Monthly Archives: April 2012

InterBank is largest Minnesota bank failure since 2008 crisis

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Inter Savings Bank, fsb, whose condition has been deteriorating for more than four years, was closed Friday by the Comptroller of the Currency. It was the largest Minnesota-based financial institution to fail since the financial crisis of 2008. The bank, which operated under the DBA InterBank, fsb, was based in Maple Grove, Minn., and had four branches. With the FDIC acting as receiver, Great Southern Bank, Reeds Spring, Mo., assumed virtually all of the failed institution’s $473.0 million in deposits and $481.6 million in assets.

In 2008, Inter Savings Bank’s equity capital ratio dropped to 5.85 percent from 7.36 percent upon recording a net loss of $23 million for the year. Losses and capital depletion continued. In 2009, the bank lost $16 million and saw its capital drop to 3.87 percent; in 2010, it lost $13 million and its capital dropped to 2.21 percent. Last year, the federal savings bank lost $6 million and at year end its equity capital to assets ratio was 1.52 percent.

The FDIC and Great Southern agreed to a loss share transaction on $413.0 million of the assets. Read the FDIC press release here.

The FDIC estimates the cost to the Deposit Insurance Fund will be $117.5 million. It’s the 20th failure of an FDIC-insured institutions this year, and the third one in Minnesota. Since the 2008 financial crisis 20 banks (about 5 percent) have failed in Minnesota.

Tension high between banks and credit unions

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The tension between the banking industry and the credit union industry is as palpable as ever, with the Senate poised to vote on a bill to expand the authority of credit unions to make business loans.

The Minnesota Bankers Association has its annual Washington  D.C. trip scheduled for this week, and the bankers that make the trip will surely make the case that credit unions should not be permitted to make more business loans. That will be a tough case to make at Sen. Al Franken’s office; Franken is a co-sponsor on S. 2231, the bill to expand the credit unions’ lending power. Finance and Commerce has this article on the issue.

The Independent Community Bankers of America is hosting its Washington Summit this week, with hundreds of bankers expected to participate, including dozens from the Upper Midwest. They also will meet with elected officials to discuss the credit union issue, in addition to other issues.

In Minnesota, the credit unions have further poisoned the air with a recent campaign to encourage consumers to post stories on a facebook page about their bad experiences at banks. This Start Tribune article describes the campaign, which will award prizes up to $2,000 to consumers who post bank bashing stories.

There have been campaigns in the past where individual credit unions have bashed banks, but this is the first time I can remember that the entire industry getting behind such a smear campaign. MBA President/CEO Joe Witt wrote this letter to the Minnesota Department of Commerce to complain.

Surely, most credit unions are managed by people who believe they can best make their case by promoting their advantages rather than by stirring up ill feelings about the competition. I wonder if in the long run this campaign might not backfire.

New magazine focuses on role of local banks

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NFR Communications is very pleased to announce the creation of Local Banker magazine. Get a look at it by clicking here.

For the past 10 years, NFR Communications has published a magazine called Lawmakers Edition, which provided background information on banking industry issues to elected officials. The magazine was sponsored by banker associations in various Upper Midwest states, as well as United Bankers Bank and the Independent Community Bankers of America.

It became evident in recent months that the audience for our message was much greater than elected officials. Educators, reporters, policy analysts and other thought leaders would certainly benefit from a publication describing the issues facing today’s community banker. So we discontinued the Lawmakers Edition and have launched a new, livelier publication serving a broader audience. Local Banker will be published three times in 2012, and beginning in 2013 will move to a quarterly publishing schedule.

We continue to mail the magazine to state legislators and other elected officials, but we are now also sending it to selected members of the media. In addition, we are building broad email distribution. The magazine currently has five sponsors — including UBB and ICBA. We hope to grow the sponsorship base so the magazine can be distributed more broadly.

The magazine is attractively designed and appropriate for public distribution at libraries, colleges and perhaps even bank lobbies. We are happy to work with bankers who would like to make the publication available in these kinds of locations. Please contact us here at NFR Communications to work out the details.

Local banks play an incredibly important role in local economies. Local Banker magazine tells that story.

First quarter earnings releases start coming out

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Wells Fargo released its earnings earlier today, reporting net income of $4.2 billion in the first quarter, 14 percent ahead of fourth quarter 2011. Return on assets for the first quarter was 1.31 percent and return on equity came in at 12.14 percent. Read the entire earnings press release from Wells Fargo here.

Wells Fargo was the first of the publicly held banks to report earnings this season, with JPMorgan Chase also announcing earnings today.

Most of the big banks will announce their first quarter earnings next week. U.S. Bank will announce its earnings on Tuesday, and TCF Financial, Associated Banc-Corp and KeyCorp are scheduled to announce their earnings on Thursday.

Wells Fargo said revenue in the first quarter was its strongest in nine quarters. Hopefully, that’s an indication of how things are going across the industry.

Industry leader in Minnesota dies

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Pete Allen, long-time president of the First National Bank of Milaca, Minn., died April 4. Burton Prentice Allen, Jr., better known as Pete, was 83. He died of ideopathic pulmonary fibrosis and lung cancer.

Allen was president of the Minnesota Bankers Association in 1973-74. He was a director for the American Bankers Association, was chairman of the American Institute of Banking, and was a director of the Federal Reserve Bank of Minneapolis.

After serving in the Air Force, He returned to Milaca to join his father at the First National Bank, which has been in the Allen family since 1897. Pete became president and CEO in 1965.

Allen was also a founder of the Falcon National Bank in Foley, Minn., and for 12 years was a director at ECM Publishers in Anoka, Minn.

Pete is survived by his wife, Thora, and their four sons: Eric, Andrew, Kirby, and Matthew. A memorial service is set for April 20 with a funeral set for April 21. Read the obituary here.

Bank crimes generally on the decline

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The FBI reports that bank crimes are more rare today than a decade ago. That’s the good news; the bad news is we really don’t know to what extend computer-based theft is emerging as a more efficient way to steal money from a bank.

The FBI released this information about bank crimes in the third quarter of 2011. There were a total of 1,094 robberies, burglaries, larcenies and acts of extortion at banks across the country during the third quarter, down from third quarter in 2010 when there were 1,325 such crimes.

Looking at data for an entire year, it appears this kind of crime is on the wane. In 2003, there were 7,644 bank crimes and that number has generally dwindled since then: 7,720 in 2004; 6,957 in 2005; 7,272 in 2006; 6,182 in 2007; 6,849 in 2008; 6,062 in 2009 and 5,628 in 2010. Through three quarter in 2011, there were 3,209 reported bank crimes, which puts the year on track to come in under 2010′s total statistic.

During the third quarter of 2011, the FBI notes that money was taken in 89 percent of the incidents, totaling more than $9.3 million; only about $1.9 million of it was recovered. In the third quarter, 5 percent of the incidents involved acts of violence, resulting in 18 injuries, three deaths and four persons taken hostage. Friday remains the most likely day a bank crime will occur, most frequently between 9 and 11 in the morning.

Point about health care law fits Dodd-Frank

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The Opinion page of the Wall Street Journal today points us to this essay in Friday’s Orange County Register. Columnist Mark Steyn recounts Supreme Court Justice Antonin Scalia comments last week during oral arguments over the health care law. Referencing the size of the law, Scalia says “You really want us to go through these 2,700 pages? Or do you expect us to give this function to our law clerks?”

Steyn goes on to make the point that 2,700 pages is ridiculously too long for a law to be practical. “A 2,700-page law is not a law by any civilized understanding of the term…It’s not just that the  legislators who legislate it don’t know what’s in it, nor that the citizens on the receiving end can ever hope to understand it, but that even the nation’s most eminent judges acknowledge that it is beyond individual human comprehension. A 2,700-page law is, by definition, an affront to self government.”

I am writing about this in a banking blog because isn’t 2,700 pages about the length of the Dodd-Frank Act? How many lawmakers read the entire bill before they voted on it? The same point Justice Scalia makes about the health care law could be made about Dodd-Frank. More words — more pages — don’t make a law clearer, only more complicated. We see it in health care and we certainly see in it banking.

Steyn suggests laws should be limited to 27 pages. That seems like a reasonable suggestion. Certainly, if laws are going to be useful they need to be succinct enough to understand, let alone implement.