Bid farewell to 2007

JANUARY

A one-year extension for the moratorium on applications for deposit insurance and change in control notices for industrial loan companies that will be owned by commercial companies was approved by the FDIC board at its Jan. 31 meeting. The moratorium does not apply to ILCs owned by financial companies. In addition, the board voted to issue for public comment a proposed rule to strengthen the framework for consideration of applications or notices for industrial banks owned by financial companies not subject to federal consolidated bank supervision.

Kenneth E. Stout, 59, chairman and CEO of Citizens State Bank & Trust Co. and general partner of Stout & Deines Performance Management of Woodbine, Kan., died Jan. 9 at the Salina (Kan.) Regional Health Center following open heart surgery.

FEBRUARY

Assumption of the insured deposits of Metropolitan Savings Bank, Pittsburgh, by Allegheny Valley Bank, Pittsburgh, has been approved by the FDIC.

Metropolitan Savings is the first FDIC-insured institution failure since June 25, 2004.

David A. Ochsner has been named president and CEO of Nebraska Bankers' Bank, Lincoln. Ochsner was formerly senior vice president, chief operating officer and chief financial officer of Geneva (Neb.) State.

Compass Bancshares Inc., Birmingham, Ala., has announced a definitive agreement under which Banco Bilbao Vizcaya Argentana S. A. will acquire Compass for a combination of cash and stock. The transaction has an aggregate value of approximately $9.6 billion.

BBVA, which operates in 35 countries, is based in Spain and has substantial banking interests in the Americas.

FDIC-insured commercial banks and savings institutions reported net income of $145.7 billion in 2006, eclipsing the previous record of $133.9 billion in 2005. The FDIC said the improvement can be attributed in part to strong growth in noninterest income at large banks, higher net interest income and lower expenses for bad loans. This is the sixth consecutive year that industry earnings set a new record.

More than half of all insured institutions (55.9 percent) reported increased profits in 2006 compared to 2005, but only 46.3 percent reported higher returns on assets. The industry's ROA of 1.28 percent in 2006 was slightly lower than the 1.30 percent in 2005. The average net interest margin declined to an 18-year low of 3.31 percent in 2006, down from 3.52 percent in 2005.

MARCH

Comerica Inc., Detroit, has announced plans to relocate its corporate headquarters to Dallas. Officials said the relocation to Texas, where Comerica already has a major presence, will position the company in a more central location with greater accessibility to all of its markets. Comerica will maintain its significant presence in Detroit, remaining one of Southeast Michigan's largest employers following the relocation to the new ,Dallas headquarters office.

Wal-Mart has withdrawn its application for an industrial loan company charter. In a statement, Wal-Mart Financial Services President Jane Thompson said, "We notified the FDIC today (March 16) that Wal-Mart has withdrawn the application we made in July 2005 for an industrial loan company charter. This action follows January's FDIC decision to extend the moratorium on a number of pending ILC applications."

Once again, the Federal Open Market Committee decided to keep its target for the federal funds rate at 5.25 percent.

APRIL

William A. Mitchell Jr. will assume duties as president of Bankers' Bank of the West, Denver, effective May 1. He will succeed Roger R. Reiling, who will become vice chairman and CEO. Reiling has been president and CEO since 1987. Mitchell was previously chairman and president of Front Range Capital Corp. and president and CEO of its subsidiary, Heritage Bank, Broomfield, Colo.

In Missouri, agreement has been reached on the definition of a "local, well-defined neighborhood, community or rural district." The definition focuses on the county were a credit union's headquarters is located. Counties contiguous to that single county define the areas where a credit union may operate.

SB 591 is the result of negotiations between the Missouri Bankers Association, Missouri Independent Bankers Association and credit unions

Richard Berglund, former CEO of the Iowa Independent Bankers, passed away. Instrumental in the formation of the association, he was its CEO and lobbyist during the challenges to the banking industry of the 1970s and 1980s.

Federal preemption won the day in the U.S. Supreme Court decision in Walters v. Wachovia Bank, a case brought by the Michigan commissioner of insurance and financial services. The Supreme Court ruled 5-3 that mortgage lending companies that are national bank operating subsidiaries are subject to federal regulation rather than individual state laws.

In a cash transaction valued at $21 billion, Bank of America Corp., Charlotte, N.C., plans to purchase ABN AMRO North America Holding Co., parent of Chicago-based LaSalle Bank Corp. and its subsidiaries, from ABN AMRO Holding NV. The acquisition would create for Bank of America a leading banking franchise in metropolitan Chicago and in Michigan.

Mark F. Furlong has assumed duties as CEO of Marshall & Ilsley Corp. and M&I Marshall & Ilsley Bank, both of Milwaukee. As CEO, Furlong succeeds Dennis J. Kuester, who retired in connection with the company's annual meeting April 24. Kuester will continue as chairman. This transition was announced in December 2006 as part of the company's succession plan.

MAY

Tornado damage in Greensburg, Kan., involved three Kansas banks. Centera Bank, Sublette, and The Peoples Bank, Pratt, each operate branches in Greensburg. Greensburg State has its only office in the town.

Centera Bank and The Peoples Bank reported that their staff members were safe although the structures were heavily damaged. The Pratt bank plans to have a mobile unit in place for its Greensburg customers within the week.

A definintive agreement calling for the acquisition of TierOne Corp., Lincoln, Neb., by CapitalSource Inc., Chevy Chase, Md., has been signed. The transaction is valued at approximately $652 million.

Jorge Solis has been appointed director of the Illinois Division of Banking within the Department of Financial and Professional Regulation. Solis has more than 30 years of banking experience and most recently worked as a senior vice president at LaSalle Bank, Chicago.

The U.S. House of Representatives in a 371-16 vote, has passed H.R. 698, the Industrial Bank Holding Company Act of 2007, designed to maintain the historic separation between banking and commerce by closing the ILC loophole. This legislation also prevents branch banking by some commercially-owned industrial loan companies and bolsters the examination and enforcement authorities of the FDIC as a holding company regulator.

JUNE

Net income of $36 billion was reported by FDIC-insured commercial banks and savings institutions in the 2007 first quarter, slightly below the $36.9 billion earned in the first quarter of 2006 but still the fourth-highest ever reported by the industry. In releasing the latest results, the FDIC cited the housing slump, unfavorable interest rate conditions, slower growth in the U.S. economy and higher levels of problem loans as the main reasons why industry earnings were flat during the first quarter.

Wachovia Corp., Charlotte, N.C., and A.G. Edwards Inc., St. Louis, have announced an agreement under which Wachovia will acquire A.G. Edwards. The St. Louis-based firm will be combined with Wachovia Securities LLC.

Plans to open 1,000 Wal-Mart MoneyCenters - covering a quarter of its stores - by the end of 2008 have been announced by Wal-Mart Stores Inc. The company said it will also broaden its menu of financial products and services, beginning with the launch of the Wal-Mart MoneyCard, a reloadable prepaid Visa rolling out nationally with GE Money and Green Dot.

The FDIC board has approved a two-year pilot project to review affordable and responsible small-dollar loan programs in financial institutions. The project, the Affordable and Responsible Consumer Credit initiative, is designed to assist bankers by identifying information on replicable business models for affordable small-dollar loans. Best practices resulting from the pilot will be identified and become a resource for other institutions.

JULY

Merger plans have been announced by the American Bankers Association and America's Community Bankers. The organizations said their respective boards have approved pursuing a merger with the intention of finalizing it during the 2007 fourth quarter.

The new organization would retain the American Bankers Association name. Ed Yingling would remain in his current role as president and CEO of the ABA. Diane Casey-Landry, currently president and CEO of ACB, would become executive vice president and COO of the combined entity.

Changes have been announced by the Federal Reserve Banks to their check operations as consumers and businesses continue the shift from using paper checks toward electronic payments. As part of a longer-range strategy, the Federal Reserve Banks have selected Philadelphia, Cleveland, Atlanta and Dallas as regional check processing sites that are expected to provide the full range of check processing services through at least mid-2011. Other remaining sites will have their operations scaled back.

The target for the federal funds rate was maintained at 5.25 percent by the Federal Open Market Committee.

Wells Fargo & Co., San Francisco, has named John G. Stumpf, president and chief operating officer, CEO. Stumpf succeeds Dick Kovacevich, who continues as chairman. Stumpf joined the former Norwest Corp. in 1982 and served as regional president in various states.

Eugene "Gene" T. Barrett, 77, Kansas State Banking Commissioner from 1984-1987, died July 20.

An amendment to the farm bill (H.R. 2419) removed a provision that would have expanded the powers of the Farm Credit System into non-farm lending. The amendment was offered by House Financial Services Committee Chairman Barney Frank, D-Mass., and Ranking Member Spencer Bachus, R-Ala.

AUGUST

Charles L. Evans will become president and CEO of the Federal Reserve Bank of Chicago, effective Sept. 1. Evans will replace Michael H. Moskow, who will retire Aug. 31 after 13 years as president.

Evans is currently senior vice president and director of research at the Chicago Fed.

The target for the federal funds rate was kept at 5.25 percent at the Aug. 7 meeting of the Federal Open Market Committee.

A merger is under discussion by the Federal Home Loan Banks of Chicago and Dallas. The banks announced they are engaged in discussions aimed at evaluating the benefits and feasibility of combining the business operations of the two institutions.

Addressing financial market conditions, the Federal Reserve Board on Aug. 17 approved temporary changes to its primary credit discount window facility. The Fed approved a 50-basis-point reduction in the primary credit rate to 5.75 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The FRB also announced a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower.

Net income of $36.7 billion for the 2007 second quarter was reported by commercial banks and savings institutions insured by the FDIC. This is $1.3 billion (3.4 percent) below the level of a year ago but still the fourth-best quarterly earnings ever reported. Higher expenses for bad loans and narrower net interest margins were the main reasons for the year-to-year decline in quarterly earnings, according to the FDIC.

SEPTEMBER

Fined rules for limits and terms that will govern extension of credit to active duty service members and their dependents have been published by the U.S. Department of Defense. The rules are effective Oct. 1.

The rules do not cover mortgages or auto loans or other loans that do not meet the definition of consumer credit specified in the regulations. Affected are such loans as payday loans, vehicle title loans and tax refund anticipation loans. Additional disclosures are required for covered loans and a maximum military annual percentage rate is set at 36 percent.

Edward Gramlich, 68, former member of the Federal Reserve Board, died Sept. 5 of leukemia. He served on the FRB from 1997 until August 2005, when he returned to the University of Michigan, where he served as an acting provost in 2005 and 2006.

ISB Financial Corp., Iowa City, and MidWestOne Financial Group Inc., Oskaloosa, Iowa, have entered into a definitive agreement to combine in a merger of equals. The action would create the third-largest independent publicly traded bank holding company headquartered in Iowa, officials said.

The federal funds rate was cut by 50 basis points to 4.75 percent at the Sept. 18 meeting of the Federal Open Market Committee. In its statement, the FOMC said, "Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally."

In a related action, the Federal Reserve Board approved a 50-basis-point decrease in the discount rate to 5.25 percent.

OCTOBER

Insured deposits of Miami Valley Bank, Lakeview, Ohio, have been assumed by The Citizens Banking Company, Sandusky, Ohio. Miami Valley, with $86.7 million in total assets and $76 million in total deposits as of Oct. 1, was closed Oct. 4.

Shareholders of Marshall & Ilsley Corp., Milwaukee, have approved the transactions that will split Marshall & Ilsley Corp. and Metavante Corp. into independent public companies.

The target for the federal funds rate was reduced 25 basis points to 4.5 percent at the Oct. 31 meeting of the Federal Open Market Committee.

In its statement announcing the action, the FOMC said, "Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction."

NOVEMBER

As part of its ongoing commitment to improve the accountability and public understanding of monetary policy making, the Federal Open Market Committee announced it will increase the frequency and expand the content of the economic projections that are made by Federal Reserve Board members and Reserve Bank presidents and released to the public.

In the future, the FOMG will compile and release projections four times each year rather than twice a year. In addition, the projection horizon will be extended to three years, from two.

A decline of $9.4 billion (24.7 percent) in net income from the third quarter of 2006 to $28.7 billion for the third quarter of 2007 was reported by FDIC-insured commercial banks and savings institutions. A steep increase in provisions for loan losses, as well as a decline in noninterest income, were chiefly responsible for the year-over-year earnings decline. The last time that banks earned less than $30 billion in a quarter was in the first quarter of 2003.

National Australia Bank has agreed to acquire Great Western Bancorp., the holding company of Great Western Bank, a regional bank based in Sioux Falls, S.D., for $798 million.

Great Western Bank has assets of more than $3.4 billion and more than 100 branches across six states.

DECEMBER

Measures designed to address elevated pressures in short-term funding markets have been announced by the Federal Reserve, the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank.

Central Bank and the Swiss National Bank.

Federal Reserve actions include the establishment of a temporary term auction facility and the establishment of foreign exchange swap lines with the European Central Bank and the Swiss National Bank. The TAF was approved by the Federal Reserve Board and the foreign exchange swap lines were approved by the Federal Open Market Committee.

More than two-thirds of all U.S noncash payments were made electronically in 2006, according to the Federal Reserve's 2007 study of noncash payments. From 2003 to 2006, the period covered by the study, all types of electronic payments grew while check payments decreased. The Federal Reserve's 2004 Payments Study found that the number of electronic payments and check payments were roughly equal in 2003.

About 19 billion more electronic payments were made in 2006 than in 2003. In contrast, the number of checks paid fell by about 7 billion over the same period.

Richard K. Davis has succeeded Jerry A. Grundhofer as chairman of U.S. Bancorp, Minneapolis. Davis will continue as president and CEO of the holding company. Grundhofer, who has retired from the board, has assumed the title of chairman emeritus.

[Author Affiliation]

By Bill Roquette, Editor-in-Chief