Reduce liability for losses on commercial accounts by adhering to four requirements.
Accentuating the Postive
Since positive news is all too rare currently, let’s look at that first. Seven of 32 companies whose earnings reports follow improved their profits in the fourth quarter of 2008 and a couple of new records were set. The big winners were Bank of the Ozarks Inc. in Arkansas, with new records for the quarter and the year, and Northern Trust Corp. of Chicago with a record year.
In addition, Jacksonville Bancorp Inc. in Illinois, First Financial Bankshares Inc. in Texas (22 consecutive years of earnings growth) and Tri City Bankshares Corp. in Wisconsin had gains for both periods, while Bank Mutual Corp. in Wisconsin had an up quarter and flat year, and Guaranty Bancorp in Denver earned a fourth-quarter profit but an annual loss following losses for both periods in 2007.
Commenting on eight consecutive years of record net income, Bank of the Ozarks Chairman and CEO George Gleason said, “Continued improvement in our net interest margin, along with good growth in our average earning assets, allowed us to achieve our eighth consecutive quarter of record net interest income in the quarter just ended. Early in 2008 we stated that one of our goals for the year was to achieve record net interest income in each quarter. We accomplished this goal, and this will continue to be an important goal for us in 2009.”
Northern Trust’s president and CEO, Frederick H. Waddell, attributed his company’s performance to “our sound balance sheet and prudent business model.”
Perhaps the best news is that more than two-thirds (24) of the 32 companies, although less profitable than in 2007, did show profits in 2008 for the quarter and/or the year. They included Simmons First National Corp. in Arkansas; West Bancorp. Inc. in Iowa; IBERIABANK Corp. in Louisiana; TCF Financial Corp. and U.S. Bancorp and in Minnesota; Hancock Holding Co. and BancorpSouth Inc. in Mississippi; Commerce Bancshares Inc., Great Southern Bancorp Inc. and Pulaski Financial Corp. in Missouri; New York’s JPMorgan Chase & Co.; BancFirst Corp. and Southwest Bancorp Inc. in Oklahoma; Comerica Inc. and North Dallas Bank & Trust Co. in Texas; and Associated Banc-Corp in Wisconsin.
Of these, Simmons First National experienced a flat 12 months, Commerce was flat for the quarter and down for the year, and Great Southern had a full-year loss. In addition, Home BancShares Inc. in Arkansas had a quarterly loss but a full-year-profit, although down from the prior year. Likewise for North Carolina-based Bank of America Corp.
Home BancShares called its quarterly loss an “abnormal event,” due to an increased loan loss provision, writedowns on other real estate owned and trust-preferred securities, merger expenses from its bank charter conversion for a total after-tax loss of $16.2 million.
Bank of America’s fourth-quarter loss was blamed on “escalating credit costs, including additions to reserves, and significant writedowns and trading losses in the capital markets businesses.”
Losses for the quarter and full year were reported by Regions Financial Corp. in Alabama; AMCORE Financial Inc. in Illinois; Citizens Republic Bancorp Inc. in Michigan; Fifth Third Bancorp and KeyCorp in Ohio; First Horizon National Corp. in Tennessee; and Marshall & Ilsley Corp. in Wisconsin.
A $6 billion non-cash charge for goodwill impairment in the fourth quarter was to blame for the major portion of Regions Financial’s poor results.
The weak and deteriorating economy was cited by AMCORE, Fifth Third and Marshall & Ilsley in their reports of losses. KeyCorp’s CEO Henry L. Meyer III said his company’s results “reflect actions taken to manage risks and to fortify the balance sheet for an extremely challenging operating environment,” including a $4.2 billion capital injection.
Citizens Republic said losses were “primarily the result of a non-cash valuation allowance of $136.6 million against deferred tax assets and higher provision for loan losses.”
First Horizon National noted that it narrowed its fourth-quarter loss to $55.7 million from $125.1 million in the third quarter, calling it “solid strategic headway.” The measures included raising capital, selling assets and exiting lending businesses outside the company’s banking region.
The chairman and CEO of one of the region’s better performing companies, William A. Cooper of TCF Financial, made a statement many bank CEOs would love to echo in this dismal earnings season: “TCF did not engage in the activities that have created so many problems in the financial industry.TCF has not made subprime, broker-purchased, option ARM, teaser-rate, out-of-market, low-doc or other risky mortgage loans. TCF kept on its balance sheet all the loans it originated. TCF has no auto or credit card portfolios or asset-backed commercial paper.
“We have never owned Fannie Mae or Freddie Mac preferreds, trust preferred securities or bank-owned life insurance,” Cooper continued. “TCF does not have any derivative contracts. Higher charge-offs at TCF have been primarily due to the imprudent behavior of our competitors and an ill-advised monetary policy that created the unprecedented rise and fall of the housing markets. TCF remains profitable, solidly capitalized and ready to take advantage of prudent growth opportunities.”
And, by the way, TCF executive management received no bonuses for 2008 and Cooper has received neither a salary nor a bonus.
Bill Poquette is editor-in-chief of BankNews.
Copyright © February 2009 BankNews Publications