Tag Archives: financial institutions

financial institutions - bank

Understanding The Function, Purpose, Regulation Of Financial Institutions

The functions and regulations of financial institutions have changed since our most recent recession and will likely continue to be governed at a higher level going forward. This is critical for the success of our future economy.

Financial institutions help provide opportunity for our economic growth and improve our living standards. They do this by assisting as a liaison for those who have savings (dollars) and those who have a need for capital. Institutions typically will raise dollars from other institutions or individuals then loan those dollars to other entities at a cost (interest rate). This is how financial institutes help aid the flow of money through our economy.

There are several types of financial institutions, such as banks, credit unions, brokerage companies, insurance companies and trust companies — all of which have different primary functions and assist with the transferring of funds from investors to companies in need of funds.

Banks

Banks are corporations with a state or federal charter, which can accept deposits, invest in securities and make loans to businesses or individuals. Loans are considered to be the most valuable assets for commercial banks and deposit accounts are their main liability. Some banks may provide other financial services for its members. Banks are regulated on a federal level and have government protection for their depositors (FDIC insurance).

Credit unions

FDIC insures depositor accounts for commercial banks and most non-bank thrift institutions, such as credit unions. Credit unions have similar services as banks but are focused more for small savers and checkable type of transactions. They provide lending services and are owned by their members.

Brokerage companies

Brokerage companies are large corporations and are an intermediary to investors and investment companies. They offer financial services typically to buy and sell stocks for clients.

Insurance companies

An insurance company is another type of financial institution that offers investment vehicles for investors along with other products which may provide financial protection by way of insuring businesses or individuals.

These financial institutions are the backbone of our economy. With improved regulation, we hope they will continue to prosper and develop a strong foundation for our country.

For more information about the financial institutions discussed in this column, visit jacobgold.com.

Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.This information was prepared by Michael Cochell of Jacob Gold & Associates, Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.

Jerry Colangelo discusses Arizona's economic future and more. - AZ Business Magazine Nov/Dec 2010

CEO Series: Jerry Colangelo

Local businessman Jerry Colangelo talks basketball, Arizona Commerce Authority, the recession and more.

Jerry Colangelo
Title: Principal Partner
Company: JDM Partners

Did you always aspire to be in business or was it circumstances that put you on this path?
I transferred universities for basketball reasons, originally. I went to (University of) Kansas for a semester to play with Wilt Chamberlain. When he transferred — when he quit school — I transferred to (University of) Illinois. I had taken business courses in Kansas and when I transferred I brought those credits with me. But then I went into education. I thought I would teach and coach. But I had some business background and I was always a little bit of an entrepreneur, in terms of trying to make a dollar as a young kid, little businesses, etc. So it all kind of came together and I ended up being in the sports business, which means that I was being prepared all along.

How would describe the Valley’s business environment for entrepreneurs?
I think it is a good place, but it has evolved. I came to the Valley 40-plus years ago, when things were kind of wide open and there were many more opportunities, at least from my perspective. You had the ability to get things done because it was still a small town, to some degree. I’ve seen it quintuple in size, if you will, and we’ve had our ups and our downs in the Valley, but we’re trying to re-identify who we are and what our future holds. But there will always be room for entrepreneurs. There’s no question about that. I still believe in the Valley and the business climate, and it’s going to get better as our economy gets better, so there’s room.

How will the new Arizona Commerce Authority help the state’s economy?
I think the Commerce Authority is coming at exactly the right time. We have the opportunity to re-do how we do business in this state. It’s very important to retain the businesses that we have and it’s very competitive out there. The states are competing for big business and small business. We need to create a climate that is truly conducive for small and big business to come to Arizona. I think that with the people, the manpower that we will have on this authority, we have a chance to make that happen.

I’ve been a little outspoken about the fact that we need the Legislature to help with the funding — there’s no question about that — but at that point they need the business community to conduct the business of commerce. That’s what they know best. And if we can kind of separate that, we have a great opportunity to go out and be competitive. We’re going to need some things from the Legislature. Incentives — that seems to be a dirty word to some people, but it’s reality. That’s what’s happening in other states. That’s why they’ve had so much success. We have the models to look at.

For me, coming from the world of sports and every day you’re competing, it’s another game, it’s going for another win. This is a classic example of taking something that needed to be restructured, a little like my USA Basketball experience of late, when I took over the program and it was back on its heels. Today, we’re the defending gold medalists in every category, men’s and women’s, every age bracket. We have a chance with the Commerce Authority to basically do the same thing. We need to win a gold medal. We need to go out and compete with all the other states, because we have a lot to offer in this state. We just need some incentives. We need to look people eyeball-to-eyeball and sell them on why it’s important to come here, why they will enjoy not just the quality of life. We need to improve our education, we need to make it a better community in which it is conducive to do business here. If you get people jumping on the bandwagon, we have a chance.

How did the recession affect the sports industry in general and in the Valley in particular?

The recession has hit everyone and every segment of the marketplace. It’s interesting; when things are really bad economically, people still want to be entertained. … Vicariously, people follow sports teams because they once played, they have some affiliation, they love the association when their teams are winning. When teams are losing, that’s when they jump off the bandwagon. … We took a hit here in the Valley big time. Because we have so much emphasis on the construction industry, we were hit harder than other parts of the country — in the Southwest. No. 2, we are saturated right now with sports teams — no question about that. Everyone was affected. If we had continued with our growth, because we were on an incredible growth curve, we would have grown into maturity with all of our sports teams. What we have gone through have been some real challenges. But the good news is that the sports franchises have adjusted. They’ve had to adjust their policies, their attitudes toward discounts, etc. And that’s one of the things I’ve noticed in sports in the last two years is that they’ve made adjustments to deal with what’s taken place with the recession.

You are still involved in sports, but you’ve also moved on to real estate development. Some would say that’s a risky move. How do you respond to that?
People say when you make money in real estate is when you buy appropriately. There are a lot of deals out there to buy in — they say cash is king. Well, there are a lot of financial institutions sitting on a lot of cash, but they’re not really willing to let the consumer have that cash. So everyone is very hesitant right now. There is great opportunity in real estate. You have to be more specific about residential, commercial. My partners and I are involved in some iconic properties: the (Arizona Biltmore Golf & Country Club), the (Wigwam Golf Resort & Spa). In taking that step with distressed properties, we were able to take these properties out of bankruptcy. We believe we made a good buy at the time. We are making an investment in those properties, because we believe in the future. We believe things will get better over a period of time and that the real estate marketplace will continue to get better over a period of time. We’re sitting on 37,000 acres of property on the west side of Phoenix that have the ability and the approval to build a city of over 300,000 people. But this isn’t the time to start that project — that’s in Buckeye, Ariz. Do I think someday that will happen? Maybe in some way, shape or form; maybe not the way it was visualized five years ago, but are people going to continue to come here? I believe so. But back to the Commerce Authority; we have to bring jobs to Arizona. So by being creative and being aggressive going out to bring companies here — with high-paying jobs, not just service jobs — then we will continue with the growth pattern, because we have so many wonderful things to offer in terms of quality of life out here in the Southwest.

What advice do you have for entrepreneurs who are ready to take their companies to the next level?
Don’t be afraid to fail. … You have to take calculated risks. You have to be willing to step out on that board knowing you might get pushed, fall off. The worst thing that could happen is you do — you get up and you start over again. One of the things that has probably marked my career is that I started with nothing and I was never afraid to go back to nothing, but I was going to enjoy the ride. And so as it relates to my mix of experiences. Being competitive as an athlete prepared me for the business world, which was another competition. No one has batted 1,000 percent. Hall of Famers hit .300 — that’s only three out of 10. So why is it any different in business? You’re going to make mistakes, you’re going to learn from your mistakes. You can’t be afraid to fail, you have to be willing to take that kind of calculated risk. I’ve seen so many people, again in my lifetime, who have complained and whined about never getting an opportunity. And I would say to them, “Opportunity walked by you three or four times, but you never recognized it, because you’re so busy whining.” Get out there, don’t be afraid to compete and believe in yourself.

    Vital Stats




  • Became general manager of the new NBA franchise Phoenix Suns in 1968
  • Coached the Suns in the 1969-1970 and 1972-1973 seasons
  • Purchased the Suns for $44.5 million in 1987
  • Founder and owner of the Arena Football League’s Arizona Rattlers from 1992-2005
  • Played a key part in moving the NHL’s Winnipeg Jets to Arizona in 1996
  • Launched the WNBA’s Phoenix Mercury in 1997
  • Launched the MLB Arizona Diamondbacks in 1998
  • Served as chairman and CEO of the 2001 World Champion Diamondbacks
  • Chairman of the NBA’s Board of Governors from 2001-2005
  • Sold the Suns, Mercury and Rattlers to an investment group headed by Robert Sarver in 2004
  • Sold his controlling interest in the Diamondbacks to a group of investors in 2004
  • Elected to the Basketball Hall of Fame in 2004
  • March 26, 2004 proclaimed Jerry Colangelo Day in Phoenix
  • Named director of USA Basketball in 2005
  • Received the Spirit of Caring award in 2005 from the Valley of the Sun United Way
  • Inducted into the Suns’ Ring of Honor in 2007

Arizona Business Magazine Nov/Dec 2010

Make Larger Loans To Small Businesses - AZ Business Magazine Sept/Oct 2010

Arizona’s Credit Unions Want To Make Larger Loans To Small Businesses

As lending opportunities for small businesses throughout Arizona continue to tighten, legislation has been moving through Congress that would enable Arizona’s credit unions to make more loans to small businesses. The media is filled with reports about how small businesses are having trouble gaining access to affordable credit. Credit unions did not take TARP money during the financial crisis, and they can help small businesses create jobs and jumpstart the economy, all at no cost to the taxpayer. This is inconsistent with additional proposals that would give added TARP money to the for-profit banks in order to stimulate small-business lending.

Many local credit unions stand ready to help. But unlike banks, credit unions are constrained by an arbitrary cap that, under current law, limits the amount of small business loans they can make to 12.25 percent of total assets. The Senate is currently debating legislation introduced in the House, the Small Business Lending Fund Act, and Sen. Mark Udall (D-Colo.) has offered a proposed bipartisan amendment to the bill that would raise the business lending cap on credit unions from 12.25 percent of assets to 27.5 percent.

Upholding credit unions’ history of prudent and responsible lending, the credit union would need to meet certain criteria and be approved by the National Credit Union Administration to lend in excess of the current 12.25 percent cap. A credit union would have to be well capitalized (above 7 percent); at or above 80 percent of the current business lending cap for one year before applying; have five or more years of business-lending experience; have a history of strong underwriting and servicing of business loans; and have strong management, an adequate capacity to lend and policies to manage increased business loans. This amendment also includes provisions that would protect the National Credit Union Share Insurance Fund. The Treasury Department also sent a similar proposal to Congress earlier this year.

If the credit union member business lending cap were raised from 12.25 percent to 27.5 percent of assets, the estimated increase of small business loans would be $10 billion in the first year, leading to the creation of 108,000 new jobs, according to estimates from the Credit Union National Association. More than 1,600 of those jobs would be created here in Arizona. Just as important, this arbitrary lending cap increase would come at no cost to the U.S. taxpayer.

Small business is the cornerstone of our community and the key to increasing jobs and economic recovery. The additional lending authority would enable credit unions to do more of what they do best — make safe-and-sound loans to members. In this case, to members who are looking to start or expand a small business in Arizona.

As member-owned, not-for-profit, cooperative financial institutions, supporting local business is natural, and oftentimes, members are seeking a business loan that is too small for banks. The average size of a credit union small business loan in Arizona is only about $240,000, and Arizona credit unions maintain only about 2.6 percent of the local business lending market share.

A well-run member business lending program has the potential to bring a great amount of success to the community. First and foremost, the member businesses have another lending option, allowing them a chance to succeed with the right loan. However, a member business lending program requires personnel and resources. With a cap that is as low as 12.25 percent, many credit unions find the cap too restrictive to offer business loans.

With more capacity to make small business loans, credit unions throughout Arizona can do more to help spur the creation of new jobs, and help accelerate our nation’s economic recovery.

Arizona Credit Unions
Currently Offering Member Business Loans

  • Arizona Federal
  • Arizona Heritage Credit Union
  • Arizona State Credit Union
  • AEA Federal Credit Union
  • Continental Federal Credit Union
  • Credit Union West
  • Arizona Central Credit Union
  • First Credit Union
  • Tempe School Credit Union
  • Tombstone Federal Credit Union
  • Desert Schools Federal Credit Union
  • Vantage West Credit Union
  • TruWest Credit Union
  • Tucson Federal Credit Union

Austin De Bey also contributed to this article.  He is vice president of governmental affairs for the Arizona Credit Union League & Affiliates, www.azcreditunions.coop.

Arizona Business Magazine Sept/Oct 2010

Valuations For Financial Institutions Are Falling — And Presenting New Opportunities For Estate Planning

“Strange,” “Nothing like it before,” “Astonishing” are a few ways to describe what has transpired in the financial institution industry over the last several months. As liquidity and asset concerns for financial institutions have become magnified, national economic trends have exacerbated the situation.

Despite all of this gloomy news there is at least one silver lining: If you own stock in a financial institution and need to do some estate planning, now is a great time to consider gifting some of those shares to family members or other beneficiaries. While gifting has many advantages, one of the most important benefits is the removal of assets from your estate and lowering your future estate tax.

Valuations of shares in financial institutions (and many other privately held businesses) are likely to be lower than in recent years due to many factors.

Some of the external factors include the uncertainty and volatility of the public stock markets, the effects and duration of the current economic downturn, the potential estate tax law changes that will occur with a new administration in the White House, and U.S. Treasury programs that are still being finalized from the financial-system bailout.

Each financial institution is unique and specific facts will dictate whether a substantial decline in value exists for each institution. The following are some noteworthy items that should apply when determining the value of any financial institution in today’s environment.

Liquidity and capital concerns may lead to financial institutions tightening their distribution policies to ensure capital levels are maintained.

Distribution policies can significantly impact the value of an entity. If lower distribution levels are expected to be maintained for a significant period of time, lower values for an entity can be substantiated.

There have been 139 bank failures since July 1, 2008, according to the FDIC’s Web site. As many as 115 of those bank failures have occurred in 2009. To put this in perspective, from 2001 through 2007, there were only 24 bank failures. This trend suggests that problems are more prevalent with financial institutions than in the past and that earnings expectations for future years may be lower than in recent years. Lower future earnings generally equate to lower valuations of stock prices.

The ability to achieve recent historical earning levels for financial institutions may prove to be difficult. According to the FDIC’s quarterly banking profile for the fourth quarter of 2008, annual net income for all financial institutions was at its lowest level since 1989, and return on assets for the industry (0.08 percent) has not been this low since 1987. During the second quarter of 2009, the FDIC noted that more than one in four institutions was unprofitable and industry assets declined by $238 billion. With future earnings unlikely to mirror recent historical earnings (prior to 2008), valuations for shares in financial institutions should be lower.

Many valuations of privately held financial institutions rely on publicly traded information as benchmarks for establishing values. While the markets have rebounded since early 2009, the publicly held banks are still trading at considerably lower levels. Specifically, a review of publicly traded banks in Yahoo! Finance’s Pacific and Southwest Regional Banks category indicates the average price-to-book value for the 184 publicly traded banks was 0.70 as of October 31, 2009. This is considerably lower than price-to-book ratios prior to 2008, and will likely impact buyers of private financial institutions leading to lower valuations.

The private marketplace is another source of information that appraisers rely upon when determining the value of financial institutions. The amount of activity in mergers and acquisitions of private financial institutions in the Southwestern U.S. significantly dropped during 2008 and 2009. Of the 20 transactions in 2008, only five were announced in the second half of 2008. Like the publicly traded banks, private banks in the Southwest also have seen a decline in the average price-to-book multiple above 30 percent from 2007.

Moving shares at lower values seems counter intuitive, but the tax advantages may be beneficial in planning your estate. With the current potential for lower stock valuations of financial institutions, owners may be able to gift more shares for the same dollar amount than they would have been able to gift in the past. These conditions should reduce the applicable gift tax and/or unified credit that would be used in connection with a gift. While the timing may be right for gifting shares of stock in your financial institution, be sure to visit with your financial advisers to determine when gifting is the best option for you.


Arizona Business Magazine

February 2010

credit unions reaching out to small business

Arizona’s Credit Unions Are Reaching Out To Small Businesses

Relative newcomers to the field of making business loans, credit unions nonetheless have become key players in today’s tight-money economy. Barely 10 years ago, credit unions concentrated mainly on savings and checking accounts, and made personal, auto and home loans. But the Credit Union National Association says credit unions nationally originated $6.5 billion in business loans in the first six months of 2008, up 36 percent from the $4.8 billion in the corresponding period of 2007.

Credit union business loans in Arizona average about $240,000. Because the loans are relatively small, credit unions focus on small businesses.

For the past six years, Arizona credit unions have been working closely with the Small Business Administration and have emerged as strong SBA lenders. But because of the expertise involved in making such loans, only the larger credit unions are active in that segment of lending.

Steve Dunham, president and CEO of Canyon State Credit Union and board chairman of the Arizona Credit Union League & Affiliates, suggests that credit unions with assets of at least $400 million generally have the ability and staff support, so they are most likely to make business loans.

Then there is the issue of the federal cap, which the credit union industry has been trying to get Congress to increase or eliminate. Under the cap, credit unions may make business loans totaling no more than 12.25 percent of their assets.
The business lending cap comes into play at Arizona State Credit Union, one of the state’s largest.

“We’re getting very close to the cap, so we are being selective about what we do,” says Paul Stull, senior vice president of marketing at Arizona State Credit Union. “We keep bumping into it, and we have to find a way to make room. It’s quite a challenge to manage that.”

Despite the regulatory limits placed on credit unions, opportunities for businesses to borrow are available. Businesses face a combination of challenges, such as finding a money source and finding the right rate, Stull says.

“For many of the people we deal with, the rate is important, but many times they don’t have too many alternatives to look at for financing,” Stull says. “That usually means their needs are somewhat smaller than the targeted range of other providers. It takes just as much work to originate a small loan as it does a large one. Some would prefer to do only larger loans. A small business person might fall outside of that window. When they do, it’s tough for them to get the attention they want and deserve. Certainly small enterprises are not coming up on the radar of some of the larger lenders. That doesn’t mean rate isn’t important. It still is. But clearly you need to talk to somebody before you can get a rate.”

In all phases of lending, credit unions traditionally follow very conservative underwriting principles and only make loans to members. It’s not uncommon for an individual member to approach a credit union with a business loan request.

“The strong suit for credit unions is what it has always been — credit unions take the time to know their members,” Stull says. “That certainly puts us in a better position to meet the needs of a business. Many of our business customers have a personal relationship with us. They like the way we treat them personally, and they realize they can do their business banking with us as well. And that leads to a deeper relationship. The wider use of our business services is a more recent phenomenon. It’s a natural progression, and is indicative of the way we like to know our customers.”

Most experts see the economy beginning a slow turnaround toward the end of this year or early 2010. Consumers for the most part are still on the sidelines. Credit unions and the business community are keeping an eye on the nation’s savings rate.

For the past 20 to 30 years, Americans saved 7 percent of the income. But in recent years, before the recession hit, people were spending and borrowing more and saving considerably less. The U.S. Department of Commerce notes that the U.S. savings rate has been on the rise after almost five years in which consumers barely saved a penny.

Stull calls the rise in savings a good sign-bad sign situation.

“It’s good because people are being more cautious, developing more security,” he says. “The money they save goes to financial institutions and becomes available for lending. But, it’s a bad sign because people are not buying cars, motor homes, washers and dryers, and they’re not dining out as much as they used to. So it’s really kind of a double-edged sword.”

Law Review - Arizona’s Legal Landscape

A Look Back Finds Substantial Changes To Arizona’s Legal Landscape

Rapid-fire change has become the status quo in the legal and business community over the past 25 years. This change is particularly apparent to me, as my firm, Fennemore Craig, will celebrate its 125-year anniversary in Arizona next year, and I have practiced law for more than three decades.

One of the most pronounced and positive changes over the years has been who becomes a lawyer. Through an increased emphasis on diversity, law firms and legal departments have become places of opportunity for people of all backgrounds, reflecting the diverse nature of our communities and clients. We can do better, but the profession has made significant strides in the area of diversity since the 1980s.

While the face of the state’s law firms has changed, so has their size. Not too many years ago, the largest firms in the Southwest were still relatively small, with client bases dominated by locally headquartered companies and financial institutions. Since the 1980s, the region has lost quite a few headquarters, yet law firms like Fennemore Craig have benefited from strong economic growth in the Sun Belt, with Phoenix emerging as a regional business hub.

Notwithstanding the current economic downturn, the long-term economic prospects for the region promise continued opportunity. This economic strength has led to growth among several of Arizona’s home-grown firms and it also has attracted firms with their principal offices in other states. In turn, Arizona firms have responded with a growing platform of offices and lawyers expanding into other markets. The influence of technology in changing the legal profession over the past 25 years cannot be overstated. The pace and volume of work for us and for our clients have increased exponentially. Research, which is central to the law, has been almost totally automated. While successful lawyers still must be good communicators and excellent practitioners, information flow occurs literally around-the-clock. Waiting to work on a transaction or litigation based on deliveries through the U.S. Postal Service has gone the way of the typewriter and the mimeograph machine. Transmittal of documents, filings and other activities occurs primarily on an electronic basis and the demand for quick responses has increased accordingly.

The professional aspects of practicing law have shifted as well. Training is better than ever, though time pressures mean some of the one-on-one mentoring and discussions with senior lawyers that characterized much of my early professional learning curve are more rare.
As a credit to Arizona, it is also important to note that the state’s institution of the merit selection system for its judges created a better, more professional judiciary. Merit selection has improved both the state’s justice system and the practice of law here in terms of professionalism, fairness and quality.

One of the appealing aspects of the legal profession is its strong tie to tradition. We must discern when tradition is fostering positive values, rather than preserving the status quo for its own sake. The positive values inherent in the profession 25, even 125 years ago, remain true today regardless of the changes in pace, volume and complexity in the practice of law. Then as now, we have the opportunity and responsibility to help people solve problems and get things done.

National Bank of Arizona - Best of the Best Awards 2009 presented by Ranking Arizona

Best of the Best Awards 2009: Finance & Professional

Finance & Professional Honoree: Banks: $900M or more in AZ assets

National Bank of Arizona

National Bank of Arizona - Best of the Best Awards 2009 presented by Ranking Arizona

Photograph by Duane Darling

With 25 years of strength, stability and profitability, National Bank of Arizona is one of the state’s premier financial institutions. Since its inception, National Bank of Arizona has been there for its customers, continually searching for new ways to help Arizonans meet their financial goals. As a community focused and locally managed bank with the resources of a major financial institution, we deliver industry-leading product solutions, award-winning service and innovative technology. Through our team of more than 1,100 employees, National Bank of Arizona reaches 55 diverse communities throughout Arizona. With this staff of experienced local bankers, we are able to respond to the needs of our customers with flexibility and custom solutions.

The effort, commitment and passion put forth by our bankers to deliver the very best customer service adds new honors to a bank that has been achieving firsts and bests since 1984.

6001 N. 24th St., Phoenix
602-235-6000
www.nbarizona.com

Year Est: 1984 Branches: 76
Principal(s): John J. Gisi,
Keith D. Maio
Assets: $4.8B


Finance & Professional Finalist: Accounting Firms: 26 CPAs or more

Deloitte & Touche LLP

Deloitte & Touche LLP’s goal today remains the same as it was since it began serving Arizona businesses more than 45 years ago. Deloitte & Touche is dedicated to helping its clients and people excel. Deloitte’s growing and thriving practice — the largest in the state — is the only company that provides Arizona businesses with a comprehensive range of professional services, including assurance, tax, enterprise risk management, management and information systems consulting, financial advisory services, employee benefits and human capital. Deloitte & Touche strives for the highest levels of integrity and public trust, every day, for every client.

2901 N. Central Ave., #1200, Phoenix
602-234-5100
www.deloitte.com/us


Finance & Professional Finalist: Law Firms: 65 Attorneys or more

Greenberg Traurig LLP

Greenberg Traurig offers an international platform built to meet the legal needs of today’s businesses. With 1,800 attorneys and governmental affairs professionals in 30 offices, our combination of wide-ranging experience and onthe- ground resources enables us to provide local insights and legal services in markets across the U.S. and around the world. Our Phoenix attorneys offer clients decades of local experience, complemented by the global reach of the GT network. GT helps clients take on the legal challenges they face today — and prepare for those they may face tomorrow.

2375 E. Camelback Road, #700, Phoenix
602-445-8000
www.gtlaw.com


Best of the Best Awards 2009 presented by Ranking Arizona

Financial Institutions Receive Bailout

Financial Institutions In Arizona Are Expected To Receive Bailout Money

While most of Arizona’s state-chartered banks were mulling over their options for federal assistance late last year, Uncle Sam was injecting billions of dollars of new capital into national banking companies with Arizona subsidiaries. The question is whether any of that money from the Department of the Treasury’s $700 billion Troubled Asset Relief Program (TARP) will find its way here.

Although there were a couple of exceptions, nationally chartered banks with Arizona operations didn’t know whether portions of their capital infusions would be earmarked for deployment in Arizona, and they may not know until sometime during the first quarter. The capital comes in the form of federal purchases of senior preferred shares. The Treasury set aside $250 billion for the program.

The Treasury purchased $200 million of shares in Seattle-based Washington Federal Inc., the parent company of Washington Federal Savings. John Pirtle, senior vice president and Phoenix division manager for Washington Federal, estimates the thrift’s Arizona operations will receive about $20 million and use it for mortgage lending.

Western Alliance Bancorporation in Las Vegas, owner of Alliance Bank of Arizona, received $140 million from the Treasury. James Lundy, chief executive officer of the Arizona bank, expects his parent company to share the new capital.

“I would expect we’ll get somewhere between $8 million and $12 million,” Lundy says. “That would be a good estimate. We are well capitalized now, but we do have plans to continue our growth trajectory, which has been pretty strong.”

Alliance Bank would use the capital to “support a bigger balance sheet, so we can gather more deposits to make more loans,” Lundy says. “Banks like ours are the ones making loans to small and mid-size businesses. Despite the economic issues Arizona is facing, we have strong loan demand from borrowers we think are very creditworthy.”

Ten million dollars in new capital can be leveraged to generate $100 million in new loans, Lundy says.

The Treasury purchased $1.715 billion of stock in Milwaukee-based Marshall & Illsley Corporation.

“All the funds are going to be used throughout the franchise,” says Dennis Jones, chairman and president of M&I’s Arizona region. “It’s not a matter of allocating a certain amount of it for Arizona.”

Chicago-based Northern Trust Corporation, parent company of Northern Trust Bank, received a $1.576 billion capital infusion. David Highmark, chairman and chief executive officer of the Arizona subsidiary, says he expects enough of the capital will flow to his bank to allow it to keep growing. Northern Trust Bank’s loan volume is two to three times its normal level.

“If our loan volume continues to grow as it has, we will get a portion of that money allocated to us,” Highmark says.

The parent company is classified as well capitalized, “but we knew, based on our growth, that we would ultimately need more capital. This was a timely opportunity for us,” Highmark notes.

Zions Bancorporation in Salt Lake City, owner of National Bank of Arizona, received $1.4 billion from the Treasury. Keith Maio, president and chief executive officer of the Arizona bank, says he expects his bank will receive some of the capital, but the amount has not been determined. Maio says the funds will be used to bolster the bank’s capital ratios to keep it actively lending, targeting small to medium-size businesses.

Other Treasury stock purchases of nationally chartered banks with Arizona subsidiaries break down as follows:
JPMorgan Chase & Co., New York — $25 billion.
Bank of America, Charlotte, N.C. — $25 billion.
Wells Fargo & Company, San Francisco — $25 billion.
U.S. Bancorp, Minneapolis, owner of U.S. Bank — $6.599 billion.
Comerica Incorporated, Dallas, owner of Comerica Bank — $2.25 billion.
Mutual of Omaha in Omaha, Neb., which acquired First National Bank of Arizona, did not apply for TARP funding.

The Treasury gave publicly traded banks the first opportunity to receive capital infusions, with a Nov. 14 deadline to apply for stock purchases. It issued capital-infusion guidelines later for privately held banks, which had until Dec. 8 to apply. According to the Arizona Bankers Association, most of Arizona’s 33 state-chartered banks are privately held and had not applied to the Treasury while they weighed their options as their deadline neared. Jack Hudock with the Arizona Department of Financial Institutions said eight state-chartered banks or bank holding companies had applied, but he could not identify them and did not know the status of their applications.

Meridian Bank of Arizona, a privately held, nationally chartered bank owned by Marquette Financial Companies in Minneapolis, applied for a federal stock purchase and was awaiting a decision from the Treasury concerning how much capital it might receive. Doug Hile, president and CEO of Meridian, is not happy that publicly traded banks had first shot at a capital infusion. He does not mince his words in his displeasure over how the government treated privately held banks.

“From a public policy perspective, it’s not fair to small banks that have opted not to go public with their stock,” Hile says. “We are up in arms about it. This is harming Main Street banking by not allowing them to participate on an equal basis.”