Montana Banks Tap Water Sage As State's Reexamintion Process Creates Water Rights Uncertainty

Partnership continues to sprout new ways lenders look at the value of water

Ponderosa Advisors, LLC announced recently the addition of three Montana banks that have signed onto using Water Sage for risk mediation and due diligence purposes in their lending practices. This new crop of banks tapping Water Sage comes as Montana’s water rights reexamination and “second decree” process is underway, whereby nearly half of the water rights claimed in Montana will be reviewed and/or contested.

First Interstate Bank, Citizens Bank & Trust, and Bank of Bozeman are the latest trio of banks finding value in Water Sage’s online map-based data access portal to efficiently search and view water rights information and land ownership.

“While our initial interest in Water Sage was for our core focus in agriculture lending, we learned its benefits expanded well beyond farming and ranching interests,” said Scott Johnson, Vice President of the Agri-Business Department at First Interstate Bank in Billings. “Because water rights can be separated from real property, this tool protects our bank and customers as we sift through each and every qualifying loan application.  We’ve also discovered old accounting records can include errors, and property that might not appear to have water rights, actually do and increase the overall value for the landowner,” said Johnson.

“The first property we researched had water rights ownership in three different entities,” added Clint Rech, Vice President and Senior Loan Officer at Citizens First bank in Big Timber. “Water Sage will help us perfect our lien and gives us valuable insight,” said Rech.

“Purchasing Water Sage was a very easy decision,” said Mark Gannon, Senior Vice President & Chief Lending Officer at the Bank of Bozeman. Water Sage is easy to use and provides a lot of value for the bank, not only in situations with large agricultural producers, but also for small acreages where the water is part of the building lot’s value,” continued Gannon.

“This partnership whereby our members have greater certainty with Water Sage as they navigate Montana’s reexamination and second decree path is invaluable at this time.  Questions continue to surface and Water Sage and the team at Ponderosa are there to answer,” said Steve Turkiewicz, President and CEO of Montana Bankers Association (MBA), who was responsible for working with Ponderosa Advisors to create an association-based membership plan offering Water Sage to all MBA member banks. Members are able to access Water Sage’s customized platform to bolster best practices when writing loans. Since water often underpins the value of land, addressing water rights in the security process can help mitigate risks of lost value if water is severed from land.

“If you have land with water, that land has an increased value whether it’s for crops or hunting or recreation – and banks need to secure that value,” continued Turkiewicz.

Last year, Bank of the Rockies N.A. was the first lending institution to fully utilize this partnership designed to help Montana banks access crucial water rights and land information data through Water Sage’s online water rights mapping program.  Ponderosa Advisors is working with banks across Montana to improve transparency in both the sale and purchase of properties throughout the state. 

“For banks, it is important to realize that these valuable water right assets included in real estate, commercial, agricultural and other transactions may be involved in new litigation over the next few years,” said Colleen Coyle, a Director at Ponderosa who has more than 15 years of experience as a water rights attorney and served as a water master in the Montana Water Court.  Water rights can be reduced, enlarged, or terminated as a result of Montana’s second decree process.

“The best way to prepare for reexamination is to find out as much as possible about the historical water rights you own, or that are involved in a bank’s transactions,” continued Coyle.

To educate banks and landowners about the current laws and second decree process, Ponderosa Advisors has begun hosting a series of complimentary workshops to share about the reexamination, how to be prepared, and get proactive to protect one’s water rights.  Although water rights are critical to land value, they are sometimes missed when lenders take security on land, exposing banks to risks in the event of foreclosure. In some instances, banks have been caught off guard when landowners have severed water rights prior to foreclosure or refinancing and properties are devalued. In other instances, errors from older, historical water rights have been caught and corrected improving both sides of a lending transaction.

Water Sage was developed to research water rights and is a valuable risk mitigation tool. Efficient access to water rights data allows bankers to understand and address the relationship between the land involved in an agricultural or recreational ranch lending transaction and the water that supports production or development, and even address the relevant aspects of water rights that may make a land parcel particularly valuable.

About Water Sage
Water Sage is a web-based mapping and research platform that integrates water rights, well, and land data, with diverse analytical capabilities. Water Sage provides simple, efficient access to this data, helping users understand and evaluate water rights and their relationship to land. The platform is the brainchild of the team at Denver-based Ponderosa Advisors, LLC, a firm of analysts, lawyers, technical experts and developers, that believe access to information and transparency facilitates better decision-making, which benefits everyone. The firm has locations in Colorado, Montana, and Texas.