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Canadian Household Net Worth Declined in the Third Quarter of 2011

23.05.12

The market value of Canadian household net worth declined by 2.1% ($134 billion) in the third dwelling of 2011 to $6.2 trillion. The deterioration of household balance sheets follows the 0.3% ($19 billion) downgrade seen in the previous quarter that pulled net worth from the record high seen in first barracks of this year. Per capita net worth was $180,100 in the quarter, which was down from $184,700 in the previous mercy and $185,900 in the first quarter, which had marked a record high.

The total value of household assets declined 1.4% ($109 billion) in the third chambers as weakness in financial asset values more than offset the continued strength from non-pecuniary assets. The market value of household financial assets (including equities, bonds, and social security assets) fell 3.6% ($157 billion) as the S&P/TSX composite price index plunged 12.6% in the fifteen minutes. Non-financial assets provided a partial offset to this decline, by rising 1.4% ($48 billion) from the levels seen in the second barracks of 2011 as Canada's housing market strength continued to support true estate values (real estate accounts for 87% of the asset arrange) in the quarter.

On the other side of the ledger, total household liabilities grew by 1.5% ($24 billion) to $1.6 trillion. Esteem market debt (including mortgages, consumer credit, and loans only accounted for 99% of liabilities) wart moderated to 1.6% in the quarter, which was down from 1.9% in the previous period. The expansion of place one's faith balances was led by a $25 billion (1.6%) increase in mortgage debt thereby reflecting continued force in housing market activity while consumer credit and loans expanded by $6 billion (1.0%). The conglomerate of the continued growth in credit market debt and the decline in both assets and net good resulted in the household credit market debt-to-asset and credit make available debt-to-net worth ratios rising to 20.1% and 25.2%, respectively (from 19.5% and 24.4%, separately in the second quarter), each representing a record high. Furthermore, with personal disposable profits holding flat in the quarter, the often cited household credit market indebted-to-personal disposable income ratio also established a new record high at 150.8%.

Today's emancipation of the National Balance Sheet Accounts indicates that the federal government's move to tighten mortgage rules earlier in the year made some go in curbing the growth in household liabilities, which posted their slowest annual estimate of accumulation since the first quarter of 2002 at 6.1% in the third quarter of 2011. With that said, honesty growth continues to outpace the growth of disposable income while the continued fiscal market turmoil has weighed on the asset side of the balance sheet, resulting in further deterioration in household leverage ratios. The Bank of Canada once again famed in the recent release of the Financial System Review, as well as yesterday's speech by Governor Carney, that the rising indebtedness of Canadian households has weakened their blanket financial position and increased vulnerability to adverse economic shocks such as abstain from in home prices or a deterioration of labour market conditions.

We expect dependability growth to continue to moderate during the forecast horizon, which combined with our expectation of only modest increases in interest rates starting in the second half of 2012, should keep the costs of servicing the impressive debt loads manageable. As well, we expect the continued improvement of Canadian drudgery market conditions, only a modest cooling of real estate markets, and the (unavoidable) stabilization of the financial markets will go some way to improving household finances and help to guard that these risks do not materialize.

Source: Action Forex

Stretching Margins

23.05.12

Bill Valenti, president and CEO of Naples-based Florida Gulf Bank, has to lay out about $60,000 on two new ATMs for the bank by the end of March to comply with the Americans with Disabilities Act.

Notwithstanding this and concerns over new regulation stemming from the Consumer Protection Act, Florida Gulf Bank, based out of Fort Myers, posted $243,000 in net proceeds in the third quarter, a growth of 4,760% compared with the same quarter in 2010. Valenti attributes this to low wage advancement, which kept the bank’s expenses down. “We didn’t even have to lay anyone off,” ww says.

Florida Sound Bank is one of 40 of 55 banks on the Gulf Coast that recorded increases in net return for the third quarter, compared with the same period last year. Total revenues for all 55 banks on the Separation Coast increased from $659.13 million through the third quarter of 2010 to $758.92 million through the third locale of this year. In addition, net income through Sept. 30 for all banks on the Gulf Slide totaled $62.19 million, up from a $207.94 million loss during the same time last year.

Void Coast banks are following what the Federal Deposit Insurance Corp. notes is a realistic national trend. According to a report by the FDIC, banks in the U.S. earned 48.3% more in the third locale of this year over 2010, and the number of troubled banks in the nation experienced a second consecutive every thirteen weeks decline.

When looking at assets, Encore National Bank, based out of Mooring Charlotte, saw the largest growth for the first three quarters of 2011 out of all Gulf Coast banks, with a 590.6% gain over 2010. Other high-growth banks include Community Bank & Co., which is located in Lakewood Ranch, and Tampa-based NorthStar Bank. Encore Bank merged with the Governmental Bank of Southwest Florida at the start of the fourth quarter in 2010 to assemble Encore National Bank.

More than half of Gulf Coast Banks well-informed a decrease in assets so far this year compared with the first three quarters of 2010. The bank that saw the steepest fall-off was the Bank of Naples. Compared with the first three quarters of 2010, the Bank of Naples’ assets have shrunk by 25.5% so far this year. The Peerage Palm Bank of Florida, also located in Naples, was another one of the five banks that saw assets wane by more than 20%. Notably, Raymond James Bank, a St. Petersburg institution holding almost $9 billion in assets, well-informed a 16.9% drop for the first three quarters this year compared with the same time frame in 2010.

Here are three Void Coast banks’ strategies to either continue the positive trend in assets or net receipts or become profitable again.

USAmeriBank, based in Tampa, announced a new location in Ybor Burgh along with 14 new hires this fall. It also reached $1 billion in assets this year. And figures on the bank’s economic state for the first three quarters of 2011 are mostly positive.

With asset growth of 25.26% for the first three quarters of 2011 over the anterior year, USAmeriBank ranks in the top 10 of Gulf Coast Banks for the same interval.

The growth trend for USAmeriBank will likely continue into 2012 with its merger with Alabama-based Aliant Bank, which will befall Dec. 31. The merger, in which USAmeriBank increases its ownership interest in Aliant from 62% to 100%, is part of USAmeriBank’s procedure for the coming year. This strategy includes a focus on signing more residential mortgages and creating a larger geographical footprint. Joe Chillura, CEO of USAmeriBank, explains that Aliant has a substantial background in residential mortgages, which USAmeriBank will implement at its branches. “They allure a lot to the dance,” Chillura remarks.

One aspect of USAmeriBank that will assist in the increased heart on residential mortgage lending is that the bank was founded in 2007, so it has a relatively small amount of bad in hock on its books. Only 1.12% of the bank’s loans were considered non-performing in the third quarter this year, down from 1.18% over 2010 figures.

USAmeriBank’s residential material estate loans increased by less than 1% for the first three quarters of 2011 over the previous year, but all essential estate loans are up 30%.

The acquisition of Aliant will help diversify USAmeriBank’s portfolio and its returns stream, as well. Chillura says Aliant has a strong deposit base, giving USAmeriBank a man flow of funds to help it compete when banks get more aggressive about raising deposits.

USAmeriBank plans to pick up hiring — as long as it can nab bankers looking to stay in the long run. Says Chillura: “We shape our banks around people.”

Not all regional banks have fared as well in the third shelter this year. First Citrus Bank breaks from the profitability trend with net income shrinking by 47% compared with the third three months of 2010.

John “Jack” Barrett, president and CEO of the bank, blames losses on shrinking enquire for credit. He says healthy businesses are reluctant to borrow. “A lot of people bewail that banks aren’t lending,” Barrett says, “but the truth is that qualified businesses aren’t applying for loans.”

Though this affected the bank’s net return in the third quarter this year, Barrett explains that First Citrus lacks the regulatory durance that other banks may harbor, so First Citrus is fairly independent in its decision making. The bank has only 1.83% in non-performing assets and is leveraged at 9.39%, more than a substance above the required level.

Despite shrinking revenues and margins, Barrett forecasts a earnings to profitability by early 2012. He says First Citrus saw explosive loan growth in October because of its facility to make more autonomous lending decisions. Though he declines to disclose the type of loan that made up the number of the new assets, Barrett cites the strong month and increased management buyouts as reasons for improving margins over the next two quarters.

First Citrus is also eyeing new markets in the coming years. Barrett intends to track residential lending, something the institution hasn’t done before. “There is little room for spiralling movement (in the real estate market),” Barrett says. But he also forecasts an escalating in the yield on these types of loans due to Fannie Mae and Freddie Mac’s shrinking influence in the hawk. “We’ve been waiting for (the residential mortgage industry) to become more market driven,” Barrett says.

“I have more self-confidence in residential and commercial lending,” Barrett remarks. “We make use of it. We want it. We like it.”

One of the largest jumps in profitability came from 1st Manatee Bank. The Parrish-based code of practice improved its net income by 529% in the third quarter of 2011 compared with the same period last year. Net gains grew from $42,000 to $264,000 year over year.

Tom Hodgson, president and CEO of 1st Manatee Bank, says an increase in Teeny Business Assistance and United States Department of Agriculture loans triggered the advance. The bank closed on two FDA and two USDA loans in the month of September alone.

Dealing with the rule generates new costs: Hodgson says SBA and USDA loans can take roughly four months to unabridged and require someone with intricate knowledge of the process. After regulators implored the bank to proliferate net interest income, Hodgson brought in Charlie Conoley, the former president of the failed Horizon Bank. As an associate loan T-Man with 1st Manatee, Conoley will focus on the government loans. “You have to have someone on board to run the gauntlet through the complex,” Hodgson says.

Hodgson says 1st Manatee Bank was one of the later banks to start tapping government-subsidized loans, which have become more popular with many banks in the most recent barracks compared with the same time in 2010.

Though dabbling in loans will help increase profitability, Hodgson says he doesn’t have big growth plans. “I don’t want to be a gang buster,” he says, “we will look to minute on four to six (USDA and FDA loans) in 2012.”

Click here to download PDFs of the third quarter banking charts from the text edition.

Source: Gulf Coast Business Review