EDUCATION

Ah, Spring! The flowers and trees are beginning to bloom, the birds are singing, more rain than sun, all the joy of a Midwest change of seasons. Another rite of passage that comes with Spring is the search for new homes. In Illinois, like many other parts of the country, people start to think about and explore options related to purchasing a new residence. Unlike a lot of previous Spring buying seasons, 2024 is shaping up to be a challenging year for home buyers due to the increased interest rates and lower inventory of homes for sale. I don’t know much about the inventory issue, but I wanted to take the next few moments to discuss financing that purchase of your new “dream home”. When it comes to mortgage options, our current financial world provides no shortage of choices and those choices come with many more choices and options. Perhaps it is best to discuss some of these options in the hope of simplification and comparing apples to oranges and bananas. There are many government-based programs from FHA to VA to USDA, and I don’t wish to dig into these options as they have their own specific requirements and downpayment processes. For the purposes of this short article, I want to focus on conventional offerings within the mortgage tree – namely Fixed Rates, Adjustable Rates and Balloon Mortgages. Let’s begin with the Fixed Rate options…traditional mortgage offerings come with traditional terms of 15, 20, and 30-year amortizations that have a specific rate that works out into full payment within the specific term. In today’s market, these rates are tiered from the lowest rate at 15 years up to the highest rate at 30 years. As of the time I am writing this blog, the 30-year rate is around 7.30%. While this is “historically” speaking a pretty reasonable rate, most people are dealing with the sticker shock of having a previous mortgage that is half that rate (3.35-3.50%) in that last 5 years. The real positive side of the Fixed Rate is that there are no changes during the loan term. The rate you receive at the start is the rate that you pay until the loan is paid in full or until you refinance the loan at some future date. There is a significant cost certainty for you as a borrower and minimal risk that your mortgage will change on a monthly basis. Another option is the Adjustable-Rate mortgage. Within the world of Adjustable rates there are many options ranging from 5/1 (5 years fixed with adjustments every year after) to 3-year adjustable (fixed term for 3-year increments), to one-year adjustable (changes every single year). These loans are perfect for short-term homeowners, the borrower that is going to be in one location for a short period of time and then look to move to another area. Short-term buyers may be in the market for a starter home today with an eye toward a different home in the near future – think about someone just starting out in a new career, maybe a single person looking at possibly marrying and starting a family in the next 5-7 years, they don’t plan on being in this home forever. The lower starting point on an adjustable mortgage may fit their needs perfectly for this “first” purchase, and may give them the opportunity to balance a new job/income against the learning about living in this first home and the costs associated with ownership. Currently, you can find a 5/1 ARM at about 6.5%, which would be a savings to the budget even with the upside rate risk compared to a 30-year fixed rate loan. Adjustable-rate mortgages are NOT for everyone and should be considered with your eyes wide open – they can go UP. It is wise to have some serious discussions about the risk before you jump into an adjustable-rate loan. It’s a good idea to know how the adjustments work before you sign up for the lower payment. The final option is the Balloon Mortgage , and this loan is a hybrid of sorts. The balloon typically has an initial fixed rate from up to 15 years in length followed by a second period of time in which the loan would be rewritten to complete the term of the loan. A balloon, therefore, has an amortization term that sets the payments along with a final payment at the maturity of the first period. For example, the balloon mortgage would start the term of 15 years at today’s rate of 6.75% and have a fixed rate period that carries the borrower to year 15. At year 15, the loan is subject to being refinanced at whatever the prevailing rate is at that time. You receive the surety of a fixed rate/payment for the first 15 years, without the risk of the adjustable and for a lower rate than the 30-year fixed rate. A couple of final thoughts…first, most people are in their homes for, on average, 9 to 11 years, which means that the balloon mortgage is a pretty reasonable option versus the adjustable and at a lower overall cost than the 30-year fixed rate option. Secondly, the all-in costs that you would expect to pay are typically lower at your local community bank than they are with some of the large national lenders that you see in advertisements. Remember that the costs you pay to obtain your loan will also affect the overall value of the loan type that you select. All in all, I wish you the best as you look for a new home is this current real estate market – patience and a little bit of questioning will insure that you receive the best possible deal for yourself and your future financial pursuits. Michael Herzog President

Imagine that you notice an error on your bank statement when you are viewing your account online. Now you have to call the bank and navigate the following… Thank you for calling insert bank name , in order to better serve you please listen to the following choices. For Personal Banking, press 1, for Business Banking, press 2, for questions about online banking, press 3… Then you enter the next level with more choices and possibly a third level of choices. You reach the point where you are repeatedly pressing the 0 key, all the while hoping that you will finally get the attention of a live person. When you finally find a person will they be local or will they be in a call center ½ way around the world? Now you are calling Washington State Bank… The phone rings and you hear, “Thank you for calling Washington State Bank, this is staff person’s name , how may I help you?” Instantly you are on the way to speaking with a local banker who works to assist you with your questions or concerns. A Community Bank starts with this customer experience and is designed to meet the needs of the local residents. We don’t take deposits from all over the state or the Midwest, we focus our efforts on Washington and the surrounding community. Likewise, we’re not interested in lending those same dollars in areas outside our geography – Washington State Bank is focused on our local market. We work with small businesses right here in Central Illinois. We make loans to young people purchasing their first car. We help young families move into their first homes. We live and work right alongside our residents and you see us in the community. In thinking about this month’s post, I ran across a lot of articles on the benefits of community banks. Let’s look at a few of these items. Lower Fees Community banks often charge lower fees for account services, loan origination, and in general. While larger banks may tout low or no fees, there are often higher access fees to obtain credit and/or maintain your account with that institution. Fees add up over time, and community banks are consistently less expensive than the big, national banks. Flexibility Oftentimes, you will find that community banks have the ability to fit that round peg into a square hole. Not every person has perfect credit or a spotless past, sometimes, you simply need the chance to move beyond the numbers and be considered as a person again. The big banks can be very unforgiving, and not every situation qualifies, but many find credit in community banks that are traditionally dismissed or denied by larger institutions. Personal Attention You may find that a community bank is more customer-facing, in other words, a place where you can develop a relationship with bankers that care about your business. I would like to highlight our staff at WSB, we have many bankers here that have been with the bank for many years – you know who I’m talking about, stop in and say “Hi!”. Community Investment We are members of many local organizations, we place dollars into fund-raising for St. Jude Runners, Easterseals, Susan G. Komen Memorial, MS Walk-a-Thon, our local sports and academic programs along with the Chamber of Commerce. Let me close by revisiting our opening scenario, which experience do you find less frustrating? Which of those two banks values you enough to call you by name when you walk through the front door of the lobby? In the famous words of the theme from the TV show Cheers, “Sometimes you want to go, where everybody knows your name. And they're always glad you came. You want to be where you can see, our troubles are all the same. You want to be where everybody knows your name.” For over two hundred years of American history, that is your local, community bank. Washington State Bank is proud to stand in this long line of community banks, serving in the same location for over 75 years! Michael Herzog President

Welcome to 2024! If you are like me at all, this is the time where we make resolutions… Here are five of the most common New Year’s resolutions that I could find… exercise more lose weight quit smoking, drinking, something else get organized spend more time with family and friends How about your finances as we head into a new year? It is no secret that everything that we spend money on is more expensive today than it was just a couple of years ago. Is your financial house in order? At Washington State Bank, we have tools available for you in setting yourself up for success in a brand-new year. Below are a few examples. Nest Egg – a complete set of tools to help you manage your financial savings program. You’ll have access to an advisor, or you may make investments on your own. Banzai! – a tool that will assist you in thinking about your future financial needs and goals. There are many tools that include budgeting and games that are appropriate for all ages. If you are looking for some additional reading materials on finances, look no further than Banzai! ID TheftSmart – the world is becoming more and more complicated every year, and criminals are after our private information. This product provides you with peace of mind and protection from many threats that exist today. A minimal cost, of $12, provides access to some of the best tools in the marketplace today. At Washington State Bank we have resolutions as well, primarily to be your one-stop source for financial information, education, and products designed to meet your individual needs. We offer many of the same products and services that other banks do, we also answer our phones –without going through a selection list of options. Finally, I want to take a moment to wish you a happy and healthy New Year! May your financial goals come into clear focus and, if I or my team can assist you along the way – we are ready to be a part of your plans! Michael Herzog President