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CHAIRMAN PERSPECTIVE

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CHAIRMAN PERSPECTIVE Powered By Docstoc
					September 2007

A Publication
of Heritage Group
Member FDIC                                                                                                              Aurora               Kearney
                                                                                                                         Doniphan             Neligh
                                                                                                                         Grand Island         Stromsburg
                                                                                                                         Hastings             Wood River


                 CHAIRMAN’S PERSPECTIVE
                 Back to the Basics
                Our country’s credit markets are in                                                     whom have long-term investment horizons.
                turmoil. The credit markets are                                                                Many of the underlying home loans (sub
                tightening for many types of credit.                                                    prime loans) in the mortgage securities are
 Sam Moyer
                This tightness is a result of the                                                       losing their value. It’s difficult to trace where
problems in the home mortgage market created                                                            the bad loans are and thus Wall Street investors
by credit quality issues in “sub prime mortgages”.                                                      have stopped buying these securities. This
What is a sub prime mortgage? It is a home loan                                                         creates both a valuation issue (since few are
that is outside the historical loan underwriting                                                        being bought and sold) and a liquidity issue for
norms for house loans. These norms include                                                              the mortgage market. These problems have
requirements like substantial equity down                                                               spilled over to other credit markets, like
payments, income that is verifiable and sufficient                                                      commercial paper, commercial mortgage backed
to adequately service the homeowner’s loan, good                                                        securities, etc. The result is that the “spread”
credit reports, supporting appraisals, etc.                                                             (the additional interest rate necessary to
Examples of sub prime mortgage credit include:                                                          compensate for risk) between all types of private
1) Second mortgages for up to 110% of                                                                   credit and risk-free US Treasury securities has
     collateral value.                                                                                  increased significantly.
2) “Liars loans” where income is not verified.                                                                 Who, what and how was this mess
3) Low rate teaser loans that readjust the                                                              created? Let’s start with the players.
     interest rate up in two years.                                                                     Innocent Defaulting Borrowers: These folks did
4) Interest only loans where principal is not repaid.                                                   not attempt to buy more house than they could
   One must understand the history of home                                                              afford, but accepted loan terms like teaser rate
mortgage credit to obtain a real perspective on                                                         loans that contained inherent interest rate
what has happened that led to the current credit                                                        increases that resulted in their payments
debacle. From the early 1900’s to the early                                                             becoming unaffordable. Many are currently in
1980’s, most home loans were made directly by                                                           default causing losses to investors.
building and loan associations, savings and loan                                                        Greedy Borrowers: These folks purposely bought
associations (S&L’s) and life insurance                                                                 homes they could not afford; signed interest only
companies. When interest rates were deregulated                                                         loans; misstated their income they knew would
by Congress in the early 1980’s many, if not most,                                                      not be verified; signed teaser loans with starting
of the S&L’s went broke. This void in home                                                              low rates knowing full well they could not make
lending was immediately filled by commercial                                                            the payments when the rate changed in a couple
banks and the onslaught of the so-called                                                                of years. Why would they do that? Because
mortgage broker. Commercial banks did not have                                                          houses were appreciating 15% to 20% a year and
good access to the long-term, fixed-rate funding                                                        they wanted to share in the big gains. They were
necessary to place home loans in their own                                                              gambling.
portfolios, so they too gave up on being direct
                                                                               Rating Agencies: These are companies like Moodys and Standard & Poors.
lenders for their own portfolio and became mortgage brokers.
                                                                               They are hired to “independently” evaluate the credit worthiness of the
   A mortgage broker is a salesperson/agent that simply originates and sells   mortgage-backed securities created and issued by the investment banks.
the home loan to a mortgage conduit. The sold mortgages are pooled             They failed to dig deep enough in their credit underwriting and gave the
together by the conduit, usually an investment bank. They are packaged into    problem securities an investment-grade rating. Unfortunately, their
a mortgage-backed security (MBS) or collateralized mortgage obligation         independence has come into question since they were paid by the
(CMO). Each pool is split into numerous traunches with varying risk factors.   investment banks from which they were to be independent.
The mortgage securities that are created by investment banks (Goldman
                                                                               Mortgage Brokers: Though many are honest and forthright, they are
Sachs, Merrill Lynch, etc.) are then sold to fixed-income investors, some of
                                                                                                 CHAIRMAN’S PERSPECTIVE Continued on page 2

          www.bankonheritage.com                                                                                       Service You Can Bank On
CHAIRMAN’S PERSPECTIVE CONTINUED From Page 1
 basically commissioned salespeople who do not           investors are shying away from purchasing
 care about the credit worthiness of the loan nor do     mortgage securities because not only can the                    Are your money market
 they have any financial repercussions if the loan       industry not trace the bad loans into particular
 goes bad. Many brokers knew the weaknesses in           securities, but it is also difficult to compute the size         mutual funds paying
 the system of underwriting by the investment            of the potential losses since the home foreclosure                higher yields than
 bankers and drove truckloads of bad credit through      process is just getting underway. And, when                     current Treasury rates?
 the cracks.                                             lenders start getting houses back from foreclosures
 Investment Bankers: The Wall Street firms like          and borrowers walking away from homes worth                      If so, then you are taking
 Goldman Sachs created the conduit markets. They         less than the outstanding loan balance, they will                 more risk than owning
                                                         start dumping the homes on an already bad
 made huge fees packaging the loans into securities                                                                            U.S. Treasuries.
                                                         market. The housing stock then devalues even
 and selling them. They were short on underwriting
                                                         further just exacerbating the problem.
 talent and did their client investors a disservice in                                                                      Call Steve Arnett
 “looking the other way” and “twisting the arms” of         Why is Sam writing about this? How does this
 the credit rating agencies to grant their junk bonds    affect the average person in central Nebraska? The             at 888-554-5499 today
 an investment grade.                                    answer is in various ways. First, expect more                   for protection against the
                                                         stringent underwriting if you are looking for a                current market turbulence.
     These Wall Street investment houses were            home loan. Second, make sure you go to a lender
 paramount in creating this whole home loan              you trust so you do not get sold flaky terms on your
 disintermediation process. By disintermediation, I      new mortgage loan. Third, if you have investment           other players suffer the financial losses associated
 mean the process of skipping the S&L’s and              money, ask your portfolio advisor if you own               with their behavior and poor business practices.
 commercial banks that historically had                  anything with sub prime exposure. Fourth, the sub          Further, the Federal Reserve’s main tool to help
 underwritten these loans. You see, underwriting         prime debacle will create many opportunities for           is their ability to lower interest rates, which is
 takes knowledge and talent. Knowledge and talent        astute investors. If your broker/money manager is          not fair to the savers and conservative fixed-
 takes good people and people are expensive. As an       just a mutual fund salesperson, consider upgrading         income investors.
 alternative to quality underwriting and local           to people who search out real opportunities in the            What Congress should do (not the Federal
 knowledge, the industry created computer models         marketplace. Fifth, if you have CD’s or other fixed-       Reserve) is attempt to help the “innocent
 and made credit decisions based on mathematical         rate investments, you need to make a decision on           borrower”, but not the greedy borrower.
 scoring. It took less people and was less expensive,    your expectation of the direction of future interest       Innocent borrowers may just need some time and
 but obviously had weaknesses.                           rate moves. Most economists and large banks are            the ability to refinance their loans at normal
 Investors: The final buyers of the “paper” committed    begging the Federal Reserve to drop rates. Finally,        market rates. This will not cost much and could
 the ultimate sin of not understanding what they         the sub prime problem is going to exacerbate the           help stabilize housing markets.
 were buying. They paid too much for the paper and       housing problem and contribute to the devaluation             Further, the industry should go back to a
 failed to require a reasonable credit premium.          of homes in many parts of the country.                     lending system where the originator and
 Housing Market: The housing market is a player in       Solution: Many on Wall Street and in Congress              underwriter are also the investor and where such
 the credit problem as well. Housing markets are         are begging the Federal Reserve to bail out the big        person has a financial stake in the performance of
 local in nature and many markets in Florida,            banks, investment banks and investors (pension             the loan they make (“direct lending”). If this
 Arizona and California have appreciated much too        funds, university endowments, hedge funds) to              were the lending system, this problem could have
 fast (bubble). Homebuilders have now overbuilt in       ease the pain. Once again, this would lead to a            been avoided or minimized. In lending, whether
 these markets and there is now home value               moral hazard when you privatize the profits and            its to consumers on homes or to businesses, its
 depreciation occurring. Many economists expect          socialize the losses. This rewards poor                    time to get . . . back to the basics.
 that we are just at the tip of the iceberg in housing   underwriting, gambling and excessive risk taking.                             Sam L. Moyer, President & CEO
 devaluation in a lot of the biggest and most            This would be an unwarranted solution. We need                                                   Heritage Bank
 overbuilt markets. This is important because            to let the investment banks, big banks and all                                       sam@bankonheritage.com


                   Premier Club
                   Travel Opportunities
  Heritage Bank’s Premier Club customers and             the season with their Holiday Under Glass                     Trip includes deluxe Doc Holiday motorcoach
guests are invited to join in on these fun and           luncheon and holiday concert. Following a                  transportation from Hastings, Doniphan, Grand
exciting trips. Call for reservations today!             museum tour as well, we’ll head to Lauritzen               Island, Aurora and York, museum admission and
Christmas Magic                                          Gardens. Each year they put on a spectacular               concert, $10 for cafeteria-style lunch service at
December 4th                                             Poinsettia Garden, and we’ll receive a guided tour         the Durham Café at Joslyn (keep the change if you
$63 per person                                           of the colorful plants. Then, we’ll tour a unique          don’t need the whole $10!), garden admission and
  The wonders of the holiday season will come alive      Omaha Ukrainian Church to see how Christmas is             tour, Ukrainian church tour and dessert, plus
with this fascinating day trip! First stop will be       celebrated in the Ukraine. We’ll even be treated to        Heritage Bank escorts. Reservation deadline is
Joslyn Art Museum where we’ll enjoy the sounds of        a special Ukrainian dessert before heading home.           November 1st.


        www.bankonheritage.com                                                                                                      Service You Can Bank On
2
                    Wall Street Insights

               Planning a Long-Term Strategy? Don’t Forget About Inflation!
                Anyone who has paid for                 Investing to Beat Inflation                   Another option is a stock mutual fund, which
                gasoline, health care or college                                                      offers the benefit of professional management.
                                                       Over the long run — 10 years or more —
                tuition lately knows that even if                                                     Stock mutual funds have demonstrated the
                                                    stocks may provide the best potential for
 Mike Landgren the overall rate of inflation is
                                                                                                      same long-term growth potential as individual
                                                    returns that exceed inflation. While past
                modest, there are areas where                                                         stocks. S&P tracked domestic equity mutual
                                                    performance is no guarantee of future results,
costs are rising more dramatically. Earning                                                           funds from 1987 through 2006 and found an
                                                    stocks have historically provided higher
returns that exceed the cost of living is                                                             average return of 11.8%.4
                                                    returns than other asset classes. A Standard &
important for all investors, but it is especially   Poor’s analysis of holding periods between            Whether you’re a first-time investor or an
critical for those who may depend on their          1926 and 2006 found that the annual return for    experienced retiree, you need to keep inflation
portfolios as a source of income.                   a portfolio comprised exclusively of stocks in in your sights. Stocks may be your best
                                                    the S&P 500 was 10.49% — well above the weapon, and there are many ways to include
What Is Inflation?                                  average inflation rate of 3.04% for the same them. Your financial advisor can help you
                                                    period.3 The average annual return for long- determine your best options.
   Inflation is the increase in the price of any
                                                    term government bonds, on the other hand,             This article is not intended to provide specific investment
good or service. The most commonly referenced
                                                    was only 4.86%.                                   or tax advice for any individual. Consult me, Mike Landgren,
measure of that increase is the Consumer Price                                                        with questions at 402-461-2192 or 888-463-6611.
Index (CPI), which is based on a monthly survey
by the U.S. Bureau of Labor Statistics. The CPI A Balancing Act                                                      Mike Landgren, Investment Officer
compares current and past prices of a sample           Keep in mind that stocks do involve greater                                                 Heritage Bank
“market basket” of goods from a variety of risk of short-term fluctuations than other types                               landgrenm@bankonheritage.com
categories including housing, food and of investments. Unlike a bond, which
transportation.                                     guarantees a fixed return if you hold it until Investing in mutual funds involve risk, including possible loss
                                                    maturity, a stock can rise or fall in value based of principal. Investments in specialized industry sectors have
   Inflation has been a consistent fact of life for on daily events in the stock market, trends in additional risks, which are outlined in the prospectus.
U.S. consumers. Between 1900 and 1970, the economy or problems at the issuing  
                                                                                                      Bonds are subject to market and interest rate risk of sold prior
inflation was moderate, averaging 2.5% company. But if you have a long investment to maturity. Bond values will decline as interest rate rise and
annually. From 1970 to 1990, however, the time frame, you may find that stocks offer the are subject to availability and change in price.
average rate increased to around 6%, hitting a best chance to beat inflation.
high of 13.3% in 1979.1 Recently, rates have                                                          1
                                                                                                        Source: U.S. Bureau of Labor Statistics.
                                                       The key is to consider your time frame, your 2
been closer to the 2% to 4% range, averaging
                                                    income needs and how much volatility you are 3 Based on an average annual inflation rate of 4%.
3.2% in 2006.                                       willing to accept, and then construct a             Source: Standard & Poor’s. Performance is for the
                                                                                                         period December 31, 1926, to December 31, 2006.
                                                    portfolio with a mix of stocks and other             Stocks are represented by the total return of the S&P
What It Means to Your Finances                      investments. For instance, if you have 30 or 40      500 Index, bonds by long-term Treasuries (10+
   An inflation rate of 4% might not seem           years until you plan to retire, a portfolio          years). Past performance cannot guarantee future
                                                                                                         results. Individuals cannot invest directly in any
significant until you consider the long-term weighted to stocks or stock funds might be                  index. Results include reinvested dividends.
effect on your purchases and your investments. suitable. But even if you are approaching 4 Source: Standard & Poor’s. Based on average annual
For example, in 20 years, 4% inflation annually retirement, you may still need to maintain               returns of all U.S. equity funds, including sector and
                                                    some growth-oriented investments as a hedge
would drive the value of a dollar down to $0.44.                                                         balanced funds. Does not reflect sales charges or other
                                                    against inflation. Your retirement assets may        expenses associated with purchasing mutual fund
   Inflation also works against your need to last for 30 years or more, and inflation                    shares. Past performance is no guarantee of future
investments. When pursuing long-term                will continue to work against you throughout.        results.
financial goals, from college savings for your         There are many ways to include stocks in Securities and Insurance Products offered through
loved ones to your own retirement, it’s your long-term plan in whatever proportion Linsco/Private Ledger, member NASD/SIPC. Not FDIC
                                                                                                      insured. No Bank Guarantee. May lose Value. Not a
important to consider the real rate of return, you decide is appropriate. You and your deposit. Not insured by any Federal Government
which is determined by figuring in the effects financial advisor could create a diversified Agency. Heritage Bank is not a Broker/Dealer nor
of inflation.                                       portfolio of shares from companies you select. affiliated with Linsco/Private Ledger


       www.bankonheritage.com                                                                                                     Service You Can Bank On
                                                                                                                                                                    3
                   Ag Focus

            Harvest Is Finally Here. Are You Really Ready?
               As I talk with farmers every      are not selling right out of the field, where     that’s what we do every day.
             day, the conversation inevitably    will they go? Will the unusually wide basis
                                                                                                      From everyone at Heritage Bank – have a
             centers around how good are the     be a major factor in your decision?
 Wayne Beck                                                                                        safe and bountiful harvest!
             Nebraska Cornhuskers this year      Something you need to think about.
or just how good the corn crop is looking. I
                                                    Have you talked to the elevator about bin                                    Wayne Beck,
won’t speculate on the Huskers right now,
                                                 space? Are they going to be able to take it                              Relationship Manager
but I can tell you that this may be one of the
best crop years our territory has seen in the
                                                 all? At first, I am sure it will not be much of                     Heritage Bank, Stromsburg
last decade. As of this writing, much of Polk    a problem but with the added bushels, what
and York counties have been blessed with         are they going to do with it. We
moisture and most of it has come at very         know there is already a
opportune times. Many of the yield estimates     shortage of rail cars and it’s not
that I am hearing on irrigated corn are          going to get much better by the
coming in at the 215 to 240 bushels per acre     end of harvest. There was a
range. Dry land corn is estimated up to 170      large amount of corn stored on
bushels per acre in some areas and much of it    the ground in 2006. Imagine
could average 150 bushels. Soybeans aren’t       what 2007 will be like if we
much different though a little early to start    raise 10 or 20 percent more
guessing yields. I am sure that not every        corn this year!
place has been so fortunate but as I drive
                                                     Have you anticipated some
through the country, there are vast areas of
                                                 delays? They may come in the
excellent looking crops.
                                                 form of mechanical failure,
   My question to many of the farmers is:        weather delays, and problems at
“What are you going to do with all that          the elevator or long lines. All
corn?” The answers range from a very             this needs to be factored in so
sophisticated plan to “I’ve never really         that you are not pressured into
thought that much about it.” If you really       making a bad decision. At least
haven’t given it much thought, now is the        you can have an alternative plan
time to get a plan put together. You have        if things do not fall into place.
done an excellent job of growing the crop,
now is the time to figure out how you are           I am not writing to give you
going to market the crop. One is just as         all the answers because first of
important as the other.                          all, no one has all the answers
                                                 and second, these are not “one
   Do you have enough space of your own if       size fits all” questions.
you are pleasantly surprised with your
                                                 However, I would invite you to
yields? What would you do with all of the
                                                 call or stop in and see any one
“excess bushels” that do not fit in the bins?
                                                 of     the    Heritage    Bank
Is there a better alternative to piling it on
                                                 Relationship Managers to visit
the ground?
                                                 about your unique situation.
  As is usually the case, these “excess          Put our Ag expertise to work
bushels” are not priced. What is your            helping you make the best
marketing plan for these bushels? If you         decision for your operation –



      www.bankonheritage.com                                                                                    Service You Can Bank On
4
                      Insurance Insights
               Insurance for Identity Theft – Is There Such a Thing?
                 Insurance is simply a risk                 •   Loan re-application fees                                  containing your name, social security number,
                management tool, right? Insurance           •   Attorney fees                                             bank account number or any credit cards?
                cannot prevent events from                  •   Costs of long distance phone calls                      • Have you ever responded to an email divulging
                happening, but rather it is designed                                                                      more information than you feel you should have
 Linda DeWitt   to protect you in the event of a loss.      Through a partnership with Worldwide Assistance,              in hindsight?
                Whenever a consumer, farm owner             Allied also offers some of the best service available in    • Do you shred your receipts, bills and other
                or business owner contemplates his          the industry, including 24/7 assistance from                  documents containing your personal financial
                insurance needs, he needs to weigh          experienced professionals who will:                           information before you put them in the trash?
                the costs of purchasing insurance to                                                                    • Has anyone in your household received a phone
                protect against a potential loss            •   Assist in identifying fraudulent accounts
                                                            •   Place a “fraud alert” on your credit reports              call asking to “confirm” your bank account or
                versus the benefits of having that                                                                        credit card information and actually given it out?
                coverage if/when a loss occurs. This        •   Report your ID theft to the Federal Trade
                                                                Commission                                                We are amazed at how many people provide the
 Nancy Parks    article is designed to make you aware
                                                            •   Notify credit-reporting agencies                          requested information without first thinking “Is
                of one of the newer insurance
                                                            •   Contact creditors on your behalf                          this a legitimate request?”
protections available on the market, and some
considerations that should weigh into your decision         •   Assist in replacing driver’s license, passport,
                                                                                                                           To learn more about identity theft and how you can
to purchase this coverage or not.                               social security card and any other identification
                                                                                                                        prevent it, we recommend you visit the Federal Trade
                                                                documents
   We hope you’re aware by now of the prevalence of                                                                     Commission website at www.ftc.gov/bcp/edu/
                                                            •   Provide an emergency cash advance when
identity theft nationwide, including right here in                                                                      microsites/idtheft/. They estimate that as many as 9
                                                                needed, if theft occurs away from home
Nebraska, as well as the nightmares that come with                                                                      million Americans have their identity stolen each year.
having your identity stolen. Our co-workers at              Plus, for no additional fee, one person per policy may         The decision to purchase Identity Theft coverage is
Heritage Bank help people who have been victims of          also sign up annually for Allied’s credit monitoring
this crime as they try to stop more damage from
                                                                                                                        yours to make. It’s our job as experienced insurance
                                                            service from TransUnion, one of the country’s three         professionals to make you aware that this relatively
occurring and then set about unwinding the tangled          biggest credit-rating organizations.        Additional
web the thief has left behind. Falling prey to an                                                                       new coverage is available and what benefits it will
                                                            insureds may be added for a small monthly fee if you        provide if you ever need it. At Heritage Insurance we
identity thief is much like being caught in spider’s        so choose. Customers are notified if any changes are
web – there is no easy out! If you ask someone who                                                                      take our responsibility to our clients very seriously,
                                                            made to their report. Monitored data includes:
has been through that process, they’ll likely tell you                                                                  and we have your best interest at heart. If you’re
of the time and energy they’ve spent on the phone           •   Address                                                 currently an Allied customer and would like to learn
with every creditor involved not to mention the             •   Employment                                              more about this endorsement, just give us a call. If
credit bureaus and so on.                                   •   New inquiries—details which creditor has                you’re insured with another company today, we would
                                                                reviewed the file                                       be happy to provide you with a no obligation quote
    So what can you do to protect yourself against the
                                                            •   New accounts—provides information about an              and help you compare coverages.
pain of identity theft before it happens? Well,
certainly safeguarding your personal financial                  new account opened in the member’s name                    Contact any one of the professionals at Heritage
information very carefully is key.          But, our        •   Delinquent account/late payment—provides an             Insurance in Aurora, Grand Island, Hastings,
experience tells us that ID theft victims don’t often           alert if an account moves into late pay status          Kearney, Neligh, Stromsburg or Wood River today.
look back and see that they’ve been careless – they’re      •   Bankruptcy—indicates if an account is included
usually people just like you and us. They’re stymied            in a bankruptcy filing                                                                        Linda DeWitt
as to how it could have happened!                           •   Fraud alerts—indicates when an alert had been                                      Heritage Insurance, Agent
                                                                added to the file by the member or another                                                 308-583-2266 x18
   Beyond being careful, you can now insure yourself                                                                                            dewittl@bankonheritage.com
                                                                company
with Identity Theft coverage. We can’t speak for all
insurance companies, but Allied Insurance does                  So, is this coverage worth it? That’s what we                                                 Nancy Parks
make this coverage available at a very affordable price     always have to ask ourselves when deciding what risks                                 Heritage Insurance, Agent
– just $45 a year! This endorsement can be added to         to insure ourselves against. Only you can answer that                                             402-887-4171
your homeowners, condo, or renter’s coverage. Let’s         for your unique situation. But first of all ask yourself,                           nparks@bankonheritage.com
be clear -- this form of insurance cannot prevent           is the simple peace of mind of knowing you’ll have
identity theft. Rather, it provides assistance if your      these resources at your disposal if it happens worth        Heritage Insurance is an independent insurance
identity is ever stolen. Specifically, Allied will pay up                                                               agency representing many strong insurance
                                                            $45 a year ($.12 a day)? Several other factors worth
to $25,000 with no deductible to cover expenses                                                                         companies. This means that we can approach
                                                            considering include but are not limited to:
incurred to restore your identity, including:                                                                           multiple companies to find you a competitive
•   Costs of executing affidavits                           • How would you know it if your identity had been           solution for your home, auto, farm, business, life,
•   Costs of certified mail                                   stolen, and how quickly would you find out?               and crop insurance needs. Heritage Insurance has
•   Lost income (maximum $250 per day,                        Minimizing the damage is a race against the clock.        been meeting the risk management needs of clients
    total of $5,000)                                        • Have you ever lost your wallet or purse                   throughout Nebraska since 1952.


         www.bankonheritage.com                                                                                                          Service You Can Bank On
                                                                                                                                                                               5
                      Community Spotlights
AURORA                                                         settle along the trail. They set up trading posts and         of experience sets Conditioned Air Mechanical apart
Under Construction                                             established farms and ranches. One of these people was        from many other businesses in the industry. Dan states,
                                                               W.J. Burger who founded the town of Doniphan.                 “Providing outstanding and first class service at a fair
    Crews in Aurora have been busy for the past several                                                                      and reasonable price is what Conditioned Air Mechanical
                                                                   Jay Gould, a New York financier and robber baron,
months with multiple construction projects. The                                                                              is all about”.
                                                               was a key player in the start of Doniphan. Jay Gould was
finishing touches to a few are getting near, and by the
                                                               a major shareowner of the original Union Pacific Rail            Heritage Bank and Heritage Insurance are pleased
time you are reading this they may very well be
                                                               Road. By the 1870’s the St. Joseph and Western Rail Road      and proud to have earned the opportunity to work with
complete. Highway 14 that runs north and south
                                                               had reached Hastings, Nebraska. Jay Gould purchased           Dan, Sheila and Conditioned Air Mechanical. Heritage
through Aurora has been undergoing a complete
                                                               this railroad and constructed a 24-mile rail line to Grand    congratulates Dan and Sheila on their success and
replacement for most of the summer. Widening of the            Island, Nebraska. Shortly after the completion of that rail
highway and making a few of the corners easier to                                                                            wishes them and their company the best in the future.
                                                               line W. J. Burger purchased the land and platted the
maneuver for larger vehicles is a very welcomed                original town of Doniphan. The town is named after Col.
enhancement. Many businesses as well as residents in           John Doniphan. He was an attorney in St. Joseph,              HASTINGS
the community were affected with the road                      Missouri who worked for Gould and also, the St. Joseph        “And the winner is…”
construction, however the public and traffic seemed to         Rail Road. In the early 1900’s the town had two banks,
adjust fine by taking alternate routes through town.           five grain elevators, a brickyard, a lumberyard, several          On June 25, 2007, Yahoo! Inc. announced that
                                                               general stores and several service business all common        Hastings, Nebraska won its “Be a Better Planet”
    A second project that has been completed is the
                                                               to that era.                                                  Greenest City in America challenge. Hastings received a
downtown redevelopment project that has occurred over
                                                                                                                             grand prize of $250,000 to be dedicated toward city
the past two summers. With new sidewalks, curbing and             This year the ownership of a 98-acre tract of land just    greening projects, developed in conjunction with Global
lighting around the downtown square, shoppers in               west across Highway 281 changed hands. The new owner          Green USA. More than 350 cities participated in the “Be
Aurora will have an excellent experience not only inside       reportedly plans to establish a new business district and     a Better Planet”program, which challenged Americans
the stores but also now as they stroll around downtown.        additional sites for new homes. This will augment the         to take action against climate change and use tools such
The new pavement and handicap accessible points makes          Amick Acres subdivisions located further to the west as       as Yahoo! to become better planetarians.
it possible for all to enjoy. If you haven’t been to Aurora    well as the new residential subdivision on the east side of
lately, it is worth your trip to see the new redeveloped       town. It is interesting to note that this transaction took       “The determined green spirit demonstrated by the
downtown area.                                                 place in the year of the 150th anniversary of Hall County.    people of Hastings, Nebraska, underscores our belief
    Thirdly, the Aurora School District has been a busy                                                                      that individual actions can add up to significant
                                                                  The Annual Fall Festival is Doniphan’s big celebration     change,” said Yahoo! Co-Founder David Filo. “Cities
construction zone this past summer and is getting closer       every year. This year promises to be bigger and better
to being finished. The school year for the Aurora students                                                                   from the coasts to the heartland rallied together to
                                                               with the 150th anniversary of Hall County being               participate and we’re encouraged by how the citizens
started a few days later than expected because of the          celebrated in conjunction with the annual festival.           came together around this important cause.”
construction, however I don’t believe the students minded      Proceeds generated help fund the Cemetery budget. So,
it much. Everyone adjusted and the Aurora School               come on over October 6th and enjoy yourselves                    Yahoo! declared Hastings the “Greenest City in
Administrative team and teachers should be congratulated                                                                     America” at a Yahoo!-hosted Nebraska-style BBQ and
on a job well done in getting the school and classrooms                                                                      celebration at Hastings’ Chautauqua Park. Residents of
ready. The extra space that has been added-on will enable      GRAND ISLAND                                                  Hastings were invited to join Mayor Matt Rossen as he
the school district to accommodate the needs of the            Experience Counts!                                            accepted the award on behalf of the city. Nebraska
students and educators in the Aurora School District. The                                                                    Lieutenant Governor Rick Sheehy was also in attendance
Aurora School District has always been spoken of highly            Six years ago, Dan and Sheila Morrell started             as well as other city & state government officials.
and this project will enable the District to continue to be    Conditioned Air Mechanical Systems and Service Co.
                                                               Conditioned Air Mechanical is a Nebraska corporation             “Hastings is honored to be a part of Yahoo!’s ‘Be a
an excellent educational institution.
                                                               that specializes in the servicing of commercial and           Better Planet’ program and to be crowned as the
   We in Aurora invite all of our surrounding township         industrial heating and air conditioning systems. The          greenest city in America,” said Mayor Rossen. “This
neighbors to come visit us and enjoy these recent              company can provide regular maintenance programs and          achievement has spurred us to become even greener,
improvements to our community!                                 has the capability to replace or retrofit existing boilers,   and we thank all of the citizens in central Nebraska who
                                                               chillers, air handlers, pumps and control systems. The        have supported us and helped promote this great city
DONIPHAN                                                       company has six employees based in Omaha, Grand               and state in which we live.”
                                                               Island, and North Platte, all with a minimum of 20 years          Subsequent to receiving the award, the city created
Happy Anniversary Hall County!                                 experience in this field.                                     the Green City Task Force to lead the charge in what can
   This year Hall County celebrates its 150th                      Over the past few years the business has seen many        be done in Hastings to protect our community’s quality
anniversary. All of the towns in the county have had or        changes, from the restricted use and sale of refrigerants     of living. One of the priorities that the Task Force has
will have special events to remember the past 150 years.       to the implementation of higher energy efficiency             identified is to make it easy for the public to be a part of
Doniphan will combine its celebration with the Annual          standards on new equipment. Additionally, a large             the      historic    planning       process.      Go      to
Fall Festival on October 6, 2007.                              challenge for Dan and Sheila as owners of this business       www.gogreenhastings.com to be part of the process.
   It is interesting to note that Doniphan is the only Hall    is fewer people choosing the industry in which to work
                                                                                                                                 Heritage Bank would like to congratulate the
County town located south of the Platte River. In the mid      and start a career. Consequently, Dan and Sheila are
                                                               always looking for good, well-trained technicians to          citizens of the community and area on becoming the
1800’s pioneers traveled along the trails that often ran
parallel to the rivers. The Nebraska City—Fort Kearney         support the growth of their company.                          “Greenest city” along with all the individuals and
Trail was one such trail. It ran along the south side of the                                                                 organizations that worked hard to make it happen.
                                                                  Dan has over 27 years of experience and worked for
Platte River. Some of the early travelers began to stop and    one of the nation’s largest HVAC companies. Those years                      SPOTLIGHT continued on page 7

        www.bankonheritage.com                                                                                                                  Service You Can Bank On
6
                         Community Spotlights
SPOTLIGHT continued from page 6
KEARNEY                                                               sand beach with swimming and fishing. There is even a                WOOD RIVER
                                                                      three-person waterslide nearby!
Making Dreams Come True                                                                                                                    50 Years and Counting
                                                                         Guests are welcome to use the fire pit, full basketball/             The          all-
   Whether       you
                                                                      tennis court, and waterslide whenever they would like. The           American story of
want to freshen up
                                                                      Walnut Grove Inn will close this fall for repairs on the pond.       Post WWII family-
your own home or
                                                                      “It has been a lot of work, but we have enjoyed meeting so           owned businesses is
you’re searching for
                                                                      many wonderful people,” said Traci. They are excited to finish       one that’s been told
a special present,
                                                                      the upcoming landscaping projects so they can reopen for             before. But as these
Annie Kay & Co.
                                                                      more guests next summer. So, if you’re looking for a relaxing        businesses enter
has      got     you
                                                                      northeast Nebraska getaway, this bed & breakfast has just            their 3rd or 4th
covered! Annie Kay
                                                                      what you are looking for. Call Traci or Roger at 402-887-4674        generation, their
& Co., located at
                                                                      to make a reservation.                                               long-term viability
2201         Central
Avenue in Kearney, is the perfect ticket to all your home                While visiting northeast Nebraska, you might enjoy one            is often uncertain.
décor and gift ideas. Heritage Bank provided the financing            of these interesting attractions – In Neligh: Starlite Drive-In      Escalating health insurance costs, the constant demands
for this firm using a Small Business Administration (SBA)             Movie Theater (one of the few left in the country), Neligh           placed on the owners’ time and resources, and changes
program called Community Express. Community Express is                Mills State Historical Site, Pierson Wildlife Museum                 within the industry all take their toll. For this reason, we
targeted specifically to women, minorities and/or businesses          Learning Center, Antelope County Jail Museum/Log                     all need to take time to salute these family owned
located in blighted areas. The mother-daughter duo, Noreen            Cabin (an old County Jail, reproduction log cabin and The            businesses while they’re still here with us.
Malchow and Tammy Kaup, had their loan approved in less               Pioneer Church), Cowboy Trail (a national rail trail built on           One such business is the R.E. Mead Shop in Wood River,
than 24 hours! With hard work and smiling faces their                 the former C & NW line through Neligh); In the area:                 which specializes in farm machinery repair. It was formed
dream became reality.                                                 Grove Lake Trout Rearing Station (can feed the trout,                in 1957 when Chuck Mead and his father Ron Mead
    Annie Kay & Co. recently celebrated their Grand Opening           located north and east of Royal), Ashfall Fossil Beds State          purchased the interest of Art Mead in the original Mead
in August. As soon as the door swings open the fresh aroma            Historical Park (amazing display of 12 million year old              Bros. Blacksmith Shop. The original business was founded
fills the air and the friendly staff is there to greet with a smile   fossils left intact for public viewing www.ashfall.unl.edu.          in 1948, so it’s been in the family for nearly 60 years.
and help with anything you may need! The store is filled                                                                                   Countless hours of hard work and excellent service have
with country-styled home décor, candles, and picture frames.          STROMSBURG                                                           been logged since then. The R.E. Mead shop celebrated its
They also feature beautiful quilts, and their greeting cards          Townhouse Worth visiting                                             50th anniversary in July with an open house. They estimate
have been a big hit! Annie Kay & Co. just received their fall                                                                              they served around 300 people that day, which is evidence of
                                                                         The Townhouse is a home décor and gift shop located in
items and the women have been busy decorating. As the                                                                                      the strong relationships they’ve built over the years. As
                                                                      downtown Stromsburg, NE. Whether you’ve heard of this shop
seasons change, so will the merchandise! Their regular                                                                                     Chuck’s wife, Judy, pointed out “Many of our customers are
                                                                      or not, you’ll want to put it on your list of “must-see’s”. Some
hours are Monday through Saturday 10:00-5:30. Also, they                                                                                   2nd and 3rd generation farm customers too.”
                                                                      may have also known it as Town & Country or even Aunt Ruth’s
are open until 8:00 on Thursday evenings if you need a quick          House. The name has changed, but the owners have not. Shari             The business that once replaced steel wheels on wagons
gift after work! Don’t miss Annie Kay& Co. the next time              Sundberg, Jean Waller and Shirley Baker make up this trio,           with tires, and spent much of the spring pounding plow
you’re in Kearney!                                                    which have been together for about 19 years. This business           lathes, now repairs all types of farm machinery.
                                                                      began 19 years ago as Aunt Ruth’s House located 1 mile north         Consolidation of many small farming operations into fewer
                                                                      and 3 miles west of Stromsburg. They later moved to downtown
NELIGH                                                                Stromsburg and changed their name to Town & County. A year
                                                                                                                                           numbers but larger operations usually means less business
                                                                                                                                           for a shop such as this. Technological advancements make
A little home away from home                                          ago they moved to the old lumber yard building that had been         the repair work more complex these days. Plus the advent
                                                                      recently remodeled and changed to their present name – The
    Roger and Traci Rudloff are busy with their new bed &                                                                                  of equipment leasing has reduced the need for independent
                                                                      Townhouse. One thing remains the same –their commitment.
breakfast, called                                                                                                                          shops’ repair services since leased equipment must be
                                                                      The Townhouse mission “is to educate and inspire customers as
the Walnut Grove                                                      they decorate their homes, and to provide variety and quality for
                                                                                                                                           serviced by the dealer.
Inn, on the edge                                                      every gift giving need in a welcoming home-like atmosphere.”            We would like to take this opportunity to recognize
of Neligh. This                                                                                                                            Chuck & Judy Mead for the leadership they’ve shown in
                                                                         The Townhouse has a great variety of products for sale, from
modern         style                                                                                                                       Wood River throughout the years. Despite the fact that
                                                                      items for entertaining to kitchen gadgets to gourmet food. On
guesthouse was                                                        Saturdays they serve samples from the pantry. You can find baby      these business owners didn’t have a 9-5 job, they’ve been
originally built for                                                  items from clothing to toys. There are collectibles available such   catalysts of growth and progress in town. Chuck served on
the      expanding                                                    as Peggy Karr glass plates & serving pieces, Franz fine porcelain,   the City Council and on numerous committees that
Rudloff family, but                                                   and NeQua ornaments. The Aroma products range from candles           addressed important issues such as street paving, the
when they realized it wasn’t getting enough use, they turned          to lamps to skin care products. You can also find jewelry and        railroad crossing, school bonds to name a few. Judy served
it into a very cozy cabin for guests. The Walnut Grove Inn            purses and bags by Journey and Maggie B. There are also lots of      16 years on the school board and over 10 years (and
Bed & Breakfast opened last December and is now running               garden and picnic items for your enjoyment.                          counting) as Treasurer of her church. That too was on top
in full force. They are not open during holidays so they can             Beyond shopping, The Townhouse has an in-house designer           of working 33 years in downtown Wood River for
be with their family. This summer, Roger and Traci have               with 20+ years of experience. She can help with problems like        Markussen Bookkeeping before her retirement.
been busier than ever. Cleaning, cooking and keeping up               color schemes, room arrangement and window treatments.
yard work are only a few of the many tasks.                           They feature Hunter Douglas, Nanik, custom designer fabrics             So, on behalf of everyone in at Heritage Bank, Heritage
                                                                      and hardware.                                                        Insurance and HGI Realty, we salute you Chuck & Judy.
   The A-Frame style log home includes three bedrooms, a
                                                                                                                                           For the 50+ years of running a successful business in this
full kitchen, living room and a loft. It sleeps six easily.             Gift certificates are available and they also offer a Bridal and
                                                                                                                                           community, and for all of the benefits residents enjoy
There is a cozy wood burning stove and also electric heat             Baby Gift registry. You can visit The Townhouse at 415
                                                                      Commercial St. in Stromsburg or visit them on the web at             today that were made possible because of the time and
when needed. The house has a wrap-around deck that
                                                                      www.thetownhousegifts.com.                                           energy you invested in this town over the past 50 years.
actually hangs over the edge of the pond. The pond has a



         www.bankonheritage.com                                                                                                                               Service You Can Bank On
                                                                                                                                                                                                      7
                     Wealth Management Strategies
                 Stay the Course in Volatile Times
                   Do you feel like your investment “boat”     reaching retirement and desiring more consistent income        inevitable and normal. By staying the course, you will
                  has been tossed about in a worrisome         from your portfolio.                                           be positioned to profit from the bounce-back. There
                  storm lately? You’re not alone, and             If you have an identified need for funds, keep those        have always been problems affecting markets, and there
                  that’s a natural emotional reaction.         assets safe and accessible. For people relying on cash         always will be. Don’t let the latest bad news affect you.
   Steve Arnett   However, despite the inevitable storm,       flow from their investments, I keep a few years of cash          I wrote last newsletter about the benefits of
it’s important for you to keep a long-term                                    invested in safer investments such as CDs       international investing. Economic growth around the
outlook when it comes to investing                                             or short-term bond funds. For money            world is unprecedented. I believe worldwide strength will
successfully.                                                                  not needed for at least five years, I          help the US economy weather whatever storms arise in
   Let’s review basic investing strategy.                                      generally use a diversified portfolio of       the near future.
Given the volatile state of the stock and                                      mutual funds, preferably low-cost funds          If you’re an institutional investor, or have more than
bond market this summer, this is a timely                                       with an index approach to investing.          $100,000 to invest, we have the strategies and tools to
topic. A significant portion of your                                           This portfolio structure allows your safe      help you achieve your goals.
invested assets should have a long-term                                         portfolio to continue meeting your cash
focus. The best long-term approach to                                           flow needs while your more aggressive                              Steve Arnett, Trust Manager
investing is a diversified strategy using a                                    investments have time to grow and                                                 Heritage Bank
concept known as asset allocation, which                                       recover from volatile markets.
                                                                                                                                                  arnettst@bankonheritage.com
I’ve written about many times in the past.                                       Remember, the goal of a publicly traded
Don’t make changes due to short-term                                          company is to make money for its                Steve Arnett manages trusts and investments for
problems in the markets. There are only two times to           shareholders. There may be bad apples (such as Enron) from     individuals, businesses and institutions with more than
change your allocation. First is to rebalance your portfolio   time-to-time, but if you have a diversified strategy, one or   $100,000 to invest. You can call him at 888-554-5499.
back to your original allocation (sell high-performing areas   two bad apples won’t have an impact on your portfolio.         Investment products are not obligations or, guaranteed
and reinvest in lower-performing areas). For most                 Also, the economy may be “bad” from time-to-time.           or insured by the bank, the FDIC or any other
investors, rebalancing once per year is usually good           Problems, such as the current liquidity crisis in the          government agency. Investments are subject to risk,
enough. Second is when your goals change, such as              market arising from sub prime mortgage troubles, are           including possible loss of principal.




                     Technology Solutions

               Another Reason to Use Your Heritage Bank Debit Card
                   Have you ever been to a store and            has never written a “bad”check and has a bank account          that moment and there is no chance of getting your
               written a paper check, only to have the          in excellent standing. In the latter case, the company         account information confused with another consumer’s
               cashier swipe the check through a                that this merchant has contracted with to process              account information.       Stores rely on “real-time”
               machine that reads your bank’s routing           electronic checks has made a mistake. In some way the          information for these debit card transactions and as
    Kevin      number and your account number, and              routing number and/or account number on this check             long as you have sufficient funds in your checking
  Henderson then hand you the check back as your                has accidentally matched that of another person in their       account, you will have a pleasant transaction with the
receipt? If so, hopefully you haven’t encountered any           database who may have a checking account at another            clerk. A description of where you completed the
problems with this type of transaction. Merchants do            institution. The account it accidentally matched with          transaction will be listed on your bank statement and
this to eliminate the paper and the need to physically          may well not be in good standing with the store. The           your Heritage Bank Internet Banking account history if
transport lots of checks to their bank for deposit.             clerk at the store cannot possibly be aware of the             you are enrolled. If you haven’t applied for your
                                                                mismatch or what exactly has transpired. The only way          Heritage Bank Check Card yet, please contact your
   Unfortunately, there have been many cases where
                                                                that the customer can get an explanation and fix the           favorite Heritage Banker for assistance. There is NO
consumers have had their paper check turned into an
                                                                problem is to call the company the store has contracted        COST to own the card and there aren’t any costs to use
electronic transaction in this fashion and then been told       with for its “check acceptance” processing services.           it either. In fact, debit card transactions don’t count
by the merchant that the store cannot accept the check          After a brief conversation with the company, the               toward any per item charges that may exist on your
because the account has been “blocked” by the                   customer can only hope that the company will correct           checking product either. So, why not go with a Check
merchant’s processor. While this is an embarrassing             its database so this doesn’t happen to him or her again.       Card today?
moment that no one desires to experience, it occurs with
some regularity. In some cases, the merchant truly has             A great way to prevent this type of embarrassing
received a “bad”check from this customer before and the         situation is to use your Heritage Bank Check Card (also                                            Kevin Henderson,
                                                                known as a debit card). When a store swipes your debit                           Director of Information & Technology
store has elected not to accept any more checks from                                                                                                                    Heritage Bank
that person. However, in other situations, the customer         card, the card and account balance is verified with us at
                                                                                                                                                          kevinh@bankonheritage.com



         www.bankonheritage.com                                                                                                                 Service You Can Bank On
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