23 OctTuesday Afternoon Business Brief


Stocks appear on track for more gains today. The market is getting a boost from an encouraging report on China#39;s economic growth as well as strong quarterly results from Apple and several other big companies. The Dow had gained more than 1 percent by early afternoon, up close to 200 points. The broader indexes are seeing even stronger gains, with the Samp;P 500 up more than 30 and the Nasdaq up about 90.

  • Federal regulators are relaxing the rules banks must follow in packaging and selling mortgage securities. The aim is to get banks to take on more of the risk and spur broader home lending. Regulators are also requiring fewer borrowers to make hefty down payments.
  • A top New York financial regulator is accusing the nation#39;s largest servicer of subprime mortgages of abuses that could potentially harm hundreds of thousands of borrowers. New York#39;s Superintendent of Financial Services has issued a letter to Ocwen Financial Corp., documenting the same kinds of suspicious actions that worsened the housing crisis, including backdating foreclosure warnings and loan denials, making it nearly impossible for borrowers to appeal the company#39;s decisions.
  • Federal officials are pledging regulatory attention and financial help to rural towns hit hard by the subprime mortgage crisis. Government data provided to The Associated Press by researchers at the US Department of Agriculture and Middlebury College show subprime loans were distributed in the rural US at even higher rates on average than in the Sun Belt cities devastated by risky lending.
  • The final report on state unemployment before next month#39;s elections shows jobless rates dropped in 31 US states last month. Two states with hard-fought Senate campaigns, Colorado and Kentucky, experienced the biggest declines in unemployment. Colorado#39;s fell to 4.7 percent, and Kentucky#39;s rate dropped to 6.7 percent. Nationwide, the unemployment rate eased to 5.9 percent in September.

23 OctConsumer loans rise

The growth in consumer loans remains manageable, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said Wednesday.

Right now, we dont see any risks on consumer loans in terms of consumer loans together with credit card receivables and auto loans. To sum it up and relate that to the total portfolio of the banking system, it still is a very small amount, Guinigundo said.

Latest data showed consumer loans grew 9.3 percent to P803.257 billion in the second quarter from P735.1 billion in the first quarter.

Automobile loans expanded to P206.783 billion from P194.373 billion, while credit card receivables climbed to P157.222 billion from P153.396 billion.

Residential real estate loans grew 6.5 percent to P348.16 billion in the second quarter from P326.9 billion in the first quarter.

Total loan portfolio of the banking sector as of end-June grew by 4 percent to P4.878 trillion from P4.698 trillion in end-March.

23 OctSales of U.S. Existing Homes Rise to One-Year High

The increase in sales exceeded the median forecast of 77 economists surveyed by Bloomberg, which projected a gain to a 5.1 million annual rate. Estimates ranged from 4.95 million to 5.2 million.

Sustained Improvement

“Job creation is good, we have low rates and more inventory is coming online,” Lawrence Yun, NAR chief economist, told reporters as the figures were released. The market “one year from now, two years from now, it will be better.”

At the current pace, employment would increase by 2.7 million this year, marking the biggest advance since 1999. The jobless rate dropped to a six-year low of 5.9 percent last month, according to figures from the Labor Department.

Declining borrowing costs will help bring homes within reach of more Americans. The average 30-year, fixed-rate mortgage fell to 3.97 percent in the week ended Oct. 16, the lowest since June 2013, according to Freddie Mac data. The rate has dropped by 0.22 percentage point over the past two weeks as concern over slowing global growth pushed investors out of stocks and into the safety of Treasury securities, causing yields to drop on the benchmarks used to calculate home-lending costs.

Photographer: Daniel Acker/Bloomberg

22 OctRogers appoints president, Enterprise Business Unit

Guy Laurence, Rogers President and Chief Executive Officer has announced the appointment of Nitin Kawale to president, Enterprise Business Unit, effective 1 December. In this role, Kawale will be responsible for the delivery of the companys Enterprise business strategy and commercial plan covering Small and Medium Business, Enterprise and Public Sector customers.

Kawale joins Rogers from Cisco Systems Canada where he held the position of president since 2008 with responsibility for all aspects of the Canadian operation including sales, marketing, finance, distribution and services. He has been with Cisco since 1995 serving a variety of domestic and international roles including: Worldwide Strategy and Worldwide Mobility as well as Cisco Canada executive roles in Enterprise, Small and Medium Business, and Public Sector businesses.

22 OctBusiness Briefs: Oct. 21

Snyder, of Anderson, received an Outstanding Achievement Award for his work to fostering diversity at the college. Snyder hired the college’s first vice president for diversity, equity and inclusion and commissioned a study that resulted in a proposal to create a statewide diversity program. The college has a minority student enrollment of over 25,000 students.

The college has also increased the level of Minority Business Enterprise and Woman-Owned Business Enterprise purchases by 93 percent since 2007.

Ivy Tech is one of Indiana’s largest and fastest growing colleges and serving more than 200,000 students at 32 campuses and 100 learning centers.

To see your good news, special recognition or other business news here, contact Traci Moyer at traci.moyer@heraldbulletin.com or call 648-4250.

22 OctSaline Area Chamber of Commerce honors top businesses in annual enterprise …

SALINE–The best of the best business in the Saline area were recently honored during a ceremony held by the Saline Area Chamber of Commerce.

The 19th annual Business Enterprise Awards took place Thursday, Oct. 16 at the Stonebridge Golf Club in Ann Arbor.

The ceremony featured the presentation of the Lifetime Achievement Award, 2014 Small Business of the Year and 2014 Large Business of the Year. Government officials were on hand to give tributes to each award winner. Officials included Congressman Tim Walberg, State Rep. Gretchen Driskell and Saline Mayor Brian Marl.

Lifetime Achievement Award

The Robison-Bahnmiller Funeral Home received the award in recognition of the businesss long history of outstanding contributions to the Saline community.

This is a big deal to us and we are very grateful for the honor, said Alison Robison, wife of owner Jim Robison.

Alison Robison spoke about the evolution of the funeral home, which the couple purchased from the Bahnmillers in 1984.

In 1982, just four months after the birth of their daughter, they moved from Ann Arbor to the apartment above the funeral home. At the request of Gerald and Mildred Bahnmiller they moved to Saline to become the next owners of the business.

Once again, I found I had a limited and fairy tale understanding of what I had signed on for and what we had committed to doing, she said.

She recalled stories of raising two children above the funeral home and working to live up to the reputation of the Bahnmillers and Lockwood families. Continued…

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22 OctArrow Reports Third-Quarter Earnings Per Share Up 8.9%, Strong Asset Quality …

GLENS FALLS, NY, Oct. 20, 2014 /PRNewswire/ — Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three- and nine-month periods ended September 30, 2014. Net income for the third quarter of 2014 was $6.15 million, an increase of $524 thousand, or 9.3%, from net income of $5.62 million for the third quarter of 2013. Diluted earnings per share (EPS) for the quarter was $0.49, an 8.9% increase from the comparable 2013 quarter, when diluted EPS was $0.45. Return on average assets for the 2014 third quarter was 1.13%, and return on average equity for the 2014 third quarter was 12.22%. Net income for the first nine months of 2014 was $17.0 million, an increase of $980 thousand, or 6.1%, from net income of $16.0 million for the first nine months of 2013. Diluted EPS for the nine-month period was $1.35, a 5.5% increase from the comparable 2013 period, when diluted EPS was $1.28.

Arrow President and CEO

Thomas J. Murphy stated, Arrow delivered another quarter of solid performance, with increased net income, earnings per share and net interest margin. We posted record highs for total loans outstanding and total stockholders equity. In addition, our income from our trust division and commission income from insurance agency operations continues to grow, and we maintained excellent asset quality and strong capital ratios.

Also in the third quarter, the Company was named to the Sandler ONeill Sm-All Stars Class of 2014 based on financial performance, and our lead subsidiary, Glens Falls National Bank and Trust Company, launched a fully redesigned website that enhances its online delivery of information and services.

The following list expands on our third-quarter results:

Net Interest Income and Margin:In the third quarter of 2014, on a tax-equivalent basis, our net interest income increased $1.2 million, or 8.7%, compared to the third quarter of 2013, while our tax-equivalent net interest margin increased by 15 basis points from 3.06% in the third quarter of 2013 to 3.21% for the third quarter of 2014. The increase in net interest margin reflected an increase in the yield on investments and a decrease in our cost of deposits offset, in part, by a decrease in the yield on our loan portfolio.

Trust Assets and Related Noninterest Income:Assets under trust administration and investment management at September 30, 2014, were $1.2 billion, an increase of $88.8 million, or 8.0%, from the September 30, 2013, balance of $1.111 billion. The growth in asset balances was generally attributable to a significant rise in the equity markets between the periods and the addition of new accounts. Income from fiduciary activities increased by $620 thousand, or 12.4%, from $5.0 million for the first nine months of 2013, to $5.6 million for the first nine months of 2014.

Loan Growth:For the first nine months of 2014, our loan balances increased by $115.0 million, or 9.1%, with increases in all three of our major segments: residential real estate, commercial and commercial real estate, and consumer automobile.

Our residential real estate loan portfolio grew by $56.2 million, or 12.2%, during the first nine months of 2014. We originated approximately $98 million of residential real estate loans, an increase of 1.3% from approximately $97 million of residential real estate loans originated in the comparable period for 2013. Included in these amounts is an increase of $13.6 million, or 13.4%, in our home equity loan balances, a program we have been promoting in 2014. Our gain on the sale of residential real estate loans for the first nine months of 2014 was significantly less than our gain for the first nine months of 2013, primarily because, in the first two quarters of 2013, we were still selling a high percentage of our originations into the secondary market.

Our commercial and commercial real estate loan portfolio grew by $33.6 million, or 8.3%, during the first nine months of 2014. Even with a very competitive environment for commercial loans, we experienced steady growth over the past nine months.

We also experienced growth from our indirect automobile lending program. We have advanced $166.0 million in new and used automobile loans in the first nine months of 2014, increasing our outstanding balances by $25.3 million, or 6.4%, for the first nine months of 2014.

Asset Quality and Loan Loss Provision:Asset quality remained strong at September 30, 2014, as measured by our low level of nonperforming assets and the low level of net charge-offs. Nonperforming assets of $8.4 million at September 30, 2014, represented only 0.38% of period-end assets, an increase of one basis point from our 0.37% ratio as of December 31, 2013. Net loan losses for the third quarter of 2014, expressed as an annualized percentage of average loans outstanding, were just .05% and only .06% for the nine-month period ended September 30, 2014. All of our asset quality ratios continue to be significantly better than recently reported industry-wide averages.

Our allowance for loan losses was $15.3 million at September 30, 2014, which represented 1.11% of loans outstanding, six basis points below our ratio one year earlier and three basis points below our ratio at December 31, 2013. Our provision for loan losses for the third quarter of 2014 was $444 thousand, primarily reflecting the strong growth in our outstanding loan balances.

Cash and Stock Dividends: We distributed a cash dividend of $.245 per share to stockholders in the third quarter of 2014. The cash dividend was 2% higher than the cash dividend paid in the third quarter of 2013, adjusting both for our 2% stock dividend in September 2014.

Insurance Agency Operations: Insurance commission income rose slightly from $2.4 million for the third quarter of 2013 to $2.5 million for the third quarter of 2014, an increase of $47 thousand, or 2.0%. This improvement was primarily attributable to an increase in new business.

22 OctWatt prepares to expand home lending

Mel Watt, the director of the Federal Housing Finance Agency that oversees the two bailed-out…

The head of a powerful housing regulatory agency announced new steps Monday intended to expand home lending facilitated by Fannie Mae and Freddie Mac.

Mel Watt, the director of the Federal Housing Finance Agency that oversees the two bailed-out government mortgage businesses, said in a speech to the Mortgage Bankers Association in Las Vegas that his agency would work to clear up some of the legal impediments to greater mortgage lending by banks and aim to increase loans with down payments as low as 3 percent.

We know that access to credit remains tight for many borrowers, and we are also working to address this issue in a responsible and thoughtful manner, said Watt, who took over at the FHFA in January and has reversed course from his predecessor, who sought to reduce the role of Fannie and Freddie in the home lending market.

Watt said his agency was working with Fannie and Freddie to provide clear rules of the road to allow lenders to sell the two government-sponsored enterprises home loans without fear that Freddie and Fannie would later require them to repurchase underperforming loans on the grounds that they were misrepresented. Fannie and Freddie do not make home loans directly, but rather create a secondary market for mortgages by buying them from lenders, bundle them into securities to sell to investors and offer insurance on those mortgage-backed securities.

21 OctOwner of Charleston-based CresCom Bank reports 3Q earnings

In addition to CresCom, the parent company owns Crescent Mortgage Co., a national wholesale home lender that does business in 45 states. Profits at that Atlanta-based unit fell 56 percent to $575,000 from the third quarter of 2013. For the first nine months this year, its net income fell 83 percent to $1.6 million.

The decline in net income derived from Crescent Mortgage … can be attributed to the significant declines in mortgage applications, which are at almost 20-year industry lows, Carolina Financial said.

The company has made it a goal to increase its bottom line this year by bringing CresComs profits to the level of earnings exhibited a superior community bank and relying less on the home-lending subsidiary, Rexroad said.

Net income at the retail bank jumped 20 percent $2 million in the third quarter from the same period a year ago.

CresCom has been adding branches, including a newly opened office at Cane Bay Plantation in Berkeley County.

It also is extending the reach of its Grand Strand franchise. CresCom announced in August that it is buying 13 branches from First Community Bank of Bluefield, Va. The offices have deposits of about $230 million and loans totaling $59 million.

Three of the locations are in South Carolina and operate as Peoples Community Bank. The rest are in southeastern North Carolina.

The sale is expected to close by the end of the year.

Carolina Financial is the largest bank owner based in the Charleston region. It has $1 billion in assets and 14 retail branches.

Contact John McDermott at 937-5572.

21 OctThree Small Cap Texas Banking Stocks Cashing In on the Texas Boom (TCBI …

Texas has set another record for job creation with small cap Texas banking stock like Texas Capital Bancshares (NASDAQ: TCBI), ViewPoint Financial Group (NASDAQ: VPFG) and First Financial Bankshares (NASDAQ: FFIN) naturally being well positioned to take advantage of the Texas economic miracle (see my previous article: Texas is Booming and So Are These Texas Stocks (EE, TPL amp; ATO)). I should add that I wrote about these Texas banking stocks back in late 2012 (see: Don’t Mess With Texas Banking Stocks TCBI, VPFG amp; FFIN) and the Texas Workforce Commission has just reported that the Texas economy added 36,400 jobs in September while over the past 12 months, employers added 413,700 jobs — the most ever recorded by the state. Moreover, several companies surveyed by the Dallas Fed responded by saying they are seeing labor market tightness while companies are saying they are experiencing upward wage pressures and staffing firms note that candidates are often receiving multiple offers.

With that in mind, here is a look at three small cap Texas banking stocks that are sure to benefit from the boom in Texas:

  • Texas Capital Bancshares. A member of the Russell 2000 Index and the Samp;P SmallCap 600, small cap Texas Capital Bancshares is the parent company of Texas Capital Bank, a commercial bank that delivers personalized financial services to businesses and entrepreneurs through full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio. Back in July, Texas Capital Bancshares reported second quarter 2014 earnings and that loans held for investment, excluding mortgage finance, increased 3% and total loans increased 11% on a linked quarter basis, growing 22% and 24%, respectively, from the second quarter of 2013. In addition, mortgage finance loans increased 38% on a linked quarter basis and 30% from the second quarter of 2013; demand deposits increased 21% and total deposits increased 11% on a linked quarter basis, growing 43% and 35%, respectively; net income increased 18% on a linked quarter basis and increased 39% from the second quarter of 2013; and EPS increased 18% on a linked quarter basis and increased 37% from the second quarter of 2013. Texas Capital Bancshares will next report third quarter results on Wednesday, October 22, 2014 at 5:00 PM EDT plus has a trailing P/E of 20.07 and forward P/E 16.06 along with no dividend. On Friday, small cap Texas Capital Bancshares rose 1.05% to $54.69 (TCBI has a 52 week trading range $47.59 to $67.08 a share) for a market cap of $2.36 billion plus the stock is down 10.6% since the start of the year, up 11.9% over the past year and up 226.7% over the past five years.
  • ViewPoint Financial Group. Founded in 1952, small cap ViewPoint Financial Group operates as the holding company for ViewPoint Bank, which provides financial services in the Dallas/Fort Worth Metroplex. The banks deposit products include checking accounts, savings accounts, money market deposits, term certificate accounts, and demand accounts while its lending products consist of one-to-four family residential mortgage loans; home improvement loans; construction mortgage loans; commercial real estate loans; home equity loans; consumer loans, including new and used automobile loans, recreational vehicle loans, and loans secured by savings deposits; and commercial business loans. The bank also offers brokerage services for the purchase and sale of non-deposit investment and insurance products through a third party brokerage arrangement. Back in May, ViewPoint Financial Group announced that the shareholders of LegacyTexas Group, Inc, the holding company for LegacyTexas Bank which operates 20 branches in the Dallas/Fort Worth metropolitan area, had overwhelmingly approved a merger agreement by and between the two companies. The merger is subject to regulatory approvals and customary closing conditions. However and in late August, ViewPoint Financial Group announced that additional time will be required to obtain regulatory approvals and to satisfy customary closing conditions necessary to complete their merger. If and when completed, the merger will result in one of the largest independent banks in the state of Texas, with 51 branches and pro forma assets of over $5 billion. Otherwise, ViewPoint Financial Group will release its third quarter 2014 results after the close of the market on Tuesday, October 21, plus has a forward P/E of 15.66 and a forward dividend of $0.48 for a 1.90% dividend yield. On Friday, small cap ViewPoint Financial Group rose 0.2% to $24.65 (VPFG has a 52 week trading range of $20.72 to $29.59 a share) for market cap of $985.89 million plus the stock is down 9.8% since the start of the year, up 13.6% over the past year and up 75.4% over the past five years.
  • First Financial Bankshares. For more than 124 years and through the Great Depression, the collapse of the Texas economy in the 1980s and the Great Recession, small cap First Financial Bankshares is recognized as one of the nations most financially secure banking institutions, with assets of $5.45 billion, 12 regional banks with 62 banking locations, plus a Trust Company with eight locations, all to serve customers in Texas markets stretching from Hereford in the Panhandle to Orange in southeast Texas. Last Thursday, First Financial Bankshares reported that third quarter earnings rose 19.78% to $23.43 million while net interest income increased 7.46% to $48.89 million. In addition, the provision for loan losses was $896 thousand compared with $1.35 million in the same quarter last year and $1.12 million in the second quarter of 2014 while nonperforming assets as a percentage of loans and foreclosed assets totaled 0.83% on September 30th compared with 0.93% on June 30th and 1.09% on September 30, 2013. The Chairman/CEO commented:

We are pleased to report another quarter of good growth in loans and deposits as well as solid earnings. We continue to pursue opportunities for acquisitions and focus on growing loans, cutting costs and increasing income.

Otherwise, First Financial Bankshares has a trailing P/E of 21.19 and a forward dividend of 18.49 along with a forward dividend of $0.56 for a 2%. On Friday, small cap First Financial Bankshares rose 1.01% to $28.09 (FFIN has a 52 week trading range of $26.58 to $33.76 a share) for a market cap of $1.80 billion plus the stock is down 15.1% since the start of the year, down 9.1% over the past year and up 67.7% over the past five years.

Finally, here is a look at the long term performance chart for all three Texas banking stocks:

As you can see from the above chart, Texas Capital Bancshares, ViewPoint Financial Group and First Financial Bankshares have produced pretty decent returns for investors albeit performance has leveled off this year.