The Trend in Fear

By Mark E. Peiler, CFA – Senior Vice President, Chief Investment Officer

For the majority of the last five plus years following the Great Recession, the Chicago Board Options Exchange S&P 500 Volatility Index (VIX) or “fear index” has been in steady decline. On July 3, 2014, the VIX reached a recent low of 10.32, nearly matching the ten year low of 9.89 from January of 2007. The decrease in the VIX generally coincided with the S&P 500 making new highs in terms of price and near historic highs in terms of valuation. By the summer of 2014, it seemed the only thing to fear was the general lack of fear.

However, in the months since the mid-2014, several trends have emerged in the commodity, currency, and bond markets. Some examples of the magnitude of these trends are shared in the following table:
Mark Peiler Table
Along with the above, the trend in fear has reversed and is now on the rise. The VIX increased to 26.25 on October 15, 2014 and experienced spikes above 20 in both December and January.

It is during periods of rising fear when a broader approach to diversification has an opportunity to benefit a portfolio. If you are interested in learning more about BNC Wealth Management’s approach to portfolio construction, please contact Mark E. Peiler,CFA – Senior Vice President, Chief Investment Officer, mpeiler@bnccorp.com.

8 Things Cyber Criminals Don’t Want You to Know

From American Bankers Association

For all the internet’s advantages, it can also make users vulnerable to fraud, identity theft and other scams. ABA offers the following tips to help consumers stay safe and secure online:

1. Keep your computers and mobile devices up to date. Having the latest security software, web browser, and operating system are the best defenses against viruses, malware, and other online threats. Turn on automatic updates so you receive the newest fixes as they become available.
2. Set strong passwords. A strong password is at least eight characters in length and includes a mix of upper and lowercase letters, numbers, and special characters.
3. Watch out for phishing scams. Phishing scams use fraudulent emails and websites to trick users into disclosing private account or login information. Do not click on links or open any attachments or pop-up screens from sources you are not familiar with.
• Forward phishing emails to the Federal Trade Commission (FTC) at spam@uce.gov – and to the company, bank, or organization impersonated in the email.
4. Keep personal information personal. Hackers can use social media profiles to figure out your passwords and answer those security questions in the password reset tools. Lock down your privacy settings and avoid posting things like birthdays, addresses, mother’s maiden name, etc. Be wary of requests to connect from people you do not know.
5. Secure your internet connection. Always protect your home wireless network with a password. When connecting to public Wi-Fi networks, be cautious about what information you are sending over it.
6. Be careful in the cloud. While using the cloud makes it easier to store and share large amounts of files, understand that it also opens other avenues for attack.
7. Shop safely. Before shopping online, make sure the website uses secure technology. When you are at the checkout screen, verify that the web address begins with https. Also, check to see if a tiny locked padlock symbol appears on the page.
8. Read the site’s privacy policies. Though long and complex, privacy policies tell you how the site protects the personal information it collects.

For more information and tips to protect your mobile device, your identity or your small business account – visit aba.com/consumers.

How To Protect Your Small Business from Financial Fraud

From American Bankers Association

To combat this type of fraud, ABA offers small business owners the following advice to help prevent account takeover:

• Educate your employees. You and your employees are the first line of defense against corporate account takeover. A strong security program paired with employee education about the warning signs, safe practices, and responses to a suspected takeover are essential to protecting your company and customers.
• Protect your online environment. It is important to protect your cyber environment just as you would your cash and physical location. Do not use unprotected internet connections. Encrypt sensitive data and keep updated virus protections on your computer. Use complex passwords and change them periodically.
• Partner with your bank to prevent unauthorized transactions. Talk to your banker about programs that safeguard you from unauthorized transactions. Positive Pay and other services offer call backs, device authentication, multi-person approval processes and batch limits help protect you from fraud.
• Pay attention to suspicious activity and react quickly. Look out for unexplained account or network activity, pop ups, and suspicious emails. If detected, immediately contact your financial institution, stop all online activity and remove any systems that may have been compromised. Keep records of what happened.
• Understand your responsibilities and liabilities. The account agreement with your bank will detail what commercially reasonable security measures are required in your business. It is critical that you understand and implement the security safeguards in the agreement. If you don’t, you could be liable for losses resulting from a takeover. Talk to your banker if you have any questions about your responsibilities.

For more information on protecting your money – as well as a variety of other personal finance tips and resources – visit aba.com/consumers.

5 Steps of the Mortgage Process

Mortgage Process Image
By Michael Zerr, Internet Marketing Manager, mzerr@bncnationalbank.com

Step #1: Applying A seller will be more willing to accept your offer if you’ve already been pre-qualified. So before beginning your home search in earnest, you should start the application process. Your Loan Originator will work with you to come up with a pre-qualification letter for a ballpark loan amount. At this point, you’ll want to ask yourself:
• How big of a loan can I afford? How much of a monthly mortgage payment am I willing to take on?
• What type of mortgage programs and assistance am I eligible for (like FHA, VA or others)?
• What are current loan rates, and what do I qualify for?

Step #2: Finding a Home When you receive your pre-qualification, you can start looking at homes in your price range. When you’ve found a home you love, you’ll make an offer to the seller. There may be some back-and-forth, but hopefully your offer will be accepted quickly.

Step #3: Appraising Call your Loan Originator once you’ve found a home and the seller has accepted your offer. He or she will order an appraisal to determine how much your new home is worth, and will also let you know what documentation you’ll need to provide.

Step #4: Submitting Paperwork As your loan gets ready to be finalized and underwritten, you’ll need to fill out and send us any requested paperwork. Your Loan Originator will take over at this point, getting your paperwork in order and double-checking that everything is correct so your loan can be sent to the processing department.

Step #5: Closing This is the final step that officially makes your new home “yours.” Your Loan Originator will set up a time for you to sign the paperwork, pay your down payment and gather your keys.

What Professionals are Needed for a Successful Business Team

Team Image
Established and new business owners should assemble a team they can trust to lookout for the best interest of their company as well as provide the benefits needed for themselves and necessary to attract and retain quality employees.

Your team of trusted advisors should include:
• A Banker who can provide financing, deposits options, cash management and merchant services designed to best suit your specific organization.
• An Accountant that will handle your financial statements, assist with budgeting and is up to date on the tax issues that will affect you and your business directly.
• An Attorney who will set up the business entity for start-up businesses and serve as your legal advisor.
• An Insurance Agent who will provide and advise you on the insurance property and liability needs.
• A Financial Advisor for retirement planning options.

By finding the right individuals to fill these roles you will have peace of mind and the tools necessary for growth and success.

P2P Payments

P2P Payment Image
By Britt Felderhoff, VP Cash Management, bfelderhoff@bncbank.net

When is the last time you owed someone money?
babysitter, handyman, grandchild, roommate, co-worker… this list goes on.

In the past, you probably wrote this person a check. Maybe you even used Bill Payment to mail them a check. Now, you can initiate an electronic payment to your friends and family using Person to Person Payments (P2P) – all you need is their email address! And, the best part is that you already have this feature available in your current Online Banking or Mobile Account. To use it simple go here: www.bncbank.com/586.htm

Updated Tax Law Changes

By Alan Reid, Vice President Financial Services and Corporate Tax, areid@bncbank.com

The Tax Increase Prevention Act of 2014, TIPA, became law on December 19, 2014. This law extended 50+ tax saving provisions from December 31, 2013 to December 31, 2014. For businesses, these extended provisions include the ability to expense up to $500,000 of qualifying asset additions for eligible taxpayers, 50% Bonus Depreciation for qualifying new asset additions and the research credit.

For individuals, the extended provisions include the ability to deduct state and local sales taxes in lieu of state and local income taxes, the $250 above-the-line deduction for teachers for classroom supplies, the deduction for mortgage insurance premiums for certain taxpayers, and the above-the-line deduction for qualified tuition and related expenses if the taxpayers AGI is within certain limits.

All these deductions are gone again for 2015. Although there is a fairly high chance that some or all of these provisions will be extended again, no one knows when Congress will act. This uncertainty can make it very difficult for business owners to plan their capital spending, and for individuals to make informed, tax savvy decisions. We can only hope for an early resolution to this dilemma.

Online Banking Security Tips: General PC Security

By Shawn Cleveland, Chief Operating Officer & Compliance Officer, scleveland@bnccorp.com

Maintain active and up-to-date antivirus protection provided by a reputable vendor. Schedule regular scans of your computer in addition to real-time scanning.

Update your software frequently to ensure you have the latest security patches. This includes your computer’s operating system and other installed software (e.g. Web Browsers, Adobe Flash Player, Adobe Reader, Java, Microsoft Office, etc.).

Automate software updates, when the software supports it, to ensure it’s not overlooked.

If you suspect your computer is infected with malware, discontinue using it for banking, shopping, or other activities involving sensitive information. Use security software and/or professional help to find and remove malware.

Use firewalls on your local network to add another layer of protection for all the devices that connect through the firewall (e.g. PCs, smart phones, and tablets).

Require a password to gain access. Log off or lock your computer when not in use.

Use a cable lock to physically secure laptops, when the device is stored in an untrusted location.

When to Lease or Buy Your Own Building

By Ward Hickey, Senior Vice President, whickey@bncbank.net

Lease or Buy Building

As businesses expand they are sometimes faced with the dilemma of running out of operating space for their company and may question whether they should lease a larger space or purchase a building.

There are many advantages for buying commercial real estate. Many business owners purchase their building to avoid the rising rents, as an investment, or to make their businesses look more attractive to prospective buyers. When thinking about purchasing you should immediately evaluate the benefits versus the cost. The benefits include depreciation, interest, and appreciation of value which enables you to profitably sell, trade or refinance the building in the future. If you run a family-owned business, owning a building may be a good investment for the future.

While there are advantages to owning a commercial building, it may also have several drawbacks. For example, your company may experience a cash drain if the building needs to be renovated. You will also need to handle the ownership issues of utilities, insurance, property taxes and ongoing maintenance (i.e. cleaning, snow removal and lawn care).

Sometimes business owners consider leasing a new facility for their business instead of buying. One advantage is the ability to sign a short-term or long-term lease with an option to renew. Further, leasing doesn’t tie up needed capital. If the leased building has common areas such as the conference room and fitness facility, you will be able to take advantage of these as well. As your business expands and you need more space, you may be able to move within the building if their structure allows. Your landlord will take care of making the leased space fit your needs and they will handle all the ownership responsibilities (i.e. property taxes, insurance and building maintenance).

The disadvantages of leasing, however, include the frustrating and time-consuming task of finding the perfect amount of space in exactly the right location. You may also lose your lease to a higher bidder or building sell-out. With leasing, you are at the mercy of the landlord, who sets rent and restrictions on building use.

There are many factors that go into the decision of leasing versus buying a building for you business. You should spend time understanding the cost-benefit scenario for your particular business needs.

BNC finances commercial building purchases through both conventional and SBA loans. We can help you analyze the facts and make the best decision for you and for your business. Call us anytime!

Financial Market Observations

By Mark E. Peiler, CFA – Senior Vice President, Chief Investment Officer, mpeiler@bnccorp.com

My current observations of the financial markets can be summarized as follows:
1. Measures of financial stress and fear are low
2. Valuations are high
3. The additional return for accepting risk is low, and
4. The set of good risk/reward opportunities has diminished

These conditions have an impact on future return expectations and portfolio construction. To understand more, visit with one of our Wealth Management staff or attend our upcoming Wealth Management conference September 25th.

BNC Wealth Management Conference

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