Wednesday, October 21, 2009

“US Bancorp 3Q profit rises, bad loans increase (Washington Post)” plus 4 more

“US Bancorp 3Q profit rises, bad loans increase (Washington Post)” plus 4 more

US Bancorp 3Q profit rises, bad loans increase (Washington Post)

Posted: 21 Oct 2009 08:06 AM PDT

US Bancorp continued to suffer from stress in home construction and related industries. From the end of June until the end of September, nonperforming loans rose 9.4 percent to $4.39 billion. Net charge-offs rose 12.1 percent. But the bank said the growth in bad loans and charge-offs was slower than in the previous quarter.

The bank is seeing signs that the economy is stabilizing and even improving slightly, said Richard K. Davis, its chairman, president, and CEO.

"I would consider this quarter to be much closer to business as usual than we have seen in quite some time," he said on a conference call.

Still, business customers are only borrowing 32 percent of their authorized loans, down 3 percentage points from the second quarter. And credit costs remain high, Davis said.

Demand for new commercial and consumer loans is soft, too, "as they remain cautious and are waiting to see concrete signs of an improving economy before investing and extending their businesses and debt obligations," Davis said.

The earnings beat Wall Street estimates, and US Bancorp shares rose 63 cents, or 2.7 percent, to close at $24.43 Wednesday.

Its profit rose to $583 million from $557 million a year ago as interest income and fee revenue rose. The profit worked out to 30 cents per share, beating the 27 cents per share expected by analysts surveyed by Thomson Reuters.

Revenue rose 2.2 percent to $4.25 billion.

Mortgage banking revenue rose $215 million as homeowners refinanced during a stretch when interest rates were low. About 80 percent of its mortgage banking fees came from refinancings versus new sales.

Davis said the company began working with the government's Home Affordable Modification Program in August, and has modified 3,500 mortgages, or about 12 percent of those eligible. It has modified 21,000 residential mortgages worth $3.6 billion since 2008, he said.

He said they may end up with fewer modifications than other lenders because the quality of US Bancorp's original loans was higher than other providers.

US Bancorp has retail banks in 24 states, mostly in the Midwest and West. Davis said that rather than trying to grow geographically, it will try to get more business in the markets where it already has banks. It's one of the top three players in slightly more than half of its 168 cities, so it can grow a lot by improving its position in the remaining cities, he said.

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Obama boosts aid to get more loans for small business (The Christian Science Monitor)

Posted: 21 Oct 2009 02:09 PM PDT

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The Obama administration threw out a lifeline of promised help Wednesday to small businesses, some of which continue to struggle to get credit to maintain and expand their operations. The president announced that he would ask Congress to increase the current caps on three types of loans offered by the Small ...

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SBA loans slow to catch on (South County Spotlight)

Posted: 21 Oct 2009 03:10 PM PDT

By Darryl Swan

The South County Spotlight, Oct 21, 2009

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Even as many businesses struggled to stay steady with the turbulent economic landscape of the past year, few tapped government-backed, low-interest loans offered to small businesses as a safety net.

Only four stabilization and expansion loans offered through the U.S. Small Business Administration closed over the past year in Columbia County, all done through U.S. Bank.

In 2008, for comparison, Columbia County businesses took out 11 loans, 10 of which were of the 7a variety typically used to finance growth.

There have been no takers for SBA's promoted ARC loan, a deferred-payment loan that originates from a pool of $255 million federal stimulus funds. ARC loans allow businesses that can prove viability up to a $35,000 cash infusion at zero percent interest rate with payments not kicking in until a year after disbursement. Then, the loan term is five years.

Of course, that's part of the catch: Business that can prove viability have little use for an ARC loan, and those that really need it don't qualify.

Gauging small business loan activity is one way of measuring the local economy. In fiscal year 2009, there were 60 percent fewer loans than last year.

An example of a business that qualifies for an ARC loan, said a SBA loan representative, is one that can make ends meet but has a significantly high percentage of cash being deferred to debt payment.

Banks also have hesitated to promote ARC loans, largely because the risks, both real and perceived, tied to such loans have made bankers shy away. There are no bank fees and limited interests rates, for example, limiting the opportunity for banks to turn a profit, and the borrower by definition is a business that has gone through a rough patch.

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Wellesley Class Teaches Personal Finance Basics (NPR)

Posted: 21 Oct 2009 03:58 AM PDT

Prof. Ann Witte teaches the Fundamentals of Personal Finance at Wellesley College.
Enlarge Richard Howard

Prof. Ann Witte created the Fundamentals of Personal Finance at Wellesley College to help students get some real life experience before they start real life.

Richard Howard

Prof. Ann Witte created the Fundamentals of Personal Finance at Wellesley College to help students get some real life experience before they start real life.

You can tell a lot about the times we're in by what college kids choose to study.

In the 1960s, humanities were big. In the 1980s, it was all about high finance. Today at Wellesley College in Massachusetts, kids are looking for something a little more basic. It's called ECON 223 but you might call it Real Life 101.

Twice a week, Professor Ann Witte plows through the fundamentals of personal finance.

Students dissect a real pay stub and learn about everything from gross and net earnings to COBRA, COLAs and co-pays.

It's not exactly sexy stuff, but this course fills up minutes after registration opens.

"It's dry, but this is what you need to know before you go out into the real world," says senior Fatima Burney. She says she's watched her older sister make costly mistakes that she doesn't want to repeat — like ending up having to fly out of the country to get dental work because she let her insurance lapse.

"There was a huge amount I didn't know, and you can get in a lot of trouble for it," Burney says.

It may be stuff that people used to just learn on the fly, but as senior Caroline Phillips puts it, that clearly hasn't worked out too well for the generation of grownups now losing their houses.

"Adults also seem to be kinda flummoxed by everything that's going on, and well, maybe it didn't work, and maybe younger people need to take courses like these and hopefully we can be a more responsible generation," Phillips says.

"I actually have relatives and friends who have already graduated, they're already doing jobs, and when I told them I was doing this class, they asked me if I could forward my notes to them," says Burney.

'You're An Econ Major?'

Witte started the course about five years ago when she began to notice students completely unprepared to manage their finances.

"They would be racking up credit card debt at 18 percent and paying off student loans at 5.6 percent and it was just like 'You're an econ major?' It doesn't make economic sense," Witte says.

Hoping to give students some real-life experience before they start real life, Witte has them invent a profile of a person and then make decisions — such as how to invest for retirement or whether to sign up for a flexible spending account.

"Most of those students wouldn't have known what any of that stuff was. They don't understand what's going on," Witte says.

Going through the exercises in class provides an "aha" moment for students, "and now they understand and they know what to do," Witte says.

Ultimately, Witte says every student should take a class like this, and get those "aha" moments in the classroom, rather than making mistakes in the real world.

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Personal assets safe from receivers (Timaru Herald)

Posted: 21 Oct 2009 09:32 AM PDT

By FLEUR COGLE - The Timaru Herald

Mascot Finance receivers will not be going after any of the personal assets of the failed finance company's former directors.

Receivers Brett Chambers and Paul Munro, of Deloitte, indicated in a six-month report that an interim payment of about $34 million will be made to Mascot's secured debenture stock holders within several weeks.

Most of the company's physical assets, including property, vehicles and office equipment, have been sold, but none of the personal assets of the company's four directors were being sought to cover payback to investors.

"They certainly had an obligation to work in the best interests of the company all the time," Mr Chambers said.

However, as there were no signs the company had acted inappropriately, none of the company's four directors, Ken and Judith Lane, Brian Kreft or David Stock, were liable for any losses.

"There's no suggestion there's been anything untoward in the months leading up to the receivership," Mr Chambers said.

Mascot closed its books to new investors in September last year and started to pay out clients as investments fell due.

At the time Mr Kreft, then Mascot chairman, said a lack of confidence in the finance market, impending legislative costs, including a credit rating requirement, and the cost of having cash on hand to repay short-term investments meant the established Timaru business was no longer feasible.

Mr Lane, the majority shareholder, could not be reached for comment yesterday.

Mascot's slide into receivership in March made it the first company signed up under the Government's deposit guarantees scheme to collapse.

According to the receivers' report, at the time of receivership, Mascot had 2511 investors with a total principal outstanding of $68.5m.

"We are anticipating that is basically going to be 50c [in the dollar] of the principal that investors would have deposited," Mr Chambers said.

Treasury had indicated most investors covered by the guarantee scheme had received their money back; and the Government, once it confirmed all guaranteed investors were paid out, would collect the biggest portion of the $34m payback.

Mr Chambers said "probably less than 100" investors were not covered by the payback scheme, and they would be treated equally with the Crown.

Although further repayments were expected, the amount would depend on a small number of large loans that were yet to be realised, and Mr Chambers said it was most unlikely the Government would get its full investment back.

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