a minimum, stabilized and we see improvement in the local economy and better yet, a general improved attitude of Joe Public.
Are we finally “out of the woods” and is it all “downhill’ from here with rapid economic growth? Well, I certainly don’t have a crystal ball and we still have that “fiscal cliff” thing pending, so nothing is for sure, but here at VisionBank we certainly have a positive attitude towards our future.
VisionBanks’ five communities, range in size from a small agricultural town, to a mid-size community with a University environment, to a bank located on the fringes of a metro area. This gives our lenders an opportunity to work on many different types of loans and keeps our loan portfolio diversified. Recently, most of our banks’ loan funding has been in owner and non-owner occupied commercial real estate area. This includes a range of properties, from single use commercial space, to multi-family residential real estate properties.
One economic area of the commercial banking world that has been very strong the last few years has been agriculture. Grain prices, specifically corn and soybean commodities, for farmers in central Iowa, have set high market records in 2012. As of October of this year, corn prices were twenty one percent higher than a year ago and sixty one percent higher than two years ago. Soybean prices are twenty percent higher than last year and thirty-nine percent higher than two years ago. These strong prices have in turn made the demand as well as the prices for agriculture real estate land extremely strong. Iowa farmland prices have increased by twenty four percent in the last year and sixty percent since 2009.
With positive growth in the local economy, as well as in our business, it is easy for us at VisionBank to feel excited about what 2013 will bring. We look forward to continued growth in the economy and in turn look forward to helping our current customers grow and we look forward to showing new customers how we can help them to expand their business. VisionBank commercial staff has a wide range of lending expertise and have the ability, capacity, and willingness to complete many types of deals.
Come in today and visit a commercial lender and “see what we can do for you”.
Chris Brinkmeyer is Executive Vice President and head of the Commercial Loan Department at VisionBank.
When I started at VisionBank (then, Ames Community Bank) 5 months ago, I jumped right into all things related to the name change. As all new employees, I read our strategic plan which listed the bank’s values and the direction that our executive team wanted the bank to head. I read the employee handbook (well…most of it) that spells out the company’s expectations for how we as employees should act. But it wasn’t until a few weeks ago that I was able to take a breath, reflect and start to notice if the bank and our employees actually lived up to the words on those pages.
Well, our employees proved it last month. During the 2012 LIVE UNITED annual campaign our employees stepped up to the plate and proved that our commitment to our communities is not just something the bank says, but it is what our employees are doing which showed by 100% of employees participating in the campaign!
So what does that mean? Well, it means that our employees found it in their hearts (and budgets) to give to a cause that helps those less fortunate that us. It means that during the holiday season, when there never seems to be enough money, our employees made room to support an organization that operates to help those with financial struggles.
What about the bank? What does it mean for us as a business? It means that even though we removed the word “community” from our name, we did not change our focus. It means that we are supporting our employees so that they can help support others. And it means that we have so many things to be thankful for during this holiday season.
We are thankful for a successful name change. We are thankful for a successful year of business, we are thankful for going into 2013 stronger than ever and we are thankful that we have the ability to give back. But most of all we are thankful to our employees for making it all happen. Without their support and excitement through the name change, the name change would not have been the success it was. Without their dedication, we would not have the success that we have experienced and without them we would not be able to serve our communities and customers the way we do.
Thank you VisionBank employees. Thank you for making me proud to say I work for VisionBank and thank you for your commitment to our organization and our communities.
Mary Savage is the Marketing Coordinator for VIsionBank
What is your highest current CD interest rate?
As bankers, we become used to hearing our customers ask this question. Recently, customers have been disappointed with the answer.
We are in a time of historically low interest rates. Regardless of what bench mark rate you examine…the Federal Funds Rate, Prime, or U.S. Government Securities… rates are low. While this is very good news for consumers that need or want to borrow money, it is bad news for investors and savers.
Rate, or APY, is an important component of making an investment decision. However, other factors are also important to insure the best decision is made for your unique situation.
Investors generally consider three factors when choosing where to invest.
1. Rate – Return on investment
2. Risk – Probability that you will lose money
3. Liquidity – Accessibility to your money
Each investment option fairs a little differently on each of these factors and no option gives you a “perfect” combination (high rate, low risk and easily accessible).
Consumers wanting to invest in a CD are typically risk adverse. This means they want to insure preservation of their principal. Banks are a relatively safe place for people to invest in CDs and as long as your bank helps you manage your money correctly, you will not risk losing principal.
Investing in CDs does not automatically mean you are avoiding all investment risk, there are other risks to consider. Anytime a CD investor places a majority of CD funds in one maturity term, the investor is exposed to interest rate risk.
Well…what does that mean?
Let’s suppose a CD investor has $50,000 to invest in a bank CD. The investor shops the competition and determines that bank “X” currently has the best deal. Let’s suppose that bank “X” is currently offering an 18 month CD “special” with an APY of 1.0%. Since this is the best “deal” in the market, the investor makes the decision to purchase that CD. In this scenario, the investor will earn $752.50 of interest over the term of the CD (18 months).
But what happens if during that 18 month term rates rise? The entire $50,000 balance is unavailable to be invested at the now higher interest rate. The investor will have to make a decision: Pay the early withdrawal penalty and reinvest at the higher rate (in some cases this might be financially beneficial) or hope that interest rates stay high until the current 18 month CD matures.
I would propose to this investor that there is a better way. Laddering. By laddering your CD investment, the investor can take advantage of higher CD rates in longer maturity terms at current offering rates and reduce the exposure to interest rate risk over time.
For example, if the investor chose to place $25,000 in a 12 month CD offering a 0.50% APY and placed the remaining $25,000 in a 60 month CD offering a 1.70% APY, the investor would earn a total return over the same 18 month period of $828.93, a $76.43 increase from the first scenario. In addition to an increase in the total return, the investor has exposed half the total investment to less interest rate risk. If rates rise in the short term, the investor will have the ability to reinvest half of the total investment at a higher rate, increasing total return on investment and the added benefit of increased liquidity with funds coming available more frequently if needed.
While achieving that “perfect” investment opportunity may be a fantasy, this is one option to achieve 2 of the 3 factors (low risk and liquidity) while achieving a better overall return on your investment.
Has your banker discussed CD laddering with you?
We will.
VisionBank. See what we can do for you.
*CD rates in this article are hypothetical and not a prediction or offering of future rates or earnings.
Mike Philips is the Senior Vice President of Retail Banking at VisionBank
