A P R I L 2 0 1 4 V O L U M E X V I S S U E 4 Michael White Associates is pleased to distribute BankInsurance.com News, a monthly publication that distills 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. Community Bank Investment Program Earnings and Bank-Owned Life Insurance Assets CLIMB CLIMBCLIMB CLIMB CLIMB CLIMBCLIMB toto RECORDRECORD HEIGHTSHEIGHTS VOLUME XV, ISSUE 4, APRIL 2014 PAGE 2 BANNER BANK PARTNERS WITH COLDSTREAM CAPITAL MANAGEMENT Walla Walla, WA-based, $4.39 billion- asset Banner Corporation subsidiary of all U.S. households say Banner Bank has agreed to partner with Bellevue, WA-based Coldstream Capital 1/2 they Management to offer comprehensive need more wealth management services to its high net worth clients. Banner Bank President and CEO Mark Grescovich said, life insurance . "Banner's high net worth clients who are referred to Coldstream will have a dedicated relationship management team who will proactively address the complicated issues that come with having wealth." He added, "We are confident our clients will feel well-served when they work with Banner and Coldstream." Coldstream specializes in 401k plan design, risk management and other financial advisory services and currently holds $1.4 billion in assets under advisement. JPMORGAN, HSBC & WELLS FARGO SETTLE LENDER-PLACED INSURANCE CLAIMS New York City-based HSBC Holdings and San Francisco-based Wells Fargo & Co. have entered into separate agreements with their mortgage holders over insurance that the lenders placed on their property when the mortgage holders' own policies lapsed or were not sufficient to cover the values of the properties. HSBC has agreed to pay up to $32 Help them get the protection million to resolve claims of inflated lender- placed premiums and allegedly inappropriate commission kickbacks they want and need. between banks and insurers and reinsurers. The projected financial cost to Wells Fargo was not included in its settlement agreement. Both settlements were filed in the U.S. District Court, Southern District of Florida (Miami), where the JPMorgan Chase & Life Insurance. Quickly. Co. and Citigroup lender-placed class- action settlements were approved and @ - Life Insurance . Simply. where Bank of America and its class- action plaintiffs filed their lender-placed J D - Life Insurance. Professionally. settlement on February 18, - 9I insurancejournal.com reports. -D- Life Insurance. Affordably. WELLS FARGO INSURANCE WINS - J Life Insurance. Reliably. TRADEMARK INFRINGEMENT CASE D@, IN APPEALS COURT The U.S. District Court of Appeals has IDţ overturned the U.S. District Court of the -J - @ Ŧ Northern District of California ruling that VOLUME XV, ISSUE 4, APRIL 2014 PAGE 3 denied San Francisco-based Wells Fargo & Co. and Wells Fargo Insurance Services, USA's request for a preliminary injunction against ABD Insurance & Financial Services et. al. (New ABD) for false affiliation and advertisement, unfair competition and infringement on Wells Fargo's ABD trademark, which it acquired when it purchased ABD Insurance and Financial Services (Former ABD) in 2007. The Appeals Court wrote that while Wells Fargo renamed the acquired agency Wells Fargo Insurance Services, it never abandoned the ABD trademark, but "continued to use the mark in several ways." Such uses, the Court said, "demonstrate Wells Fargo's business calculation that it could continue to benefit from the good will and mark recognition associated with ABD…. Thus, the district erred by concluding that Wells Fargo abandoned the ABD mark." The Appeals Court reversed the District Court's denial of the motion for preliminary injunction and remanded the case to that court for reconsideration and further proceedings. To read the opinion filed on March 3, 2014, click here. SLOWDOWN IN COMMERCIAL RATE INCREASES U.S. composite commercial insurance rates in February were up 2% over rates in February 2012, but were down from the (+4%), while most industries including the FINRA DISCIPLINARY ACTIONS UP, 3% year over year increase recorded in manufacturing, contracting, service and BUT FINES DOWN IN 2013 January, according to Dallas, TX-based habitational industries experienced 3% The number of disciplinary actions filed MarketScout. rate increases. In contrast, rates for by the U.S. Financial Industry Regulatory Year over year February renewal rates public entities rose 2% and rates for Authority (FINRA) in 2013 slid 1% to by coverage class rose the highest for companies in the energy business inched 1,535, down from 1541 in 2012, while the business owners policies and commercial ahead 1%. dollar amount of the fines imposed fell auto insurance (+4%), followed by February renewal rates compared to 27% to $57 million, down from $78 commercial property and workers January renewal rates, however, million, and the amount ordered to be compensation (+3%); business indicated slippage. Umbrella, workers paid in restitution dropped 29% to just interruption, general liability, umbrella compensation and general liability short of $24 million, down from the record excess, professional liability, employment insurance renewals, and rates for small $34 million in 2013, according to practices liability insurance (EPLI) and and medium accounts, and renewal rates Washington, DC-based Sutherland Asbill directors and officers liability (+2%); and for the manufacturing, contracting, & Brennan. inland marine, fiduciary, surety and crime service and energy industries all declined Additionally, while the number of firms insurance (+1%). 1% from January increases, MarketScout FINRA expelled in 2013 fell 20% to 24, Renewal rates by account size found based on pricing surveys down from 30 in 2012; the number of continued to increase the greatest for conducted by the National Alliance for individuals FINRA suspended climbed small accounts up to $25,000 (+3%), Insurance Education and Research. 22% to 670, and the number of while both medium accounts of $25,001 to Commenting on the slowing trend in individuals FINRA barred from the $250,000 and large accounts of $250,001 renewal rate increases, MarketScout industry jumped 46% to 429. to $1 million rose 2%, and jumbo CEO Richard Kerr said, "Absent a FINRA brought the greatest number of accounts over $1 million ticked up 1%. catastrophic event, we predict the U.S. enforcement actions in 2013 for faulty February renewal rates by industry commercial market will continue to trade reporting (198), inaccurate books class compared to a year ago were moderate, and rates will ultimately start to and records (95), suitability failures (73), highest for the transportation industry decrease towards the latter part of 2014. electronic communication failures (6), VOLUME XV, ISSUE 4, APRIL 2014 PAGE 4 faulty advertising (53), municipal securities failures (51) and inappropriate short selling (40). The number of actions brought per enforcement issue, however, did not correlate with the fines imposed. Electronic communication failures, especially those related to email retention, increased by only 5%, but the fines imposed spiked 132% to $15.1 million. Trade reporting cases increased 25%, but fines jumped 57% to $12.1 million. Short selling cases increased 5% but fines climbed 41% to $7.2 million. Banks and records cases grew 20%, while fines increased 13% to $7.1 million, and the number of municipal securities actions grew 21%, while fines imposed for municipal securities failures jumped 43% to $6 million. Looking forward to potential top enforcement actions in 2014, Sutherland Asbill & Brenan Associate Andrew McCormick said, "Firms need to focus on technology issues like email retention and surveillance, because FINRA has been concentrating on this issue." IIS HONORS PEKING UNIVERSITY PROFESSOR QIXLANG SUN The International Insurance Society (IIS) announced that the IIS Honors Committee has selected Dr. Qixlang Sun as the winner of the 2014 John S. Bickley Founder's Award Gold Medal for Excellence. Dr. Sun serves as the Dean of the School of Economics and the C.V. Starr Chair Professor of Risk Management and Insurance at Peking University in Peking, China. Among other accomplishments, she is the author of scores of research articles and 20 books, including the best-selling textbook Principles of Insurance. IIS Honors Committee Chairman Bernhard Fink said, "Dr. Sun's work and leadership has influenced insurance thought and practice not only in China but around the world." He added, "She has contributed greatly to the reform and development of the insurance industry in China and has served as a major advisor and resource for policymakers." Dr. Sun will be honored at the IIS Awards Dinner on June 23, 2014, when the Society meets for its 50th annual seminar at the Park Plaza Westminster Bridge Hotel in London, England from June 22 through June 25. VOLUME XV, ISSUE 4, APRIL 2014 PAGE 5 STEADY INSURANCE EARNINGS REMAIN TOP NONINTEREST CONTRIBUTOR AT SUMMIT FINANCIAL Moorefield, WV-based, $1.39 billion-asset Summit Financial Group reported insurance brokerage fee income in 2013 remained the top contributor to noninterest earnings, despite staying flat at $4.43 million. Insurance revenue comprised 39.5% of noninterest income, which fell 13% to $11.21 million, down from $12.88 million in 2012, hit by an over $1.1 million drop in securities gains. Net interest income on a 3.22% net interest margin slipped 2.6% to $38.80 million, down from $39.82 million in 2012, reflecting a $6.60 million decline in interest income, which could not be covered by a $5.59 million cut in interest expense. Net interest income, after a $4 million drop in loan loss provisions to $4.5 million, grew 9.5% to $34.30 million, up from $31.32 million. Net income, after a $2.51 million cut in noninterest expense driven by a $3.14 million drop in write downs on foreclosed properties, climbed 41.2% to $8.07 million, up from $5.71 million in 2012.