Bankinsurance.Com News 2011 Year in Review

YEAR IN REVIEW 2 0 1 1

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YEAR IN REVIE W Michael White Associates is pleased to distribute BankInsurance.com News, a monthly electronic publication that reports the most important news stories in the bank insurance and investment marketplace. Visit BankInsurance.com regularly for timely industry news and analysis, as well as up-to-date information about MWA consulting products and services. No other site offers as much information, knowledge and understanding of the bank insurance and investment market as www.BankInsurance.com.

Bank Insurance & Investment Acquisitions 2 Here is the one place to see who bought and sold what in the bank insurance and investment marketplace. In 2011, banks continued acquiring insurance agencies and broker-dealers. But, like the year before, some banks divested insurance and investment-related operations.

Bank Insurance & Investment Fee Income Contributions to Earnings 18 This section looks at the progress the banking industry made in producing insurance brokerage income, annuity commissions, securities brokerage income, total investment program income, wealth management income and generating BOLI holdings. Plus, with data on approximately 6,750 banks and 930 large, top-tier bank holding companies, we examine the earnings reports of dozens of individual banking companies and, using our MWA Fee Income Ratings Reports and other reports, we measure, compare, rank and rate each institution’s fee income results.

Bank Insurance & Investment Marketplace 84 Other events and forces besides domestic agency and broker-dealer acquisitions influenced the bank insurance and investment market in 2011. These included growth and expansion in the international bancassurance movement; domestic strategic alliances, partnerships, joint ventures, and marketing agreements; trends in commercial insurance premiums and life insurance applications; and slacking fixed annuity sales.

Bank Insurance & Investment Legislation, Regulation & Litigation 108 The bank insurance and investment landscape in 2011 was shaped by allegations of deceptive sales practices, litigation over new federal healthcare law, charges of failure to disclose insurance policy features, continual short- term renewal of the national flood insurance program, registration of broker-dealer operations personnel, establishment of a federal advisory committee on insurance, a GAO study of debt protection products, and continued fallout from the financial services reforms and costs of the Dodd-Frank Act. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT ACQUISITIONS - P AGE 2

JANUARY 17 - 23, 2011 acquisition will complement our estab- Bank Insurance WELLS FARGO lished presence in China, including the INSURANCE SERVICES recent incorporation of our wholly-owned & Investment BUYS KANSAS-BASED banking subsidiary, our equity interest in Acquisitions EMPLOYEE BENEFITS AGENCY Fullgoal Fund Management, and our M&A San Francisco, CA-based, $1.2 trillion- advisory services.” JANUARY 3 - 9, 2011 asset Wells Fargo & Co. unit Chicago- Lloyd George Management will retain CONNECTICUT’S based Wells Fargo Insurance Services its name, Robert Lloyd George will re- PEOPLE’S UNITED USA (WFIS) has acquired Overland Park, main chairman, and the company’s em- MERGES INSURANCE AGENCIES KS-based employee benefits brokerage ployees will be invited to continue with UNDER PEOPLES BRAND and consulting firm JFK Consulting Group LGM, when the deal closes in third quar- Bridgeport, CT-based, $20.4 billion-asset (JFK). The agency will operate under the ter 2011, pending regulatory approval. People’s United Bank has merged its WFIS name, but retain its personnel and insurance agency subsidiaries, including location and continue to serve business- JANUARY 17 - 23, 2011 Chittenden Insurance Group, Bank of es, associations and public sector em- STATE STREET GLOBAL ADVISORS Smithtown Insurance Agents and Bro- ployers in Kansas and Missouri. WFIS BUYS BANK OF IRELAND kers, R.C. Knox, and Beardsley Brown & East Executive Vice President Kevin Ken- ASSET MANAGEMENT Basset, into Peoples United Insurance ny said the acquisition helps strengthen Boston-based State Street Global Advi- Agency. Former Chittenden Insurance Wells Fargo’s commitment to maintaining sors (SSgA), the investment management Group President and CEO Daniel Cosey a strong presence in Kansas, where the unit of Boston, MA-based, $171.5 billion- serves as president and CEO of the newly acquired agency will work with asset State Street Corp., has acquired merged unit. local Wells Fargo & Co. brokers. WFIS Dublin, Ireland-based Bank of Ireland operates over 200 offices in 37 states Asset Management (BIAM) for $76.1 mil- JANUARY 10 - 16, 2011 and earlier this month announced it had lion, including $18.7 million net assets of WELLS FARGO acquired another employee benefits the business. The acquisition adds $34.7 INSURANCE SERVICES agency in Ohio. billion in assets managed to SSgA’s Ire- ACQUIRES DAYTON, OH In 2009, WFIS helped Wells Fargo & land operations. The acquired company EMPLOYEE BENEFITS AGENCY Co. generate $1.725 billion in insurance has retained its management team, staff San Francisco, CA-based, $1.2 trillion- brokerage income, which comprised and offices and been renamed State asset Wells Fargo & Co. unit Chicago- 4.2% of its noninterest income and 1.9% Street Global Advisors Ireland Limited. based Wells Fargo Insurance Services of its net operating revenue. The compa- State Street Global Advisors President USA (WFIS) has purchased Dayton, OH- ny ranked first in insurance brokerage and CEO Scott Powers said, “We are based employee benefits agency Prestige earnings among BHCs engaged in signifi- pleased to complete this acquisition of an Professional Plans (PPP). cant banking activities, according to organization that has built a strong fran- Former PPP owner Penny Profitt said, Michael White-Prudential Bank Insurance chise and a first-rate investment team “While we have a new name, our custom- Fee Income Report. that shares our focus on research and ers will continue to be served by the commitment to clients.” same team of insurance professionals” JANUARY 17 - 23, 2011 who will expand their offerings beyond BMO TO ACQUIRE HONG KONG JANUARY 24 - 30, 2011 employee benefits to include the broad INVESTMENT MANAGER LLOYD TOWNEBANK ACQUIRES range of WFIS insurance products. GEORGE MANAGEMENT NEWPORT NEWS AGENCY WFIS East Executive Vice President Toronto, Canada-based C$411.6 billion Hampton Roads, VA-based, $3.66 billion- Kevin Kenny said the company’s ex- (US$415.2 billion)-asset BMO Financial asset TowneBank, through Towne Insur- panded Dayton operations “will work Group (formerly Bank of Montreal) has ance Agency, has acquired Newport with our local Dayton bankers to provide agreed to acquire Hong Kong-based News, VA-based W.T. Chapin, a bonding customers with fully integrated financial Lloyd George Management (LGM), an services and general insurance agency. and insurance solutions for their busi- investment manager with $6 billion in TowneBank Chairman and CEO G. Rob- nesses.” assets under management and offices in ert Aston said the acquisition “will allow WFIS operates more than 200 offices London, Singapore, Mumbai, Florida as us to expand the services available to our in 37 states and in 2009 helped Wells well as Hong Kong. LGM Chairman Rob- bank and insurance clients while continu- Fargo & Co. generate $1.725 billion in ert Lloyd George said, “We have built ing our focus on providing exquisite ser- insurance brokerage income, which com- Asia’s leading independent boutique, vice.” The agency will maintain its man- prised 4.2% of its noninterest income and originally focused on China and India but agement team, staff and location and 1.9% of its net operating revenue. The now encompassing global emerging and operate as a Towne Insurance Agency company ranked first in insurance broker- frontier markets.” affiliate serving TowneBank’s banking age earnings among BHCs engaged in BMO Financial Private Client Group office in Newport News. significant banking activities, according to President and CEO and Bank of Montreal In 2009, Towne Insurance helped the Michael White-Prudential Bank (China) Chairman Gilles Ouellette said, TowneBank generate $14.8 million in Insurance Fee Income Report. “Wealth management is a key component insurance brokerage income, which com- of BMO’s Greater China strategy. This prised 18.6% of its noninterest income

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT ACQUISITIONS - P AGE 3 and 8.2% of its net operating revenue. The company ranked first in insurance brokerage earnings among BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

FEBRUARY 7 - 13, 2011 BANK OF AMERICA TO SELL BALBOA TO AUSTRALIA’S QBE Charlotte, NC-based, $2.26 trillion-asset Bank of America (BofA) has agreed to sell the lender-placed (excepting mortgage) insurance and voluntary property and casualty insurance assets and liabilities of Irvine, CA-based Balboa Insurance and its affiliates (Balboa) to Sydney, Aus- tralia-based QBE Insurance Group for $700 million in cash plus additional future payments. QBE will assume Balboa’s insurance liabilities in return for a reinsurance transaction with Balboa, which provides the cash and assets needed to cover those liabilities. QBE has also agreed to retain Balboa’s employees and enter into an initial 10-year distribution agreement with BofA for lender-placed insurance, real estate-owned programs and certain voluntary consumer insurance products, including homeowners, con- tents and auto insurance. BofA will retain approximately $1.7 billion of Balboa’s remaining net tangible equity, which it intends to use for different purposes as Balboa’s insurance liabilities expire. QBE CEO Frank O’Halloran said, “The distribution agreement with BofA in the U.S. and the portfolio transfer provide QBE with a specialist personal lines portfolio which is complementary to the Ster- ling National business acquired in 2008.” When the deal closes in mid-2011, pending regulatory approval, QBE’s U.S. businesses will include bank, agency and broker distribution systems for a range of products including those acquired in the Balboa-deal and other specialty, crop and reinsurance products. BofA acquired Balboa when it purchased Countrywide Financial Corp., its parent, in 2008. In 2009, Balboa helped BofA generate $2.3 billion in insurance underwriting earnings, which comprised 3.67% of the company’s noninterest income, according to the Michael White- Prudential Bank Insurance Fee Income Report. Bank of America Corporation (NC) earned $355.0 million in P&C underwriting net income in 2009, up 532.3% from $56.1 million in 2008.

FEBRUARY 7 - 13, 2011 Allstate Financial President and CEO da, which was merged with FDIC assis- ARROW FINANCIAL ACQUIRES Matthew Winter said the changing regula- tance last year into Jacksonville, FL- THIRD AGENCY tory environment influenced the compa- based, $12 billion-asset EverBank. The Glens Falls, NY-based, $1.69 billion- ny’s decision to “refocus on insurance, cash deal includes $700,000 upfront and asset Arrow Financial, through subsidiary retirement and investment products.” a $700,000 contingent payment to be Glens Falls National Bank and Trust Discover Consumer Banking President made one year after the transaction is Company, has acquired Chestertown, NY Carlos Minetti emphasized the distribu- completed. Florida Trust, which holds -based Upstate Agency. The acquired tion agreement Discover had forged with $460 million in assets under manage- property and casualty insurance broker- Allstate and said, Affinity relationships ment, will retain its offices in Naples and age will retain its name, staff, manage- with leading organizations have provided Fort Lauderdale, its management team, ment team and seven locations in North- us with an effective platform for offering other professionals and staff and merge ern New York and operate as a wholly Discover Bank’s products to an expanded into Iberia Wealth Advisors, Iberiabank’s owned subsidiary of Glens Falls National customer base.” trust and asset management division, Bank and Trust, joining health insurance when the deal closes. agency Capital Finance Group and prop- FEBRUARY 14 - 20, 2011 Iberiabank Trust, Brokerage and WELLS FARGO INSURANCE erty and casualty agency Loomis & La Wealth Management Managing Director SERVICES TO SELL Pann. Jefferson Parker said, “By acquiring a E&S WHOLESALER TO Arrow operates 35 branches across seasoned team with an established base R-T SPECIALTY northeastern New York, and Arrow Finan- and connectivity to their local markets, we San Francisco, CA-based, $1.22 trillion- cial Chairman, President and CEO Thom- can immediately begin serving our bank- asset Wells Fargo & Co., through Chica- as Hoy said, “We are very pleased to ing clients with services they have been go, IL-based subsidiary Wells Fargo In- have … the professionals of Upstate unable to access previously within our surance Services, has agreed to sell San Agency join Arrow and the Glens Falls franchise.” Iberiabank has acquired three Francisco-based American E&S Insur- National Bank team…. Upstate’s offices banks and 42 branches in Southeast and ance Brokers (E&S) to Chicago-based R- across the North Country will provide Southwest Florida over the past 15 T Specialty, the wholesale brokerage unit additional convenience and new opportu- months. nities in our existing banking commit- of Ryan Specialty Group. The purchase ments.” of the excess and surplus insurance FEBRUARY 28 - MARCH 6, 2011 In 2009, Arrow Financial earned $2.4 wholesaler includes E&S’s offices in At- BRYN MAWR BANK TO ACQUIRE billion in insurance brokerage income, lanta, Denver, Fresno, Irvine, Nashville, HERSHEY TRUST’S PRIVATE WEALTH which comprised 12.3% of its noninterest New York City, and Seattle as well as its MANAGEMENT GROUP income. The company ranked 57th in San Francisco home office. Bryn Mawr, PA-based, $1.7 billion-asset insurance brokerage earnings among Wells Fargo Insurance Services CEO Bryn Mawr Bank has agreed to acquire U.S. bank holding companies with assets Neal Aton said the sale enables WFIS to the Private Wealth Management Group between $1 billion and $10 billion, ac- focus on its core retail and niche busi- (PWMG) of Hershey Trust Company. cording to Michael White-Prudential Bank nesses, including Wells Fargo Special Hershey, PA-based PWMG will retain its Insurance Fee Income Report. Risks, which offers underwriting and back office, investment advisors and client ser- office support services. vices teams and merge into Bryn Mawr FEBRUARY 14 - 20, 2011 Ryan Specialty Group Chairman and Trust’s Wealth Management Division. ALLSTATE EXITS CEO Patrick Ryan said the acquisition Bryn Mawr Trust Wealth Management CONSUMER BANKING BUSINESS; will not only benefit R-T Specialty’s Division Director Francis Leto said, “This FORGES SALE AND DISTRIBUTION wholesale operations, but it will also en- acquisition is an important step in growing AGREEMENT WITH DISCOVER hance the company’s presence in key a business that has strategic importance Riverwood, IL-based, $61.6 billion-asset metropolitan areas. to us.” Hershey Trust Company Chair- Discover Financial Services has agreed Since Ryan Specialty was formed last man LeRoy Zimmerman said, “The Her- to acquire all the deposits of Northbrook, year it has established Technical Risk shey Trust Company has been taking IL-based, $1.25 billion-asset Allstate Underwriters and acquired professional ongoing steps to return its full focus to its Bank, a subsidiary of Northbrook, IL- liability intermediary Bloomfield, CT- core mission of managing the assets of based insurer Allstate Corporation. Dis- based OakBridge Insurance Services and the Milton Hershey School Trust. Selling cover Bank will assume the deposits and wholesaler West Palm Beach, FL-based our private wealth management business provide banking products and services, McAuley Woods. to Bryn Mawr Trust is another important including personal savings and money step to help us achieve that goal.” market accounts, certificates of deposit FEBRUARY 28 - MARCH 6, 2011 When the cash and stock deal closes IBERIABANK EXPANDS WEALTH (CDs) and individual retirement account in second quarter 2011, pending regula- MANAGEMENT DIVISION CDs to Allstate Customers through All- tory approval, PWMG will add $1.1 billion WITH FLORIDA TRUST PURCHASE state affiliates and agents. However, in assets under management to Bryn Lafayette, LA-based, $10 billion-asset Allstate Financial affiliate Allstate Finance Mawr Trust’s current $3.4 billion in trust Iberiabank has agreed to acquire Florida Company will continue to offer and ad- and investment assets under manage- Trust Company from formerly Naples, FL- minister business loans to Allstate agen- ment, administration, supervision and based, $640.9 million-asset Bank of Flori- cies. brokerage.

FEBRUARY 28 - MARCH 6, 2011 NEW YORK LIFE TO SELL STAKE IN THAILAND INSURER TO PARTNER SIAM COMMERCIAL BANK New York City-based New York Life In- surance Company has agreed to sell its 23.89% stake and its Thai affiliate’s 23.44% stake in Bangkok, Thailand- based Siam Commercial New York Life Insurance Public Company (SCNYL) to Bangkok-based, Baht 1.477 trillion ($48.1 billion)-asset Siam Commercial Bank Public Company (SCB) for Thai Baht 8.4 billion ($274 million). New York Life International Chairman and CEO Dick Mucci said of the deal, “The joint venture with Siam produces the majority of its sales through the bank distribution, and SCB is very interested in fully integrating the operation into its consumer banking platform.” SCB President Khun Kannikar Chalitaporn said, “SCB views life insurance as an important component of our long-term strategy that complements our banking franchise, and we see enormous opportunity in our insurance sector.” When the deal closes in March 20111, pending regulatory approvals, SCB will own 94.66% of SCNYL, which in 2010 wrote Baht 24 billion ($790 million) in net written premiums selling its life insurance of the company’s noninterest income and CEO Clive James said the acquisition will products primarily through SCB’s 1,019 25.8% of its net operating revenue, and expand Kane’s presence “in key insur- branches throughout Thailand. to rank first in insurance brokerage earn- ance territories, … traditional captives

MARCH 14 - 20, 2011 ings among banks with assets between and the specialist ILS and LPI [life, pen- ONEIDA ACQUIRES $500 million and $1 billion. sions and investments] markets.” CENTRAL NY AGENCY Kane Group focuses on providing risk MARCH 14 - 20, 2011 management services, healthcare con- Oneida, NY-based, $661 million-asset KANE GROUP TO ACQUIRE sulting, regulatory compliance, underwrit- Oneida Financial Corp. has acquired Uti- HSBC’S INSURANCE ing services, Takaful insurance solutions ca, NY-based David Holmes Agency. MANAGEMENT BUSINESSES and self-insurance structures, including The agency has merged into Oneida Sav- London, England-based Kane Group has captives, protective cell companies and ings Bank subsidiary Bailey & Haskell agreed to acquire the insurance manage- mutual insurance companies. HIM pro- Associates, which does business as Bai- ment operations of London, England- vides management, administration and ley, Haskell & LaLonde (BHL). David based HSBC Holdings. The operations structuring support services for captives, Holmes will continue at his Utica location include HSBC Insurance Holdings cell companies, ILS, insurance and rein- and work with his existing clients as an (Bermuda), HSBC Insurance SPC, the surance companies, and LPI companies. account executive with BHL “introducing insurance management business of The $27.5 million deal to merge HIM into new relationships to Oneida Financial HSBC Bank (Cayman), and HSBC Insur- Kane is expected to close on April 30, Corp.’s team of banking, insurance and ance Agency (USA) – together called 2011, pending regulatory approval. financial services professionals,” Bailey & HSBC Insurance Management (HIM). Haskell Associates’ CEO John Haskell Kane Group CEO Stephen May said APRIL 4 - 10, 2011 said. the acquisition “supports our aim of creat- FIRST TENNESSEE BANK TO SELL BHL has other offices in Oneida, North ing a global, domicile-neutral platform INSURANCE GROUP TO BROWN & Syracuse, Cazenovia, Chittenango, New from which to offer our independent ex- BROWN Haven, Buffalo and Malverne, NY, as well pert advice.” Noting that HIM, a leader in Memphis, TN-based, $24.7 billion-asset as Fort Mill, SC. In 2010, these agencies insurance-linked securities (ILS), has First Horizon National Corp. subsidiary helped The Oneida Savings Bank to gen- offices in Bermuda, Cayman, Guernsey, First Tennessee Bank has agreed to sell erate $10.52 million in insurance broker- Malta, New York, South Carolina, Wash- First Horizon Insurance Group (FHIG) to age fee income, which comprised 46.4% ington, DC, and Vermont, Kane Group Daytona Beach, FL-based Brown &

Brown, Inc. FHIG will operate as Brown bles WFIS “to more effectively manage na, Oregon and Kansas, said, “This ac- & Brown of Tennessee as it maintains its conflicting interests in the E & S [excess quisition significantly expands IN- Memphis and Chattanooga offices and and surplus] marketplace” and “gives our SURICA’s market and is an excellent merges its Nashville office into Brown & AES team members an outstanding op- strategic fit for us.” Brown’s existing Nashville operations. portunity with a fast growing company Guaranty Bank, a division of Temple- Brown & Brown Regional President C. and ongoing partner.” R-T Specialty fo- Inland, previously owned Guaranty Insur- Roy Bridges said, “First Horizon has or- cuses on high-hazard, tough property, ance until it was sold to a Dallas business ganically and by acquisition built an ex- casualty, transportation and professional executive in December 2008. The Feder- emplary insurance operation. This trans- and management liability risks. al Deposit Insurance Corporation (FDIC) action will expand and deepen Brown & closed the $13 billion-asset, 162-branch Brown’s footprint in the Western, Middle APRIL 18 - 24, 2011 Guaranty Bank in August 2009 and sold it OLD NATIONAL ACQUIRES and Eastern regions of the Volunteer to BBVA Compass, a division of Banco INTEGRA’S WEALTH & TRUST State.” First Horizon National Corp. said Bilbao Vizcaya Argentaria SA, Spain’s BUSINESS First Tennessee Bank and Brown & second largest bank. Evansville, IN-based, $2.4 billion-asset Brown “expect to maintain business rela- Integra Bank Corp. has agreed to sell tionships after the closing,” which is ex- APRIL 18 - 24, 2011 Integra Wealth & Trust (IWT) to Evans- FIRST NIAGARA ADDS pected to occur at the end of April. ville-based, $7.3 billion-asset Old Nation- AGENCY PURCHASE TO First Horizon Insurance Group offers al Corp. When the deal closes by the ITS MOVE INTO CONNECTICUT risk management services, employee end of the second quarter, IWT will Buffalo, NY-based, $30 billion-asset First benefits, personal lines and bonding to merge into Old National Wealth Manage- Niagara Financial Group, through First commercial clients and individuals in 40 ment. Until then, a servicing agreement Niagara Risk Management (FNRM), has states and in 2009 helped First Horizon reached between the two companies acquired Pierson & Smith (P & S), an National Corp. generate $34.4 million in enables Old National Wealth Manage- insurance brokerage, consulting and third insurance brokerage fee income and rank ment to immediately offer products and -party administration agency based in 27th among bank holding companies with services to IWT’s clients. Integra Bank Norwalk, CT. The acquisition dovetails more than $10 billion in assets. Insur- Corp. Chairman and CEO Mike Alley with First Niagara’s move into Connecti- ance earnings comprised 3.3% of First said, “We believe this represents the best cut and Massachusetts with its purchase Horizon’s noninterest income and 1.9% of solution for our clients to ensure they of New Haven, CT-based, $12 billion- its net operating revenue last year, ac- continue to receive exceptional service asset NewAlliance Bancshares. cording to the Michael White-Prudential and investment advice.” Both Integra and Pierson & Smith will merge into First Bank Insurance Fee Income Report. Old National have branches in Indiana, Niagara Risk Management and serve as APRIL 4 - 10, 2011 Kentucky and Illinois. the company’s flagship agency in New WELLS FARGO INSURANCE England. P & S President Bruce Rogers SERVICES SELLS APRIL 18 - 24, 2011 and Executive Vice Presidents Fred But- INSURICA EXPECTS TO DOUBLE AMERICAN E & S ler and Matt Fair will serve as FNRM Re- REVENUE WITH PURCHASE OF INSURANCE BROKERS gional Directors of Insurance and contin- GUARANTY INSURANCE SERVICES TO R-T SPECIALTY ue to operate from P & S’s current loca- Oklahoma City, OK-based INSURICA has Chicago-based Wells Fargo Insurance tion with current staff. Rogers said, “We acquired Plano, TX-based Guaranty In- Services, a unit of San Francisco-based look forward to expanding our risk man- surance Services. Both agencies spe- $1.3 trillion-asset Wells Fargo & Co., has agement and employee benefit brokerage cialize in insuring educational institutions completed its sale of San Francisco- and consulting expertise to First Niag- ministries, municipalities and the con- based American E & S Insurance Brokers ara’s growing base of banking customers struction, energy, hospitality and technol- (AES) to Chicago-based R-T Specialty, in the state.” ogy industries. INSURICA additionally the wholesale brokerage arm of Ryan In 2010, First Niagara reported $50.2 focuses on real estate, agribusiness, win- Specialty Group (RSG). The deal in- million in insurance brokerage income, eries, transportation, healthcare, staffing cludes AES’s offices in San Francisco, which comprised 28.2% of its noninterest and professional services. “Our addition- Fresno, Irvine, New York City, Denver, income and 6.4% of its net operating rev- al expertise,” INSURICA President and Atlanta, Nashville and Seattle and offers enue. The company ranked 17th in insur- CEO Mike Ross said, “provides both syn- of employment to all staff in these loca- ance brokerage earnings among all bank ergy and opportunities for continued ex- tions. holding companies, according to the pansion and growth.” RSG Chairman and CEO Patrick Ryan Michael White-Prudential Bank Insurance Ross said he expects the acquisition said the acquisition increases not only the Fee Income Report. to more than double INSURICA’s reve- breadth and scope of RSG’s specialty nue, as it increases its agent count from wholesale operations, but it also adds key APRIL 18 - 24, 2011 245 to 465 and more than doubles its RBS TO MERGE NONLIFE UNITS locations to the company’s reach, and office locations from 12 to 27, increasing UNDER RBS INSURANCE BANNER “talented employees with established the company’s presence in Texas and Edinburgh, Scotland-based Royal Bank of relationships and professional expertise.” California. INSURICA, which operates Scotland (RBS) is utilizing a Part VII Wells Fargo Insurance Services primarily in Oklahoma, Arkansas, Arizo- transfer to merge its four nonlife insur- (WFIS) CEO Neal Aton said the sale ena-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT ACQUISITIONS - P AGE 7 ance units – Direct Line Insurance, Churchill Insurance, National Insurance and Guarantee Corp. – into RBS Insur- ance. While the Part VII transfer allows RBS to transfer business from one insurer to another, leaving no contractual liabilities with the original insurer, it requires High Court approval and time to complete. RBS said it is beginning the transfer process now in the hope of receiving High Court approval in October and merger Whether you are in California or Connecticut, as a completion by January 2012. With its member of the Independent Community Bankers of insurance units under one banner, RBS America, you are part of a family which is committed will meet the European Union Solvency II YOU to the values that keep Main Streets across the requirement when it takes effect January 1, 2013. Then, by the end of 2013, RBS are building. country strong and prosperous. must meet the EU requirement set earlier to sell RBS Insurance, BestWire reports. Thousands of banks like yours trust the ICBA Services Network to provide the innovative products and services to make a difference to their bottom line. Customers are on the MAY 2 - 8, 2011 BNY MELLON WEALTH MANAGE- move; let us show you how ICBA solutions can capture, develop and retain the very best. MENT REACHES INTO CHICAGO WITH TALON PURCHASE New York City-based, $247 billion-asset The Bank of New York Mellon Corp. (BNY Mellon) has agreed to acquire the One Mission. Community Banks.® ICBA Bancard & TCM Bank | ICBA Securities wealth management operations of Chica- 1-866-THE-ICBA | www.icba.org ICBA Mortgage | ICBA Financial Services | ICBA Reinsurance go-based Talon Asset Management. The purchase includes $800 million in assets under management but does not include Talon’s private equity and hedge fund businesses. cializes in providing employee benefits to and David Lilly. The agents and their When the deal closes in second quar- small and mid-sized businesses. Frost acquired businesses will form ESSA Advi- ter 2011, pending regulatory approval, Insurance President Bruce Burdett said, sory Services and offer group health, Talon’s wealth management business, “We are committed to building an out- dental, vision, life and disability insur- including staff, will merge into BNY standing insurance operation statewide, ance, 401(k) retirement planning and Wealth Management, where its senior and this acquisition expands our ability to individual health insurance. ESSA Ban- principals will assume Chicago office meet our customers’ benefit insurance corp President and CEO Gary Olson said, leadership positions. needs.” Clark will relocate to Frost Insur- “The acquisition of these companies ex- BNY Mellon Wealth Management ance’s current San Antonio office. tends our business banking platform and CEO Lawrence Hughes said of the pur- In 2010, Cullen/Frost Bankers report- creates an opportunity to win market chase, “BNY Mellon Wealth Management ed $34.2 million in insurance brokerage share in an increasingly important area of had targeted Chicago as part of its na- income, which comprised 12.6% of its the financial services industry.” tional and global expansion strategy. noninterest income and 4.1% of its net This transaction marks a significant step MAY 16 - 22, 2011 operating revenue. The company ranked in the company’s growth in the region.” SUNTRUST BANKS ACQUIRES 25th in insurance brokerage earnings BNY Mellon Wealth Management manag- SAN FRANCISCO-BASED among all BHCs, according to the es $171 billion in private client assets, CSI CAPITAL MANAGEMENT Michael White-Prudential Bank Insurance nationally and internationally. Atlanta, GA-based, $170.8 billion-asset Fee Income Report. SunTrust Banks has acquired San Fran- MAY 9 - 15, 2011 cisco-based CSI Capital Management, a FROST BANK ACQUIRES HOMETOWN MAY 9 - 15, 2011 ESSA BANCORP ENTERS wealth management firm that focuses on BENEFITS INSURANCE AGENCY INSURANCE BUSINESS high net worth individuals, especially pro- San Antonio, TX-based $17.9 billion- VIA ACQUISITION fessional athletes. SunTrust Sports and asset Cullen/Frost Bankers, through Frost Stroudsburg, PA-based, $1 billion-asset Entertainment Specialty Group Managing Bank subsidiary Frost Insurance Agency, ESSA Bancorp, through ESSA Bank & Director Thomas Carrol said the acquisi- has acquired San Antonio-based Clark Trust, has acquired the benefit consulting tion reinforces the SunTrust unit’s Benefit Group. The acquired agency, insurance businesses of Lehigh Valley- “reputation as a leading wealth and in- Frost’s eleventh agency purchase, spe- based insurance agents William Harrison vestment management group [that] helps

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT ACQUISITIONS - P AGE 8 successful artists, athletes and entertain- Morris County, NJ offices, and be headed the Treasury last year and has since de- ers achieve their financial goals.” The by Provident Wealth Management CEO termined that Federal Trust is no longer acquisition adds $1.5 billion in assets James Nesci. part of its “core operations.” under management and offices in San In 2010, Provident Financial reported The Hartford said it expects to take a Francisco, Boca Raton and Greenwich, $3.3 million in wealth management in- $70 million after-tax charge tied to divesti- CT to SunTrust Sports and Entertainment come, which constituted 10.7% of its non- ture and losses on Federal Trust Bank Specialty Group’s established franchise in interest income. The company ranked assets and liabilities not sold to Center- Atlanta, Los Angeles, San Diego, Nash- 99th in wealth management earnings State Banks. CenterState, in turn, will ville, Daytona Beach and Charlotte, NC. among U.S. bank holding companies with buy Federal Trust’s $170 million in per- assets between $1 billion and $10billion, forming loans at a 27% discount and will MAY 23 - 29, 2011 according to Michael White’s Wealth acquire the thrift’s $230 million in deposits M&T COMPLETES Management Fee Income Report. and 11 offices in 5 Florida counties, when WILMINGTON TRUST the deal closes in the fourth quarter, ACQUISITION MAY 23 - 29, 2011 pending regulatory approval. CenterState Buffalo, NY-based M&T Bank Corp has ALLSTATE TO ACQUIRE Banks currently operates 52 branches in completed its all-stock acquisition of Wil- WEB-BASED ESURANCE 14 Florida counties through its subsidiar- mington, DE-based, $10.7 billion-asset AND ANSWER FINANCIAL ies, CenterState Bank and Valrico Bank. Wilmington Trust Corp. The acquisition Northbrook, IL-based Allstate Corp. has transforms M&T into a $78 billion-asset agreed to acquire Esurance and Answer JUNE 6 - 12, 2011 financial holding company with 780 retail Financial from Hamilton, Bermuda-based FIRST FINANCIAL TO SELL and commercial branches across New White Mountains Insurance Group for INSURANCE AGENCY TO HUB York, Delaware, Pennsylvania, Maryland, $700 million in cash plus the tangible Charleston, SC-based, $3.3 billion-asset Virginia, West Virginia, New Jersey, Flori- book value of both at closing. The esti- First Financial Holdings has agreed to sell da, Washington, D.C. and Ontario, Cana- mated $1 billion deal is expected to close First Southeast Insurance Services da. Wilmington Trust Wealth Advisory in autumn, pending regulatory approval. (FSIS), its insurance agency subsidiary, Services and Wilmington Trust Corporate Web-based Esurance has doubled its to Chicago-based HUB International for Client Services will continue to operate policies in force and grown its premiums $38 million in cash. First Financial Presi- under the Wilmington Trust name, but on average 20% per year over the past dent and CEO R. Wayne Hall said, the Wilmington Trust Bank will be renamed five years, enough to become the third deal will increase First Financial’s tangi- M&T Bank when M&T completes its sys- largest provider of auto insurance online ble equity and regulatory capital and tems conversion in the third quarter. and through 24/7 call centers. Answer “better position the company for the fu- M&T Bank Chairman and CEO Robert Financial offers consumers web-based ture.” Hall added, “We expect to continue Wilmers said of the merger, “M&T now personal insurance quotes and compari- to have a mutually beneficial relationship offers the nation’s premier wealth man- sons among 20 insurance companies. with HUB … so that First Financial’s cus- agement services with approximately $81 Allstate Chairman, President and CEO tomers can continue to receive outstand- billion in assets under management.” Thomas Wilson said, “Esurance will ex- ing products and services in banking, pand our ability to serve customers that investments and insurance.” MAY 23 - 29, 2011 are self-directed but still prefer a branded When the deal closes in the second PROVIDENT FINANCIAL product. Answer Financial will strengthen quarter, pending regulatory approval, TO ACQUIRE BEACON TRUST & our offering to individuals who want to be FSIS will serve as HUB’s new regional ASSET MANAGEMENT UNITS offered a choice between insurance carri- platform and operate as HUB Internation- Jersey City, NJ-based, $6.8 billion-asset ers and are brand neutral.” The purchas- al Southeast. HUB International Chair- Provident Financial Services, through es offer Allstate “two additional sources of man and CEO Martin Hughes said, “FSIS Provident Bank, has agreed to acquire growth and an immediate increase in possesses all of the attributes we were Morristown, NJ-based Beacon Trust customer relationships,” Wilson added. looking for in a new regional HUB plat- Company and Delaware-incorporated form, including talented insurance profes- Beacon Global Asset Management from JUNE 6 - 12, 2011 sionals, a strong diversified book of busi- Beacon Financial. Provident Financial HARTFORD FINANCIAL TO SELL ness, and longevity in the marketplace.” Chairman, President and CEO Christo- THRIFT USED TO QUALIFY FOR TARP Charleston, SC-based FSIS operates 9 pher Martin said, “This transaction will Hartford, CT-based The Hartford Finan- property-casualty, employee benefits and serve to significantly expand Provident’s cial Services Group has agreed to sell personal lines offices in South Carolina wealth management business throughout Sanford, FL-based, $367 million-asset and North Carolina. the state, … [and] strategically position Federal Trust Corp. to Davenport, FL- our organization to enhance market share based, $2.2 billion-asset CenterState JUNE 13 - 19, 2011 and non-interest earnings growth.” Bank. The Hartford paid $10 million in TOMPKINS FINANCIAL EXPANDS When the up to $10.5 million cash 2009 to acquire the thrift, in order to at- HOMETOWN AGENCY WITH deal closes in the third quarter, pending tain unitary thrift holding company status OLVER ACQUISITION regulatory approval, Provident’s wealth and qualify for $3.4 billion in troubled Ithaca, NY-based, $3.28 billion-asset management business will oversee $1.65 asset relief program (TARP) funds from Tompkins Financial Corp, through Tomp- billion in assets, be based in Beacon’s the U.S. Treasury. The Hartford repaid kins Insurance Agencies, has acquired

Tompkins Insurance Agencies operates six offices in central New York and 15 offices in western New York, and in 2010 enabled Tompkins Financial to re- IT’S AMAZING HOW MANY port $12.74 million in insurance brokerage income, which comprised 27.7% of PEOPLE CHANGE its noninterest earnings and 8.1% of its net operating revenue. The company ranked 13th in insurance brokerage in- THEIR VIEWS come among BHCs with assets between $1 billion and $10 billion, according to the ABOUT BOLI Michael White-Prudential Bank Insurance Fee Income Report.

AFTER SPEAKING WITH MEYER-CHATFIELD JUNE 13 - 19, 2011 BANK OF AMERICA Many banks think that it makes no difference who they turn to for COMPLETES SALE OF CERTAIN BALBOA INSURANCE BOLI and executive compensation services. Too bad. ASSETS & LIABILITIES TO QBE There are differences—differences that matter. Charlotte, NC-based, $2.3 trillion-asset

Bank of America Corp (B of A) has com- EYER- HATFIELD OFFERS ADDITIONAL BENEFITS THAT CAN M C pleted its sale of Newport Beach, CA- MAKE A BIG DIFFERENCE FOR YOUR BANK. based Balboa Insurance and its affiliated

Meyer‐Chatfield offers a unique guarantee, as well as other companies’ lender-placed and voluntary property and casualty insurance assets differentiated services that help our clients maximize the benefits and liabilities to Sydney, Australia-based of their BOLI and overall executive compensation programs. If you QBE Insurance Group. To complete the are one of the many banks looking for new options because transaction, QBE forged a reinsurance Clark Consulting exited the market, you owe it to yourself to talk agreement with Balboa equal to the cash to Meyer‐Chatfield. and other asset values of the deal. In addition, QBE and B of A agreed to a Talk to us and you’ll quickly find out why we now are the industry long-term distribution arrangement leader. Discover how we help clients develop and implement the whereby B of A will offer its customers QBE’s lender-placed and voluntary con- most effective BOLI and executive compensation programs. sumer insurance lines and associated Contact Chris Pezalla at: [email protected] or services. QBE the Americas CEO John Rumpler said, “The acquisition supports 800.444.BOLI for more information. QBE’s commitment to growing its business through product diversification and new distribution channels.”

JULY 5 - 10, 2011 FIRST FOUNDATION BANK LAUNCHES INSURANCE AGENCY 261 Old York Road, Suite 604 · Jenkintown, PA 19046 · 215.884.5273 Irvine, CA-based, $456 million-asset First www.meyerchatfield.com Foundation Bank (FFB) has launched First Foundation Insurance Services (FFIS) “in response to clients asking for advice on how to best meet their financial security needs,” FFB said. FFIS will offer Ithaca-based Olver & Associates Insur- Tompkins Financial President and life, disability, long-term care and annuity ance. Neil Olver will serve as a senior CEO Stephen Romaine said the acquisi- products to FFB’s individual and business vice president on the Tompkins Insurance tion “brings more valued customers into customers. First Foundation Bank Presi- leadership team; Lisa Olver will continue the expanded Tompkins Financial family dent David Rahn said, “Our clients trust to manage commercial lines, and the in central New York,” a move that Tomp- our financial advice and have indicated remaining three members of the Olver kins Insurance Agencies President and that they understand the value that First group will move with the acquired agency CEO David Boyce said “will also enhance Foundation can add in extending its ser- into Tompkins Insurance Agencies’ Ithaca our ability to grow our business.” vices to include insurance.” offices in August.

JULY 5 - 10, 2011 WFIS and continue to operate from their Hughes said, “This acquisition represents RENASANT TO ACQUIRE current location offering employee bene- a significant step in BNY Mellon Wealth RBC BANK’S fits programs and health insurance con- Management’s growth as we move into BIRMINGHAM, AL-BASED sulting to middle - market and large em- the third largest wealth market in the TRUST DEPARTMENT ployers. WFIS Florida Region Managing U.S.” Tupelo, MS-based, $4.2 billion-asset Re- Director Tom Longhta said, “EDIFY’s BNY Managing Director Michael nasant Corp., through Renasant Bank, experienced team of professionals … will DiMedico has been named Regional has agreed to acquire the Birmingham, strengthen our growing presence in Flori- President of BNY Mellon Wealth Manage- AL-based trust department of RBC Bank da [now 8 offices] and further support ment’s new Chicago office, which will (USA). The deal includes $680 million in Wells Fargo’s commitment to help cus- include former Talon principals Terry Dia- assets under management in over 200 tomers succeed financially by addressing mond, Alan Wilson and Edwin Ruthman. trust, custodial and escrow accounts their insurance needs.” The move also The Talon deal does not include the com- owned by Alabama and Georgia custom- fits with WFIS’s stated goal of doubling its pany’s private equity and hedge fund ers. It does not include the trust opera- employee benefits business over the next business. tions of RBC Wealth Management (US) five years. or RBC Trust Company (Delaware). JULY 11 - 17, 2011 Renasant Chairman & CEO E. Robinson JULY 11 - 17, 2011 WINTRUST FINANCIAL MORE THAN McGraw described the purchase as part BANK AMERICA DOUBLES ASSET MANAGEMENT of Renasant’s overall growth strategy and SELLS OFF BALBOA LIFE BUSINESS WITH GREAT LAKES said, “We look to continue to expand our TO SECURIAN ADVISORS ACQUISITION client base, franchise and delivery of fi- St. Paul, MN-based Securian Financial Lake Forest, IL-based, $14 billion-asset nancial services in Alabama where our Group has agreed to acquire Irvine, CA- Wintrust Financial Corp. has completed current footprint consists of multiple loca- based Balboa Life Insurance Company its all-stock acquisition of Chicago, IL- tions in Birmingham, Huntsville, Decatur (BLIC) and Balboa Life Insurance Com- based Great Lakes Advisors (GLA). The and Madison.” pany of New York (BLICNY) from Char- acquired investment management com- Renasant Bank’s Trust division will lotte, NC-based Bank of America (BofA). pany manages $2.4 billion in assets, hold $1.5 billion in wealth management The to-be-acquired companies offer mort- overseeing domestic equity and fixed and trust assets, when the deal closes by gage insurance, accidental death insur- income investments for institutional cli- August 31, 2011, pending regulatory ap- ance, accidental death and dismember- ents. GLA has merged with Wintrust’s proval. ment coverage, and term life insurance – $2.1 billion-asset management company, products also offered by Securian. Secu- Wintrust Capital Management (WGM), to JULY 5 - 10, 2011 rian Financial Group Executive Vice Pres- form Great Lake Advisors, LLC, a Win- WELLS FARGO TO SELL H.D. VEST ident Christopher Hilger said, “This acqui- trust Wealth Management Company. FINANCIAL TO PARTHENON CAPITAL sition increases the scale of our financial Wintrust Financial President and CEO San Francisco-based, $1.2 trillion-asset institutions business and further demon- Edward Wehmer said, “Building our asset Wells Fargo & Co. has agreed to sell Ir- strates our commitment to this market- management capabilities is a strategic ving, TX-based H.D. Vest Financial Ser- place.” Securian provides insurance, priority. With the acquisition of Great vices, a Wells Fargo Advisors unit, to mid debt protection, loan documents and mar- Lakes Advisors, we establish ourselves -market private equity firm Parthenon keting services to over 4,000 financial as a major player in the institutional in- Capital Partners based in Boston and institutions throughout the U.S. vestor market in the Midwest.” Great San Francisco. H.D. Vest provides finan- After the deal closes on October 1, Lakes Advisors will manage $4.5 billion in cial advice to 1.8 million customers 2011, pending regulatory approval, the assets as part of Wintrust Wealth Man- through over 4,800 securities-licensed tax BLIC and BLICNY will merge into Securi- agement, which manages over $12 billion professionals. Wells Fargo said it decid- an Financial Group’s St. Paul-based opin assets. ed to sell the company because its ap- erations. Integration is expected to be proach and customer base did “not align completed in 2012. JULY 25 - 31, 2011 precisely” with Wells Fargo Advisor’s fo- METLIFE TO EXIT cus on serving and advising affluent and JULY 11 - 17, 2011 DEPOSITORY BANKING wealthy clients. BNY MELLON WEALTH BUSINESS MANAGEMENT ADDS AND BHC STATUS JULY 11 - 17, 2011 CHICAGO OFFICE New York City-based MetLife Inc. has WELLS FARGO INSURANCE WITH TALON ACQUISITION decided its bank holding company (BHC) SERVICES ACQUIRES FLORIDA New York City-based, $267 billion-asset structure is no longer appropriate and has EMPLOYEE BENEFITS FIRM BNY Mellon has completed its acquisition put Covent Station, NJ-based, $15.6 bil- San Francisco, CA-based, $1.2 trillion- of the wealth management operations of lion-asset MetLife Bank’s depository busi- asset Wells Fargo & Co. unit Chicago- Chicago-based Talon Asset Manage- ness, including its savings accounts, cer- based Wells Fargo Insurance Services ment, adding $800 million in assets under tificates of deposits and money market (WFIS) has acquired Fort Lauderdale, FL- management to BNY Mellon’s $171 bil- accounts up for sale. MetLife President based employee benefits consulting firm lion wealth management business. BNY and CEO Steven Kandarian said, “We do EDIFY. The acquired company’s princi- Wealth Management CEO Lawrence not believe it is appropriate for the over- pals, management team and staff will join

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT ACQUISITIONS - P AGE 11 whelming majority of our business [life insurance and annuities] to be governed by regulations written for banking institutions.” He added, “In a highly competitive global insurance market, it is imperative that MetLife be able to operate on a level playing field with other insurance companies.” In the first quarter, MetLife’s insurance operations accounted for 98% of its net operating income, while MetLife Bank accounted for only 2%. When the sale of MetLife Bank’s depository business is completed, MetLife will jettison its BHC charter and lose access to the Federal Reserve’s discount window. MetLife will, however, retain its MetLife Home Loans business and access to the Federal Home Loan Bank (FHLB), where as of the first quarter, the company held $20.8 billon in loan agreements or advances with the FHLB of New York and $600 million with the FHLB of Boston.

JULY 25 - 31, 2011 THE BANK OF TAMPA AND LOCAL AGENCY FORGE EXCLUSIVE REFERRAL AGREEMENT Tampa, FL-based, $1 billion-asset The Bank of Tampa and Tampa-based Bald- win Krystyn Sherman Partners (BKS- Glens Falls National Bank & Trust subsid- Partners) have forged an exclusive joint JULY 25 - 31, 2011 SAN ANTONIO’S JEFFERSON BANK iary Glens Falls National Insurance Agen- venture bank insurance agreement ACQUIRES HOMETOWN AGENCY cies, has agreed to acquire greater Glens whereby both companies will refer their San Antonio, TX-based, $860 million- Falls-based property and casualty insur- clients to each other for their respective asset Jefferson Bank has acquired ance agencies W. Joseph McPhillips, Inc. services, with The Bank of Tampa receiv- hometown agency Sanger & Altgelt. The and McPhillips-Northern, Inc. Arrow Fi- ing referral fees. The Bank of Tampa acquired agency has retained its location, nancial Chairman, President and CEO President Bill West said, “Employee ben- management team and staff and oper- Thomas Hoy said, “This transaction will efits and commercial insurance is typical- ates as Sanger & Altgelt LLC, with its complement Arrow’s other property and ly the second largest expense for most President Joe Haynes serving on the casualty insurance operations, Upstate businesses. The partnership with BKS- Jefferson Bank Board of Directors. Agency LLC and Loomis & LaPann, Inc., Partners provides an efficient way to as- Jefferson Bank Chairman Steve Lewis as well as its health insurance agency, sist our clients in one of their largest ex- said, “In Sanger & Altgelt, we saw an Capital Financial Group.” Arrow Financial penses and top concerns.” opportunity to expand the services we Senior Vice President David DeMarco The Bank of Tampa Director of Finan- can offer our customers by coming to- added that the acquisitions are part of cial Services Corey Neil described the gether with another family-owned institu- Arrow’s strategy to generate more nonin- joint venture as “a pivotal phase in ex- tion that shares our values and our focus terest fee income and become less reliant panding our Wealth Management capabil- on building long-term relationships.” The on net interest margins. ities.” The Bank of Tampa is looking to acquired insurance agency has handled W. Joseph McPhilips and McPhillips- boost its noninterest fee income to 30- Jefferson’s insurance needs for almost 15 Northern will maintain their locations, 40% of total earnings, Neil said, and the years. management teams, staff and agents and referral agreement with BKS-Partners, operate as a separate division of Glens which has additional offices in Atlanta, JULY 25 - 31, 2011 Falls National Insurance Agencies, when GA and Naples and Sarasota, FL, is a ARROW FINANCIAL ACQUIRES the deal closes on August 1, pending step in that direction, Tampa Bay Busi- TWO MORE P&C AGENCIES regulatory approval. ness Journal reports. Glens Falls, NY-based, $1.98 billion- asset Arrow Financial Corp., through

AUGUST 8 - 14, 2011 AUGUST 8 - 14, 2011 AUGUST 15 - 21, 2011 JPMORGAN CHASE GUILFORD SAVINGS ACQUIRES STERLING BANK SELLS SELLS PENSION UNIT MAJORITY INTEREST IN MBM ADVISORS TO PACIFIC LIFE INVESTMENT ADVISORY FIRM TO MANAGEMENT TEAM New York City-based, $2.2 trillion-asset Guilford, CT-based, $505.9 million-asset Houston, TX-based Sterling Bank, which JPMorgan Chase has sold its U.S. Pen- Guilford Savings Bank (GSB) has ac- was acquired by Comerica, Inc. on July sion Advisory Group to Newport Beach, quired a majority interest in hometown- 28, has sold MBM Advisors, its invest- CA-based Pacific Life Insurance Compa- based Asset and Retirement Investment ment management and corporate retire- ny. The acquired pension plan company Associates (ARIA), a fee-only registered ment plan record-keeping unit to MBM will be renamed Pacific Global Advisors, investment advisory firm with $100 million Advisors’ leadership team. MBM Advi- but will continue to operate from its New in assets under management. Guilford sors Chairman Donald Black said, “We York City offices under its current man- Savings Bank President and CEO Marga- remain a flexible, responsive, entrepre- agement team, offering customized in- ret Livingston said ARIA founder and neurial organization that shares a com- vestment and risk management products managing member Deborah Abildsoe mon culture and understands the chal- to corporations, defined benefit pension “brings with her a wealth of sound invest- lenges of the companies we serve – from plans, voluntary employees’ beneficiary ment advice and … delivers outstanding small privately held partnerships to associations, nuclear de-commissioning personalized customer service, in true midsize corporations.” MBM Advisors trusts and other institutional investors. alignment with GSB’s values.” Abildsoe currently manages $1 billion in assets. Pacific Life Chairman, President and said, “I fully anticipate assets under man- CEO Jim Morris said the acquisition agement to continue to grow as we move AUGUST 15 - 21, 2011 PROVIDENT EXPANDS “reinforces one of Pacific Life’s core forward with GSB.” WEALTH MANAGEMENT BUSINESS strengths, which is to help deliver finan- WITH BEACON PURCHASE cial security for retirees.” Pacific Life AUGUST 8 - 14, 2011 DISCOVER FINANCIAL Morristown , NJ-based, $6.9 billion-asset CFO and CIO Khanh Tran added that the DEAL FOR ALLSTATE BANK’S Provident Financial Services, through The acquired company’s “pioneering ap- DEPOSITS TERMINATED Provident Bank, has completed its acquisi- proach to advising pension plans based Riverwoods, IL-based, $64.7 billion-asset tion of Beacon Trust Company and Bea- on an asset-liability management model Discover Financial Services’ agreement con Global Asset Management. Provident is consistent with the practices of Pacific to acquire the deposits of Northbrook, IL- Chairman, President and CEO Christopher Life.” based, $16 billion-asset Allstate Bank Martin said, “This transaction serves to AUGUST 8 - 14, 2011 from insurer Allstate Corp. has been ter- significantly expand Provident’s wealth HAMPTON ROADS BANKSHARES minated. Regulatory approval by an management business throughout the SELLS INSURANCE AGENCY TO agreed upon date forced the termination, state, … increase our market share and BANKERS INSURANCE Allstate said, but the insurer added, “We enhance our non-interest earnings Norfolk, VA-based, $2.72 billion-asset Hamp- are continuing with plans to wind down growth.” Provident’s Wealth Management ton Roads Bankshares has sold its Gateway the Allstate Bank’s operations and antici- Chief James Nesci has been named presi- Insurance Services unit to Richmond, VA- pate obtaining regulatory approval to can- dent of the acquired companies, which will based Bankers Insurance LLC in return for cel its banking charter by year-end 2011.” continue to operate from their Morristown cash and a membership interest in Bankers offices, where they currently manage a Insurance. The deal adds one insurance AUGUST 15 - 21, 2011 combined $1.5 billion in assets. UNITRIN SELLS agency office in Virginia and 5 in North Caro- FIRESIDE BANK’S lina to Bankers Insurance’s reach and pro- AUGUST 22 - 28, 2011 ACTIVE LOAN PORTFOLIO LANDERBURG THALMANN vides Hampton Roads customers access to Chicago-based insurer Unitrin has agreed EXPANDS BROKER-DEALER insurance products through Bankers Insur- to sell the active loan portfolio of its sub- OPERATIONS WITH ance. Bankers Insurance President and sidiary, Pleasanton, CA-based, $452.9 SECURITIES AMERICA ACQUISITION CEO Marshall Fleming said, “We are excited billion-asset Fireside Bank, to a unit of Miami, FL-based Ladenburg Thalmann to be expanding into the eastern North Caro- Irvine, CA-based Consumer Portfolio Financial Services (Ladenburg) has lina area and look forward to partnering with Services. Fireside Bank will retain its non agreed to acquire La Vista, NE-based the Bank of Hampton Roads.” -active loan portfolio, which includes Securities America Financial Corp. and its In 2010, Hampton Roads reported about $475 million in previously charged- subsidiaries (Securities America) for $150 $4.5 million in insurance brokerage fee off loans and in run-off. Unitrin Chair- million in cash plus potential performance income, which comprised 24.8% of its man, President and CEO Donald South- -based payments over two years. Laden- noninterest income and 4.8% of its net well said, “The sale represents substan- burg Chairman Dr. Phillip Frost said, operating revenue. Hampton Roads tial progress in the wind-down of Fireside “This acquisition … is consistent with ranked 38th in insurance brokerage earn- Bank and demonstrates continued suc- Ladenburg’s long-stated goal to grow into ings among bank holding companies with cess in executing our strategy to allocate a more diversified financial services firm assets between $1 billion and $10 billion, capital to our core businesses.” The sale with a stable, growing revenue stream according to the Michael White-Prudential is expected to close in the third quarter, from our independent broker-dealer busi- Bank Insurance Fee Income Report. pending regulatory approval. ness to balance our capital markets and investment banking areas.”

ca’s industry-leading technology, risk management and practice development / management platform.”

AUGUST 22 - 28, 2011 SECURIAN FINANCIAL TO EXPAND CREDIT PROTECTION BUSINESS WITH AMERICAN MODERN LIFE PURCHASE St. Paul, MN-based Securian Financial Group has agreed to acquire American Modern Life Insurance Company (AMLIC) and its subsidiary Southern Pioneer Life Insurance Company (SPLIC) from Cincin- nati, OH-based American Modern Insur- ance Group. The to-be-acquired companies offer credit life, disability insurance and debt protection products through the bank insurance channel and are ex- JOIN THE pected to increase Securian’s credit protection business by 25%. Securian provides insurance, debt protection, loan American Bankers Insurance Association documents and marketing services to financial institutions. When the deal closes by the end of 2011, pending regulatory approval, Secu- Turn to the ABIA for expert advice and support. We’re the rian will merge the acquired businesses premier national organization representing the industry, into its St. Paul operations. The purchas- Starting, acquiring offering outstanding: es mark Securian’s second major acquisition in two months. In July the company or expanding a • legislative and regulatory advocacy acquired Irvine, CA-based Balboa Life bank-insurance • compliance information and support Insurance Company and New York City- agency? • industry publications and benchmarking data based Balboa Life Insurance Company of • peer networking New York from Charlotte, NC-based, • direct access to bank-insurance industry providers $2.26 trillion Bank of America Corpora- tion. Contact the ABIA to learn more about how we can help you SEPTEMBER 5 - 11, 2011 grow your bank-insurance business! RENASANT COMPLETES ACQUISITION OF RBC (USA)’S ALABAMA-BASED www.theabia.com TRUST DEPARTMENT Tupelo, MS-based, $4.2 billion-asset Re- 202-663-5163 nasant Bank, a unit of Renasant Corp., E-mail Valerie Barton: has completed its acquistion RBC Bank [email protected] (USA)’s Birmingham, AL-based, $680 million-asset trust department and formed Renasant Trust and Wealth Management Alabama Division, a unit designed to serve the Alabama and Georgia markets. Securities America is expected to add sor business will include 2,700 financial The expansion of Renasant’s Trust and $50 billion in client assets, including $15 advisors, $70 billion in client assets, and Wealth Management Division fits with the billion in assets under management, to $675 million in projected annual revenue. bank’s moves into Tuscaloosa and Mont- Ladenburg’s independent broker-dealer Like Triad and Investacorp, Securities gomery, AL, and its FDIC-assisted acqui- and investment advisor operations, which America will continue to operate with its sitions of Roswell, GA-based, $145 mil- currently include Norcross, GA-based current management team and staff from lion-asset American Trust Bank and Jas- Triad and Miami-based Investacorp. its current location. Ladenburg President per, GA-based, $1 billion-asset Crescent When the deal closes by the end of 2011, and CEO Richard Lampen said of the Bank & Trust. Renasant Chairman and pending regulatory approval, Ladenburg’s newest acquisition, “Ladenburg looks CEO Robinson McGraw said, “We have combined broker-dealer/investment advi- forward to … leveraging Securities Ameri- added an experienced and talented team

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT ACQUISITIONS - P AGE 14 to grow our financial services share in our reported approximately $1 billion in pre- full-service brokerage firm, Pulse Trading. Alabama and Georgia markets … and we tax net income, insurancejournal.com State Street Global Markets Executive look to capitalize on future growth oppor- reports. Vice President David Puth said, “Pulse tunities as they become available.” Trading’s sophisticated technology and In 2010, Renasant Corp. reported SEPTEMBER 26 - OCTOBER 2, 2011 block trading capabilities will expand the BB&T EXPANDS $2.41 million in fiduciary income, which number of execution venues and the INSURANCE OPERATIONS comprised 2.6% of its noninterest fee range of electronic trading tools available IN CALIFORNIA WITH income and 1.2% of its net operating rev- to our clients and ultimately help lower BENEFITS AGENCY ACQUISITION enue. The company ranked 111th in fidu- their trading costs.” The deal for Pulse Raleigh, NC-based BB&T Insurance Ser- ciary earnings among U.S. BHCs with Trading includes its institutional equities vices, the insurance brokerage unit of assets between $1 billion and $10 billion, business, and is expected to add approxi- Winston-Salem, NC-based, $157 billion- according to the Michael White-Prudential mately 40 employees and operations in asset BB&T Corp., has agreed to acquire Bank Insurance Fee Income Report. Boston, New York City, St. Louis and San San Jose, CA-based Liberty Benefit In- Francisco when it closes in the fourth surance Services (LBIS). The full-service SEPTEMBER 12 - 18, 2011 quarter, pending regulatory approval. HSBC HOLDINGS employee benefits agency helps commer- State Street holds $22.8 trillion in assets MAY SELL CANADIAN cial clients manage health care costs and under custody and administration and RETAIL BROKERAGE navigate changing federal and state regu- $2.1 trillion in assets under management London, England-based HSBC Holdings lations offering plan analysis, employer and operates in 26 countries reaching PLC is continuing “discussions regarding benefit products, human resource con- 100 geographic markets. the possible sale” of its Canadian retail sulting and financial auditing. LBIS Presi- In 2010, State Street Corporation re- brokerage unit. Any sale of the Toronto- dent Dixon Greer described the broker- ported $598.3 million in trading revenue, based unit would not include its online age as “essentially the optimal extension which comprised 9.1% of its noninterest brokerage or trust services divisions, of a large company’s human resources, income and 6.5% of its net operating rev- HSBC said in a press release. benefits and risk management depart- enue. The company ranked 9th in trading ments – focused on expense reduction revenue among all U.S. bank holding SEPTEMBER 19 - 25, 2011 and a preeminent level of customer ser- WELLS FARGO INSURANCE companies, according to the Michael vice.” ACQUIRES NEW JERSEY White-Prudential Bank Insurance Fee The acquisition is BB&T Insurance BENEFITS AGENCY Income Report. Services’ ninth in California, a state which Chicago-based Wells Fargo Insurance BB&T Insurance Services Chairman and Services (WFIS), the insurance broker- SEPTEMBER 26 - OCTOBER 2, 2011 CEO Wade Reece described as “the No. FIRST PLACE FINANCIAL age unit of San Francisco-based, $1.3 1 state for insurance values in the country SELLS INSURANCE AGENCY trillion-asset Wells Fargo & Co., has ac- and the 10th largest economy in the FOR NEEDED CAPITAL quired Hazlet, NJ-based Procomp Benefit world.” When the deal closes on October Warren, Ohio-based, $3.1 billion-asset Resources. The acquired full-service 1, Liberty will retain its location, manage- First Place Financial Corp. has sold brokerage and consulting agency pro- ment team, staff and agents and operate Youngstown, OH-based First Place Insur- vides employee benefits, voluntary bene- as BB&T-Liberty Benefit Insurance Ser- ance Agency to Briarcliff Manor, NJ- fits, individual life, disability and retire- vices. based USI Insurance Services and has ment services to middle-market and large BB&T Insurance Services operates executed a joint marketing agreement employers. The agency will retain its more than 100 agencies in North Caroli- with USI. First Place Financial President staff, management and sales team and na, Virginia, Georgia, South Carolina, and CEO Steven Lewis said he expects relocate to an already established WFIS Maryland, West Virginia, Tennessee, the marketing agreement with USI to give office in New Jersey. WFIS Northeast Florida, Kentucky, and California, and in his customers “access to the expertise of Region Managing Director Peter Gilbert- 2010 helped BB&T Corp. generate one of the country’s leading insurance son said the acquisition will “strengthen $933.3 million in insurance brokerage brokers.” our growing presence in New Jersey.” income, which comprised 33.0% of its USI expects First Place Insurance, SEPTEMBER 19 - 25, 2011 noninterest income and 11.5% of its net which specializes in providing commercial HSBC REPORTEDLY PUTTING operating revenue. The company ranked property and casualty and employee ben- NON-LIFE BUSINESS 4th in insurance brokerage earnings efits insurance to middle-market busi- ON THE BLOCK among all U.S. bank holding companies, nesses, to contribute $3.6 million in annu- London, England-based HSBC Holdings according to the Michael White-Prudential al revenue to its operations. USI Chair- is reportedly putting its non-life insurance Bank Insurance Fee Income Report. man, President and CEO Michael Sicard businesses in Britain, France, Hong Kong said that by merging First Place with and Singapore up for sale with first-round SEPTEMBER 26 - OCTOBER 2, 2011 USI’s existing Youngstown office, “We STATE STREET TO INCREASE bids due by mid-October. HSBC’s 16% believe we will become the preeminent ELECTRONIC TRADING CAPABILITIES stake in China-based Ping An Insurance middle-market insurance brokerage in the WITH PULSE TRADING ACQUISITION and 18% stake in Vietnam-based Bao Youngstown/Warren area.” Boston, MA-based State Street Corpora- Vietnam are not on the block. In 2010, On September 21, First Place Finan- tion has agreed to acquire Boston-based HSBC’s non-life insurance businesses cial (FPF) issued Securities and Ex-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT ACQUISITIONS - P AGE 15 change Commission filing Form 8-K stating its financial statement filings and reports on internal control over financial reporting as of June 30, 2008, cannot be relied upon. Additionally, FPF said, the Office of Thrift Supervision concluded after its annual periodic exam that the bank’s loan loss allowances were under- stated as of June 30, 2010. Lastly, FPF noted that it sold First Place Insurance as “part of the Company’s capital enhance- ment plan.”

OCTOBER 3 - 9, 2011 WELLS FARGO INSURANCE SERVICES ACQUIRES EMPLOYEE BENEFITS AGENCY Chicago-based Wells Fargo Insurance Services (WFIS), the insurance brokerage unit of San Francisco-based, $1.26 trillion-asset Wells Fargo & Co., has acquired Reno, NV-based ISU Stetson- Beemer Insurance. The acquired commercial and personal insurance agency offers employee benefit products and consulting services as well as commercial and personal property, casualty and health insurance products. The agency’s 24-member team will join WFIS’s current Reno office, where Stetson Beemer Pres- ident Richard Schield said the merged complete lines of commercial property, income, which comprised 33.0% of its unit will “provide our clients with access to casualty and employee benefits, the to-be noninterest income and 11.5% of its net more re-sources, financial services and -acquired agency specializes in surety operating revenue. The company ranked products.” WFIS Sacrament/Central Val- bonds for the construction industry and fourth in insurance brokerage earnings ley Regional Managing Director Greg Van telecommunication insurance for inde- among all U.S. bank holding companies, Ness said the acquisition “will strengthen pendent cellular tower owners and paging according to the Michael White-Prudential our growing presence in Nevada.” companies. BB&T Insurance Services Bank Insurance Fee Income Report. Wells Fargo Insurance Services oper- Chairman and CEO Wade Reece said, ates more than 200 offices in 37 states OCTOBER 10 - 16, 2011 “This acquisition provides an attractive and in 2010 helped Wells Fargo & Co. FIRST FINANCIAL EXITS foothold for us in metro Baltimore and a generate $1.78 billion in insurance bro- INSURANCE BUSINESS & broader representationin the Washington, kerage income, which comprised 4.4% of RAISES CASH WITH AGENCY SALE DC area.” When the deal closes in Octo- its noninterest fee income and 2.1% of its Charleston, SC-based, $3.2 billion-asset ber, pending regulatory approval, the net operating revenue. The company First Financial Holdings has sold Myrtle agency and its 45 employees will contin- ranked second in insurance brokerage Beach, SC-based Kimbrell Insurance ue to be led by ARM President Mary Ann earnings among all traditional BHCs, ac- Group, its managing general insurance Marbury and will operate from its current cording to the Michael White-Prudential agency, to Farmington Hills, MI-based location as BB&T-Atlantic Risk Manage- Bank Insurance Fee Income Report. Burns & Wilcox. First Financial President ment. The agency is BB&T Insurance and CEO R. Wayne Hall said the all-cash Services’ second Maryland purchase. OCTOBER 3 - 9, 2011 deal with a potential two-year earn-out BB&T INSURANCE TO ENTER BB&T -Frederick Underwriters operates in based on revenue growth “is an addition- BALTIMORE AND DC AREAS Frederick, MD. al step forward in our strategic transfor- WITH AGENCY ACQUISITION BB&T Insurance Services operates mation.” The sale marks First Financial’s Raleigh, NC-based BB&T Insurance Ser- more than 100 agencies in North Caroli- exit from the insurance brokerage busi- vices, the insurance brokerage unit of na, Virginia, Georgia, South Carolina, ness. In July, First Financial sold First Winston-Salem, NC-based, $157 billion- Maryland, West Virginia, Tennessee, Southeast Insurance Services to Chicago asset BB&T Corp., has agreed to acquire Florida, Kentucky, and California, and in -based HUB International for about $38 Columbia, MD-based Atlantic Risk Man- 2010 helped BB&T Corp. generate million in cash after the bank holding agement (ARM). In addition to offering $933.3 million in insurance brokerage company reported a first-half net loss of $42.26 million.

Burns & Wilcox Chairman, President OCTOBER 17 - 23, 2011 quarter reported its noninterest income and CEO Alan Kaufman said the Kimbrell TOWNEBANK ADDS declined 9.3% to $1.68 million, down from acquisition “strengthens our position in RALEIGH-BASED AGENCY TO ITS $1.85 million in second quarter 2010. the South, providing our brokers and NORTH CAROLINA OPERATIONS agents additional resources, insurance Hampton Roads, VA-based, $4.02 billion- OCTOBER 17 - 23, 2011 METLIFE PUTS products and greater depth of service.” asset TowneBank, through Town Insur- METLIFE BANK’S Burns & Wilcox, an H.W. Kaufman Finan- ance Agency, has acquired Raleigh, NC- FORWARD MORTGAGE BUSINESS cial Group subsidiary, is a wholesale in- based Stanton Taylor Agency. ON THE BLOCK surance brokerage and underwriting man- TowneBank Chairman and CEO Robert New York City-based MetLife is exploring ager with 37 offices across the U.S. and Aston said, “The quality and professional- the sale of the forward mortgage busi- one in London. ism of the Stanton Taylor staff will allow us to expand the services available to our ness of its banking unit, Convent Station, OCTOBER 10 - 16, 2011 bank and insurance clients.” TowneBank NJ-based, $16.49 billion-asset MetLife B-OF-A COMPLETES operates bank branches in the Raleigh, Bank. Earlier this year MetLife put Met- SALE OF BALBOA LIFE UNITS NC area, including Moyock, Grandy, Life Bank’s depository business up for TO SECURIAN Camden, Southern Shores, Corolla and sale as the first step in the company ef- St. Paul, MN-based Securian Financial Kill Devil Hills, NC in addition to its bank forts to deregister as a bank holding com- Group has completed its acquisition of branch system in Virginia. pany and exit that regulatory environ- Charlotte, NC-based, $2.26 trillion-asset In 2010, Towne Insurance helped ment. MetLife said it wants “to operate Bank of America units, Irvine, CA-based TowneBank generate $24.3 million in within the same regulatory environment Balboa Life Insurance Company and New insurance brokerage income, which com- as other insurance companies” as it con- York City-based Balboa Life Insurance prised 27.5% of its noninterest income tinues to focus on its global insurance Company of New York. Securian Finan- and 11.5% of its net operating revenue. and employee benefits businesses. cial Executive Vice President Christopher The company ranked third in insurance Hilger said, “This acquisition increases OCTOBER 24 - 30, 2011 brokerage earnings among banks with WELLS FARGO INSURANCE the scale of our financial institution busi- assets between $1 billion and $10 billion, SERVICES TO SELL TPA ness and further demonstrates our com- according to the Michael White-Prudential TO HEALTHSMART mitment to the marketplace.” Securian Bank Insurance Fee Income Report. Wells Fargo Insurance Services USA, the Financial provides insurance, debt protec- Chicago-based insurance brokerage unit tion, loan documents and marketing ser- OCTOBER 17 - 23, 2011 of San Francisco-based, $1.26 trillion- vices to over 4,000 U.S. financial institu- NEW HAMPSHIRE asset Wells Fargo & Co., has agreed to tions. The acquired Balboa companies THRIFT BANCSHARES ENTERS sell Charleston, WV-based Wells Fargo offer mortgage accidental death insur- THE INSURANCE MARKET Third Party Administrators to Irving, TX- ance, accidental death and dismember- WITH ACQUISITION based HealthSmart Holdings. Wells Far- ment insurance and individual term life Newport, NH-based, $1 billion-asset New go Insurance Services (WFIS) President insurance. Securian plans to have Bal- Hampshire Thrift Bancshares (NHTB), and CEO Neal Aton said WFIS will offer boa’s businesses integrated into its St. parent of Lake Sunapee Bank, has HealthSmart’s medical third party admin- Paul-based operations by March 2012. agreed to acquire Newport-based full- service commercial and personal agency istrator (TPA) products and services to its OCTOBER 10 - 16, 2011 McCrillis & Eldredge Insurance, Inc. customers, after the deal closes by the ZURICH FINANCIAL & NHTB President Stephen Theroux de- end of the year, pending approvals. Aton BANCO SANTANDER COMPLETE scribed the acquisition as consistent with said, “By working with HealthSmart, we FIRST STEP IN LATIN AMERICAN the thrift holding company’s “goal of are able to offer our customers additional BANCASSURANCE DEAL providing comprehensive financial solu- access to the medical TPA products and Zurich, Switzerland-based Zurich Finan- tions to our customers.” Theroux said, services they need.” cial Services has completed its acquisi- “With the addition of insurance, we can HealthSmart has agreed to assume tion of a 51% stake in Banco Santander’s offer a full range of products from loans the leases for Wells Fargo TPA’s offices life, pension and general insurance oper- and deposits to investments and insur- in Charleston, WV; Juneau, AK; Fayette- ations in Brazil and Argentina. The ac- ance.” ville, NC; and Newman, GA and has qusition marks the first step in Zurich’s McCrillis & Eldridge will continue to agreed to retain the TPA’s 600 benefits $1.67 billion agreement to acquire 51% operate under its current name from its and administrative services employees. stakes in Santander’s insurance opera- offices in Newport and New London, NH “The combination of Wells Fargo TPA tions in Argentina, Brazil, Chile, Mexico after the deal closes in thirty days, pend- and HealthSmart creates the second- and Uruguay and establish 25-year exclu- ing regulatory approval. McCrillis & El- largest non-carrier-owned TPA in the sive bancassurance distribution agree- dredge Vice President David McCrillis country,” HealthSmart Chairman Daniel ments with Banco Santander in each said, “We look forward to our new part- Crowley said. HealthSmart President Jim country. Zurich’s acquisitions of stakes in nership with Lake Sunapee Bank.” Lake Pennington added, “The ongoing relation- Santander’s insurance businesses in Sunapee Bank operates 28 offices ship with Wells Fargo Insurance Services Chile, Mexico and Uruguay are expected throughout west-central New Hampshire creates a strategic vehicle for additional to close before the end of 2011, pending and central Vermont, and in the second growth.” regulatory approvals.

NOVEMBER 1 - 6, 2011 tion, human resource management and DECEMBER 19 - 25, 2011 PRUDENTIAL TO SELL STAKE IN retirement services to employers and WELLS FARGO TO EXPAND MEXICO-BASED PENSION FUND MAN- plan participants worldwide from its offic- ASSET MANAGEMENT GROUP AGER TO BANORTE es in Houston, Dallas and Austin. WITH EVERKEY ACQUISITION Newark, NJ-based Prudential Financial Cullen/Frost Bankers Chairman and San Francisco, CA- based, $1.3 trillion- has agreed to sell its stake in Mexico CEO Dick Evans described the acquisi- asset Wells Fargo & Co. has agreed to City, Mexico-based Afore XXI, S.A., a tion as “strategic” and said, “Stone Part- acquire New Providence, Bahamas- private pension fund manager, to Monter- ners … will allow us to add value to exist- based EverKey Global Partners, a bou- rey, Mexico-based Banorte, one of the ing business relationships and expand tique investment firm with $215 million in country’s major banks. Prudential ex- new business opportunities.” Frost Insur- assets for institutional clients. pects to receive about $200 million in ance President Bruce Burdett added, EverKey, which is headed by former proceeds from the sale when the deal “Stone Partners gives us the ability to Templeton Global Advisors Chief Invest- closes by the end of 2011, pending regu- provide a full complement of HR [human ment Officer Jeff Everett, will operate latory approval. The sale does not affect resource] consulting and advisory ser- within Wells Fargo Asset Management Prudential’s other businesses in Mexico, vices under the Frost Brand.” Group, which includes Wells Capital Man- including life insurer Prudential Seguros, Stone Partners will retain its offices agement, European Credit Management Prudential Real Estate Investors and Pru- and 25 employees and operate as a divi- and Global Capital Management. dential Relocation. sion of Frost Insurance, when the deal EverKey will retain its 11-person staff and closes on January 1, 2012. its offices in New York City and the Baha- DECEMBER 19 - 25, 2011 mas when the deal closes on January 1, CULLEN/FROST BANKERS’ In 2010, Cullen/Frost Bankers earned 2012. INSURANCE UNIT TO ACQUIRE $34.2 million in insurance brokerage in- In 2010, Wells Fargo & Co. earned HR CONSULTING FIRM come, which comprised 12.6% of its non- $3.44 billion in investment banking, advi- Frost Insurance, the insurance brokerage interest earnings and 4.1% of its net op- sory and underwriting income, ranking it unit of San Antonio, TX-based, $19.5 erating revenue. The company ranked 7th in investment banking, advisory and billion-asset Cullen/Frost Bankers, has 22nd in insurance brokerage income underwriting income among all bank hold- agreed to acquire Houston, TX-based among bank holding companies with as- ing companies, according to the Michael Stone Partners. The human resource sets greater than $1 billion, according to White Bank Investment Bank, Advisory consulting firm offers actuarial services, the Michael White - Prudential Bank and Underwriting Fee Income Ratings benefit and managed payroll administra- Insurance Fee Income Report. Report.

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supervised banks and 915 large top-tier made up 10.5% of their total mutual fund Bank Insurance & bank holding companies operating on and annuity income of $16.59 billion and September 30, 2010. 15.9% of their total insurance sales vol- Investment Fee Income Of the 915 BHCs, 386 or 42.2% partici- ume of $10.92 billion. Contributions to Earnings pated in annuity sales activities during the BHCs with assets between $1 billion first three quarters of 2010. Their $1.84 and $10 billion recorded a slight increase billion in annuity commissions and fees of 0.2% in annuity fee income, rising from constituted 11.0% of their total mutual $91.4 million in the first three quarters of JANUARY 17 - 23, 2011 U.S. BHC ANNUITY EARNINGS fund and annuity income of $16.84 billion 2009 to $91.6 million in the first three DOWN 7.6% IN and 15.9% of total BHC insurance sales quarters of 2010 and accounting for FIRST THREE QUARTERS 2010 volume (i.e., the sum of annuity and in- 36.7% of their mutual fund and annuity Income earned from the sale of annuities surance brokerage income) of $11.6 bil- income of $249.6 million. BHCs with at bank holding companies (BHCs) de- lion. Of the 7,020 banks, 923 or 13.2% $500 million to $1 billion in assets gener- clined 7.6% to $1.84 billion in the first participated in annuity sales activities, ated $16.9 million in annuity commissions three quarters of 2010, down from $2.00 earning $560.9 million in annuity commis- in the first three quarters of 2010, up billion in the first three quarters of 2009, sions or 30.4% of the banking industry’s 1.0% from $16.7 million in the first three according to the Michael White-ABIA total annuity fee income. However, bank quarters of 2009. Only 33.5% of BHCs Bank Annuity Fee Income Report. Third- annuity production was down 20.5% from this size engaged in annuity sales activi- quarter annuity commissions fell to $705.5 million in the first three quarters of ties, which was the lowest participation $621.3 million, down 3.1% from $640.9 2009. rate among all BHC asset classes. million in second quarter 2010 and down Seventy-four percent (74.0%) of BHCs Among these BHCs, annuity commis- 7.3% from $669.8 million earned in third with over $10 billion in assets earned sions constituted the smallest proportion quarter 2009. third quarter year-to-date annuity com- (13.3%) of total insurance sales volume Compiled by Michael White Associates missions of $1.74 billion, constituting of $127.5 million. (MWA) and sponsored by American 94.1% of total annuity commissions re- Wells Fargo & Company (CA), Morgan Bankers Insurance Association (ABIA), ported. This was a decrease of 8.1% Stanley (NY), and JPMorgan Chase & the report measures and benchmarks the from $1.89 billion in annuity fee income in Co. (NY) led all bank holding companies banking industry’s performance in gener- the first three quarters of 2009. Among in annuity commission income in the first ating annuity fee income. It is based on this asset class of largest BHCs in the three quarters of 2010. Among BHCs data from all 7,020 commercial and FDIC- first three quarters, annuity commissions with assets between $1 billion and $10 billion, leaders included Stifel Financial Corp. (MO), Hancock Holding Company (MS), and National Penn Bancshares, TOP 10 BANK HOLDING COMPANIES IN ANNUITY FEE INCOME Inc. (PA). Among BHCs with assets be- YEAR TO DATE AT SEPTEMBER 30, 2010 - NATIONALLY tween $500 million and $1 billion, leaders were First American International Corp. (NY), CCB Financial Corporation (MO), R YEAR-TO-DATE % and Ironhorse Financial Group, Inc. (OK). A ANNUITY INCOME CHANGE % OF BANK HOLDING COMPANY ASSETS NONINT. The smallest community banks, those N 3Q 2009 INCOME K 3Q 2010 3Q 2009 - 3Q 2010 with assets less than $500 million, were (ALL DOLLAR AMOUNTS IN THOUSANDS) used as “proxies” for the smallest BHCs, which are not required to report annuity 1 $517,000 $504,000 2.58% Wells Fargo & Company CA $1,220,662,000 1.75% fee income. Leaders among bank proxies for small BHCs were The Hardin 2 $237,000 $168,000 41.07% Morgan Stanley NY $841,372,000 1.03% County Bank (TN), Bank of Oak Ridge 3 $185,000 $258,000 -28.29% JPMorgan Chase & Co. NY $2,139,511,000 0.51% (NC) and FNB Bank, N.A. (PA). Among the top 50 BHCs nationally in 4 $126,718 $203,240 -37.65% Bank of America Corp. NC $2,334,511,000 0.28% annuity concentration (i.e., annuity fee 5 $78,286 $71,198 9.96% Regions Financial Corp. AL $133,554,896 3.69% income as a percent of noninterest income), the median year-to-date Annuity 6 $60,173 $98,953 -39.19% PNC Financial Services Grp. PA $260,174,102 1.44% Concentration Ratio was 6.1% in third quarter 2010. Among the top 50 small 7 $48,584 $46,160 5.25% Keycorp OH $93,120,696 3.54% banks in annuity concentration that are 8 $46,151 $62,917 -26.65% Suntrust Banks, Inc. GA $174,725,825 1.84% serving as proxies for small BHCs, the median Annuity Concentration Ratio was 9 $42,000 $52,000 -19.23% U.S. Bancorp MN $290,654,000 0.69% 14.5% of noninterest income. Click here to find out more about the 10 $36,847 $29,237 26.03% BBVA USA Bancshares, Inc. TX $64,318,215 6.36% Michael White-ABIA Bank Annuity Fee Income Report. SOURCE: Michael White-ABIA Bank Annuity Fee Income Report

JANUARY 17 - 23, 2011 FOURTH QUARTER TRUST EARNINGS RISE 4% AT M&T Buffalo, NY-based, $68 billion-asset M&T Bank Corp. reported trust income in the fourth quarter rose 5% to $31.0 million, up from $29.7 million in fourth quarter, while brokerage services income fell 19% to $11.7 million, down from $14.4 million. Trust and brokerage services earnings comprised, respectively, 10.8% and 4.1% of noninterest income, which rose 8% to $286.9 million, up from $265.9 million, helped by a 91% jump in trading account and foreign exchange gains to $12.8 million and hurt by a 30% drop in mortgage banking income to $35 million. Net interest income on a 3.85% net interest margin grew 18% to $489.1 million, up from $413.7 million, driven by a 41% drop in loan loss provisions to $85 million. Net income jumped 48.9% to $204 million, up from $137 million, “strong results,” which M&T Chief Financial Of- ficer Rene Jones said “capped off a successful year.” For the year 2010, trust earnings slid 5% to $122.6 million, down from $128.6 million in 2009, and brokerage services income fell 14% to $49.7 million, down from $57.6 million. Trust income was the age services earnings slid 4.2% to $2.3 million. Trust fees, the third largest con- third largest contributor to noninterest million, down from $2.4 million. Trust and tributor to noninterest earnings behind earnings, comprising 11.0% of that reve- brokerage earnings comprised, respec- bankcard fees and service charges, com- nue, which rose 6% to $1.11 billion, up tively, 19.1% and 2.1% of noninterest fee prised 20.0% of noninterest fee income, from $1.05 billion, while brokerage ser- income, which rose 6.8% to $110.5 mil- which rose 2.2% to $405.1 million, up vices income comprised 4.5%. lion, up from $103.5 million in fourth quar- from $396.3 million, while brokerage fees Net interest income on a 3.84% net ter 2009. Total noninterest earnings, comprised 2.3%. Noninterest income interest margin climbed 31% to $1.9 bil- including net securities gains and losses, including net investment securities losses lion, up from $1.45 billion reflecting a 31% grew 10.4% to $111.7 million, up from totaled $403.3 million compared to drop in interest expenses and a 39% drop $101.2 million the year before, when the $389.1 million in fourth quarter 2009. in loan loss provisions to $386,000. Net company recorded $1.3 million in net Net interest income for the year income for the year almost doubled to securities losses. climbed 15.0% to $545.9 million, up from $736 million, up from $380 million, with all Net interest income for the fourth $474.8 million in 2009, when the compa- results reflecting the fourth quarter quarter grew 12.6% to $139.0 million, up ny recorded $60.7 million more in loan 2010 FDIC-assisted acquisition of Ran- from $123.5 million, reflecting a $3.3 mil- loss provisions and $71.4 million more in dallstown, MD-based, $538.3 million of K lion decrease in interest expenses and a expenses. In 2010, interest expenses Bank. $19.4 million drop in loan loss provisions and loan loss provisions totaled, respec-

JANUARY 17 - 23, 2011 to $21.7 million. Net income climbed tively, $83.6 million and $100 million. Net FEE INCOME, INCLUDING TRUST 24.8% to $61.9 million, up from $49.6 income jumped 31.1% to $221.7 million, FEES, BOLSTER EARNINGS million, helped by “solid growth in core up from $169.1 million in 2009. AT COMMERCE BANCSHARES fee income,” including trust earnings. The company also repurchased 1.1 mil- JANUARY 17 - 23, 2011 Kansas City, MO-based, $18.5 billion- WEALTH MANAGEMENT FEES GROW lion in common stock sold to the U.S. asset Commerce Bancshares Chairman AS WEBSTER FINANCIAL Treasury under the Troubled Asset Relief and CEO David Kemper noted the com- TURNS PROFITS Program (TARP). pany’s positive results in the fourth quar- Waterbury, CT-based, $18 billion-asset For the year, trust fees rose 5.4% to ter “were mainly due to solid growth in Webster Financial Corp. reported wealth $80.96 million, up from $76.83 million in core fee income.” Trust earnings grew management fees in the fourth quarter 2009, but brokerage services fees fell 9.3% to $21.1 million, up from $19.3 mil- grew 10.6% to $6.65 million, up from 15.1% to $9.19 million, down from $10.83 lion in fourth quarter 2009, while broker- $6.01 million in fourth quarter 2009, and

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 20 for the year rose 3.9% to $24.93 million, from $63.48 million, as loan loss provisions JANUARY 24 - 30, 2011 up from $24 million. Bank-owned life were slashed by $52 million to $15 million BHC SECURITIES BROKERAGE insurance (BOLI) income remained basi- and interest expenses were cut by $13.35 EARNINGS UP 5.5% IN cally steady, slipping 1.1% in the quarter million to $37.7 million. For the year 2010, FIRST THREE QUARTERS OF 2010 to $2.65 million, down from $2.68 million, net interest income surged 119.1% to Bank holding company securities broker- and slipping 1.0% for the year to $10.52 $419.8 million, up from $191.6 million, age income totaled $26.59 billion year-to- million, down from $10.63 million. Nonin- reflecting a $188 million drop in loan loss date (YTD) at the end of third quarter terest income for the quarter dropped provisions to $115 million and a $79 million 2010, up $1.39 billion or 5.5% from 12.0% to $47.05 million, down from fall in interest expenses to $171.4 million. $25.20 billion in three quarters of 2009, $53.46 million in fourth quarter 2009, but Net income of $32.6 million in the fourth according to the Michael White Bank Se- for the year grew 10.6% to $206.86 mil- quarter and net income of $74.3 million for curities Brokerage Income Report. While lion, up from $187.11 million in 2009, the year contrasted with losses in the quar- YTD third-quarter securities brokerage when the company recorded $28.5 million ter and for the year in 2009. income reached new heights, it reached in losses on investment securities write In the fourth quarter, Webster Finan- its lowest mark since first quarter 2009 as downs compared to $5.84 million in 2010. cial repurchased all remaining common production slowed. Wealth management earnings comprised, shares the U.S. Treasury had acquired Compiled by Michael White Associates respectively, 14.1% and 12.1% of nonin- under the Troubled Asset Relief Program (MWA), the report measures and bench- terest revenue for the quarter and the (TARP). Webster Chairman and CEO marks banks and bank holding compa- year, while BOLI earnings comprised, James Smith said the company’s ability nies’ performance in generating securities respectively, 5.6% and 5.1%. to do so “underscores Webster’s capital brokerage fee income. It is based on Net interest income for the fourth quar- strength and positions us well for future data reported by all 7,020 commercial ter jumped 91.2% to $121.35 million, up growth.” banks and FDIC-supervised savings banks and by 915 top-tier large bank holding companies (BHCs), i.e., those with consolidated assets in excess of $500 million, operating on September 30, TOP 15 BANK HOLDING COMPANIES IN SECURITIES BROKERAGE FEE INCOME 2010. YEAR-TO-DATE SEPTEMBER 30, 2010 - NATIONALLY So far this year, 527 or 57.6% of the 915 large BHCs engaged in securities YTD SECURITIES brokerage activities. They reported earn- R % BROKERAGE % OF ing $8.25 billion in commissions and fees A FEE INCOME CHANGE BANK HOLDING COMPANY ASSETS NONINT. N 3Q 2009 - from those activities in third quarter 2010, K 3Q 2010 INCOME 3Q 2010 3Q 2009 an 11.1% decrease from the $9.27 billion (ALL DOLLAR AMOUNTS IN THOUSANDS) earned in the second quarter of 2010 and 1 $7,339,372 $7,568,888 -3.03% Bank of America Corporation NC $2,334,511,000 16.02% a 6.5% decline from $8.82 billion in third quarter 2009. Of the 7,020 banks, 1,428 2 $5,316,000 $4,223,000 25.88% Morgan Stanley NY $841,372,000 23.15% or 20.3% participated in securities brokerage activities, earning $2.92 billion in 3 $3,708,000 $2,594,000 42.95% Wells Fargo & Company CA $1,220,662,000 12.57% securities brokerage commissions and fees or 11.0% of the banking industry’s 4 $2,761,000 $3,014,000 -8.39% Goldman Sachs Group, Inc. NY $905,686,000 10.51% total annuity fee income. However, bank 5 $2,086,000 $2,175,000 -4.09% JPMorgan Chase & Co. NY $2,139,511,000 5.78% securities brokerage production was down 23.8% from income of $3.84 billion 6 $1,003,000 $981,126 2.23% Barclays Group US Inc. DE $383,955,000 24.75% in the first three quarters of 2009. Securities brokerage income includes 7 $971,000 $1,252,000 -22.44% Bank of New York Mellon NY $254,352,000 12.21% fees and commissions from securities 8 $683,000 $756,000 -9.66% Taunus Corporation NY $389,993,000 16.63% brokerage activities, from the sale and servicing of mutual funds, from the pur- 9 $579,849 $498,866 16.23% Stifel Financial Corp. MO $4,183,843 61.57% chase and sale of securities and money market instruments where the bank hold- 10 $540,174 $530,822 1.76% Regions Financial Corp. AL $133,554,896 25.47% ing company is acting as agent for other 11 $197,512 $184,544 7.03% State Street Corporation MA $171,494,202 4.11% banking institutions or customers, and from the lending of securities owned by 12 $183,062 $199,597 -8.28% BB&T Corporation NC $157,230,367 8.79% the bank holding company or by bank holding company customers. Securities 13 $115,068 $104,969 9.62% PNC Financial Services Grp. PA $260,174,102 2.76% brokerage income does not include in- 14 $101,753 $119,700 -14.99% Keycorp OH $93,120,696 7.41% come from fiduciary activities, trading revenue, or fees and commissions from 15 $101,319 $100,557 0.76% Suntrust Banks, Inc. GA $174,725,825 4.03% the sale of annuities to BHC customers by the bank holding company or any se- SOURCE: Michael White Bank Securities Brokerage Income Report

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 21 curities brokerage subsidiary. income fell 19% to $11.7 million, down JANUARY 24 - 30, 2011 Bank of America Corporation (NC) from $14.4 million. Insurance and trust/ TITLE INSURANCE SALES HELP topped the list with securities brokerage investment fees comprised, respectively, DRIVE HUNTINGTON’S FOURTH earnings of $7.34 billion as of September 5.4% and 28.5% of noninterest income, QUARTER EARNINGS UP 22% 30, 2010, helped by its acquisition of Mer- which declined 7% to $10.4 billion, down Columbus, OH-based, $58.8 billion-asset rill Lynch. Morgan Stanley (NY) and from $11.2 billion, reflecting significant Huntington Bancshares reported higher Wells Fargo & Company (CA) ranked, drops in service charge fees, operating mortgage refinance activity drove in- respectively, second with $5.32 billion lease income and mortgage banking creased title insurance sales, which in and third with $3.71 billion in securities fees. turn helped drive overall insurance broker- brokerage revenue. Goldman Sachs Net interest income on a 4.16% net age fee income up 22% in the fourth quar- Group, Inc. (NY) stood fourth with $2.76 interest margin jumped 45% in the fourth ter to $19.7 million, from $16.1 million in billion, and JPMorgan Chase & Co. (NY) quarter to $8.07 billion, up from $5.59 fourth quarter 2009. At the same time, ranked fifth with $2.09 billion. billion in fourth quarter 2009, when provi- increased asset market values and organ- Bank holding companies over $10 bil- sions for credit losses were double those ic growth accounted equally for an 8% lion in assets had the highest participation in fourth quarter 2010 and expenses were rise in trust services income to $29.4 mil- (84.4%) in securities brokerage activities. 12% higher. Net income surged 720% to lion, up from $27.3 million in fourth quarter These large BHCs produced $25.68 bil- a record $3.23 billion, up from $394 mil- 2009. Bank-owned life insurance (BOLI) lion in securities brokerage income, up lion in fourth quarter, with enough prior income grew 15% to $16.1 million, up 5.1% from $24.44 billion YTD at end of revenue to fully redeem preferred stock from $14.1 million, and brokerage income three quarters in 2009. They accounted purchased by the U.S. Treasury under rose 6% to $17 million, up from $16 mil- for 96.6% of all BHC securities brokerage the Troubled Asset Relief Program lion. Insurance, trust, BOLI and securities income earned through three quarters of (TARP). brokerage earnings comprised, respec- 2010, a share down 42 basis points from For the year 2010, insurance earnings tively, 7.5%, 11.1%, 6.1% and 6.4% of last year. were flat at $2.13 billion, while trust and noninterest income, which increased 8% BHCs with assets between $1 billion investment fees grew 12% to $10.93 bil- to $264.2 million, up from $244.5 million, and $10 billion recorded an increase of lion, up from $9.74 billion. Insurance and hampered by a 27% drop ($20.9 million) 20.3% in securities brokerage income in trust/investment fees comprised, respec- in account service charges and a 17% three quarters of 2010, increasing from tively, 5.3% and 27.0% of noninterest ($2.2 million) fall in auto lease income. $716.2 million through three quarters of income, which slid 5% to $40.45 billion, Net interest income of $328.2 million 2009 to $861.3 million. The top 5 leaders down from $42.36 billion, hit by smaller on a 3.37% net interest margin contrasted in this asset class were Stifel Financial net gains from trading activities and lower with a net interest loss of $519.9 million in Corp. (MO), Santander Bancorp. (PR), mortgage banking and service charge fourth quarter 2009, when loan loss provi- Boston Private Financial Holdings, Inc. fees. sions reached to $894 million compared (MA), Centerstate Banks, Inc. (FL), and Net interest income on a 4.26% net with $86.97 million in fourth quarter 2010. PlainsCapital Corporation (TX). interest margin climbed 18% to $29.0 Net income of $39.15 million, after paying Among BHCs with assets between billion, up from $24.66 billion, reflecting a out $83.75 million in dividends on pre- $500 million and $1 billion, which saw a 27% drop in credit loss provisions to ferred shares, contrasted with a $398.98 21.8% growth in their securities business $15.75 billion and 19% decline in interest million net loss in fourth quarter 2009. In to $48.5 million at the end of three quar- expenses to $8.04 billion. Net income for the quarter, Huntington also repurchased ters in 2010 from $39.8 million in 2009, the year jumped 46% to a record $11.63 $1.4 billion in shares purchased by the the top five were United Bankers’ Bancor- billion, up from $7.99 billion, and Wells U.S. Treasury under the Troubled Asset poration, Inc. (MN), F&M Financial Corpo- Fargo Chairman and CEO John Stumpf Relief Program (TARP). ration (NC), CCB Financial Corporation said, “Our diversified model continued to For the year 2010, insurance broker- (MO), Nexity Financial Corporation (AL), work for our stakeholders.” age earnings rose 4% to $76.41 million, and The Tampa Banking Company (FL). In 2009, Wells Fargo reported $1.725 up from $73.33 million in 2009; trust ser- billion in insurance brokerage income and vices income increased 9% to $112.56 JANUARY 24 - 30, 2011 $1.732 billion in trust income, which com- million, from $103.64 million; BOLI earn- WELLS FARGO’S INSURANCE prised, respectively, 4.2% and 4.2% of its ings grew 11% to $61.07 million, from EARNINGS JUMP 17% IN FOURTH noninterest income and 1.9% and 2.0% $54.87 million; and securities brokerage QUARTER, BUT FLAT FOR 2010 of its net operating revenue. The compa- income rose 6% to $68.86 million, from San Francisco, CA-based, $1.3 trillion- ny ranked first in insurance brokerage $64.84 million. Insurance, trust, BOLI, asset Wells Fargo & Co. reported insur- earnings and fifth in trust earnings among and securities brokerage comprised, re- ance earnings in fourth quarter 2010 BHCs with assets over $10 billion, ac- spectively, 7.3%, 10.8%, 5.9% and 6.6% climbed 17% to $564 million, up from cording to the Michael White-Prudential of noninterest income, which rose 4% to $482 million in fourth quarter 2009, and Bank Insurance Fee Income Report and $1.04 billion, up from $1.01 billion. trust and investment fees grew 14% to the Michael White’s Bank Fiduciary Fee For the year, net interest income on a $2.96 billion, up from $2.61 billion in Income Report. 3.44% net interest margin reached fourth quarter, while brokerage services $984.3 million and contrasted with a net interest loss of $650.4 million in 2009, as

credit loss provisions dropped 69% to FEBRUARY 7 - 13, 2011 top-tier bank holding companies operat- $634.6 million and interest expenses fell RECORD INSURANCE EARNINGS AT ing on September 30, 2010. Bank hold- 35% to $526.6 million. Net income, after U.S. BANK HOLDING COMPANIES ing company insurance brokerage fee a payout of $172.03 million in dividends, Over the first three quarters of 2010, income consists of commissions and fees totaled $143.32 million and compared BHCs tallied a record $9.73 billion in in- earned by a bank holding company or its with a net loss of $3.27 billion in 2009. surance brokerage fee income, up 7.0% subsidiary from insurance product sales Huntington Chairman and CEO Stephen from $9.10 billion for the same period in and referrals of credit, life, health, proper- Steinour said, “As we enter 2011, we 2009, according to the Michael White- ty, casualty, and title insurance. expect earnings will continue to grow. Prudential Bank Fee Income Report. Among companies with significant We believe this is going to be a year Nonetheless, third-quarter bank holding banking activities as of September 30, when Huntington breaks away even more company (BHC) insurance brokerage 2010, Wells Fargo & Company (CA) from our peers in both financial perfor- income was down 6.3% to $2.86 billion topped the leader board with insurance mance, as well as in delivering more in- compared to $3.05 billion in third quarter brokerage earnings of $1.34 billion. novative and customer friendly products 2009, hitting the lowest amount since Citigroup Inc. (NY) ranked second nation- and services to our customers.” fourth quarter 2008. Thus far in 2010, ally with $1.34 billion; and BB&T Corpora- In 2009, Huntington Bancshares re- 63.9% of large top-tier BHCs engaged in tion (NC), which owns more agencies ported $70.3 million in insurance broker- insurance brokerage activities. than any other financial holding company, age income, which comprised 7.7% of its Compiled by Michael White Associates ranked third with $712.8 million in insur- noninterest income and 3.0% of its net (MWA) and sponsored by The Prudential ance brokerage revenue over three quar- operating revenue. The company ranked Insurance Company of America’s Individ- ters. 15th in insurance brokerage earnings ual Life Insurance business, a proud Bank holding companies over $10 bil- among all bank holding companies, ac- member of the American Bankers Insur- lion in assets continued to have the high- cording to the Michael White-Prudential ance Association (ABIA), this report est participation (90.9%) in insurance Bank Insurance Fee Income Report. measures and benchmarks the banking brokerage activities. These BHCs pro- In 2009, Huntington reported $103.6 industry’s performance in generating in- duced $9.18 billion in insurance fee in- million in trust income, ranking 21st surance brokerage and underwriting fee come in the first three quarters of 2010, among BHCs with assets over $10 billion, income. Results are based on data from up 7.6% from the $8.53 billion they pro- according to the Michael White’s Bank all 7,020 commercial and FDIC- duced YTD in 2009. These large bank Fiduciary Fee Income Report. supervised savings banks and 915 large holding companies accounted for 94.3% of all BHC insurance brokerage fee income earned thus far in 2010. At a time when other bank revenues TOP 12 BANK HOLDING COMPANIES IN INSURANCE BROKERAGE FEE INCOME are down, particularly service charges on YEAR-TO-DATE SEPTEMBER 30, 2010 - NATIONALLY deposit accounts as a result of regulation, INSURANCE CONCEN- insurance brokerage stands out as a nat- R BROKERAGE % TRATION ural business for banks. Bank insurance A FEE INCOME CHANGE RATIO: N 3Q 2009 - BANK HOLDING COMPANY ASSETS % OF income is proving to be a nice addition to K 3Q 2010 3Q 2009 3Q 2010 NONINT. the income statement. “Life insurance in INCOME particular is showing an increase in (ALL DOLLAR AMOUNTS IN THOUSANDS) sales,” said Joan H. Cleveland, senior 1 $1,340,000 $1,382,000 -3.04% Wells Fargo & Company CA $1,220,662,000 4.54% vice president, Business Development with Prudential’s Individual Life Insurance 2 $1,321,000 $771,000 71.34% Citigroup Inc. NY $1,982,776,000 5.17% business. “This positive trend builds on 3 $712,834 $699,922 1.84% BB&T Corporation NC $157,230,367 34.24% our confidence in the product and pro- cesses we’ve developed and the relation- 4 $211,000 $115,000 83.48% Morgan Stanley NY $841,372,000 0.92% ships we have formed with financial insti- 5 $148,473 $84,746 75.20% American Express Company NY $144,853,158 0.97% tutions. We believe we will continue to enable them to achieve noninterest in- 6 $103,209 $95,495 8.08% Discover Financial Services IL $61,620,705 7.73% come while helping to meet their custom- 7 $102,000 $80,000 27.50% Goldman Sachs Group, Inc. NY $905,686,000 0.39% ers' life insurance needs.” Among BHCs with assets between $1 8 $84,000 $106,000 -20.75% Ally Financial Inc. MI $173,182,000 1.20% billion and $10 billion, leaders in insur- 9 $81,162 $83,999 -3.38% Regions Financial Corp. AL $133,554,896 3.83% ance brokerage income in the first three quarters of 2010 included Eastern Bank 10 $70,000 $65,000 7.69% JPMorgan Chase & Co. NY $2,139,511,000 0.19% Corporation (MA), Stifel Financial Corp. (MO), and Old National Bancorp (IN). 11 $64,489 $63,664 1.30% BancorpSouth, Inc. MS $13,589,893 37.13% BHCs of this size registered a 2.9% de- 12 $54,591 $55,088 -0.25% Huntington Bancshares, Inc. OH $52,954,267 7.40% crease in insurance brokerage income to SOURCE: Michael White-Prudential Bank Insurance Fee Income Report $442.3 million in three quarters of 2010, Prudential is a proud Platinum member of the American Bankers Insurance Association (ABIA)

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 23 down from $455.4 million for the same earnings slid 2.5% to $11.62 billion, down asset Midwest Bank and Trust Company. period in 2009. from $11.92 billion in 2009. Insurance Net interest income on a 4.14% net Among BHCs with assets between and combined investment and brokerage interest margin jumped 82.0% to $104.48 $500 million and $1 billion, leaders were services earnings comprised, respective- million, up from $57.42 million, reflecting Two Rivers Financial Group, Inc. (IA), ly, 3.5% and 19.8% of noninterest in- acquisitions and a $6.6 million drop in 473 Broadway Holding Corporation (NY), come, which fell 19.1% to $58.7 billion, loan loss provisions to $23.39 million and and Texas Independent Bancshares (TX). down from $72.54 billion in 2009, hit by a $4.5 million decrease in interest ex- These BHCs experienced a 1.5% decline an over $6 billion drop in mortgage bank- pense to $18.5 million. Net income, ben- year-over-year in their insurance broker- ing earnings. efiting from acquisitions and organic per- age income. The smallest community Net interest income in 2010 of $23.08 formance jumped 86.7% to $27.03 mil- banks, with assets less than $500 million, billion contrasted with a $1.44 billion net lion, up from $14.48 million in fourth quar- were used as “proxies” for the smallest interest loss in 2009, when loan loss pro- ter 2009. BHCs, which are not required to report visions were over $20 billion and higher For the year 2010, trust department insurance brokerage income. Leaders interest expenses exceeded those of earnings increased 6.1% to $21.95 mil- among bank proxies for small BHCs were 2010 by $7 billion. A loss of $3.595 billion lion, up from $20.68 million in 2009; BOLI Soy Capital Bank and Trust Company applicable to common shareholders con- income rose 8.8% to $14.95 million, up (IL), Hoosac Bank (MA), and First State trasted with a net loss of $2.204 billion in from $13.74 million; but combined invest- Bank (IA). (Not shown in the accompany- 2009. BofA President and CEO Brian ment services and insurance earnings, ing table of companies is MetLife, Inc., Moynihan said, “Our results reflect the generated in part by FirstMerit’s title in- which did not engage in significant bank- progress we are making at putting legacy surance agency, slid 5.6% to $9.45 mil- ing activities.) For more on the Michael – primarily mortgage-related issues – lion, down from $10.01 million. Trust, White-Prudential Bank Insurance Fee behind us. We earned $10.2 billion be- BOLI, and combined investment services Income Report, click here. fore goodwill impairment charges, rebuilt and insurance earnings comprised, re- For more on third quarter year-to-date our capital positions, reduced the risk on spectively, 10.3%, 7.0%, and 4.4% of insurance brokerage results, click here. our balance sheet, and shed more than noninterest income, which rose 1.1% to $19 billion in assets that didn’t directly $212.56 million, up from $210.30 million FEBRUARY 7 - 13, 2011 service customers and clients.” in 2009, helped by $1.04 million in a NONINTEREST EARNINGS In 2009, Bank of America’s insurance goodwill gain tied to the George Washing- INCLUDING INSURANCE brokerage income comprised 0.7% of its ton acquisition. DROP AT BANK OF AMERICA noninterest income. The company Net interest income in 2010 climbed Charlotte, NC-based, $2.26 trillion-asset ranked 5th in insurance brokerage earn- 47.9% of $370.30 million, up from Bank of America Corporation (BofA) re- ings among U.S. bank holding companies $250.33 million in 2009, helped by acqui- ported insurance earnings in fourth quar- with assets over $10 billion, according to sitions and a $10 million drop in loan loss ter 2010 dropped 14.9% to $598 million, the Michael White-Prudential Bank Insur- provisions to $88.22 million and a $26.9 down from $703 million in fourth quarter ance Fee Income Report. million cut in interest expense to $83.85 2009, and investment and brokerage ser- million. Net income reflected acquisitions vices income slid 4.3% to $2.88 billion, FEBRUARY 7 - 13, 2011 and improved organic performance and down from $3.01 billion in fourth quarter TRUST AND BOLI EARNINGS grew 35.8% to $102.91 million, up from 2009. Insurance and combined invest- UP AT FIRSTMERIT $75.80 million in 2009, when the company ment and brokerage services earnings Akron, OH-based, $14.1 billion-asset benefited from $38 million in net securities comprised, respectively, 6.0% and 28.9% FirstMerit Corp reported trust department gains. FirstMerit Chairman, President and of noninterest income, which dropped earnings in the fourth quarter rose 4.8% CEO Paul Greig said, “During the fourth 26.3% to $9.96 billion, down from $13.52 to $5.63 million, up from $5.37 million in quarter we … successfully converted our billion, reflecting decreases in all named fourth quarter 2009,while bank-owned life Midwest Bank and Trust acquisition in categories but credit card earnings. insurance (BOLI) income fell 29.4% to Chicago, continued the integration of the Net interest income in fourth quarter $3.19 million, down from $4.52 million, three Chicago acquisitions with the First- 2010 surged fourfold to $7.31 billion, up and combined investment services and Merit franchise and further penetrated the from $1.45 billion in fourth quarter 2009, insurance revenue remained basically flat Chicago and Northeast Ohio markets.” reflecting a $5 billion cut in loan loss pro- at $3.20 million compared to $3.22 mil- He added, “Our disciplined growth strate- visions to $5.13 billion. With expenses lion. Trust, BOLI and combined invest- gies … support the execution of our supe- and a $2 billion goodwill impairment ment services and insurance earnings rior community bank model.” charge tied to the company’s Home comprised, respectively, 10.4%, 5.9%, In 2009, FirstMerit’s fiduciary income Loans and Insurance segment, BofA re- and 5.9% of noninterest income, which comprised 10.4% of its noninterest in- ported a net loss applicable to sharehold- rose 3.1% to $54.31 million, up from come and 3.7% of its net operating reve- ers of $1.57 billion compared to a net loss $52.70 million in fourth quarter 2009, nue. The company ranked 47th in fiduci- of $5.2 billion in fourth quarter 2009. before the company acquired 24 Chicago ary earnings among all U.S. bank holding For the year 2010, BofA reported in- -area branches from $7.8 billion-asset, companies (BHCs), according to the surance income dropped 25% to $2.07 St. Louis, MO-based First Bank, Chicago- Michael White’s Bank Fiduciary Fee billion, down from $2.76 billion in 2009, based, $420 million-asset George Wash- Income Report. and investment and brokerage services ington and Chicago-based, $3.2 billion-

FEBRUARY 7 - 13, 2011 tions and consistency in earnings and come from the Scout Funds, a $4.1 mil- ALLY FINANCIAL’S GROWING balance sheet strength, demonstrating lion jump (336%) in institutional and in- INSURANCE NET INCOME performance against our strategies as a vestment management services fees, and BOLSTERS OVERALL RESULTS diversified financial services company.” a $1.8 million increase (13%)in fund ad- New York City-based, $172 billion-asset In fourth quarter 2010, trust and secu- ministration and custody services fees. In Ally Financial reported that in fourth quar- rities processing fee income grew 34.8% contrast, insurance brokerage fee income ter 2010 its insurance unit, which offers to $46.33 million, up from $34.38 million slipped 5.5% to $1.03 million, down from such auto-dealer-centric products as ex- in fourth quarter 2009, driven by a $4 $1.09 million, and securities brokerage tended service contracts and dealer in- million climb (40%) in advisory fee in- fees dipped 0.6% to $1.67 million, down ventory insurance, generated $164 million in pretax income, almost double the $85 million earned in fourth quarter 2009, when the company still owned its U.S. and U.K. consumer property and casualty insurance businesses. Insurance earnings helped overcome a $49 million loss in the company’s legacy portfolio, a $355 million loss in corporate division earnings and a $117 million loss from discontinued operations. Along with increased auto finance and mortgage earnings, Ally reported fourth quarter net income of $79 million compared to a net loss of $4.95 billion in fourth quarter 2009. For the year 2010, insurance earnings jumped 72.9% to $569 million, up from $329 million in 2009, helped by the first and second quarter 2010 sales of the company’s respective U.S. and U.K. consumer property and casualty insurance businesses and bolstered by Ally’s selec- JOIN THE tion as the recommended provider of insurance products for Saab dealerships. Again, insurance earnings and climb- American Bankers Insurance Association ing auto finance and mortgage origination and servicing income countered legacy and corporate unit losses enabling Ally to report $1.08 billion in net income for year Starting, acquiring Turn to the ABIA for expert advice and support. We’re the 2010 compared to a net loss of $10.3 premier national organization representing the industry, billion in 2009. or expanding a offering outstanding: In 2009, GMAC, Inc. reported $2.1 bank-insurance billion in total insurance income, which agency? • legislative and regulatory advocacy comprised 20.8% of its noninterest in- • compliance information and support come and 20.5% of its net operating revenue. The company ranked fifth in total • industry publications and benchmarking data insurance earnings among bank holding • peer networking companies with assets over $10 billion, • direct access to bank-insurance industry providers according to the Michael White-Prudential Bank Insurance Fee Income Report. Contact the ABIA to learn more about how we can help you grow your bank-insurance business! FEBRUARY 7 - 13, 2011 TRUST AND SECURITIES PROCESSING FEE INCOME www.theabia.com CLIMB AT UMB Kansas City, MO-based, $12.4 billion- 202-663-5163 asset UMB Financial Corp. Chairman and E-mail Valerie Barton: CEO Mariner Kemper said, “2010 marked [email protected] another strong year [for the company] with record revenue, strategic acquisi-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 25 from $1.68 million. Trust and securities FEBRUARY 7 - 13, 2011 tinuing strong capital and liquidity, we processing fees, insurance earnings and RISING INSURANCE EARNINGS enter 2011 confident that we are on the securities brokerage fees comprised, COMPRISE 31% OF right path to achieve that goal.” respectively, 48.9%, 1.1%, and 1.8% of BANCORPSOUTH’S In 2009, BancorpSouth’s insurance noninterest income, which grew 13.6% to NONINTEREST INCOME brokerage income comprised 31.2% of its $94.76 million, up from $83.43 million in Tupelo, MS-based, $13.6 billion -asset noninterest income and 11.4% of its net fourth quarter 2009, despite a $3.3 million BancorpSouth reported insurance broker- operating revenue. The company ranked decline in service charges on deposits age fee income in the fourth quarter in- 13th in insurance brokerage earnings and a $3.5 million decrease in gains in creased 2.4% to $18.01 million, up from among U.S. bank holding companies with securities available for sale. $17.58 million in fourth quarter 2009, and assets over $10 billion, according to the Net interest income on a 3.12% net trust income rose 2.0% to $3.07 million, Michael White-Prudential Bank Insurance interest margin grew 7.8% to $71.39 up from $3.01 million. Insurance broker- Fee Income Report. million, up from $66.21 million in fourth age and trust earnings comprised, re- quarter 2009, helped by a $4.1 million spectively, 24.3% and 4.2% of noninter- FEBRUARY 14 - 20, 2011 SUNTRUST HAILS decrease in loan loss provisions to est income, which grew 14.7% to $73.97 DIVERSE $7.4 million and a $3.8 million de- million, up from $64.51 million in fourth REVENUE SOURCES crease in interest expense to $7.99 quarter 2009, bolstered by an almost $10 Atlanta, GA-based, $173 billion-asset million. Net income for the fourth quar- million jump in mortgage lending fees to SunTrust Banks Chairman and CEO ter, however, fell 20.2% to $19 million, $18.13 million, just ahead of insurance James Wells III said, “We are pleased down from $23.9 million in fourth quar- revenue. with the diversity of our revenue sources ter 2009, reflecting acquisition-related Net interest income on a 3.59% net and the continued improvement in our expenses. interest margin climbed 33.7% to $66.96 credit quality.” In fourth quarter 2010, For the year 2010, trust and securities million, up from $50.08 million in fourth retail investment services income (RIS) processing fee income climbed 33.0% to quarter 2009, as interest expense was rose 6% to $57 million, up from $54 mil- $160.36 million, up from $120.54 million cut by almost $7 million to $32.8 million lion in fourth quarter 2009, while trust and in 2009, and insurance fees and commis- and loan loss provisions were slashed by investment management (TI) income sions grew 16.0% to $5.57 million, up $19 million to $43.29 million. Net income, slipped 4% to $130 million, down from from $4.80 million, but securities broker- driven by improved overall performance, $135 million in fourth quarter 2009, re- age fees fell 11.4% to $6.35 million, especially in mortgage lending, reached maining the second largest source of down from $7.17 million. Trust and secu- $15.8 million and compared with a fourth noninterest revenue behind declining (- rities processing, insurance and securi- quarter 2009 net loss of $2.1 million. 19%) deposit account fees. RIS and TI ties brokerage fee income comprised, For the year 2010, insurance broker- comprised, respectively, 5.5% and 12.6% respectively, 44.5%, 1.5%, and 1.8% of age earnings at BancorpSouth rose 1.5% of noninterest income, which climbed noninterest income, which grew 16.2% to to $82.17 million, up from $80.94 million 39% to $1.03 billion, up from $742 million $360.37 million, up from $310.18 million in 2009, and trust income grew 14.9% to in fourth quarter 2009, when the company in 2009. $11.15 million, up from $9.70 million. reported $31 million in trading account Net interest income in 2010 rose 3.0% Insurance and trust earnings comprised, losses and $68 million in mortgage pro- to $279.10 million, up from $270.89 mil- respectively, 31.1% and 4.2% of noninter- duction losses. lion in 2009, driven largely by a $19.3 est income, which slid 4.0% to $264.14 Net interest income on a 3.44% net million drop in interest expense to $35.89 million, down from $275.28 million in interest margin in the fourth quarter million. Net income for the year rose 2009. soared 271.4% to $754 million, up from 1.7% to $91.0 million, up from $89.5 mil- Net interest income for 2010 dropped $203 million in fourth quarter 2009, as lion in 2009. Kemper noted, “We remain 27.6% to $237.13 million, down from loan loss provisions were cut by almost pleased with the performance of our mul- $327.58 million, reflecting primarily an half to $512 million and interest expense tiple fee income businesses.” He added, $86.7 million jump in loan loss provisions was sliced by 27% to $329 million. Net “As the economy improves, we expect to to $204.02 million, which overpowered an income of $114 million contrasted with a achieve even greater operating leverage almost $29 million drop in interest ex- net loss of $316 million in fourth quarter from the investments we have made in pense to $141.62 million. For the year 2009. our company.” 2010, the company reported net income For the year 2010, trust and invest- In 2009, UMB Financial reported dropped 72.3% to $22.9 million from ment (T&I) income rose 3% to $503 mil- $127.7 million in wealth management fee $82.7 million in 2009. lion, up from $483 million in 2009, while income, which comprised 42.4% of its BancorpSouth Chairman and CEO retail investment services (RIS) income noninterest income and 21.1% of its net Aubrey Patterson said, “We are encour- slid 6.0% to $205 million, down from $218 operating revenue. The company ranked aged by the improvement in the compa- million. TI and RIS earnings comprised, 24th in wealth management earnings ny’s performance in the fourth quarter…. respectively, 13.5% and 5.5% of noninter- among all BHCs, up from 55th in 2008, We do not underestimate the challenges est income, which ticked up 1% to $3.73 according to Michael White’s Wealth to returning our credit metrics to their billion from $3.71 billion in 2009, when Management Fee Income Report. historical levels, but with the progress achieved throughout 2010 and with con- the company recorded a $112 million gain from ownership in Visa.

Net interest income for 2010 more than quintupled to $2.20 billion, up from $420 million in 2009, as provisions for loan losses were sliced 35% to $2.65 billion and interest expense was cut 34% to $1.49 billion. After noninterest expenses, the company reported a net loss available to shareholders of $87 million, which contrasted with a net loss of $1.73 billion in 2009. In 2009, SunTrust reported $17.4 million in insurance brokerage income, which comprised 0.5% of its noninterest income and 0.2% of its net operating revenue. The company ranked 33rd in insurance brokerage earnings among BHCs engaged in significant banking activities, according to the Michael White-Prudential Bank Insurance Fee Income Report.

FEBRUARY 14 - 20, 2011 SOFT PREMIUM PRICING SENDS BB&T’S INSURANCE EARNINGS DOWN 4.2% IN 4Q2010 Winston-Salem, NC-based, $157.1 billion -asset BB&T Corp. reported insurance earnings in fourth quarter 2010 slipped 4.2% to $249 million, down from $260 million in fourth quarter 2009, “reflecting continued softness in the industry’s pricing for premiums,” the company said. In contrast, investment banking and broker- gress in our efforts to diversify the bal- es on deposits were $19 million higher. age fees and commissions grew 17% to ance sheet, and across-the-board im- Net interest income on a 3.75% net $97 million, up from $83 million, “driven provement in credit trends in the fourth interest margin surged 637% to $748 by increased equity-offerings due to im- quarter.” million in fourth quarter 2010, up from proved market conditions.” Improved In 2009, BB&T Corp. reported $922.5 $102 million in fourth quarter 2009, market conditions also drove trust and million in insurance brokerage income, helped by a $616 million drop in loan loss investment advisory fees up almost 11% which comprised 26.5% of its noninterest provisions to $166 million. Net income of to $42 million from $38 million, while in- income and 11.1% of its net operating $270 million contrasted with a net loss of come from bank-owned life insurance revenue. The company ranked third in $160 million in fourth quarter 2009, driven (BOLI) climbed 24% to $31 million, up insurance brokerage earnings among primarily by dramatically lower loss provi- from $25 million. Insurance, investment BHCs engaged in significant banking sions. banking and brokerage fees, trust and activities, according to the Michael White- For the year 2010, investment adviso- investment advisory revenues, and BOLI Prudential Bank Insurance Fee Income ry revenue grew 11% to $361 million, up earnings comprised, respectively, 25.8%, Report. from $326 million in 2009, and comprised 10.1%, 4.4% and 3.2% of noninterest 13.2% of noninterest income, which income, which dipped 0.6% to $964 mil- FEBRUARY 14 - 20, 2011 dropped 43% to $2.73 billion, down from lion, down from $970 million in fourth INVESTMENT ADVISORY REVENUE $4.78 billion in 2009, when card and pro- quarter 2009, when service charges on RISES WITH THE MARKET cessing revenues were $300 million deposits were $11 million higher. AT FIFTH THIRD greater and the company recorded a Fourth quarter 2010 net interest in- Cincinnati, OH-based, $111 billion-asset $1.76 billion gain on the sale of a pro- come on a 4.04% net interest margin rose Fifth Third Bancorp reported “an overall cessing business. 8.1% to $226 million, up from $209 million increase in equity and bond market val- Net interest income of $2.07 billion in in fourth quarter 2009, helped by the ues” drove fourth quarter investment ad- 2010 contrasted with a net interest loss of FDIC-assisted Colonial acquisition. Net visory revenue up 8% to $93 million from $189 million in 2009, when loan loss pro- income grew 12.4% to $208 million, up $86 million in fourth quarter 2009. Invest- visions were $2 billion higher. Net in- from $185 million in fourth quarter 2009. ment advisory earnings comprised 14.2% come, however, slipped 1% to $503 mil- BB&T Corp. Chairman and CEO Kelly of noninterest income, which rose 1% to lion, down from $511 million in 2009, re- King said, “We are pleased to report rec- $656 million, up from $651 million in flecting primarily the aforementioned ord revenues for 2010, significant pro- fourth quarter 2009, when service charg-

$1.76 billion gain on the sale of the pro- fell 4.3% to $154 million, down from $161 A fourth quarter net interest loss of cessing business. million in 2009, and brokerage fees de- $54.2 million on a 3.15% net interest mar- Fifth Third Bancorp President and clined 19.4% to $25 million, down from gin contrasted with a fourth quarter 2009 CEO Kevin Kabat said, “We expect re- $31 million, but BOLI earnings grew net interest loss of $232.9 million, reflect- turns on assets and equity to improve 14.3% to $40 million, up from $35 million. ing primarily, a 33% drop in loan loss further in the longer term as a result of Fiduciary, BOLI and brokerage earnings provisions to $429 million. The overall balance sheet growth, related efficien- comprised, respectively, 19.5%, 3.2% net loss of $133.4 million contrasted with cies, lower credit costs and a more robust and 5.1% of noninterest income, which a net loss of $259.5 million in fourth quar- economic environment.” dropped 24.9% to $789 million, down ter 2009 and included $25.3 million in In 2009, Fifth Third reported $192.4 from $1.05 billion in 2009 when net secu- dividends paid to the U.S. Treasury as a million in combined investment banking, rities gains and service charges were, result of the government share purchases advisory and underwriting and securities respectively, $2040 million and $20 mil- under the Troubled Asset Relief Program brokerage income, which comprised 4.2% lion higher. (TARP). of its noninterest income and 2.4% of its Net interest income on a 3.24% net For the year 2010, wealth manage- net operating revenue. The company interest margin in 2010 more than dou- ment earnings rose 5.7% to $280.4 mil- ranked 21st in investment banking and bled to $1.17 billion, up from $485 million lion, up from $265.1 million in 2009, and securities brokerage earnings among all in 2009, as loan loss provisions dropped comprised 32.0% of noninterest income, BHCs, according to the Michael White’s by $592 million to $480 million and inter- which slipped 3% to $875 million, down Bank Broker-Dealer Fee Income Report. est expense was sliced by $331 million to from $903 million in 2009, reflecting a That year the company reported $207 million. In 2010, net income at- 22% drop in mortgage banking income $156.9 million in income from fiduciary tributable to common shares of $153 mil- and lower securities gains. activities, which comprised 3.4% of its lion contrasted with a net loss of $118 A net interest loss of $279.4 million in noninterest income and 1.9% of its net million in 2009. 2010 contrasted with a net interest loss of operating revenue. The company ranked Comerica Chairman and CEO Ralph $696.6 million in 2009, when loan loss 17th in trust earnings among BHCs with Babb, Jr. said, “Given the many positive provisions were $555.7 million greater. A assets over $10 billion, according to the signs we have seen, as well as our strat- net loss of $616.9 million for the year Michael White’s Bank Fiduciary Fee In- egy for success, which is focused on 2010 contrasted with a net loss of $858.8 come Report. growth and balance, we believe we are million in 2009 and included $100.2 mil- uniquely positioned for the future.” lion paid out to the U.S. Treasury under FEBRUARY 14 - 20, 2011 In 2009, Comerica reported $159.0 the TARP. M&I President and CEO Mark FIDUCIARY AND BROKERAGE million in fiduciary income and $31.0 mil- Furlong said, “We continue to make EARNINGS FLAT TO DOWN lion in securities brokerage fee income, steady progress in addressing credit chal- WHILE BOLI JUMPS AT COMERICA which comprised, respectively, 20.7% lenges.” Dallas, TX-based, $53.7 billion -asset and 4.0% of its noninterest income. The In 2009, M&I Corp. reported $257.5 Comerica Inc. reported fiduciary income company ranked 16th in fiduciary earn- million in wealth management fee in- in the fourth quarter rose 1% to $39 mil- ings and 21st among U.S. bank holding come, which comprised 39.3% of its non- lion, up from $38 million in fourth quarter companies with assets over $10 billion, interest income and 11.5% of its net oper- 2009, and bank-owned life insurance according to the Michael White’s Wealth ating revenue. The company ranked 20th (BOLI) income jumped 55.6% to $14 mil- Management Fee Income Report and the in wealth management earnings among lion, up from $9 million, while brokerage Michael White’s Bank Broker-Dealer Fee all BHCs, according to Michael White’s fees remained flat at $7 million. Fiduci- Income Report. Wealth Management Fee Income Report. ary, BOLI and brokerage fee earnings Montreal, Canada, $110 billion-asset comprised, respectively, 18.1%, 6.5% FEBRUARY 14 - 20, 2011 BMO (Bank of Montreal) Financial Group and 3.3% of noninterest income, which WEALTH MANAGEMENT has agreed to acquire M&I in a stock deal rose 0.5% to $215 million, down from EARNINGS CONTINUE UP that is expected to close before July 31, $214 million in fourth quarter 2009, when AT MARSHALL & ILSLEY 2011. service charges on deposits were $7 mil- Milwaukee, WI-based, $50.8 billion-asset lion higher. Marshall & Ilsley Corp (M&I) reported FEBRUARY 14 - 20, 2011 Net interest income on a 3.29% net wealth management earnings in the PEOPLES UNITED REPORTS interest margin in fourth quarter 2010 fourth quarter rose 4.2% to $72.9 million, FEE INCOME FLAT TO DOWN soared 148.6% to $348 million, up from up from $69.9 million in fourth quarter Bridgeport, CT-based, $25 billion-asset $140 million in fourth quarter 2009, re- 2009, dominating all other sources of Peoples United Financial reported invest- flecting an almost $200 million drop in noninterest fee income. Wealth management management fees ($7.9 million) and loan loss provisions to $57 million and a ment revenue comprised 28.5% of total securities brokerage commissions ($2.9 more than halving of interest expense to noninterest revenues, which increased million) remained flat compared to fourth $40 million. Net income attributable to 6.7% to $255.9 million, up from $239.8 quarter 2009, while insurance revenue common shares of $95 million contrasted million in fourth quarter 2009, despite a slipped 1.4% to $6.9 million, down from with a net loss of $62 million in fourth drop in deposit service fees and helped $7 million, and bank-owned life insurance quarter 2009. by a 134% jump in mortgage banking (BOLI) income fell 47.4% to $1 million, For the year 2010, fiduciary income income to $15.7 million. down from $1.9 million. Investment man-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 28 agement fees, brokerage commissions, interest margin in fourth quarter 2010 For year 2010, investment manage- insurance revenue and BOLI earnings jumped 33.6% to $178.9 million, up from ment fees slipped 1.2% to $32 million, comprised, respectively, 10.4%, 3.8%, $133.9 million in fourth quarter 2009, re- down from $32.4 million in 2009; insur- 9.1% and 1.3% of noninterest income, flecting acquisitions, a $3 million decrease ance revenue slid 4.0% to $28.8 million, which increased 5.9% to $75.9 million, up in loan loss provisions and a $9 million down from $30 million; securities broker- from $71.7 million in fourth quarter 2009, decrease in interest expenses. Net in- age commissions declined 7.4% to $11.3 before Peoples acquired Smithtown Ban- come, despite $34.7 million in increased million, down from $12.2 million; and BO- corp and LSB Corp. noninterest expenses, climbed 28.5% to LI income fell 20.2% to $6.7 million, down Net interest income on a 3.85% net $32 million, up from $24.9 million. from $8.4 million in 2009. Investment management, insurance, securities brokerage and BOLI earnings comprised, respectively, 10.7%, 9.6%, 3.8% and 2.2% of noninterest income, which dipped 3.2% to $299.2 million, down from $309.1 million in 2009, when net securities gains of $22 million contrasted with a net securities loss of $1 million in 2010. Net interest income in 2010 jumped 22.9% to $639 million, up from $519.8 million in 2009, benefiting from a $60.2 million drop in interest expenses. Net income for 2010, however, fell 15.3% to $85.7 million, down from $101.2 million, reflecting merger and acquisition-related expenses tied to the Smithtown Bancorp and LSB Corp. purchases. Peoples Unit- ed Financial President and CEO Jack Barnes said, “Our performance throughout 2010 continues to reflect the benefits from our focused commercial, wealth management and retail banking strategy.”

FEBRUARY 21 - 27, 2011 BOLI SHINES AT FIRST HORIZON Memphis, TN-based, $24.7 billion-asset Independence. Integrity. Service. First Horizon National reported trust services and investment management (TI) income slid 4% in fourth quarter 2010 to That’s what it takes to be $7.34 million, down from $7.66 million in fourth quarter 2009. Securities brokerage America’s BOLI Expert . income fell 11% to $5.79 million, down from $6.52 million. Insurance brokerage fee income dropped 31% to $4.04 million, Meyer-Chatfield is a national leader in helping banks find down from $5.87 million, and reinsurance fees tumbled 71% to $516,000, down solid, safe and secure BOLI investment strategies. Learn from $1.79 million, but bank-owned life what over 250 financial institutions already know. insurance (BOLI) income jumped 47% to $7.73 million, up from $5.28 million in fourth quarter 2009. TI, securities brokerage, insurance brokerage, reinsurance fees and BOLI comprised, respectively, 3.5%, 2.7%, 1.9%, 0.24% and 3.7% of noninterest income, which fell 14% to $210.95 million, down from $246.20 million in fourth quarter 2009, reflecting drops in all sources of noninterest income 261 Old York Road, Suite 604, Jenkintown, PA 19046 except BOLI. 800 · 444 · BOLI . [email protected] Net interest income on a 3.18% net interest margin in fourth quarter 2010 soared 150% to $137.24 million, up from

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 29 fourth quarter 2009, when loan loss provi- million. Retail commissions, trust ser- helped by an almost doubling of sales on sions were $95 million higher. After re- vices fees and BOLI earnings comprised, loans to $1.42 million and increased se- purchasing $63 million in preferred respectively, 17.7%, 11.0% and 4.6% of curities gains. Noninterest income com- shares bought by the U.S. government noninterest income, which dipped 1.5% to prised 28% of fourth quarter revenue. under the Troubled Asset Relief Program $345.5 million, down from $350.96 million Fourth quarter 2010 net interest in- (TARP), the company reported a net loss in fourth quarter 2009, when net invest- come on a 3.77% net interest margin of $48.69 million compared to a net loss ment securities gains were $16 million jumped 40.3% to $63.72 million, up from of $70.58 million in fourth quarter 2009. higher. $45.43 million in fourth quarter 2009, re- First Horizon National CEO Bryan Jordan Net interest income in 2010 declined flecting a $6.44 million drop in interest said, “We retired TARP while keeping our 9.2% to $243.77 million, down from expense, a 58% slash in loan loss provi- capital position strong. We are excited $268.41 million in 2009, despite a 48% sions to $10.81 million and the acquisition about our progress in 2010.” drop in loan loss provisions to $390 mil- of Comm Bancorp. Net income soared In 2009, First Horizon reported $34.4 lion and a 33% fall in interest expense to 416.5% to $23.53 million, up from $4.56 million in total insurance income (i.e., the $172.3 million. A net loss of $30.4 million million in fourth quarter 2009, helped by a sum of insurance brokerage, underwriting contrasted with a net loss of $161.2 mil- $6.9 million after-tax credit to pension and reinsurance income), which com- lion in 2009. Associated Banc-Corp expense, reduced expenses and negligi- prised 3.3% of its noninterest income and President and CEO Philip Flynn said, ble net securities losses compared to 1.9% of its net operating revenue. The “Our full attention is now on the challeng- $3.66 million in those losses in 2009. company ranked 27th in total insurance ing job of ensuring profitable growth. We For the year 2010, total insurance earnings among BHCs with assets great- believe the enhancements we have made income slid 5.4% to $15.77 million, down er than $10 billion, according to the to our business portfolio, along with our from $16.67 million in 2009; trust income Michael White-Prudential Bank Insurance strategic initiatives position us well for the increased 7.7% to $12.72 million, up from Fee Income Report. future.” $11.81 million; and securities commis- In 2009, Associated Banc-Corp report- sions and fees fell 8.3% to $6.84 million, FEBRUARY 21 - 27, 2011 ed $42.6 million in insurance brokerage down from $7.46 million, with these FOURTH QUARTER BOLI CLIMBS income, which makes up the bulk of what sources of fee income reflecting the same WHILE INSURANCE AND TRUST FEES Associated calls “retail commissions” and conditions noted in the fourth quarter. SLIDE AT ASSOCIATED BANC-CORP comprised 13.0% of its noninterest in- Total insurance earnings, trust income Green Bay, WI-based, $22 billion-asset come and 4.0% of its net operating reve- and securities commissions and fees Associated Banc-Corp reported “retail nue. The company ranked 17th in insur- comprised, respectively, 13.6%, 11.0% commissions” in fourth quarter 2010 slid ance brokerage earnings among BHCs and 5.9% of noninterest income, which 5.6% to $14.4 million, down from $15.29 with assets over $10 billion, according to increased 9.9% to $115.97 million, up million in fourth quarter 2009. Trust ser- the Michael White-Prudential Bank Insur- from $105.82 million in 2009. vices fees slipped 4% to $9.52 million, ance Fee Income Report. Net interest income in 2010 climbed down from $9.91 million, while bank- 18.3% to $244.32 million, up from owned life insurance (BOLI) income FEBRUARY 21 - 27, 2011 $206.59 million in 2009, reflecting a 29% climbed 36.2% to $4.51 million, up from MARKET CONDITIONS drop in loan loss provisions to $47.32 $3.31 million in fourth quarter 2009. Re- BOOST TRUST INCOME, ANNUITIES million and a 27% cut in interest expense tail commissions, trust services fees, and BUT HURT SECURITIES to $88.73 million. Net income soared BOLI earnings comprised, respectively, BROKERAGE AT F.N.B. 127.6% to $74.65 million, up from $32.8 17.0%, 11.2% and 5.3% of noninterest Hermitage, PA-based, $9.6 billion-asset million in 2009, when F.N.B. paid out $8.3 income, which remained steady at $84.7 F.N.B. Corp reported total insurance fee million in dividends and buybacks of stock million, helped by a 43% jump in mort- income (i.e., the sum of insurance broker- sold to the U.S. Treasury under the Trou- gage banking income to $13.2 million. age and underwriting) in fourth quarter bled Asset Relief Program (TARP). Fourth quarter 2010 net interest in- 2010 slipped 3% to $3.68 million, down F.N.B. Corp CEO Stephen Gurgovits come of $87.86 million on a 3.13% net from $3.79 million in fourth quarter 2009, said of the company’s performance, “Our interest margin contrasted with a net in- reflecting “decreased contingent fee reve- commercial and retail bankers continue to terest loss of $216.4 million in fourth nue,” F.N.B. said. Trust income, in con- be successful in winning new customer quarter 2009, when loan loss provisions trast, rose 8.7% to $3.29 million, up from relationships and deepening existing rela- and interest expenses were, respectively, $3.03 million, as market conditions im- tionships. We begin 2011 with good mo- $331.8 million and $13.6 million higher. proved, but the low interest rate environ- mentum and an expanded footprint in Net income of $6.6 million compared to a ment for annuities drove securities com- northwestern Pennsylvania with the re- net loss of $180.6 million in fourth quarter missions and fees down 22.4% to $1.72 cently completed acquisition of Comm 2009. million from $2.21 million, F.N.B. said. Bancorp, Inc.” For the year 2010, retail commissions Total insurance earnings, trust income In 2009, F.N.B. Corp reported $16.67 ticked up 1% to $61.26 million from and securities commissions and fees million in total insurance income, which $60.68 million in 2009, and trust services comprised, respectively, 12.5%, 11.2% comprised 14.8% of its noninterest in- fees rose 5.1% to $37.85 million, up from and 5.8% of noninterest income, which come and 4.4% of its net operating reve- $36 million, but BOLI income slipped grew 16.7% to $29.50 million, up from nue. The company ranked 7th in total 1.7% to $15.76 million, down from $16.03 $25.28 million in fourth quarter 2009,

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 30 insurance earnings among BHCs with estate market conditions continues to be 20.5% to $5.93 million, up from $4.92 assets between $1 and $10 billion, ac- a primary focus.” On January 1, 2011, million. Wealth management, insurance cording to the Michael White-Prudential Jerry Host took over as CEO. brokerage and BOLI earnings comprised, Bank Insurance Fee Income Report. In 2009, Trustmark reported $12.8 respectively, 29.0%, 14.6% and 6.0% of million in fiduciary income and $29.1 mil- noninterest income of $98.22 million com- FEBRUARY 21 - 27, 2011 lion in insurance brokerage fee income, pared to a noninterest loss of $1.52 mil- COMBINED INSURANCE AND which comprised, respectively, 8.3% and lion in 2009, when the company recorded TRUST EARNINGS COMPRISE 31% 18.9% of its noninterest income. The $101.79 million in net securities losses. OF 4Q NONINTEREST INCOME company ranked 18th in fiduciary earn- Net interest income in 2010 climbed AT TRUSTMARK rd ings and 3 in insurance brokerage in- 81.0% to $178.23 million, up from $98.48 Jackson, MS-based, $9.36 billion-asset come among U.S. bank holding compa- million in 2009, reflecting a $59.03 million Trustmark Corp. reported insurance com- nies with assets between $1 billion and drop in loan loss provisions to $95 million missions in fourth quarter 2010 slipped $10 billion, according to the Michael and a $52.62 million cut in interest ex- 2.6% to $6.22 million, down from $6.39 White’s Wealth Management Fee Income pense to $116.02 million. With $241.68 million in fourth quarter 2009, while Report and the Michael White-Prudential million in noninterest expenses, net in- wealth management earnings rose 5.9% Bank Insurance Fee Income Report. come reached $13.32 million and com- to $5.76 million, up from $5.43 million. pared with a net loss of $356.38 million in Insurance brokerage and wealth manage- FEBRUARY 21 - 27, 2011 2009. National Penn Bancshares Presi- ment earnings comprised, respectively, HALF OF NATIONAL PENN’S dent and CEO Scott Fainor said, “The 16.1% and 14.9% of noninterest income, NONINTEREST INCOME strategic initiatives of divesting Christina which comprised 29.6% of total revenue, MADE UP OF INSURANCE, Bank & Trust and finalizing the $150 mil- although it slipped 4.1% to $38.63 million, WEALTH MANAGEMENT AND BOLI lion Warburg Pincus investment position down from $40.28 million in fourth quarter Boyertown, PA-based, $9 billion-asset National Penn well for the future.” 2009, when mortgage banking income National Penn Bancshares issued its In 2009, National Penn Bancshares’ was $2.05 million higher. 2010-2009 quarterly and year-to-date fiduciary income and insurance brokerage Fourth quarter net interest income on earnings release using non-GAAP fee income comprised, respectively, a 4.36% net interest margin grew 9.6% to measures. According to the financial 17.3% and 15.6% of its noninterest in- $80.16 million, up from $73.15 million in information the company made available, come. The company ranked 7th in fiduci- fourth quarter 2009, reflecting 33% drops wealth management income in the fourth ary earnings and 7th in insurance broker- in loan loss provisions and interest ex- quarter declined 6.6% to $6.92 million, age income among U.S. bank holding pense to, respectively, $11.29 million and down from $7.41 million in fourth quarter companies with assets between $1 billion $12.30 million. Net income jumped 2009. Insurance commissions and fees and $10 billion, according to the Michael 81.3% to $25.16 million from $13.88 mil- decreased 13.9% to $3.42 million, down White’s Wealth Management Fee Income lion in fourth quarter 2009, when the com- from $3.97 million, which bank-owned life Report and the Michael White-Prudential pany paid out about $10.60 million to the insurance (BOLI) income rose 4.2% to Bank Insurance Fee Income Report. U.S. Treasury. $1.50 million, up from $1.44 million. For the year 2010, insurance broker- Wealth management, insurance broker- FEBRUARY 28 - MARCH 6, 2011 age fee income slid 4.8% to $27.69 mil- age and BOLI earnings comprised, re- BOLI ASSETS HIT RECORD $140.2 lion, down from $29.08 million in 2009, spectively, 29.2%, 14.4% and 6.3% of BILLION IN THIRD QUARTER 2010 and wealth management income slipped total noninterest income, which declined Bank-owned life insurance (BOLI) assets 1.0% to $21.87 million, down from $22.08 9.9% to $23.66 million, down from $26.25 reached $140.24 billion in the third quar- million. Insurance brokerage and wealth million in fourth quarter 2009. ter of 2010, reflecting a 4.8% increase management earnings comprised, re- Net interest income in the fourth quar- from $133.87 billion in third quarter 2009, spectively, 16.7% and 13.2% of noninter- ter surged 145.2% to $50.14 million, up according to the Michael White/ Meyer- est income, which dropped 1.4% to from $20.45 million in fourth quarter Chatfield BOLI Holdings Report. The $165.93 million, down from $168.24 mil- 2009, reflecting a $29.5 million drop in third quarter 2010 total for BOLI holdings lion. loan loss provisions to $17.50 million and is the sum of BOLI assets held by large Net interest income in 2010 climbed a $10.4 million cut in interest expense to bank holding companies (BHCs), stand- 10.1% to $315.89 million, up from $26.10 million. Net income available to alone banks, and savings associations $286.81 million in 2009, as loan loss pro- shareholders of $6.64 contrasted with a (i.e., thrifts). BOLI is used to recover visions were cut by $27.57 million to net loss of $283.29 million in fourth quar- costs of employee benefits and offset the $49.55 million and interest expense was ter 2009, despite a $5.5 million tax ex- liabilities of retirement benefits, helping sliced by $31.66 million to $56.20 million. pense tied to the divestiture of Christina banks and thrifts to keep up with rising In 2010, net income jumped 37.8% to Bank & Trust. benefit costs. $100.64 million, up from $73.05 million in For the year 2010, wealth manage- Compiled by Michael White Associates, 2009, when the company paid out almost ment earnings slipped 1.3% to $28.53 LLC (MWA) and sponsored by Meyer- $20 million in preferred stock dividends million, down from $28.92 million, and Chatfield, the Michael White/ Meyer- and discounts to the U.S. Treasury. insurance brokerage earnings decreased Chatfield BOLI Holdings Report Trustmark said, “Managing credit risks 8.8% to $14.33 million, down from $15.71 measures and benchmarks the cash sur- resulting from current economic and real million in 2009. BOLI income grew render values (CSV) of life insurance and

- Almost every asset class, except banks and thrifts with assets between $100 mil- TOTAL BANK-OWNED LIFE INSURANCE (BOLI) ASSETS lion and $300 million, experienced a de- REACH RECORD LEVELS crease in the number of banks and thrifts reporting BOLI assets. The largest decrease occurred among depository institutions under $100 million in assets. $142 Their number decreased by 4.7% from 902 in third quarter 2009 to 860 banks and thrifts in third quarter 2010. Declines $140 in banks and thrifts reporting BOLI assets generally did not reflect decisions to leave the BOLI market. The declines were pri- $138 marily due to some banks and thrifts merging or being sold with FDIC assistance. (See Table 2.) $136 - According to federal banking regulators, it is generally not prudent for a banking company to hold BOLI assets with an

$134 aggregate cash surrender value (CSV) BOLI ASSETS (IN BILLIONS) (IN ASSETS BOLI that exceeds 25 percent of the sum of the $132 institution’s total capital. (Depending on the bank’s charter, total capital is defined either as Tier 1 capital or the sum of Tier $130 1 capital and the allowance for loan and 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q lease losses). Nationally, mean bank 2008 2009 2010 BOLI assets as a percent of the sum of Tier 1 capital and the loss allowances increased only slightly (1.1%) from SOURCE: Michael White / Meyer-Chatfield BOLI Holdings Report 14.60% in third quarter 2009 to 14.76% in third quarter 2010. (See Table 3.) - Among the largest bank holding compa- ratio of CSV to capital possessed by - Among BHCs, those with assets greater nies (BHCs) with assets over $10 billion, BHCs and banks and thrifts. The data than $10 billion reported the highest inci- the 6.9% increase in allowances for loan herein were reported by 915 large top-tier dence of BOLI ownership, as 66 of 77 and lease losses from $210.4 billion in BHCs with assets greater than $500 mil- BHCs, or 85.7%, reported having BOLI the third quarter of 2009 to $224.9 billion lion and 7,760 commercial banks, thrifts assets. in the third quarter of 2010 helped pro- and FDIC-supervised savings banks op- - Of 7,760 banks and savings associa- duce a 3.8% increase in the sum of Tier 1 erating on September 30, 2010. tions operating on September 30, 2010, Capital and the allowances. By compari- Among the study’s most significant find- 3,792 or 48.9% reported holding BOLI son, Tier 1 capital rose 3.1% during the ings are these: assets of $125.57 billion, an increase of same period. These increases in capital - Large top-tier BHCs increased their BO- 3.0% from $121.86 billion in third quarter and allowances for losses among the LI holdings by 5.1% from $123.91 billion 2009. largest BHCs helped keep a lid on their in third quarter 2009 to $130.21 billion in - The total number of banks and thrifts mean BOLI-to-capital ratios and those of third quarter 2010. reporting BOLI assets decreased 67 or the industry as a whole, as they rose, - Of 1,409 stand-alone banks, those with- 1.7% from 3,859 in third quarter 2009 to respectively, 5.2% and 1.1% by third out BHCs, 432 or 30.7% recorded $2.94 3,792 banks and thrifts in third quarter quarter 2010. billion in third-quarter BOLI holdings, up 2010. (See Table 2.) 23.3% from $2.38 billion in third quarter - Among banks and thrifts, those with FEBRUARY 28 - MARCH 6, 2011 2009. assets between $1 billion and $10 billion BENEFITS AGENCY ACQUISITION - Of 740 savings association, 340 or were most likely to report BOLI assets, as DRIVES NORTHWEST BANCSHARES 45.9% recorded $7.10 billion in BOLI 409 of 556 banks and thrifts or 73.6% INSURANCE EARNINGS UP holdings, down 6.2% from $7.57 billion in reported having them in the third quarter Warren, PA-based, $8.15 billion-asset third quarter 2009. of 2010. Northwest Bancshares reported its acqui- - Of the 915 large top-tier BHCs, 744 or - The largest banks and thrifts, those over sition of Veracity Benefits Design drove 81.3% reported holding BOLI assets in $10 billion in assets, accounted for the fourth quarter 2010 insurance brokerage third quarter 2010, representing a 0.8% largest dollar increase ($3.56 billion) and fee income up 120% to $1.36 million from increase in their number from the 738 in largest percentage increase (3.7%) in $619,000 in fourth quarter 2009. Income third quarter 2009. their combined BOLI assets. (See Table from bank-owned life insurance (BOLI) 1.) also increased, rising 2.5% to $1.23 mil-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 32 lion, from $1.20 million in fourth quarter FEBRUARY 28 - MARCH 6, 2011 securities transactions. 2009, while income from trust and other HANCOCK REPORTS Hancock President and CEO Carl financial services slipped 2.6% to $1.91 GROWING INSURANCE, Chaney commented on the company’s million, down from $1.96 million. Insur- TRUST, INVESTMENT pending acquisition of New Orleans, LA- ance brokerage, BOLI and trust earnings AND ANNUITY FEES based, $11.8 billion-asset Whitney Hold- comprised, respectively, 9.2%, 8.1% and Gulfport, MS-based, $8.14 billion-asset ing, saying, “Upon completion of the 12.6% of noninterest income, which fell Hancock Holding Company reported in- transaction, our business footprint will 12.3% to $15.17 million, down from surance earnings in fourth quarter 2010 grow dramatically in Hancock’s current, $17.30 million in fourth quarter 2009, grew 13.3% to $3.77 million, up from Louisiana, Mississippi, Alabama and Flor- when the company recorded a $3.50 mil- $3.33 million in fourth quarter 2009. ida markets, and we will expand into dy- lion gain on the bargain purchase of Key- Trust fees rose 9.8% to $4.32 million, up namic new regions such as Houston and stone State Savings Bank. from $3.94 million, and combined invest- Tampa-St. Petersburg.” He added, “We Net interest income in fourth quarter ment and annuity fees jumped 40.4% to are excited about the coming year.” The 2010 jumped 22.4% to $53.31 million, up $2.33 million, up from $1.66 million. In- deal with Whitney is expected to close in from $43.54 million in fourth quarter 2009, surance, trust and combined investment the second quarter. largely reflecting a $7.05 million drop in and annuity fees comprised, respectively, In 2009, Whitney Holding reported interest expenses and a $580,000 de- 10.7%, 12.3% and 6.6% of noninterest $2.52 million in insurance brokerage increase in loan loss provisions to $13.92 income, which dropped 44.6% to $35.07 come, which comprised 2.3% of its nonin- million. Net income soared nearly thir- million, down from $63.36 million in fourth terest income and 0.5% of its net operat- teen-fold to $12.7 million, up from $1 mil- quarter 2009, when the company recording revenue. The company ranked 48th lion in fourth quarter 2009. ed a $33.62 million gain on the acquisi- in insurance brokerage earnings among For the year 2010, insurance broker- tion of Peoples First Community Bank. BHCs with assets over $10 billion, ac- age income almost doubled to $5.19 mil- Net interest income on a 4.06% net cording to the Michael White-Prudential lion, up from $2.66 million in 2009 before interest margin in fourth quarter 2010 Bank Insurance Fee Income Report. the Veracity benefits acquisition; trust climbed 26.2% to $60.42 million, up from In 2009, Hancock Holding reported earnings grew 14.9% to $7.25 million, $47.87 million in fourth quarter 2009, $10.63 million in insurance brokerage and BOLI income rose 6.1% to $5.08 reflecting primarily a $4.4 million cut in income, which comprised 6.8% of its non- million. Insurance, trust and BOLI earn- loan loss provisions to $11.39 million and interest income and 2.8% of its net oper- ings comprised, respectively, 8.6%, a $5.7 million drop in interest expense. ating revenue. The company ranked 17th 12.0% and 8.4% of noninterest income, Net income tumbled 46.4% to $17.02 in insurance brokerage earnings among which climbed 13.2% to $60.40 million, million, down from $31.78 million in fourth BHCs with assets between $1 billion and up from $53.34 million 2009, despite the quarter 2009, when the $33.62 million $10 billion, according to the Michael fact that mortgage banking income was gain in the Peoples First acquisition was White-Prudential Bank Insurance Fee sliced by over $5 million. recorded. Income Report. Net interest income in 2010 climbed For the year 2010, insurance fees 16.2% to $217.16 million, up from rose 0.7% to $14.46 million, up from FEBRUARY 28 - MARCH 6, 2011 BREMER REPORTS $186.81 million in 2009, helped by a $14.36 million in 2009; trust fees in- RISING TRUST FEES, $22.88 million drop in interest expense creased 10.5% to $16.72 million, up from FALLING BROKERAGE EARNINGS, and a $1.36 million decline in loan loss $15.13 million; and combined investment AND INSURANCE EARNINGS provisions to $40.49 million. Net income and annuity fees grew 23.8% to $10.18 DOWN IN 4Q BUT UP FOR 2010 jumped 76.2% to a record $57.5 million, million, up from $8.22 million. Insurance, St. Paul, MN-based, $8 billion-asset up from $32.7 million in 2009. Northwest trust and combined investment and annu- Bremer Financial reported insurance Bancshares President and CEO William ity fees comprised, respectively, 10.6%, earnings in fourth quarter 2010 slipped Wagner said, “We are pleased to report 12.2% and 7.4% of noninterest income, 2.2% to $5.73 million, down from $5.86 record annual earnings during a year which fell 13.0% to $136.95 million, down million in fourth quarter 2009. Trust and when the banking industry continued to from $157.33 million in 2009, when the investment management (TI) fees rose be challenged by economic and regulato- $33.62 million gain on the Peoples First 5.6% to $3.74 million, up from $3.54 mil- ry issues.” acquisition and a $69 million gain on se- lion, but brokerage earnings fell 18.7% to In 2009, Northwest Savings Bank re- curities transactions were recorded. $1.87 million, down from $2.30 million. ported $2.94 million in insurance broker- Net interest income in 2010 climbed Insurance, TI management and brokerage income, which comprised 5.2% of its 16.2% to $216.05 million, up from age earnings comprised, respectively, noninterest income and 1.0% of its net $185.90 million in 2009, despite an 18.3%, 12.0% and 6.0% of noninterest operating revenue. The company ranked $11.40 million increase in loan loss provi- income, which grew 11.6% to $31.23 34th in insurance brokerage earnings sions to $65.99 million, but helped by a million, up from $27.98 million in fourth among banks with assets between $1 more than $13 million decrease in inter- quarter 2009, helped by a $2.10 million billion and $10 billion, according to the est expense. Net income, however, fell increase in loan sales and a $2.6 million Michael White-Prudential Bank Insurance 30.2% to $52.21 million, down from gain on the sale of other real estate Fee Income Report. $74.78 million in 2009, when the company recorded the $33.62 million Peoples owned (OREO). First gain and the $69 million gain on Net interest income on a 3.84% net

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 33 interest margin declined 8.6% in fourth $4.31 million in fourth quarter 2009, top- securities brokerage earnings fell 42.9% quarter 2010 to $53.46 million, down from ping all other sources of noninterest fee to $1.04 million, down from $1.82 million. $58.47 million in fourth quarter 2009, de- income. Wealth management earnings Trust, BOLI and combined insurance and spite a $5.86 million decrease in interest comprised 39.4% of the $11.89 million in securities brokerage earnings comprised, expense which made up for a $2.19 mil- noninterest income, which contrasted respectively, 10.7%, 9.8% and 7.3% of lion increase in loan loss provisions to with a noninterest loss of $81.63 million in noninterest income, which jumped 62.2% $15.28 million. Net income, bolstered by fourth quarter 2009, when losses on to $14.26 million, up from $8.87 million in noninterest earnings and decreased non- sales of securities reached $52 million. fourth quarter 2009. interest expense, grew 10.3% to $17.11 Net interest income in fourth quarter Fourth quarter 2010 net interest in- million, up from $15.52 million in fourth 2010 fell 25.1% to $20.62 million, down come on a 3.86% net interest margin quarter 2009. from $27.52 million in fourth quarter climbed 23.7% to $43.74 million, up from For the year 2010, insurance earnings 2009, reflecting a $5.58 million increase $35.36 million in fourth quarter 2009, re- rose 1% to $14.87 million, up from $14.75 in loan loss provisions to $9.98 million flecting an almost $6 million decline in million in 2009; TI fees grew 12.4% to and a $2.49 million decrease in interest expenses and a $13.06 million drop in $13.97 million, up from $12.43 million, income before expenses and provisions. loan loss provisions to $8 million. Net and brokerage earnings slid 3.1% to Net income of $3.87 after dividend pay- income, driven by improved overall per- $6.44 million, down from $6.64 million. ments contrasted with a net loss of formance, jumped fourfold to $11.95 mil- Insurance, TI and brokerage income com- $75.25 million in fourth quarter 2009. lion, up from $2.73 million in fourth quar- prised, respectively, 13.3%, 12.5% and For the year 2010, wealth manage- ter 2009. 5.7% of noninterest income, which ment revenues climbed 23.3% to $17.85 For the year 2010, trust income, slipped 2.5% to $112.08 million, down million, up from $14.47 million in 2009, helped by increased market values and from $114.91 million in 2009, when the helping compensate for $36.89 million in revised pricing schedules, grew 22.7% to gain on loan sales was $3.60 million high- derivatives losses, which cut noninterest $5.90 million, up from $4.81 million in er and service charges were $3.40 million income to $5.13 million, an improvement 2009, and BOLI income, reflecting im- higher. over a noninterest loss of $2.07 million in proved crediting rates, grew 20.0% to Net interest income on a 3.96% net 2009. $5.33 million, up from $4.44 million. But, interest margin increased 7.8% in 2010 to Net interest income in 2010 slipped combined insurance and securities bro- $230.73 million, up from $213.98 million 2% to $113.00 million, down from kerage earnings declined 12.3% to $6.37 in 2009, driven by a $31.42 million drop in $115.36 million in 2009, despite a $20 million, down from $7.26 million. Trust, interest expense and a $13.42 million cut million drop in interest expense. With BOLI and combined insurance and secu- in loan loss provisions to $45.97 million. almost $40 million in increased noninter- rities brokerage earnings comprised, re- Net income rose 5.1% to $68.94 million, est expenses and $28.04 million paid out spectively, 12.0%, 10.8% and 12.9% of up from $65.16 million in 2009. to shareholders, the company reported a noninterest income, which surged 155% Bremer Financial CEO Pat Donovan year 2010 net loss of $18.21 million com- to $49.23 million, up from $19.33 million looked to and beyond the results and pared to net income of $18.14 million in in 2009, when the company recorded said, “In the face of an economy that re- 2009. Oriental Financial President and $36.19 million in net impairment losses. fused to warm up, Bremer mobilized CEO Jose Rafael Fernandez said, “Our Net interest income on a 3.87% net around emerging needs and successfully core Oriental Bank & Trust and Oriental interest margin in 2010 climbed 30.6% to positioned the company for future oppor- Financial Services banking and financial $154.38 million, up from $118.24 million tunities.” services operations performed well.” He in 2009, as interest expense was cut by In 2009, Bremer Financial reported added, “We expect to continue to make over $25 million and loan loss provisions $14.7 million in insurance brokerage fee strong progress in 2011 in line with our were slashed by $39 million to $61.55 income, which comprised 15.5% of its strategy of generating a great portion of million. Net income of $22.98 million con- noninterest income and 3.9% of its net our income from lending and wealth man- trasted with a net loss of $20.06 million in operating revenue. The company ranked agement activities. 2009, when net impairment losses 8th in insurance brokerage income reached $36.19 million. First Common- among U.S. bank holding companies with MARCH 7 - 13, 2011 wealth Financial President and CEO John TRUST, BOLI, INSURANCE/ assets between $1 billion and $10 billion, Dolan said, “Modifying the risk profile of SECURITIES BROKERAGE according to the Michael White-Prudential our balance sheet was a major strategic COMPRISE 36% OF Bank Insurance Fee Income Report. initiative throughout 2010…. We believe FIRST COMMONWEALTH’S we are well-positioned structurally to take NONINTEREST INCOME FEBRUARY 28 - MARCH 6, 2011 advantage of 2011 market opportunities.” ORIENTAL FINANCIAL Indiana, PA-based, $5.8 billion-asset First In 2009, First Commonwealth Finan- BANKS ON GROWING Commonwealth Financial reported trust cial reported $3.18 million in insurance WEALTH MANAGEMENT income in fourth quarter 2010 climbed brokerage income, which comprised 5.8% REVENUE 26.7% to $1.52 million, up from $1.20 of its noninterest income and 1.2% of its San Juan, PR-based, $7.31 billion-asset million in fourth quarter 2010, and bank- net operating revenue. The company Oriental Financial Group reported wealth owned life insurance (BOLI) income grew ranked 51st in insurance brokerage earn- management revenues in fourth quarter 17.6% to $1.40 million, up from $1.19 ings among bank holding companies with 2010 grew 8.9% to $4.69 million, up from million, while combined insurance and

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 34 assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

MARCH 7 - 13, 2011 MARKET DRIVES TRUST EARNINGS UP 21.7% AT WESBANCO Wheeling, WV-based, $5.4 billion-asset WesBanco reported new business, market improvements and revised fee schedules drove fourth quarter trust fees up 21.7% to $4.38 million from $3.60 million in fourth quarter 2009, and a benefit claim propelled bank-owned life insurance (BOLI) earnings up 78.2% to $1.72 million from $963,000. Net insurance services revenue also increased, rising 6.5% to $653,000 from $613,000, but net securities brokerage revenue fell 13% to $922,000, down from $1.06 million in fourth quarter 2009. Trust, BOLI, insurance, and securities brokerage comprised, respectively, 29.2%, 11.5%, 4.4% and 6.1% of noninterest income, which fell 13.3% to $15 million, down from $17.29 million in fourth quarter 2009, when the company recorded $2.11 million in net securities gains. Fourth quarter net interest income on a 3.66% net interest margin climbed 25% to $32.7 million, up from $26.2 million in fourth quarter 2009, reflecting a $4.73 million drop in loan loss provisions to $9.63 million and an almost $7 million cut in interest expense. Net income jumped 41.3% to $10.3 million, up from $7.3 million in fourth quarter 2009, helped especially by decreased loss provisions and expenses. For the year 2010, WesBanco reported trust fees climbed 15.2% to $15.84 million, up from $13.75 million in 2009; net securities brokerage revenue grew 9.5% to $4.56 million, up from $4.17 million; net insurance brokerage revenue rose 1% to $2.35 million, up from $2.33 million, but BOLI earnings slipped 2.6% to $4.51 million, down from $4.62 million. Trust, securities brokerage, net insurance brokerage, and BOLI earnings comprised, respectively, 26.6%, 7.7%, 3.9% and 7.6% of noninterest income, which slid 8% to $59.60 million, down from $64.59 million in 2009, when the net loss on other real estate owned (OREO) was $3.38 million lower and net securities gains were $2.69 million higher. Year 2010 net interest income on a 3.60% net interest margin grew 12.5% to $121.51 million, up from $108.00 million,

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 35 driven by a $5.79 million drop in loan loss est income, which rose 6.3% to $88.79 reflecting a $2 million drop in loan loss provisions to $44.58 million and a $28.55 million, up from $83.54 million in 2009, provisions to $6.69 million and a $4.5 million cut in interest expense. Net in- despite a $2 million drop in deposit ser- million cut in interest expense. Net income for the year jumped 90.4% to $35.6 vices fees. come increased 4.6% to $14.4 million, up million, up from $18.7 million in 2009. Year 2010 net interest income on a from $13.8 million in fourth quarter 2009. With positive quarter over quarter and 4.04% net interest margin climbed 12.1% For the year 2010, insurance and oth- year over year performance, WesBanco to $174.48 million, up from $155.71 mil- er financial services revenue rose 6.4% to President and CEO Paul Limbert said, lion in 2009, driven by a $2.58 million $18.87 million, up from $17.73 million in “The challenges of a slow recovery and drop in loan loss provisions to $7.21 mil- 2009; trust earnings grew 14.9% to $7.72 increased regulatory burden have been lion and a $16.68 million cut in interest million, up from $6.72 million; retirement mitigated by successes in managing our expense. Net income jumped 52.8% to a plan administration fees grew 14.0% to core businesses.” record $63.32 million, up from $41.45 $10.36 million, up from $9.09 million, and In 2009, WesBanco reported $9.90 million in 2009. Community Bank System BOLI income ticked up 2.5% to $3.22 million in fiduciary income, which com- President and CEO Mark Tryniski said, million from $3.14 million in 2009. Insur- prised 16.8% of its noninterest income “Our record earnings in 2010 reflect the ance, trust, retirement plan administration and 4.6% of its net operating revenue. effectiveness of our disciplined and bal- and BOLI earnings comprised, respec- The company ranked 30th in trust earn- anced approach to business regardless tively, 22.5%, 9.2%, 12.3%, and 3.8% of ings among bank holding companies with of economic or market conditions.” noninterest income, which rose 4.7% to assets over $10 billion, according to the In 2009, Community Bank System $83.89 million from $80.13 million in Michael White Bank Trust Fee Income reported $39.8 million in “other” noninter- 2009, despite a $3.12 million drop in ser- Ratings Report. est income (primarily benefit plan fees). vice charges on account deposits. “Other” noninterest income comprised Year 2010 net interest income in 2010 MARCH 7 - 13, 2011 47.7% of its noninterest income and on a 4.15% net interest margin increased COMMUNITY BANK SYSTEM 16.0% of its net operating revenue. The 5.9% to $172.72 million, up from $163.08 RECORDS RISING BENEFITS company ranked 24th in “other” noninter- million in 2009, driven by a $23.71 million ADMINISTRATION, TRUST AND est income among U.S. bank holding cut in interest expense and a $4.5 million ASSET MANAGEMENT FEES companies with assets between $1 billion drop in loan loss provisions to $29.81 Syracuse, NY-based, $5.4 billion-asset and $10 billion, according to the million. Net income grew 10.4% to $57.4 Community Bank System reported com- Michael White Bank Noninterest Fee million, up from $62.8 million in 2009, as bined benefits plan administration, con- Income Ratings Report. the company “focused on aggressively sulting and actuarial fees generated by its managing our conservative banking strat- Benefit Plans Administrative Services MARCH 7 - 13, 2011 egy and continued strategic investment subsidiary remained steady at $7.20 mil- GROWING INSURANCE, TRUST, RE- and new market expansion to support lion in fourth quarter 2010 compared to TIREMENT PLAN ADMINISTRATION future growth,” NBT Bancorp President fourth quarter 2009, while combined trust AND BOLI EARNINGS COMPRISE 49% and CEO Martin Dietrich said. investment and asset management OF NONINTEREST INCOME AT NBT In 2009, NBT Bancorp reported $13.7 (TIAM) fees also remained steady at Norwich, NY-based, $5.3 billion-asset million in insurance brokerage fee in- $2.39 million, up from $2.38 million. Ben- NBT Bancorp reported fourth quarter come, which comprised 17.1% of its non- efit plan fees and TIAM fees comprised, 2010 insurance and other financial ser- interest income and 5.0% of its net oper- respectively, 33.1% and 11.0% of nonin- vices revenue grew 13.9% to $4.33 mil- ating revenue. The company ranked 10th terest income, which rose 0.3% to $21.78 lion, up from $3.80 million in fourth quar- in insurance brokerage income among million, up from $21.72 million in fourth ter 2009; retirement plan administration U.S. bank holding companies with assets quarter 2009. fees rose 0.7% to $2.76 million, up from between $1 billion and $10 billion, ac- Net interest income on a 4.07% net $2.74 million; and trust earnings climbed cording to the Michael White-Prudential interest margin in the fourth quarter grew 20.2% to $2.26 million, up from $1.88 Bank Insurance Fee Income Report. 9.5% to $44.20 million, up from $40.36 million, but bank-owned life insurance million in fourth quarter 2009, reflecting (BOLI) income slid 4.2% to $872,000, MARCH 14 - 20, 2011 primarily a $3 million drop in interest ex- down from $910,000 in fourth quarter INSURANCE BROKERAGE pense. Net income jumped 69.6% to 2009. Insurance, retirement plan admin- & TRUST EARNINGS $15.89 million, up from $9.37 million in istration, trust and BOLI earnings com- CLIMB HIGHER fourth quarter 2009, when the company prised, respectively, 19.5%, 12.4%, AT RENASANT CORP. recorded a $3.08 million goodwill impair- 10.2%, and 3.9% of noninterest income, Tupelo, MS-based, $4.3 billion-asset Re- ment. which grew 12.0% to $22.24 million, up nasant Corp. reported insurance broker- For the year 2010, benefit plan- from $19.85 million in fourth quarter age fee income in fourth quarter 2010 associated fees increased 6.7% to 2009, despite a $1.2 million drop in ser- climbed 30.5% to $916,000, up from $29.62 million, up from $27.77 million in vice charges on account deposits. $705,000 in fourth quarter 2009, and trust 2009, and TIAM fees grew 13.9% to Fourth quarter 2010 net interest in- revenue grew 12.0% to $626,000, up $9.83 million, up from $8.63 million. Ben- come on a 4.09% net interest margin from $559,000. Insurance brokerage and efit plan fees and TIAM comprised, re- rose 1.9% to $43.81 million, up from trust comprised, respectively, 6.3% and spectively, 33.4% and 11.1% of noninter- $42.98 million in fourth quarter 2009, 4.3% of noninterest income, which in-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 36 creased 8.4% to $14.55 million, up from $13.42 million in fourth quarter 2009. Net interest income on a 3.43% net interest margin in fourth quarter 2010 jumped 43.3% to $24.36 million, up from $17.00 million in fourth quarter 2009, reflecting loans acquired in the New Orle- ans, LA-based, $577 million-asset Cres- cent acquisition, a $3.43 million drop in interest expense, and a $2.3 million cut in loan loss provisions. Net income rose 17.1% to $4.72 million, up from $4.03 Whether you are in California or Connecticut, as a million in fourth quarter 2009, helped by member of the Independent Community Bankers of noninterest earnings, which the company America, you are part of a family which is committed described as “key sources of revenues.” In 2009, Renasant reported $3.85 YOU to the values that keep Main Streets across the million in insurance brokerage income, are building. country strong and prosperous. which comprised 7.1% of its noninterest income and 2.5% of its net operating rev- Thousands of banks like yours trust the ICBA Services Network to provide the innovative enue. The company ranked 45th in insur- products and services to make a difference to their bottom line. Customers are on the ance brokerage earnings among bank move; let us show you how ICBA solutions can capture, develop and retain the very best. holding companies with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

MARCH 14 - 20, 2011 One Mission. Community Banks.® GROWING INSURANCE & ICBA Bancard & TCM Bank | ICBA Securities WEALTH MANAGEMENT EARNINGS 1-866-THE-ICBA | www.icba.org ICBA Mortgage | ICBA Financial Services | ICBA Reinsurance COMPRISE 34.3% OF S&T’S 2010 NONINTEREST INCOME Indiana, PA-based, $4.1 billion-asset S&T Bancorp reported wealth management ny recorded $5.09 million in net securities 27.9% to $463,000, up from $362,000. revenue in fourth quarter 2010 increased losses. Trust fees, combined brokerage and in- 6.8% to $2.05 million, up from $1.92 mil- Net interest income on a 4.05% net surance commissions and BOLI earnings lion in fourth quarter 2009, while insur- interest margin in 2010 jumped 58.7% to comprised, respectively, 13.3%, 5.2% ance brokerage fee income slipped 1.1% $125.14 million, up from $78.83 million in and 2.5% of noninterest income, which to $1.86 million, down from $1.88 million. 2009, reflecting a $47 million drop in loan jumped 36.8% to $18.29 million, up from Wealth management and insurance bro- loss provisions to $25.34 million and a $13.37 million in fourth quarter 2009, as kerage earnings comprised, respectively, $14.54 million cut in interest expense. mortgage loan sales and a valuation ad- 17.1%, and 15.5% of noninterest income, Net income grew 7.5% to $46.94 million, justment on mortgage servicing rights which rose 5.5% to $11.99 million, up up from $43.67 million in 2009. S&T grew. from $11.37 million in fourth quarter 2009. Bancorp President and CEO Todd Brice Net interest income on a 4.05% net Fourth quarter 2010 net interest in- said S&T expects “positive momentum to interest margin in fourth quarter 2010 come on a 4.06% net interest margin continue into 2011” despite cautious bor- climbed 12.7% to $26.99 million, up from grew 24.1% to $33.91 million, up from rowers and new regulations on deposit $23.95 million in fourth quarter 2009, re- $27.33 million in fourth quarter 2009, re- service charges that “challenge our fee flecting a $4.5 million cut in interest ex- flecting an almost $7 million drop in loan revenue.” pense and an almost $2 million drop in loss provisions to $3.5 million and a $2.79 loan loss provisions to $8.86 million. Net million cut in interest expense. MARCH 14 - 20, 2011 income of $5.20 million compared with a For the year 2010, insurance broker- TRUST, INSURANCE, BROKERAGE & net loss of $9.17 million in fourth quarter age earnings grew 7.2% to $8.31 million, BOLI UP AT HEARTLAND FINANCIAL 2009, when the company took a $12.66 up from $7.75 million in 2009, and wealth Dubuque, IA-based, $4 billion-asset million goodwill impairment charge. management revenue rose 4.1% to $7.81 Heartland Financial USA reported trust For the year 2010, trust fees climbed million, up from $7.50 million. Insurance fees in fourth quarter 2010 grew 12.5% to 18.5% to $9.21 million, up from $7.77 brokerage and wealth management earn- $2.43 million, up from $2.16 million in million in 2009; combined brokerage and ings comprised, respectively, 17.7% and fourth quarter 2009; brokerage and insur- insurance commissions rose 1.9% to 16.6% of noninterest income, which in- ance commissions climbed 36.0% to $3.18 million, up from $3.12 million; and creased 7.5% to $46.94 million, up from $948,000, up from $697,000, and bank- BOLI income jumped 47.0% to $1.47 $43.67 million in 2009, when the compa- owned life insurance (BOLI) income grew

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 37 million, up from $1 million. Trust, com- $25.14 million in fourth quarter 2009, ment of debt. bined brokerage and insurance, and BO- reflecting a $1.3 million decrease in loan Net interest income on a 4.44% net LI earnings comprised, respectively, loss provisions to $1.43 million and a interest margin in fourth quarter 2010 17.6%, 6.1% and 2.8% of noninterest $2.2 million cut in interest expense. Net soared 143.7% to $23.20 million, up from income, which slipped 0.7% to $52.33 income increased 8.3% to $8.89 million, $9.52 million in fourth quarter 2009, million, down from $52.70 million in 2009. up from $8.21 million in fourth quarter helped by the FDIC-assisted acquisitions Net interest income on a 4.12% net 2009. of Home National and Scottsdale, AZ- interest margin in 2010 climbed 18.4% to For the year 2010, insurance commis- based Legacy Bank, a $5.1 million drop in $110.54 million, up from $93.39 million in sions and fees rose 3.5% to $12.74 mil- loan loss provisions to $3.33 million and a 2009, reflecting a $14.65 million cut in lion, up from $12.31 million in 2009, and $2.19 million cut in interest expense. Net interest expenses and a $7.2 million drop investment services income grew 7.5% to income of $6.4 million contrasted with a in loan loss provisions to $32.51 million. $14.33 million, up from $13.33 million. net loss of $850,000 in fourth quarter Net income surged fourteen-fold to Insurance and investment services earn- 2009. Enterprise Bank & Trust President $18.56 million, up from $1.22 million in ings comprised, respectively, 27.6% and and CEO Peter Benoist said, “Double 2009, when the $12.66 million in goodwill 31.0% of noninterest income, which digit increases in Wealth Management impairment charges were recorded. slipped 0.1% to $46.16 million, down from revenues and a strong emphasis on ex- Heartland Financial Chairman, President $46.21 million in 2009, impacted by a pense management have contributed to and CEO Lynn Fuller commented on $780,000 drop in service charges on ac- strengthening our operating results.” “nice improvement in revenues in our count deposits. For the year 2010, wealth manage- Wealth Management Group and Invest- Net interest income in 2010 on a ment revenue grew 20.4% to $5.44 mil- ment Services divisions” and pointed to 3.86% net interest margin grew 5.6% to lion, up from $4.52 million in 2009 and the company’s “concerted efforts in $103.27 million, up from $97.75 million in comprised 28.6% of noninterest income, weathering the difficult credit conditions 2009, reflecting a $7.5 million cut in inter- which declined 4.5% to $18.99 million, that have significantly impacted the bank- est expense and a $781,000 decline in down from $19.88 million in 2009, when ing industry.” loan loss provisions to $8.51 million. Enterprise recorded a $7.39 million gain In 2009, Heartland Financial’s $7.77 Driven by decreased interest expenses on the extinguishments of debt. million in fiduciary income comprised and loan loss provisions, net income rose Net interest income in 2010 jumped 21.4% of its noninterest income and 4.6% 6.2% to a record $33.81 million, up from 85.8% to $54.30 million, up from $29.23 of net operating revenue. The company $31.83 million in 2009. Tompkins Finan- million in 2009, reflecting the FDIC- ranked 17th in fiduciary income among cial President and CEO Stephen Ro- assisted HomeBank and Legacy acquisi- U.S. bank holding companies with assets maine said, “Our commitment to a strate- tions and a $16.43 million slash in interest between $1 billion and $10 billion, ac- gy of long term sustainable growth is expense and a $6.67 million decline in cording to the Michael White Bank Trust what has allowed us to continue our long loan loss provisions to $33.74 million. Fee Income Ratings Report. history of earnings and dividend growth, Net income of $9.1 million compared with even during the challenging economic a net loss of $48 million in 2009. MARCH 14 - 20, 2011 environment of recent years.” In 2009, Enterprise Financial reported INSURANCE & INVESTMENT In 2009, Tompkins Financial’s $12.31 $4.94 million in fiduciary income, which SERVICES EARNINGS million in insurance brokerage fee income comprised 20.0% of its noninterest in- COMPRISE 58.6% OF TOMPKINS comprised 26.7% of its noninterest income. The company ranked 63rd in fidu- 2010 NONINTEREST INCOME come and 8.0% of its net operating reve- ciary income among U.S. bank holding Ithaca, NY-based, $3.26 billion-asset nue. The company ranked 12th in insur- companies with assets between $1 billion Tompkins Financial reported Tompkins ance brokerage income among U.S. bank and $10 billion, according to the Michael Insurance Agencies generated $3.02 holding companies with assets between White Bank Trust Fee Income Ratings million in insurance brokerage income in $1 billion and $10 billion, according to the Report. fourth quarter 2010, achieving 5.2% Michael White-Prudential Bank Insurance growth over $2.87 million earned in fourth MARCH 14 - 20, 2011 Fee Income Report. quarter 2009. Tompkins Financial Advi- CITY HOLDING CONTINUES sors generated $3.56 million in invest- MARCH 14 - 20, 2011 TO BENEFIT FROM CLIMBING ment services income, up 1.7% from WEALTH MANAGEMENT JUMPS 52% INSURANCE, TRUST AND $3.50 million. Insurance brokerage and IN 4Q AT ENTERPRISE FINANCIAL INVESTMENT MANAGEMENT investment services fee income com- St. Louis, MO-based, $2.81 billion-asset & BOLI REVENUES prised, respectively, 24.9% and 29.3% of Enterprise Financial Services reported Charleston, WV-based, $2.64 billion-asset noninterest income, which rose 1.2% to wealth management revenue in fourth City Holding Company reported insurance $12.28 million, up from $12.14 million in quarter 2010 jumped 52.0% to $1.52 mil- commissions in fourth quarter 2010 fourth quarter 2009, despite a half million lion, up from $1.00 million in fourth quar- climbed 35.1% to $1.50 million, up from dollar drop in service charges on account ter 2009, and comprised 35.9% of nonin- $1.11 million in fourth quarter 2009. Trust deposits. terest income, which fell 9.5% to $3.83 and investment management (TIM) fee Net interest income on a 3.75% net million, down from $4.23 million in fourth income grew 31.1% to $720,000, up from interest margin in fourth quarter 2010 quarter 2009, when the company record- $549,000. Bank-owned life insurance rose 5.1% to $26.43 million, up from ed a $2.06 million gain on the extinguish- (BOLI) income remained basically stable

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 38 at $751,000. Insurance brokerage, TIM and BOLI earnings comprised, respectively, 12.6%, 6.0%, and 6.3% of noninterest income, which declined 7.8% to $11.91 million, down from $12.92 million in fourth quarter 2009, impacted $400,00 in decreased service charges on account deposits and a $344,000 increase in net securities impairment losses. Net interest income on a 3.92% net interest margin in fourth quarter 2010 decreased 6.7% to $20.62 million, down from $22.11 million in fourth quarter 2009, as a $2 million cut in expense was countered by an almost $1 million increase in loan loss provisions to $2.34 million. Net income, reflecting overall performance, fell 10.6% to $9.91 million, down from $11.08 million in fourth quarter 2009. For the year 2010, insurance brokerage fee income slipped 1.6% to $5.49 million, down from $5.58 million in 2009, while TIM income grew 18.4% to $2.77 million, up from $2.34 million, and BOLI earnings rose 4.0% to $3.40 million, up from $3.27 million in 2009. Insurance, TIM and BOLI earnings comprised, respectively, 12.5%, 6.3%, and 7.7% of noninterest income, which fell 15.5% to $43.94 million, down from $51.98 million, as service charges on deposit accounts dropped by $5 million. cording to the Michael White-Prudential (FHLB) of Chicago. Net interest income on a 4.06% net Bank Insurance Fee Income Report. For the year 2010, brokerage and in- interest margin in 2010 slipped 1.4% to surance commissions grew 10.1% to $87.20 million, down from $88.44 million MARCH 21 - 27, 2011 $3.07 million, up from $2.79 million in ANNUITY & MUTUAL FUND SALES in 2009, despite an $8.67 million cut in 2009, driven by annuity and mutual fund DRIVE BROKERAGE & INSURANCE interest expense and basically stable loan sales, and comprised 7.6% of noninterest EARNINGS AT BANK MUTUAL loss provisions of $7.09 million. Net in- income, which climbed 28.2% to $40.60 Milwaukee, WI-based, $2.59 billion-asset come also declined, falling 8.7% to million, up from $31.68 million, helped by Bank Mutual Corp. reported brokerage $38.96 million, down from $42.65 million a $15.97 million net gain on investments. and insurance commissions in fourth in 2009. City Holding President and CEO A net interest loss of $3.33 million quarter 2010 rose 5.2% to $752,000, up Charles Hageboeck said, “Changes man- compared to net interest income of from $715,000 in fourth quarter 2009, dated in Regulation E and a general de- $55.62 million in 2009, and reflected, driven by increased tax-deferred annuity cline in consumer spending adversely primarily, a $37.2 million spike in loan sales. Brokerage and insurance commis- affected our service fee revenues … and loss provisions to $49.62 million, again, sions comprised 12.0% of noninterest net impairment losses primarily tied to our related to commercial properties. A net income, which increased 3.8% to $6.28 portfolio of community bank equity posi- loss of $72.6 million compared to net in- million, up from $6.05 million in fourth tions” impacted year 2010 results. He come of $13.7 million in 2009. Bank Mu- quarter 2009. added, however, “City remains one of the tual Chairman and CEO Michael Crowley The company reported a net interest most profitable and well-capitalized pub- said the company’s losses reflected the loss of $25.87 million in fourth quarter licly traded banks in the U.S.” payback of the FHLB loan and elevated 2010, as loan loss provisions tied to com- In 2009, City Holding reported $5.58 loan loss provisions. Regarding the lat- mercial properties surged over $30 mil- million in insurance brokerage fee inter, Crowley said, “We noted a substantial lion to $33.94 million, undermining a $5 come, which comprised 9.8% of its nonin- increase in the number of our commercial million cut in interest expense. A net terest income and 3.7% of its net operat- real estate borrowers whose properties quarter loss of $76.4 million compared ing revenue. The company ranked 30th were experiencing increased vacancies, with net income of $1.5 million in fourth in insurance brokerage income among declining lease rates or delays in unit quarter 2009 and reflected a $53.6 million U.S. bank holding companies with assets sales, as well as continued declines in charge tied to the repayment of borrow- between $1 billion and $10 billion, ac- real estate values.” ings from the Federal Home Loan Bank

MARCH 21 - 27, 2011 $109,000. Combined insurance and in- tial increase in our noninterest income for GROWING INSURANCE & vestment commissions, BOLI and trust the quarter, which consisted primarily of TRUST EARNINGS earnings comprised, respectively, 17.2%, growth in fee income from fiduciary activi- COMPRISE 43% OF 3.0%, and 1.8% of noninterest income, ties, insurance commissions and net NONINTEREST INCOME which jumped 35.3% to $7.55 million, up gains on the sale of loans.” Fiduciary AT COBIZ from $5.58 million in fourth quarter 2009, income rose 6.3% to $1.35 million, up Denver, CO-based, $2.4 billion-asset when the company recorded $1.40 million from $1.27 million in fourth quarter 2009, CoBiz Financial reported insurance bro- in impairment on securities. and insurance commissions jumped kerage fee income in fourth quarter 2010 Net interest income on a 3.89% net 40.7% to $830,000, up from $590,000. climbed 21.7% to $3.14 million, up from interest margin in fourth quarter 2010 Fiduciary income and insurance earnings $$2.58 million in fourth quarter 2009, climbed 33.6% to $12.10 million, up from comprised, respectively, 28.5% and while trust and investment advisory (TI) $9.06 million in fourth quarter 2009, re- 17.5% of noninterest income, which grew income slipped 2.9% to $1.32 million, flecting a $2 million cut in interest ex- 24.4% to $4.74 million, up from $3.81 down from $1.36 million. Insurance and pense and an almost $3 million drop in million in fourth quarter 2009. TI earnings comprised, respectively, loan loss provisions to $5.65 million. Net Net interest income on a 3.30% net 30.3% and 12.7% of noninterest income, income surged more than threefold to interest margin in fourth quarter 2010 which jumped 59.6% to $10.36 million, up $2.3 million, up from $555,000 in fourth decreased 4.2% to $14.57 million, down from $6.49 million in fourth quarter 2009, quarter 2009. from $15.21 million in fourth quarter 2009, helped by a $2.6 million increase in in- For year 2010, insurance and invest- despite a $258,000 drop in loan loss pro- vestment banking income. ment commissions rose 2.4% to $5.14 visions to $177,000 and a $619,000 cut in Net interest income on a 4.26% net million, up from $5.02 million in 2009; interest expense. Bolstered by noninter- interest margin in fourth quarter 2010 BOLI income jumped 106.5% to $1.15 est earnings, net income rose 1.4% to soared 143% to $20.5 million, up from million, up from $557,000; and trust in- $5.19 million, up from $5.12 million in $8.44 million in fourth quarter 2009, driv- come grew 22.2% to $507,000, up from fourth quarter 2009. en by a $1.7 million cut in interest ex- $415,000 in 2009. Combined insurance For year 2010, fiduciary income in- pense and a $13 million drop in loan loss and investment commissions, BOLI and creased 7.6% to $5.39 million, up from provisions to $3.52 million. Net income of trust earnings comprised, respectively, $5.01 million in 2009, and insurance com- $2.38 million compared to a net loss of 18.6%, 4.2% and 1.8% of noninterest missions grew 24.1% to $2.99 million, up $5.47 million in fourth quarter 2009. Co- income, which increased 4.9% to $27.59 from $2.41 million in 2009. Fiduciary and Biz Chairman and CEO Steve Bangert million, up from $26.30 million in 2009, insurance earnings comprised, respec- said, “During a very challenging financial when the company reported $3.94 million tively, 28.2% and 15.7% of noninterest period, we made some difficult decisions, in impairment in securities compared to income, which slid 2.6% to $19.09 million, opting to invest in building and upgrading $331,000 in 2010. down from $19.59 million in 2009, when our business development team…. I am Net interest income in 2010 rose 6.6% the company recorded a $2.97 million glad to see our efforts beginning to pay to $46.99 million, up from $44.09 million gain on the sale of its merchant bankcard off.” in 2009, reflecting a $7.56 million cut in processing business. In 2009, CoBiz Financial reported interest expenses, as loan loss provisions Net interest income on a 3.58% net $11.77 million in insurance brokerage remained stable at just over $23 million. interest margin in 2010 rose 2.4% to income, which comprised 49.7% of its Net income grew 12.5% to $8.1 million, $59.98 million, up from $58.58 million in noninterest income and 9.2% of its net up from $7.2 million in 2009. First Defi- 2009, reflecting, primarily, a $2.80 million operating revenue. The company ranked ance Financial Chairman, President and cut in interest expense. Net income 14th in insurance brokerage earnings CEO William Small said, “I am pleased to ticked up 0.5% to a record $21.89 million among bank holding companies with as- report that despite the very difficult oper- from $21.79 million in 2009. Hoy said, sets between $1 billion and $10 billion, ating environment in 2010, First Defiance “We continue to believe in our conserva- according to the Michael White-Prudential Financial was once again profitable.” tive business model.” Bank Insurance Fee Income Report. Small added, “We are still dealing with In 2009, Arrow Financial reported

MARCH 21 - 27, 2011 uncertainty in the commercial real estate $2.41 million in insurance brokerage in- INSURANCE, TRUST & BOLI market and stubbornly high unemploy- come and $3.56 million in fiduciary in- CLIMB AT FIRST DEFIANCE ment rates in our region.” come, which comprised, respectively, Defiance, OH-based, $2.04 billion-asset 12.3% and 18.2% of its noninterest in- MARCH 21 - 27, 2011 come. The company ranked 57th in in- First Defiance Financial Corp reported FIDUCIARY & INSURANCE surance brokerage earnings and 77th in insurance and investment sales commis- EARNINGS DRIVE POSITIVE fiduciary income among bank holding sions in fourth quarter 2010 grew 20.4% 4Q PERFORMANCE companies with assets between $1 billion to $1.3 million, up from $1.08 million in AT ARROW FINANCIAL and $10 billion, according to the Michael fourth quarter 2009. Bank-owned life Glens Falls, NY-based, $1.91 billion- White-Prudential Bank Insurance Fee insurance (BOLI) income rose 4.6% to asset Arrow Financial President and CEO Income Report and the Michael White $229,000, up from $219,000, and trust Thomas Hoy said, “Our [fourth quarter Bank Trust Fee Income Ratings Report. income grew 23.9% to $135,000, up from 2010] performance was led by a substan-

MARCH 21 - 27, 2011 to a broad-based strategy that capitalizes $10 billion, according to the Michael TRUST, BROKERAGE & on our strong community bank presence White Bank Securities Brokerage Fee BOLI EARNINGS DRIVE … and the diversification of our revenue Income Ratings Report. CLIMBING NONINTEREST INCOME sources.” AT S.Y. BANCORP In 2009, S.Y. Bancorp’s $1.75 million MARCH 21 - 27, 2011 TRUST & INVESTMENT Louisville, KY-based, $1.9 billion-asset in securities brokerage income comprised MANAGEMENT INCOME S.Y. Bancorp reported trust and invest- 5.4% of its noninterest income and 1.9% CONTINUES UP AT PEOPLES ment management (TIM) income in fourth of net operating revenue. The company Marietta, OH-based, $1.8 billion-asset quarter 2010 climbed 24.8% to $3.72 ranked 36th in securities brokerage in- Peoples Bancorp reported insurance bro- million, up from $2.98 million in fourth come among U.S. bank holding compa- kerage fee income in fourth quarter 2010 quarter 2009; brokerage commissions nies with assets between $1 billion and and fees grew 32.8% to $652,000, up from $491,000, and bank-owned life insurance (BOLI) income rose 0.8% to $253,000, up from $251,000. TIM, brokerage commissions and BOLI earnings comprised, respectively, 38.8%, 6.8% and 2.6% of noninterest income, which climbed 29.6% to $9.58 million, up from $7.39 million in fourth quarter 2009, “led by ongoing growth in investment management and trust income,” S.Y. said. Net interest income on a 3.92% net interest margin in the fourth quarter jumped 35.5% to $13.63 million, up from $10.06 million in fourth quarter 2009, reflecting $1.78 million drop in loan loss provisions to $3.70 million, and a $1.39 Now that you know how the industry is doing . . . million cut in interest expense. With a $1.5 million drop in noninterest expense, How are YOU doing ? net income more than doubled to $6.05 million, up from $2.88 million in 2009. For the year 2010, trust and invest- Discover the simplest way to find out. ment management (TIM) income grew 18.6% to $13.26 million, up from $11.18 million in 2009; brokerage commissions GET VALUABLE FEEDBACK ON YOUR PERFORMANCE IN ANY OF THE FOLLOWING: and fees climbed 22.3% to $2.14 million, INSURANCE BROKERAGE FEE INCOME ANNUITY COMMISSIONS up from $1.75 million; and BOLI income rose 0.7% to $995,000, up from TOTAL INSURANCE FEE INCOME MUTUAL FUND & ANNUITY FEE INCOME $988,000. TIM, brokerage commissions INVESTMENT FEE INCOME INCOME FROM FIDUCIARY ACTIVITIES and BOLI earnings comprised, respec- INVESTMENT PROGRAM INCOME WEALTH MANAGEMENT FEE INCOME tively, 39.3%, 6.3% and 2.9% of noninterest income, which grew 12.3% to $33.74 SECURITIES BROKERAGE INCOME TOTAL NONINTEREST FEE INCOME million, up from $30.04 million in 2009, as “our investment management and trust COMPARES, RANKS AND RATES BY PERCENTILE: department” generated “new fee income NATIONALLY FEE INCOME DOLLAR VOLUME from both an expanding client base and a rebounding stock market,” S.Y. Bancorp BY REGION AS A % OF NONINTEREST INCOME Chairman and CEO David Heintzman BY STATE AS A % OF NONINTEREST FEE INCOME said. Net interest income on a 3.93% net BY ASSET-PEER GROUP AS A % OF NET OPERATING REVENUE interest margin in 2010 climbed 20.7% to AS A % OF RETAIL DEPOSITS $55.41 million, up from $45.90 million in AS A % OF ASSETS 2009, driven by a $1.3 million drop in loan loss provisions to $11.47 million and a PER EMPLOYEE $5.91 million cut in interest expense. Net PER DOMESTIC OFFICE income reflected increased overall earnings and jumped 40.7% to $22.95 million, BY COMPOUND ANNUAL GROWTH 1-3 YRS up from $16.31 million in 2009. Heintz- man said, “We credit our success in 2010 ORDER TODAY AND WE’LL EMAIL YOUR REPORT IN AS LITTLE AS 24 HOURS

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 41 slipped 2.5% to $1.96 million, down from MARCH 21 - 27, 2011 MARCH 21 - 27, 2011 $2.01 million in fourth quarter 2009. Bank SOLID INSURANCE EARNINGS INSURANCE COMPRISED 66% -owned life insurance (BOLI) income COMPRISE 18.6% OF NONINTEREST OF SUMMIT FINANCIAL’S dropped 53.7% to $113,000, down from INCOME AT FIRST M&F 2010 NONINTEREST INCOME $244,000, but trust and investment man- Kosciusko, MS-based, $1.6 billion-asset Moorefield, WV-based, $1.48 billion-asset agement (TIM) income rose 9.7% to First M&F Corp. reported insurance bro- Summit Financial Group reported insur- $1.36 million, up from $1.24 million. In- kerage fee income in fourth quarter 2010 ance brokerage fee income in fourth surance, TIM and BOLI earnings com- ticked up 0.9% to $864,000 from quarter 2010 slid 6.7% to $1.09 million, prised, respectively, 24.2%, 1.4% and $856,000 in fourth quarter 2009, and down from $1.16 million in fourth quarter 16.8% of noninterest income, which in- combined fiduciary and brokerage in- 2009, but contrasted with a 15.6% fall in creased 4.1% to $8.10 million, up from come rose 2.6% to $120,000, up from service fee income. Insurance income $7.78 million in fourth quarter 2009, $117,000. Insurance and combined fidu- was the largest contributor to noninterest helped by an almost doubling of mort- ciary and brokerage income comprised, earnings, which dropped 74.3% from gage banking income to $710,000. respectively, 17.4% and 2.4% of noninter- fourth quarter 2009 to $737,000, reflect- Net interest income on a 3.44% net est income, which increased 12.0% to ing a $1.21 million write down on other interest margin in fourth quarter 2010 fell $4.96 million, up from $4.43 million in real estate owned and $850,000 in other 17.9% to $7.11 million, down from $8.66 fourth quarter 2009, helped by a than temporary impairment of securities. million in fourth quarter 2009, despite a $537,000 gain in AFS securities. Net interest income on a 3.19% net $2.82 million cut in interest expense and Net interest income on a 3.57% net interest margin in fourth quarter 2010 a modest $196,000 increase in loan loss interest margin in fourth quarter 2010 soared 120% to $7.44 million, reflecting a provisions to $6.95 million. Net income reached $10.09 million and contrasted $2.34 million cut in interest expense. Net for the quarter totaled $55,000. with a net interest loss of $3.57 million in income of $836,000 contrasted with a net For the year 2010, insurance broker- fourth quarter 2009, when loan loss provi- loss of $508,000 in fourth quarter 2009. age fee income declined 5.8% to $8.85 sions were $13.5 million higher and inter- For the year 2010, insurance broker- million, down from $9.39 million in 2009, est expense was almost $2 million higher. age fee income slid 6% to $4.74 million, impacted by “lower commercial insurance Net income of $267,000 contrasted with a down from $5.05 million in 2009, and activity due to the weak economy and net loss of $27.49 in fourth quarter 2009. comprised 65.7% of noninterest income, competitive pricing of premiums by under- For the year 2010, insurance broker- which grew 25% to $7.22 million, up from writers,” Peoples Bancorp Chief Financial age fee income slipped 1.8% to $3.81 $5.80 million in 2009. Officer Edward Sloane said. BOLI in- million, down from $3.88 million in 2009, Net interest income on a 2.96% net come also fell, dropping 42.1% to but fiduciary/brokerage income rose 7.6% interest margin in 2010 fell 19% to $18.80 $608,000, down from $1.05 million, but to $526,000, up from $489,000. Insur- million, down from $23.22 million in 2009, TIM income grew 13.3% to $5.35 million, ance brokerage and fiduciary earnings despite an $6.47 million cut in interest up from $4.72 million in 2009. Insurance, comprised, respectively, 18.6% and 2.6% expense, as loan loss provisions in- TIM and BOLI earnings comprised, re- of noninterest income, which rose 2.8% creased by $1 million to $21.35 million. spectively, 28.0%, 1.9% and 16.9% of to $20.52 million, up from $19.97 million With noninterest expenses totaling noninterest income, which slipped 1.3% in 2009, helped by $2.26 million in gains $30.95 million, Summit reported a net to $31.63 million, down from $32.05 mil- on AFS securities. loss of $2.27 million, which contrasted lion in 2009, when deposit account ser- Net interest income reached $38.58 with a net loss of $790,000 in 2009. vices charges were $809,000 higher. million and contrasted with a net interest Summit Financial President and CEO H. Net interest income in 2010 fell 8.7% loss of $2.01 million in 2009, when inter- Charles Maddy III said, “Our primary fo- to $32.99 million, down from $36.12 mil- est expense and loan loss provisions cus remains to reduce our portfolio of lion in 2009, despite a $10.83 million cut were, respectively, $7.35 million and nonperforming assets.” He added, “We in interest expense. Net income totaled $40.39 million higher. Net income of are hopeful that the profit we reported in $3.5 million. Sloane said, “In 2010 we $15.07 million, including a $12.87 million the fourth quarter will serve as a baseline saw the benefits of a diversified revenue gain on the exchange of preferred stock, for profitability as we move into 2011.” stream as economic conditions and regu- contrasted with a net loss of $60.66 mil- In 2009, Summit Financial Group re- latory charges challenged certain revenue lion available to common shareholders in ported $5.05 million in insurance broker- sources.” 2009. age fee income, which comprised 49.8% In 2009, Peoples Bancorp’s $9.39 In 2009, First M&F Corp.’s $3.88 mil- of its noninterest income and 9.4% of its million in insurance brokerage fee income lion in insurance brokerage fee income net operating revenue. The company comprised 29.4% of its noninterest in- comprised 26.6% of its noninterest in- ranked 36th in insurance brokerage income and 10.0% of its net operating reve- come and 6.2% of its net operating reve- come among U.S. bank holding compa- nue. The company ranked 18th in insur- nue. The company ranked 44th in insur- nies with assets between $1 billion and ance brokerage income among U.S. bank ance brokerage income among U.S. bank $10 billion, according to the Michael holding companies with assets between holding companies with assets between White-Prudential Bank Insurance Fee $1 billion and $10 billion, according to the $1 billion and $10 billion, according to Income Report. Michael White-Prudential Bank Insurance Michael White-Prudential Bank Insurance Fee Income Report. Fee Income Report.

MARCH 28 - APRIL 3, 2011 in customer service fees to $436,000, noninterest income, comprising 57.8% of INSURANCE BROKERAGE EARNINGS down from $589,000 in fourth quarter that revenue, while brokerage and invest- DOMINATE 57.8% OF VIST’S 2010 2009. ment advisory and BOLI earnings com- NONINTEREST INCOME Net interest income on a 3.43% net prised, respectively, 3.6% and 2.1%. Wyomissing, PA-based, $1.43 billion- interest margin in fourth quarter 2010 Noninterest income grew 18.3% to asset VIST Financial reported “a de- grew 14.8% to $8.70 million, up from $20.62 million, up from $17.43 million in crease in contingency income on insur- $7.58 million in fourth quarter 2009, pri- 2009, helped by a $1.88 million gain on ance products sold through VIST Insur- marily reflecting a $718,000 cut in interest the sale of a 25% equity interest in First ance” accounted for a 9.2% decrease in expense and a stabilizing of loan loss HSA and a $1.60 million reduction in net insurance brokerage fee income in fourth provisions at $2.05 million. Net income credit impairment losses to $850,000. quarter 2010 to $2.72 million, down from soared 214% to $1.35 million, up from Net interest income on a 3.44% net $3.00 million in fourth quarter 2009. In $429,000 in fourth quarter 2009, before interest margin in 2010 grew 13.7% to contrast, brokerage and investment advi- the company acquired Bala Cynwyd, PA- $30.53 million, up from $26.85 million in sory commissions and fees jumped based Allegiance Bank of North America 2009, despite a $1.64 million increase in 43.3% to $172,000, up from $120,000, in an FDIC-assisted purchase. loan loss provisions to $10.21 million and and bank-owned life insurance (BOLI) For the year 2010, insurance broker- helped by an almost $4 million cut in in- earnings rose 9.0% to $121,000, up from age fee income slipped 2.8% to $11.92 terest expense. Net income surged $111,000. Insurance brokerage, broker- million, down from $12.25 million in 2009, 556% to $3.98 million, up from $607,000 age and investment advisory commis- when contingency fees were higher. Bro- in 2009, reflecting overall improved per- sions, and BOLI earnings comprised, kerage and investment advisory fees and formance and the FDIC-assisted Alle- respectively, 57.0%, 3.6% and 2.5% of commissions rose 3.2% to $737,000, up giance Bank acquisition. VIST Financial noninterest income, which rose 7.8% to from $714,000, and BOLI income in- President and CEO Robert Davis said, $4.77 million, up from $4.43 million in creased 8.2% to $423,000, up from “The Allegiance acquisition contributed fourth quarter 2009, despite a 26% drop $391,000. Insurance earnings dominated $51,000 to our fourth quarter pre-tax net Relax. You can count on us.

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FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 43 income [and] … represents a significant respectively, 27.3% and 12.7% of nonin- net operating revenue. The company market extension of our core Berks, terest income, which increased 7.1% to ranked 34th in insurance brokerage earn- Schuykill and Montgomery county mar- $14.09 million, up from $13.15 million ings among bank holding companies with kets … in[to] Philadelphia and the sur- when $2.56 million in other than tempo- assets between $1 billion and $10 billion, rounding suburbs.” Davis added, “Our rary impairment of securities was record- according to the Michael White-Prudential non-interest fee based revenue … contin- ed. Bank Insurance Fee Income Report. ues to represent 31% of our total net rev- Net interest on a 3.19% net interest In 2009, German American’s $577,000 enue.” margin in 2010 rose 1.2% to $35.15 mil- in fiduciary income comprised 3.5% of its In 2009, VIST Financial reported lion, up from $34.73 million in 2009, driv- noninterest income and 0.9% of net oper- $12.25 million in insurance brokerage en by a $5.4 million cut in interest ex- ating revenue. The company ranked income, which comprised 66.5% of its pense as loan loss provisions rose 198th in fiduciary income among U.S. noninterest income and 22.8% of its net $450,000 to $7.05 million. Net income bank holding companies with assets be- operating revenue. The company ranked more than tripled to $4.7 million, up from tween $1 billion and $10 billion, according 13th in insurance brokerage earnings $1.4 million in 2009. MutualFirst Presi- to the Michael White Bank Fiduciary Fee among bank holding companies with as- dent and CEO David Heeter said, “While Income Ratings Report. sets between $1 billion and $10 billion, we are still prudently working through according to the Michael White-Prudential credit issues, we believe 2010 was a very MARCH 28 - APRIL 3, 2011 TRUST AND INVESTMENT INCOME Bank Insurance Fee Income Report. good year.” RISES AT SHORE WHERE MARCH 28 - APRIL 3, 2011 MARCH 28 - APRIL 3, 2011 INSURANCE DOMINATES 56% OF GROWING BOLI, TRUST AND WEALTH GERMAN AMERICAN LOOKS NONINTEREST EARNINGS MANAGEMENT EARNINGS TO EXPAND PROFITABLE Easton, MD-based, $1.13 billion-asset COMPRISE 40% OF MUTUALFIRST’S INSURANCE BUSINESS Shore Bancshares reported insurance NONINTEREST INCOME Jasper, IN-based, $1.38 billion-asset Ger- brokerage fee income in fourth quarter Muncie, IN-based, $1.4 billion-asset Mu- man American Bancorp reported insur- 2010 slipped 2% to $2.12 million, down tualFirst Financial reported trust and ance brokerage fee income in 2010 rose from $2.16 million in fourth quarter 2009, wealth management commissions in 1% to $5.35 million, up from $5.30 million while trust and investment (TI) income fourth quarter 2010 grew 9.0% to in 2009, while trust and investment (TI) rose 2.3% to $358,000, up from $350,000 $925,000, up from $849,000 in fourth product fees slipped 2% to $1.58 million, in fourth quarter 2009. Still, insurance quarter 2009, and bank-owned life insur- down from $1.62 million. Bank-owned life earnings dominated noninterest income, ance (BOLI) income rose 4.1% to insurance (BOLI) income dropped 27% to comprising 53.7% of that revenue, which $406,000, up from $390,000. Trust/ $806,000 from $1.10 million in 2009, slid 4.3% to $3.95 million, down from wealth management commissions and when the company received death benefit $4.13 million in 2009. In contrast, rising BOLI earnings comprised, respectively, payouts. Insurance, TI and BOLI earn- TI earnings comprised 9.1% of noninter- 23.7% and 10.4% of noninterest income, ings comprised, respectively, 31.6%, est income. which jumped 120% to $3.91 million, up 9.3%, and 4.8% of noninterest income, Net interest income on a 4.09% net from $1.78 million in fourth quarter 2009, which increased 7% to $16.94 million, up interest margin in fourth quarter 2010 when the company recorded $2.36 million from $15.86 million in 2009. decreased 9.3% to $6.47 million, down in other than temporary impairment of With net interest income on a 3.98% from $7.14 million in fourth quarter 2009, securities. net interest margin in 2010 growing 9.2% as an almost $1 million cut in interest Net interest income on a 3.10% net to $49.48 million, up from $45.32 million expense was not to compensate for de- interest margin in fourth quarter 2010 in 2009, net income grew 10% to a record creased interest on deposits and a 20% slipped 2.1% to $8.45 million, down from $13.4 million, up from $12.2 million in climb in loan loss provisions to $4.39 mil- $8.63 million in fourth quarter 2009, de- 2009. German American Chairman and lion. Net income dropped 29.2% to spite a $1.29 million cut in interest ex- CEO Mark Schroeder said, “This achieve- $850,000, down from $1.2 million in pense, which more than compensated for ment is due to the fiscal responsibility of fourth quarter 2009. the $125,000 increase in loan loss provi- our customers, the economic vitality of Insurance brokerage fee income for sions to $1.78 million. Net income of $1.4 the Southern Indiana communities we the year 2010 decreased 9.1% to $10.11 million contrasted with a net loss of $1.6 serve, and the commitment of our staff of million, down from $11.13 million in 2009, million in fourth quarter 2009, when the dedicated financial professionals.” while TI income jumped 36.6% to $1.5 company was impacted by the aforemen- On January 1, 2011, German Ameri- million, up from $1.1 million. Insurance tioned $2.36 million in securities impair- can acquired Evansville, IN-based, $340 and TI earnings comprised, respectively, ment. million-asset Bank of Evansville, where, 56.0% and 8.3% of noninterest income, For the year 2010, trust and wealth Schroeder said, the company is “excited which slid 7.7% to $18.04 million, down management commissions climbed about … the expansion of our insurance from $19.54 million in 2009. 26.2% to $3.85 million, up from $3.05 and investment lines of business.” Net interest income on a 4.02% net million in 2009, and BOLI income grew In 2009, German American Bancorp interest margin in 2010 dropped 33.6% to 14.0% to $1.79 million, up from $1.57 reported $5.17 million in insurance bro- $21.52 million, down from $32.39 million million. Trust/wealth management com- kerage income, which comprised 31.8% in 2009, as loan loss provisions jumped missions and BOLI earnings comprised, of its noninterest income and 8.5% of its by $12.13 million to $21.12 million and

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 44 undermined a $4.59 million slash in inter- company’s leasing portfolio. Net income higher employee benefit and marketing est expense. With increased expenses tumbled 64.3% to $500,000, down from expenses associated with insurance including $1.9 million in dividends and $1.4 million in fourth quarter 2009. sales. discount accretion tied to the sale and For the year 2010, insurance broker- For year 2010, insurance brokerage repurchase of preferred shares under the age fee income slipped 2.8% to $6.99 and health and benefit-associated fee Troubled Asset Relief Program (TARP), million, down from $7.19 million in 2009; income climbed 10.5% to a record $17.50 Shore reported a net loss of $1.7 million and BOLI income fell 19% to $468,000, million, up from $15.84 million in 2009, in 2010, which contrasted with net income down from $578,000. Insurance and and comprised 76.5% of noninterest in- of $5.4 million in 2009. Shore BOLI earnings comprised, respectively, come, which grew 9.6% to $22.89 million, Bancshares CEO W. Moorehead Vermi- 55.3% and 3.7% of noninterest income, up from $20.88 million in 2009, driven by lye said, “We are proactively managing which declined 10.2% to $12.63 million,, commissions and fees on sales of insur- our way through a very tough operating impacted by a 16.1% drop in deposit ser- ance brokerage-related products. environment for community banks.” Ver- vice charges to $1.9 million, while slip- Net interest income in 2010 slipped milye added, “We remain well-capitalized ping insurance revenue remained the 1.3% to $16.45 million, down from $16.67 with our capital ratios continuing to be largest contributor to noninterest income million in 2009, as a $1.89 million cut in well in excess of regulatory minimums.” overall. interest expense was not enough to com- In 2009, Shore Bancshares reported Net interest income on a 4.16% net pensate for lower interest on deposits and $11.1 million in insurance brokerage in- interest margin in 2010 jumped 70% to borrowings and an $890,000 increase in come and $520,000 in fiduciary income, $20.55 million, up from $12.09 million in loan loss provisions to $1.65 million. Net which comprised, respectively, 57.1% 2009, driven by a $6.56 million drop in income declined 7.3% to $3.8 million, and 2.7% of its noninterest income. The loan loss provisions to $3.94 million and a down from $4.1 million in 2009, reflecting company ranked 15th in insurance bro- $1.18 million cut in interest expense. Net decreased net interest income and higher kerage earnings and 201st in fiduciary income soared 585% to $4.84 million, up noninterest expenses. income among bank holding companies from $707,000 in 2009 as a direct result Oneida Financial President and CEO with assets between $1 billion and $10 of the company’s strategic focus on get- Michael Kallet commented on the compa- billion, according to the Michael White- ting its clients to entrust their complete ny’s past and future performance and Prudential Bank Insurance Fee Income banking relationship to Evans, Evans said, “Our insurance and financial ser- Report and the Michael White Bank Trust Bancorp President and CEO David Nas- vices subsidiaries, Bailey & Haskell and Fee Income Ratings Report. ca said. Nasca added, “Evans has re- Benefit Consulting Group, once again turned to a more historic profile of profita- posted a record revenue year in 2010.” MARCH 28 - APRIL 3, 2011 bility and is well-positioned to further build Looking ahead, he added, “Our business SOFT MARKET ASIDE, 55.3% OF market share both organically and strategies position us as a diversified EVAN’S NONINTEREST INCOME through acquisition.” banking and financial services company.” COMES FROM INSURANCE In 2009, Oneida Financial’s $9.69 mil- Hamburg, NY-based, $672 million-asset MARCH 28 - APRIL 3, 2011 lion in insurance brokerage fee income Evans Bancorp reported The Evans ONEIDA’S INSURANCE AND BENEFIT only comprised 43.2% of its noninterest Agency posted a 10% decline in insur- CONSULTING BUSINESSES GENER- income and 24.3% of its net operating ance brokerage fee income in fourth ATE RECORD REVENUE AND 76.5% revenue. The company ranked second in quarter 2010 to $1.34 million, down from OF NONINTEREST EARNINGS insurance brokerage income among U.S. $1.78 million in fourth quarter 2009 “as Oneida, NY-based, $661.6 million-asset banks with assets between $500 million the soft insurance market and macro- Oneida Financial reported commissions and $1 billion, according to the Michael economic conditions put downward pres- and fees generated by Bailey, Haskell & White-Prudential Bank Insurance Fee sure on personal and commercial proper- LaLonde Agency, Benefit Consulting Income Report. ty and casualty insurance commissions.” Group and Workplace Health Solutions in Bank-owned life insurance (BOLI) income fourth quarter 2010 rose 7.5% to $4.56 MARCH 28 - APRIL 3, 2011 slipped as well, down 2.7% to $109,000 million, up from $4.24 million in fourth INSURANCE AND BOLI COMPRISE from $112,000. Insurance brokerage quarter 2009, and dominated noninterest 57.7% OF NORTHEAST’S NONINTER- commissions and BOLI earnings com- income, comprising 74.4% of that reve- EST INCOME DESPITE SLIDES prised, respectively, 47.3% and 3.9% of nue, which grew 10.8% to $6.13 million, Lewiston, ME-based, $644.8 million-asset noninterest income, which decreased up from $5.53 million in fourth quarter Northeast Bancorp Northeast Bank Insur- 4.4% to $2.83 million, down from $2.96 2009, despite a decline in deposit ac- ance Group generated $1.22 million in million in fourth quarter 2009, when insur- count service charges. insurance brokerage fee income in fourth ance, BOLI and deposit service charges Net interest income on a 3.33% net quarter 2010, 11.6% short of the $1.38 were higher. interest margin in fourth quarter 2010 million generated in fourth quarter 2009. Net interest income on a 4.0% net remained flat at $4.44 million, driven by a Bank-owned life insurance (BOLI) income interest margin in fourth quarter 2010 fell $421,000 cut in interest expense. Net also declined, slipping 2.4% to $123,000, 9.1% to $4.68 million, down from $5.15 income rose 25.0% to $1.5 million, up down from $126,000, but securities bro- million in fourth quarter 2009, reflecting a from $1.2 million in fourth quarter 2009, kerage fee income grew 16.8% to $490,000 increase in loan loss provisions despite a $500,000 increase in noninter- $625,000, up from $535,000 in fourth to $1.41 million, with $400,000 tied to the est expense to $8.8 million largely tied to quarter 2009. Insurance, securities bro-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 45 kerage and BOLI earnings comprised, Northeast’s solid community banking slid 7.7% to $72,000, down from $78,000, respectively, 39.7%, 3.5% and 18.0% of franchise. We plan to introduce two new and trust earnings slipped 1.8% to noninterest income, which grew 14.9% to business lines: a loan acquisition and $54,000, down from $55,000. Insurance, $3.48 million, up from $3.03 million in servicing group and an affinity deposit investment brokerage and trust earnings fourth quarter 2009, when the December program, which will create new jobs in comprised, respectively, 24.1%, 6.3% 29, 2010 merger with FHB Formation is Maine and offer new savings products for and 4.7% of noninterest income, which not included, or spiked four fold to $15.06 customers.” fell 18.4% to $1.15 million, down from million when the bargain purchase gain of In 2009, Northeast Bancorp reported $1.41 million in fourth quarter 2009, when $14.92 million on that merger is included. $5.88 million in insurance brokerage fee service charges on deposit accounts Net interest income on a 2.86% net income, which comprised 53.2% of its were higher and the company reported a interest margin in fourth quarter 2010, not noninterest income and 20.8% of its net $221,000 net gain on the sale of securi- including FHB, fell 9.7% to $3.65 million, operating revenue. The company ranked ties. down from $4.04 million in fourth quarter 4th in insurance brokerage income Net interest income on a 3.84% net 2009, despite flat loan loss provisions of among U.S. bank holding companies with interest margin in fourth quarter 2010 slid $453,000 and a $575,000 cut in interest assets between $500 million and $1 bil- 3.3% to $2.38 million, down from $2.46 expense. Net income, excluding FHB, lion, according to the Michael White- million in fourth quarter 2009, despite a jumped 31.9% to $777,000, up from Prudential Bank Insurance Fee Income $214,000 cut in interest expense as loan $589,000, and including FHB, spiked Report. loss provisions remained stable at fifteen fold to $11.83 million, driven by $150,000. With a $326,000 increase in noninterest income before and after the APRIL 4 - 10, 2011 noninterest expense, net income dropped RISING INSURANCE BROKERAGE merger. 56.9% to $304,000, down from $706,000 EARNINGS COMPRISE 24% OF SW Regarding Northeast Bancorp’s fourth in fourth quarter 2009. GEORGIA’S 4Q 2010 NONINTEREST quarter performance and the implications For year 2010, insurance brokerage INCOME of its end of year merger with FHB, North- fee income rose 5.6% to $1.13 million, up Moultrie, GA-based, $296.4 million-asset east Bancorp President and CEO Richard from $1.07 million in 2009; investment Southwest Georgia Financial reported Wayne said, “With the successful comple- brokerage fee income grew 12.8% to insurance brokerage fee income in fourth tion of the merger and integration with $300,000, up from $266,000; and trust quarter 2010 rose 1.1% to $277,000, up management between Northeast and services income climbed 13.1% to from $274,000 in fourth quarter 2009, FHB, we look forward to building upon $241,000, up from $213,000. Insurance while investment brokerage fee income

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FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 46 brokerage, investment brokerage and contrasted with a net loss of $199,000 in 9.2% to $4.54 million, down from $5.00 trust earnings comprised, respectively, fourth quarter 2009. million in 2009, when charges on deposit 22.2%, 5.9% and 4.7% of noninterest For the year 2010, TI earnings grew accounts and gains on the sale of loans income, which slipped 0.6% to $5.09 mil- 10.6% to $1.56 million, up from $1.41 were higher. lion, down from $5.12 million in 2009, million in 2009, while BOLI income fell Net interest income on a 3.80% net when service charges on deposit ac- 10.3% to $295,000, down from $329,000. interest margin in 2010 grew 11.0% to counts were $199,000 higher. TI and BOLI earnings comprised, respec- $7.98 million, up from $7.19 million in Net interest income on a 3.90% net tively, 27.6% and 5.2% of noninterest 2009, reflecting a $63,000 decrease in interest margin in 2010 rose 1.5% to income, which rose 0.7% to $5.66 million, loan loss provisions to $907,000 and a $9.53 million, up from $9.39 million in up from $5.62 million in 2009, despite an $1.88 million cut in interest expense. Net 2009, reflecting a $783,000 cut in interest almost $100,000 drop in service charges income, however, slipped 4.10% to $2.02 expense as loan loss provisions rose and fees on deposit accounts. million, down from $1.94 million in 2009. $64,000 to $600,000. With noninterest Net interest income in 2010 fell 35.1% Wells Financial President Lonnie Trasa- expense trimmed by $15,000, net income to $4.67 million, down from $7.20 million mar said, “During the first two quarters of rose to $1.86 million, up from $1.81 mil- in 2009, reflecting a $2.85 million jump in 2010, the Bank experienced less activity lion in 2009. Southwest Georgia Finan- loan loss provisions to $5.39 million, in loan originations for sale to the second- cial President and CEO DeWitt Drew which undercut a $1.73 million slice in ary markets when compared to the first said, “The economic downturn continues interest expense. A net loss of $709,000 two quarters in 2009, resulting in a de- to challenge our region, however, our contrasted with net income of $915,000 in crease in gain on the sale of loans in strength and stability in the market and 2009. Sturgis Bancorp President and 2010.” our focused efforts enabled us to achieve CEO Eric Eishen said, “The majority of solid results in 2010.” the loss was attributable to additional APRIL 4 - 10, 2011 FIRST FEDERAL OF NORTHERN In 2009, Southwest Georgia Financial provisioning in the Allowance for Loan MICHIGAN SAW DECLINES IN INSUR- reported $1.07 million in insurance bro- and Lease Losses (ALLL)…. The bank ANCE & INVESTMENT BROKERAGE kerage income, which comprised 22.0% has made some changes to the credit EARNINGS IN 2010 of its noninterest income and 7.2% of its department and expects troubled loans to Alpena, MI-based, $216 million-asset net operating revenue. The company mitigate as the economy improves in First Federal of Northern Michigan Ban- ranked 10th in insurance brokerage earn- 2011.” He added, however, that in the corp reported combined insurance and ings among banks with assets between bank’s market “real estate values contin- investment brokerage fee income fell $100 million and $300 million, according ue to be depressed and employment re- 8.7% to $36,691 in fourth quarter 2010, to the Michael White-Prudential Bank mains weak.” down from $40,174 in fourth quarter Insurance Fee Income Report. APRIL 4 - 10, 2011 2009, and comprised 5.7% of noninterest APRIL 4 - 10, 2011 INSURANCE BROKERAGE EARNINGS income, which climbed 23.6% to GROWING TRUST & INVESTMENT CONTINUED UP AT WELLS FINAN- $643,853, up from $521,033, driven by a BROKERAGE EARNINGS COMPRISE CIAL IN 2010 $181,685 increase in mortgage loan 27.6% OF STURGIS BANCORP’S 2010 Wells, MN-based, $238.8 million-asset sales, a $13,484 cut in interest expense NONINTEREST INCOME Wells Financial reported insurance bro- and a $49,595 gain on investment sales, Sturgis, MI-based, $370 million-asset kerage fee income in fourth quarter 2010 which overcame a $96,006 loss on equip- Sturgis Bancorp reported combined trust rose 5.2% to $162,000, up from $154,000 ment and other real estate owned and investment brokerage (TI) fee income in fourth quarter 2009, and comprised (OREO). in fourth quarter 2010 grew 15.2% to 10.9% of noninterest income, which Net interest income of $1.97 million on $448,000, up from $389,000 in fourth climbed 37.0% to $1.48 million, up from a 3.93% net interest margin in fourth quarter 2009, while bank-owned life insur- $1.08 million in fourth quarter 2009, driv- quarter 2010 contrasted with a net inter- ance (BOLI) income fell 11.3% to en by a $501,000 jump in a gain on sale est loss of $918,944 in fourth quarter $71,000, down from $80,000. TI and of loans to $783,000. 2009, reflecting a $2.64 million in loan BOLI earnings comprised, respectively, Net interest income on a 4.40% net loss provisions to $67,553 and a 20.2% and 3.2% of noninterest income, interest margin in fourth quarter 2010 $233,629 cut in interest expense. Net which more than doubled to $2.22 million, increased 8.1% to $2.01 million, up from income of $79,511 compared with a net up from $1.06 million in fourth quarter $1.86 million in fourth quarter 2009, as a loss of $3.09 million in fourth quarter 2009, driven by a $1.01 million gain on $572,000 cut in interest expense com- 2009. the sale of securities. pensated for a $257,000 increase in loan Combined insurance and investment Net interest income on a 3.07% net loss provisions to $402,000. Net income, brokerage fee income in 2010 slid 6.4% interest margin in fourth quarter 2010 reflecting overall positive performance, to $159,046, down from $169,971 in dropped 55.1% to $776,000, down from jumped 39% to $611,000, up from 2009, and comprised 5.0% of noninterest $1.73 million in fourth quarter 2009, de- $440,000 in fourth quarter 2009. income, which climbed 24.9% to $3.21 spite a $317,000 cut in interest expense, For year 2010, insurance brokerage million, up from $2.57 million in 2009, as loan loss provisions jumped by $1.11 fee income increased 6.8% to $679,000, driven by a $546,412 gain on the sale of million to $1.80 million. Net income of up from $636,000 in 2009, and comprised available-for-sale investments. $72,000, driven by noninterest earnings, 15.0% of noninterest income, which fell Net interest income on a 3.78% net

interest margin in 2010 surged six-fold to Annuity earnings among BHCs with York City-based, $2.1 trillion-asset $6.97 million, up from $1.16 million in over $10 billion in assets comprised JPMorganChase, where annuity earnings 2009, driven by a $5.17 million drop in 94.4% of all BHC annuity fee income, but fell 21% to $259 million. Charlotte, NC- loan loss provisions to $1.03 million and a slid 2% to $2.43 billion, down from $2.48 based, $2.3 trillion-asset Bank of America $1.64 million cut in interest expense. Net billion. In contrast, annuity earnings Corp. maintained its fourth-ranked posi- income of $972,800 compared with a net among BHCs with $1 billion to $10 billion tion, despite a 28.8% drop in annuity fee loss of $6.76 million in 2009. First Feder- in assets rose 1.9% to $123.2 million, and income to $179.4 million, and Birming- al of Northern Michigan Bancorp Presi- annuity earnings among BHCs with $500 ham, AL-based Regions Financial bene- dent and CEO Michael Mahler said, “We million to $1 billion in assets inched up fited from 10% growth in annuity earnings experienced a marked improvement in 0.9% to $22.2 million. to $102.8 million, enough to replace for- core banking in 2010…. In addition, we Among the top 50 BHCs in annuity fee merly fifth-ranked PNC Financial among are encouraged by the increased interest income in 2010, annuity earnings com- the top five. in and the successful sale of bank-owned prised a mean 12.9% of noninterest in- American Bankers Insurance Associa- properties during 2010.” come (Annuity Concentration Ratio), and tion (ABIA) Executive Director Valerie mean annuity income per employee Barton commented on the contrast be- APRIL 25 - MAY 1, 2011 reached $3,007 (Annuity Productivity tween annuity sales survey results and BANK ANNUITY FEE INCOME SLIPS Ratio). Among the top 50 BHCs with the MWA-ABIA findings based on data 1.8% IN 2010 under $500 million in assets, the mean BHCs filed with the Federal Reserve. Annuity fee income earned by U.S. bank Annuity Concentration Ratio grew to Barton said, “Given the numerous sur- holding companies (BHCs) slipped 1.8% 16.5%, and the mean Annuity Productivi- veys indicating significant drops in annui- in 2010 to $2.57 billion, down from $2.62 ty Ratio reached $4,298. ty sales in 2010, one has to conclude that billion in 2009, according to the Michael San Francisco, CA-based, $1.3 trillion- more of the annuity revenues BHCs are White-ABIA Bank Annuity Fee Income asset Wells Fargo & Co. retained its num- earning are asset fees or trailer commis- Report based on data reported to banking ber one position among all U.S. BHCs in sions, continuing or renewing streams of regulators. Less than half (42.4%) of annuity earnings, recording 4.13% growth income that make the sellers less de- large top-tier BHCs reported annuity earn- in that revenue to $706 million. New York pendent on front-end commissions from ings in 2010, led by BHCs with over $10 City-based, $808 billion-asset Morgan new sales.” billion in assets (74.7%), while BHCs with Stanley achieved a 30.8% jump in annui- To read more of the top-level findings, $500 million to $1 billion in assets record- ty earnings to $331 million to rank a dis- click here. ed the lowest participation rate (33.9%). tant second, ahead of third-ranked, New To order the 2011 Michael White-ABIA Bank Annuity Fee Income Report, click here.

MAY 9 - 15, 2011 TOP 10 BANK HOLDING COMPANIES IN ANNUITY FEE INCOME U.S. BHCS GENERATE RECORD YEAR-END DECEMBER 31, 2010 - NATIONALLY $13.33 BILLION IN INSURANCE BROKERAGE EARNINGS IN 2010 R % ANNUITY INCOME % OF Bank insurance brokerage fee income in A CHANGE BANK HOLDING COMPANY ASSETS NONINT. N 2009 2010 reached a record level, according to K - 2010 INCOME 2010 2009 the Michael White-Prudential Bank (ALL DOLLAR AMOUNTS IN THOUSANDS) Insurance Fee Income Report, as it rose 1 $706,000 $678,000 2.58% Wells Fargo & Company CA $1,258,010,000 1.76% 7.9% from $12.36 billion in 2009 to $13.33 billion in 2010. 2 $331,000 $253,000 41.07% Morgan Stanley NY $807,698,000 1.09% Compiled by Michael White Associates (MWA) since 2001 and sponsored by The 3 $259,000 $328,000 -28.29% JPMorgan Chase & Co. NY $2,115,583,000 0.53% Prudential Insurance Company of 4 $179,383 $251,828 -37.65% Bank of America Corp. NC $2,261,499,723 0.33% America’s Individual Life Insurance business, a proud member of the 5 $102,807 $93,532 9.96% Regions Financial Corp. AL $132,399,290 3.50% American Bankers Insurance Association (ABIA), this report measures and bench- 6 $86,955 N/A -39.19% RBC USA HoldCo Corp. NY $99,150,441 3.50% marks the banking industry’s performance 7 $77,013 $121,284 5.25% PNC Financial Services Grp. PA $264,414,112 1.31% in generating insurance brokerage and underwriting fee income. Results are 8 $63,267 $80,455 -26.65% Suntrust Banks, Inc. GA $172,875,298 1.84% based on data from all 6,927 commercial and FDIC-supervised savings banks and 9 $59,199 $60,725 -19.23% Keycorp OH $90,795,572 3.16% 911 large top-tier bank holding compa- 10 $56,000 $66,000 26.03% U.S. Bancorp MN $307,786,000 0.67% nies (BHCs) operating on December 31, 2010. SOURCE: Michael White-ABIA Bank Annuity Fee Income Report “In 2010, the number of bank holding

are not required to report insurance bro- TOP 10 BANK HOLDING COMPANIES IN INSURANCE BROKERAGE FEE INCOME kerage income. Leaders among bank YEAR-END DECEMBER 31, 2010 - NATIONALLY proxies for small BHCs were Soy Capital Bank and Trust Company (IL), Bank For- ward (ND), Hoosac Bank (MA), First R INSURANCE % State Bank (IA), and Industry State Bank A BROKERAGE INCOME CHANGE % OF BANK HOLDING COMPANY ASSETS NONINT. (TX). N 2009 INCOME K 2010 2009 - 2010 “Single premium life insurance has (ALL DOLLAR AMOUNTS IN THOUSANDS) proven to be particularly attractive to bank customers and offers a valuable stream 1 $1,862,000 $1,040,000 79.04% Citigroup Inc. NY $1,913,410,000 6.30% of fee income to financial institutions,” 2 $1,780,000 $1,725,000 3.19% Wells Fargo & Company CA $1,258,010,000 4.44% said Joan H. Cleveland, senior vice president, Business Development with 3 $933,349 $922,489 1.18% BB&T Corporation NC $157,081,396 33.05% Individual Life Insurance, The Prudential Insurance Company of America. “Our 4 $298,000 $191,000 56.02% Morgan Stanley NY $807,698,000 0.98% immediate-issue single premium univer- 5 $196,899 $136,016 44.76% American Express Company NY $145,849,493 0.94% sal life insurance policy simplifies the sales process by leveraging an innovative 6 $139,131 $128,796 8.02% Discover Financial Services IL $63,894,877 7.75% Internet-based application process that can deliver a policy in real-time.” 7 $131,000 $124,000 5.65% Goldman Sachs Group NY $908,580,000 0.39% Among the top 50 bank holding compa- 8 $110,000 $122,000 -9.84% Ally Financial Inc. MI $172,006,000 1.22% nies nationally in insurance brokerage concentration (i.e., insurance brokerage 9 $107,920 $110,721 -2.53% Regions Financial Corp. AL $132,399,290 3.67% income as a percent of noninterest income), the adjusted mean Insurance Bro- 10 $88,000 $92,000 -4.35% JPMorgan Chase & Co. NY $2,115,583,000 0.18% kerage Concentration Ratio was 40.4%. Ranking excludes MetLife, Inc., a traditional life insurance company. Among the top 50 small banks in insur- SOURCE: Michael White-Prudential Bank Insurance Fee Income Report ance brokerage concentration that are Prudential is a proud Platinum member of the American Bankers Insurance Association (ABIA) serving as proxies for small bank holding companies, the adjusted mean Insurance Brokerage Concentration Ratio was companies that grew their insurance bro- income from $11.63 billion in 2009 to 73.0% of noninterest income. kerage revenues largely equaled those $12.60 billion in 2010. Bank holding Among the top 50 bank holding compa- that didn’t. We examined 162 bank hold- companies with assets between $1 billion ny leaders in insurance brokerage ing companies with at least $1 million in and $10 billion experienced a slight 0.2% productivity (i.e., insurance brokerage insurance brokerage income. While one decline in insurance brokerage income income per bank holding company em- bank holding company had no growth from $587.8 million in 2009 to $586.6 ployee), the mean Insurance Brokerage and 6 were new, positive reporters of that million in 2010. Productivity Ratio was $21,926 per em- revenue, 81 bank holding companies Excluding MetLife, a traditional life in- ployee. Among the top 50 small banks in increased their insurance brokerage insurer, Citigroup, Inc. (NY), Wells Fargo & insurance brokerage productivity, the come, while 74 experienced declines. Company (CA), BB&T Corporation (NC), adjusted mean Insurance Brokerage Forty-four (44) had increases under 10%, and Morgan Stanley (NY) led all BHCs in Productivity Ratio was $34,205 per em- and 46 had declines of less than 10%,” insurance brokerage income in 2010. ployee. said Michael White, President of MWA. Among BHCs with assets between $1 For more information about the 2011 “Thirty-seven (37) achieved revenue in- billion and $10 billion, leaders included edition of the Michael White-Prudential creases over 10%, and 28 BHCs endured Eastern Bank Corporation (MA), Stifel Bank Insurance Fee Income Report and decreases greater than 10%. A difficult Financial Corp. (MO), Old National Ban- how to order it, click here. economy, soft commercial insurance mar- corp (IN), Trustmark Corporation (MS), kets, and BHCs’ capital restraint inhibiting and Johnson Financial Group, Inc. (WI). MAY 9 - 15, 2011 LLOYDS BANK SETS ASIDE acquisition have hindered agencies Among bank holding companies with $5.3 BILLION IN PPI PROVISIONS, across the country, whether bank-owned assets between $500 million and $1 bil- WHICH ALSO HIT B OF A or not. For many, life insurance seems to lion, leaders were Two Rivers Financial London, England-based, 41% govern- have been the one bright glimmer in Group (IA), 473 Broadway Holding Cor- ment-owned Lloyds Banking Group set 2010.” poration (NY), Texas Independent aside £3.2 billion ($5.3 billion) in provi- The largest bank holding companies, Bancshares (TX), Evans Bancorp, Inc. sions in the first quarter to cover what it those with assets over $10 billion, had the (NY), and Northeast Bancorp (ME). The described as “potential costs of customer highest participation (92.0%) in insurance smallest community banks with assets contact and/or redress following High brokerage activities. They managed an less than $500 million were used as Court judgment and discussions with the 8.3% increase in insurance brokerage “proxies” for the smallest BHCs, which

Financial Services Authority (FSA)” re- sonably estimate the total amount of ad- and author of the report. “Our benchmark garding inappropriate Payment Protection ditional possible loss or a range of loss as findings show meaningful improvements Insurance (PPI) sales. Lloyds stopped of September 30, 2010.” in Program Concentration, Penetration, offering PPI products in July 2010, but is To read more about the impact of this Productivity and Density, key measures estimated to have sold 4 million policies restatement that caused FIA Card Ser- by which to gauge investment program prior to that time. vices to go from positive earnings of strength.” In April, Britain’s High Court let stand $177.814 million originally filed in 2009 to Program Production the FSA’s Policy Statement of August 10, a loss of $435.516 million in 2010, order In 2010, 1,517 or 22.4% of community 2010, which outlines evidential provisions the 2011 edition of the Michael White- banks participated in investment program and guidelines regarding customer com- Prudential Bank Insurance Fee Income activities, producing $456.5 million in pro- plaints and financial redress for valid Report. gram income, up 9.4% from $417.4 mil- complaints concerning inappropriate PPI lion in 2009. Fourth quarter 2010 pro- sales and contact. Lloyds said, “While MAY 16 - 22, 2011 gram income of $113.7 million declined 15.4% CLIMB IN SECURITIES there are still a number of uncertainties 2.4% from $116.5 million in third quarter BROKERAGE EARNINGS as to the eventual costs from any such 2010, but was up 8.1% from $105.3 mil- DRIVES INVESTMENT PROGRAM contact and/or redress, the Group has lion in fourth quarter 2009. REVENUE UP 9.4% AT made a provision of £3.2 billion at this These community banks achieved U.S. COMMUNITY BANKS time.” With the provision, Lloyds reported average investment program fee income Community bank investment programs a first quarter pretax loss of £3.47 billion of $300,928 in 2010, up 15.8% from strengthened in 2010 due to increases in ($5.69 billion). $259,889 in 2009. The number of banks both securities brokerage fee income and This same FSA Policy Statement sig- participating in investment program activi- annuity commissions, according to the nificantly impacted Bank of American ties was down by 5.5% from 1,606 banks Michael White-Securities America Report: Corporation’s (B of A) subsidiary FIA in 2009 to 1,517 banks in 2010. Community Bank Investment Programs. Card Services. At the end of first half Program Penetration Sponsored by Securities America and 2010, FIA Card Services reported The Penetration of an investment pro- issued by Michael White Associates, $116.95 million in insurance brokerage gram is measured as the amount of pro- LLC, the report measures and bench- earnings. By the end of the third quarter, gram revenue generated per million dol- marks investment programs at community however, the company reported a lars of core or retail deposits. These de- banks, i.e., banks with less than $4 billion $442.02 million loss in that revenue. posits substitute as a measure of retail in assets. The current report is based on In a 10-Q filing, Bank of America said, customers and the breadth of the custom- data reported by 6,760 commercial and “Given the new regulatory guidance, as of er relationship, since the data for retail FDIC-regulated savings banks operating September 30, 2010, the Corporation customers or retail households are hard on December 31, 2010. The report not recorded a liability of $592 million based to obtain on a reliable, national, and only examines all community banks, but it on its current claims history and an esti- standardized basis. further segments them into five asset mate of future claims which have yet to “In 2010, community banks earned classes whose performance is also ana- be asserted against the Corporation. The mean investment program income of lyzed. liability is included in accrued expenses $851 per million dollars of retail bank de- “The 2010 revenues of community and other liabilities and the related ex- posits,” said White. “In contrast, big bank investment programs remained well pense is included in insurance income … banks with assets over $4 billion attained ahead of those in 2009. Indeed, 2010 it is possible that an additional liability a higher mean Investment Program Pen- was the best year for those program rev- may be required. As the review will not etration of $1,352 per million dollars of enues since 2007,” said Michael White, be completed until the first quarter of retail deposits. There is by comparison, president of Michael White Associates 2011, the Corporation is unable to rea- then, room for continued improvement in program penetration and overall expansion of community bank investment programs.” 2010 INVESTMENT PROGRAM INCOME PERFORMANCE BENCHMARKS Program Concentration FOR COMMUNITY BANKS - NATIONALLY Program Concentration calculates the portion of total noninterest income attributable to a specific kind of noninterest PERFORMANCE MEASURES MEAN fee income. This ratio enables us to PRODUCTION - Dollar Volume $300,928 know how concentrated or meaningful bank investment programs are among CONCENTRATION - % of Noninterest Income 7.67% their banks’ non-lending activities. PENETRATION – $ per Million Dollars of Retail Deposits $851 As a group, community banks achieved a mean Concentration of invest- PRODUCTIVITY - $ per Bank Employee $2,189 ment program income to noninterest income of 7.7% in 2010, up from 6.4% in DENSITY - $ per Domestic Office $49,501 2009. Large banks, those with assets SOURCE: Michael White-Securities America Report: Community Bank Investment Programs

SOURCE: Michael White Community Bank Investment Programs Report greater than $4 billion, had a mean Con- adjusted reading for Program Density banks with assets in excess of $4 billion centration ratio of 4.3%, although they among community banks produces a Pro- had a considerably lower mix of annuity have more sources from which to earn gram Density Ratio of $29,573, based on commissions in their programs. noninterest income. adjustment for eight banks. Of the 1,517 community banks that Program Productivity Revenue Mix – Securities Brokerage reported earning investment program Investment Program Productivity In 2010, community banks earned income, 857 banks or 56.5% reported measures the amount of program fee securities brokerage fee income of earning annuity commissions, and 175 income per bank employee. Program $343.7 million, up 15.4% from $297.9 banks or 11.5% reported earning annuity Productivity enables us to assess the million in third quarter 2009. Fourth quar- income only. This latter finding of 175 relative generation of income among ter brokerage revenues of $87.5 million banks reporting only annuity income may bank employees, which are frequently the were up 0.3% from $87.2 million in third be indicative of banks that have only plat- important human assets in generating quarter 2010. Security brokerage reve- form annuity or licensed bank employee customer referrals and the attendant fee nues constituted 75.3% of total invest- (LBE) programs and not full-product or income earned from those customer rela- ment program income of $456.5 million in hybrid investment programs. The number tionships. In 2010, mean community 2010, up from a cumulative mix of 71.4% of community banks reporting only annui- bank employee Productivity was $2,189 in 2009. Fourth quarter 2010 securities ty income dropped 5.9% from 186 banks per bank employee, up 10.8% from revenue mix rose two points from the in 2009. $1,975 in 2009. third quarter to 76.9%, its highest point Leaders – Investment Program Program Density for the year. In 2010, leaders in investment program Measured as the amount of program Of the 1,517 banks with assets under fee income among big banks with assets fee income per domestic banking office, $4 billion that reported earning invest- under $4 billion were CenterState Bank of Program Density evaluates the relative ment program income, 1,342 banks or Florida (FL) with $33.91 million, up 86.9% density of program income among bank- 88.5% reported earning commissions and from $18.15 million in 2009; North Shore ing locations, the critical physical assets fees from securities brokerage, and 660 Community Bank & Trust Company (IL) in generating investment program in- banks or 43.5% reported earning securi- with $15.17 million in 2010, up 34.3% from come. Unadjusted mean density per do- ties brokerage fee income only. $11.30 million in 2009; TIB The Independ- mestic community bank office was Revenue Mix – Annuities ent Bankersbank (TX) with $11.52 million, $49,501 in 2010. Community banks earned annuity fee down 2.8% from $11.86 million; Espirito However, a number of banks with sub- income of $112.8 million, down 5.6% Santo Bank (FL) with $7.63 million, up stantial securities brokerage production, from $119.5 million in 2009. 25.9% from $6.06 million; and BAC Florida including some commercial banks and Fourth quarter 2010 annuity revenues Bank (FL) with $7.35 million, up 26.9% bankers’ banks that provide specialized of $26.3 million were down 10.4% from from $5.79 million in 2009. (Not all income investment and correspondent banking $29.3 million in third quarter 2010. Annu- in some investment programs is derived programs to small community banks, also ity commissions constituted 24.7% of from activities conducted for retail custom- have or report only a handful of domestic community bank investment program ers. Institutions like CenterState Bank of offices, sometimes only one office. When income of $456.5 million in 2010. Fourth Florida and bankers’ banks sell securities, that happens, this ratio can be susceptible quarter 2010 annuity revenue mix was particularly bonds, for other community to skewing on a large scale, so this tends down to 23.1%, the lowest quarterly point banks. When bank lending is tight and to be the ratio in which mean readings are of the year. With 13.7% of fourth quarter there are higher deposits and fewer loans, often most likely to be adjusted so as to program income and 14.8% of 2010 pro- the increased liquidity of banks’ balance get a more normal or typical reading. An gram income from annuities, the bigger sheets also increases community banks’

demand for bonds.) ter. Barclays will “begin to process all on- ings are based on data reported to the Leaders – Annuities hold and any new complaints from cus- Federal Reserve Board by large top-tier In 2010, leaders in annuity fee income tomers about PPI policies.” It will contact BHCs. The analysis measures the bank- among banks under $4 billion in assets the customers, Barclays said, and ing industry’s insurance business and were United Bank (WV) with $2.17 million “assess and redress their complaints as provides some benchmarks that gauge in 2010, up 31.9% from $1.65 million in quickly as practicable.” HSBC said, bank insurance performance. 2009; First Victoria National Bank (TX) “There is currently a high degree of un- “Total insurance revenues include both with $1.97 million, up 2.7% from $1.92 certainty around the ultimate costs of insurance brokerage and underwriting,” million; Lake City Bank (IN) with $1.73 dealing with the matter.” said Valerie Barton, ABIA Executive million, up 46.8% from $1.18 million; Director. “On the whole, brokerage man- GreenBank (TN) with $1.70 million, up MAY 23 - 29, 2011 aged to grow, albeit somewhat unevenly, U.S. BHC TOTAL INSURANCE 24.7% from $1.37 million; and Marquette at a rate of 6.0 percent in 2010, excluding EARNINGS SLIDE 5.7% IN 2010 Bank (IL) with $1.54 million, up 67.9% MetLife. Fortunately, for every institution The nation’s bank holding companies from $917,000 in 2009. For more on the where insurance brokerage income was (BHCs) experienced a decrease of 5.7 top-level findings of the report, click here. down, another was up.” Barton continued, percent in their total insurance revenue To order it, click here. “What hurt the industry in particular in from a record $15.08 billion in 2009 to 2010 was a widespread decline in under- $14.21 billion in 2010, when MetLife, a MAY 16 - 22, 2011 writing, as 46 of 68 BHCs engaged in un- BARCLAYS & HSBC SET ASIDE traditional life insurance company, is ex- derwriting reported a drop in that income. POSSIBLE PPI PROVISIONS cluded. Total insurance income consists None the less, overall, the prospects for a London-based Barclays plc and HSBC of both insurance brokerage and insur- resumption of long-term growth in bank Holdings have joined Lloyds Banking ance underwriting fee income. insurance revenues seem positive.” Group in setting aside provisions to cover Citigroup, Inc. (NY), Wells Fargo & During 2010, 595 bank holding compa- possible future costs associated with re- Company (CA) and Bank of America Cor- nies (or 65.3 percent of all large top-level dressing consumers for possibly improp- poration (NC) led all bank holding compa- BHCs reporting) earned some type of erly selling them payment protection in- nies in total insurance income in 2010, insurance-related revenue. Including surance (PPI). HSBC set aside £268.4 according to findings released today by MetLife, total BHC insurance revenue million ($440 million) in the first quarter, Michael White Associates (MWA) in con- increased 1.1 percent from $47.24 billion and Barclays said it would set aside £1 junction with the American Bankers in 2009 to $47.74 billion in 2010. Exclud- billion ($1.64 billion) in the second quar- Insurance Association (ABIA). The finding MetLife, total BHC insurance income was $14.21 billion in 2010, down 5.7 percent from $15.08 billion in 2009. “Bank revenues from insurance activi- TOP 10 BANK HOLDING COMPANIES IN TOTAL INSURANCE INCOME ties made another decent showing in YEAR-END - DECEMBER 31, 2010 - NATIONALLY 2010, despite continued rough spots in the economy and a seemingly unending TOTAL soft property-casualty market. Among the RANK RANK INSURANCE BANK HOLDING COMPANY STATE 2010 2009 INCOME top 50 in insurance revenue, the mean (ALL DOLLAR AMOUNTS IN THOUSANDS) ratio of the concentration of total insurance revenue to noninterest income was 1 1 $2,683,000 Citigroup Inc. NY 17.2 percent in 2010. Among the top 50 in this Concentration Ratio, the mean was 2 3 $2,126,000 Wells Fargo & Company CA 42.5 percent,” said Michael D. White, President of MWA. 3 2 $2,065,843 Bank of America Corporation NC The analysis includes a ranking of the 4 4 $1,975,000 Ally Financial Inc. MI top 50 bank holding companies on the basis of the absolute dollar amount of 5 5 $1,042,662 BB&T Corporation NC total insurance revenue (earnings from sales and underwriting) and on the basis 6 8 $499,000 JPMorgan Chase & Co. NY of the concentration of total insurance revenue as a percentage of each institu- 7 6 $487,000 The Goldman Sachs Group, Inc. NY tion’s total noninterest income. Other findings include: 8 7 $452,190 American Express Company NY - Joining the top 50 in total insurance revenue in 2010 were RBC USA Holdco 9 9 $311,254 HSBC North America Holdings Inc. NY Corporation (NY), First Niagara Financial Group (NY), Two Rivers Financial Group 10 10 $298,000 Morgan Stanley NY (IA), Doral Financial Corporation (PR), Ranking excludes MetLife. and Valley National Bancorp (NJ). RBC SOURCE: Michael White Associates and American Bankers Insurance Association USA Holdco became the new top-tier

MAY 30 - JUNE 5, 2011 TABLE 1. TOTAL BOLI ASSETS (IN BILLIONS) BANK OWNED LIFE INSURANCE HELD BY BANKS AND THRIFTS (BOLI) ASSETS REACHED OVER $142 BILLION IN 2010 BANKS AND THRIFTS PERCENT Bank-owned life insurance (BOLI) assets 2010 2009 BY ASSET SIZE CHANGE reached $142.43 billion in 2010, according to the 2011 edition of the Michael Over $10 billion $100.78 $97.08 3.8% White/Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report. The $1 billion - $10 billion $13.90 $13.10 6.1% banking industry’s 2010 total reflected a 5.8% increase from $134.60 billion in $500 million - $1 billion $4.75 $4.70 1.1% 2009 BOLI assets held by large bank $300 million - $500 million $3.09 $3.19 -3.0% holding companies (BHCs), stand-alone banks and savings associations. BOLI is $100 million - $300 million $4.01 $3.83 4.8% used to recover costs of employee bene- Under $100 million $901.5 $905.4 -0.4% fits and offset the liabilities of retirement benefits, helping banks to keep up with All $127.44 $122.81 3.8% rising benefit costs. SOURCE: Michael White-Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report Compiled by Michael White Associates, LLC and sponsored by Meyer-Chatfield, the Michael White / Meyer-Chatfield BOLI Holdings Report measures and bench- TABLE 2. NUMBER OF BANKS AND THRIFTS marks the cash surrender values (CSV) REPORTING BOLI ASSETS of life insurance and ratios of CSV to capital attained by BHCs, banks and thrifts. The data in this report were submitted to BANKS AND THRIFTS PERCENT 2010 2009 regulators by 911 large top-tier BHCs with BY ASSET SIZE CHANGE assets greater than $500 million and all 7,657 commercial banks, savings banks, Over $10 billion 71 71 0.0% and savings associations or thrifts that were operating on December 31, 2010. $1 billion - $10 billion 413 414 -0.2% Among the study’s most significant find- $500 million - $1 billion 479 494 -3.0% ings are these additional results: - Of 911 large top-tier BHCs, 737 or $300 million - $500 million 520 547 -4.9% 80.9% reported holding BOLI assets in $100 million - $300 million 1,442 1,426 1.1% 2010, increasing their BOLI holdings by 5.9% from $124.8 billion in 2009 to Under $100 million 843 882 -4.4% $132.10 billion in 2010. - Of 1,393 stand-alone banks, i.e., All 3,768 3,834 -1.7% those without parent-BHCs, 434 or 31.2% SOURCE: Michael White-Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report recorded $3.05 billion in BOLI holdings, up 25.0% from $2.44 billion in 2009. - Of 730 savings association, 338 or U.S. bank holding company in the Royal its predecessor’s rank in total insurance 46.3% recorded $7.28 billion in BOLI Bank of Canada (RBC) organization in income the most, having jumped from holdings, down 1.3% from $7.38 billion in 2010, replacing RBC’s previous U.S. high 243rd place at the end of 2009 to 11th by 2009. -holder, as the bank reorganized the own- year-end 2010. We believe this rise in - Of 7,657 banks and savings associa- ership-structure of its U.S.-based hold- total insurance income is due to a reor- tions, 3,768 or 49.2% reported BOLI as- ings, including insurance. First Niagara ganization of RBC entities that were not sets of $127.44 billion, an increase of was formerly a thrift and consequently did previously part of a top-tier U.S. BHC. 3.8% from $122.81 billion in 2009. not report insurance income as a line item Doral Financial (PR) jumped 10 rungs of - The total number of banks and thrifts in its call reports to the Office of Thrift the ladder from 53rd to 43rd place, Stifel reporting BOLI assets decreased by 66 or Supervision (OTS). Two Rivers Financial Financial ascended 6 spots from 34th to 1.7% from 3,834 in 2009 to 3,768 banks was previously a small bank holding com- 28th ranking, and Valley National Ban- and thrifts in 2010. pany and, thus, exempt from reporting corp (NJ) climbed 5 rungs from 54th to - Among banks and thrifts, those with line item fee income like insurance. 49th place in the rankings. assets between $1 billion and $10 billion - Among the top 50 nationally and those For more on the Michael White-ABIA were most likely to report BOLI assets, as BHCs reporting data in 2009 as well as Total Insurance Report, click here. 2010, RBC USA Holdco (NY) increased 413 of 560 banks and thrifts or 73.8% reported having them in 2010. Among

ance Corporation (FDIC). A 59.9% drop TABLE 3. MEAN BOLI ASSETS AS A PERCENTAGE OF in loan loss provisions to $20.7 billion, THE SUM OF TIER 1 CAPITAL + ALLOWANCE FOR LOAN & LEASE LOSSES down from $51.6 billion in 2010, drove the earnings increase, overcoming a $3.2 billion decline in net interest income ex- BANKS AND THRIFTS PERCENT cluding provisions and a $2.2 billion de- 2010 2009 BY ASSET SIZE CHANGE crease in noninterest income. Narrower net interest margins and weak growth in Over $10 billion 12.98% 16.73% -24.1% interest earning assets impacted the interest income decline, while a $1.7 billion $1 billion - $10 billion 14.01% 13.33% 5.1% drop in services charges on deposit ac- $500 million - $1 billion 14.27% 14.16% 0.8% counts and a $1 billion decrease in trading income accounted for the noninterest $300 million - $500 million 15.31% 15.11% 1.3% earnings slide, the FDIC said. More than half (56%) of banks report- $100 million - $300 million 14.72% 14.63% 0.6% ed first quarter net income improved over Under $100 million 16.07% 16.04% 0.2% first quarter 2010, and 15% reported a net loss. With decreased loan loss provisions All 14.93% 14.86% 0.5% driving overall earnings growth, FDIC SOURCE: Michael White-Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report Chairman Sheila Bair commented, “There is a limit to how far reductions in loan loss provisions can boost industry earnings.” BHCs, those with assets greater than $10 an institution’s charter, total capital is She cautioned, “The economic recovery, billion reported the highest incidence of defined either as Tier 1 capital or the sum along with borrower demand, remains BOLI ownership, as 64 of 75 BHCs, or of Tier 1 capital and the allowance for sluggish. Longer term, banks may be 85.3%, declared they had BOLI loan and lease losses). Nationally, mean exposed to interest rate risk when we assets. bank BOLI assets as a percent of the emerge from this prolonged stretch of - The largest banks and thrifts, those sum of Tier 1 capital and the loss allow- unusually low rates.” over $10 billion in assets, accounted for ances increased only slightly (0.5%) from Twenty-six banks failed in the first the largest dollar increase ($3.70 billion) 14.86% in 2009 to 14.93% in 2010. Na- quarter; 56 were absorbed by mergers in BOLI, and institutions with assets be- tionally, mean BHC BOLI assets as a and 4 were added to the problem list, tween $1 billion and $10 billion attained percent of total capital decreased from increasing that number to 888 out of the the largest percentage increase (6.1%) in 13.73% in 2009 to 13.63% in 2010. total 7,574 FDIC-insured institutions. To BOLI assets. Among BHCs, it was the - Among the largest bank holding com- read the FDIC’s Quarterly Banking Pro- largest that accounted for the biggest panies (BHCs) with assets over $10 bil- file, click here. dollar increase ($6.71 billion), as well as lion, the 6.6% increase in Tier 1 capital the greatest percentage increase (6.0%), from $1.01 trillion in 2009 to $1.08 trillion JUNE 6 - 12, 2011 U.S. THRIFTS REPORT 19% DROP IN in their combined BOLI assets. in 2010 helped produce a 5.5% increase FIRST QUARTER EARNINGS - Four of six asset classes experienced in the sum of Tier 1 Capital and the allow- Net income at U.S. thrifts dropped 19% in a decrease in 2010 in the number of ances for loan and lease losses. By com- first quarter 2011 to $1.4 billion, down banks and thrifts reporting BOLI assets. parison, the allowances hardly changed, from $1.73 billion in first quarter 2010, as The largest numerical decrease, 39 decreasing only 0.1% from year to year. loans fell 3.8% to $556 billion from $578 banks and thrifts, occurred among depos- The increase in Tier 1 capital among the billion and return on assets declined to itory institutions under $100 million in largest BHCs helped keep a lid on their 0.60% from 0.73% in first quarter 2010, assets. The largest percentage decrease mean BOLI-to-capital ratio and that of the according to the Office of Thrift Supervi- was 4.9% among banks and thrifts with industry as a whole, as those mean ratios sion (OTS). assets between $300 million and $500 dropped, respectively, 8.9% and 0.7% in Still, loan loss provisions declined and million. Declines in banks and thrifts re- 2010. troubled assets decreased to 3.09% of porting BOLI assets generally did not For more on the Michael White/Meyer- total assets from 3.28% in first quarter reflect decisions to leave the BOLI mar- Chatfield BOLI Holdings Report, click 2010. Over 90% (91.2%) of all thrifts ket. The declines were primarily due to here. reported their capital exceeded “well- some banks and thrifts merging or being capitalized” regulatory standards, and sold with FDIC assistance. JUNE 6 - 12, 2011 U.S. BANKS REPORT 66.5% JUMP IN only 11 of the 724 thrifts supervised fell - According to federal banking regula- FIRST QUARTER NET INCOME into the less than adequately capitalized tors, it is generally not prudent for a bank- Net income at U.S. commercial banks category. ing company to hold BOLI assets with an and savings institutions (banks) jumped Commenting on the seventh consecu- aggregate cash surrender value (CSV) 66.5% to $29 billion in the first quarter, up tive quarter of thrift profitability, albeit that exceeds 25 percent of the sum of the from $17.4 billion in first quarter 2010, declining, OTS Acting Director John Bow- institution’s total capital. (Depending on according to the Federal Deposit Insur- man said, “Although the economic recov-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 54 ery is uneven and housing markets re- In 2010, German American reported count life insurance (GALI) assets and main fragile in many communities across $5.3 million in insurance brokerage in- hybrid account life insurance (HALI) as- the country, we are seeing some stability come, which comprised 31.2% of its non- sets held by commercial banks and FDIC- in the thrift industry. I am increasingly interest income and 8.1% of its net oper- supervised savings banks became availa- optimistic that the worst is behind us.” ating revenue. The company ranked 31st ble for the first time at the end of first For more on the performance of U.S. in insurance brokerage earnings among quarter 2011. Savings associations, i.e., thrifts in the first quarter, click here. BHCs with assets between $1 billion and thrifts, do not currently report these types $10 billion, according to the of BOLI assets. JUNE 13 - 19, 2011 Michael White-Prudential Bank Insurance Separate account life insurance assets INSURANCE CLIMBS 22%, Fee Income Report. are the cash surrender values (CSVs) TIP GROWS 19% & associated with separate account insur- COLI JUMPS 75% JUNE 27 - JULY 4, 2011 ance policies whose CSVs are supported AT GERMAN AMERICAN SEPARATE ACCOUNTS HOLD by assets segregated from the general Jasper, IN-based, $1.8 billion-asset Ger- LARGEST SHARE OF BOLI ASSETS; assets of the insurance carrier. Under man American Bancorp reported insur- GENERAL ACCOUNT POLICIES such arrangements, the policyholders ance brokerage fee income in the first MOST POPULAR neither own the underlying separate ac- quarter climbed 22% to $2.05 million, up Separate account life insurance (SALI) count created by the insurance carrier on from $1.69 million in first quarter 2010, assets constituted the majority ($62.56 its behalf, nor control investment deci- bolstered by more than a doubling of con- billion or 51.5%) of total bank-owned life sions in the underlying account; but they tingency fee income to $784,000. Trust insurance (BOLI) assets in the first quar- do assume all investment and price risk and investment product (TIP) fees grew ter of 2011, according to the Michael so that investment income and invest- 18.7% to $464,000, up from $391,000, White / Meyer-Chatfield BOLI Holdings ment gains and losses generally accrue and company-owned life insurance (COLI) Report. Among the biggest banks, those directly to the policyholders and are not income jumped 74.8% to $353,000, up over $10 billion in assets, SALI assets of accounted for on the general accounts of from $202,000. Insurance brokerage, TIP $57.92 billion constituted even more of the insurer. fees and COLI earnings comprised, re- their BOLI assets of $97.88 billion, reach- Compiled by Michael White Associates, spectively, 34.1%, 7.7% and 5.9% of non- ing nearly $3 of every $5 (59.2%). (MWA) and sponsored by Meyer- interest income, which climbed 31.2% to BOLI is used to recover costs of em- Chatfield, the Michael White / Meyer- $6.01 million, up from $4.58 million in first ployee benefits and offset the liabilities of Chatfield BOLI Holdings Report quarter 2010, reflecting increased insur- retirement benefits, helping banks to measures and benchmarks the cash surance, TIP and COLI income and $1.05 keep up with the rising benefit costs. render values of life insurance and ratios million in net securities gains. Information about separate account life of CSV to capital possessed by banks Net income climbed 47.6% to $4.65 insurance or SALI assets, general ac- million, up from $3.15 million in first quarter 2010, driven by noninterest earnings, organic growth in net interest income and additional interest earnings tied to the TABLE 1. TOTAL BOLI ASSETS (IN BILLIONS) January acquisition of Evansville, IN- HELD BY BANKS IN FIRST QUARTER 2011 based, $340.3 million-asset American Community Bancorp, parent of the Bank GENERAL SEPARATE HYBRID of Evansville. German American Bancorp BANKS ACCOUNT ACCOUNT ACCOUNT Chairman and CEO Mark Schroeder said, BY LIFE LIFE LIFE TOTAL “We have seen a strong resurgence in ASSET INSURANCE INSURANCE INSURANCE our non-banking lines of business within SIZE ASSETS ASSETS ASSETS insurance, investment and trust services.” (GALI) (SALI) (HALI) He added, “We are excited about the opportunities the Evansville market will Over $10 billion $33.18 $57.92 $6.78 $97.88 offer us, not only within banking but also relative to the expansion of our insurance, $1 billion - $10 billion $7.40 $3.66 $1.18 $12.24 investment and trust lines of business.” In 2010, German American Bancorp $500 million - $1 billion $3.28 $0.44 $0.54 $4.25 reported $1.6 million in wealth manage- $300 million - $500 million $2.09 $0.19 $0.34 $2.62 ment income, which comprised 9.3% of its noninterest income and 2.4% of its net $100 million - $300 million $3.04 $0.29 $0.39 $3.73 operating revenue. The company ranked 143rd in wealth management earnings Under $100 million $0.70 $0.06 $0.04 $0.81 among BHCs with assets between $1 billion and $10 billion, according to All $49.70 $62.56 $9.27 $121.53 Michael White’s Wealth Management Fee Income Report. SOURCE: Michael White-Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 55 and bank holding companies (BHCs). life insurance assets, representing 7.6% life insurance (GALI) policies, and only The data here were reported by 6,850 of total BOLI assets and making HALI the 15% of stand-alone banks’ BOLI assets commercial banks and FDIC-supervised smallest reporting category of BOLI as- were in separate account life insurance savings banks operating on March 31, sets. Hybrid account insurance policies (SALI) policies. 2011. Among the study’s most significant combine features of both general and - Of 1,366 national banks, 661 or 48.4% findings in the first quarter are these: separate account insurance products. held two-thirds ($81.45 billion) of total - Of 6,850 commercial and FDIC- Similar to general account life insurance BOLI assets; those 661 banks represent- supervised savings banks, 3,409 or policies, the general assets of the insured 9.6% of all banks operating at the end 49.8% reported holding BOLI assets of ance company issuing hybrid account of first quarter 2011. Only 122 of those $121.53 billion in first quarter 2011, a policies support the policies’ cash surren- national banks reported separate account slight decline of 1.6% from $123.52 billion der values. However, like separate ac- life insurance assets, but they possessed in first quarter 2010. count policies, the assets of hybrid ac- $52.33 billion or 83.6% of the industry’s - Separate account CSV assets totaled counts are protected from claims on the total SALI assets of $62.56 billion, making $62.56 billion among banks and repre- insurer. Additionally, the banks holding national banks of all banking charters the sented 51.5% of total BOLI assets. At the hybrid account life insurance policies are leading owner of SALI. Indeed, SALI same time, only 582 or 17.1% of all banks able to select the investment strategies in assets represented 64.2% of national reporting BOLI assets held separate ac- which the insurance premiums are invest- bank’s total BOLI assets of $81.45 billion. count assets. Of banks holding BOLI ed. According to federal banking regula- assets, the fewest number held SALI as- - Separate account life insurance assets tors, it is generally not prudent for a bank sets, which were the largest portion of were heavily concentrated (92.6%) to hold BOLI assets with an aggregate BOLI assets. among the largest banks. But, GALI and cash surrender value (CSV) that exceeds - The largest banks, i.e., those with as- HALI types of BOLI assets were much 25 percent of the sum of the institution’s sets greater than $10 billion, reported the less concentrated among the big banks. total capital. (Depending on the bank’s most in BOLI assets, as 62 of 88 large Smaller banks held 33.2% of general charter, total capital is defined either as banks or 70.5% reported having $97.88 account life insurance assets and 26.9% Tier 1 capital or the sum of Tier 1 capital billion in BOLI assets or 80.5% of the of hybrid account life insurance assets in and the allowance for loan and lease industry’s total of $121.53 billion. These first quarter 2011. losses). Nationally, mean bank BOLI large banks held $57.92 billion or 92.6% - Most banks are subsidiaries of bank assets as a percent of the sum of Tier 1 of the $62.56 billion in SALI assets held holding companies and account for most capital and the loss allowances increased by all banks in first quarter 2011. The BOLI assets. But approximately 20% of very slightly from 14.69% in first quarter SALI assets held by these large banks banks are stand-alone, i.e., not part of 2010 to 14.80% in first quarter 2011. alone constituted 47.7% of the industry’s BHCs. Of $3.10 billion in BOLI assets Click here to read more about the total BOLI assets of $121.53 billion. owned by stand-alone banks, $2.42 bil- Michael White / Meyer-Chatfield BOLI - In other words, the largest banks domi- lion or 78% resided in general account Holdings Report. nated the ownership of both total BOLI assets and separate account life insurance assets in first quarter 2011. Yet, the TABLE 2. NUMBER OF BANKS REPORTING BOLI ASSETS least commonly held BOLI policies were IN FIRST QUARTER 2011 SALI policies, as the fewest banks (582) with BOLI assets in first quarter held SALI GENERAL SEPARATE HYBRID assets. BANKS ACCOUNT ACCOUNT ACCOUNT BY LIFE LIFE LIFE - Ninety-three percent (93.0%) or 3,170 of TOTAL the 3,409 institutions reporting BOLI as- ASSET INSURANCE INSURANCE INSURANCE SIZE ASSETS ASSETS ASSETS sets had $49.70 billion in general account (GALI) (SALI) (HALI) life insurance assets, representing 40.9% of total BOLI assets at the end of first Over $10 billion 59 49 28 62 (of 88) quarter. Thus, the most commonly held policies were GALI policies. In GALI poli- $1 billion - $10 billion 342 150 112 365 (of 482) cies, the general assets of the insurance company issuing the policies support their $500 million - $1 billion 411 83 139 438 (of 610) CSV. This reporting category also includes the portion of the carrying value of $300 million - $500 million 427 63 124 451 (of 725) separate account policies that represents general account claims on the insurance $100 million - $300 million 1,216 162 254 1,318 (of 2,589) company, such as realizable deferred acquisition costs and mortality reserves. Under $100 million 715 75 56 775 (of 2,356) - Seven hundred thirteen (713) or 20.9% of the 3,409 institutions reporting BOLI All 3,170 582 713 3,409 (of 6,850) assets held $9.27 billion in hybrid account SOURCE: Michael White-Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report

COMMUNITY BANK COMMUNITY BANK COMMUNITY BANK INVESTMENT PROGRAM INCOME SECURITIES BROKERAGE INCOME ANNUITY COMMISSIONS

$113.7 $118.2 $110.1 MILLION MILLION MILLION $82.6 $87.5 $87.5 MILLION MILLION MILLION

$27.5 $26.3 $30.7 MILLION MILLION MILLION

1Q 2010 4Q 2010 1Q 2011 1Q 2010 4Q 2010 1Q 2011 1Q 2010 4Q 2010 1Q 2011

SOURCE: Michael White Community Bank Investment Programs Report

JULY 11 - 17, 2011 COMMUNITY BANK Program Production banks with assets over $4 billion attained INVESTMENT PROGRAMS In first quarter 2011, 1,370 or 20.5% a higher mean Investment Program Pen- HAVE BEST 1Q SINCE 2008 of community banks participated in in- etration of $282 per million dollars of retail Community bank investment programs vestment program activities, producing deposits; so, there is opportunity for com- are off to a promising start in 2011 due to $118.2 million in program income, up munity banks to enhance their programs.” increases in both securities brokerage fee 7.4% from $110.1 million in first quarter Community banks with assets between income and annuity commissions, ac- 2010. First quarter 2011 program income $100 million and $300 million and those cording to the Michael White-Securities of $118.2 million increased 4.0% from with assets under $100 million had the America Report: Community Bank Invest- $113.7 million in fourth quarter 2010. largest mean Penetration ratio at, respec- ment Programs. These community banks achieved tively, $220 and $221 per million dollars Sponsored by Securities America and average investment program fee income of retail deposits. issued by Michael White Associates, LLC, of $300,928 in 2011, up 15.8% from Program Concentration the report measures and benchmarks $86,269 in first quarter 2011, up 10.6% Program Concentration calculates the investment programs at community from $77,969 in first quarter 2010. The portion of total noninterest income attributa- banks, i.e., banks with less than $4 billion number of banks participating in invest- ble to a specific kind of noninterest fee in- in assets. The current report is based on ment program activities was down by come. This ratio enables us to know how data reported by all 6,850 commercial 3.0% from 1,412 banks in first quarter concentrated or meaningful bank invest- banks and FDIC-regulated savings banks 2010 to 1,370 banks in first quarter 2011. ment programs are among their banks’ non- operating on March 31, 2011. The report Program Penetration lending activities. specially examines the 6,685 community The Penetration of an investment pro- As a group, community banks banks among the 6,850, plus it further gram is measured as the amount of pro- achieved a higher mean Concentration of segments them into five asset classes gram revenue generated per million dol- investment program income to noninter- whose performance is also analyzed. lars of core or retail deposits. These de- est income than larger banks in first quar- “This first-quarter report finds that com- posits substitute as a measure of retail ter 2011. As a group, community banks munity banks’ investment program revenue customers and the breadth of the custom- attained a Concentration ratio of 7.9%, surpassed where they started and ended in er relationship, since the data for retail with banks under $100 million in assets 2010,” said Gregg H. Johnson, Senior Vice customers or retail households are hard reaching the highest mean ratio of pro- President at Securities America. “In fact, to obtain on a reliable, national, and gram income to noninterest income of revenues of community bank investment standardized basis. 9.8%. Large banks, those with assets programs are off to their best start since “In first quarter 2011, community greater than $4 billion, had a lower mean 2008. In addition, first quarter 2011 mean banks earned mean investment program Concentration ratio of 4.3% for the same program income is 13.9% higher than it’s income of $210 per million dollars of retail period, reflecting the fact that, in their been since these filed data became availa- bank deposits,” said Michael White, presi- case, they tend to have more sources of ble to us for measurement in first quarter dent of Michael White Associates and noninterest income in larger volumes than 2007.” author of the report. “In contrast, big just investment program income.

Program Productivity Investment Program Productivity 1Q 2011 INVESTMENT PROGRAM INCOME PERFORMANCE BENCHMARKS measures the amount of program fee FOR COMMUNITY BANKS - NATIONALLY income per bank employee. Program Productivity enables us to assess the PERFORMANCE MEASURES MEAN relative generation of income among bank employees, which are frequently the PRODUCTION - Dollar Volume $86,269 important human assets in generating CONCENTRATION - % of Noninterest Income 7.90% customer referrals and the attendant fee income earned from those customer rela- PENETRATION – $ per Million Dollars of Retail Deposits $210 tionships. In first quarter 2011, mean community bank employee Productivity PRODUCTIVITY - $ per Bank Employee $634 was $634 per bank employee, up 8.0% DENSITY - $ per Domestic Office $14,584 from $587 in first quarter 2010. Commu- SOURCE: Michael White-Securities America Report: Community Bank Investment Programs nity banks with assets between $1 billion and $4 billion generated the highest level of program productivity at $713 in program revenue per bank employee. Program Density Revenue Mix – Annuities million in first quarter 2010; North Shore Measured as the amount of program Community banks earned annuity fee Community Bank & Trust Company (IL) fee income per domestic banking office, income of $30.7 million in first quarter with $4.16 million in 2011, up 17.0% from Program Density evaluates the relative 2011, up 11.4% from $27.5 million in first $3.56 million; TIB The Independent Bank- density of program income among bank- quarter 2010. First quarter 2011 annuity ersbank (TX) with $2.81 million, up 36.7% ing locations, the critical physical assets revenues of $30.7 million were up 16.8% from $2.06 million; Espirito Santo Bank in generating investment program in- from $26.3 million in fourth quarter 2010. (FL) with $2.02 million, up 7.6% from come. Unadjusted mean density per do- Annuity commissions constituted 26.0% $1.88 million; and Safra National Bank of mestic community bank office was of community bank investment program New York (NY) with $1.91 million, up $14,584 in first quarter 2011, up only income of $118.2 million in first quarter 22.3% from $1.56 million in first quarter slightly (0.9%) from $14,460 in first quar- 2011, up from fourth quarter 2010’s annu- 2010. (Not all income in some invest- ter 2010. ity revenue mix of 23.1%, the lowest ment programs is derived from activities Revenue Mix – Securities Brokerage quarterly point of last year. With 16.9% conducted for retail customers. Institu- In first quarter 2011, community banks of first quarter 2010 program income and tions like CenterState Bank of Florida and earned securities brokerage fee income 13.7% of fourth quarter 2010 program bankers’ banks sell securities, particularly of $87.5 million, up 6.0% from $82.6 mil- income from annuities, the bigger banks bonds, for other community banks. When lion in first quarter 2010. First quarter with assets in excess of $4 billion had a bank lending is tight and there are higher 2011 brokerage revenues of $87.50 mil- considerably lower mix of annuity com- deposits and fewer loans, the increased lion were $25,000 more than the near missions in their programs. liquidity of banks’ balance sheets also identical $87.48 million in fourth quarter Of the 1,370 community banks that increases community banks’ demand for 2010. Security brokerage revenues con- reported earning investment program bonds.) stituted 74.0% of total investment pro- income in first quarter 2011, 744 banks or Leaders – Annuities gram income of $118.2 million in first 54.3% reported earning annuity commis- In first quarter 2011, leaders in annuity quarter 2011, up from a cumulative mix of sions, and 154 banks or 11.2% reported fee income among banks under $4 billion 75.3% in 2010. First quarter 2011 securi- earning annuity income only. This latter in assets were Lake City Bank (IN) with ties revenue mix fell nearly three points finding of 154 banks reporting only annui- $586,000, up 32.6% from $442,000; Cen- from fourth quarter 2010’s 76.9% to ty income may be indicative of banks that tier Bank (IN) with $450,000, up 26.4% 74.0%, its highest point for the year.Of have only platform annuity or licensed from $356,000; Sun National Bank (NJ) the 1,370 banks with assets under $4 bank employee (LBE) programs and not with $423,000, up from zero in first quar- billion that reported earning investment full-product or hybrid investment pro- ter 2010; United Bank (WV) with program income in first quarter 2011, grams. $416,000 in 2011, down 2.8% from 1,216 banks or 88.8% reported earning Leaders – Investment Program $428,000; and First Victoria National commissions and fees from securities In first quarter 2011, leaders in invest- Bank (TX) with $393,000, down 23.7% brokerage, and 626 banks or 45.7% re- ment program fee income among big from $515,000 in first quarter 2010. ported earning securities brokerage fee banks with assets under $4 billion were For more on the Michael White- income only. CenterState Bank of Florida (FL) with Securities America Community Bank $4.80 million, down 24.9% from $6.39 Investment Program Report, click here.

JULY 25 - 31, 2011 BHCs with assets between $1 billion (LA), and Bremer Financial Corp. (MN). FIRST QUARTER U.S. and $10 billion recorded an increase of Among BHCs with assets between $500 BHC ANNUITY EARNINGS 13.9% in annuity fee income, growing million and $1 billion, leaders were North- CLIMB 28.4% from $29.7 million in first quarter 2010 to east Bancorp (ME), First Volunteer Cor- YEAR OVER YEAR $33.8 million in first quarter 2011 and poration (TN), Van Diest Investment Co. Income earned from the sale of annuities accounting for 31.6% of their mutual fund (IA), River Valley Bancorporation, Inc. at bank holding companies (BHCs) rose and annuity income of $1.33 billion. (WI), and First American International 28.4% to $748.2 million in first quarter BHCs with $500 million to $1 billion in Corp. (NY). The smallest community 2011, up from $582.6 million in first quar- assets generated $6.12 million in annuity banks, those with assets less than $500 ter 2010, according to the Michael White- commissions in first quarter 2011, up million, were used as “proxies” for the ABIA Bank Annuity Fee Income Report. 19.0% from $5.15 million in first quarter smallest BHCs, which are not required to That is the highest quarterly amount of 2010. Only 30.5% of BHCs this size en- report annuity fee income. Leaders annuity fee income since first quarter gaged in annuity sales activities, which among bank proxies for small BHCs were 2007 when these data first became avail- was the lowest participation rate among Jacksonville Savings Bank (IL), Essex able. First-quarter 2011 annuity commis- all BHC asset classes. Among these Savings Bank (CT), Savers Co-operative sions were also 2.6% more than the BHCs, annuity commissions constituted Bank (MA), FNB Bank, N.A. (PA), and $729.5 million earned in fourth quarter the smallest proportion (15.1%) of total The Hardin County Bank (TN). 2010. insurance sales volume of $40.6 million. Among the top 50 BHCs nationally in Compiled by Michael White Associates Wells Fargo & Company (CA), Morgan annuity concentration (i.e., annuity fee (MWA) and sponsored by American Stanley (NY), JPMorgan Chase & Co. income as a percent of noninterest in- Bankers Insurance Association (ABIA), (NY), Bank of America Corporation (NC), come), the median Annuity Concentration the report measures and benchmarks the and Regions Financial Corp. (AL) led all Ratio was 7.3% in first quarter 2011. banking industry’s performance in gener- bank holding companies in annuity com- Among the top 50 small banks in annuity ating annuity fee income. It is based on mission income in first quarter 2011. concentration that are serving as proxies data from all 6,850 commercial and FDIC- Among BHCs with assets between $1 for small BHCs, the median Annuity Con- supervised banks and 942 large top-tier billion and $10 billion, leaders included centration Ratio was 16.6% of noninterest bank holding companies operating on Stifel Financial Corp. (MO), Hancock income. For more on the first quarter March 31, 2011. Holding Company (MS), National Penn findings of the Michael White-ABIA Bank Of the 942 BHCs, 378 or 40.1% partici- Bancshares (PA), Iberiabank Corporation Annuity Fee Income Report, click here. pated in annuity sales activities during first quarter 2011. Their $748.2 million in annuity commissions and fees constituted 11.9% of their total mutual fund and annuity income of $6.31 billion and 15.8% of total BHC insurance sales volume (i.e., TOP 10 BANK HOLDING COMPANIES IN ANNUITY FEE INCOME the sum of annuity and insurance broker- YEAR-TO-DATE MARCH 31, 2010 - NATIONALLY age income) of $4.73 billion. Of the 6,850 banks, 821 or 12.0% participated in first- R YTD ANNUITY INCOME % % OF quarter annuity sales activities. Those A CHANGE BANK HOLDING COMPANY ASSETS NONINT. participating banks earned $204.2 million N 1Q 2010 INCOME K 1Q 2011 1Q 2010 - 1Q 2011 in annuity commissions or 27.2% of the banking industry’s total annuity fee in- (ALL DOLLAR AMOUNTS IN THOUSANDS) come. In contrast to BHCs, the banks’ 1 $186,000 $169,000 10.06% Wells Fargo & Company CA $1,244,550,000 1.93% annuity production was up 9.7% from $186.1 million in first quarter 2010. 2 $108,000 $82,000 31.71% Morgan Stanley NY $836,185,000 1.43% Seventy-four percent (74.3%) of BHCs with over $10 billion in assets earned first 3 $84,000 $60,000 40.00% JPMorgan Chase & Co. NY $2,196,218,000 0.63% -quarter annuity commissions of $708.3 4 $60,374 $44,458 35.80% Bank of America Corp. NC $2,269,872,425 0.43% million, constituting 94.7% of total annuity commissions reported by the banking 5 $30,520 $24,338 25.40% Regions Financial Corp. AL $131,798,824 4.17% industry. This was an increase of 29.3% 6 $20,746 $13,873 49.54% Suntrust Banks, Inc. GA $170,835,041 2,60% from $547.8 million in annuity fee income in first quarter 2010. Among this asset 7 $20,377 $3,687 452.67% PNC Financial Services Grp. PA $259,500,612 1.41% class of largest BHCs, annuity commissions made up 11.4% of their total mutual 8 $18,655 N/A N/A RBC USA Holdco Corporation NY $85,012,708 2.67% fund and annuity income of $6.20 billion 9 $18,618 $9,915 87.78% BBVA USA Bancshares, Inc. TX $63,647,110 9.47% and 15.8% of their total insurance sales revenue of $4.49 billion in first quarter 10 $16,000 $12,000 33.33% U.S. Bancorp MN $311,462,000 0.80% 2011. SOURCE: Michael White-ABIA Bank Annuity Fee Income Report

JULY 25 - 31, 2011 million), Jackson National ($179.3 million), top-tier BHCs engaged in insurance bro- U.S. BANKS SEE 16% GROWTH W&S Financial Group Distributors ($177.6 kerage activities. IN FIRST QUARTER million) and Pacific Life ($81.7 million). Compiled by Michael White Associates FIXED ANNUITY Commenting on the results of the fixed (MWA) since 2001 and sponsored by PREMIUM SALES annuity premium study, Beacon Re- Prudential’s Individual Life Insurance U.S. banks sold $4.93 billion in fixed an- search President and CEO Jeremy Alex- business, a proud member of the Ameri- nuity premiums in first quarter 2011, up ander said, “Risk aversion has increased can Bankers Insurance Association 16% over $4.25 billion sold in first quarter and that tends to favor sales of fixed an- (ABIA), this report measures and bench- 2010 and up 56% over $3.16 billion sold nuities over variable annuities.” marks the banking industry’s performance in fourth quarter 2010, according to Ev- in generating insurance brokerage and anston, IL-based Beacon Research’s AUGUST 8 - 14, 2011 underwriting fee income. Results are MICHAEL WHITE- Fixed Premium Annuity Study. A surge in based on data from all 6,850 commercial PRUDENTIAL REPORT sales of fixed annuities without market banks and FDIC-supervised savings BANK INSURANCE BROKERAGE value adjustments (MVAs) drove the in- banks and 942 large top-tier bank holding INCOME HITS RECORD crease and accounted for 9 of the top-ten companies operating on March 31, 2011. FOR SECOND STRAIGHT QUARTER fixed annuity products sold. Lincoln Fi- “In first quarter 2011, the number of Marking the highest quarterly results nancial’s lone indexed annuity ranked 5th BHCs that grew or maintained their insur- achieved, first-quarter bank holding com- in popularity among the ten. ance brokerage revenues largely equaled pany (BHC) insurance brokerage income Houston, TX-based Western National those that didn’t. We examined 156 of $3.98 billion was up 19.8% from $3.32 Life remained by far the top fixed annuity BHCs with at least $1 million in annual- billion in first quarter 2010, according to provider in the bank channel with $2.1 ized insurance brokerage income. While the Michael White-Prudential Bank Fee billion in annuity premiums sold. New two BHCs had no growth, 74 BHCs Income Report. The last two quarters York Life ranked second with $618.3 mil- showed positive growth in their insurance have registered the highest quarterly wa- lion, followed by Symetra Life ($548,4 brokerage income, while 80 experienced termarks ever recorded in BHC insurance million), Great American Financial Re- declines. Twenty-seven (27) had increas- brokerage fee income, and first quarter sources ($271.5 million), Lincoln Financial es under 10%, and 42 had declines of was 10.6% greater than fourth quarter ($252.8 million), American National less than 10%,” said Michael White, 2010. Thus far in 2011, 58.9% of large ($238.5 million), Protective Life ($215.1 President of MWA. “Forty-seven (47) achieved revenue increases over 10%, and 38 BHCs endured decreases greater than 10%. Across the country, insurance TOP 12 BANK HOLDING COMPANIES IN INSURANCE BROKERAGE FEE INCOME agencies and brokerages continue to be YEAR-TO-DATE MARCH 31, 2011 - NATIONALLY hampered by a difficult economy, seven years of soft commercial insurance mar- R INSURANCE BROKERAGE % kets, and capital restraint on the part of FEE INCOME % OF A CHANGE BANK HOLDING COMPANY ASSETS NONINT. many potential buyers, thereby inhibiting N 1Q 2010 INCOME K 1Q 2011 1Q 2010 - 1Q 2011 acquisition.” Excluding MetLife, a traditional life in- (ALL DOLLAR AMOUNTS IN THOUSANDS) surer, Citigroup Inc. (NY) topped the lead- 1 $552,000 $247,000 123.48% Citigroup Inc. NY $1,947,314,000 6.40% er board in first quarter 2011 with insurance brokerage earnings of $552.0 mil- 2 $455,000 $531,000 -14.31% Wells Fargo & Company CA $1,244,550,000 4.72% lion. Wells Fargo & Company (CA) ranked second nationally with $455.0 3 $222,356 $225,121 -1.23% BB&T Corporation NC $157,036,797 36.37% million in insurance brokerage fee in- 4 $118,335 $140,339 -15.68% Bank of America Corporation NC $2,269,872,425 0.85% come. BB&T Corporation (NC), which owns more agencies than any other fi- 5 $84,000 $68,000 23.53% Morgan Stanley NY $836,185,000 1.11% nancial holding company, ranked third 6 $54,000 $42,509 27.03% American Express Company NY $142,773,000 1.01% with $222.4 million in insurance brokerage revenue in first quarter 2011. 7 $36,173 $33,660 7.47% Discover Financial Services IL $64,694,631 8.13% Bank holding companies over $10 billion in assets continued to have the high- 8 $36,000 $19,000 89.47% Goldman Sachs Group, Inc. NY $931,631,000 0.34% est participation (89.2%) in insurance 9 $29,033 $27,772 4.54% Regions Financial Corp. AL $131,798,824 3.97% brokerage activities. These BHCs produced $3.78 billion in insurance fee in- 10 $25,000 $33,000 -24.24% Ally Financial Inc. MI $173,702,000 1.45% come in first quarter 2011, 21.0% more than the $3.13 billion they produced in 11 $22,660 $21,781 4.04% BancorpSouth, Inc. MS $13,553,661 36.50% first quarter 2010. These large bank 12 $18,524 $17,521 5.72% Eastern Bank Corporation MA $7,499,469 46.54% holding companies accounted for 95.0% of all BHC insurance brokerage fee in- SOURCE: Michael White-Prudential Bank Insurance Fee Income Report come earned in first quarter 2011.

“Our internet-based simplified issue products continue to enable the banks to grow their life insurance brokerage income and provide an opportunity to increase the non-fee revenue to the bank,” said Joan H. Cleveland, senior vice president, Business Development with Individ- ual Life Insurance, The Prudential Insur- Get the reports ance Company of America. “We are seeing our term product positioned as a pro- others are calling tection tool for the mass-middle market customer and our single premium UL product enabling bank customers to create a legacy; both very positive attributes for consumers from our perspective.” ‘Outstanding’ Among BHCs with between $1 billion and $10 billion in assets, leaders in insurance brokerage income in first quarter 2011 included Eastern Bank Corporation ‘Second (MA), Stifel Financial Corp. (M0), Old Na- tional Bancorp (IN), Johnson Financial to none.’ Group, Inc. (WI), and Trustmark Corpora- tion (MS). BHCs of this size registered a 3.7% increase in insurance brokerage income to $163.5 million in first quarter 2011, up from $157.7 million in first quarter 2010. ‘Finally … Among BHCs with assets between $500 million and $1 billion, leaders were facts Two Rivers Financial Group (IA), 473 Broadway Holding Corporation (NY), Ev- not projections. ans Bancorp (NY), Texas Independent Bancshares (TX), and Northeast Bancorp (ME). BHCs of this size registered an 11.7% decline in insurance brokerage income to $34.5 million, down from $39.0 www.bankinsurance.com/products million in first quarter 2010. The smallest community banks, those with assets less than $500 million, were used as “proxies” for the smallest BHCs, The Michael White-Prudential which are not required to report insurance brokerage income. Leaders among bank Bank Insurance Fee Income Report proxies for small BHCs were Soy Capital Bank and Trust Company (IL), Industry State Bank (TX), Hoosac Bank (MA), First State Bank (IA), and Stoneham Savings The Michael White-ABIA Bank (MA). These small banks, representing small BHCs, also registered a Bank Annuity Fee Income Report decline in insurance brokerage income, albeit a smaller 3.4%, from $39.6 million in first quarter 2010 to $38.2 million in first quarter 2011. the median Insurance Brokerage Con- Ratio of $19,828). Among the top 50 Among the top 50 BHCs nationally in centration Ratio was 64.4% of noninterest small banks in insurance brokerage insurance brokerage concentration (i.e., income. productivity, the median Insurance Bro- insurance brokerage income as a percent Among the top 50 BHC leaders in in- kerage Productivity Ratio was $5,168 per of noninterest income), the median Insur- surance brokerage productivity (i.e., in- employee (or an annualized Productivity ance Brokerage Concentration Ratio was surance brokerage income per BHC em- Ratio of $20,670). 36.7%. Among the top 50 small banks in ployee), the median Insurance Brokerage To read more about the Michael White- insurance brokerage concentration that Productivity Ratio was $4,957 per em- Prudential Bank Insurance Fee Income are serving as proxies for small BHCs, ployee (or an annualized Productivity Report, click here.

AUGUST 29, 2011 - SEPTEMBER 4, 2011 OCTOBER 10 - 16, 2011 ity commissions and fees constituted 53% DROP IN LOAN LOSS MICHAEL WHITE-ABIA REPORT 12.0% of their total mutual fund and an- PROVISIONS DRIVES 38% JUMP BANK ANNUITY FEE INCOME nuity income of $12.77 billion and 16.3% IN PROFITS AT U.S. BANKS HITS RECORD LEVEL FOR of total BHC insurance sales volume (i.e., U.S. banks and savings institutions re- FIRST HALF AND SECOND QUARTER the sum of annuity and insurance broker- ported an aggregate profit of $28.8 billion Income earned from the sale of annuities age income) of $9.39 billion. Of the 6,805 in the second quarter, a 37.8% jump over at bank holding companies (BHCs) in the banks, 887 or 13.0% participated in first- second quarter 2010, according to the first half of 2011 hit a record $1.53 billion, half annuity sales activities. Those partici- Federal Deposit Insurance Corporation up 25.0% over $1.22 billion earned in first pating banks earned $401.1 million in (FDIC). A 53.0% drop in loan loss provi- half 2010. Second-quarter 2011 annuity annuity commissions or 26.2% of the sions to $19 billion, down from $40.4 bil- commissions also reached record heights banking industry’s total annuity fee in- lion in second quarter 2010, drove the in rising to $781.4 million, up 21.9% from come; their annuity income production increase, compensating for a decline in $640.9 million earned in second quarter was up 6.9% from $375.0 million in first the average net interest margin to 3.61%, 2010 and up 4.4% from $748.2 million in half 2010. a 61% tumble in realized gains on securi- first quarter 2011, according to the Three -fourths (74.7%) of BHCs with ties, a 41% drop in loan servicing fee Michael White-ABIA Bank Annuity Fee over $10 billion in assets earned first-half income, and a 13% fall in service charges Income Report. annuity commissions of $1.46 billion, con- on deposit accounts. Compiled by Michael White Associates stituting 95.2% of total annuity commis- Most (60%) banks and savings institu- (MWA) and sponsored by American sions reported by the banking industry. tions reported improved earnings; the Bankers Insurance Association (ABIA), This revenue represented an increase of number reporting net losses fell to 15.2%, the report measures and benchmarks the 26.6% from $1.15 billion in annuity fee down from 20.8% in second quarter 2010, banking industry’s performance in gener- income in first half 2010. and the remaining 24.8% basically main- ating annuity fee income. It is based on Among this asset class of largest BHCs tained year-ago numbers. data from all 6,805 commercial and FDIC in the first half, annuity commissions While 22 FDIC-insured institutions -supervised banks and 934 large top-tier made up 11.6% of their total mutual fund failed in the second quarter, the number bank holding companies operating on and annuity income of $12.56 billion and of banks on the problem list decreased to June 30, 2011. 16.3% of their total insurance sales vol- 865, down from 888 in the first quarter. Of the 934 BHCs, 383 or 41.0% partici- ume of $8.94 billion. For more on the FDIC’s Quarterly pated in annuity sales activities during Bank holding companies with assets Banking Profile, click here. first half 2011. Their $1.53 billion in annu- between $1 billion and $10 billion recorded a decrease of 1.1% in annuity fee income, falling from $62.5 million in first half 2010 to $61.8 million in first half 2011 TOP 10 BANK HOLDING COMPANIES IN ANNUITY FEE INCOME and accounting for 30.1% of their mutual YEAR-TO-DATE JUNE 30, 2011 - NATIONALLY fund and annuity income of $205.4 million. Bank holding companies with $500 R ANNUITY INCOME % % OF million to $1 billion in assets generated A CHANGE BANK HOLDING COMPANY ASSETS NONINT. $12.3 million in annuity commissions in N 2Q 2010 INCOME K YTD 2Q2011 YTD 2Q2010 - 2Q 2011 first half 2011, up 12.4% from $11.0 mil-

(ALL DOLLAR AMOUNTS IN THOUSANDS) lion in first half 2010. Only 31.8% of BHCs this size engaged in annuity sales 1 $415,000 $347,000 19.60% Wells Fargo & Company CA $1,259,622,000 2.15% activities, which was the lowest participation rate among all BHC asset classes. 2 $214,000 $160,000 33.75% Morgan Stanley NY $830,747,000 1.26% Among these BHCs, annuity commis- 3 $163,000 $121,000 34.71% JPMorgan Chase & Co. NY $2,244,903,000 0.59% sions constituted the smallest proportion (15.3%) of total insurance sales volume 4 $124,440 $79,113 57.29% Bank of America Corp. NC $2,258,000,455 0.88% of $80.4 million. 5 $59,093 $52,360 12.86% Regions Financial Corp. AL $130,907,840 4.28% Wells Fargo & Company (CA), Morgan Stanley (NY), and JPMorgan Chase & 6 $40,380 $28,372 42.32% SunTrust Banks, Inc. GA $172,236,691 2.43% Co. (NY) led all bank holding companies in annuity commission income in first half 7 $38,814 N/A N/A RBC USA Holdco Corp. NY $84,857,923 3.28% 2011. Among BHCs with assets between 8 $38,318 $37,400 $2.45 PNC Financial Services Grp. PA $263,259,894 1.34% $1 billion and $10 billion, leaders included Stifel Financial Corp. (MO), National 9 $36,140 $24,045 50.30% BBVA USA Bancshares, Inc. TX $62,686,049 9.06% Penn Bancshares, Inc. (PA), and Old National Bancorp (IN). 10 $34,000 $28,000 21.43% U.S. Bancorp MN $320,874,000 0.82% Among BHCs with assets between SOURCE: Michael White-ABIA Bank Annuity Fee Income Report $500 million and $1 billion, leaders were

Northeast Bancorp (ME), First Citizens OCTOBER 17 - 23, 2011 Program Production Bancshares, Inc. (TN), and Van Diest MICHAEL WHITE- In first half 2011, 1,422 or 21.4% of Investment Company (IA). SECURITIES AMERICA REPORT: community banks participated in invest- The smallest community banks, those COMMUNITY BANK ment program activities, producing with assets less than $500 million, were INVESTMENT PROGRAMS $239.6 million in program income, up used as “proxies” for the smallest bank HAVE BEST 1ST HALF 5.9% from $226.3 million in first half holding companies, which are not re- IN THREE YEARS 2010. Second quarter 2011 program quired to report annuity fee income. Community bank investment programs income of $121.5 million increased 2.9% Leaders among bank proxies for small continued to perform well in first half 2011 from $118.1 million in first quarter 2011 BHCs were Jacksonville Savings Bank with modest increases in securities bro- and 4.6% from $116.2 million in second (IL), Vantage Point Bank (PA), and Iowa kerage fee income and double-digit quarter 2010, hitting its highest level State Bank (IA). growth in annuity commissions, according since third quarter 2007. Among the top 50 BHCs nationally in to the Michael White - Securities America These community banks achieved av- annuity concentration (i.e., annuity fee Report: Community Bank Investment erage investment program fee income of income as a percent of noninterest in- Programs. $168,525 in first half 2011, up 8.6% from come), the median Annuity Concentration Sponsored by Securities America and $155,191 in first half 2010. Average first- Ratio was 7.6% in first half 2011. Among issued by Michael White Associates, the half investment program fee income in the top 50 small banks in annuity concen- report measures and benchmarks invest- 2011 constituted the high-water mark tration that are serving as proxies for small ment programs at community banks, i.e., since these data became available in first BHCs, the median Annuity Concentration banks with less than $4 billion in assets. quarter 2007 for measurement by MWA. Ratio was 15.9% of noninterest income. The current quarterly report is based on The number of banks participating in in- To find out more about the data reported by all 6,805 commercial vestment program activities was down by Michael White - ABIA Bank Annuity Fee banks and FDIC-regulated savings 2.5% from 1,458 banks in first half 2010 Income Report, click here. banks operating on June 30, 2011. The to 1,422 banks in first half 2011. annual report specially examines the Program Penetration OCTOBER 10 - 16, 2011 6,639 community banks among the The Penetration of an investment pro- U.S. BANKS’ INTERCHANGE 6,805, further segmenting them into five gram is measured as the amount of pro- REVENUE EXPECTED TO DROP BY asset classes whose performance is also gram revenue generated per million dol- $33 BILLION TO $39 BILLION analyzed. lars of core or retail deposits. These de- As of October 1, another source of banks’ “This first-half 2011 report finds that posits substitute as a measure of retail fee income has been slashed, thanks to community banks’ investment program customers and the breadth of the custom- regulations put in place by the Dodd- revenue have exceeded revenues gener- er relationship, since the data for retail Frank Act. Interchange fees on debit ated in first half 2010,” said customers or retail households are hard card transactions are now capped at Gregg H. Johnson, Senior Vice President to obtain on a reliable, national, and $0.21 plus 0.05% of each transaction, at Securities America. “In fact, revenues standardized basis. down from an average $0.44. As a result, of community bank investment programs “In first half 2011, community banks the Federal Reserve estimates that inter- continue to be the best since 2008. In earned mean investment program income change revenue will drop by $33 to $39 addition, second quarter 2011 mean pro- of $414 per million dollars of retail bank billion over the next two years, according gram income is 6.5% higher than second deposits,” said Michael White, president to the motleyfool.com. Add this to Regu- quarter 2010 and ranks as the second of Michael White Associates and author lation E, and insurance brokerage fee highest quarter on record in mean pro- of the report. “That Penetration Ratio income becomes an ever more attractive gram income, behind only first quarter was down more than 10% from the previ- source of noninterest earnings for banks. 2011.” ous year, due to the large influx of retail deposits. In contrast, big banks with assets over $4 billion attained a higher FIRST HALF 2011 INVESTMENT PROGRAM INCOME mean Investment Program Penetration of PERFORMANCE BENCHMARKS FOR COMMUNITY BANKS - NATIONALLY $557 per million dollars of retail deposits; so, there is opportunity for community banks to enhance their programs.” PERFORMANCE MEASURES MEAN Program Concentration PRODUCTION - Dollar Volume $168,525 Program Concentration calculates the portion of total noninterest income at- CONCENTRATION - % of Noninterest Income 7.04% tributable to a specific kind of noninterest fee income. This ratio enables us to PENETRATION – $ per Million Dollars of Retail Deposits $414 know how concentrated or meaningful PRODUCTIVITY - $ per Bank Employee $1,236 bank investment programs are among their banks’ non-lending activities. DENSITY - $ per Domestic Office $26,841 As a group, community banks achieved SOURCE: Michael White - Securities America Report: Community Bank Investment Programs a higher mean Concentration of invest-

ment program income to noninterest income than larger banks in first half 2011. COMMUNITY BANK INVESTMENT PROGRAM INCOME As a group, community banks attained an adjusted Concentration ratio of 7.0%,

$140.0 adjusted for banks whose Concentration Ratio exceeded 100% as a result of significant losses on their sale of investment Millions $130.0 securities and properties. Large banks, those with assets greater than $4 billion, $120.0 had a lower mean Concentration ratio of 5.3% for the same period, reflecting the fact that, in their case, they tend to have $110.0 more sources of noninterest income in larger volumes than just investment pro- $100.0 gram income. Program Productivity Investment Program Productivity $90.0 measures the amount of program fee income per bank employee. Program $80.0 Productivity enables us to assess the relative generation of income among 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q bank employees, which are frequently the 2007 2008 2009 2010 2011 important human assets in generating customer referrals and the attendant fee income earned from those customer rela- SOURCE: Michael White - Securities America Report: Community Bank Investment Programs tionships. In first half 2011, mean community bank Program Productivity was $1,236 per bank employee, up 6.6% from $1,160 in first half 2010, and the highest level of first-half productivity since MWA began analyzing these data in 2007. Community banks with assets between $1 billion and $4 billion generated the highest level of Program Productivity at $1,343 MICHAEL WHITE - SECURITIES AMERICA in program revenue per bank employee. REPORT Program Density Measured as the amount of pro- Community Bank gram fee income per domestic banking office, Program Density evalu- Investment Programs ates the relative density of program income among banking locations, the critical physical assets in generating in- Measures and benchmarks community banks’ performance vestment program income. Unadjusted in generating securities brokerage and annuity fee income. mean density per domestic community bank office was $26,841 in first half 2011, Uses innovative benchmarking ratios that give insight into up only slightly (1.5%) from $26,448 in community bank investment programs, including: first half 2010. Revenue Mix – Securities Brokerage · Program Productivity In first half 2011, community banks earned securities brokerage fee income · Program Density of $175.3 million, up 3.7% from $169.0 · Program Contribution million in first half 2010. Second quarter · Program Concentration 2011 brokerage revenues of $87.77 mil- · Program Penetration lion were 0.3% or $271,000 more than the similar $87.50 million in first quarter 2011 and 1.5% more than $86.5 million in www.bankinsurance.com/products/cmmty-bk-inv-rpt second quarter 2010.

in first half 2010; North Shore Community COMMUNITY BANK COMMUNITY BANK Bank & Trust Company (IL) with $8.16 SECURITIES BROKERAGE INCOME ANNUITY COMMISSIONS million in 2011, up 10.8% from $7.36 million; TIB The Independent Bankersbank (TX) with $6.20 million, up 12.8% from $5.50 million; Espirito Santo Bank (FL) $86.5 $87.5 $87.8 with $3.75 million, up 8.4% from $3.46 MILLION MILLION MILLION million; and BAC Florida Bank (FL) with $3.49 million, down 7.1% from $3.75 million in first half 2010. (Not all income in $29.7 $30.7 $33.7 MILLION some investment programs is derived MILLION MILLION from activities conducted for retail customers. For instance, CenterState Bank of Florida and bankers’ banks sell securi- 2Q 2010 1Q 2011 2Q 2011 2Q 2010 1Q 2011 2Q 2011 ties, particularly bonds, for other community banks. When bank lending is tight SOURCE: Michael White - Securities America Report: Community Bank Investment Programs and there are higher deposits and fewer loans, the increased liquidity of banks’ balance sheets also increases community Security brokerage revenues constitut- ported earning annuity commissions, and banks’ demand for bonds.) ed 73.1% of total investment program 174 banks or 12.2% reported earning an- Leaders – Annuities income of $239.6 million in first half 2011, nuity income only. This latter finding of In first half 2011, leaders in annuity fee down from a cumulative mix of 74.7% in 174 banks reporting only annuity income income among banks under $4 billion in 2010. Second quarter 2011 securities may be indicative of banks that have only assets were Lake City Bank (IN) with revenue mix fell 2.1 points from second platform annuity or licensed bank employ- $1,065,000, up 47.9% from $720,000; quarter 2010’s 74.4% to 72.3%. ee (LBE) programs and not full-product or Sun National Bank (NJ) with $989,000, Of the 1,422 banks with assets under hybrid investment programs. up 32.0% from $749,000 in first half 2010; $4 billion that reported earning invest- Leaders – Investment Program Centier Bank (IN) with $816,000, up ment program income in first quarter In first half 2011, leaders in investment 13.5% from $719,000; Marquette Bank 2011, 1,248 banks or 87.8% reported program fee income among big banks (IL) with $809,000, up 4.4% from earning commissions and fees from secu- with assets under $4 billion were Center- $775,000; and United Bank (WV) with rities brokerage, and 611 banks or 43.0% State Bank of Florida (FL) with $10.80 $796,000 in 2011, up 57.0% from reported earning securities brokerage fee million, down 22.4% from $13.92 million $507,000 in first half 2010. income only. Revenue Mix – Annuities Community banks earned annuity fee income of $64.4 million in first half 2011, up 12.5% from $57.2 million in first half 2010. Second quarter 2011 annuity revenues of $33.7 million were up 9.8% from $30.7 million in first quarter 2010 and up 13.4% from $29.7 million in second quarter 2010. Are You Receiving Your Annuity commissions constituted 26.9% of community bank investment Complimentary Subscription? program income of $239.6 million in first half 2011, up from first half 2010’s annuity BankInsurance.com News. distills the revenue mix of 25.3%. In second quarter most important news stories that 2011, annuity revenue mix was 27.7%, up from 25.6% in second quarter 2010. With directly impact businesses in the bank 13.1% of first half 2010 program income insurance and investment world. and 16.9% of first half 2011 program income from annuities, the bigger banks with assets in excess of $4 billion had a Register now to receive your considerably lower mix of annuity com- complimentary subscription today. missions in their programs. Of the 1,422 community banks that reported earning investment program income in first half 2011, 744 banks or 52.3% re- www.bankinsurance.com/editorial/news/bi-com-news

OCTOBER 24 - 30, 2011 $62.94 billion among banks, representing alone constituted 47.5% of the industry’s MICHAEL WHITE / 51.4% of all BOLI assets. At the same total BOLI assets of $122.56 billion. MEYER-CHATFIELD REPORT time, only 556 or 16.3% of all banks re- - In other words, the largest banks 2Q BOLI ASSETS UP porting BOLI held separate account as- dominated the ownership of both total AND TRENDING TOWARD sets. Thus, the fewest number of banks BOLI assets and separate account life HYBRID ACCOUNTS with BOLI held SALI assets, which were insurance assets in first half 2011. Yet, Separate account life insurance (SALI) the largest portion of BOLI assets. Sepa- the least commonly held BOLI policies assets constituted the majority ($62.94 rate account life insurance assets are the were SALI policies, as the fewest banks billion or 51.4%) of total bank-owned life cash surrender values (CSVs) associated (556) with BOLI assets in first half held insurance (BOLI) assets in the first half of with separate account insurance policies SALI assets. 2011, according to the Michael White / whose CSVs are supported by assets - Ninety-three percent (93.2%) or 3,174 Meyer-Chatfield BOLI Holdings Report. segregated from the general assets of the of the 3,405 institutions reporting BOLI Among the biggest banks, those over $10 insurance carrier. Under such arrange- assets had $50.13 billion in general ac- billion in assets, SALI assets of $58.23 ments, the policyholders neither own the count life insurance assets, representing billion constituted even more of their BOLI underlying separate account created by 40.9% of total BOLI assets at the end of assets of $98.61 billion, reaching nearly the insurance carrier on its behalf, nor first half. Thus, the most commonly held $3 of every $5 (59.1%) of total BOLI as- control investment decisions in the under- policies were GALI policies. In GALI poli- sets. lying account; but they do assume all cies, the general assets of the insurance BOLI is used to recover costs of em- investment and price risk so that invest- company issuing the policies support their ployee benefits and offset the liabilities of ment income and investment gains and CSV. This reporting category also in- retirement benefits, helping banks to keep losses generally accrue directly to the cludes the portion of the carrying value of up with the rising benefit costs. Infor- policyholders and are not accounted for separate account policies that represents mation about separate account life insur- in the general account of the insurer. general account claims on theinsurance ance (SALI) assets, general account life - The largest banks, i.e., those with company, such as realizable deferred insurance (GALI) assets and hybrid ac- assets greater than $10 billion, reported acquisition costs and mortality reserves. count life insurance (HALI) assets held by the most in BOLI assets, as 62 of 88 - Seven hundred thirteen (764) or commercial banks and FDIC-supervised large banks or 70.5% reported having 22.4% of the 3,405 institutions reporting savings banks became available for the $98.61 billion in BOLI assets or 80.5% of BOLI assets held $9.49 billion in hybrid first time at the end of first half 2011. the industry’s total of $122.56 billion. account life insurance assets, represent- Savings associations, i.e., thrifts, consoli- These large banks held $58.23 billion or ing 7.7% of total BOLI assets and making date these types of BOLI assets when 92.5% of the $62.94 billion in SALI assets HALI the smallest reporting category of reporting. held by all banks in first half 2011. The BOLI assets. Hybrid account insurance Compiled by Michael White Associates, SALI assets held by these large banks policies combine features of both general LLC (MWA) and sponsored by Meyer-Chatfield, the Michael White / Meyer-Chatfield BOLI Holdings Report measures and benchmarks the cash sur- TABLE 1. TOTAL BOLI ASSETS (IN BILLIONS) render values of life insurance and ratios HELD BY BANKS IN FIRST HALF 2011 of CSV to capital possessed by banks and bank holding companies (BHCs). GENERAL SEPARATE HYBRID The data here were reported by 6,805 BANKS ACCOUNT ACCOUNT ACCOUNT commercial banks and FDIC-supervised BY LIFE LIFE LIFE TOTAL savings banks operating on June 30, ASSET INSURANCE INSURANCE INSURANCE 2011. Among the study’s most significant SIZE ASSETS ASSETS ASSETS findings in the first half are these: (GALI) (SALI) (HALI) - Of 6,850 commercial and FDIC- supervised savings banks, 3,405 or Over $10 billion $33.60 $58.23 $6.78 $98.61 50.0% reported holding BOLI assets of $122.56 billion in first half 2011, an in- $1 billion - $10 billion $7.43 $3.72 $1.29 $12.44 crease of 4.9% from $116.83 billion in first half 2010. $500 million - $1 billion $3.22 $0.47 $0.58 $4.27 - Of special note were changes from $300 million - $500 million $2.15 $0.19 $0.35 $2.69 first to second quarter in the use of different types of BOLI assets. The number of $100 million - $300 million $3.03 $0.28 $0.43 $3.73 banks using hybrid accounts increased 7.2% from 713 in first quarter to 764 Under $100 million $0.71 $0.05 $0.05 $0.81 banks in second quarter. Banks employ- ing separate account or SALI assets de- All $50.13 $62.94 $9.49 $122.56 creased by 26 (4.5%). - Separate account CSV assets totaled SOURCE: Michael White / Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report

and separate account insurance prod- TABLE 2. NUMBER OF BANKS REPORTING BOLI ASSETS ucts. Similar to general account life insur- IN FIRST HALF 2011 ance policies, the general assets of the insurance company issuing hybrid ac- GENERAL SEPARATE HYBRID count policies support the policies’ cash BANKS ACCOUNT ACCOUNT ACCOUNT surrender values. However, like separate BY LIFE LIFE LIFE account policies, the assets of hybrid TOTAL ASSET INSURANCE INSURANCE INSURANCE accounts are protected from claims on SIZE ASSETS ASSETS ASSETS the insurer. Additionally, the banks hold- (GALI) (SALI) (HALI) ing hybrid account life insurance policies are able to select the investment strate- Over $10 billion 59 47 28 62 (of 88) gies in which the insurance premiums are invested. $1 billion - $10 billion 343 146 123 365 (of 482) - Separate account life insurance assets were heavily concentrated (92.5%) $500 million - $1 billion 410 84 149 438 (of 610) among the largest banks. But, GALI and HALI types of BOLI assets were much $300 million - $500 million 432 59 130 451 (of 725) less concentrated among the big banks. $100 million - $300 million 1,210 151 268 1,318 (of 2,589) Smaller banks held 33.0% of general account life insurance assets and 28.5% Under $100 million 720 69 66 775 (of 2,356) of hybrid account life insurance assets in first half 2011. All 3,174 556 764 3,409 (of 6,850) - Most banks are subsidiaries of bank holding companies and account for most SOURCE: Michael White / Meyer-Chatfield Bank-Owned Life Insurance (BOLI) Holdings Report BOLI assets. But approximately 20.2% of banks are stand-alone, i.e., not part of BHCs. Of those banks, 442 or 32.1% recorded $3.23 billion in first half BOLI holdings. Of that amount, $2.51 billion or 77.6% resided in general account life insurance (GALI) policies, and Knowledge only 13.9% of stand-alone banks’ BOLI assets were in separate account life insurance (SALI) policies. - Of 1,349 national banks, 656 or is Power. 48.6% held two-thirds ($81.83 billion) of total BOLI assets; those 656 banks represented 9.6% of all banks oper- Get yours here. ating at the end of first half 2011. Only 116 of those national banks The first research report on reported separate account life insurance as- BOLI holdings based on sets, but they possessed $52.48 billion or 83.4% of authentic industry-wide data. the industry’s total SALI assets of $62.94 billion, making national banks of all www.bankinsurance.com/products/boli-hr banking charters the leading owner of SALI. Indeed, SALI assets represented 64.1% of national bank’s total BOLI assets of $81.83 billion.- According to federal banking regulators, it is generally not prudent for a bank to hold BOLI assets with an aggregate cash surrender value (CSV) that exceeds 25 percent of the sum of the institution’s total capital. (Depending on the bank’s charter, total

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 67 capital is defined either as Tier 1 capital said, “Wells Fargo’s diversified model which comprised 33.0% of its noninterest or the sum of Tier 1 capital and the allow- was again able to produce solid results income and 11.5% of its net operating ance for loan and lease losses). Nation- for our shareholders.” revenue. Excluding traditional life insurer ally, mean bank BOLI assets as a percent In 2010, Wells Fargo & Co. earned MetLife, the company ranked third in in- of the sum of Tier 1 capital and the loss $1.78 billion in insurance brokerage insurance brokerage earnings among all allowances increased very slightly from come, which comprised 4.4% of its nonin- bank holding companies, according to the 14.55% in first half 2010 to 14.75% in first terest income and 2.1% of its net operat- Michael White-Prudential Bank Insurance half 2011. ing revenue. Excluding traditional life Fee Income Report. To learn more about the Michael insurer MetLife, the company ranked se- White / Meyer-Chatfield BOLI Holdings cond in insurance brokerage earnings OCTOBER 24 - 30, 2011 SALE OF LONG-TERM Report, click here. among all bank holding companies, ac- ASSET MANAGEMENT BUSINESS cording to the Michael White-Prudential IMPACTS U.S. BANCORP’S OCTOBER 24 - 30, 2011 Bank Insurance Fee Income Report. LOSS OF BALBOA EARNINGS TRUST & INVESTMENT HITS B-OF-A UNIT’S BOTTOM LINE OCTOBER 24 - 30, 2011 MANAGEMENT FEES Charlotte, NC-based, $2.26 trillion-asset DESPITE 4.4% SLIDE, INSURANCE Minneapolis, MN-based, $320.9 billion Bank of America Corp. reported lower EARNINGS STILL COMPRISE 35% OF U.S. Bancorp reported trust and invest- insurance income tied to the second BB&T’S NONINTEREST INCOME ment management (TIM) fees in the third quarter sale of Balboa Insurance was a Winston-Salem, NC-based BB&T Corp. quarter fell 9.7% to $241 million, down prime contributor to the year-over-year reported insurance earnings in the third from $267 million in third quarter 2010, decline in revenue in its Consumer Real quarter slid 4.4% to $241 million, down impacted by money market investment Estate Services (CRES) operations. from $252 million in third quarter 2010, fee waivers and the fourth quarter 2010 Third quarter revenue in that unit fell despite the third quarter acquisitions of sale of the company’s long-term asset 21.9% to $2.82 billion, down from $3.61 San Jose, CA-based Liberty Benefit In- management business to Nuveen Invest- billion in third quarter 2010 and, with non- surance Services and Columbia, MD- ments. In contrast, investment product interest expense up 31.8% to $3.85 bil- based Atlantic Risk Management. Invest- fees and commissions climbed 27% to lion from $2.92 billion and provisions for ment banking and brokerage (IBB) fees $31 million, up from $27 million in third credit losses at $918 million, CRES re- and commissions also declined, sliding quarter 2010. TIM fees and investment ported a net loss of $1.14 billion, which 4.7% to $81 million, down from $85 mil- product fees comprised, respectively, contrasted with a $392 million net loss in lion. In contrast, trust and investment (TI) 11.1% and 1.4% of noninterest income, third quarter 2010. advisory revenues rose 7.5% to $43 mil- which ticked up 1.2% to $2.17 billion from lion, up from $40 million, and income $2.11 billion. OCTOBER 24 - 30, 2011 from bank-owned life insurance (BOLI) Net interest income on a 3.65% net INSURANCE, TRUST & INVESTMENT grew 10% to $33 million, up from $30 interest margin grew 43.4% to $2.05 bil- FEES UP AT WELLS FARGO; million. Insurance, IBB, TI and BOLI in- lion, up from $1.43 billion in third quarter MORTGAGE BANKING DROPS 27% come comprised, respectively, 34.9%, 2010, helped by a $376 million drop in San Francisco, CA-based, $1.26 trillion- 11.7%, 6.2% and 4.8% of noninterest loan loss provisions to $519 million and a asset Wells Fargo & Co. reported insur- income, which dropped 38% to $690 mil- $19 million cut in interest expense. Net ance earnings in the third quarter rose lion down from $1.11 billion in third quar- income applicable to shareholders 7% to $423 million, up from $397 million ter 2010, impacted additionally by a 4% climbed 42.4% to a record $1.24 billion, in third quarter 2010, and trust and invest- decline in service charges on deposits, a up from $871 million in third quarter 2010. ment (TI) fees increased 9% to $2.79 33% drop in mortgage banking income, a U.S. Bancorp Chairman, President and billion, up from $2.56 billion. Insurance $104 million net loss on FDIC loss-share CEO Richard Davis said, “Our company and TI fees comprised, respectively, 4.7% income and $39 million in net securities was able to achieve record earnings in and 30.7% of noninterest income, which losses. what many would describe as a difficult fell 7% to $9.09 billion, down from $9.78 Net interest income on a 4.09% net and uncertain economic environment.” billion in third quarter 2010, impacted by a interest margin more than doubled to Davis added, “We are providing our com- 27% drop in mortgage banking income $1.17 billion, up from $544 million in third mercial, institutional and consumer cus- and a 3% dip in service charges on de- quarter 2010, driven by a $114 million tomers with the financial products, ser- posit accounts. million cut in interest expense to $334 vices and trusted banking partnership Net interest income on a 3.84% net million and a $520 million drop in loan they need to succeed.” interest margin grew 14% to $8.73 billion, loss provisions to $250 million. Net in- In 2010, U.S. Bancorp earned $38.0 up from $7.65 billion in third quarter 2010, come available to shareholders jumped million in insurance brokerage income, driven by a 19% decrease in interest ex- over 74% to $366 million up from $210 which comprised 0.5% of its noninterest pense to $1.64 billion and a 47% drop in million in third quarter 2010, marking “our income. Excluding traditional life insurer provisions for credit losses to $1.81 bil- strongest earnings quarter in three MetLife, the company ranked 22nd in lion. Net income after preferred dividends years,” BB&T Corp. Chairman and CEO insurance brokerage earnings among all climbed 22% to $3.84 billion, up from Kelly King. bank holding companies, according to the $3.15 billion in third quarter 2010. Wells In 2010, BB&T Corp. earned $933.3 Michael White-Prudential Bank Insurance Fargo Chief Financial Officer Tim Sloan million in insurance brokerage income, Fee Income Report.

OCTOBER 24 - 30, 2011 respectively, 31.0% and 3.8% of M&T’s the execution of the company’s business KEYCORP REPORTS DECLINES IN noninterest earnings, which climbed 27% plan and said, “We believe that focusing INSURANCE, TRUST & INVESTMENT to $366.38 million, up from $289.89 mil- on the customer, enhancing enterprise- SERVICES EARNINGS lion, despite a 38% drop in mortgage wide risk management and building sus- Cleveland, OH-based, $89.3 billion-asset banking revenues and a 31% fall in trad- tainable performance are keys to our long KeyCorp reported insurance earnings in ing and foreign exchange gains. term success.” the third quarter fell 7.1% to $13 million, Net interest income on a 3.68% net Regions said it estimates that the im- down from $14 million in third quarter interest margin grew 17% to $558.72 plementation of the Durbin Amendment 2010, and income from corporate-owned million, up from $476.89 million in third debit card interchange fee rule will cost life insurance dropped 20.5% to $31 mil- quarter 2010, helped by a $35 million Regions $170 million in annual fees. lion, down from $39 million in third quarter drop in loan loss provisions to $58 million Regions, however, intends to mitigate the 2010, when the product paid out a $12 and a $12.40 million cut in interest ex- impact through account structure chang- million dividend. Trust and Investment pense. After a $181.89 million increase es, new fees, products and services, and services (TIS) income also declined, de- in noninterest expense to $662.02 million, expense management. creasing 2.7% to $107 million down from largely tied to the Wilmington Trust acqui- In 2010, Regions Financial earned $110 million in third quarter 2010. Insur- sition, net income slid 5% to $183.11 $107.9 million in insurance brokerage ance, COLI and TIS income comprised, million, down from $192.02 million in third income, which comprised 3.7% of its non- respectively, 2.7%, 6.4% and 22.2% of quarter 2010. M&T Chief Financial Of- interest income and 1.7% of its net oper- noninterest earnings, which slid 0.6% to ficer Rene F. Jones said, “Now that con- ating revenue. Excluding traditional life $483 million, down from $486 million. versions are behind us, we are well posi- insurer MetLife, the company ranked 9th Net interest income on a 3.09% net tioned to turn our attention to achieving in insurance brokerage earnings among interest margin decreased 1.3% to $539 the economic benefits from combining the all bank holding companies, according to million, down from $546 million in third organizations.” the Michael White-Prudential Bank quarter 2010, as a $48 million cut in inter- In 2010, M&T earned $11.3 million Insurance Fee Income Report. est expense and an $84 million drop in and $87.9 million, respectively, in securi- credit loss provisions to $10 million, were ties brokerage and fiduciary income, NOVEMBER 1 - 6, 2011 GROWING INSURANCE EARNINGS not enough to make up for a $139 million which comprised 1.6% and 12.6% of its COMPRISE 25% OF FIRST NIAGARA’S decline in interest income to $705 million. noninterest income. The company NONINTEREST INCOME Net income, however, grew 19.1% to ranked 32nd in securities brokerage earn- Buffalo, NY-based, $31 billion-asset First $212 million, up from $178 million in third ings and 18th in fiduciary income among Niagara Financial Group reported insur- quarter 2010, helped by a $3 million de- all bank holding companies, according to ance brokerage fee income in the third crease in noninterest expense. KeyCorp the Michael White-Prudential Bank quarter grew 24.5% to $16.89 million, up Chairman and CEO Beth Mooney said, Insurance Fee Income Report. “Our clients continue to benefit from our from $13.57 million in third quarter 2010; ability to work together across business NOVEMBER 1 - 6, 2011 wealth management fees climbed 33.5% lines.” INSURANCE EARNINGS UP 8% to $7.93 million, up from $5.94 million, In 2010, KeyCorp earned $3.3 million AT REGIONS FINANCIAL and bank-owned life insurance (BOLI) in insurance brokerage income, which Birmingham, AL-based, $130 billion-asset income rose 32.4% to $2.74 million, up comprised 0.2% of its noninterest income. Regions Financial reported insurance from $2.07 million. Insurance brokerage, Excluding traditional life insurer MetLife, brokerage fee income in the third quarter wealth management and BOLI income the company ranked 102nd in insurance grew 8% to $27 million, up from $25 mil- comprised, respectively, 24.6%, 11.5% brokerage earnings among all bank hold- lion in third quarter 2010, while trust in- and 4.0% of noninterest earnings, which ing companies, according to the Michael come remained flat at $49 million and jumped 38.7% to $68.66 million from White-Prudential Bank Insurance Fee combined brokerage, investment banking $49.51 million in third quarter 2010, Income Report. and capital markets (BIC) fee income fell helped by organic growth and the second 15.6% to $217 million, down from $257 quarter acquisition of Alliance OCTOBER 24 - 30, 2011 million. Insurance, trust and BIC fee in- Bancshares. WILMINGTON TRUST ACQUISITION come comprised, respectively, 3.6%, Net interest income on a 3.48% net DRIVES M&T’S TRUST EARNINGS 6.6% and 29.1% of noninterest earnings, interest margin climbed 47.0% to $220.93 273% HIGHER which slipped 0.7% to $745 million, down million, up from $150.28 million despite a Buffalo, NY-based, $77.9 billion-asset from $750 million in third quarter 2010. $3.5 million increase in loan loss provi- M&T Bank Corp. reported the May 2011 Net interest income on a 3.02% net sions to $14.5 million, and helped by a acquisition of Wilmington, DE-based Wil- interest margin soared 366% to $503 $12.36 million cut in interest expense and mington Trust Corp. drove third quarter million, up from $108 million in third quar- driven by an $86.51 million increase in trust income up 273% to $113.65 million ter 2010, reflecting a $405 million drop in interest income achieved organically and from $30.49 million in third quarter 2010 loan loss provisions to $355 million. Net by acquisition. Net income grew 25.0% and impacted brokerage services income, income of $101 million compared with a to $56.98 million, up from $45.60 million which grew 15% to $13.91 million, up third quarter 2010 loss of $209 million. despite $16.33 million in restructuring from $12.13 million. Trust income and Regions President and CEO Grayson charges and an additional $7.09 million in brokerage services income comprised, Hall described the results as reflecting merger and integration expenses com-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 69 pared to the year before. First Niagara NOVEMBER 1 - 6, 2011 ing Corp. in June 2011, reported insur- Financial Group President and CEO John TRUST, BOLI & RETAIL ance brokerage fee income in the third Koelmel said, “Strong fundamentals COMMISSIONS COMPRISE OVER quarter grew 23.2% to $4.36 million, up drove positive results again this quarter, 40% OF ASSOCIATED BAN-CORP’S from $3.54 million in third quarter 2010; as we continue to take market share, NONINTEREST EARNINGS investment and annuity fee income grow our customer base and diversify Green Bay, WI-based, $22 billion-asset climbed 59.5% to $4.64 million, up from revenue sources.” Associated Ban-Corp reported trust fees $2.91 million; and trust fees jumped In 2010, First Niagara earned $50.2 in the third quarter rose 3.5% to $9.79 74.4% to $7.22 million from $4.14 million. million in insurance brokerage income, million, up from $9.46 million in third Insurance brokerage, investment and which comprised 28.2% of its noninterest quarter 2010, and income from bank- annuity fee income and trust fees com- income and 6.4% of its net operating rev- owned life insurance (BOLI) increased prised, respectively, 6.7%, 7.1% and enue. Excluding traditional life insurer 6.2% to $3.99 million, up from $3.76 mil- 11.1% of noninterest income, which MetLife, the company ranked 16th in in- lion, while retail commissions slipped surged 84.5% to $64.95 million, up from surance brokerage earnings among all 1.5% to $15.05 million, down from $15.28 $35.21 million in third quarter 2010, be- bank holding companies, according to the million. Trust, BOLI income and retail fore the Whitney acquisition. Michael White-Prudential Bank Insurance commissions comprised, respectively, Net interest income on a 4.32% net Fee Income Report. 13.7%, 5.6%, 21.0% of noninterest in- interest margin more than tripled to come, which fell 12.5% to $71.68 million, $170.83 million, up from $53.45 million in NOVEMBER 1 - 6, 2011 down from $81.90 million in third quarter third quarter 2010, reflecting the Whitney BOLI INCOME JUMPS 43%, 2010, when service charges on deposit acquisition and a $7 million decrease in INSURANCE BROKERAGE RISES 8.4% accounts and mortgage banking earnings loan loss provisions to $9.26 million. Net AT PEOPLE’S UNITED were, respectively, $3.9 million and $4.49 income more than doubled to $30.38 mil- Bridgeport, CT-based, $27 billion-asset million greater. lion, up from $14.85 million in third quar- People’s United Financial reported insur- Net interest income on a 3.23% net ter 2010, and included the U.S. Justice ance brokerage fee income in the third interest margin surged 66% to $149.16 Department’s forced sale of 8 Whitney quarter increased 8.4% to $9 million, up million, up from $59.26 million in third branches. Hancock President and CEO from $8.3 million in third quarter 2010. quarter 2010, driven by a $60 million drop Carl Chaney said, “Results for the third Investment management fees grew in loan loss provisions to $4 million and a quarter better reflect the long-term earn- 10.5% to $8.4 million, up from $7.6 mil- $10.4 million cut in interest expense, ings potential of this newly combined lion. Bank-owned life insurance (BOLI) which more than compensated for an company.” Chaney added, “I look for- income jumped 42.9% to $2 million, up $11.1 million decline in interest income to ward to what the future holds for this from $1.4 million, and brokerage commis- $185.1 million. Net income after a $5.6 premiere Gulf Coast franchise.” sions remained flat at $2.8 million. Insur- million increase in noninterest expense In 2010, Hancock Holding Company ance brokerage, investment manage- almost quintupled to $34.03 million, up earned $11.0 million and $16.7 million, ment, BOLI and brokerage earnings com- from $6.92 million in third quarter 2010. respectively, in insurance brokerage and prised, respectively, 10.6%, 9.9%, 2.4% Associated Ban-Corp President and CEO fiduciary income, which comprised 8.3% and 3.3% of noninterest income, which Philip Flynn said, “We are pleased with and 12.5% of its noninterest income. The climbed 24.6% to $84.7 million, up from our improving results. Our focus remains company ranked 45th in insurance bro- $68 million in third quarter 2010, helped on meeting the needs of our customers kerage earnings and 53rd in fiduciary by $8.6 million in securities gains and and investing in our core businesses.” income among all bank holding compa- increased noninterest revenue tied to the In 2010, Associated Ban-Corp earned nies, according to the Michael White- July 1 acquisition of Danvers, MA-based, $42.8 million in insurance brokerage in- Prudential Bank Insurance Fee Income $2.1 billion-asset Danvers Bancorp. come, which comprised 13.8% of its non- Report. Net interest income on a 4.11% net interest income and 4.5% of its net oper- interest margin jumped 46.5% to $225.6 ating revenue. Excluding traditional life NOVEMBER 1 - 6, 2011 million, up from $154 million in third quar- insurer MetLife, the company ranked 17th BENEFITS COMMISSIONS ter 2010, helped by a $7.4 million drop in in insurance brokerage earnings among DRIVE INSURANCE EARNINGS UP loan loss provisions to $14.4 million and a all bank holding companies, according to 11.4% AT CULLEN/FROST $66.5 million increase in organic and ac- the Michael White-Prudential Bank San Antonio, TX-based, $18.8 billion- quisition-driven interest income to $274 Insurance Fee Income Report. asset Cullen/Frost Bankers reported in- million. Net income more than doubled to surance brokerage fee income in the third $52.9 million, up from $24.1 million in NOVEMBER 1 - 6, 2011 quarter grew 11.4% to $9.57 million, up third quarter 2010. People’s United Fi- HANCOCK HOLDING’S INSURANCE, from $8.59 million in third quarter 2010, nancial President and CEO Jack Barnes SECURITIES & TRUST EARNINGS driven by a $736,000 increase in benefits said, “Our emphasis on building lasting CLIMB ON ORGANIC GROWTH & commissions, $243,000 of which were relationships throughout our franchise WHITNEY ACQUISITION generated by Clark Benefit Group, ac- and continuing to cross-sell our products Gulfport, MS-based, $19.4 billion-asset quired by the company in May 2011. across all lines of business are key con- Hancock Holding Company, which com- Trust fees, driven by increased invest- tributors to our organic growth and strong pleted its acquisition of New Orleans, LA- ment fees, increased 8.1% to $18.41 mil- operating performances.” based, $11.7 billion-asset Whitney Hold- lion, up from $17.03 million in third quar-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 70 ter 2010. Insurance brokerage and trust fees comprised, respectively, 12.1% and 23.2% of noninterest income, which grew 12.5% to $79.22 million, up from $70.43 The most comprehensive million, helped additionally by a $6.41 million gain on securities transactions source of institution compared to zero such gains in third quarter 2010. rankings and industry Net interest income on a 3.81% net interest margin rose 4.1% to $151.57 data on banks and million, up from $145.60 million in third quarter 2010, reflecting growing interest earnings and a $1.1 million drop in loan bank holding company loss provisions. Noninterest expense, reflecting the opening of three new finan- annuity programs cial centers in the quarter, grew by almost $5 million, impacting net income, which in the nation. slipped 0.9% to $54.51 million, down from $55 million in third quarter 2010. Cullen/ SPONSORED B Y Frost CEO Dick Evans said, “In a lending environment that remains challenging, with individuals and businesses remain- Michael White-ABIA ing cautious and paying down debt, we continue to add relationships. We are American Bankers Bank Annuity seeing the results of our disciplined call- Insurance Association ing and team setting efforts in the expan- an ABA subsidiary Fee Income Report sion of our customer base, which should drive future growth.” In 2010, Cullen/Frost Bankers earned www.bankinsurance.com/products/annuity-fir $34.2 million in insurance brokerage income, which comprised 12.6% of its noninterest income. Excluding traditional life insurer MetLife, the company ranked 24th in insurance brokerage earnings among NOVEMBER 7 - 13, 2011 all bank holding companies, according to interest margin climbed 23.4% to $135.38 BB&T INSURANCE SERVICES the Michael White-Prudential Bank Insur- million, up from $109.73 million in third ACQUIRES “GAME-CHANGING” ance Fee Income Report. quarter 2010, reflecting a $20 million drop CALIFORNIA AGENCY in loan loss provisions to $5 million and Raleigh, NC-based BB&T Insurance Ser- NOVEMBER 1 - 6, 2011 an $8.69 million cut in interest expense, vices, the insurance brokerage unit of WEBSTER FINANCIAL both of which more than compensated for Winston-Salem, NC-based, $168 billion- REPORTS RISING a $3 million decrease in interest income asset BB&T Corp., has acquired Irvine WEALTH & INVESTMENT to $173.25. Net income jumped 133.7% and San Ramon, CA-based Precept SERVICES FEE INCOME to a $41.55 million, up from $17.78 million Group, an employee benefits and admin- Waterbury, CT-based, $18 billion-asset in third quarter 2010. Webster Chairman istrative services agency that specializes Webster Financial reported wealth and and CEO James Smith said, “Recent in health insurance plans for middle- investment services fee income in the events in consumer banking underscore market and large corporate clients. third quarter rose 4.3% to $6.49 million, the increasing competitive advantage we BB&T Insurance Services of California up from $6.22 million in third quarter have as a community focused bank that President and CEO Martin Loth described 2010, while income from bank-owned life appeals to local customers seeking value the acquisition as “a game-changer” that insurance (BOLI) remained basically and personal attention in their banking expands his agency system’s ability to steady at $2.64 million compared to $2.68 relationships.” offer employers cost-effective health in- million in third quarter 2010. Wealth and In 2010, Webster Financial earned surance plans that meet the expanded investment services and BOLI income $6.83 million in annuity fee income, which requirements of recent U.S. healthcare comprised, respectively, 14.0% and 5.7% comprised 3.7% of its noninterest in- legislation. BB&T Insurance Services of noninterest income, which slipped come. The company ranked 31st in an- Chairman and CEO Wade Reece added, 2.2% to $46.21 million, down from $47.27 nuity earnings among all bank holding “This acquisition positions us as a leader million in third quarter 2010, when the companies in the United States, accord- in this space at the most opportune time company recorded a $1.26 million net ing to the Michael White-ABIA Bank An- imaginable.” gain on investment securities. nuity Fee Income Report. In 2010, BB&T Corp. reported $933.3 Net interest income on a 3.45% net

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 71 million in insurance brokerage income, NOVEMBER 7 - 13, 2011 2010,retaining its position as the largest which comprised 33.0% of its noninterest GROWING INSURANCE & contributor to noninterest earnings. Trust income and 11.5% of its net operating BOLI INCOME COMPRISE 27% income also increased, rising 2.5% to revenue. The company ranked third in OF NONINTEREST INCOME $2.85 million, up from $2.78 million. In- insurance brokerage earnings among AT VALLEY NATIONAL surance brokerage and trust income com- BHCs engaged in significant banking Wayne, NJ-based, $14 billion-asset Val- prised, respectively, 35.5% and 4.6% of activities, according to the Michael White- ley National Bancorp reported insurance noninterest earnings, which fell 11.0% to Prudential Bank Insurance Fee Income brokerage fee income in the third quarter $62.06 million, down from $69.75 million Report. climbed 33.6% to $3.42 million, up from in third quarter 2010, impacted by a $1.44 $2.56 million in third quarter 2010, and million loss in mortgage lending com- NOVEMBER 7 - 13, 2011 income from bank-owned life insurance pared to an $8.9 million gain in mortgage TRUST EARNINGS RISE (BOLI) grew 17.1% to $1.99 million, up lending in third quarter 2010, when ser- AT FIRSTMERIT from $1.70 million, while trust and invest- vice charges on deposit accounts were Akron, OH-based, $14.6 billion-asset ment services (TIS) earnings declined also $1.29 million higher. FirstMerit Corp reported combined insur- 8.3% to $1.77 million, down from $1.93 Net interest income on a 3.66% net ance and investment services fee income million. Insurance brokerage, BOLI and interest margin jumped 51.3% to $82.96 in the third quarter fell 26.8% to $1.97 TIS income comprised, respectively, million, up from $54.83 million in third million, down from $2.69 million in third 16.9%, 9.9% and 8.8% of noninterest quarter 2010, driven by a $29.74 million quarter 2010, and bank-owned life insur- earnings, which grew 16.6% to $20.20 drop in loan loss provisions to $25.11 ance (BOLI) income slipped 1.2% to million, up from $17.33 million in third million, and a $10.89 million cut in interest $3.18 million, down from $3.22 million, quarter 2010, when the company record- expense, which more than made up for a while trust department earnings rose ed $2.63 million in net impairment losses $12.49 million decline in interest revenue 2.6% to $5.61 million, up from $5.47 mil- on securities. to $132.40 million. Net income after lion. Insurance and investment services Net interest income on a 3.86% net $7.61 million in increased noninterest earnings, BOLI income and trust earnings interest margin rose 5.3% to $114.15 expense, almost half of which was tied to comprised, respectively, 3.2%, 5.2% and million, up from $108.43 million in third the closure of 22 branches, rose 6.0% to 9.2% of noninterest income, which grew quarter 2010, reflecting a $1.05 million $11.93 million, up from $11.26 million in 10.2% to $60.77 million, up from $55.14 increase in interest income, a $3.15 mil- third quarter 2010. BancorpSouth Chair- million in third quarter 2010, helped by a lion cut in interest expense, and a $1.53 man and CEO Aubrey Patterson said, $4.34 million increase in net securities million decrease in loan loss provisions to “Our community banking operations again gains, which compensated for a $2.9 mil- $7.78 million. Net income, despite a produced consistent, solid results… Our lion drop in loan sales and servicing in- $2.72 million increase in noninterest ex- noninterest revenue businesses remained come. pense, rose 8.3% to $35.36 million, up resilient … [and] our insurance business Net interest income on a 3.74% net from $32.64 million in third quarter 2010. generated further organic growth com- interest margin fell 4.6% to $100.02 mil- Valley National Chairman, President and pared with 2010.” lion, down from $104.79 million in third CEO Gerald Lipkin said, “Given the cur- In 2010, BancorpSouth earned $82.6 quarter 2010, despite a $7.68 million cut rent sluggish operating environment, we million in insurance brokerage income, in interest expense and a nominal rise believe our performance continued to be which comprised 34.0% of its noninterest ($621,000) in loan loss provisions to very solid during the third quarter.” income and 12.0% of its net operating $19.37 million, as total interest income In 2010,Valley National earned $11.3 revenue. Excluding traditional life insurer dropped by $11.78 million to $133.56 million in insurance brokerage income, MetLife, the company ranked 11th in in- million. Net income increased 9.4% to which comprised 13.4% of its noninterest surance brokerage earnings among all $31.74 million, up from $29.00 million, income and 2.1% of its net operating rev- bank holding companies, according to the helped by a $4.71 million cut in noninter- enue. Excluding traditional life insurer Michael White-Prudential Bank Insurance est expense. FirstMerit Chairman, Presi- MetLife, the company ranked 45th in in- Fee Income Report. dent and CEO Paul Greig said, “Our third surance brokerage earnings among all quarter results reflect exceptional perfor- bank holding companies, according to the NOVEMBER 7 - 13, 2011 mance in challenging times…. Even as Michael White-Prudential Bank Insurance INSURANCE, TRUST & SECURITIES the economy continues to struggle, we Fee Income Report. BROKERAGE REVENUE are building shareholder value through GROW AT F.N.B. CORP. our dedication to sound banking princi- NOVEMBER 7 - 13, 2011 Hermitage, PA-based, $9.95 billion-asset ples.” INSURANCE EARNINGS REMAIN F.N.B. Corp. reported insurance commis- In 2010, FirstMerit Corp. earned TOP CONTRIBUTOR TO sions and income in the third quarter rose $21.95 million in fiduciary income, which BANCORPSOUTH’S 2.1% to $4.00 million, up from $3.92 mil- comprised 10.6% of its noninterest in- NONINTEREST INCOME lion in third quarter 2010. Trust income come and 3.3% of its net operating reve- Tupelo, MS-based, $13.2 billion-asset grew 15.6% to $3.57 million, up from nue. The company ranked 48th in ficui- BancorpSouth Inc. reported insurance $3.08 million; and securities commissions ary earnings among all bank holding com- brokerage fee income in the third quarter and fees increased 3.6% to $1.86 million, panies, according to the Michael White increased 5.7% to $22.01 million, up from up from $1.79 million. Insurance broker- Bank Trust Fee Income Ratings Report. $20.83 million in third quarter age, trust and securities brokerage fee

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 72 income comprised, respectively, 13.5%, come among all bank holding companies, lion, up from $78.64 million in third quar- 12.0% and 6.3% of noninterest income, according to the Michael White-Prudential ter 2010, driven by a $3.02 million cut in which rose 6.8% to $29.63 million, up Bank Insurance Fee Income Report and interest expense and a $4.28 million drop from $27.75 million in third quarter 2010. the Michael White Bank Trust Fee In- in loan loss provisions to $7.98 million. Net interest income on a 3.79% net come Ratings Report. Net income, after a $1.06 million increase interest margin grew 19.8% to $73.84 in noninterest expense, rose 4.3% to million, up from $61.62 million in third NOVEMBER 7 - 13, 2011 $26.97 million, up from $25.86 million in INSURANCE & WEALTH quarter 2010, reflecting a $5.2 million third quarter 2010. Trustmark President MANAGEMENT EARNINGS increase in interest revenue, a $3.39 mil- and CEO Gerard Host pointed to the im- COMPRISE 30.5% lion cut in interest expense, and a $3.74 pact of noninterest earnings on the com- OF TRUSTMARK’S million drop in loan loss provisions to pany’s bottom line and said, “Trustmark NONINTEREST INCOME $8.57 million. Net income climbed 38.1% continued to post strong financial perfor- Jackson, MS-based, $9.57 billion-asset to $23.77 million, up from $17.22 million mance as reflected in expanded profitabil- Trustmark Corp. reported insurance bro- in third quarter 2010, despite a $5 million ity in our mortgage banking, wealth man- kerage fee income in the third quarter increase in noninterest expense. F.N.B. agement and insurance businesses.” slipped 3.1% to $7.52 million, down from Corp. CEO Stephen Gurgovits noted, In 2010, Trustmark earned $27.7 mil- $7.75 million in third quarter 2010, while “Revenue growth was achieved for the lion and $17.3 million, respectively, in wealth management earnings grew eighth consecutive quarter.” Gorgovits insurance brokerage and wealth manage- 15.3%% to $5.99 million, up from $5.20 said, “The third quarter was another posi- ment income, which comprised 18.9% million. Insurance brokerage and wealth tive quarter for F.N.B.” and 11.8% of its noninterest income. The management earnings comprised, re- In 2010, F.N.B. Corp. earned $13.2 company ranked 28th in insurance bro- spectively, 17.0% and 13.5% of noninter- million and $12.7 million, respectively, in kerage earnings and 61st in wealth man- est income, which ticked up 0.7% to insurance brokerage and fiduciary in- agement income among all bank holding $44.27 million from $43.98 million in third come, which comprised 11.4% and companies, according to the Michael quarter 2010. 11.0% of its noninterest income. The White-Prudential Bank Insurance Fee Net interest income on a 4.17% net company ranked 40th in insurance bro- Income Report and the Michael White interest margin rose 3.5% to $81.37 mil- kerage earning and 73rd in fiduciary in- Bank Wealth Management Fee Income Ratings Report.

NOVEMBER 7 - 13, 2011 INSURANCE & COMPREHENSIVE, GROWING BOLI & WEALTH MANAGEMENT NATIONAL, EARNINGS DOMINATE 49% OF NATIONAL PENN’S STANDARDIZED NONINTEREST INCOME Boyertown, PA-based, $8.6 billion-asset DATA AND National Penn Bancshares reported in- BENCHMARKS surance brokerage fee income in the third quarter slipped 2.6% to $3.41 million, FOR down from $3.50 million in third quarter 2010, while income from bank-owned life BANK insurance (BOLI) climbed 47.9% to $1.73 million; and wealth management earnings AND increased 11.0% to $6.23 million. Insur- BANK HOLDING ance brokerage, BOLI and wealth management income comprised, respectively, COMPANY 14.7%, 7.5% and 26.9% of noninterest earnings, which dipped to $23.14 million, INSURANCE down 1.4% from third quarter 2010. Net interest income on a 3.46% net FEE INCOME. interest margin jumped 35.1% to $64.42 million, up from $47.69 million in third quarter 2010, driven by a $20 million drop in loan loss provisions to zero and a $7 million cut in interest expense, which The Michael White-Prudential compensated for a $10.31 million drop in interest revenue to $86.06 million. Net Bank Insurance Fee Income Report income, helped additionally by a $4 million cut in noninterest expense, more than

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 73 doubled to $24.81 million, up from $10.30 NOVEMBER 14 - 20, 2011 mance in generating insurance brokerage million in third quarter 2010. National U.S. BANK HOLDING COMPANIES’ and underwriting fee income. Results are Penn Bancshares CEO Scott Fainor said, INSURANCE BROKERAGE based on data from all 6,805 commercial “We will continue to build on our positive EARNINGS banks and FDIC-supervised savings momentum by remaining focused on BREAK RECORDS banks and 934 large top-tier bank holding serving our customers and on our initia- Bank holding companies (BHCs) set new companies operating on June 30, 2011. tives to expand outreach to potential cli- records in insurance brokerage fee in- “In first half 2011, the number of BHCs ents as we navigate through this period.” come in the second quarter and year-to- that grew or maintained their insurance Among those initiatives are plans “to fur- date (YTD) in the first half of 2011, ac- brokerage revenues largely equaled ther develop new and existing customer cording to the Michael White-Prudential those that didn’t. We examined 154 relationships by expanding delivery of Bank Insurance Fee Income Report. BHCs with at least $1 million in annual- banking, insurance, investments and trust BHC insurance brokerage income of ized insurance brokerage income. While services.” $3.88 billion in second quarter 2011 was three BHCs had no growth, 74 BHCs In 2010, National Penn earned $14.9 up 9.1% from $3.55 billion in second showed positive growth in their insurance million and $23.9 million, respectively, in quarter 2010. First-half income of $7.86 brokerage income, while 77 experienced insurance brokerage and wealth manage- billion was up 14.3% from $6.88 billion in declines. Thirty-six (36) had increases ment income, which comprised 15.0% first half 2010. Thus far in 2011, 62.4% under 10%, and 40 had declines of less and 24.1% of its noninterest income. The of large top-tier BHCs engaged in insur- than 10%,” said Michael White, President company ranked 37th in insurance bro- ance brokerage activities. of MWA. “Thirty-eight achieved revenue kerage earnings and 50th in wealth man- Compiled by Michael White Associates increases over 10%, and 37 BHCs en- agement income among all bank holding (MWA) since 2001 and sponsored by dured decreases greater than 10%. companies, according to the Michael The Prudential Insurance Company of Across the country, insurance agencies White-Prudential Bank Insurance Fee America’s Individual Life Insurance and brokerages continue to be hampered Income Report and the Michael White business, a proud member of the Ameri- by a difficult economy, soft insurance Bank Wealth Management Fee Income can Bankers Insurance Association markets, and capital restraint on the part Ratings Report. (ABIA), this report measures and bench- of many potential buyers, thereby inhibit- marks the banking industry’s perfor- ing acquisition.” Among companies with significant banking activities as of June 30, 2011, Citigroup Inc. (NY) topped the leader TOP 12 BANK HOLDING COMPANIES IN INSURANCE BROKERAGE FEE INCOME board with insurance brokerage earnings YEAR-TO-DATE JUNE 30, 2011 - NATIONALLY of $1.12 Billion. Wells Fargo & Company (CA) ranked second nationally with $923.0 million; and BB&T Corporation R INSURANCE BROKERAGE % FEE INCOME % OF (NC), which owns more agencies than A CHANGE BANK HOLDING COMPANY ASSETS NONINT. N 2Q 2010 INCOME any other financial holding company, K YTD 2Q2011 YTD 2Q2010 - 2Q 2011 ranked third with $492.7 million in insur- (ALL DOLLAR AMOUNTS IN THOUSANDS) ance brokerage revenue in first half 2011. (Not included in the accompanying list of 1 $1,119,000 $771,000 45.14% Citigroup Inc. NY $1,956,103,000 6.65% companies is MetLife, Inc., a traditional 2 $923,000 $1,005,000 -8.16% Wells Fargo & Company CA $1,259,622,000 4.79% life insurer.) Five of the top ten producers of insur- 3 $492,660 $484,042 1.78% BB&T Corporation NC $159,307,350 38.08% ance brokerage were BHCs chartered during the financial crisis: Morgan Stanley 4 $171,000 $136,000 25.74% Morgan Stanley NY $830,747,000 1.00% (NY), American Express (NY), The Gold- 5 $107,000 $93,555 14.37% American Express Company NY $146,541,000 0.95% man Sachs Group (NY), Discover Finan- cial (IL) and Ally Financial (MI), the former 6 $71,281 $67,966 4.88% Discover Financial Services IL $64,304,907 7.64% GMAC Inc. But, these recently minted 7 $68,000 $70,000 -2.86% The Goldman Sachs Group NY $935,544,000 0.41% BHCs contributed only $41.76 million or 4.3% of the industry’s $980.99 million or 8 $55,485 $54,713 1.41% Regions Financial Corp. AL $130,907,840 4.02% 14.3% increase in insurance brokerage income in first half 2011. 9 $50,000 $58,000 -13.79% Ally Financial Inc. MI $178,889,000 1.44% Bank holding companies over $10 bil- 10 $45,715 $43,555 4.96% BancorpSouth, Inc. MS $13,373,373 36.80% lion in assets continued to have the highest participation (89.3%) in insurance 11 $34,000 $53,000 -35.85% JPMorgan Chase & Co. NY $2,244,903,000 0.12% brokerage activities. These BHCs produced $7.49 billion in insurance fee in- 12 $33,138 $35,805 -7.45% Huntington Bancshares Inc. OH $52,699,501 6.91% come in the first half of 2011, 15.2% more SOURCE: Michael White - Prudential Bank Insurance Fee Income Report than the $6.50 billion they produced in

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 74 first half 2010. These large bank holding 36.3%. Among the top 50 small banks in incredible focus by everyone at Bremer to companies accounted for 95.3% of all insurance brokerage concentration that drive revenue, build partnerships, BHC insurance brokerage fee income are serving as proxies for small BHCs, strengthen relationships and control ex- earned in first half 2011. the median Insurance Brokerage Con- penses.” “Our internet-based simplified issue centration Ratio was 69.4% of noninterest In 2010, Bremer Financial earned products continue to enable the banks to income. $14.9 million in insurance brokerage in- grow their life insurance brokerage in- Among the top 50 BHC leaders in income, which comprised 18.5% of its non- come and provide an opportunity to insurance brokerage productivity (i.e., in- interest income and 4.1% of its net oper- crease the non-fee revenue to the bank,” surance brokerage income per BHC em- ating revenue. Excluding traditional life said Joan H. Cleveland, senior vice presi- ployee), the median Insurance Brokerage insurer MetLife, the company ranked 36th dent, Business Development with Individ- Productivity Ratio was $9,351 per em- in insurance brokerage earnings among ual Life Insurance, The Prudential Insur- ployee (or an annualized Productivity all bank holding companies, according to ance Company of America. “These prod- Ratio of $18,702). Among the top 50 the Michael White-Prudential Bank Insur- ucts were designed with the consumer in small banks in insurance brokerage ance Fee Income Report. mind and allow banks to easily work with productivity, the median Insurance Bro- their customers to help meet their protec- kerage Productivity Ratio was $13,550 NOVEMBER 14 - 20, 2011 INSURANCE BROKERAGE & tion needs or create a legacy.” per employee (or an annualized Produc- TRUST EARNINGS CLIMB 29% AT Among BHCs with assets between $1 tivity Ratio of $27,100). NORTHWEST BANCSHARES billion and $10 billion, leaders in insur- To read more about first half 2011 results Warren, PA-based, $7.99 billion-asset ance brokerage income in the first half in bank insurance brokerage income, Northwest Bancshares reported both in- 2011 included Eastern Bank Corporation click here. surance brokerage fee income and trust (MA), Stifel Financial (MO), Old National and investment management (TIM) fees Bancorp (IN), Trustmark Corporation NOVEMBER 14 - 20, 2011 RISING INSURANCE, TRUST & climbed 29% in the third quarter, with (MS), and Johnson Financial Group, Inc. SECURITIES BROKERAGE EARNINGS insurance reaching $1.80 million and TIM (WI). BHCs of this size registered a 0.2% COMPRISE 39% OF fees hitting $2.06 million. At the same decrease in insurance brokerage income BREMER’S NONINTEREST INCOME time, income from bank-owned life insur- to $301.42 million in first half 2011, down St. Paul, MN-based, $8 billion-asset ance (BOLI) jumped 60% to $1.94 million from $302.05 million in first half 2010. Bremer Financial reported insurance bro- from $1.21 million, reflecting the payout of Among BHCs with assets between kerage fee income in the third quarter death benefits on two policies. Insurance $500 million and $1 billion, leaders were rose 6% to $3.02 million, up from $2.85 brokerage, TIM fees and BOLI income Two Rivers Financial Group (IA), 473 million in third quarter 2010; trust and comprised, respectively, 12.4%, 14.2% Broadway Holding Corporation (NY), Tex- investment management (TIM) fees in- and 13.4% of noninterest income, which as Independent Bancshares (TX), Evans creased 7.6% to $3.66 million, up from rose 5% to $14.51 million from $13.83 Bancorp (NY), and Northeast Bancorp $3.40 million; and securities brokerage million in third quarter 2010, despite a (ME). These BHCs experienced a de- fee income climbed 21.7% to $1.87 mil- $1.3 million drop in service charges and cline of 7.8% year-over-year in their insur- lion, up from $1.54 million. Insurance fees. ance brokerage income. Northeast Ban- brokerage, TIM fees and securities bro- Net interest income on a 3.70% net corp recently announced that it is selling kerage fee income comprised, respec- interest margin rose 3.8% to $58.96 mil- its insurance agencies. tively, 13.8%, 16.7% and 8.5% of nonin- lion, up from $56.78 million in third quar- The smallest community banks, with terest earnings, which slid 7.2% to $21.92 ter 2010, despite a $3.98 million decrease assets less than $500 million, were used million, down from $23.63 million in third in interest revenue, as interest expense as “proxies” for the smallest BHCs, which quarter 2010, hit by a $2.61 million drop was cut by $4.34 million and loan loss are not required to report insurance bro- in the gain on the sale of loans and a provisions decreased by $1.81 million to kerage income. Leaders among bank $109,000 decline in service charges. $8.06 million. Net income rose 7.7% to proxies for small BHCs were Soy Capital Net interest income on a 3.91% net $16.7 million, up from $15.5 million in Bank and Trust Company (IL), Hoosac interest margin rose 3.3% to $65.24 mil- third quarter 2010. Northwest Bank (MA), Industry State Bank (TX), lion, up from $63.18 million in third quar- Bancshares President and CEO William First State Bank (IA), and Deutsche Bank ter 2010, driven by a $4.60 million (25%) Wagner said, “We are pleased to report Trust Company (DE). These small drop in interest expense, and a $577,000 another solid quarter with fairly significant banks, representing small BHCs, also (10%) decline in loan loss provisions to growth in earnings.” registered a decline of 4.7% in insurance $5.13 million. Net income climbed 39% In 2010, Northwest Bancshares brokerage income, dropping from $84.7 to $19.96 million, up from $14.36 million, earned $5.55 million in insurance broker- million in first half 2010 to $80.8 million in helped by an $8.44 million (12.6%) de- age income, which comprised 9.2% of its first half 2011. crease in noninterest expense, particular- noninterest income and 1.7% of its net Among the top 50 BHCs nationally in ly a $9.28 million (82%) drop in expenses operating revenue. The company ranked insurance brokerage concentration (i.e., tied to other real estate owned (OREO). 49th in insurance brokerage earnings insurance brokerage income as a percent Commenting on Bremer’s third quarter among all bank holding companies, ac- of noninterest income), the median Insur- performance, President and CEO Pat cording to the Michael White-Prudential ance Brokerage Concentration Ratio was Donovan said, “These numbers reflect an Bank Insurance Fee Income Report.

NOVEMBER 14 - 20, 2011 climbed 19.2% to $53.53 million, up from lion, down from $48.54 million in third ORIENTAL FINANCIAL BENEFITS $44.92 million in third quarter 2010, as quarter 2010, reflecting an $8.38 million FROM 17% GROWTH IN WEALTH interest revenue grew 12.5% to $70.42 drop in interest revenue to $57.6 million MANAGEMENT EARNINGS million, up from $62.60 million, interest and a $2.45 million increase in loan loss San Juan, Puerto Rico-based, $7.02 bil- expense declined by $423,000, and loan provisions to $6.98 million, both of which lion-asset Oriental Financial Group re- loss provisions decreased by $357,000 to overwhelmed the $4.77 million cut in in- ported wealth management revenues in $1.04 million. Net income, despite interest expense. Net income fell 22.4% to the third quarter grew 16.8%% to $5.39 creased noninterest expenses largely tied $8.3 million, down from $10.7 million in million, up from $4.61 million in third quar- to The Wilbur Corporation acquisition, third quarter 2010. Looking ahead, First ter 2010, and comprised 31.4% of nonin- grew 15.9% to $20.01 million, up from Commonwealth Financial President and terest income of $17.19 million, which $17.26 million in third quarter 2010. CEO John Dolan said, “We are commit- compared with a noninterest loss of Community Bank System CEO Mark ted to solidifying our balance sheet posi- $10.46 million in third quarter 2010, when Tryniski described the results as “another tioning, expanding our customer relation- the company reported a $14.74 million quarter of record earnings” and said, “We ships and resolving any complex, trou- loss on other-than-temporarily impaired remain very pleased with the perfor- bled debts that remain. We believe this securities and a $22.58 million net loss on mance of our new Central New York re- strategic focus will provide sustainable derivatives. gion (the former Wilbur National Bank long-term benefits for our organization.” Net interest income fell 10.2% to branches) and the response of our cus- In 2010, First Commonwealth Finan- $30.59 million, down from $34.06 million tomers to the availability of enhanced cial earned $3.3 million in insurance bro- in third quarter 2010, despite a $3.85 product offerings.” kerage income, which comprised 6.2% of million cut in interest expense, as interest In 2010, Community Bank System its noninterest income and 1.3% of its net revenue dropped by $9.56 million to earned $2.7 million and $43.1 million, operating revenue. The company ranked $71.66. Net income of $15.59 million respectively, in insurance brokerage and 101st in insurance brokerage earnings contrasted with a third quarter 2010 loss other noninterest income, which com- among all bank holding companies, ac- of $31.73 million. Oriental Financial Pres- prised 3.0% and 48.6% of its noninterest cording to the Michael White-Prudential ident and CEO Jose Rafael Fernandez income. The company ranked 113th in Bank Insurance Fee Income Report. said, “Taking advantage of local market insurance brokerage earnings and 89th in conditions, we are expanding relation- other noninterest income among all bank NOVEMBER 14 - 20, 2011 INSURANCE, TRUST & BOLI ships and building our reputation.” holding companies, according to the COMPRISE 45% OF In 2010, Oriental Financial earned Michael White-Prudential Bank Insurance WESBANCO’S $8.4 million and $7.3 million, respectively, Fee Income Report and other Michael NONINTEREST INCOME in fiduciary income and securities broker- White Bank Fee Income Ratings Reports. age income. The company ranked 92nd Wheeling, WV-based, $5.5 billion-asset in fiduciary income and 47th in securities NOVEMBER 14 - 20, 2011 WesBanco reported combined insurance brokerage income among all bank holding INSURANCE, SECURITIES and securities brokerage fee income in companies, according to the Michael BROKERAGE, TRUST & BOLI the third quarter declined 9% to $1.70 White Bank Fiduciary Fee Income INCOME UP AT million, down from $1.87 million in third Ratings Report and the Michael White FIRST COMMONWEALTH quarter 2010, while trust fees increased Bank Securities Brokerage Income Indiana, PA-based, $5.65 billion-asset 4.7% to $3.94 million, up from $3.77 mil- Ratings Report. First Commonwealth Financial reported lion, and bank-owned life insurance combined insurance and retail brokerage (BOLI) income rose 3.3% to $908,000, up NOVEMBER 14 - 20, 2011 commissions in the third quarter rose from $879,000. Combined insurance and GROWING BENEFIT PLAN & 6.3% to $1.70 million, up from $1.60 mil- securities brokerage earnings, trust fees TRUST FEES DOMINATE COMMUNITY lion in third quarter 2010. Trust income and BOLI income comprised, respective- BANK’S NONINTEREST EARNINGS increased 7.4% to $1.60 million, up from ly, 11.6%, 27.0% and 6.2% of noninterest Syracuse, NY-based, $6.50 billion-asset $1.49 million; and income from bank- earnings, which slipped 2.5% to $14.60 Community Bank System reported benefit owned life insurance (BOLI) rose 2.2% to million, down from $14.98 million in third plan administration, consulting and actuari- $1.41 million, up from $1.38 million. quarter 2010, when net gains on sales of al (benefit plan) fees in the third quarter Combined insurance and retail brokerage mortgage loans and net securities gains rose 5.9% to $7.69 million, up from $7.26 commissions, trust earnings and BOLI were, respectively, $658,000 and million in third quarter 2010. Trust and income comprised, respectively, 15.7%, $914,000 higher. investment management (TIM) income 14.8% and 13.1% of noninterest earn- Net interest income on a 3.69% net grew 20.8% to $2.90 million, up from $2.40 ings, which slipped 0.7% to $10.80 mil- interest margin rose 6.15% to $32.07 million. Benefit plan and TIM fees income lion, down from $10.88 million in third million, up from $30.21 million in third comprised, respectively, 33.1% and 12.5% quarter 2010, when the company record- quarter 2010, as a $3.20 million cut in of noninterest income, which ticked up ed $1.43 million in net securities gains interest expense and a $942,000 de- 1.4% to $23.22 million, up from $22.91 compared to zero such gains in third crease in loan loss provisions to $10.84 million in third quarter 2010, helped by the quarter 2011. million more than compensated for a second quarter acquisition of Oneonta, NY Net interest income on a 3.81% net $2.29 million decline in interest revenue. -based The Wilbur Corporation. interest margin fell 13.9% to $41.79 mil- Net income additionally benefited from an Net interest income in the third quarter

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 76 over $2 million cut in noninterest expense for a $3.53 million drop in interest reve- NOVEMBER 21 - 27, 2011 and climbed 20.3% to $11.01 million, up nue. Net income rose 4.4% to $15.2 mil- INVESTMENT SERVICES FEES from $9.15 million in third quarter 2010. lion, up from $14.6 million in third quarter GROW 38.2% AT PINNACLE; WesBanco President and CEO Paul Lim- 2010. NBT President and CEO Marty INSURANCE & TRUST bert said, “Wesbanco has continued to Dietrich said, “Through our ongoing focus INCOME UP, TOO post improved earnings in the third quar- on our customers and our people, we Nashville, TN-based, $4.87 billion-asset ter.” Limbert added, “We are also seeing have again delivered a strong perfor- Pinnacle Financial Partners reported in- the benefits of expense saving initiatives.” mance.” Dietrich added, “We continue to surance brokerage fee income in the third In 2010, WesBanco earned $2.4 mil- seek out opportunities for strategic invest- quarter increased 4.8% to $1.00 million, lion and $594,000, respectively, in insur- ments to secure our future success.” up from $954,015 in third quarter 2010; ance brokerage and securities brokerage In 2010, NBT Bancorp earned $14.5 investment services fee income grew income, which comprised, respectively, million and $4.4 million, respectively, in 38.2% to $1.70 million, up from $1.23 4.1% and 1.0% of its noninterest income. insurance brokerage and securities bro- million; and trust fees rose 3.8% to The company ranked 120th in insurance kerage income, which comprised 17.8% $753,551, up from $726,094. Insurance brokerage earnings and 184th in securi- and 5.4% of its noninterest income. The brokerage, investment services and trust ties brokerage income among all bank company ranked 38th in insurance bro- fee income comprised, respectively, holding companies, according to the kerage earnings and 63rd in securities 9.9%, 16.9% and 7.5% of noninterest Michael White-Prudential Bank Insurance brokerage income among all bank hold- earnings, which grew 17.3% to $10.08 Fee Income Report and the Michael ing companies, according to the Michael million, up from $8.59 million in third quar- White Bank Securities Brokerage Fee White-Prudential Bank Insurance Fee ter 2010. Income Ratings Report. Income Report and the Michael White Net interest income on a 3.60% net Bank Securities Brokerage Fee Income interest margin increased 11.0% to NOVEMBER 14 - 20, 2011 Ratings Report. $34.72 million, up from $31.27 million in INSURANCE, TRUST, BOLI third quarter 2010, despite a $7.76 million & RETIREMENT PLAN FEES NOVEMBER 21 - 27, 2011 drop in interest income, as interest ex- DOMINATE OVER 50% WEALTH MANAGEMENT EXPANSION pense was cut by $6.06 million and loan OF NBT’S NONINTEREST REVENUE PRODUCES RESULTS AT loss provisions declined by $1.16 million Norwich, NY-based, $5.5 billion-asset INDEPENDENT BANK CORP. to $3.63 million. Net income spiked to NBT Bancorp reported insurance broker- Rockland, MA-based, $4.9 billion-asset $34.54 million, up from $549,048 in third age fee income in the third quarter grew Independent Bank Corp., parent of Rock- quarter 2010, driven by a $16.97 million 11.5% to $5.13 million, up from $4.60 land Trust Company, reported investment income tax benefit. Pinnacle’s President million in third quarter 2010, helped by management fee income in the third and CEO M. Terry Turner said, “Our firm the acquisition of another insurance quarter climbed 22.5% to $3.49 million, is well positioned to capitalize on future agency in second quarter 2011. Trust up from $2.85 million in third quarter growth opportunities in two very strong earnings increased 16.8% to $2.09 mil- 2010, while income from bank-owned life banking markets.” lion, up from $1.79 million, and income insurance (BOLI) fell 16% to $757,000, In 2010, Pinnacle Financial Partners from bank-owned life insurance (BOLI) down from $901,000. Investment man- earned $3.86 million in insurance broker- rose 2.9% to $674,000, up from agement and BOLI income comprised, age income, which comprised 13.1% of $655,000. Retirement plan administration respectively, 28.3% and 6.1% of noninter- its noninterest fee income and 2.5% of its fees, however, declined 11.9% to $2.30 est earnings, which rose 5.7% to $12.32 net operating revenue. The company million, down from $2.61 million, impacted million, up from $11.65 million in third ranked 43rd in insurance brokerage earn- by the fourth quarter 2010 loss of one quarter 2010. ings among bank holding companies with client, NBT said. Insurance brokerage, Net interest income on a 3.84% net assets between $1 billion and $10 billion, trust fees, BOLI income and retirement interest margin rose 5.4% to $39.67 mil- according to the Michael White-Prudential plan administration fees comprised, re- lion, up from $37.70 million in third quar- Bank Insurance Fee Income Report. spectively, 25.4%, 10.4%, 3.3% and ter 2010, driven by a drop in loan loss 11.4% of noninterest income, which slid provisions to $2 million and a $2.13 mil- NOVEMBER 21 - 27, 2011 3.8% to $20.19 million, down from $20.99 lion cut in interest expense, which made INSURANCE & ADVISORY FEE million in third quarter 2010, when service up for a $1.65 million decline in interest INCOME COMPRISE 30.2% OF charges on deposit accounts were great- earnings. Net income increased 7.30% BENEFICIAL MUTUAL’S er and the company recorded $1.12 mil- to $11.96 million, up from $11.15 million NONINTEREST EARNINGS lion in net securities gains compared to in third quarter 2010. Independent Bank Philadelphia, PA-based, $4.63 billion- $12,000 in third quarter 2011. Corp. President and CEO Christopher asset Beneficial Mutual Bancorp reported Net interest income on a 4.14% net Oddleifson said, “Despite the challenging combined insurance and advisory fee interest margin increased 4.8% to $45.19 operating environment, we continue to income generated by Beneficial Insur- million, up from $43.10 million in third deliver quality results,… and the recent ance Services and Beneficial Advisors in quarter 2010, driven by a $3.26 million expansion of our commercial lending and the third quarter slipped 2.1% to $1.90 cut in interest expense and a $2.35 mil- wealth management franchises will help million, down from $1.94 million in third lion decline in loan loss provisions to us sustain our momentum.” quarter 2010, and comprised 30.2% of $5.18 million, which more than made up noninterest earnings, which grew 9.8% to

$6.30 million, up from $5.74 million in NOVEMBER 21 - 27, 2011 17.9% and 1.6% of noninterest earnings, third quarter 2010. INSURANCE BROKERAGE & which increased 5.2% to $13.26 million, Net interest income of $25.83 million WEALTH MANAGEMENT EARNINGS up from $12.61 million in third quarter on a 3.21% net interest margin contrasted UP & DOMINATE 40% OF 2010, when the company posted a $1.24 with a net interest loss of $15.96 million in S&T’S NONINTEREST INCOME million loss on the valuation adjustment of third quarter 2010, when loan loss provi- Indiana, PA-based, $4.1 billion-asset S&T mortgage servicing rights. sions reached $51.05 million and interest Bancorp reported insurance brokerage Net interest income on a 4.14% net expense hit $12.20 million. Net income of fee income in the third quarter ticked up interest margin fell 10.7% to $28.51 mil- $4.1 million contrasted with a third quarter 2.8% to $2.19 million, from $2.13 million lion, down from $31.91 million in third net loss of $21.7 million in third quarter in third quarter 2010; and wealth man- quarter 2010, driven by a $2.67 million 2010, driven by the net interest loss. agement earnings rose 5.9% to $1.97 drop in interest income and a $2.93 mil- Beneficial Mutual President and CEO million from $1.86 million. Insurance bro- lion jump in loan loss provisions to $7.73 Gerard Cuddy said, “We remain con- kerage and wealth management earnings million. Net income dropped 39.2% to cerned about economic conditions and comprised, respectively, 21.0% and $3.39 million from $5.58 million in third the interest rate environment and believe 18.9% of noninterest income, which fell quarter 2010, reflecting recognition of we are in a period of slow growth that will 15.5% to $10.42 million, down from $2.6 million in unamortized discount on last well past 2012.” $12.33 million in third quarter 2010. preferred stock tied to the repurchase of In 2010, Beneficial Mutual Savings Net interest income on a 3.76% net stock acquired by the U.S. Treasury un- Bank earned $7.2 million in insurance interest margin grew 11.8% to $33.34 der the Troubled Asset Relief Program brokerage income, which comprised million, up from $29.83 million in third (TARP). Heartland Chairman, President 33.2% of its noninterest income. The quarter 2010, reflecting a $3.24 million and CEO Lynn Fuller said, “We are very company ranked 8th in insurance broker- reduction in interest expense and a $6.74 pleased with Heartland’s solid third quar- age earnings among bank holding com- million drop in loan loss provisions to ter earnings. Most performance panies with assets between $1 billion and $1.54 million. Net income increased measures are moving in a positive direc- $10 billion, according to the Michael 12.0% to $12.24 million, up from $10.93 tion.” White-Prudential Bank Insurance Fee million in third quarter 2010. S&T Ban- In 2010, Heartland Financial earned Income Report. corp President and CEO Todd Brice said, $9.2 million in fiduciary income, which “Our nonperforming assets are at the comprised 26.8% of its noninterest in- NOVEMBER 21 - 27, 2011 lowest levels since December 2008, come. The company ranked 35th in fidu- INSURANCE BROKERAGE & TRUST which demonstrates our continued pro- ciary income among bank holding compa- FEES RISE AT 1ST SOURCE gress in resolving challenging loans with- nies with assets between $1 billion and South Bend, IN-based, $4.31 billion-asset in our portfolio.” $10 billion, according to the Michael 1st Source Corporation reported its seven In 2010, S&T Bancorp earned $5.8 White Bank Trust Fee Income Ratings 1st Source Insurance offices generated million in insurance brokerage income, Report. $1.21 million in insurance brokerage fee which comprised 12.4% of its noninterest income in the third quarter, up 2.5% from income and 3.0% of its net operating rev- NOVEMBER 21 - 27, 2011 $1.18 million earned in third quarter 2010. enue. The company ranked 29th in insur- RBC ACQUISITION DRIVES TRUST At the same time, 1st Source Bank’s eight ance brokerage earnings among bank REVENUE UP 37.2% AT RENASANT; trust and wealth management locations holding companies with assets between INSURANCE INCOME UP, TOO generated $3.90 million in trust fees, up $1 billion and $10 billion, according to the Tupelo, MS-based, $4.1 billion-asset Re- 0.8% from $3.87 million. Insurance bro- Michael White-Prudential Bank Insurance nasant Corp. reported insurance broker- kerage and trust fees comprised, respec- Fee Income Report. age fee income in the third quarter rose tively, 6.0% and 19.3% of 1st Source’s 2.3% to $847,000, up from $828,000 in noninterest income, which declined NOVEMBER 21 - 27, 2011 third quarter 2010, and trust revenue 11.1% to $20.23 million, down from HEARTLAND’S COMBINED climbed 37.2% to $771,000, up from $22.75 million in third quarter 2010, when INSURANCE & SECURITIES $562,000, reflecting the August acquisi- mortgage banking earnings were almost BROKERAGE EARNINGS tion of RBC Bank (USA)’s Birmingham, $1.5 million higher and equipment rental CLIMB 24.2% AL-based, $680 million-asset trust divi- income was $1.32 million greater. Dubuque, IA-based, $4.1 billion-asset sion. Insurance brokerage and trust fees Net interest income on a 3.66% net Heartland Financial reported combined comprised, respectively, 4.3% and 3.9% interest margin grew 11.9% to $35.37 insurance and securities brokerage fee of noninterest income, which tumbled million from $31.61 million in third quarter income in the third quarter grew 24.2% to 64% to $19.6 million, down from $54.53 2010, based on a $3.10 million reduction $918,000, up from $739,000 in third quar- million in third quarter 2010, when the in interest expense and a $4.32 million ter 2010; trust fees rose 4.8% to $2.38 company recorded a $42.2 million bar- drop in loan loss provisions to $1.26 mil- million, up from $2.27 million, but bank- gain purchase gain on an FDIC-assisted lion. Net income grew 21.7% to $11.54 owned life insurance (BOLI) income fell acquisition. million, up from $9.48 million in third quar- 47.5% to $208,000, down from $396,000. Net interest income on a 3.92% net ter 2010, when the company paid out Combined insurance and securities bro- interest margin jumped 75% to $27.36 $1.72 million in dividends. kerage earnings, trust fees and BOLI million, up from $15.62 million in third income comprised, respectively, 6.9%, quarter 2010, reflecting a $7.25 million

million, up from $26.46 million in third quarter 2010, driven by interest income derived from the April acquisition of Rome The most comprehensive Bancorp and the August acquisition of Legacy Bancshares. Net income, after a source of institution $14.62 million increase in noninterest expense largely tied to mergers and ac- rankings and industry quisitions, grew 27.2% to $4.39 million, up from $3.45 million in third quarter data on banks and 2010.

NOVEMBER 28 - DECEMBER 4, 2011 bank holding company ENTERPRISE FINANCIAL REPORTS 38% CLIMB IN annuity programs WEALTH MANAGEMENT REVENUE St. Louis, MO-based, $3.37 billion-asset in the nation. Enterprise Financial Services reported wealth management revenue in the third

SPONSORED B Y quarter climbed 38% to $1.83 million, up from $1.33 million in third quarter 2010, and comprised 27.9% of noninterest Michael White-ABIA earnings, which increased 8.4% to $6.56 million, up from $6.05 million in third quarter 2010, bolstered by a $484,000 in- American Bankers Bank Annuity crease in state tax credit activity to $1.37 Insurance Association an ABA subsidiary Fee Income Report million. Net interest income on a 4.56% net interest margin jumped 61.3% to $26.84 www.bankinsurance.com/products/annuity-fir million, up from $16.64 million in third quarter 2010, reflecting the August FDIC- assisted acquisition of Olathe, KS-based, $538.1 million-asset The First National Bank of Olathe, which helped drive interest income up by $8.02 million to $40.05 million. At the same time, interest expense was reduced by $84,000 and loan loss provisions dropped by $2.09 million cut in interest expense and a $6.00 mil- NOVEMBER 21 - 27, 2011 to $5.56 million. Net income after divi- lion drop in loan loss provisions to $5.50 BERKSHIRE HILL’S dends more than doubled to a record million. Net income fell 67% to $6.53 WEALTH MANAGEMENT FEES $9.07 million, up from $4.35 million in million, down from $19.55 million in third JUMP 48%; third quarter 2010. Enterprise Financial quarter 2010, when the company benefit- INSURANCE INCOME President and CEO Peter Benoist noted ed from the $42.21 million gain on the ALSO UP the acquisition of The First National Bank FDIC-assisted acquisition. Looking Pittsfield, MA-based, $4 billion-asset of Olathe doubled the company’s deposit ahead to the benefits expected by the Berkshire Hills Bancorp reported insur- base in Kansas City to over $1 billion. company’s move into the Alabama and ance brokerage fee income in the third However, he attributed the jump in net Golden Triangle Markets, Renasant quarter rose 4.7% to $2.43 million, up income to “a continuing trend of organic Chairman and CEO Robinson McGraw from $2.32 in third quarter 2010, and commercial loan growth … and steady said, “Moving into the fourth quarter, we wealth management fees jumped 47.7% progress in improving credit quality.” believe our basic banking metrics are to $1.61 million, up from $1.09 million. In 2010, Enterprise Financial earned positive and we anticipate a strong finish Insurance brokerage and wealth manage- $5.62 million in wealth management infor 2011.” ment fees comprised, respectively, 22.8% come, which comprised 30.4% of its non- In 2010, Renasant Corp. earned $2.4 and 15.1% of noninterest income, which interest income. The company ranked million in fiduciary income, which com- climbed 62.7% to $10.67 million, up from 56th in wealth management income prised 2.6% of its noninterest income. $6.56 million in third quarter 2010, bol- among bank holding companies with as- The company ranked 111th in fiduciary stered by a $1.98 million non-recurring sets between $1 billion and $10 billion, income among bank holding companies gain tied to the company’s acquisition of according to the Michael White Bank with assets between $1 billion and $10 Legacy Bancshares. Wealth Management Fee Income Ratings billion, according to the Michael White Net interest income on a 3.74% net Report. Bank Trust Fee Income Ratings Report. interest margin increased 9.0% to $28.84

NOVEMBER 28 - DECEMBER 4, 2011 income in the third quarter “benefited standing balances and enabled the com- GROWING INSURANCE & from increased sales of tax-deferred an- pany to recover $1.9 million in previously INVESTMENT SERVICES nuity products” and rose 3.7% to recorded charges,” zeroing out loan loss EARNINGS $765,000, up from $738,000 in third quar- provisions in the quarter. Net income DOMINATE 57% OF ter 2010. The combined earnings com- climbed 28.4% to $11.58 million, up from TOMPKINS FINANCIALS’ prised 14.0% of noninterest income, $9.02 million in third quarter 2010, helped NONINTEREST INCOME which dropped 57.8% to $5.47 million, by insurance. City Holding CEO Charles Ithaca, NY-based, $3.36 billion-asset down from $12.96 million in third quarter Hagebock said, “City’s franchise is excep- Tompkins Financial Corp. reported insur- 2010, when the company recorded $5.22 tionally strong; and our community bank ance brokerage fee income generated by million in net investment securities gains. model allows us to grow our business at Tompkins Insurance Agencies increased Net interest income on a 2.75% net the expense of our big bank competitors.” 5.9% to $3.57 million, up from $3.37 mil- interest margin soared 159.3% to $14.39 In 2010, City Holding earned $5.5 million in third quarter 2010, and investment million, up from $5.55 million in third lion in insurance brokerage income, services fee income generated by Tomp- quarter 2010, reflecting a $10.20 million which comprised 10.6% of its noninterest kins Financial Advisors rose 0.3% to cut in interest expense and a $5.07 mil- income. The company ranked 30th in $3.43 million, up from $3.42 million. In- lion drop in loan loss provisions to $1.09 insurance brokerage earnings among surance brokerage and investment ser- million, which more than compensated for bank holding companies with assets be- vices income comprised, respectively, a $6.42 million decline in interest revenue tween $1 billion and $10 billion, according 29.0% and 27.9% of noninterest earn- to $22.02 million. Net income climbed to the Michael White-Prudential Bank ings, which grew 9.6% to $12.31 million, 46.3% to $1.35 million, up from $923,000 Insurance Fee Income Report. up from $11.23 million in third quarter in third quarter 2010. Bank Mutual Presi- 2010. dent David Baumgarten said, “Our focus NOVEMBER 28 - DECEMBER 4, 2011 INSURANCE, INVESTMENT Net interest income on a 3.71% net continues to be on reducing our non- ADVISORY, TRUST & BOLI INCOME interest margin slid 5.2% to $23.04 mil- performing loans. We are pleased with DRIVE RISE IN UNIVEST’S lion, down from $24.31 million in third our progress so far.” quarter 2010, reflecting a $1.41 million NONINTEREST EARNINGS decline in interest revenue to $34.33 mil- NOVEMBER 28 - DECEMBER 4, 2011 Souderton, PA-based, $2.17 billion-asset lion and a $1.39 million increase in loan LIFE INSURANCE PAYOUT Univest Corporation of Pennsylvania re- loss provisions to $4.87 million. Net in- ZEROES OUT ported insurance brokerage fee income in come, driven by increased noninterest LOAN LOSS PROVISIONS the third quarter slipped 2.2% to $1.78 earnings and decreased noninterest ex- AT CITY HOLDING million, down from $1.82 million in third pense, rose 4.9% to $7.86 million, up Charleston, WV-based, $2.7 billion-asset quarter 2010. Investment advisory fee from $7.49 million in third quarter 2010. City Holding Company reported insur- income rose 0.8% to $1.24 million, up Tompkins Financial President and CEO ance commissions in the third quarter from $1.23 million; trust fee income grew Stephen S. Romaine commented, rose 3.0% to $1.39 million, up from $1.35 12.4% to $1.63 million, up from $1.45 “Although the interest rate and economic million in third quarter 2010. Trust and million, and income from bank-owned life environment will remain a challenge for investment management (TIM) fee in- insurance (BOLI) jumped 69.9% to our business, we are extremely pleased come climbed 33.2% $699,000, up from $554,000, up from $326,000. Insurance to see continued growth in a majority of $618,000, while income from bank-owned brokerage, investment advisory, trust and our key business lines,” including insur- life insurance (BOLI) declined 13.5% to BOLI income comprised, respectively, ance. $952,000, down from $1.10 million. In- 19.8%, 13.8%, 18.2% and 6.2% of nonin- In 2010, Tompkins Financial earned surance commissions, TIM fees and BO- terest income, which rose 1.0% to $8.97 $12.74 million in insurance brokerage LI income comprised, respectively, million, up from $8.88 million in third quar- income, which comprised 27.7% of its 10.3%, 5.2% and 7.0% of noninterest ter 2010, despite drops in service charges noninterest fee income and 8.1% of its earnings, which grew 16.2% to $13.53 on deposit accounts and mortgage bank- net operating revenue. The company million, up from $11.64 million in third ing income. ranked 13th in insurance brokerage earn- quarter 2010, when the company record- Net interest income on a 4.15% net ings among bank holding companies with ed $1.57 million in net investment securi- interest margin grew 11.5% to $14.97 assets between $1 billion and $10 billion, ties losses. million, up from $13.42 million in third according to the Michael White-Prudential Net interest income on a 3.93% net quarter 2010, driven by a $1.49 million Bank Insurance Fee Income Report. interest margin increased 10.6% to drop in interest expense and a $1.88 mil- $23.57 million, up from $21.31 million in lion decline in loan loss provisions to NOVEMBER 28 - DECEMBER 4, 2011 third quarter 2010, despite a $1.60 million $3.65 million, which more than made up TAX-DEFERRED ANNUITY SALES decline in interest revenue to $28.37 mil- for a $1.82 million decrease in interest DRIVE RISE IN INSURANCE & lion, as interest expense was cut by revenue to $21.24 million. Net income SECURITIES BROKERAGE REVENUE $2.01 million, and a $1.9 million payout climbed 26.8% to $5.2 million, up from AT BANK MUTUAL on a life insurance policy carried by one $4.1 million in third quarter 2010. Milwaukee, WI-based, $2.5 billion-asset of the company’s commercial borrowers In 2010, Univest earned $8.3 million in Bank Mutual Corp. reported combined naming City Holding the beneficiary, insurance brokerage income, which com- insurance and securities brokerage fee “satisfied the customer’s remaining out- prised 24.5% of its noninterest income

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 80 and 7.7% of its net operating revenue. the July acquisition of Payak-Dubbs In- earnings, which climbed 48.4% to $7.88 The company ranked 18th in insurance surance Agency and its merger into First million, up from $5.31 million in third quar- brokerage earnings among bank holding Insurance Group of the Midwest added ter 2010, when net gains on securities companies with assets between $1 billion $579,000 to its third quarter insurance transactions were $1.19 million lower. and $10 billion, according to the Michael brokerage earnings, helping drive com- Net interest income on a 3.43% net White-Prudential Bank Insurance Fee bined insurance and investment sales interest margin slipped 2.1% to $14.48 Income Report. commissions up 43.7% to $2.04 million million, down from $14.79 million in third from $1.42 million in third quarter 2010. quarter 2010, despite a $1.48 million cut NOVEMBER 28 - DECEMBER 4, 2011 At the same time, trust income grew in interest expense and a $200,000 drop GROWING TRUST & INVESTMENT 21.2% to $143,000, up from $118,000, in loan loss provisions to $175,000. Net MANAGEMENT INCOME and income from bank-owned life insur- income, impacted by decreased net inter- DOMINATES 42.6% OF ance (BOLI) ticked up 1.3% to $229,000 est income and increased noninterest S.Y.’S NONINTEREST EARNINGS from $226,000. Combined insurance and expense, declined 3.8% to $5.37 million, Louisville, KY-based, $1.99 billion-asset investment sales commissions, trust down from $5.58 million in third quarter S.Y. Bancorp reported trust and invest- earnings and BOLI income comprised, 2010. Hoy said, “We are pleased with ment (TIM) income in the third quarter respectively, 29.7%, 2.1% and 3.3% of these results during this challenging low grew 9.8% to $3.35 million, up from $3.05 noninterest earnings, which fell 8.3% to interest rate environment.” in third quarter 2010; securities brokerage $6.86 million, down from $7.48 million in In 2010, Arrow Financial earned $3.0 commissions increased 8.6% to third quarter 2010, when mortgage bank- million in insurance brokerage income, $570,000, up from $525,000, and income ing income and service fees on deposit which comprised 17.0% of its noninterest from bank-owned life insurance (BOLI) accounts were higher. income and 3.8% of its net operating rev- rose 2.4% to $257,000, up from Net interest income on a 3.89% net enue. The company ranked 51st in insur- $251,000. TIM income, brokerage com- interest margin grew 15.8% to $14.55 ance brokerage earnings among bank missions and BOLI income comprised, million, up from $12.57 million in third holding companies with assets between respectively, 42.6%, 7.3% and 3.3% of quarter 2010, driven by a $2.28 million $1 billion and $10 billion, according to the noninterest earnings, which fell 4.8% to cut in interest expense and a $2.10 mil- Michael White-Prudential Bank Insurance $7.86 million, down from $8.26 million in lion decline in loan loss provisions to Fee Income Report. third quarter 2010, when service charges $3.10 million, which made up for a $3.39 on deposit accounts and gains on the DECEMBER 5 - 11, 2011 million decline in interest revenue. Net sale of mortgage loans were higher. INSURANCE, COLI AND income almost doubled to $4.1 million, up Net income declined 9% to $5.77 mil- TRUST & INVESTMENT INCOME from $2.3 million in third quarter 2010. lion, down from $6.37 million in third quar- COMPRISE 46% OF First Defiance Financial Chairman, Presi- ter 2010. S.Y. Bancorp Chairman and GERMAN AMERICAN’S dent and CEO William Small said, “We CEO David Heintzman said, “Despite NONINTEREST EARNINGS continue to stay on our strategic course challenging business conditions the Jasper, IN-based, $1.87 billion-asset Ger- and are pleased with the overall perfor- Bank’s markets, competitive position and man American Bancorp reported third mance in the quarter.” strategic direction remained fundamental- quarter insurance revenues generated by ly sound during the third quarters.” DECEMBER 5 - 11, 2011 property and casualty agency German Heintzman added, “The revenue diversifi- INSURANCE EARNINGS MORE THAN American Insurance slid 4.5% to $1.26 cation that we have created with our in- DOUBLE AT ARROW FINANCIAL million, down from $1.32 million in third vestment management and trust depart- Glens Falls, NY-based, $1.95 billion- quarter 2010. In contrast, trust and in- ment … continues to drive a high level of asset Arrow Financial Corporation Chair- vestment product (TIP) fees generated by noninterest income for the Bank.” man, President and CEO Thomas Hoy German American Financial Advisors & In 2010, S.Y. Bancorp earned $2.1 announced that his company’s operating Trust Co. jumped 73.0% $602,000, up million in securities brokerage income, results in the third quarter “included a from $348,000, and company-owned life which comprised 6.1% of its noninterest substantial increase in our noninterest insurance (COLI) income grew 18.3% to income. The company ranked 37th in income, which consisted primarily of $233,000, up from $197,000. Insurance securities brokerage income among bank strong growth in insurance commissions, brokerage, TIP fees and COLI income holding companies with assets between an increase in fee income from fiduciary comprised, respectively, 27.6%, 13.2% $1 billion and $10 billion, according to the activities and significant net gains on se- and 5.1% of noninterest earnings, which Michael White Bank Trust Fee Income curities transactions.” Insurance broker- rose 2.9% to $4.56 million, up from $4.43 Ratings Report. age fee income more than doubled to million in third quarter 2010. $1.99 million, up from $808,000 in third Overall, third quarter net income benefit- NOVEMBER 28 - DECEMBER 4, 2011 quarter 2010, driven by this year’s acqui- ed from the first quarter 2011 acquisition AGENCY ACQUISITION HELPS DRIVE sitions of two new property-casualty of American Community Bancorp and its FIRST DEFIANCE’S INSURANCE & agencies. At the same time, fiduciary banking subsidiary, Bank of Evansville, INVESTMENT SALES income grew 17.4% to $1.55 million, up and climbed 38% to a record $5.17 mil- COMMISSIONS UP 44% from $1.32 million. Insurance brokerage lion, up from $3.59 million in third quarter Defiance, OH-based, $2.06 billion-asset and fiduciary income comprised, respec- 2010. Commenting on the results, Ger- First Defiance Financial Corp. reported tively, 25.3% and 19.7% of noninterest man American Chairman and CEO Mark

Schroeder said, “We feel extremely privi- accounts” and “the addition of new sales DECEMBER 5 - 11, 2011 leged to serve our growing client base associates resulted in double-digit trust RISING INSURANCE EARNINGS throughout Southern Indiana and are and investment revenue growth.” DOMINATE 73.3% OF extremely thankful for our clients’ willing- In 2010, Peoples Bancorp earned VIST FINANCIAL’S ness to entrust all their banking, insur- $8.85 million in insurance brokerage in- NONINTEREST INCOME ance and investment needs to our team come, which comprised 31.2% of its non- Wyomissing, PA-based, $1.49 billion- of financial professionals.” interest income and 10.0% of its net oper- asset VIST Financial reported insurance In 2010, German American Bancorp ating revenue. The company ranked 17th brokerage fee income in the third quarter earned $5.3 million in insurance broker- in insurance brokerage income among rose 4.0% to $3.14 million, up from $3.02 age income, which comprised 31.2% of bank holding companies with assets be- million in third quarter 2010 and dominat- its noninterest income and contributed tween $1 billion and $10 billion, according ed 73.3% of noninterest earnings, which 8.1% of its net operating revenue. The to the Michael White-Prudential Bank grew 17.7% to $4.12 million, up from company ranked 31st in insurance bro- Insurance Fee Income Report. $3.50 million in third quarter 2010. Bank- kerage earnings among bank holding owned life insurance (BOLI) income also companies with assets between $1 billion DECEMBER 5 - 11, 2011 increased, rising 7.2% to $119,000, up ACQUISITION DRIVES and $10 billion, according to Michael from $111,000; however, securities bro- 65.3% JUMP IN White - Prudential Bank Insurance Fee kerage fee income dropped 45.5% to WEALTH MANAGEMENT EARNINGS Income Report. $152,000, down from $279,000. BOLI AT BRYN MAWR BANK and securities brokerage fee income DECEMBER 5 - 11, 2011 Bryn Mawr, PA-based, $1.76 billion-asset comprised, respectively, 2.9% and 3.7% PEOPLES’ “TOP DOWN” Bryn Mawr Bank Corp., parent of Bryn of noninterest earnings. COMMITMENT DRIVES GROWTH Mawr Trust, reported the May acquisition Net interest income on a 3.50% net IN INSURANCE AND of the Private Wealth Management Group interest margin climbed 43.9% to $9.54 TRUST & INVESTMENT REVENUES (PWMG) of the Hershey Trust Company million, up from $6.63 million in third quar- Marietta, OH-based, $1.81 billion-asset accounted for $2 million of the $2.4 mil- ter 2010, bolstered by a $1.57 million Peoples Bancorp reported insurance bro- lion jump in wealth management fee in- drop in loan loss provisions to $1.98 mil- kerage fee income in the third quarter come to $6.1 million in the third quarter, lion and a $207,000 cut in interest ex- rose 4.5% to $2.32 million, up from $2.22 up 65.3% from $3.7 million in third quar- pense. Net income of $992,000 contrast- million in third quarter 2010, and trust and ter 2010. Wealth management fee in- ed with a net loss of $1.02 million in third investment (TIM) income grew 13.0% to come dominated 65.7% of noninterest quarter 2010. Looking ahead, VIST Fi- $1.39 million, up from $1.23 in third quar- earnings, driving that revenue up 31.6% nancial President and CEO Robert Davis ter 2010; while income from bank-owned to $9.28 million from $7.05 million in third said, “Our financial results will continue to life insurance (BOLI) dropped 29.9% to quarter 2010. be influenced for the balance of the year $96,000, down from $137,000. Insurance Net interest income on a 3.90% net with elevated asset quality costs and the brokerage, TIM and BOLI income com- interest margin benefited from the July potential of additional OTTI charges. Our prised, respectively, 27.7%, 16.6% and acquisition of Media, PA-based, $481 near-term forecast contemplates a slow 1.1% of noninterest earnings, which in- million-asset First Keystone Financial and but steady improvement in our regional creased 8.8% to $8.39 million, up from grew 31.1% to $13.83 million, up from business climate.” $7.71 million in third quarter 2010, helped $10.55 million in third quarter 2010, In 2010, VIST Financial earned $11.9 additionally by increased mortgage and helped by a $2.41 million drop in loan million in insurance brokerage income, electronic banking income. loss provisions to $1.83 million and a which comprised 66.3% of its noninterest Net interest income on a 3.39% net $673,000 cut in interest expense. Net income and 19.9% of its net operating interest margin climbed 70.8% to $12.40 income of $5.02 million contrasted with a revenue. The company ranked 14th in million, up from $7.26 million in third quar- $1.02 million net loss in third quarter insurance brokerage income among bank ter 2010, driven by a $7.14 million drop in 2010. Bryn Mawr Bank Corp. Chairman holding companies with assets between loan loss provisions to $7.14 million and a and CEO Ted Peters commented, “We $1 billion and $10 billion, according to the $2.17 million cut in interest expense. Net are looking forward to continued growth Michael White-Prudential Bank Insurance income of $3.68 million compared to a net and profitability in the coming quarters.” Fee Income Report. loss of $101,000 in third quarter 2010. In 2010, Bryn Mawr Bank Corp. Peoples Bancorp President and CEO earned $12.47 million in wealth manage- DECEMBER 5 - 11, 2011 Chuck Sulerzyski said the company ment income, which comprised 47.3% of DESPITE 12.6% DECLINE, “began devoting additional resources to its noninterest income and 15.8% of its INSURANCE MAKES UP 49% OF growing revenue and improving our effi- net operating revenue. The company SUMMIT FINANCIAL’S ciency” in the third quarter. “Those efforts ranked 34th in wealth management in- NONINTEREST EARNINGS produced positive results … and new come among bank holding companies Moorehead, WV-based, $1.46 billion- business in our insurance and wealth with assets between $1 billion and $10 asset Summit Financial Group reported management areas,” Sulerzyski said. billion, according to the Michael White insurance brokerage fee income generat- Peoples Chief Financial Officer Edward Bank Wealth Management Fee Income ed by Summit Insurance Services fell Sloane added, “Our insurance sales pro- Ratings Report. 12.6% in the third quarter to $1.07 million, ducers were successful in obtaining new down from $1.23 million in third quarter

2010, and comprised 48.9% of noninter- net income of $94,000 contrasted with a tween $500 million and $1 billion, accord- est income, which declined 9.6% to $2.19 third quarter 2010 net loss of $1.40 mil- ing to the Michael White-Prudential Bank million, down from $2.42 million, with lion. Shore Bancshares CEO W. Moor- Insurance Fee Income Report. $1.52 million in securities gains not head Vermilye said, “We are still experi- enough to balance out $1.64 million in encing elevated credit losses associated DECEMBER 12 - 18, 2011 INSURANCE & BENEFIT write downs on foreclosed properties. with the disposition of nonperforming CONSULTING FEES Net interest income on a 3.08% net loans…. It’s a very slow process, howev- DOMINATE 75% OF ONEIDA’S interest margin jumped 57% to $7.92 er, since real estate values across our NONINTEREST INCOME million, up from $5.05 million in third quar- markets remain at historical lows.” Oneida, NY-based, $678 million-asset ter 2010, reflecting a $2.50 million drop in In 2010, Shore Bancshares earned Oneida Financial Corp. reported commis- loan loss provisions to $2.00 million and a $10.1 million in insurance brokerage in- sions and fees generated by insurance $2.28 million cut in interest expense, come, which comprised 58.2% of its non- and financial services subsidiaries Bailey which made up for a $1.90 million decline interest income and 16.8% of its net oper- & Haskell Associates and Benefit Con- in interest revenue to $17.65 million. ating revenue. The company ranked 16th sulting Group grew 10.6% to $4.26 mil- Summit Financial President and CEO H. in insurance brokerage earnings among lion, up from $3.85 million in third quarter Charles Maddy, III said, “We continue to bank holding companies with assets be- 2010, and dominated 75.1% of noninter- see significantly fewer problem loans. tween $1 billion and $10 billion, according est income, which increased 8.6% to However, progress in regard to disposi- to the Michael White-Prudential Bank $5.67 million, up from $5.22 million in tions of foreclosed properties remains Insurance Fee Income Report. third quarter 2010. difficult to achieve as the return of our Net interest income on a 3.54% net real estate markets to more normal levels DECEMBER 12 - 18, 2011 EVANS BANCORP REPORTS interest margin climbed 25.4% to $4.99 is progressing slowly.” INSURANCE EARNINGS million, up from $3.98 million in third quar- In 2010, Summit Financial earned COMPRISE 56.6% OF ter 2010, driven by a $447,000 cut in in- $4.74 million in insurance brokerage in- NONINTEREST REVENUE terest expense and a $600,000 drop in come, which comprised 68.3% of its non- Hamburg, NY-based, $733 million-asset loan loss provisions to $50,000, which interest income and 10.1% of its net oper- Evans Bancorp reported “successful made up for a $36,000 decline in interest ating revenue. The company ranked 36th commercial line commission growth” revenue. Net income after increased in insurance brokerage income among drove third quarter insurance brokerage expenses grew 17.3% to $956,000, up bank holding companies with assets be- fee income up 4.2% to $1.8 million from from $815,000 in third quarter 2010. tween $1 billion and $10 billion, according $1.78 million in third quarter 2010, de- Oneida Financial President and CEO to the Michael White-Prudential Bank spite what Evans described as “the soft Michael Kallet said, “Oneida Financial Insurance Fee Income Report. insurance market and macro-economic continues to succeed in Central New York DECEMBER 5 - 11, 2011 conditions.” Insurance earnings dominat- and beyond despite record low interest INSURANCE REMAINS ed noninterest income, comprising 56.6% rates and a highly competitive banking TOP CONTRIBUTOR TO SHORE’S of that revenue, which rose 1.9% to $3.18 and insurance marketplace.” NONINTEREST INCOME million, up from $3.12 million in third In 2010, Oneida Savings Bank earned Easton, MD-based, $1.16 billion-asset quarter 2010, enough to comprise 33% of $10.5 million in insurance brokerage in- Shore Bancshares reported insurance total revenue. come, which comprised 46.4% of its non- brokerage fee income in the third quarter Net interest income on a 3.97% net interest income and 25.8% of its net oper- slid 8% to $2.31 million, down from $2.51 interest margin grew 21.8% to $6.36 mil- ating revenue. The company ranked 1st million in third quarter 2010, but remained lion, up from $5.22 million in third quarter in insurance brokerage income among by far the largest contributor to noninter- 2010, reflecting an $853,000 drop in loan banks with assets between $500 million est earnings, comprising 51.1% of that loss provisions to $159,000, a $104,000 and $1 billion, according to Michael White revenue, which slipped 2.6% to $4.52 cut in interest expense and a $177,000 -Prudential Bank Insurance Fee Income million, down from $4.64 million. While increase in interest revenue. Net income Report. trust and investment fee income rose 9% jumped 51% to $1.93 million, up from to $389,000, up from $357,000, that in- $1.28 million in third quarter 2010. Evans DECEMBER 12 - 18, 2011 INVESTMENT BROKERAGE FEES come comprised only 8.6% of noninterest Bancorp President and CEO David Nas- UP 14%, TRUST FEES DOWN 15% earnings, which were also hit by a 17% ca said, “Evans continues to see excep- AT STURGIS BANCORP decrease in deposit account fees. tional results across the board as we cap- Sturgis, MI-based, $340 million-asset Net interest income on a 3.77% net ture increasing market share in Western Sturgis Bancorp reported investment bro- interest margin slipped 0.3% to $6.47 New York.” kerage commission income in the third million, down from $6.49 million in third In 2010, Evans Bancorp earned $7.0 quarter grew to $308,000, up 14.1% from quarter 2010, as a 7% ($969,000) decline million in insurance brokerage income, third quarter 2010, while trust fee income in interest revenue to $12.87 million was which comprised 55.4% of its noninterest dropped 14.8% to $69,000, down from almost overcome by a $405,000 cut in income and 18.8% of its net operating $81,000, and bank-owned life insurance interest expense and $543,000 decline in revenue. The company ranked 4th in (BOLI) income slid 5.3% to $71,000, loan loss provisions to $3.65 million. Af- insurance brokerage earnings among down from $75,000. Investment broker- ter $1.32 million in impairment charges, bank holding companies with assets be-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT FEE INCOME CONTRIBUTIONS TO EARNINGS - P A GE 83 age fee income, trust fees and BOLI in- net operating revenue. The company income. come comprised, respectively, 19.6%, ranked 2nd in investment program in- Net interest income on a 4.13% net 4.4% and 4.5% of noninterest earnings, come among banks with assets between interest margin slid 4.3% to $2.22 million, which climbed to $1.57 million, up 33.1% $300 million and $500 million, according down from $2.32 million in third quarter from third quarter 2010, driven by invest- to the Michael White Bank Wealth 2010, impacted by a $330,000 increase ment brokerage commissions and a Management Fee Income Ratings Re- in loan loss provisions to $480,000, which $536,000 gain on the sale of securities. port. undercut a $58,000 increase in interest Net interest income on a 3.33% net revenue and a $177,000 cut in interest interest margin more than quadrupled to DECEMBER 12 - 18, 2011 expense. Net income dropped 58.6% to INSURANCE & SECURITIES $2.66 million, up from $664,000 in third $99,000, down from $239,000 in third BROKERAGE FEES GROW AT quarter 2010, reflecting a $1.98 million quarter 2010, hit by increased loan loss SOUTHWEST GEORGIA FINANCIAL drop in loan loss provisions to a $156,000 provisions tied to one accrual loan, Moultrie, GA-based, $294 million South- credit, a $460,000 cut in interest expense, Southwest Georgia President and CEO west Georgia Financial reported insur- which more than made up for a $457,000 DeWitt Drew said. ance brokerage fee income in the third decline in interest revenue. Net income In 2010, Southwest Georgia Bank quarter grew 15.2% to $273,000, up from of $792,000 contrasted with a third quar- earned $1.13 million in insurance broker- $237,000 in third quarter 2010, and secu- ter 2010 net loss of $631,000. Sturgis age income, which comprised 25.2% of rities brokerage fee income climbed Bancorp President and CEO Eric Eishen its noninterest earnings and 7.7% of its 25.9% to $73,000, up from $58,000, but said, “As we complete 2011, we hope to net operating revenue. The company trust fee income fell 19.7% to $53,000, see earnings return to more normal lev- ranked 11th in insurance brokerage in- down from $66,000. Insurance broker- els, although the low rate environment come among banks with assets between age, securities brokerage and trust fee makes that challenging.” $100 million and $300 million, according income comprised, respectively, 22.9%, In 2010, Sturgis Bank & Trust Compa- to the Michael White-Prudential Bank 6.1% and 4.5% of noninterest earnings, ny earned $1.22 million in investment Insurance Fee Income Report. which increased 9.2% to $1.19 million, up program income, which comprised 28.1% from $1.09 million in third quarter 2010, of its noninterest income and 8.3% of its despite a decline in deposit account fee

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ties.” In 2009, BOLI/COLI generated $47 DECEMBER 13 - 19, 2010 Bank Insurance million in revenue for AEGON US. LTC COSTS ARE In addition to winding down its Texas INCREASING & Investment operations, AEGON said it intends to con- RISK FACTORS Marketplace solidate its Louisville, KY-based U.S. oper- Milwaukee, WI-based Northwestern Mu- ations with other U.S. locations, consoli- tual has completed its 2010 Cost of Long- DECEMBER 6 - 12, 2010 date its Cedar Rapids, IA-based back of- Term Care Study and found that monthly “PRIMARY RETIREMENT SOLUTIONS fice activities and reduce its U.S. workforce assisted living care costs are highest in PROVIDER” TAG WORKS, by 400 to 500 employees (5%) over the the East ($4,000) and lowest in North BNY MELLON STUDY SHOWS next two years. As a result, the company Dakota ($1,901). Monthly nursing home Jersey City, NJ-based Pershing LLC, a expects to take a $60 million restructuring care costs, on the other hand, are highest unit of New York City-based, $254.4 bil- charge in fourth quarter 2010 and a $20 in Alaska ($16,140) and Connecticut lion-asset BNY Mellon has issued a new million restructuring charge in 2011. AE- ($10, 560) and lowest in Louisiana report which concludes that financial ser- GON says all planned moves should pro- ($3,810). As for hourly home health care vices firms and professionals that position duce $70 million in annual cost savings. costs, residents of West Virginia pay the themselves as primary retirement solu- Bank-owned life insurance (BOLI) highest price, on average, $60 per hour, tions providers are more successful in assets reached $138.40 billion in the first or $14,400 for a month of eight-hour per capturing new retirement business and half of 2010, reflecting a 3.3% increase day care. Missouri and Montana resi- “money in motion.” The Secret Knock: from $133.97 billion in the first half of dents get home healthcare at a relative Unlocking the Retirement Opportunity 2009, according to the Michael White- bargain (the lowest average price) of $19 bases its conclusions on the results of a Meyer-Chatfield BOLI Holdings Report. per hour or $4,560 for one month of eight survey of over 2,000 affluent investors, BHCs with assets greater than $10 billion hours of daily care. Northwestern Mutual 401 small business owners and 822 fi- reported the highest incidence of BOLI Vice President Steve Sperka said, nancial professionals. ownership, as 66 of 77 BHCs, or 85.7%, “Understanding the reality of long-term According to the study, each year reported having BOLI assets. care costs … is a critical step in develop- $303 billion in retirement money is availa- ing a sound financial plan that won’t be ble to be moved through rollovers and DECEMBER 13 - 19, 2010 derailed by lack of awareness about long- transfers. Financial professionals who WHOLE AND UNIVERSAL LIFE SALES term care risk.” Because people are liv- position themselves as retirement solu- CONTINUE UP, TERM SALES DROP ing longer, he said, long-term care is an tions providers have a 76% chance of Whole life insurance sales rose 6% in the increasingly important risk to address. managing some of that money, vs. 50% third quarter compared to third quarter To download these reports, click here. for those who do not. In addition, those 2009 and comprised 30% of all annual- financial professionals who manage risk ized premium sales in the first three quar- DECEMBER 20 - 26, 2010 U.S. BOOMERS and build downside protection in their ters combined, according to Windsor, CT- TO INHERIT retirement plans increase their net man- based LIMRA’s U.S. Individual Life Insur- $8.4 TRILLION aged assets 19% over those who do not. ance Sales Survey. Universal life (UL) Two-thirds of U.S. Baby Boomers will Pershing Director Robert Cirrotti noted sales increased 8%, driven by a 45% inherit a total of $8.4 trillion, or $64,000 that total U.S. retirement assets exceed- jump in indexed UL sales, which compen- each, according to The MetLife Study of ed $16 trillion at the end of 2009 and sated for a 9% decline in guaranteed UL Inheritance and Wealth Transfer to Baby said, “Rebuilding trust and establishing a products, and a 6% slide in variable UL Boomers authored by Boston College’s retirement solutions provider relationship sales, enough to give UL a 41% share of Center for Retirement Research. About represents a tremendous opportunity for all life products sold in the third quarter. $2.4 trillion of that money has already financial professionals.” For more on the In contrast, sales of term life products been received, with 74% of those dollars Pershing Report, click here. dropped 16% compared to third quarter 2009, LIMRA found in its life insurance passing from parents to children. MetLife DECEMBER 6 - 12, 2010 company survey Mature Market Institute Director Dr. San- AEGON TO EXIT U.S. BOLI/COLI AND dra Timmermore warned, however, DEFINED BENEFIT PLANS MARKET DECEMBER 13 - 19, 2010 “Regardless of the anticipated amount, The Hague, Netherlands-based AEGON SENIOR WOMEN DOMINATE any prospective inheritance is uncertain. announced it plans to discontinue U.S. THE ANNUITY MARKET Wealth may be consumed by medical and sales of executive nonqualified benefit Annuity contract purchasers are generally long-term care costs or simply by virtue of plans and bank-owned corporate-owned 73-year old women (60%) who purchase a long life.” Therefore, “Boomers should life insurance (BOLI and COLI), wind lifetime guaranteed income contracts not count on an anticipated inheritance,” down these Dallas, TX-based business- (70%) with refund guarantees (90%) and she said. In fact, despite an increased es, and take a goodwill write-off of about an ability to convert a portion of remain- standard of living, when adjusted for infla- $210 million. AEGON Americas CEO ing payments to cash (67%) on their tion, the median inheritance amount thus Mark Mullin said, “The decision to exit the $107,000 premium (50%) for a contract far received by Boomers equals the same executive nonqualified benefit space and that has no automatic payout increase amount received by their cohorts born related BOLI/COLI market is consistent (93%), according to LIMRA’s Guaranteed between 1927-1945, the study revealed. with its strategy to focus on core activi- Income Annuities Report.

DECEMBER 20 - 26, 2010 U.S. LIFE INSURERS MUST MASTER 4 ISSUES TO THRIVE, ERNST & YOUNG SAYS U.S. life insurance and annuity providers are facing broad regulatory changes and uncertain economic conditions and need to master four issues in order to thrive in 2011, according to New York City-based Ernst & Young. First, they must quickly grasp and respond to laws and regulations in the Dodd-Frank Wall Street Re- form Act and to ongoing accounting changes coming from the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). Second, they must identify the most cost-effective ways to build and manage capital while managing risk and redundant regulatory reserve requirements. Third, they must strengthen their distribution, administration and customer service systems while controlling costs using technology, outsourcing, service sharing and offshore captives. Fourth, they need to reinvent their distribution methods and products in order to meet ease of access expectations and the demands of Baby Boomers for guarantees and Generation Y’s weakened interest in cover term loans and bank overdrafts. central and eastern European countries,” saving and purchasing life insurance United Bank Chairman and Managing where it helps business transition from caused by their underemployment in the Director Bhaskar Sen said, “United Bank government-run to privately run enterpris- current economy. is very aggressive in lending to the es. The partners intend to rename their Ernst & Young Global Director of In- MSME sector and is committed to offer- joint holding Sompo Japan Sigorta A.S., surance Industry Services Peter Porrino ing a wider range of products to our cus- pending approval from Turkey’s regula- said, “2011 will be a critical year for life tomers.” MetLife India Managing Director tors. and annuity insurance executives to as- Shri Rajesh Relan said, “Our partnership sess their companies’ competitive posi- with United Bank is another step towards JANUARY 3 - 9, 2011 ZURICH SIGORTA PAYS FORTIS tions and examine the risk-return profiles creating a top-of-the-rung, balanced, mul- FOR EXCLUSIVE of different business.” ti-channel distribution system.” To access Ernst & Young’s Global Insur- BANCASSURANCE ance Center 2011 U.S. Outlook, click JANUARY 3 - 9, 2011 DEAL IN TURKEY here. SAMPO JAPAN INSURANCE Istanbul, Turkey-based Zurich Sigorta AND EBRD A.S., a unit of Zurich, Switzerland-based JANUARY 3 - 9, 2011 PARTNER IN TURKEY Zurich Financial Services has paid Brus- METLIFE INDIA AND Tokyo, Japan-based Smpo Japan Insur- sels, Belgium-based Fortis Bank A.S. $26 UNITED BANK OF INDIA FORGE ance, a unit of London-based NKSJ Hold- million for an exclusive bancassurance BANCASSURANCE ings (NKSJ), has sold 9.99% of its agreement in Turkey. The agreement PARTNERSHIP 99.02% stake in Istanbul, Turkey-based anticipates Fortis’ planned merger with Mumbai, India-based MetLife India Insur- Fiba Sigorta A.S. to London-based Euro- Istanbul-based TEB Bank, Zurich ance Co. (MetLife India), an affiliate of pean Bank for Reconstruction and Devel- Sigorta’s current bancassurance partner. New York City-based MetLife, Inc., has opment (EBRD). The sale creates the Zurich Sigorta Managing Director Lutz forged a bancassurance partnership with first joint venture between a Japanese Bauer said the exclusive partnership Kolkata, India-based United Bank of In- non-life insurer and the EBRD and marks “marks an important step on our way to dia. Through the deal, MetLife India will the EBRD’s first investment in a Turkey- becoming one of the leading general offer credit life insurance products to Unit- based company. Sampo Japan parent bancassurance players in the attractive ed Bank’s micro, small and medium-sized NKSJ said, “The aim of the joint venture Turkish insurance market.” enterprises (MSME), including United is to take advantage of EBRD’s depth of Bank proprietary products designed to knowledge in corporate governance in

JANUARY 3 - 9, 2011 TAIWAN’S CHINA LIFE TO BUY STAKE IN CHINA-BASED INSURER AND ENTER CHINA’S BANCASSURANCE MARKET Taipei, Taiwan-based China Life Insur- ance Company has agreed to pay NT 1.783 billion ($60 million) to acquire a 19.9% stake in Shanghai, China-based Pacific-Antai Life from Shanghai-based China Pacific Insurance Group. The move will make China Life the second largest partner in the life insurance joint Whether you are in California or Connecticut, as a venture behind 51% owner China Con- member of the Independent Community Bankers of struction Bank. The new joint venture, America, you are part of a family which is committed which also includes partners China CCB YOU to the values that keep Main Streets across the Investment Co., Shanghai Jin Jiang Inter- country strong and prosperous. national Management Co. and Shanghai are building. Huaxu Investment Co., plans to rename the company CCB Life Insurance. China Thousands of banks like yours trust the ICBA Services Network to provide the innovative Life’s participation in the joint venture, products and services to make a difference to their bottom line. Customers are on the which plans to develop investment-linked move; let us show you how ICBA solutions can capture, develop and retain the very best. insurance products and annuities for sale through China Construction Bank’s 13,629 branches across China, is de- pendent upon approval from Taiwan’s Ministry of Economic Affairs. If the ven- One Mission. Community Banks.® ture is approved, China Life will become ICBA Bancard & TCM Bank | ICBA Securities the first Taiwan-based insurer to enter 1-866-THE-ICBA | www.icba.org ICBA Mortgage | ICBA Financial Services | ICBA Reinsurance into a joint venture with a China-based bank.

JANUARY 3 - 9, 2011 SAMPO JAPAN AND Fraizer said the moves are in line with the ketScout CEO Richard Kerr sees these BANK OF SHANGHAI IN company’s strategy to concentrate on numbers as a signal that the downward BANCASSURANCE PARTNERSHIP markets and products where it has trend in insurance pricing is moderating. Tokyo, Japan-based Sompo Japan Insur- “distinct leadership positions and Kerr said, “By year-end 2011, the largest ance, a unit of London-based NKSJ Hold- strengths.” Genworth will continue to soft market period in the last seventy ings (NKSJ), and Shanghai-based Bank focus, he said, “on key protection, wealth years will finally come to a close,” Nation- of Shanghai have agreed to a bancassur- accumulation and mortgage insurance al Underwriter reports. ance partnership whereby Sompo Japan, offerings,” including fixed annuities and life and long-term care insurance. JANUARY 17 - 23, 2011 which has a branch in Shanghai, will offer AMERICANS VOW TO Genworth expects to record a $12 non-life insurance products through the CONTROL FINANCES million pre-tax charge in the first quarter Bank of Shanghai’s 213 branches. The BUT FORGET INSURANCE NEEDS tied to severance, outplacement and oth- partnership will begin with sales of Som- Almost 70% of adult Americans say tak- er costs associated with the moves. po Japan’s fire insurance products to ing control of their finances is a top priori- Bank of Shanghai’s corporate clients be- JANUARY 10 - 16, 2011 ty for 2011, with 36% saying it is their top fore broadening into other product sales, U.S. PROPERTY-CASUALTY priority, according to a Northwestern Mu- BestWire reports. RATES SUGGEST tual - Harris Interactive online survey con-

JANUARY 10 - 16, 2011 END TO SOFT MARKET ducted from December 16 through 20 of GENWORTH FINANCIAL EXITS U.S. commercial property and casualty last year. VARIABLE ANNUITY MARKET insurance rates fell 5% in December In order to get control of their finances Richmond, VA-based, $100 billion-asset compared to December 2009, led by a those surveyed said they would prioritize Genworth Financial is (1) discontinuing 6% drop in general liability coverage, in the following way: (1) pay down debt new sales of retail and group variable according to Dallas, TX-based Mar- (39%), (2) save a portion of each annuities and (2) suspending sales of ketScout. In contrast, workers compen- paycheck (30%), (3) build an emergency linked annuity and long-term care insur- sation, professional liability, commercial fund (28%), and (4) develop and stick to a ance products until the market for those auto and surety insurance slipped 1%, budget (27%). Interestingly, few said products develops further. Genworth while fiduciary coverage remained they would first evaluate their life insur- Financial Chairman and CEO Michael steady, buoying the overall results. Mar- ance (6%), long-term care (4%) and disa-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 87 bility (4%) insurance needs. Commenting on the trend in overall said they saw an increase in demand for Northwestern Mutual Insurance Exec- fixed annuity sales, Beacon Research commercial P/C products in the fourth utive Vice President Greg Oberland was CEO Jeremy Alexander said, “The quarter, about double those with the troubled by the low priority given to risk spread between 5-year fixed annuity and same response (24%) in fourth quarter protection and said, “To achieve financial Treasury rates has declined since the 2009 and a 13 percentage point increase security, families need to manage risk; third quarter, suggesting that sequential over the 34% who saw increased demand protecting income in the event of a disa- sales will be lower. In addition, interest in the third quarter. bility or protecting the family financially if rates have been rising, and fixed annui- For more on the CIAB survey, click here. a parent dies unexpectedly” is essential. ties generally lag certificates of deposit on the way up.” FEBRUARY 7 - 13, 2011 JANUARY 17 - 23, 2011 OVERCAPITALIZATION KEEPS ONSLAUGHT OF JANUARY 24 - 30, 2011 PROPERTY AND CASUALTY RETIRING BOOMERS BEGINS U.S. VARIABLE ANNUITY RATES LOW Each day in 2011 marks the 65th birthday SALES GROW ALONG WITH U.S. property and casualty insurers held of 7,000 Americans. “The Baby Boomer LIFETIME GUARANTEES $544 billion in policyholder surplus at the tsunami has arrived, pushing the consum- U.S. variable annuity sales grew 8% in end of third quarter 2010, $74 billion more er need for retirement income to historic the first three quarters of 2010 over the than it needs in order to bring supply and levels,” Insured Retirement Institute Pres- same period in 2009, “driven by contin- demand into equilibrium and halt the ident and CEO Cathy Weatherford ob- ued innovation in product development by downward decline in premium rates, ac- served. Weatherford sees annuities as a carriers,” according to Chicago, IL-based cording to New York City-based Advisen. “value proposition” that can meet that Morningstar. While new product develop- A mega-disaster could also do the trick; need. “Our industry is primed to play a ment remained stagnant in the first quar- otherwise, property and casualty insurers pivotal role in the retirement planning ter, lifetime withdrawal benefits account- will experience a “slow, painful hemor- strategies of millions of Americans looked for six out of seven new benefits at- rhaging of capital … as deeply eroded ing for the peace of mind that only an tached to new products in the second rate levels take their toll,” Advisen said. annuity can bring to a balanced portfolio,” quarter. Lifetime guaranteed withdrawal To read $74 Billion Away From a Hard Weatherford said. benefits accounted for nine out of eleven Market, click here. new living benefits in the third quarter, JANUARY 24 - 30, 2011 and in the fourth quarter all new benefits FEBRUARY 7 - 13, 2011 U.S. BANK FIXED ANNUITY AIA BHD ENTERS included a lifetime guaranteed minimum PREMIUM SALES TUMBLE 45% SHARIAH-COMPLIANT withdrawal benefit component, with the IN THIRD QUARTER 2010 BANCASSURANCE BUSINESS average lifetime withdrawal benefit for an U.S. banks and other depository institu- IN MALAYSIA individual aged 65 at 5%, Morningstar’s tions saw their fixed annuity premium Kuala Lumpur, Malaysia-based American research showed. For more detailed sales in the third quarter tumble 45.2% to International Assurance Bhd (AIA Bhd), a information on Morningstar’s variable an estimated $3.96 billion, down from unit of American International Assurance annuity report, click here. $7.23 billion in third quarter 2009, accord- Co. (AIA) and parent New York City- ing to the Beacon Research Fixed Annui- JANUARY 24 - 30, 2011 based American International Group ty Premium Study. COMMERCIAL P&C PREMIUMS (AIG), has formed a joint venture with Book value annuities comprised seven CONTINUE DOWN, Kuala Lumpur -based Alliance Bank Ma- of the top ten annuity products sold in the BUT RISING DEMAND laysia Berhad (Alliance Bank), a subsidi- bank channel (ranking 2-8), but Lincoln SIGNALS CHANGE ary of Alliance Financial Group Berhad. National’s New Direction indexed annuity U.S. commercial property and casualty AIA AFG Takaful Bhd, the Kuala Lumpur- distinguished itself as the number one premiums have continued to decline based joint venture, will offer a range of product sold, and New York Life’s Life- quarter to quarter since fourth quarter Takaful (Islamic/Shariah compliant) sav- time Income Annuity and Great American 2009, when they were down 5.6% from ings, protection and investment products Financial Resources market value adjust- the quarter before. In first quarter 2010 to Malaysia’s Muslim population through ed (MVA) annuity ranked, respectively, they slid again 5.3%; in the second quar- Alliance Bank’s 90 branches and AIA ninth and tenth. ter they fell another 6.4%; in the third Bhd’s 23 agency offices throughout the Western National Life was the number quarter they continued down 5.2%; and in country. one provider of annuities within the bank fourth quarter 2010 they fell 5.4% from AIA Group President and CEO Mark channel with its book value annuities (5th, the quarter before, according to the Tucker said, “AIA is set to become a ma- 6th and 8th place) helping the company Council of Insurance Agents and Brokers jor player in the important and fast- generate $868.5 million in annuity premi- (CIAB) Fourth Quarter Commercial P/C growing Takaful market in Malaysia.” ums. Lincoln National ranked second Market Index Survey. Alliance Financial Group Chairman Datuk with $567.7 million, followed by New York Increasing demand for commercial oh Chong Peng said the joint venture Life ($499.0 million), Great American Fi- property-casualty lines, however, may reflects the bank’s “firm commitment to- nancial Resources ($296.5 million) and change the downward trend in rates. wards providing a broad range of Shariah Pacific Life ($268.2 million), Evanston, IL- Almost half (47%) of the insurance bro- -compliant financial solutions covering based Beacon Research found. kers who responded to the CIAB survey Islamic banking and Takaful to meet the

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 88 demands of our customers,” where the Takaful industry is growing at a rate of 40% per year. AIA AFG Takaful is 70% owned by AIA Bhd and 30% owned by Alliance Bank.

FEBRUARY 14 - 20, 2011 GUARDIAN SUBSIDIARY BERKSHIRE TO EXIT LTC MARKET Pittsfield, MA-based Berkshire Life Insur- Are You Receiving Your ance Company of America, a subsidiary Complimentary Subscription? of New York City-based Guardian Life Insurance Company of America, announced it will discontinue offering long- BankInsurance.com News. distills the term care insurance by the end of 2011. most important news stories that Berkshire Life President Gordon directly impact businesses in the bank Dinsmore said, “While it is our intent to insurance and investment world. make the current product available for the remainder of 2011, circumstances could arise that may require us to re- Register now to receive your evaluate our plans and discontinue sales complimentary subscription today. before year-end.” He added that Berk- shire’s the long-term care market “will allow [parent] Guardian to focus on its core life and disability income insurance www.bankinsurance.com/editorial/news/bi-com-news business.” Lower lapse rates, more claimants and low interest rates have been among the reasons that Berkshire and other insurers, including John Hancock, MetLife and Genworth, have decided to suspend sales or exit the long-term care insurance FEBRUARY 28 - MARCH 6, 2011 FEBRUARY 28 - MARCH 6, 2011 U.S. APPLICATIONS FOR ZURICH FINANCIAL AND market, which is estimated to cover 15-18 INDIVIDUALLY UNDERWRITTEN BANCO SANTANDER FORGE LATIN million individuals. LIFE INSURANCE DOWN AMERICAN BANK INSURANCE DEAL FEBRUARY 14 - 20, 2011 U.S. applications for individually under- Zurich, Switzerland-based Zurich Finan- INDEX SHOWS written life insurance declined 2.3% in cial Services Group (Zurich) has agreed LTC RATES January compared to January 2010, ac- to pay Santander, Spain-based, $1.68 CAN VARY UP TO 48% cording to the MIB Life Index. While ap- trillion-asset Banco Santander SA Most (76.3%) purchasers of long-term plications among individuals ages 60 and (Santander) $1.67 billion to acquire a care insurance range in age between 45- older continued their upward trend 51% stake in Santander’s life insurance, 64 with 57 being the average purchase (+8.7%), applications among individuals pension and general insurance opera- age. A 55-year old married couple with ages 45-59 slipped 0.7% and among tions in Brazil, Mexico, Chile, Argentina no health issues, on average, pays those ages 0-44 fell 5.9%, Braintree, MA- and Uruguay and to acquire a 25-year $2,350 in combined annual premiums for based MIB Group said. distribution agreement with Santander for $338,000 in combined current benefits or For the year 2010 applications slipped these products in these countries. $800,000 in combined benefits when both 1.2% from those written in 2009. Applica- As part of the 51:49 deal, Zurich will reach age 80. If that 55-year old couple tions among individuals ages 60 and old- form and manage Zurich Santander In- has health issues, their premium costs er and ages 45-59 were up, but com- surance America in Madrid, which will increase on average $325 annually, but prised, respectively, 15.3% and 29.1% of serve as a holding company for the to-be- the benefits remain the same, according all applications. Applications among indi- formed jointly owned companies. Each to the 2011 Long-Term Care Insurance viduals ages 0-44, in contrast, comprised local Latin American-based company will Price Index published by the American 55.6% of all applications and were down. then enter into an exclusive bank distribu- Association for Long-term Care Insurance Residents of the Texas/South and Mid tion agreement for life, savings, pension (AALTC). Interestingly, AALTC found -West regions were more inclined to pur- and general insurance products with San- that premiums for comparable coverage chase individually underwritten life insur- tander’s respective local banking unit, from leading insurers can vary by 41- ance than were those who lived in the giving Zurich access to Santander’s 5,600 48%. Western Mountain regions, MIB Group bank branches and 36 million customers found. throughout the region.

Zurich CEO Martin Senn said, “This alliance with Banco Santander is another milestone in the implementation of Zur- ich’s emerging market strategy in both global life and general insurance. San- IT’S AMAZING HOW MANY tander’s Latin American insurance operations offer a rare combination of high PEOPLE CHANGE growth potential and strong cash flow generation.” In 2010, Santander’s Latin American THEIR VIEWS insurance premiums grew 32% to $1.9 billion in gross written premiums, with ABOUT BOLI bank distribution in Brazil accounting for 40% of total insurance sold in 2009. The AFTER SPEAKING WITH MEYER-CHATFIELD Zurich-Santander deal is expected to close by first quarter 2012, pending regulatory approval. Many banks think that it makes no difference who they turn to for BOLI and executive compensation services. Too bad. MARCH 7 - 13, 2011 UNIVERSAL LIFE There are differences—differences that matter.

SALES CLIMB EYER- HATFIELD OFFERS ADDITIONAL BENEFITS THAT CAN WHILE TERM LIFE M C SALES DROP MAKE A BIG DIFFERENCE FOR YOUR BANK.

U.S. individual universal life insurance Meyer‐Chatfield offers a unique guarantee, as well as other sales grew 20% in fourth quarter 2010 over fourth quarter 2009 sales and differentiated services that help our clients maximize the benefits climbed 21% for the year 2010 over year of their BOLI and overall executive compensation programs. If you 2009, driven by a 47% jump in indexed are one of the many banks looking for new options because universal life sales. Annualized premi- Clark Consulting exited the market, you owe it to yourself to talk ums for universal life products also grew, to Meyer‐Chatfield. climbing, respectively, 13% and 10% quarter over quarter and year over year, Talk to us and you’ll quickly find out why we now are the industry according to LIMRA’s U.S. Individual Life leader. Discover how we help clients develop and implement the Insurance Sales Report. Sales of individual whole life insurance most effective BOLI and executive compensation programs. increased as well, rising 6% in fourth Contact Chris Pezalla at: [email protected] or quarter 2010 over fourth quarter 2009 and rising 2% year over year. Annualized 800.444.BOLI for more information. premiums reflected increased sales and grew 14% quarter over quarter and 15% year over year. In contrast to the growing sales and premiums of universal life and whole life products, term life and variable life insurance recorded drops in both measures with term life sales dropping 16% and 261 Old York Road, Suite 604 · Jenkintown, PA 19046 · 215.884.5273 variable life sales falling 14% in the fourth www.meyerchatfield.com quarter and sales year over year falling, respectively, 12% for term life and 13% for variable life. While annualized premiums for variable universal life products MARCH 14 - 20, 2011 tumbled 25% in fourth quarter, earlier U.S. FIXED ANNUITY SALES 48% of the market and income annuity quarter performance stemmed the year DROP IN 4Q & YEAR 2010 sales rose 4% to $1.9 billion to comprise over year decline to 7%. Term life annu- U.S. fixed annuity sales fell 14% in fourth 11% of the market, book value annuity alized premiums, on the other hand, quarter 2010 to $16.7 billion, down from sales dropped 38% to $5.6 billion (33.4% dropped a record 16% in the fourth quar- $19.4 billion in fourth quarter 2009, accord- of the market), and market value adjusted ter and 12% year over year, the Windsor, ing to Beacon Research’s Fixed Annuity (MVA) sales fell 29% to $1.3 billion (7.5% CT-based LIMRA said. Premium Study. While indexed annuity of the fixed annuity market), impacting the For more on the survey, click here. sales climbed 16% to $8 billion to comprise overall decline in fixed annuity sales.

Allianz Life ($2.00 billion), American MARCH 28 - APRIL 3, 2011 APRIL 11 - 17, 2011 Equity Investment Life Insurance ($1.55 UNMARRIED MEN FIXED ANNUITY SALES billion), New York Life ($1.34 billion), AND SINGLE PARENTS DROP AT U.S. BANKS Aviva USA ($1.33 billion) and Western LEAST LIKELY U.S. banks and other depository institu- National Life ($1.10 billion) ranked, re- TO OWN LIFE INSURANCE tions saw their fixed annuity sales drop spectively, as the fixed annuity sales Single parents with children living in the 48% in fourth quarter 2010 to $3.17 bil- leaders in fourth quarter 2010. Western household are more likely to have no life lion, down from $6.10 billion in fourth National led in bank channel sales, and insurance coverage (69%) than single quarter 2009, and skid 53% for year 2010 New York Life’s book value Preferred parents with children outside the house- to $15.53 billion, down from $33.04 billion Fixed Annuity ranked as the number one hold (59%) and married parents with chil- in 2009, according to Evanston, IL-based bank annuity product. dren in the household (45%), according Beacon Research. Large regional broker-dealers and to the 2011 Genworth Financial Life Jack- In the fourth quarter, fixed rate annui- direct/third-party marketers also sold pri- et Study of more than 23,000 American ties without market value adjustments marily book value products, while captive adults. (MVAs) comprised 8 of the top 10 bank agents and independent broker-dealers Unmarried men who neither own channel fixed annuities sold, which in- sold primarily income annuities; inde- homes nor have children in their house- cluded only one indexed and one income pendent producers favored indexed an- holds and who earn up to $250,000 annu- annuity. nuities, and wirehouses sold primarily ally are most likely to be uninsured Houston, TX-based Western National MVAs, Evanston, IL-based Beacon Re- (79%), while unmarried women of the Life remained the number on fixed in- search found. same description but who earn less than come annuity provider to banks ($1.06 Overall, fixed annuity sales dropped $50,000 annually are 66% uninsured and billion) with seven of its non-MVA prod- 31% in 2010 to an estimated $71.7 those earning more than $250,000 are ucts among the top ten products sold. billion, down from $103.9 billion in 56% uninsured, according to the study New York Life ranked a distant second 2009, according to Beacon’s surveys. which was based on a survey carried out ($453.4 million) with its top-ranked non- But Beacon Research CEO Jeremy over a 15-month period extending MVA product and its 7th place fixed in- Alexander expects the growing interest through 2010. For more on the Genworth come annuity. Cincinnati, OH-based in guaranteed lifetime interest income study, click here. Great American Financial ranked third to reverse the trend. “We expect fixed ($235.5 million), followed by Radnor, PA- MARCH 28 - APRIL 3, 2011 based Lincoln National ($219.3 million) annuity sales growth to resume when CHINA LIFE PROFITS with its second place indexed annuity and the [interest] rate environment be- FROM BANCASSURANCE Cincinnati, OH-based W&S Financial comes more favorable,” Alexander Beijing, China-based China Life Insur- Group Distributors ($128.6 million), Bea- said. ance Co. reported that, in 2010, 38.3% con Research found in its Fixed Annuity ($3.04 billion) of its $8 billion in first year MARCH 28 - APRIL 3, 2011 Premium Study. insurance premium was generated WOMEN Commenting on the future of bank through bancassurance. China Life Pres- REMAIN channel fixed annuity sales, Beacon Re- ident Wan Feng said, “It shows the poten- UNDERINSURED search President and CEO Jeremy Alex- tial of the bank channel.” While the same percentage of women as ander said, “The current interest rate en- China Life intends to make the most of men (60%) own some sort of life insur- vironment suggests that fixed annuity bancassurance and views recent China ance, and 30% of women earn more sales in banks will gradually increase in Banking Regulatory Commission Policy money than their husbands, women’s life 2011.” However, he cautioned, as favoring its success. Wan Feng said, insurance coverage equals just 69% of “Consumers’ inflationary expectations “According to the new policy, every bank men’s coverage, according to Windsor, may limit sales,” and “if banks raise certif- can choose only three insurance compa- CT-based LIMRA. “Too many women icate of deposit rates aggressively to at- nies to work with, so big insurers like us are uninsured or underinsured, which tract deposits as the economy improves,” have an advantage.” China Life plans to leaves their families at risk,” LIMRA Sen- fixed annuity sales “may not do as well as train bank employees and offer other ior Research Director Cheryl Retzloff expected.” For more on the Beacon services and a range of products, which said. Research survey and results, click here. To reach these women, LIMRA found, Central University of Finance and Eco- financial advisors should expect to devel- nomics Professor Hao Yansu said, puts APRIL 11 - 17, 2011 op a working relationship with them, be them “at an advantage,” Chinadaily.com DECREASE IN U.S. PROPERTY AND prepared to answer many questions and reports. CASUALTY RATES SLOWS IN MARCH provide them with educational materials. China Life has bancassurance deals Composite U.S. property and casualty In return, women who are “happy with with Bank of China, Commonwealth Bank rates moderated their downward trend in their advisor” and purchase insurance will of Australia, China Merchants Group, March, decelerating 4% compared to 5% provide referrals to their friends and fami- Industrial and Commercial Bank of China, in February, according to the National lies and be receptive to insurance check- Agricultural Bank of China and Guang- Alliance for Insurance Education and Re- ups every year or two. dong Development Bank. search surveys conducted for Dallas- based MarketScout.

Rate increases of 2 to 5% for catastrophe insurance drove the change, helped by a flattening of workers’ compensation rates, 1% declines in professional liability, small commercial (BOP), directors and offers liability (D&O), EPLI (employment practices liability), fiduciary, crime and surety rates, and 3% slides in business interruption, inland marine and umbrella rates. However, commercial auto and property rates fell 4% and general liability rates dropped 6%, elevating the composite rate of decline to 4%. Among all companies, those with varying account sizes continued to enjoy the same rate decreases they had in Febru- ary: large to jumbo accounts over $250,000 in premium enjoyed 5% cuts; medium accounts over $25,000 to under $250,000 received 3% discounts; and JOIN THE small accounts up to $25,000 continued with 1% discounts. American Bankers Insurance Association In general, however, companies in the manufacturing, energy, contracting and service industries saw their rate discounts decrease from 5% in February to 4% in Turn to the ABIA for expert advice and support. We’re the March. premier national organization representing the industry, MarketScout CEO Richard Kerr said, offering outstanding: “It looks like the soft market from 2005 to Starting, acquiring

2011 will end with workers’ compensation or expanding a • legislative and regulatory advocacy and catastrophe-exposed property lead- bank-insurance • compliance information and support ing the way out.” In fact, Kerr added, • industry publications and benchmarking data “one major insurer fully abandoned mono- agency? • peer networking line workers’ compensation,” decreasing supply and competition. For more on the • direct access to bank-insurance industry providers MarketScout survey, click here. Contact the ABIA to learn more about how we can help you APRIL 11 - 17, 2011 grow your bank-insurance business! MIDDLE INCOME RETIREES AND PRE-RETIREES IGNORED BY FINANCIAL PLANNERS www.theabia.com More than half (51%) of pre-retirees and 202-663-5163 retirees with annual incomes of $25,000 E-mail Valerie Barton: to $75,000 have not been contacted by a [email protected] retirement planning professional in the last twelve months. Not surprisingly, 54% of this group receives no professional financial advice. Among the 46% who are working with a financial planner of sure if they have saved enough money to some sort, 84% said they initiated contact APRIL 18 - 24, 2011 live comfortably in retirement; 50% said THE PRINCIPAL TO EXPAND with that individual; 76% said they are they turn to the Internet for retirement IN MEXICO WITH HSBC AFORE very satisfied with their advisor and 68% planning advice; 38% said they look to PURCHASE & HSBC BANK said they felt better prepared for retire- their families and friends for advice; and DISTRIBUTION AGREEMENT ment than their peers, according to the 30% said they spend no time on retire- Des Moines, IA-based The Principal Fi- Bankers Life and Casualty Company ment planning. nancial Group (The Principal) unit, Mexi- Center for a Secure Retirement (CSR). To download key findings of the report, co-based Principal Financial Group, S.A. Among the retirees and pre-retirees click here. de CV., Grupo Financiero (Principal Fi- surveyed for the CSR Middle Income To download the entire report, click here. nanciero) has agreed to acquire HSBC Retirement Study, 63% said they are un-

AFORE, S.A. de CV (HSBC AFORE) from Grupo Financiero HSBC, S.A. de C.V. When the $198 million deal closes in early third quarter 2011, pending regulatory approval, HSBC AFORE will merge into $4.68 billion-asset Principal AFORE, Principal Fiancieros’ pension fund business. With the additional $2.9 billion in pension assets and 1.6 million customers HSBC AFORE brings to the merger, Prin- cipal AFORE will rank 6th in pension assets ($7.58 billion) and 4th in customer size among all Mexican pension funds. Principal International Chairman Nor- man Sorensen said, “The HSBC AFORE business fits naturally with our international strategy, providing critical scale and expanding our growing base in key emerging markets like Mexico.” Sorensen added that since 1993, the company has successfully integrated a number of AFORE businesses in Mexico, where since 2008, Principal AFORE has achieved a 32% compounded annual growth rate in assets under management. In addition to the HSBC AFORE acquisition agreements, The Principal and HSBC Bank have agreed to forge an exclusive distribution agreement in Mexico whereby HSBC will offer Principal AFORE’s products through HSBC’s 1,100 -branch network throughout Mexico. With these two agreements in hand, Principal International President Luis Valdes said, “Looking ahead, we expect continued growth at an even faster pace as Mexi- co’s middle class continues to expand.

APRIL 18 - 24, 2011 GOLDMAN SACHS BUYS SECOND LARGEST STAKE IN CHINA’S TAIKANG LIFE New York City-based Goldman Sachs has received approval from the China Insurance Regulatory Commission to acquire a 12.02% stake in Beijing-based, 290 billion yuan ($44.34 billion)-asset Taikang Life Insurance Company, making Goldman the second largest stakeholder in the China-based insurer behind China Guardian Auctions, which holds a 14% share. Taikang Life said it was pleased with the Goldman Sachs investment which it said would not only enhance Taikang Life’s corporate governance, risk management, internal controls and compliance capabilities but would also strengthen cooperation between the two companies in investment management and

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 93 product development. Taikang Life tion, high quality sales leading to the trust sulting. Increases in personal auto and Chairman and CEO Chen Dong said, “I of customers and the commitment of our most commercial insurance rates are look forward to cooperating with the bank shareholders and employees in position- expected to drive the growth, as long as as Taikang Life deepens its reach in Chi- ing the company as a strong private life “the economic recovery continues at a na’s insurance market and gradually in- insurance player.” modest pace,” Conning analyst Clint Har- ternationalizes.” Canara HSBC Oriental Life distributes ris said. Last month Paris-based AXA SA sold products through the company’s parent Conning projects that catastrophe its 15.6% stake in Taikang Life to a con- banks’ 4,600 branches throughout India losses will reach $19 billion in 2011 and sortium of new and existing shareholders as well as through three regional rural insurer’s combined ratio will range be- after China’s insurance regulators limited banks – Karnataka-based Pragathi tween 102% and 103%. the number of domestic life insurers in Gramin Bank, Utter Pradesh-based For more on Conning’s Property-Casualty which foreign companies could hold Shreyas Gramin Bank and Derala-based Forecast and Analyses, click here. stakes. South Malabar Gramin Bank. Regarding the latter, Holden said Canara HSBC MAY 16 - 22, 2011 SINGAPORE’S LIFE INSURANCE APRIL 18 - 24, 2011 Oriental Life is “committed to delivering ONE IN SEVEN U.S. VEHICLES SALES JUMP 45%, DRIVEN BY need-based, affordable insurance solu- ARE UNINSURED BANCASSURANCE tions to the rural population, the social U.S. motorists run a 14% chance the car Life insurance sales in Singapore jumped sector and economically weaker sections in the lane next to them is uninsured. 45% in first quarter 2011 to $460 million of the society, especially those who have Chances of coming across an uninsured in new premium, up from $318.1 million in no or very little access to organized finan- vehicle are greatest in Mississippi (28%), first quarter 2010, according to Singapore cial services. Through our bancassur- New Mexico (26%), Tennessee (24%), Life Insurance Association (SLIA). ance model, we have increased our prox- Oklahoma (24%), and Florida (24%) and Bancassurance sales accounted for 37% imity to the rural hinterland.” lowest in Massachusetts (4.5%), Maine of all life insurance sold in the quarter, Since Canara HSBC Oriental Life was (4.5%), New York (5%), Pennsylvania jumping from 23% in first quarter 2010. launched in June 2008, the insurer has (7%) and Vermont (7%), according to the In contrast, 3% of sales came from direct written Rs 2670 crore ($603 million) in Malvern, PA-based Insurance Research marketing, and financial advisors generat- gross premium. Council (IRC). ed 12% of sales. Tied agents remained “The percentage of uninsured motor- MAY 2 - 8, 2011 the number one producers and account- ists is an unfortunate consequence of the U.S. PROPERTY & CASUALTY ed for a dwindling 48% of sales. Com- economic downturn,” said IRC Senior INSURANCE RATES menting on the overall positive results for Vice President Elizabeth Sprinkle. Sprin- CONTINUED DOWN the life insurance industry, SLIA President kle added, “Responsible drivers who car- IN FIRST QUARTER Tan Hak Leh said, “The economy is in ry insurance bear the burden of paying for U.S. property and casualty (P&C) insur- good shape and we are optimistic that the injuries caused by drivers who carry no ance renewal rates continued their down- life insurance industry will remain strong insurance at all.” Despite these percent- ward trend in first quarter 2011, according throughout 2011.” ages and risk burdens, auto insurance to the RIMS Benchmark Survey. Proper- rates have continued down. ty insurance rates suffered the greatest MAY 16 - 22, 2011 PRUDENTIAL PLC decrease (-4.2%), followed by workers CREDITS BANCASSURANCE APRIL 18 - 24, 2011 compensation (-3.2%) and directors and CANARA, HSBC, WITH CLIMBING officers (-2.3%) insurance. General liabil- ORIENTAL BANCASSURANCE SOUTHEAST ASIA SALES ity insurance recorded the smallest re- PARTNERSHIP GENERATES London, England-based Prudential plc newal premium decrease (-0.8%), but 82% JUMP IN LIFE PREMIUMS reported its joint venture with Beijing- renewal premiums neither remained flat New Delhi, India-based Canara HSBC based China International Trust and In- nor increased for any P&C product. Oriental Bank of Commerce Life Insur- vestment Corp. (CITIC) generated a 29% RIMS Director Frederick Savage noted, ance Company (Canara HSBC Oriental climb in annual premium equivalent (APE, however, “a big earthquake or hurricane Life), a joint venture among Bangalore, or new recurring premiums plus 10% of could cause premiums across the board Karnataka, India -based Canara Bank, new single premiums) in the first quarter to change dramatically.” New Delhi, India-based Oriental Bank of to £18 million ($29.4 million), up from £14 For more on the RIMS survey, click here. Commerce and Hong Kong-based HSBC million ($22.8 million) in first quarter 2010. Insurance (Asia Pacific) Holdings, report- MAY 2 - 8, 2011 Bancassurance accounted for 57% of ed an 82% jump in gross written premi- CONNING PROJECTS APE, replacing agencies as the primary ums in the fiscal year ending March 31, U.S. PROPERTY & CASUALTY source of premium sales. 2011 to Rs1532 crore ($348.3 million), up PREMIUM INCREASES IN 2011 In Hong Kong, the story was similar. from Rs841.8 crore ($190.1 million) the U.S. property and casualty net premiums Bancassurance sales climbed 21% to year before. Canara HSBC Oriental Life are projected to grow 3% to 4% in 2011, comprise 44% of APE sales, driving over- CEO John Holden said, “The company’s while underwriting results decline 2%, all sales up 13% to £77 million ($125.6 consistent growth is the result of the effi- compared to 2010, according to Hartford, million). In contrast, agency sales grew cient bancassurance model of distribu- CT-based Conning Research and Con- 10%.

In Malaysia, Prudential’s bancassurance sales jumped 91% to comprise 6% of the company’s APE, which grew 22% to £44 million ($71.8 million), up from £36 million ($58.7 million) in first quarter 2010. Prudential expects its bancassurance sales to grow significantly when it finaliz- es its Malaysia distribution agreement with United Oversees Bank (UOB). The deal should “create new opportunities through that important channel,” Pruden- tial said. Prudential’s bancassurance agreement with UOB in Thailand accounted for 51% of the company’s sales in that country, where APE rose 6% to £19 million ($31.0 million), up from £18 million ($29.4 million) in first quarter 2010. Bancassurance was the “key driver” of Prudential’s sales in Singapore, where the company has bancassurance agreements with UOB and Standard Chartered Bank. Bancassurance sales soared 173% and comprised 43% of APE, which jumped 42% to £47 million ($76.7 million), up from £33 million ($53.8 million) in first quarter 2010. Commenting on international insurance markets, Prudential said, “We believe Asia continues to offer the most attractive opportunity in the global life insurance market today, and we expect MAY 23 - 29, 2011 our momentum to continue, particularly in AXIS BANK TO ACQUIRE 4% OF Aviva UK CEO Mark Hodges said, our preferred markets of Southeast Asia.” BANCASSURANCE PARTNER “The extension of our general insurance In these markets, the company said, “Our MAX NEW YORK LIFE deal with HSBC [previously limited to the bancassurance model continues to deliv- New Delhi, India-based Max New York U.K. and excluding life insurance] is a er, with APE increasing by 32%.” Life, a joint venture between New Delhi- clear indication of the existing strength based Max India and New York Life Inter- and depth of our partnership.” Bancas- MAY 23 - 29, 2011 national, has received approval from In- surance, he added, “is a key part of our U.S. INDIVIDUAL dia’s Insurance Regulatory and Develop- multi-distribution strategy and an area we LIFE APPLICATIONS ment Authority (IRDA) to sell a 4% stake are focused on growing.” Aviva currently CONTINUE UP IN APRIL in itself to Mumbai, India-based Axis partners with over 100 banks worldwide. U.S. applications for individually under- Bank, its bancassurance partner. Axis written life insurance rose 1.1% in April JUNE 6 - 12, 2011 Bank has, in turn, received approval from compared to April 2010, led by 8.4% PRUDENTIAL SELLS FIRST India’s Reserve Bank to complete the growth among individuals aged 60 and “PENSION BUY-IN” PRODUCT deal, indianexpress.com reports. over, a continuing trend. Applications Newark, NJ-based Prudential unit Pru- among individuals aged 45-59 also in- MAY 23 - 29, 2011 dential Retirement announced it has sold creased, rising 1% over April 2010, but HSBC & AVIVA EXTEND the nation’s first pension buy-in, a single applications among individuals aged 0-44 U.K. BANCASSURANCE AGREEMENT premium, separate account insurance continued down, slipping 0.8%, according London, England-based HSBC Group product designed to mitigate benefit to the MIB Life Index. The overall growth has named London-based Aviva its pre- sponsors’ pension plan risks. Hickory, in April marked the first increase in appli- ferred strategic bancassurance partner in NC-based Hickory Springs Manufacturing cations for life insurance in that month in the United Kingdom and Europe. The Company said it purchased the $75 mil- seven years. Braintree, MA-based MIB deal enables HSBC Bank to offer all lion Prudential Portfolio Buy-in to “help us Group called this “good news for the indi- Aviva insurance products to its customers fulfill our fiduciary obligations and en- vidual life insurance market.” online, over the phone and through its hance our employees’ retirement securi- For more on the MIB Life Index, bank branches across the U.K. and Eu- ty.” BCG Terminal Funding Principal Mi- click here. rope. chael Devlin, who sold the pension buy-in to Hickory Springs, said, “The risks asso-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 95 ciated with pension plans have become a serious concern over the years.” The pension buy-in, he said, enables employee plan providers to “manage interest rate, market and mortality risks and continue to provide a valuable benefit to their employees.”

JUNE 6 - 12, 2011 CHINA CONSTRUCTION BANK APPROVED FOR MAJORITY OWNERSHIP IN DOMESTIC INSURER Beijing-based China Reconstruction Bank (CCB) has received approval from the China Insurance Regulatory Commission (CIRC) to acquire majority ownership in Shanghai-based Pacific Antar Life Insur- ance, increasing its stake in the joint venture from 50% to 51%. China Life Hold- ing remains the second largest stakeholder (19.9%), while the remaining ownership is distributed among CCB Invest- ment Company, Shanghai Jin Jiang Inter- national Investment Management Co., and Shanghai Huaxi Investment Co. The deal is expected to strengthen CCB’s bancassurance operations and revenue.

JUNE 13 - 19, 2011 PRUDENTIAL COVERS PENSION ACCOUNT VALUES WITH FIRST LONGEVITY

REINSURANCE SALE JUNE 20 - 26, 2011 Newark, NJ-based Prudential has com- healthcare reform and other economic IRDA SEEKS COMMENT ON pleted its first longevity reinsurance sale. pressures, according to Chattanooga, TN BANCASSURANCE PROPOSALS New York City-based The Goldman -based Unum’s Buyers Study 2011. At India’s Insurance Regulatory and Devel- Sachs Group unit United Kingdom-based the same time, 90% of businesses with opment Authority (IRDA) is asking for Rothesay Life purchased the product in 1,000 or more employees offer combined comments on the Committee on Bancas- order to cover £100 million ($160 million) employer and employee-paid benefits, surance’s recommendations to the IRDA in pension account values. Prudential with employee-paid benefits on the rise. following the Committee’s study of that Senior Vice President Amy Kessler said, To read the 28-page Unum study, click distribution channel mandated in 2009. “Plan sponsors face significant uncertain- here. The Committee on Bancassurance ty and exposure to pension risk. Pruden- notes in its report that India’s banks, with tial’s role as a reinsurer of longevity risk,” JUNE 20 - 26, 2011 AMERICANS PREFER their network of over 80,000 branches she said, “helps increase the security of COMMISSIONS across the country, “have the necessary the promise pension plans offer to partici- OVER FEES potential to make bancassurance the pants around the world.” Rothesay Life Americans prefer to pay commissions most efficient way to achieve financial provides annuity and other longevity (47%) for financial advice rather than pay inclusion in the insurance sector.” The products to corporate defined benefit a fee based on assets (27%), but in 2010, ease of access reduces servicing costs pension plans. 66% of financial advice providers charged and policy lapses and facilitates claims payments, among other positives, the JUNE 20 - 26, 2011 only or primarily fees for their services, EMPLOYEES ASSUMING according to Boston, MA-based Cerulli Committee found. MORE BENEFITS’ COSTS Associates. Cerulli based its findings on Currently, bancassurance in its infant Nearly 50% of U.S. employers have in- August and December 2010 surveys of stage in India is responsible for 7.31% of creased employee contributions to their U.S. households with more than $50,000 total life and non-life insurance premiums company benefits offerings, and 33% in annual income or more than $250,000 sold. The Committee recommends that, have increased the deductibles attached in investible assets, investmentnews.com with the growing unmet need for insur- to those benefits in response to U.S. reports. ance coverage throughout the country, India’s banks be encouraged to expand

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 96 their insurance programs. Specifically, JUNE 27 - JULY 4, 2011 rates remained flat. Commercial auto the Committee recommends that each 55% OF INSURERS and fiduciary slipped 1%; umbrella/ bank be permitted to partner with any two SEE BANKS AS LEAD excess, inland marine and business inter- life insurers, non-life insurers, health in- VARIABLE ANNUITY CHANNEL ruption slid 2%; and commercial property surers and ECGC/AIC insurers and con- More than half (55%) of insurers believe and general liability rates fell 3%. tinue to “operate on principles of tied that over the next two years, the bank Rates according to industry sector agency preserving the current legal status channel will become the leading distribu- remained lackluster as well. Habitation of the bank as an agent of the insurer.” tion system for growing variable annuity rates were flat; transportation slipped 1%; Comments on the Committee report sales, a recent Insured Retirement Insti- contracting and service slid 2%; manufac- are due July 10, 2011. tute (IRI) and Cerulli Associates survey turing and public entity rates fell 3%, and To access the full report, click here. found. IRI President and CEO Cathy rates for energy companies dropped 5% Weatherford said, “With the need for compared to June 2010, MarketScout JUNE 27 - JULY 4, 2011 guaranteed lifetime income at an all time found based on pricing surveys conduct- CUNA MUTUAL & high, there is a great incentive for the ed by the National Alliance for Insurance LIVERPOOL VICTORIA PARTNER IN industry to ensure that advisors have the Education and Research. BUILDING SOCIETY SALES necessary tools and information to help For more on the MarketScout findings, Madison, WI-based CUNA Mutual Group alleviate client retirement concerns and click here. and Bournemouth, United Kingdom- provide the financial safety and security based Liverpool Victoria (LV+) have part- investors seek.” JULY 18 - 24, 2011 nered to offer life insurance through build- For more on the survey, which emphasiz- U.S. LIFE INSURANCE APPLICATIONS ing societies in the United Kingdom (UK). es the need for “increased retirement BASICALLY STEADY IN JUNE AND LV+ underwrites the policies and expects income training,” click here. SECOND QUARTER to benefit from CUNA Mutual’s already U.S. applications for individually under- established relationships with 20% of UK JULY 5 - 10, 2011 written life insurance ticked up 0.1% in building societies. Those relationships DEUTSCHE BANK’S VERMONT June compared to June 2010, driven by bore fruit in the first week of the partner- CAPTIVE APPROVED TO REINSURE an 8.1% increase in applications among ship when two building societies signed DISABILITY BENEFITS individuals aged 60 and older and a 0.2% up to offer their products to their com- New York City-based Deutsche Bank rise among individuals aged 45-59. In bined 80,000 customers. Americas Holding (Deutsche), a subsidi- contrast, applications among individuals CUNA Mutual CEO Paul Walsh said, ary of Deutsche Bank’s $397 billion- aged 0-44 (the largest group) slipped “We’ve identified that there is a clear asset, U.S. financial holding company 2.2%, according to the MIB Life Index. need for a simple term life assurance Taunus Corporation, has received tenta- In the second quarter, applications product…. Less than 16% of mortgages tive approval from the U.S. Labor Depart- overall dipped 0.5% compared to second completed in building societies in Britain ment to use MHL Reinsurance, quarter 2010. A 3.2% decline in applica- have a term life insurance linked to it.” At Deutsche’s Vermont-based captive insur- tions among individuals aged 0-44 and a the same time, Walsh noted, mortgage er, to reinsure 100% of the long-term 0.8% slip among individuals aged 45-59 volume at building societies has plummet- disability benefits held by a unit of Chatta- drove the decrease and undercut 8.3% ed to 9% to 10% of 2007 levels, incentiv- nooga, TN-based Unum Group. growth in applications among individuals izing the building societies to boost their JULY 11 - 17, 2011 aged 60 and older, Braintree, MA-based revenues by serving as life insurance JUNE RISE IN WORKERS’ COMP MIB Group found. distribution channels for their customers, RATES EASES OVERALL according to BestDay Audio. AUGUST 1 - 7, 2011 COMMERCIAL RATE DECLINE METLIFE INDIA AND U.S. composite commercial property JUNE 27 - JULY 4, 2011 PUNJAB NATIONAL BANK REGIONS FINANCIAL and casualty rates declined 3% in June TO PARTNER IN CREATES NEW year - over -year, an improvement over SELLING LIFE INSURANCE WEALTH MANAGEMENT GROUP the 4% decline in May year-over-year, New York City- based MetLife unit Ban- Birmingham, AL-based, $132 billion-asset according to MarketScout. A 1% in- galore, India-based MetLife India Insur- Regions Financial has created a new crease in workers’ compensation rates ance Company (MetLife India) and New Wealth Management Group, consolidat- drove the improvement, but that rate Delhi, India-based, $67.4 billion-asset ing its Trust, Private Banking and Insur- increase may reflect the fact that one Punjab National Bank (PNB) have agreed ance operations in to one unit to be led large insurer left the monoline worker’s to enter into a bancassurance partner- by former Central Region President Bill compensation market and another is ship. According to the terms of the Ritter. Regions President and CEO Gray- refusing new business in Colorado, agreement, PNB will (1) acquire a 30% son Hall said, “This new business line will Georgia, Oregon and Pennsylvania, stake in MetLife India to form PNB- help us advance our strategic plan by MarketScout said. MetLife India Insurance Company and (2) focusing on a key, profitable customer In contrast to the increase in worker’s exclusively offer PNB-MetLife India’s segment with the goal of increasing our compensation rates, professional liability, products to its 60 million customers noninterest revenue and deepening cus- directors and officers (D&O) liability, em- through its 5,000-branch network for 10 tomer relationships.” ployment practices liability (EPLI), crime, years. surety and business owners policy (BOP)

MetLife International President William Toppeta described the deal as part of MetLife’s effort to expand its leadership position in the Indian financial services The most comprehensive market. Toppeta said, “We believe that the addition of an outstanding financial source of institution institution like PNB as a shareholder and partner will greatly enhance our ability to rankings and industry move into the top tier of life companies in India.” data on banks and PNB Chairman and Managing Director K.R. Kamath predicted the partnership bank holding company will more than double the life insurer’s market share and said, “With 60% of annuity programs branches in the rural and semi-urban areas, PNB is uniquely positioned to take insurance to the deep pockets of India.” in the nation.

The distribution and stock deal is expected to close before the end of 2011, SPONSORED B Y pending regulatory approval.

AUGUST 1 - 7, 2011 Michael White-ABIA CCB MAJORITY-OWNED CCB LIFE LAUNCHES American Bankers Bank Annuity BANCASSURANCE OPERATIONS Insurance Association Shanghai, China-based CCB Life Insur- an ABA subsidiary Fee Income Report ance Company, formerly Pacific-Antai Life, has launched operations under its new name and ownership structure with www.bankinsurance.com/products/annuity-fir 800 million yuan ($124 million) in registered capital and more than 300,000 customers already on the books. Beijing, China-based China Construction Bank added homeowners and travelers insur- were not far behind with 38%. In con- (CCB) is the majority shareholder (51%) ance to its online complement of auto and trast, financial advisors and direct market- in the life insurer, which is also 19.9% renters insurance. BB&T Insurance Ser- ing programs generated, respectively, owned by Taiwan-based China Life Insur- vices Personal Lines Manager Cathy 13% and 5% of sales. Life Insurance ance Co., as well as China-based China Lamoreau said, “We want to give our Association President Tan Hak Leh said, CCB Investment Co. (19.35%), Shanghai clients a choice in the way they buy their “The first half year’s performance was Jin Jiang International Investment Man- insurance, whether they meet us in per- buoyed by growth in bancassurance, agement Co. (4.9%), and Shanghai Huaxi son at one of our agencies, by phone or mostly from sales of savings-oriented Investment Co. (4.85%). now through our expanded online pres- products. Growth through other channels CCB Life Insurance Chairman Wang ence.” Safeco Insurance underwrites the maintained a healthy 20%.” Jun said the life, health and accident in- homeowners policies and Stonebridge surer plans “to develop itself as a flagship AUGUST 15 - 21, 2011 Casualty Insurance Co. underwrites the bancassurer in China,” expanding CCB’s “IMPRESSIVE” travelers insurance offered at position as a comprehensive financial BANCASSURANCE SALES DRIVE www.Insurance.BBT.com. services provider. Wang noted, “The 58% JUMP IN NET INCOME AT Company is the first life insurer majority- AUGUST 15 - 21, 2011 GREAT EASTERN HOLDINGS owned by one of the four largest Chinese BANCASSURANCE LIFE SALES DOU- Singapore-based life insurer Great East- state-owned lenders and is also the first BLE IN SINGAPORE ern Holdings, a unit of Singapore-based mainland Chinese financial institution that A doubling of life insurance sales through OCBC Bank, reported “impressive growth is directly invested in by a Taiwanese Singapore’s banking channel drove in regular premium products distributed financial institution,” Bestwire reports. weighted new business life insurance through the bancassurance channel” in premiums in the country up 38% in the Singapore, helped drive first half AUGUST 8 - 14, 2011 first half to S$941.5 million ($775.3 mil- weighted new sales up 23% to S$363.6 BB&T INSURANCE SERVICES ADDS lion) from S$682.2 million (US$561.8 million (US$299.4 million), up from MORE ONLINE PRODUCTS million) in first half 2010, according to S$296.2 million (US$243.9 million) in first Winston-Salem, NC-based, $159 billion- Singapore’s Life Insurance Association. half 2010. In addition, Great Eastern asset BB&T Corp. subsidiary Raleigh, NC While tied agents generated 48% of CEO Chris Wei said, “Our bancatakaful -based BB&T Insurance Services has weighted new business sales, banks partnership with OCBC Al-Amin is begin-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 98 ning to bear fruit” in Malaysia. With these (+0.2%), the MIB Life Index reveals. The more years ago. successes, and a 58% jump in second July increase is part of an overall trend in At the same time, about half (49%) of quarter net income to S$117.7 million growing individually underwritten life in- U.S. adults who have a financial advisor (US$96.9 million), up from S$74.4 surance sales, “with four of the last seven and a financial plan (that does not include (US$61.3 million) in second quarter months of 2011 finishing in positive terri- life insurance), have spoken with their 2010,” Wei said, “the Group will continue tory,” MIB Group said. Year to date, advisor about adding life insurance to that to focus on strengthening the quality of those sales are down a slight 0.3%, ac- plan. About one-third (34%) were ad- our distribution channels and partner with cording to the MIB Life Index. vised by their advisor to add some form of OCBC to serve clients across various insurance; less than one-quarter (24%) segments.” AUGUST 22 - 28, 2011 were advised to specifically add life insur- U.S. FINANCIAL ADVISORS ance, and only 10% were advised to add LAX IN LIFE INSURANCE SALES AUGUST 22 - 28, 2011 long-term care insurance to their financial HIKE IN U.S. APPLICATIONS Almost half (47%) of U.S. adults who plan. FOR INDIVIDUALLY UNDERWRITTEN have a financial advisor and are covered Saybrus Partners National Sales Man- LIFE INSURANCE by life insurance have never reviewed ager Kevin Kimbrough observed that fi- U.S. applications for individually under- their life insurance policy with their finan- nancial advisors “are missing an oppor- written life insurance rose 2.1% in July, cial advisor, according to an online sur- tunity to fill a critical gap in some existing an “unprecedented” upswing for this vey conducted by Harris Interactive last financial plans while at the same time month, according to Braintree, MA-based month for Hartford, CT-based Saybrus differentiating themselves and expanding MIB Group. Individuals aged 60 and old- Partners. Among those who have re- their practices.” Kimbrough added, “Life er drove the rise with a 9.3% increase in viewed their policies with their advisors, insurance is foundational for a well- applications, followed by individuals aged 40% have done so within the past year, designed financial plan, not only for the 45-59 (+1.4%) and those aged 0-44 but 15% said that review occurred 10 or protection it provides but also for its tax efficiency and potential for cash management and wealth transfer.”

AUGUST 29, 2011 - SEPTEMBER 4, 2011 U.S. FIXED ANNUITY SALES STEADY YEAR-OVER-YEAR, UP QUARTER-TO-QUARTER U.S. fixed annuity sales in the se- Knowledge cond quarter reached $20.4 billion, a number comparable to second quarter 2010 sales, as 8% growth in fixed-rate non-market value adjusted (non-MVAs) annuity sales is Power. to $8.2 billion and a 2% rise in income annuity sales to $2.3 billion balanced out a 12% fall in fixed-rate MVAs to Get yours here. $1.5 billion and a 2% slide in indexed annuity sales to $8.4 billion, Ev- The first research report on anston, IL-based Bea- con Research found in BOLI holdings based on its most recent Fixed Annuity Premium Study. authentic industry-wide data. Second quarter fixed annuity sales compared to first quarter 2011 sales of $18.9 billion, how- www.bankinsurance.com/products/boli-hr ever, were up 8%. In contrast to year- over-year preferences, income annuity sales jumped 30% quarter-to-quarter, indexed annuities climbed 18%, fixed-rate MVAs rose 4% and fixed-rate non-MVAs slid 5%. Houston, TX-based Western Na- tional’s Proprietary Bank Product A, a fixed rate non-MVA, led as the number one product sold through the bank insur-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 99 ance channel. Fixed-rate non-MVAs ranked second in insurance brokerage sional liability, directors and officers were the preferred products sold through earnings among all traditional BHCs, ac- (D&O) liability, employment practices direct/third party marketers and large/ cording to the Michael White-Prudential liability insurance (EPLI), and surety rates regional broker-dealers, as well. Captive Bank Insurance Fee Income Report. rose 1%, and workers compensation agents sold primarily income annuities, rates grew 2%. and wirehouses sold primarily fixed SEPTEMBER 5 - 11, 2011 Among industry classes, the manufac- WIREHOUSE BROKERS MVAs, while indexed annuities were the turing, service, public entity and energy PROFIT WHEN number one product sold through inde- businesses benefited from premium de- MOVING TO BANKS pendent broker-dealers and independent clines of 2%; contractors received 1% Securities brokers who move from a wire- producers. decreases; premiums among habitational house to a bank earn about 75% of their Allianz Life’s Master Dex X Indexed businesses remained flat, but businesses pre-move annual income in the first year annuity was the leading annuity sold over- involved in the transportation industry at the bank, but within four years their all in the quarter. Beacon Research CEO were hit with premium increases of 1%, annual income jumps to 190% of their pre Jeremy Alexander said, “The guaranteed MarketScout found based on pricing sur- -move earnings, according to Carlsbad, lifetime income benefits [of indexed annui- veys conducted by the National Alliance CA-based Armstrong Financial Group. In ties] were especially attractive during a for Insurance Education and Research. contrast, wirehouse brokers who move to time of reduced consumer confidence.” another wirehouse, earn 60% of their He added, “But yield seeking purchasers SEPTEMBER 12 - 18, 2011 prior income in the first year and recoup BANK OF AMERICA REORGANIZES: apparently appreciated the somewhat only 93% of their pre-move earnings four KRAWCHECK & PRICE OUT, higher rates offered by MVAs.” years later. Commenting on the differ- DARNELL & MONTAG IN For more on the Beacon Research ences in performance, Eric Armstrong Charlotte, NC-based, $2.26 trillion-asset Fixed Annuity Premium Study, click here. said, “A wirehouse guy is hunting every Bank of America (B of A) Global Wealth AUGUST 29, 2011 - SEPTEMBER 4, 2011 single day of his career, but when he and Investment Management President WELLS FARGO NAMES NEW goes into a bank environment, he has Sallie Krawcheck and Global Consumer INSURANCE SERVICES CEO access to billions in existing customer and Small Business President Joseph San Francisco, CA-based, $1.3 trillion- assets,” investmentnews.com reports. Price have left the company in a top- asset Wells Fargo & Co. has named Laura down management reorganization. At the Schupback its new CEO of Insurance Ser- SEPTEMBER 12 - 18, 2011 same time, B of A Commercial Banking U.S. APPLICATIONS FOR vices to succeed retiring David Zuercher. Head David Darnell has been named B of INDIVIDUALLY UNDERWRITTEN Schupbach has served in various senior A Co-Chief Operating Officer (CCOO) in LIFE INSURANCE CONTINUE UP management positions during her 16-year charge of Consumer Banking, and B of A IN AUGUST tenure at Wells Fargo, including head of veteran Tom Montag has been named U.S. applications for individually under- Enterprise Expense Management, Whole- CCOO of Corporate and Institutional In- written life insurance ticked up 0.7% in sale Banking Group, Diversified Products vestor Banking. B of A said the reorgani- August compared to August 2010 and Group and Western Bank Group. zation “aligns the company’s operating rose 1.0% over July 2011 applications, Wells Fargo Wholesale Banking SVP units with its three core customer groups: according to the MIB Life Index. Year David Hoyt said of the appointment, individuals, companies, and institutional over year, individuals aged 60 and older “Insurance is an important, core product investors.” B of A CEO Brian Moynihan continued to exhibit the greatest appetite at Wells Fargo, and I look forward to described the moves as “removing a layer for individually underwritten insurance working with Laura and our highly talent- of operations management” that were (+7.7%), followed by individuals aged 45- ed insurance team to continue to grow consistent with nearing the end of Phase I 59 (+0.4%), but demand among individu- the business and provide valuable prod- in Project New BAC begun in April. als aged 0-44 slackened (-1.2%), ucts and services to our customers.” Phase II is expected to begin in October Braintree, MA-based MIB Group reports. Schupback, who has a Bachelor of and end in March 2012. Science degree in accounting, said, “I’m SEPTEMBER 12 - 18, 2011 confident that the deep operational expe- U.S. COMPOSITE COMMERCIAL SEPTEMBER 12 - 18, 2011 CHINA REINSURANCE & rience and strong relationships I’ve built RATES SLIDE 2% IN AUGUST CHINA JIANYUN INVESTMENT in working across many of Wells Fargo’s U.S. composite commercial property and IN STRATEGIC PARTNERSHIP businesses will help the talented insur- casualty rates slid 2% in August com- Beijing, China-based China Investment ance team better meet the financial pared to August 2010, according to Dal- Corp (CIC) subsidiaries Beijing, China- needs of our commercial, retail bank and las, TX-based MarketScout. A 3% drop based China Reinsurance Group and wealth management customers.” in umbrella/excess insurance rates led Shenzhen, China-based China Jianyun Wells Fargo Insurance Services oper- the decline, followed by 2% decreases in Investment have formed a strategic part- ates more than 200 offices in 37 states inland marine and general liability and a nership. The two plan to jointly develop and in 2010 helped Wells Fargo & Co. 1% slip in commercial auto insurance (1) their media publications and financial generate $1.78 billion in insurance bro- rates. Commercial property, business information technology; (2) their medical kerage income, which comprised 4.4% of interruption, business owner’s policy insurance and direct insurance programs; its noninterest fee income and 2.1% of its (BOP), fiduciary and crime insurance (3) their insurance broking, consulting net operating revenue. The company rates, however, were flat, while profes-

SEPTEMBER 26 - OCTOBER 2, 2011 CIMRO SURVEY FINDS EFFECTIVE TRAINING THE KEY TO CREDIT INSURANCE & DEBT PROTECTION SALES MICHAEL WHITE - SECURITIES AMERICA Most U.S. banks (65%) include REPORT credit insurance, debt protection and life and disability insurance sales among their retail goals, Community Bank according to a recent survey conducted by the Credit Industry Mar- Investment Programs keting Representative Organiza- tion (CIMRO). Among those financial institutions responding to the survey, Measures and benchmarks community banks’ performance all incentivize their individual platform in generating securities brokerage and annuity fee income. bankers/lenders with monthly one-time payments and/or financial compensation Uses innovative benchmarking ratios that give insight into tied to the premium written on the product community bank investment programs, including: sold. Just over half (55.6%) reward bank office managers with monthly or quarterly · Program Productivity incentive payouts and/or points and · Program Density awards. Less than one in five (16.7%) · Program Contribution compensate regional managers with incentives and/or points and awards on a · Program Concentration quarterly basis, and not quite 6% (5.6%) · Program Penetration acknowledge higher-level managers with quarterly points and awards based on the www.bankinsurance.com/products/cmmty-bk-inv-rpt production of the units they oversee. When all banks with credit insurance programs were asked to rank those ele- ments that contributed the most to their and asset management businesses; (4) SEPTEMBER 19 - 25, 2011 insurance sales success, however, mean- their funds, and (5) their realty and equity MANULIFE PHILIPPINES ingful financial incentives ranked eighth investment programs. In 2010, China SALES JUMP IN AGENCY (33%), followed by incentive programs for Jianyin Investment reported 1.5 billion AND BANCASSURANCE managers (13%), awards (10%), cam- yuan ($234.6 million) in net income; and CHANNELS paigns (10%), marketing materials (7%) in the first half of 2011, China Re reported Manulife Philippines reported weighted and contests (7%). premium income jumped 50.5% to 28.27 insurance sales jumped 64% in the se- In contrast, effective training ranked billion yuan ($4.42 billion), BestNews cond quarter, helped by the introduction first (73%); lender accountability ranked reports. of a Guaranteed Insurability Endorsement second (62%); senior management sup- (GIA) program, which offers fixed protec- port ranked third (57%); effective sales SEPTEMBER 19 - 25, 2011 tion coverage on single premium unit- tracking ranked fourth (53%); strong sales BANK-BASED FINANCIAL ADVISORS linked products without medical require- culture ranked fifth (43%); product design NOT MAXIMIZING ments. Additionally, the company intro- ranked sixth (40%); regular recognition INTERNAL REFERRALS duced ProSecure, a bank channel prod- ranked seventh (37%); and those previ- One-third of bank-based financial advi- uct that offers life and accident insurance ously mentioned ranked eighth through sors generate more than 25% of their for premiums as low as 15 pesos ($0.35) thirteenth. For more on the CIMRO revenue from internal bank referrals, and a day. survey, click here. another third generate up to 24%. Anoth- Commenting on his company’s perfor- er third, however, say they generate no mance, Manulife Philippines President OCTOBER 3 - 9, 2011 GROUP HEALTH INSURANCE revenue from internal referrals, according and CEO Indren Naido said, “The expan- PREMIUMS JUMPED 9% IN 2011 to an online survey of 75 bank-based sion of our agency and bancassurance Group family health insurance premiums financial advisors conducted by Aite distribution channels, improved produc- jumped on average 9% to $15,703 in Group in the first quarter. Aite Group tivity and continued strengthening of 2011, a substantial increase over the 3% Senior Analyst Sophie Schmitt said, brand equity characterized our record hike in 2010, according to a survey of “Leaders must do a better job of demon- insurance sales growth for second quar- over 2,0000 employers conducted by the strating to successful advisors how work- ter 2011.” ing with internal partners can bring more Kaiser Family Foundation. Kaiser Presi- revenue.” dent and CEO Drew Altmon said, “The

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 101 open question is whether that’s a one- time spike or the start of a period of higher increases,” post-healthcare legislation. U.S. Office of Personnel Management Director John Berry said family group health insurance premiums offered to 8 million federal employees through the Federal Employees Health Benefits Pro- Get the reports gram (FEHBP) climbed 7.3% in 2011, but projected that premiums in 2012 would others are calling grow just short of 4%. Federal employees enrolled in the FEHBP pay 30% of their health insurance premiums, and taxpayers pick up the rest. ‘Outstanding’ OCTOBER 3 - 9, 2011 NEARLY HALF OF MIDDLE-INCOME AMERICANS HAVE NO LIFE INSURANCE Almost half of Americans with household ‘Second incomes between $50,000 and $250,000 have no life insurance, and those that to none.’ have life insurance have only enough to cover 3.6 years of annual income, according to the 2011 Genworth LifeJacket (SM) Study, 7 Key Insights to Help Close the Coverage Gap. ‘Finally … The impact of being inadequately insured falls on the dependents of primary facts wage earners. The policy amount received by almost all (94%) beneficiaries is not projections. not enough to enable them to maintain ’ their standard of living, and almost half (43%) are forced to use their insurance to pay the insured’s outstanding debts. www.bankinsurance.com/products Not surprisingly, 40% of those who are covered by life insurance don’t believe they have enough to meet their families’ long-term needs. Over 60% say they The Michael White - Prudential would like to meet with their agent once a year to keep pace with their needs, but Bank Insurance Fee Income Report only 38% do so. As a result, one-third of all Americans who are covered by life insurance purchased their policies more than 10 years ago. The Michael White - ABIA For more on the Genworth study, which encourages agents to sit down with Bank Annuity Fee Income Report their clients and briefly review their life insurance needs annually, click here.

OCTOBER 3 - 9, 2011 WOMEN IN FINANCIAL JEOPARDY Slightly more than half (55%) of American MetLife Mature Market Institute. income working outside the home, and women aged 50-70 know the likely amount Families, especially women, must con- (5) will face $124,000 in long-term care of their retirement income/assets; 54% are sider and make financial plans to deal costs, nearly three times that of men concerned that they will outlive their retire- with the reality that American women (1) ($44,000). ment resources; 44% have calculated their live 8% longer than men, (2) are likely to For more on The MetLife Study of Wom- essential expenses; and 16% of working experience retirement alone, (3) spend en, Retirement and the Extra-Long Life: women plan to delay their retirement by more on healthcare, (4) provide care for Implications for Planning, click here. four years, according to a new study by the others and have less opportunity to earn

OCTOBER 3 - 9, 2011 products rose 3% to $17.1 billion, up from officers bridge relationship gaps between CHINA’S SUNSHINE $16.6 billion in first half 2010, while com- banking and insurance operations. With INSURANCE GROUP AND bined annualized sales premiums re- these conditions in place, referrals and CHINA MERCHANTS BANK mained flat at $2.6 billion. Commenting on cross-selling blossom, and sales results EXPAND BANCASSURANCE overall results, Gen Re Group and Special- are best-in-class – nearly double those of PARTNERSHIP ty Senior Vice President Drew King said, average bank insurance operations in Beijing, China-based Sunshine Insurance “We are seeing some signs of a recovery financial services, employee benefits and Group, parent of Sunshine Property and in the first half of 2011, led by LTD sales.” personal and commercial insurance Casualty Insurance and Sunshine Life For more on the Gen Re survey of sales, the MarshBerry-ABIA index shows. Insurance, and Shenzhen, China-based insurance carriers, click here. China Merchants Bank (CMB) have OCTOBER 24 - 30, 2011 agreed to broaden their bancassurance OCTOBER 17 - 23, 2011 U.S. ADULT INTERNET USERS, partnership by jointly developing training U.S. APPLICATIONS FOR INCLUDING SENIORS, programs, brands, electronic commerce, INDIVIDUALLY UNDERWRITTEN PREFER ONLINE BANKING corporate governance, insurance agency LIFE INSURANCE Online banking is the preferred banking delivery systems and cash management, DOWN IN SEPTEMBER method (62%) among U.S. adults who asset management, investment and fi- U.S. applications for individually under- completed an online survey conducted in nance businesses. written life insurance in September slid August by Ipsos Public Affairs for the In 2010, Sunshine Insurance Group 3.4% compared to September 2010, the American Bankers Association (ABA). generated over 1.63 billion yuan ($255 largest month-over-month decline this Among this group, 57% of bank custom- million) in premium through its bancassur- year, according to the MIB Life Index. ers aged 55 and older said they prefer ance partnership with China Merchants While applications among individuals online banking, compared to 20% within Bank. In the first eight months of 2011, aged 60 and older continued their upward this age-group who indicated a prefer- the partnership expanded its cooperation trend, growing 6.9% over September ence for online banking when they were at 27 regional CMB branches, and in that 2010, applications among individuals questioned in a telephone survey in 2010. time generated almost the same level of aged 45-59 slipped 1.7%, and applica- Among online survey respondents, premium (1.62 billion yuan) achieved in tions among individuals aged 0-44 fell 20% prefer branch banking; 8% prefer all of 2010, BestWire reports. 7.1% driving overall results lower. using ATMs; 6% prefer using the mail; Year-to-date individual life insurance 3% prefer to bank by phone; and 1% pre- OCTOBER 10 - 16, 2011 applications are on track to be down 1% fer to bank by mobile device. Comment- VOLUNTARY for the year compared to 2010, a perfor- ing on the suvey results, ABA Senior GROUP LIFE & DISABILITY mance Braintree, MA-based MIB Group Counsel Nessa Freddis said, “Retail SALES MOSTLY UP President Lee Oliphant described as banking has changed for good…. Cus- U.S. group life insurance earned premi- “relatively good in light of a moribund tomers of all age groups prefer the speed ums reached $10.5 billion in the first half economy.” and convenience of conducting their of 2011, up 4% from the first half of 2010, banking on the Internet to visiting their while annualized sales premiums slipped OCTOBER 17 - 23, 2011 local bank or ATM.” Freddis did not ad- CEO SUPPORT ESSENTIAL TO 1% to $1.48 billion, according to South dress the fact that the survey was con- BEST-IN-CLASS Portland, ME-based Gen Re. At the same ducted only among Internet users. time, 1% fewer employers offered volun- BANK INSURANCE tary group life programs in the first half OPERATIONS OCTOBER 24 - 30, 2011 compared to the year before, Gen Re’s Best-in-class bank insurance operations UNPREPARED FOR RETIREMENT, 2011 U.S. Group Disability and Group Life begin with a “top down cross-selling com- BOOMERS SWELL Mid-Year Market Survey shows. mitment from the executive suite,” ac- SENIOR POPULATION The number of employers offering cording to the MarshBerry-ABIA Bank The number of Americans aged 55-59 group long-term disability (LTD) insur- Insurance Viability Index. With CEO sup- has grown 46% over the last decade, ance remained level with the first half of port, bank and insurance agency man- while the number of those aged 60-64 2010, as did earned premiums at $4.8 agement must (1) make cross-selling has jumped 56%, according to the In- billion, but annualized sales premiums goals part of annual performance re- sured Retirement Institute (IRI). Among grew 4% to $769 million, up from $739.4 views; (2) devise customer-relationship the latter group, 51% do not believe they million in the first half of 2010. management programs to track referral will have enough money to live comforta- Annual sales premiums for voluntary and selling activities; (3) conduct bank bly in retirement, and 42% have not de- short-term disability (STD) insurance and insurance relationship management termined how much money they need to slipped to just over $369 million, but meetings where activity pipelines are save for retirement. Of the 45% who earned premiums rose 2% to over $1.7 reviewed, relationships are built, cross- have consulted a financial advisor, two- billion, as 2% more employers offered selling success stories are celebrated, thirds have asked about annuities, the IRI STD programs through the workplace to and education about the different lines of found in Retirement Planning and the their employees, Gen Re found. business occurs; (4) develop cross- Elder Market: Advisor Strategies to Un- Combined earned premiums for volun- selling referral and sales incentives; and derstand and Work with Senior Citizens. tary group life and disability insurance (5) make sure business development For more on the report, click here.

NOVEMBER 1 - 6, 2011 cording to a study conducted by Oaks, July 1, 2012. Danamon President Henry VANTISLIFE REPORTS PA - based SEI. At the same time, 75% Ho said, “Danamon and Manulife Indone- 29% GROWTH IN fault their advisors for not “filtering out the sia share the vision that the benefits of BANK LIFE INSURANCE SALES noise” and providing them with straight- insurance and investment management Windsor, CT-based VantisLife Insurance forward, focused and relevant infor- products should be more accessible to Company reported its life insurance and mation, SEI found. people across the country.” Manulife annuity sales through U.S. financial insti- Wealth managers see things different- Indonesia President and CEO Alan Mer- tutions jumped 29% in the first nine ly. Only 4% view online communication ton added, “Danamon’s position as a uni- months of 2011 compared to the first nine via a web portal as a priority, and just versal bank serving a wide range of cus- months of 2010. VantisLife Senior Vice 33% believe email communication is a tomer segments and Manulife Indonesia’s President Craig Simms said, “Our focus priority. After completing 250 in-depth comprehensive range of reliable products on selling life insurance though financial interviews with wealth management cli- [will] serve the growing insurance and institutions continues to pay dividends.” ents and advisors, SEI concluded that wealth management needs of the Indone- Vantis offers its products through licensed “firms that invest in technology will better sian community.” bankers using online technology backed respond to ever-changing client needs.” Danamon operates 2,300 branches by Vantis wholesaling, marketing and SEI Senior Vice President Jim Morris throughout Indonesia, and Manulife Indo- training support. said, “These firms and their advisors will nesia operates offices in 24 cities across

NOVEMBER 1 - 6, 2011 be the winners in the future.” the country, offering life insurance, annui- WEALTH MANAGEMENT For more on SEI’s Communication in the ties and employee benefits, mutual funds CLIENTS WANT Information Age, click here. and asset management services through MORE ONLINE ACCESS & Manulife Asset Management Indonesia. NOVEMBER 1 - 6, 2011 Manulife Indonesia Senior Vice President STRAIGHT ADVICE PT BANK DANAMON & Hans de Waal said, “We see the success The vast majority (82%) of wealth man- MANULIFE INDONESIA FORM of this partnership leading to the improve- agement clients would prefer to access BANCASSURANCE PARTNERSHIP ment of insurance penetration rates in their financial statements on line, and Jakarta, Indonesia-based PT Bank Dana- Indonesia.” Danamon Director of Con- 50% would like their wealth management mon Indonesia Tbk (Danamon) and PT sumer Banking Michellina Triwardyhany firm to upgrade its technology to support Asuransi Jiwa Manulife Indonesia added, “We see a significant growth of a broader, more interactive online rela- (Manulife Indonesia) have agreed to form our fee-based incomes in the medium to tionship between client and advisor, ac- a bancassurance partnership beginning long-term from this strategic partnership.”

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NOVEMBER 7 - 13, 2011 fined benefit pension plans. Prudential’s between Shangai, China-based Manulife- U.S. PROPERTY & CASUALTY deal with Rothesay and sister Paternoster Sinochem Life Insurance (MSL) and Bank PREMIUMS RATES MORE is its largest longevity reinsurance trans- of China whereby Bank of China will dis- UP THAN DOWN IN OCTOBER action to date. tribute MSL products through its branches U.S. property and casualty (P&C) insur- in Beijing, Shanghai, Shenzhon, Guang- ance rates in October were generally in NOVEMBER 14 - 20, 2011 dong, Jiangsu and Zhejiang. Bank of MANULIFE FINANCIAL & line with September’s rates, according to China Executive Vice President Chen BANK OF CHINA IN Dallas-based MarketScout. By coverage Siqing said, “We are confident that this BANCASSURANCE PARTNERSHIP class, commercial property and workers mutually beneficial cooperation will further Toronto-based Manulife Financial and compensation rates each rose 2% over promote our business development.” Beijing-based Bank of China have agreed September rates; business owner policies Manulife-Sinochem is a joint venture be- to form a bancassurance partnership (BOP), directors and officers (D&O) liabil- tween Manulife and the China Foreign ity, employee practices liability insurance (EPLI) and surety rates increased 1%; business interruption, inland marine, general liability, commercial auto, professional liability, fiduciary and crime renewal rates remained flat; and umbrella/excess rates declined 1%. By account size, small account rates rose 2%, and medium accounts increased 1%, and large and jumbo account rates remained flat compared to September. By industry class, transportation rates grew 3%, energy increased 2%, and contracting and habitational rates rose 1%; manufacturing and servicing rates remained flat, and rates for pub- Now that you know how the industry is doing . . . lic entities fell 1%, according to pricing surveys conducted by the National Alli- How are YOU doing ? ance for Insurance Education and Re- search and analyzed by MarketScout. Looking at the overall two-month rate Discover the simplest way to find out. trend, MarketScout CEO Richard Kerr described the P&C industry as “on the cusp of a composite rate increase.” GET VALUABLE FEEDBACK ON YOUR PERFORMANCE IN ANY OF THE FOLLOWING: INSURANCE BROKERAGE FEE INCOME ANNUITY COMMISSIONS NOVEMBER 14 - 20, 2011 PRUDENTIAL FINANCIAL TOTAL INSURANCE FEE INCOME MUTUAL FUND & ANNUITY FEE INCOME REINSURES GOLDMAN INVESTMENT FEE INCOME INCOME FROM FIDUCIARY ACTIVITIES SUBSIDIARIES’ PENSION LIABILITIES Newark, NJ-based Prudential Financial, INVESTMENT PROGRAM INCOME WEALTH MANAGEMENT FEE INCOME through Hartford, CT-based Prudential SECURITIES BROKERAGE INCOME TOTAL NONINTEREST FEE INCOME Retirement Insurance and Annuity Com- pany (PRIAC), has agreed to reinsure the COMPARES, RANKS AND RATES BY PERCENTILE: pension liability risks of London, England- based Rothesay Life and Paternoster, NATIONALLY FEE INCOME DOLLAR VOLUME both subsidiaries of New York City-based BY REGION AS A % OF NONINTEREST INCOME Goldman Sachs Group. The initial transaction covers GBP450 million ($723 mil- BY STATE AS A % OF NONINTEREST FEE INCOME lion) in pension liability values. Prudential BY ASSET-PEER GROUP AS A % OF NET OPERATING REVENUE Retirement Senior Vice President Phil AS A % OF RETAIL DEPOSITS Waldeck said, “This new transaction … demonstrates Prudential’s capacity and AS A % OF ASSETS experience to help effectively derisk pen- PER EMPLOYEE sion plans and manage the impact of market turmoil and pension longevity PER DOMESTIC OFFICE risks.” BY COMPOUND ANNUAL GROWTH 1-3 YRS Rothesay Life provides annuity and other longevity products to corporate de- ORDER TODAY AND WE’LL EMAIL YOUR REPORT IN AS LITTLE AS 24 HOURS

Economy and Trade Trust Company, a selling indexed life insurance product, third quarter 2010. At the same time, member of the state-owned agricultural Athena Indexed UL. Aviva ranked se- charge-offs dropped 39.2% to an aggre- company Sinochem Group. cond, followed by Newport Beach, CA- gate $26.7 billion, down from $43.9 bil- based Pacific Life Companies, Cedar lion. NOVEMBER 21 - 27, 2011 Rapids, IA-based AEGON Companies, Twenty-six banks failed in the third SENIORS CONTINUE TO DRIVE RISE and Austin, TX-based National Western. quarter, down from 41 in third quarter IN LIFE INSURANCE APPLICATIONS AnnuitySpecs.com’s Moore noted that 2010, and 74 failed in the first nine U.S. applications for individually under- seven new insurance companies entered months, down 41.7% from 127 in the written life insurance rose 1.6% in Octo- the indexed life market during the third same period last year. ber compared to October 2010, led again quarter. Moore said, “With this quarter’s Commenting on the third quarter and by applications among individuals aged record sales fueling additional interest in year-to-date performance of U.S. banks, 60 and older (+10.9%) and those aged 45 the product line, I anticipate the number FDIC Acting Chairman Martin Gruenberg -59 (+2.0%), while applications among of companies offering IUL [indexed uni- said, “We continue to see income growth individuals aged 0-44 continued to de- versal life] to increase exponentially in the that reflects improving asset quality and cline (-1.1%), according to the MIB Life coming year.” lower loss provisions … but the recovery Index. Year to date, applications overall For more on the Indexed Sales and is by no means complete.” Gruenberg were basically even with 2010 applica- Market Report, click here. warned, “Ongoing distress in real estate tions (-0.4%), with October 2011 applica- markets and slow growth in jobs and in- tions up 8.3% over September 2011 ap- NOVEMBER 21 - 27, 2011 comes continue to pose risks to credit plications. Commenting on the general COMMERCIAL RATES quality.” trend, Braintree, MA-based MIB Group MAY BE HARDENING CEO Lee Oliphant said, “At a time when Average renewal premiums in three of DECEMBER 5 - 11, 2011 the U.S. economy is struggling to define the four lines of commercial insurance U.S. VARIABLE ANNUITY SALES UP direction, the pipeline for new life insur- tracked by the RIMS Benchmark Survey 14% IN THIRD QUARTER ance business appears to be holding its increased in the third quarter. While di- U.S. variable annuity sales grew 14% in own.” rectors and officers rates declined 1.9%, the third quarter to $39.1 billion, up from workers’ compensation premiums in- $34.2 billion in third quarter 2010, accord- NOVEMBER 21 - 27, 2011 creased 2.1%; property rates rose 1.6%; ing to Chicago, IL-based Morningstar. INDEXED ANNUITY & and general liability rates ticked up 1.2%, Qualified sales dominated the variable INDEXED LIFE SALES TREND UP RIMS found. While RIMS said the survey annuity market, accounting for $26.4 bil- U.S. indexed annuity sales in the third results “strongly suggest that an eight- lion or 67.5% of total variable annuity quarter slipped 1% to $8.7 billion, down year period of falling commercial insur- sales, while non-qualified sales account- from $8.79 billion in third quarter 2010, ance rates is at its end,” RIMS Director ed for $12.2 billion or 31.2% of all varia- but were up 5% compared to second Frederick Savage observed, “Pricing gen- ble annuity sales. quarter sales of $8.29 billion, according to erally is still quite favorable in most lines.” Variable annuity assets were placed AnnuitySpecs.com’s Indexed Sales and Savage said, “It would likely take a very primarily in fixed (22.6%) and allocation Market Report. AnnuitySpecs.com Presi- large catastrophe or series of catastro- (22.6%) accounts, and less popularly in dent and CEO Sheryl Moore attributed phes to trigger a hard market along the bonds (12.3%) and money market ac- the sequential growth in indexed annuity lines of what we saw a decade ago” after counts (2.7%). sales to “consumers’ quest for retirement September 11. Morningstar Director of Insurance Solu- products with guarantees.” Moore noted, tions Frank O’Connor described the “Indexed annuities now account for one NOVEMBER 28 - DECEMBER 4, 2011 growth in variable annuity sales as “a out of every two fixed annuity sales.” U.S. BANK PROFITS CLIMB 48.3% very positive development, indicating Minnesota, MN-based Allianz Life re- TO $35.3 BILLION rapidly growing interest in the use of vari- tained its position as the top indexed an- Aggregate profit at U.S. commercial able annuity guaranteed income benefits nuity provider (17% market share) with its banks and savings institutions (banks) as an important component of a portfolio MasterDex X product remaining the most climbed 48.3% in the third quarter to designed to produce sustainable income popular indexed annuity product sold. $35.3 billion, up from $23.8 billion in third throughout retirement.” Des Moines, IA-based Aviva ranked se- quarter 2010, according to the Federal cond, followed by Des Moines, IA-based Deposit Insurance Corporation (FDIC). DECEMBER 5 - 11, 2011 American Equity, Cincinnati, OH-based An almost 50% drop in loan loss provi- THIRD QUARTER Great American, and Fort Wayne, IN- sions to $18.6 billion, down from $35.1 U.S. FIXED ANNUITY SALES based Lincoln National Life. billion in third quarter 2010, drove the FALL 7% Indexed life sales in the third quarter improvement, which saw the average U.S. fixed annuity sales in the third quar- jumped over 51% over third quarter 2010 return on assets (ROA) rise to 1.03%, up ter declined 7% to $19 billion, down from sales to a record $251.1 million, and from 0.72% a year ago. $20.5 billion in third quarter 2010, accord- climbed 20% over second quarter 2011 The majority of banks (63%) reported ing to Evanston, IL-based Beacon Re- sales of $209.3 million. New York City- improvements in quarterly net income; search. While fixed income annuity sales based AXA Equitable captured 18% of 22.7% reported flat earnings, and 14.3% rose 5% over third quarter 2010 sales to the indexed life market bolstered by its #1 reported net losses, down from 19.5% in $2.2 illion and fixed indexed annuity sales

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 106 ticked up 0.4% to $9 billion, fixed MVA had moderate to specific exposure to said, “Improved pricing will help commis- sales dropped 33% to $1.3 billion, and catastrophes, Marsh found. sion-based revenues over the next 12 fixed book value sales fell 13.5% to $6.46 For more on the Marsh Property months,… [but] broker revenue growth billion. Insurance report, click here. will be modest due to a flat rate environ- Minneapolis, MN-based Allianz Life ment in the broader property/casualty led all insurers in third quarter fixed annu- DECEMBER 12 - 18, 2011 marketplace.” U.S. APPLICATIONS FOR LIFE ity sales ($1.61 billion) followed by first INSURANCE STABLE IN NOVEMBER place bank channel distributor Houston, DECEMBER 12 - 18, 2011 U.S. applications for individually under- ASIA EMBRACES TX-based Western National Life ($1.34 written life insurance in November were BANCASSURANCE billion). Des Moines, Iowa-based Ameri- comparable to those in November 2010, Bancassurance is growing quickly in Asia, can Equity ranked third ($1.27 billion); according to the MIB Life Index. Applica- where customers like accessible one-stop West Des Moines, IA-based Aviva USA tions among individuals aged 60 and old- financial services shopping, banks like ranked a closed fourth ($1.26 billion), and er grew 8.8%, while applications among the additional income stream, and insur- New York City-based New York Life individuals aged 45-59 slipped 0.4% and ers and brokers like the access to lend- ranked a distant fifth ($921 million). among those aged 0-44 dipped 2%. The ers’ customer bases, according to ING Fixed indexed annuities remained the overall “no-change status signals a posi- Insurance Asia Pacific Regional Head top-selling fixed annuity product, dominat- tive tone for the industry,” Braintree, MA- Sujoy Ghosh. Malaysia, Taiwan and Chi- ing 47.5% of third quarter sales. Book based MIB Group said. na have adopted bancassurance more value annuities ranked second with a quickly than India and Singapore, where 34% market share. However, New York DECEMBER 12 - 18, 2011 brokers and agents have traditionally Life’s Lifetime Income Annuity was the COMPOSITE COMMERCIAL P&C been captive insurance agents, according only non-indexed annuity among the top RATES REVERSE 7-YEAR DECLINE to India-based consultancy Celent. Life five specific annuity products sold. Commercial property and casualty insur- insurance sales dominate 50% to 80% of Commenting on the strength of in- ance rates reversed their almost seven- the bancassurance market in Taiwan and dexed annuity sales, Beacon CEO Jere- year decline in November, according to Malaysia, while in India, Japan and Thai- my Alexander said, “These products con- Dallas-based MarketScout. Commercial land bank life insurance sales comprise tinue to do well – despite the quarter’s property, workers’ compensation and only 10% of the bancassurance sales, low interest rate environment – because business owner policy renewal rates in- Celent said. of strong demand for guaranteed lifetime creased 2% over November 2010; em- According to ING’s Ghosh, “The gen- retirement income.” Looking ahead, how- ployment practices liability insurance, eral pie for insurance is growing rapidly ever, Alexander said he expected overall commercial auto, general liability and [in Asia], so there’s enough room for fixed annuity sales to decline in the fourth business interruption rates rose 1%; and growth of all distribution channels.” quarter due to seasonality and “the diffi- inland marine, umbrella excess, personal Ghosh favors bancassurance. Not sur- cult interest rate environment.” liability, directors and officers liability, prisingly, his company has bancassur- fiduciary, crime and surety rates re- ance joint ventures with Bank of Beijing DECEMBER 5 - 11, 2011 mained flat. PROPERTY INSURANCE RATES RISE (China), Kookmin Bank (South Korea), All industry classes renewed at higher Almost half (48%) of U.S. property insur- TMB Bank (Thailand), ING Commercial or flat rates, with the manufacturing, con- ance renewals completed to date in the Bank (Malaysia) and ING Vysya Bank tracting, habitational, transportation and fourth quarter incurred rate increases, (India) and is a preferred partner with energy industries up 1%, while rates for according to New York City-based China Construction Bank (Hong Kong). the service and public entity industries Marsh’s Global Benchmarking Portal. Ghosh warns, however, that bancassur- remained flat. Twenty-nine percent (29%) renewed with ance partnerships work only when “true Only jumbo accounts received renew- rate increases of 1% to 10%, and 9% commitment” fits the right model. The al rate decreases (-1%), while small ac- renewed with rate increases above 11%. right model, Ghosh believes, “is one count renewal rates increased 2%; medi- At the same time, 18% renewed with no where the insurer adapts to the model of um accounts rose 1%, and large account rate change, and 34% received rate re- the bank and its practices instead of try- renewal rates remained flat. MarketScout ductions. Among the latter group, 21% ing to impose something [on the bank]. CEO Richard Kerr said the data indicates received reductions of 1% to 10%; 8% One size does not fit all,” Asia/Pacific that “the soft market is over.” Kerr noted, received reductions ranging from 11% to Best Week reports. “November 2011 is the first composite 20%, and 5% received rate reductions of rate increase since the soft market began 21% or more. Overall, property insurance DECEMBER 19 - 25, 2011 in February 2005.” COMMERCIAL INSURANCE renewal rates rose an average 1.7%. RATE INCREASES FALL SHORT Commenting on the findings, Marsh DECEMBER 12 - 18, 2011 OF LOSS COSTS said, “The data points to a transitioning OUTLOOK FOR U.S. The aggregate 2% increase in third quar- property insurance market,” hit by $70 INSURANCE BROKERAGE ter commercial insurance rates over third billion in catastrophic losses in the first BUSINESS REMAINS STABLE quarter 2010 is not enough to keep up three quarters. Those properties as- The outlook for U.S. insurance brokerage with reported claim costs inflation levels, sessed with rate increases incurred re- industry remains “stable” according to according to New York City-based Tow- cent losses, had poor loss histories, or New York City-based Fitch Ratings. Fitch

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT MARKETPLACE - P AGE 107 ers Watson. The company’s most recent DECEMBER 19 - 25, 2011 policyholders it accepts before it exits the Commercial Lines Insurance Pricing Sur- SUN LIFE TO EXIT businesses, and it will focus on profitabil- vey (CLIPS) reveals that loss costs in- U.S. VARIABLE ANNUITY & ity, capital efficiency and risk management creased 4% over 2010 costs. Towers INDIVIDUAL LIFE BUSINESSES in servicing those in-force businesses. Watson U.S. Property and Casualty Prac- Toronto, Canada-based Sun Life Financial Sun Life plans to grow its less capital- tice Managing Director Bruce Fell said, will stop selling variable annuities and intensive businesses in the U.S., including “While rates are hardening, loss costs individual life insurance products in the its group insurance, voluntary benefits also continue to rise. Our view is that U.S. beginning December 30, 2011. U.S. and investment management businesses. until rate increases exceed loss cost infla- regulatory requirements and ongoing Sun Life President and CEO Dean A. tion, we will not be in a market where shifts in capital markets have generated Connor said, the repositioning will insurance company results can improve volatility and undermined the profitability of “accelerate growth, improve return on and we start to enter a real hard market.” these products, Sun Life said. However, shareholder’s equity and reduce volatility.” the insurer will continue to service the

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by purchasing a commodity in the private charges during a period extending from Bank Insurance & market.” Hudson added, “This dispute is 2003-2007. The violations involve New not simply about regulating the business York State Insurance Department Regu- Investment of insurance – or crafting a scheme of lation 60, which requires agents to (1) Legislation, universal healthcare coverage – it’s about present to customers the primary reason an individual’s right to choose to partici- for recommending a new life insurance Regulation pate.” The U.S. Congress passed the policy or annuity contract, (2) explain why & Litigation healthcare legislation earlier this year, the current policy or contract doesn’t and President Barack Obama signed it meet the customer’s needs, then (3) con- DECEMBER 13 - 19, 2010 into law in March. firm these disclosures have been made MINNESOTA ATTORNEY GENERAL by having the customer sign forms ac- SWANSON SUES DISCOVER DECEMBER 20 - 26, 2010 knowledging he or she has received and 9TH CIRCUIT REVERSES ALLEGING DECEPTIVE read the disclosed information. AND UPHOLDS CA SALES PRACTICES New York State Superintendent of ARMENIAN GENOCIDE LAW Minnesota Attorney General Lori Swan- Insurance James Wrynn said, The Ninth U.S. Circuit Court of Appeals son has filed suit in Hennepin County “Consumers considering replacing an has reversed its decision made last year, District Court in Minneapolis against annuity or insurance policy should get all which invalidated the California law that Riverwoods, IL-based, $61.6 billion-asset the information they need in order to gave heirs of Armenians killed in Turkey Discover Financial Services, DFS Ser- make an accurate comparison. We insist during World War I the right to sue life vices and Greenwood,DE-based Discover upon accurate side-by-side comparisons insurance companies for death benefits Bank alleging Discover Bank deceptively of these products in order to protect con- on the basis that those deaths resulted charged some credit card customers for sumers.” from genocide. Last year the Court said “pricey optional financial products … with- The Citigroup agencies have agreed the U.S. government accepted Turkey’s out their [these customers’] understand- to (1) create policies and procedures to position that the deaths were a result of ing that their credit cards would be address Regulation 60 requirements, (2) war not genocide, making California’s charged.” install an adequate complaint process, (3) position that the deaths resulted from According to the suit, Discover Bank assure insurance and annuity sales com- genocide invalid. This month, however, and DFS Services made aggressive, mis- ply with suitability standards, and (4) file two out of three judges ruled “there is no leading and deceptive telemarketing calls reports with the New York Insurance De- express federal policy forbidding states to to customers luring them into believing partment every 120 days. they were receiving courtesy calls while use the term ‘Armenian Genocide.’” telemarketers “tricked” them into Therefore, the California law in question JANUARY 3 - 9, 2011 “unwittingly signing up” for such products is back on the books as valid, and Arme- NEW YORK as payment, identity theft, and wallet pro- nian heir attorney Brian Kabateck is AGENCY ASSOCIATIONS tection plans. ready to act. “It’s a great victory for the APPEAL REG 194 RULING The Attorney General’s office is asking Armenian people,” he said. The Independent Insurance Agents & the Court for an injunction against Discov- About 1.5 million Armenians lost their Brokers of New York (IIABNY) and the er’s continuing these alleged practices lives in Turkey between 1915 and 1919. Council of Insurance Brokers of Greater and the requirement that Discover pay Thus far, Kabatech and other attorneys New York (CIBGNY) have filed a notice of civil penalties to the government and res- have attained $37.5 million in settlements appeal with the New York Supreme Court titution to the customers it allegedly de- from New York Life and AXA after filing Appellate Division, Third Department in ceived. lawsuits similar to the ones now allowed Albany. The filing alerts the court that the by California law, insurancejournal.com associations intend to make a formal ap- DECEMBER 20 - 26, 2010 reports. peal asking the court to overturn the deci- DISTRICT JUDGE sion made by Supreme Court Justice RULES HEALTHCARE JANUARY 3 - 9, 2011 Richard Platkin last month upholding New NEW YORK FINES PURCHASE MANDATE York Insurance Regulation 194. CIBGNY CITIGROUP AGENCIES IS UNCONSTITUTIONAL President Anthony Aquilino said, “The $2 MILLION FOR U.S. District Court Judge Henry Hudson filing is step one toward reversing the REG 60 VIOLATIONS has ruled that the mandate in the U.S. unfortunate decision of the trial court.” Citicorp Insurance Agency, Citicorp In- healthcare law requiring individuals to Regulation 194 requires agents and vestment Services and BHHU Life Agen- purchase health insurance by 2014 or be brokers to tell customers detailed infor- cies, each affiliates of New York City- fined is unconstitutional. Judge Hudson mation about compensation, including based, $1.98 trillion-asset Citigroup, have said, “The Minimum Essential Coverage differences paid out among various poli- paid New York State $2 million in fines for Provision is neither within the letter nor cies offered. IIABNY Chair David Gelia allegedly failing to disclose to their cus- the spirit of the Constitution.” The U.S. described the regulation as “a costly de- tomers comparisons among various life Constitution’s Commerce Clause, he mand on law-abiding producers,” and insurance policies and annuity contracts said, does not give the U.S. government Aquilino said the regulation “solves a non- and for inaccurately or incompletely dis- the power “to compel an individual to in- existent problem.” voluntarily enter the stream of commerce closing policy values and surrender

JANUARY 17 - 23, 2011 P&C EXECUTIVES COOL TO FINANCIAL REFORMS AND COMMERCIAL LINES Property and casualty insurance industry executives are overwhelmingly unim- pressed with the comprehensive financial services reform legislation (Dodd-Frank Act) passed by Congress and signed into law last year by President Obama. Just 8% of the 100 executives surveyed at the Insurance Information Institute’s (III) Property/Casualty Insurance Joint Indus- try Forum in New York City last week said they thought the law would be helpful for the industry. The group, however, was split 50/50 on the positive or negative impact of the new Federal Insurance Of- fice. P&C executives are also skeptical about seeing profitability improvements in commercial lines and workers’ compensation insurance in 2011, with only 24% expecting improvement in the former and 14% expecting improvement in the latter. The executives were more sanguine about increased profitability among homeowners (61%) and personal auto (59%) insurance lines in 2011; but most expect overall industry premiums to remain flat (53%) and the combined ratio to cial planners act as investment advisors, mitted to Congress a staff study recom- rise above the current 101.2 (68%). they are regulated by the Securities and mending that the SEC adopt and imple- Most P&C executives expect tort Exchange Commission (SEC), and when ment a uniform fiduciary standard of con- trends to remain the same (53%), and an they act as insurance agents, they are duct for broker-dealers and investment overwhelming number expect increased regulated by insurance commissioners. advisors when those financial profession- consolidation among P&C insurers and The GAO recommended, however, als provide personalized investment ad- reinsurers (86%) and an up year in equity that (1) the National Association of Insur- vice about securities to retail investors. markets (88%), where only 18% of their ance Commissioners (NAIC) assess con- That standard, the staff study said, should assets are invested compared to their sumers’ understanding of the standards be no less stringent than that currently 70% investment in bonds. of care associated with the sale of insur- applied to investment advisors under the As a bottom-line analysis for the out- ance products, (2) the SEC assess inves- Advisors Act. In addition, the study rec- look of the P&C industry, III Chief Econo- tors’ understanding of financial planners’ ommended that the SEC consider harmo- mist Dr. Steven Weisbart told the New titles and designations, and (3) the SEC nizing “regulatory protections.” York City forum, “The low interest rate collaborate with states to identify meth- SEC Commissioners Kathleen Casey environment, which will likely persist ods to better understand problems asso- and Troy Paredes at the same time provid- throughout 2011, will challenge insurers ciated specifically with the financial plan- ed their written objections to the staff study to price risks in closer relation to claims ning activities of investment advisors. recommendations, noting: (1) The Study potential,” insurancejournal.com reports. To read the summary and recommenda- recommends the adoption of a new uni-

JANUARY 24 - 30, 2011 tions of the GAO report or the entire reform fiduciary duty standard and harmoni- GAO SEES NO NEED FOR port itself, click here. zation of two disparate regulatory regimes, MORE FINANCIAL PLANNER but it does so without adequate articulation JANUARY 24 - 30, 2011 or substantiation of the problems that OVERSIGHT SEC STAFF RECOMMENDS would purportedly be addressed via that The U.S. Government Accounting Office “HARMONIZED REGULATION” regulation nor the adverse impact those (GAO) has completed its Congressionally AND UNIFORM STANDARDS FOR recommendations could have on investors. mandated study of regulatory oversight BROKER-DEALERS AND (2) The Study does not identify whether for financial planners and concluded that INVESTMENT ADVISORS, retail investors are being systematically “an additional layer of regulation specific COMMISSIONERS DISAGREE harmed under any regulatory regime and to financial planners does not appear to At the end of last week, the Securities therefore lacks any basis for concluding be warranted at this time.” When finan- and Exchange Commission (SEC) sub-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT LEGISLATION, REGULATION & LITIGATION - P AGE 110 that a uniform standard or harmonization alleged the two colluded with insurers to ed States Department of Health and Hu- would enhance investor protection. rig the excess casualty insurance market man Services et. al. From his seat in The Commissioners concluded: and engaged in fraud, larceny and anti- Pensacola, Fl, the judge issued a Declar- “Given the lack of concrete data provided trust law violations when they did so. atory Judgment in favor of Florida and 25 in the Study and the need for additional New York Supreme Court Judge other states, including Alabama, Alaska, research and analysis, we believe that James Yates convicted the men of anti- Arizona, Colorado, Georgia, Idaho, Iowa, any rulemaking without such considera- trust violations, but acquitted them of Indiana, Kansas, Louisiana, Maine, Michi- tion would be ill-conceived at best and engaging in fraud and larceny in February gan, Mississippi, Nebraska, Nevada, harmful at worst.” 2008. In July 2010 the same judge threw North Dakota, Ohio, Pennsylvania, South To read the Staff Study, click here. out the antitrust convictions citing the Carolina, South Dakota, Texas, Utah, Read the Commissioners’ response here. NYAG’s failure to disclose “invaluable” Washington, Wisconsin and Wyoming. exculpatory evidence at trial. In his 78-page ruling, the judge de- JANUARY 24 - 30, 2011 In December the NYAG decided not to clared that the “individual mandate” that BIG I LIKES HEALTHCARE REPEAL appeal the judge’s ruling, and this month requires people to buy insurance or pay a The Independent Insurance Agents and the NYAG dropped the case. Because penalty violates the Commerce Clause in Brokers of America (IIABA or Big I) has the New York Attorney General has dis- the Constitution. Since that mandate and enthusiastically responded to the U.S. missed the indictments, the two men the rest of the provisions in the law “are House of Representatives’ passage of have “been cleared of all charges,” the inextricably bound together,” he said, they H.R. 2 that would repeal healthcare legis- Cooley litigation team that represented “must stand or fall as a single unit…. lation signed into law by President McNenney said. Because the individual mandate is uncon- Obama last year. The current healthcare stitutional and unseverable, the entire Act law (Patient Protection and Affordable FEBRUARY 7 - 13, 2011 must be declared void.” Healthcare Act or PPAHA), the Big I said, JUDGE RULES U.S. HEALTHCARE Judge Vinson concluded “the declara- “does little to stem the skyrocketing cost LEGISLATION “UNCONSTITUTIONAL” tory judgment is the functional equivalent of healthcare and would be financed on The U.S. healthcare legislation signed of an injunction” since “it must be pre- the backs of small businesses.” In fact, into law by President Obama in March sumed that federal officers will adhere to Big I Senior Vice President Charles Sym- 2010 was ruled unconstitutional last week the law as declared by the court…. Thus, ington said, “Some of the provisions that by U.S. District Court Judge Roger the award of declaratory relief is ade- have taken affect, such as the Medical Vinson in State of Florida et. al. vs. Unit- Loss Ratio regulation, are so damaging that they are already hurting our fragile economy.” The Big I urged the U.S. Sen- ate to follow the House’s example and vote to repeal the PPAHA.

JANUARY 24 - 30, 2011 PIA ASKS CONGRESS TO DEFUND FIO AS POTENTIAL REGULATOR The National Association of Professional Insurance Agents (PIA) is calling on the U.S. Congress to pass legislation to defund any study of insurance regulation by the newly created Federal Insurance Of- fice (FIO) and repeal the FIO’s mandate to make recommendations regarding insurance regulation to Congress. PIA CEO Leonard Brevik said, “Federal bu- reaucrats should not be conducting a study on whether or not their own powers should be expanded, and then making recommendations to Congress based on a study that they alone conducted.”

JANUARY 24 - 30, 2011 NY ATTORNEY GENERAL DROPS MARSH BID-RIGGING CASE New York Attorney General (NYAG) Eric T. Schneiderman has decided not to retry the state’s case against former Marsh Managing Directors William Gilman and Edward McNenney, in which the state

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT LEGISLATION, REGULATION & LITIGATION - P AGE 111 quate, and separate injunctive relief is not necessary.” The judge then ordered: “A declaratory judgment shall be entered declaring The Patient Protection and Af- fordable Care Act unconstitutional.” The Obama administration disagreed with the judge’s ruling and said it was “confident” that it would “ultimately prevail on appeal” to the 11th U.S. Circuit Court of Appeals. The U.S. Justice Department is appealing a similar decision made by Are You Receiving Your U.S. District Court Judge Henry Hudson Complimentary Subscription? to the 4th U.S. Circuit Court of Appeals. In the latter case, Virginia Attorney Gen- eral Ken Cuccinelli has filed court papers BankInsurance.com News in Washington, DC, stating his intention to distills the most important ask the U.S. Supreme Court to consider news stories that directly impact the District Court’s decision prior to its businesses in the bank insurance review by the Appellate Court. and investment world. FEBRUARY 7 - 13, 2011 REGULATORS ASKED TO ESTIMATE COSTS Register now to receive your OF DODD-FRANK complimentary subscription today. U.S. House of Representatives Financial Services Committee Chair Spencer Bac- chus, and Chairman of the Oversight In- www.bankinsurance.com/editorial/news/bi-com-news vestigations Subcommittee Randy Neugebauer have sent letters to regulators, including the Securities and Ex- change Commission (SEC) Chair Mary billion the NFIP owed as of November 30, monitor contractors working outside the Schapiro and U.S. Treasury Secretary 2010, according to a study completed by private insurer system, (3) nor does it Timothy Geithner, asking them to calcu- the Government Accounting Office have a system in place to share infor- late “the costs that will be incurred by your (GAO). mation on contractor deficiencies. (4) agency for its implementation and annual The GAO found the NFIP is basically Despite the fact that FEMA spent 7 years execution” of the “rules, studies and re- funded by taxpayers to compensate for and $40 million to develop an effective ports required by the Dodd-Frank Act.” the fact its insurance program is not actu- system to manage flood insurance policy The Congressmen noted that Dodd- arily sound. For example, (1) the NFIP and claims data, that system “did not Frank requires that the eleven agencies cannot reject high-risk applicants; (2) rate meet users’ needs,” and its further complete a total of 59 studies, produce 22 increases have statutory limits and (3) do “development has been halted.” annual reports and write 243 regulations not reflect risks; (4) 25% of property own- The GAO concluded, “Unless these within two years. The Congressmen said, ers insured by the program pay subsi- operational and management issues are “It is our responsibility to ensure that fed- dized rates; (5) many pay grand-fathered addressed, FEMA risks ongoing challeng- eral agencies have the tools they need to rates that do not reflect reassessments of es in effectively and efficiently managing carry out congressional mandates” and their property’s flood risks; and (6) be- NFIP, including management and use of “that mandates are not overly burden- cause coverage cannot be denied on the information, data and technology.” some or wasteful of taxpayer money,” basis of frequent losses, 25% to 30% of To read the GAO report, click here. InvestmentNews.com reports. claims are made on frequent loss, high- risk properties. (7) Not surprisingly, the FEBRUARY 28 - MARCH 6, 2011 FEBRUARY 21 - 27, 2011 D.C. FEDERAL JUDGE RULES NFIP NEITHER NFIP cannot purchase reinsurance, nor U.S. HEALTHCARE LAW ACTUARILY SOUND can it build capital surplus. IS CONSTITUTIONAL NOR WELL-MANAGED, In addition to the actuarial weakness District of Columbia Federal Court Judge GAO SAYS in the NFIP, the GAO found that FEMA Gladys Kessler has ruled as constitutional The U.S. National Flood Insurance Pro- does not manage the program well. For the individual mandate in the healthcare gram (NFIP) is so poorly structured and example, (1) FEMA does not consider legislation signed into law by President managed that the Federal Emergency actuarial expense information when it Obama in March 2010. Plaintiffs had Management Agency (FEMA), which calculates its payments to private insur- argued that the mandate violates the oversees the program, will unlikely be ers who sell NFIP policies and administer Commerce Clause in the U.S. Constitu- able to repay the U.S. Treasury the $18.5 claims. (2) FEMA does not consistently tion because it requires U.S. citizens to

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT LEGISLATION, REGULATION & LITIGATION - P AGE 112 purchase health insurance or pay a pen- to $2.4 million from $12 million in 2009 Arizona, Colorado, Florida, Georgia, Ida- alty, i.e., participate in commerce against and tumbled 97.7% from $104 million in ho, Indiana, Iowa, Kansas, Louisiana, their will. Judge Kessler disagreed and 2005, Washington, DC-based Sutherland, Maine, Michigan, Mississippi, Nebraska, wrote in her decision last week: “Making a Asbill & Brennan found. Nevada, North Dakota, Ohio, Pennsylva- choice is an affirmative action whether For more on the FINRA Sanction Study, nia, South Carolina, South Dakota, Tex- one decides to do something or not do click here. as, Utah, Washington, Wisconsin and something.” She added that the individu- Wyoming. al mandate is “an appropriate means MARCH 7 - 13, 2011 JUDGE VINSON GIVES OBAMA which is rationally related to the achieve- MARCH 21 - 27, 2011 ADMINISTRATION 7 DAYS TO FRAUD CHARGES DISMISSED IN 57% ment of Congress’ larger goal of reform- APPEAL HEALTHCARE RULING OF LITIGATED SEC CASES ing the national health insurance system.” U.S. District Judge Roger Vinson has About 13% of the Securities and Ex- Four other Federal judges in different issued a seven-day stay of his January change Commission (SEC) and Financial states have also ruled on the constitution- 31, 2011 judgment declaring the U.S. Industry Regulatory Authority (FINRA) ality of the healthcare legislation. Two healthcare law unconstitutional. The charges that were litigated from October ruled it does not violate the Constitution, judge issued the stay on March 3, 2011, 2008 through September 2010 were dis- and two ruled it violates the Constitution’s in response to the Obama Administra- missed at trial, according to the 2011 Commerce Clause and is, therefore, un- tion’s request that he “clarify” his January Sutherland SEC/FINRA Study. In addi- constitutional. Virginia has asked the 31 ruling. tion, the SEC failed to prove 57% of liti- U.S. Supreme Court to expedite a hear- In his March 3 response, Judge gated fraud charges, and administrative ing on challenges to the constitutionality Vinson wrote “[T]o ‘clarify’ my order and law judges or hearing panels reduced of the law. judgment: The individual mandate was monetary sanctions in 33% of cases at MARCH 7 - 13, 2011 declared unconstitutional. Because that trial, the study found. FINRA ACTIONS GROW 13% 'essential’ provision was unseverable To read the entire Sutherland study, click WHILE FINES DECLINE 10% IN 2010 from the rest of the Act the entire legisla- here. Disciplinary actions taken by the Financial tion was void.” Industry Regulatory Authority (FINRA) in Judge Vinson continued: “This declar- MARCH 28 - APRIL 3, 2011 GAO COMPLETES DEBT 2010 grew 13% to 1,310, up from 1,158 atory judgment was expected to be treat- PROTECTION STUDY in 2009, but fines declined 10% to $45 ed as the ‘practical’ and ‘functional’ equiv- Debt protection products have replaced million, down from $50 million in 2009, alent of an injunction with respect to the credit insurance as the primary protection according to the recently released Suther- parties to the litigation. This expectation sold to consumers by credit card issuers, land FINRA Sanction Study. was based on the ‘longstanding presump- a reversal of the situation just ten years Suitability violations (53) topped the tion’ that the defendants [Obama Admin- ago. The fact that federal bank regulators list of disciplinary actions taken but gener- istration] themselves identified and ar- oversee debt protection products and ated the second to the lowest amount in gued to be bound by, which provides that state insurance regulators oversee credit fines ($3.75 million), with collateralized a declaratory judgment against federal insurance appears to account for the mortgage obligations, closed-end fund officials is a de facto injunction. To the change, according to a recent U.S. Gen- and reverse convertible note violations extent that the defendants were unable eral Accountability Office (GAO) study. the primary sources of fines. (or believed they were unable) to comply, Federal regulation allows credit card Short selling ranked second in the it was expected that they would immedi- issuers to offer one uniformly priced debt number of violations found (50) but gen- ately seek a stay of the ruling…. It was protection product with the same terms erated the lowest amount in fines ($3.5 not expected that they would effectively and conditions nationwide through multi- million), despite the fact that fines were ignore the order and declaratory judg- ple marketing channels. In contrast, state 50% higher than the $2.4 million levied in ment for two and one-half weeks, contin- regulation of credit insurance products 2009. ue to implement the Act, and only then not only prohibits this uniformity, but it Electronic communications violations file a belated motion to ‘clarify.’” also imposes price controls on insurance (34), primarily due to failure to adequately Judge Vinson issued the stay without rates, monitoring suitability and the rela- maintain and preserve company emails being requested to do so and said, “the stay tionship between benefits provided and (23), ranked both third in number and fine will be conditional upon the defendants filing premiums charged. amount ($4 million). Advertising viola- their anticipated appeal within seven (7) Importantly, debt protection products tions ranked fourth in number (24) but calendar days of this order and seeking an eliminate profit sharing with the insurer as first in fines ($4.75 million), and credit expedited appellate review, either in the middleman. The GAO found that of debt default swap (CDS) violations ranked fifth Court of Appeals or with the Supreme Court protection fees collected by the nine larg- in number (6) and second in fine amount under Rule 11 of that Court.” est credit card issuers in 2009, 21% ($4.5 million), reflecting primarily If the Obama Administration does not ($518 million) was paid out on behalf of “improper communications about custom- file an appeal within the seven-day consumers; 24% ($574 million) went to ers’ proposed brokerage rate reductions timeframe, the U.S. healthcare law will reserves and administrative expenses, in the wholesale CDS market.” not be enforceable in the 26 states that and 55% ($1.3 billion) was retained as On the other side of the ledger, fines brought their case to Judge Vinson. profit. tied to mutual funds dropped 80% in 2010 Those states include Alabama, Alaska,

All this may change when supervisory and enforcement authority for credit card debt protection products is transferred to the new Bureau of Consumer Financial Protection (CFP) as mandated by the Dodd-Frank Act. The CFP has agreed to the GAO recommendation that, in its regulatory role, it assess the relationship between the benefits and costs of debt protection products and provide information to consumers that will enable them to understand and assess the products. To read the GAO report on debt protection products, click here.

APRIL 18 - 24, 2011 FINRA FINES SANTANDER OVER STRUCTURED PRODUCT SALES & SUPERVISION JOIN THE The Financial Industry Regulatory Au- thority (FINRA) has fined Guaynabo, Puerto Rico-based Santander Securities American Bankers Insurance Association $2 million for unsuitable sales of reverse convertible securities to retail customers, inadequate supervision of sales of structured products, inadequate supervision of Turn to the ABIA for expert advice and support. We’re the accounts funded with loans from its affili- premier national organization representing the industry, ated bank and inadequate suitability Starting, acquiring offering outstanding: guidance and required training regarding the sale of structured products. In addi- or expanding a • legislative and regulatory advocacy tion to the fine, Santander is required to bank-insurance • compliance information and support review its training supervision and written agency? • industry publications and benchmarking data procedures regarding structured prod- • peer networking ucts. • direct access to bank-insurance industry providers FINRA said Santander Securities’ lapses in these areas occurred between Contact the ABIA to learn more about how we can help you September 2007 and September 2008. grow your bank-insurance business! The company has reimbursed more than $7 million to its customers for losses tied to unsuitable reverse convertible securities. www.theabia.com 202-663-5163 APRIL 18 - 24, 2011 METLIFE & METLIFE BANK E - mail Valerie Barton: ENTER INTO CONSENT DECREE [email protected] WITH BANKING REGULATORS REGARDING MORTGAGES New York City-based MetLife, parent of Convent Station, NJ-based, $16.3 billion- asset MetLife Bank, acknowledged that it, new residential mortgage servicing stand- many of these standards. The company along with several other bank holding ards, including enhancing communica- added, “MetLife Bank has never issued companies, has entered into a consent tions with customers regarding their and does not own nontraditional mort- decree with the Federal Reserve requir- home retention options and enhancing gage products such as pay-option ARMs ing it to enhance the supervision of its risk management, audit and compliance [adjustable rate mortgages] and sub- banking subsidiary. In addition, MetLife programs tied to residential mortgage prime loans … and has not experienced Bank, along with thirteen other banks, loan servicing, loss mitigation and fore- the high volume of foreclosures that many has entered into a consent decree with closure. larger services have experienced.” Met- the Office of the Comptroller of the Cur- MetLife said it has already implement- Life Bank services about 1% of the U.S. rency and the Federal Reserve to meet ed or is in the process of implementing home mortgage market.

APRIL 18 - 24, 2011 FINRA PROPOSES REGISTERING “OPERATIONS PERSONNEL” The Financial Industry Regulatory Author- ity (FINRA) has registered a proposed rule change with the Securities and Ex- change Commission (SEC) that creates a registration category for “operations personnel” and sets forth qualification exami- nations and continuing education requirements for those financial services employees “who are engaged in, responsible for or supervise certain [FINRA] member operations’ functions,” also known as “covered functions.” The proposed “covered functions” determine the categorization of “operations personnel” for those who perform them and include: (1) customer account data and document maintenance; (2) collection, maintenance and reinvest- ment (i.e., sweeps) and disbursement of funds; (3) receipt and delivery of securities and funds, account transfers; (4) bank, custody, depository and firm account management and reconciliation; (5) settlement, fail control, buys ins, segrega- tion, possession and control; (6) trade confirmation and account statements; (7) margin; (8) stock loan/securities lending; (9) prime brokerage (services to other broker-dealers and financial institutions); As an additional settlement, John FINRA found that in 2009 WFA deliv- (10) approval of pricing models used for Hancock reportedly agreed to restore the ered mutual fund prospectuses to about valuations; and another half-dozen major value of impacted policies from 1992 for- 934,000 customers from one to 153 days “covered functions.” ward and pay California 3% in com- later than the required three-business day For more on FINRA proposal pounded interest on the restored value of limit. In addition, between July 1, 2008 SR-FINRA-2011-013, click here. affected accounts dating from 1995 or and June 30, 2009, WFA failed to update

MAY 2 - 8, 2011 from the date of the policyowner’s death, 8.1% of its representatives’ registration CALIFORNIA CONTROLLER whichever was later. John Hancock re- applications (Forms U4) and 7.6% of its BLASTS JOHN HANCOCK sponded to the charges, saying it was representatives’ termination notices Boston, MA-based John Hancock Finan- “outraged by the unfounded allegations (Forms U5), FINRA said. cial Services has reportedly agreed to pay and characterizations.” The insurer said, Wells Fargo agreed to pay the $1 mil- more than $20 million in death and annui- “California has violated the very agree- lion fine and consented to an entry of ty benefits to settle charges brought by ment that it negotiated and signed with FINRA’s findings, but neither admitted nor California Controller John Chiang that it John Hancock,” Investmentnews.com denied the charges. failed to pay out these benefits when they reports. MAY 9 - 15, 2011 were due. Chiang alleged that instead of MAY 9 - 15, 2011 CEOS RANK 5 SOUTHERN STATES cross-checking dormant policy accounts FINRA FINES WELLS FARGO MOST BUSINESS FRIENDLY, with government databases recording ADVISORS $1 MILLION CA & NY THE LEAST FRIENDLY deaths, John Hancock turned dormant The Financial Industry Regulatory Author- Texas, North Carolina, Florida, Tennes- accounts into active accounts by using the ity (FINRA) has fined San Francisco, CA- see and Georgia rank, respectively, as policies’ cash reserves to pay premiums based, $1.2 trillion-asset Wells Fargo & the top five business-friendly states, ac- due. When a policy’s reserves were de- Co. unit St. Louis, MO-based Wells Fargo cording to Chief Executive magazine’s pleted, the insurer cancelled the policy. In Advisors (WFA) $1 million for failing to annual “Best and Worst States” survey. taking this route, the insurer allegedly deliver mutual fund prospectuses in a As for the worst states for business, Cali- failed to comply with California’s un- timely manner and for delays in reporting fornia, New York, Illinois, New Jersey and claimed property laws, which require com- its representatives’ registration applica- Michigan, respectively, earned that dis- panies to submit to the state accounts that tions and termination notices, and their tinction among the 550 CEOs surveyed. have been inactive for three years. associated arbitrations and complaints. San Jose, CA-based Cypress Semicon-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT LEGISLATION, REGULATION & LITIGATION - P AGE 115 ductor CEO T. J. Rodgers said, “ABC – Anywhere But California. It’s expensive, it’s hostile to business, and environmental regulations are more of a drag on business than protecting the environment.” Cypress Semiconductor’s California workforce has dropped to 600 from its peak of 1,500.

MAY 16 - 22, 2011 TREASURY ESTABLISHES FEDERAL ADVISORY Whether you are in California or Connecticut, as a COMMITTEE member of the Independent Community Bankers of ON INSURANCE America, you are part of a family which is committed The U.S. Treasury Department has established a Federal Advisory Committee YOU to the values that keep Main Streets across the on Insurance (FACI) and is soliciting ap- are building. country strong and prosperous. plications for committee membership. FACI will present advice and recommen- Thousands of banks like yours trust the ICBA Services Network to provide the innovative dations to the Federal Insurance Office products and services to make a difference to their bottom line. Customers are on the (FIO), which in turn (1) advises Treasury move; let us show you how ICBA solutions can capture, develop and retain the very best. on domestic and international insurance policy issues, (2) recommends whether an insurer should be regulated as a nonbank financial company and supervised by the Federal Reserve, (3) identifies insurance regulation gaps that could con- One Mission. Community Banks.® ICBA Bancard & TCM Bank | ICBA Securities tribute to systemic financial crises, (4) 1-866-THE-ICBA | www.icba.org ICBA Mortgage | ICBA Financial Services | ICBA Reinsurance authorizes resolutions of insurance companies regulated as nonbank financial companies, (5) develops international insurance policies, including trade agreements and helps determine whether state insurance laws and regulations are “clearance process.” That clearance pro- closed in those companies’ prospectus preempted by international policies, (6) cess includes fingerprinting, examination fee tables, (2) prominently disclose in the monitors the availability of affordable in- of income tax returns, and background same manner that this cash compensa- surance (except health insurance) to mi- checks by the Federal Bureau of Investi- tion may influence the broker-dealer’s nority and low-to-moderate income gation. Applications are due 15 days choice of what companies and products it households, (7) administers the Terrorism after notice of the formation of FACI is may recommend to investors, and (3) Risk Insurance Program, (8) collects in- printed in the Federal Register. provide in the same way a prominent surance industry data and issues reports reference to a web page or a toll-free on all types of insurance (except health MAY 16 - 22, 2011 telephone number where the investor insurance), and (9) performs other duties FINRA PROPOSES may obtain additional information regard- Treasury assigns to it. “SIGNIFICANT CHANGES” ing the cash compensation arrange- Treasury will select the 15 members of IN DISCLOSURE REQUIREMENTS ments. All the above information must be the FACI committee and envisions that The Financial Industry Regulatory Author- provided to customers prior to a new cus- these individuals will include state and ity (FINRA) has published in the Federal tomer’s investment purchase and to exist- tribal insurance regulators, insurance Register a proposal to adopt NASD Rule ing customers within 90 days of the pro- industry experts and “distinguished mem- 2830 as FINRA Rule 2341 and adopt posed rule’s adoption and effective imple- bers of the property and casualty insur- “significant changes” to that rule regard- mentation date. ance industry, the life insurance industry, ing “disclosure requirements for cash In addition to providing the above in- the reinsurance industry, the agent and compensation arrangements” among formation, each FINRA member firm must broker community, academics and con- securities brokerage companies. establish a web page or toll-free tele- sumers.” Again, health insurers are not Proposed FINRA Rule 2341 requires phone number that offers a narrative de- included in the mix. broker-dealers to (1) prominently disclose scription of the details regarding the re- Those interested in serving a two-year to customers on paper or electronically quired information detailed above. term, during which they will meet four that the member firm has received or To read proposed FINRA Rule 2341 and times each year in Washington, should agreed to receive cash compensation Amendment 1 to the Proposed Rule submit a letter of application, a full re- from investment companies in addition to change, click here. sume and an agreement to undergo a the sales charges and service fees dis-

MAY 23 - 29, 2011 the Constitution Center forged last year The Order arose after husband and FINRA LAUNCES ONLINE by the SEC. The OIG found that, among wife clients of the Coopers filed a com- DISCIPLINARY ACTIONS DATABASE other “missteps and misguided” actions, plaint with Illinois Secretary of State Se- The Financial Industry Regulatory Author- the SEC (1) used “groundless and unsup- curities Department in January 2008 ality (FINRA) has launched its searchable portable figures” to justify the expendi- leging the Coopers “through negligence FINRA Disciplinary Actions Online (DAO) ture, (2) grossly “overestimated the and lack of oversight as well as a breach database at www.finra.org. Here, users amount of space needed” (e.g., 400 of fiduciary duty, caused the complain- can access, view, print and download square feet per employee), and (3) pre- ants to suffer a $27,092.43 reduction in FINRA disciplinary action documents, pared a Justification and Approval for the life insurance death benefits.” The Secu- including Letters of Acceptance, Waivers lease one month after the SEC had al- rities Department took on the complaint, and Consent settlements, National Adju- ready signed the lease contract, then with the Secretary of State attesting: “The dicatory Council decisions and Hearing “backdated the Justification and Approv- Hearing Officer and the Secretary of Officer decisions and complaints. Access al.” State Securities Department have juris- can be achieved in a multiple of ways, The OIG found that responsibility for diction over the parties and the subject including by case number, document text, the “deeply flawed” actions originated matter dealt with herein.” document type, action date, individual with and were carried out by the SEC’s The Order describes each of the name, firm name, and Central Registra- Office of Administrative Services (OAS). Coopers as “an Investment Advisor regis- tion Depository (CDR) number. In addi- Here OAS Associate Executive Director tered in the State of Illinois” and “licensed tion, BrokerCheck now links to any specif- allegedly surrounded herself “with yes- to sell insurance in the State of Illinois.” ic pertinent information at the DAO. men, had grandiose plans” and was The complaint the Order addresses re-

MAY 23 - 29, 2011 “influenced by the upscale nature of the gards reduced life insurance benefits. In SEC PROPOSES NEW facility” with its “Jerusalem limestone describing the complaint, the Order refers CREDIT RATING RULES floors, marble walls, wood and metal pan- only to products “approved by the Illinois The U.S. Securities and Exchange Com- eling, decorative light and floor-to-celining Department of Insurance” and to life in- mission (SEC) has published Proposed glass walls facing the landscaped court- surance companies “AvivaUSA aka Rules designed to increase the transpar- yard.” Amerus Life Insurance Company, Aviva ency and improve the integrity of credit To deal with the situation, the OIG has Life & Annuity Company and EquiTrust ratings and National Recognized Statisti- recommended that a Chief Operating Life Insurance Company,” the provider of cal Rating Organizations (NRSROs). In Officer/Director be appointed to review the Illinois Insurance Department- short, the proposed rules require NRSOS and assess all matters under the purview approved indexed annuity product to: (1) report on internal controls, (2) pro- of the OAS and determine appropriate AvivaUSA EIA and Lincoln Benefit Life, tect against conflicts of interest, (3) estab- disciplinary and performance-based ac- the provider of the variable annuity prod- lish professional standards for credit ana- tions, including dismissal. In addition, the uct, that the Coopers’ clients partially lysts, (4) publish the methodology used to OIG recommended that the Office of surrendered in order to purchase the determine credit ratings, and (5) improve General Counsel, request a formal opin- Aviva indexed annuity. disclosures regarding the accuracy/ ion from the Comptroller General, regard- After the statement of these facts and adequacy of their credit ratings. In addi- ing whether or note the SEC violated the a listing of other indexed annuity transaction, due diligence providers (i.e., inde- Antideficiency Act by “failing to obligate tions handled for other clients by the pendent firms that review samples of as- appropriate funds for the Constitution Coopers, the Order focuses on the Coop- sets underlying asset-backed securities Center lease.” ers’ status as registered investment advi- and/or loan pools undergirding mortgage- To read the OIG report on the SEC real sors, refers to “Section 2.1 of the Act,” backed securities) must disclose their due estate deal, click here. defines “Security” based on Section 2.1, diligence reports. Comments on the pro- lists requirements of various other sec- JUNE 20 - 26, 2011 tions of “the Act,” and concludes that the posed rules are due 60 days after their INDEXED ANNUITIES Coopers “when acting as investment ad- publication in the Federal Register. AMBIGUOUSLY CATEGORIZED AS visor representatives … have violated To read the rules, click here. SECURITIES IN ILLINOIS ORDER Sections 12.A, F, G, H, I and J of the Act A May 24, 2011, Order by Illinois Secre- JUNE 6 - 12, 2011 … [and] are subject to suspensions or tary of State Jesse White revoking the INSPECTOR GENERAL FINDS revocations pursuant to Section 8.E.1(b), Investment Advisor Representative regis- SEC USED “GROUNDLESS (f), (g) and (m) of the Act.” The Order trations of Thomas and Susan Cooper, AND UNSUPPORTABLE FIGURES” describes the indexed annuity transac- prohibiting each from offering or selling IN LEASE DEAL tions as “investment plans” and con- securities in Illinois and fining both The Securities and Exchange Commis- cludes, “Each of the above referenced $10,000, has been appealed to the Cir- sion (SEC) “conducted a deeply flawed investment plans is an investment con- cuit Court for the Seventh Judicial Circuit and unsound analysis to justify the need tract and therefore is a security as the in Illinois for a stay and Administrative for the SEC to lease 900,000 square feet term is defined pursuant to Section 2.1 of Review. Both the order and Administra- of space” about 2 miles from its current the Act.” In other words, the order cate- tive Review are important relative to the headquarters, the SEC Office of Inspector gorized indexed annuity transactions as classification of indexed annuities as se- General (OIG) has determined after its security transactions. investigation of a $556,811,589 deal for curities or insurance products.

In appealing the Order, Thomas Kelty, ing that dual licensing is required to sell JUNE 27 - JULY 4, 2011 attorney for the Coopers, said, “The find- variable annuities in Iowa, where these 7% OF HEALTH INSURANCE AGENTS ings and conclusions of law in the Order products are classified as insurance prod- SUPPORT OBAMACARE are not supported by the record,” and “the ucts, in contrast to federal law, which Only 7% of health insurance agents sup- use of the term ‘investment plans’ in the classifies them as securities. port the health insurance legislation Order is vague and undefined.” The Sec- To access the very detailed infor- passed by Congress and signed into law retary of State Securities Department has mation contained in Insurance Bulletin 11 by President Obama last year, according 35 days to respond to the complaint for -4 or Securities Bulletin 11-S-1, click on to the 2011 Health Insurance Market Administrative Review. the preferred source. Study. Since the legislation was passed, To read the entire Order, click here.

JUNE 20 - 26, 2011 COMMENTS SOUGHT ON FINRA’S AMENDED PROPOSED RULE TO REGISTER OPERATIONS PERSONNEL IT’S AMAZING HOW MANY The Securities and Exchange Commission (SEC) has published for comment the Fi- nancial Industry Regulatory Authority’s PEOPLE CHANGE (FINRA) amended proposed Rule 1230(b) (6). The original proposed rule was pub- THEIR VIEWS lished in the Federal Register in March and received 17 comments in opposition and none in support. The current proposed ABOUT BOLI rule reflects the minor changes FINRA made in response to those comments. AFTER SPEAKING WITH MEYER-CHATFIELD Proposed FINRA Rule 1230(b)(6) establishes a registration category and qualification exam requirements for operations per- Many banks think that it makes no difference who they turn to for sonnel with “covered” responsibilities, and BOLI and executive compensation services. Too bad. requires these personnel to meet continu- There are differences—differences that matter. ing education requirements as set forth in proposed FINRA Rule 1250 (currently to-be MEYER-CHATFIELD OFFERS ADDITIONAL BENEFITS THAT CAN -amended NASD Rule 1120). The SEC is MAKE A BIG DIFFERENCE FOR YOUR BANK. soliciting comments on the amended proposed FINRA Rule 1230(b)(6) and plans to Meyer‐Chatfield offers a unique guarantee, as well as other approve it “on an accelerated basis.” differentiated services that help our clients maximize the benefits To read the proposed rule, click here. of their BOLI and overall executive compensation programs. If you

JUNE 27 - JULY 4, 2011 are one of the many banks looking for new options because IOWA ISSUES BULLETINS ON Clark Consulting exited the market, you owe it to yourself to talk PERMISSIBLE & PROHIBITED to Meyer‐Chatfield. INSURANCE & SECURITIES SALES Iowa Insurance Commissioner Susan E. Talk to us and you’ll quickly find out why we now are the industry Voss has issued two bulletins designed to leader. Discover how we help clients develop and implement the clarify the permissible and prohibited ac- most effective BOLI and executive compensation programs. tivities of individuals licensed to sell only insurance and individuals licensed to sell Contact Chris Pezalla at: [email protected] or only securities in Iowa. The bulletins also 800.444.BOLI for more information. detail what limited and defined insurance- only advice unlicensed individuals or entities are permitted to give, and both set out the permissible activities, responsibilities and risks faced by individuals both licensed to sell insurance and licensed face as investment advisors or investment advisor representatives. Insurance Bulletin 11-4 and Securities 261 Old York Road, Suite 604 · Jenkintown, PA 19046 · 215.884.5273 Bulletin 11-S-1 contain identical infor- www.meyerchatfield.com mation on both matters, with both clarify-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT LEGISLATION, REGULATION & LITIGATION - P AGE 118 agents say more of their clients believe they cannot afford health insurance; rates have increased; the underwriting process has become increasingly difficult; clients are hesitant to purchase health insurance because they are uncertain about what health care reform might offer them; and commissions tied to health insurance sales have decreased substantially due to the medical loss ratio mandate in the healthcare bill. The results of the 2011 Health Insur- ance Market Study were published in the June issue of Agents’ Sales Journal. Commenting on the results, magazine editor Andy Stonehouse said, “As the fallout from the Obama health care initiatives continues, agents say they are being kept on their toes.” He added, “The continuing drop in commissions is leading many agents to consider new products.”

JULY 5 - 10, 2011 GAO RECOMMENDS MORE ANNUITIES IN DEFINED CONTRIBUTION RETIREMENT PLANS Most U.S. retirees rely primarily on Social Security for their retirement income, and, while most retirees with a defined benefit (DB) pension receive or defer those lifetime benefits at retirement, only 6% of those with defined contribution (DC) plans purchase an annuity at retirement. As a result, 9% of Americans aged 65 or older live below the poverty line, according to a recent Government Accountability Office (GAO) study delivered to the U.S. Senate. The GAO found, however, that financial experts recommend that retirees (1) systematically draw down their savings and convert a portion of those savings into an income annuity, (2) choose an annuity instead of a lump sum for an employer- sponsored DB pension payment, (3) retire no earlier than age 66, and (4) continue to work and save past retirement age. To deal with the issue of sub-par retirement planning, the GAO recommended to the U.S. Senate Special Committee on Aging that the government encourage benefit plan sponsors to (1) offer annuities in DC plans, (2) publish information on financial risks and choices individuals face in retirement, and (3) include estimates of lifetime annuity income on benefit statements. The GAO also recommended that the government publish information that would encourage financial literacy. For more on the GAO report, click here.

quired) in 82 of 88 Ohio counties (44 counties were required). With the signature requirement met, the proposed Constitutional Amend- ment goes to the Ohio Ballot Board MICHAEL WHITE - SECURITIES AMERICA on August 3 for inclusion on the upcoming November ballot. REPORT AUGUST 8 - 14, 2011 SEC APPROVES FINRA RULE Community Bank REGISTERING CERTAIN OPERATIONS PERSONNEL Investment Programs The U.S. Securities and Exchange Commission (SEC) has approved the Financial Institution Regulatory Authori- Measures and benchmarks community banks’ performance ty’s (FINRA’s) proposal to establish a in generating securities brokerage and annuity fee income. registration category and qualification exam and continuing education require- Uses innovative benchmarking ratios that give insight into ments for certain operations personnel community bank investment programs, including: engaged in “covered” functions, including record-keeping, trade confirmation, trans- · Program Productivity action settlement, internal auditing and · Program Density securities lending operations. The Rule takes effect October 17, 2011, by which · Program Contribution time FINRA member firms “must deter- · Program Concentration mine, based on a person’s activities and · Program Penetration responsibilities, whether such person would be a covered person.” Those FINRA expects to be named as covered www.bankinsurance.com/products/cmmty-bk-inv-rpt persons include: (1) senior management with direct responsibility over covered functions, (2) supervisors, managers or others responsible for approving covered JULY 11 - 17, 2011 based Prudential Bank & Trust FSB; Las functions, and (3) persons authorized to IRS CHANGES RULES FOR Vegas, NV-based USAA Savings Bank; commit member firm capital to covered TAX-FREE ANNUITY EXCHANGES Bloomington, IL-based State Farm Bank functions or commit a member firm to a The U.S. Internal Revenue Service (IRS) FSB; Columbus, OH-based Nationwide contract or agreement regarding covered has changed the rules regarding the tax Bank; Northbrook, IL-based Allstate functions. To access Regulatory Notice treatment of certain tax-free exchanges of Bank; Northbrook, IL-based Northbrook 11-22, click here. annuity contracts, annulling Revenue Bank & Trust; and Bridgewater, NJ-based Procedure 2008-24, 2008-1 C.B. 684 and MetLife Bank. Until Hartford Financial AUGUST 15 - 21, 2011 replacing it with Revenue Procedure 2011 Services Group completes its sale of APPEALS COURT RULES -38, effective for transfers completed on Sanford, FL-based Federal Trust Bank, HEALTHCARE MANDATE or after October 24, 2011. To access the that bank also falls under the new rule, UNCONSTITUTIONAL IRS rule change, click here. NUOnline reports. The 11th U.S. Circuit Court of Appeals in JULY 18 - 24, 2011 Atlanta ruled last week that the individual AUGUST 1 - 7, 2011 mandate in the 2010 healthcare law re- INSURER-OWNED BANKS OHIOANS TO VOTE ON quiring Americans to purchase health HIT BY DEBIT CARD RULE HEALTHCARE AMENDMENT insurance or pay a penalty is unconstitu- Thrifts and banks owned by insurance TO THEIR CONSTITUTION tional. The Court wrote: “This economic companies will be hit by the new Dodd- Ohio voters will vote “yes” or “no” in No- mandate represents a wholly novel and Frank-generated debit card rule that ap- vember on an amendment to the Ohio potentially unbounded assertion of Con- plies to financial institutions and their affil- Constitution which provides that no feder- gressional authority: the ability to compel iates with more than $10 billion in assets. al, state or local law or rule can require Americans to purchase an expensive According to the final rule, these banks an Ohio resident to own health insurance health insurance product they have elect- may charge a maximum debit card trans- or require an Ohio employer to provide ed not to buy, and to make them re- action interchange fee of 21 cents health insurance. purchase that insurance product every plus .05% of the transaction value. In order to qualify the amendment for month for their entire lives.” The mandate Those insurer-owned banks affected the November ballot, Health Care Free- “exceeds Congress’s enumerated com- include San Antonio, TX-based USAA dom Amendment supporters gathered merce power,” the Court said. “What Federal Savings Bank; Hartford, CT- 426,998 signatures (385,245 were re-

Congress cannot do under the Commerce cious transfers of funds between unrelated ers and the market while Marsh and its Clause,” the Court wrote, “is mandate that accounts. Because of these supervisory employees pocketed the increased fees individuals enter into contracts with pri- lapses, registered sales assistant Tamara and kickbacks.” Spitzer further wrote, vate insurance companies for the pur- Moon was allegedly able to misappropriate “many employees of Marsh” have been chase of an expensive product from the $749,978 from 22 elderly, ill and vulnera- convicted and sentenced to jail terms.” time they are born until the time they die.” ble customers over a period of eight years. In fact, Gilman’s 2008 conviction was thrown out on new evidence in July 2010, AUGUST 15 - 21, 2011 AUGUST 22 - 28, 2011 and the case against him and others was CONGRESS QUESTIONS IRS PUBLISHES INTERIM GUIDANCE dismissed in January 2011. According to INCREASED LTC INSURANCE COSTS ON LTC-TIED ANNUITY & the suit, “While Mr. Spitzer’s statements Taxpayer dollars, especially those held in LIFE CONTRACTS do not refer to Mr. Gilman by name, Mr. federal and state Medicaid programs, The U.S. Internal Revenue Service has Gilman is readily identifiable as the sub- financed 94% of the $253 billion in long- published for comment Notice 2011-68. ject of the defamatory comments.” term nursing home and assisted living The Notice provides interim guidance Gilman is seeking $30 million in puni- care costs paid out in 2009, according to regarding taxation issues related to annu- tive damages, $20 million in general dam- the U.S. Government Accountability Of- ity and life insurance contracts with long- ages and $10 million in compensatory fice (GAO). Private insurers paid out 6%, term care insurance features. Comments damages, insurancejournal.com reports. and among those covered by private long on the guidance are due on or before -term care (LTC) insurance were federal November 9, 2011. SEPTEMBER 5 - 11, 2011 employees. When John Hancock raised To access Notice 201-68, click here. U.S. HEALTH INSURERS CUT LTC renewal premiums 25% for 66% BROKER COMMISSIONS TO (146,415) of the 268,204 federal employ- AUGUST 29, 2011 - SEPTEMBER 4, 2011 MEET MLR REQUIREMENTS FINRA CLARIFIES SOCIAL MEDIA ees participating in the Federal Long U.S. health insurers are “reducing bro- COMMUNICATION GUIDELINES Term Care Insurance Program (FLTCIP), kers’ commissions and making adjust- The Financial Institutions Regulatory Au- Congress charged the GAO with finding ments to premiums, as well as making thority (FINRA) has published Regulatory out why. changes to other business practices” in Notice 11-39 to clarify guidance regarding The GAO found that John Hancock order to meet the minimum medical loss FINRA rules governing communications had learned after seven previous years ratio (MLR) standards required by law with the public through social media sites. underwriting the FLTCIP that it needed to under the U.S. healthcare legislation The Notice reminds firms of the record change its actuarial assumptions to ac- passed and signed into law in 2010, the keeping, suitability, supervision and con- count for the facts that enrollees were U.S. Government Accountability Office tent requirements for appropriate and to- living longer and submitting more claims. (GAO) found in its recently completed be-saved communications published in In addition, the GAO learned that the Private Health Insurance study. The leg- Notice 10-06 and comments on the appli- 66% of FLTCIP participants who received islation requires that large group health cation of these rules to new technologies. the 25% premium increases had one insurers achieve minimum MLRs of 85% Basically, “the content of an electronic thing in common. All had selected the and that health insurers that cover small communication [as having to do with same 5% automatic compound inflation group and individuals meet minimum business] determines whether it must be option that increased their benefits each MLRs of 80%. Health insurers that do not preserved” for three years no matter what year by 5% without a yearly premium meet these standards must pay rebates the technology is used. increase. The 25% increase reflected the to those enrolled in their health insurance To access FINRA Regulatory Notice 11- inflation option, revised actuarial assump- plans. MLRs are calculated by (1) divid- 39, click here. tions and the fact that John Hancock’s ing medical care claims and expenses for second seven-year contract with the AUGUST 29, 2011 - SEPTEMBER 4, 2011 activities that improve healthcare quality FLTCIP began in 2009. MARSH AND MCLENNAN EXEC SUES by (2) premiums paid minus taxes, licens- For more on the GAO study, click here. ELIOT SPITZER FOR DEFAMATION ing and regulatory fees. Former Marsh and McLennan Compa- To read the GAO report, click here. AUGUST 15 - 21, 2011 nies’ Executive Marketing Director William FINRA FINES Gilman has filed a libel suit in U.S. District SEPTEMBER 5 - 11, 2011 CITIGROUP GLOBAL PARTNERS NEW YORK AGENTS Court, Southern District of New York FOR SUPERVISION LAPSES APPEAL REGULATION 194 against former New York Attorney Gen- Citigroup Global Markets (CGM) has been The Independent Insurance Agents and eral and Governor Eliot Spitzer and Slate fined $500,000 by the Financial Industry Brokers of New York (IIABNY) and the Group, parent of Slate.com. The suit al- Regulatory Authority (FINRA) for failing to Council of Insurance Brokers of Greater leges Spitzer acted with “actual malice” supervise a former registered sales assis- New York (CIBNY) have filed an appeal and defamed Gilman when he wrote in a tant at the firm’s branch office in Palo Alto, in New York State Supreme Court Appel- Slate.com column entitled “They Still CA. FINRA found that CGM failed to im- late Division, Third Department in Albany, Don’t Get It” that “Marsh’s behavior [at a plement reasonable systems and controls contesting a November 2010 trial court time when Gilman was intimately in- in supervising and reviewing accounts and ruling upholding New York State Insur- volved] was a blatant abuse of law and failed to detect or investigate conflicting ance Regulation 194. The regulation market power: price fixing, bid rigging and information in new accounts and suspi- requires insurance agents and brokers to kickbacks designed to harm their custom-

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT LEGISLATION, REGULATION & LITIGATION - P AGE 121 tell their clients how insurance companies SEPTEMBER 12 - 18, 2011 SEPTEMBER 19 - 25, 2011 pay them, and, if clients have questions CANCEL FINRA EXAMS U.S. DISTRICT COURT JUDGE IN about an agent’s compensation, the AND SESSIONS EARLY PENNSYLVANIA RULES INDIVIDUAL agent must disclose details about the OR PAY A FEE MANDATE UNCONSTITUTIONAL policy to be sold and other possible poli- The Financial Institution Regulatory Au- The individual mandate in the healthcare cies the client could purchase, comparing thority (FINRA) has filed notice that as of legislation signed into law last year by and contrasting the commission the agent September 1, 2011, individuals who can- President Obama violates the Commerce will receive, if the customer were to pur- cel or reschedule a qualification examina- Clause of the U.S. Constitution and is chase each of these other policies. tion or Regulatory Element Continuing therefore unconstitutional, U.S. District The IIABNY and CIBNY argue that, Education session up to and including 10 Judge Christopher Conner ruled in Harris- under law, the New York Insurance Depart- days prior to the appointment date will be burg, PA last week. Judge Conner wrote: ment is not empowered to “make these charged a fee. Those who cancel an “The federal government is one of enu- demands” and that Regulation 194 “is arbi- exam or session 3-10 days prior to its merated powers, and Congress’ efforts … trary and imposes large, needless compli- scheduled time will be charged a fee must fit squarely within the boundaries of ance costs on producers.” IIABNY Chair- equal to 50% of the cost of the exam or those powers.” The individual mandate man Christopher Brassard said, “We still session. Those who cancel up to two or “minimum coverage provision … can- believe that the Insurance Department ex- days before the exam or session or who not withstand constitutional scrutiny,” ceeded its authority by issuing this burden- arrive late to an exam or session will con- Conner wrote. U.S. Justice Department some, unnecessary regulation … [which] tinue to be charged a fee equal to the spokeswoman Tracy Schmaler disagreed places unprecedented obligations on law- total cost of what was scheduled. with the court’s decision and said, “We abiding insurance producers and provides To read FINRA Regulatory Notice 11-36, believe … that the law is constitutional.” no additional benefit to consumers.” click here. To read the U.S. District Court’s entire decision in this case, click here.

OCTOBER 3 - 9, 2011 SOUND ACTUARIAL PRACTICES, NOT GOVERNMENT POLICIES, PRICE RISKS APPROPRIATELY Government intervention in insurance markets should be kept to a minimum, according to Lloyds’ report Managing Knowledge the Escalating Risks of Natural Ca- tastrophes in the United States. While the report focuses on the costs of economic losses tied to natural disasters, which in the is Power. first half of 2011 totaled $27 billion in the U.S., the principles stated apply to insurance in general. Get yours here. Allowing a healthy private insurance market to price risk appropriate- The first research report on ly is fundamental, the study asserts. Lloyds’ BOLI holdings based on North American Director Sean McGovern noted, authentic industry-wide data. “Insurance is not sustainable if it is offered at rates below what is required by sound, risk-based www.bankinsurance.com/products/boli-hr actuarial practices. When insurance is not risk-based, the wrong price signals are sent, and there is little or no incentive to mitigate risk.”

OCTOBER 3 - 9, 2011 B-OF-A’S MERRILL CENSURED AND FINED IN MONEY LAUNDERING FIASCO Charlotte, NC-based, $2.26 trillion-asset Bank of America subsidiary New York

City-based Merrill Lynch has been censured and fined $400,000 by the Finan- cial Industry Regulatory Authority (FINRA). FINRA found that Merrill failed to enforce anti-money laundering rules when it accepted third-party checks for deposit into a Merrill Lynch cash management brokerage account, when those Get the reports checks did not name the brokerage account holder as the intended recipient. others are calling As a result, the cash management account holder was able to use his Merrill account to launder $9 million in funds misappropriated from his own customers at another brokerage house. ‘Outstanding’ FINRA found that Merrill failed to follow its own deposit acceptance procedures and lacked adequate deposit monitoring procedures to detect the unlawful money laundering. Merrill neither admit- ‘Second ted to nor denied the findings but consented to the sanctions and the entry of to none.’ the findings. OCTOBER 3 - 9, 2011 RAYMOND JAMES FINED AND ORDERED TO REPAY ‘Finally … OVERCHARGED CUSTOMERS St. Petersburg, FL-based Raymond facts James & Associates (RJA) and Raymond James Financial Services (RJFS) have not projections. been fined, respectively, $225,000 and ’ $200,000, and ordered to pay $1.69 million in restitution to more than 15,500 of their investors, whom FINRA found had www.bankinsurance.com/products been charged unfair and unreasonable commissions on over 27,000 securities transactions made between January 1, 2006, and October 31, 2010. Additional- The Michael White - Prudential ly, FINRA has required RJA and RJFS to revise their automated commission Bank Insurance Fee Income Report schedules to conform with the Fair Prices and Commissions Rule and recalculate and repay any additional overcharges their investors may have paid between The Michael White - ABIA November 1, 2010, and the date the companies put the revised Fair Prices in Bank Annuity Fee Income Report place.

OCTOBER 3 - 9, 2011 RBC CAPITAL CENSURED, FINED AND ORDERED TO REIMBURSE SCHOOL DISTRICTS vestments to five Wisconsin school dis- to trusts created by the five school dis- IN CDO DEAL tricts and inadequately disclosed to the tricts $200 million in credit-linked notes Toronto, Canada-based RBC Capital districts the risks associated with those tied to the performance of synthetic collat- Markets has agreed to pay the Security investments. Additionally, RBC Capital eralized debt obligations (CDOs). In or- and Exchange Commission (SEC), a $22 agreed to pay $30.4 million to reimburse der to purchase the notes, the districts million penalty, $6.6 million disgorgement the districts in varying and appropriate contributed $37.5 million in district funds and $1.8 million in prejudgment interest to amounts through a Fair Fund. and borrowed the rest ($162.5 million) settle charges that it sold unsuitable in- The SEC found that RBC Capital sold from the trusts. However, according to

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the SEC, “the school districts lacked suffi- identified by Social Security numbers into exams conducted in the first half of 2011 cient knowledge and sophistication to Merrill’s supervisory system. As a result, by 45 state and provincial securities ex- appreciate the nature of such invest- one employee opened an account as B & aminers that uncovered 3,543 deficien- ments,” and RBC Capital “failed to ade- J Partnership and for 10 months kept that cies in 13 compliance areas. quately explain the risks associated with account out of the supervisory system Registration, books and records, un- the investments.” and used it to operate a Ponzi scheme. ethical business practices, supervision The SEC censured RBC Capital and FINRA additionally found that 40,000 and advertising ranked as the top five directed the company to cease and desist other employee accounts briefly went compliance areas with the greatest num- from violating Sections 17(a)(2) and 17(a) unreported and unsupervised during that ber deficiencies, but all other compliance (3) of the Securities Act of 1933, which time. FINRA Chief of Enforcement Brad areas showed deficiencies as well. prohibit companies from engaging in Bennet said, “Firms must ensure their To facilitate compliance, NASAA de- fraud and deceit and obtaining money supervisory systems are designed to veloped a bullet-point checklist that re- through untrue statements of material properly monitor employee accounts for minds investment advisors to, among facts. potential misconduct.” other actions, (1) review and revise Form Merrill Lynch reimbursed all those who ADV and disclosure brochure annually to OCTOBER 10 - 16, 2011 invested in what turned out to be the reflect current and accurate information, B-OF-A’S MERRILL LYNCH Ponzi scheme, but neither admitted nor (2) review and update all contracts, (3) FINED $1 MILLION FOR FAILURE TO denied FINRA’s charges and consented prepare and maintain all required records, DETECT IN-HOUSE PONZI SCHEME to the entry of FINRA’s findings. including financial records, and to com- Charlotte, NC-based, $2.26 trillion-asset plete eleven more bulleted tasks. Bank of America unit New York City- OCTOBER 10 - 16, 2011 To access the entire list and NASAA’s based Merrill Lynch has been fined $1 NASAA RECOMMENDS 2011 Coordinated IA Examination Report, million for supervisory failures that al- BEST PRACTICES FOR click here. lowed one of its registered representa- INVESTMENT ADVISORS tives to use a Merrill Lynch account to The North American Securities Admin- OCTOBER 24 - 30, 2011 operate a Ponzi scheme. The Financial istration Association (NASAA) has pub- FEDERAL INSURANCE OFFICE Industry Regulatory Authority (FINRA) lished recommended best practices for REQUESTS COMMENTS ON found that between January 2006 and investment advisors that manage under IMPROVING REGULATION June 2010, Merrill Lynch relied on em- $100 million in assets. The best practic- The Federal Insurance Office (FIO) is ployees to manually input accounts not es are based on the results of oversight requesting comments on “How to Improve

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 BANK INSURANCE & INVESTMENT LEGISLATION, REGULATION & LITIGATION - P AGE 124 the System of Insurance Regulation in the United States.” Specifically, the FIO is requesting comments on (1) systemic risk regulation, (2) capital standards, (3) con- The most comprehensive sumer protection, including state regulation and access to affordable products for source of institution underserved communities, (4) national uniformity of state regulation and licens- rankings and industry ing, (5) consolidated regulation of insurance companies and their affiliates, (6) data on banks and coordinated international insurance regulation, (7) costs and benefits of federal bank holding company regulation of all insurance lines except health, (8) federal regulation of certain annuity programs insurance lines and state regulation of others, (9) eliminating or minimizing regulatory arbitrage through federal regula- in the nation. tion, (10) impact of international regulations on federal regulation, (11) potential SPONSORED B Y for consumer protection under federal regulation, and (12) federal resolution authority over insurance companies and Michael White-ABIA its impact on (a) state guaranty funds, (b) policyholder claims versus unsecured American Bankers Bank Annuity creditor claims, (c) life insurers having Insurance Association special separate accounts for assets and an ABA subsidiary Fee Income Report liabilities, and (d) international competi- tiveness. www.bankinsurance.com/products/annuity-fir To read the FIO’s notice printed in the October 27, 2011 issue of the Federal Register, click here. NOVEMBER 1 - 6, 2011 and were the third example of altered OCTOBER 24 - 30, 2011 SEC ORDERS FINRA TO CEASE documents that the Kansas City District STATE SECURITIES DOCUMENT TAMPERING office had presented to the Securities and REGULATORS’ The U.S. Securities and Exchange Com- Exchange Commission over an 8-year ENFORCEMENT ACTIONS mission (SEC) has ordered the Financial period. FINRA agreed to the orders. JUMP 51% Industry Regulatory Authority (FINRA) to To read the entire order, click here. State securities regulators conducted hire an independent consultant and take more than 7,000 investigations in 2010 NOVEMBER 14 - 20, 2011 all necessary measures to improve its and took nearly 3,500 enforcement ac- FINRA FINES MORGAN STANLEY policies, procedures and training for pro- tions, 1,133 of which were criminal, in- $1 MILLION ducing documents during SEC inspec- cluding 900 involving unregistered securi- The Financial Industry Regulatory Author- tions. At the same time, the Securities ties and 800 involving unregistered firms ity (FINRA) has fined New York City- and Exchange Commission ordered or individuals, according to the North based Morgan Stanley & Co. and Morgan FINRA to cease and desist from altering American Securities Administrators Asso- Stanley Smith Barney $1 million and or- documents for SEC inspection and violat- ciation (NASAA). As a result of these dered the company to pay $371,000 in ing Section 17(a) and Rule 17a-1 of the actions, which were up 51% over those restitution and interest to customers who Exchange Act. reported in 2009, states levied over $170 paid excessive markups and markdowns The Securities and Exchange Com- million in fines or penalties; withdrew, in corporate and municipal bond transac- mission action arose after FINRA report- denied, revoked or suspended 3,242 se- tions. FINRA further ordered Morgan ed to the SEC that, on August 7, 2008, curities licenses; ordered more than $14 Stanley to revise its written supervisory the Director of FINRA’s Kansas City Dis- billion to be paid in investor restitution procedures used to review markups and trict office altered the minutes of staff and sentenced violators to a combined markdowns in fixed income transactions. meetings that occurred on August 28, 1,100 years in jail. FINRA Executive Vice President Thomas 2006, September 22, 2006, and January To access the NASAAA 2010 Gira said, “Morgan Stanley clearly violat- 31, 2007. The alterations included delet- Enforcement Report, click here. ed fair pricing standards, and FINRA will ing and editing information and substitut- continue to require firms that violate such ing the Director’s signature for that of the standards to make their customers author of the minutes. The violations whole.” were reported to FINRA anonymously

NOVEMBER 14 - 20, 2011 NOVEMBER 21 - 27, 2011 the complaint are true, this is a very good SEC FILED RECORD NUMBER OF FINRA PUBLISHES deal for Citigroup.” He added, however, ENFORCEMENT ACTIONS REGULATORY NOTICE REGARDING that from the limited information provided IN FISCAL 2011 CERTIFICATIONS & DESIGNATIONS it was difficult to discern what the truth The U.S. Securities and Exchange Com- The Financial Industry Regulatory Author- was. Rakoff wrote, the SEC “has a duty, mission (SEC) filed a record 735 enforce- ity (FINRA) has published Regulatory inherent in its statutory mission, to see ment actions and levied $2.8 billion in Notice 11-52, reminding firms of their that the truth emerges; and if it fails to do penalties and disgorgement in the fiscal supervisory obligations regarding the use so, this Court must not, in the name of year ending September 30, 2011. Fifteen of certifications and designations that deference or convenience, grant judicial actions involving 17 individuals were re- imply expertise in advising senior inves- enforcement to the agency’s contrivanc- lated to the financial crisis; another 57 tors. The Notice includes the results of a es.” Rakoff ordered that the matter be actions involved insider trading. Eighty- survey of current practices and highlights tried and set July 16, 2012 as the date for nine violations involved financial fraud sound practices which FINRA encour- the trial to begin, Reuters reports. and issuer disclosure, and actions for ages firms to adopt to strengthen their violations ranging from making mislead- supervisory procedures. FINRA empha- DECEMBER 5 - 11, 2011 ing statements to charging undisclosed sizes that “the protection of vulnerable SEC & FINRA ISSUE NOTICE trading fees were brought against 146 customers, including senior investors, ON BROKER-DEALER investment advisors and 112 broker- continues to be a high regulatory priority.” BRANCH INSPECTIONS dealers. To access Regulatory Notice 11-52, The U.S. Securities and Exchange Com- click here. mission (SEC) and the Financial Industry NOVEMBER 21 - 27, 2011 Regulatory Authority (FINRA) have is- FINRA FINES CHASE INVESTMENT NOVEMBER 21 - 27, 2011 sued a Risk Alert and Regulatory Notice SERVICES $1.7 MILLION & ORDERS U.S. SUPREME COURT 11 - 54 in order to provide guidance on $1.9 MILLION REIMBURSEMENT AGREES TO HEAR effective policies and procedures for bro- The Financial Industry Regulatory Author- HEALTHCARE LAW ARGUMENTS ker-dealer branch inspections. The No- ity (FINRA) has fined Chicago, IL-based The U.S. Supreme Court has agreed to tice reminds firms of their supervisory Chase Investment Services (CIS), a unit hear oral arguments regarding the consti- requirements, notes common branch in- of JPMorgan Chase, $1.7 million and tutionality of U.S. healthcare legislation spection and oversight deficiencies, and ordered the company to reimburse cus- signed into law in 2010 by President outlines practices that characterize effec- tomers $1.9 million-tied to the sale of Barack Obama. Twenty-six states have tive branch office supervision. To access unsuitable unit investment trusts (UITs) been upheld in District Court in their posi- Regulatory Notice 11-54, click here. and floating rate loan funds. tion that the entire law should be struck According to FINRA, CIS failed to pro- down on the basis that the “inseparable” DECEMBER 12 - 18, 2011 vide its brokers with sufficient training and individual mandate requiring all Ameri- SEC CRACKS DOWN ON guidance regarding the risks and suitabil- cans to buy health insurance or pay a RESUME-ENHANCING ADVISORS ity of these products, and failed to proper- penalty violates the Commerce Clause of The U.S. Securities and Exchange Com- ly supervise their brokers’ sales practices. the U.S. Constitution. The Obama Admin- mission (SEC) Division of Enforcement Because of these lapses, CIS brokers istration argues that the individual man- has created an Asset Management Spe- sold to unsophisticated investors with little date and the entire law are constitutional. cialized Unit to uncover and discipline or no risk tolerance (1) UITs containing The Supreme Court is expected to hear investment advisors who lie about their high-yield or junk bonds, and (2) floating arguments pro and con in March 2012. credentials, conceal their association with rate loans containing loans of below- past failed business ventures, or inflate investment-grade quality. The UIT sales DECEMBER 5 - 11, 2011 their assets under management. FEDERAL JUDGE REJECTS resulted in $1.4 million in losses, and the The Asset Management Unit uses SEC-CITIGROUP SETTLEMENT floating rate loan sales produced losses data and risk-based analytics to identify & ORDERS TRIAL of about $500,000, FINRA found. FINRA signs of fraud, including poor-performing Manhattan Federal Court Judge Jed ordered CIS to improve its training and mutual funds with high fees and subadvi- Rakoff has rejected the settlement guidance regarding the products involved sors. Then, the unit reviews the registra- agreed to between the Securities and and to improve its supervision of sales tion documents of what it determines to Exchange Commission (SEC) and New practices. FINRA Chief of Enforcement be “high-risk investment advisors” and York City-based Citigroup over mortgage- Brad Bennettt said, “It is incumbent upon deals with those who have been dishon- linked collateralized debt obligations firms to properly train and provide guid- est. SEC Division of Enforcement Direc- (CDOs). According to the settlement, ance to their brokers about the products tor Robert Khuzami said these advisors Citigroup agreed to disgorge $160 million that they sell, and supervise the sales “might well be the same persons who in alleged ill-gotten gains and $30 million practices of their brokers.” outright steal your money when the mar- in interest tied to those gains and pay an kets turn against them.” additional $95 million fine for its role in For more on the actions of the SEC’s selling a client $1 billion in CDOs and Division of Enforcement, click here to then betting against the transaction. read Khuzami’s recent speech to the Judge Rakoff said, “If the allegations of Consumer Federation of America (CFA).

FOR MORE INFORMATION ON MICHAEL WHITE ASSOCIATES, LLC, PLEASE VISIT WWW.BANKINSURANCE.COM OR CALL 610 -254-0440. 2 0 1 1 Y E A R I N R E V I E W VOLUME XII, ISSUE 13 P AGE 126

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