ARROW FINANCIAL REPORTS 38% DROP IN INSURANCE EARNINGS

Glens Falls, NY-based, $1.84 billion-asset Arrow Financial Corp. reported insurance commissions generated by its agency, which specializes in selling and servicing group health plans, jumped 37.7% to $727,000, up from $528,000 in third quarter 2008, and comprised 18.3% of noninterest income, which climbed 28.8% to $3.98 million, up from $3.09 million a year ago, when the company wrote down $1.2 million in securities losses. Trust and investment fee income, like all other sources of fee income except insurance, decreased, falling 11.1% to $1.2 million, down from $1.35 million, to comprise 30.2% of noninterest income. Net interest income on a 3.79% net interest margin rose 0.9% to $14.78 million, up from $14.65 million, as loan loss provisions rose to $427,000, up from $253,000. Net income, bolstered by noninterest earnings, rose 2.0% to $5.1 million, up from $5.0 million in third quarter 2008. Arrow Financial Chairman, President and CEO Thomas Hoy said, “We are pleased to report that our conservative business model has again produced solid earnings.” In 2008, Arrow Financial reported $2.1 million in insurance brokerage income, which comprised 12.3% of its noninterest income. The company ranked 63rd in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael

BOLI, TRUST & INVESTMENT INCOME BRIGHT SPOTS AT TIB

Naples, FL-based, $1.72 billion-asset TIB Financial Group reported third-quarter investment advisory and trust fees climbed 82.4% to $279,000, up from $153,000 in third quarter 2008, and its $1.19 million in bank-owned life insurance (BOLI) income helped propel noninterest income ahead 206.7% to $4.6 million, up from $1.5 million. BOLI comprised 25.9% of noninterest income, while investment advisory and trust fees comprised 6.1%. In contrast to noninterest income, TIB reported a net interest loss of $7 million on a net interest margin of 2.86% compared to net interest income of $6.9 million a year ago, as loan loss provisions surged by $10 million to $14.76 million. The company reported a net loss of $8.1 million, almost four times greater than a net loss of $2.2 million a year ago. TIB Financial President and CEO Thomas Longe said, “The operating and economic environment in our markets continues to be challenging with high levels of unemployment impacting economic activity and borrowers continuing to struggle.” He added, “We are aggressively moving to resolve our nonperforming assets and working closely with our customers to restructure their obligations when prudent.”

CADENCE FINANCIAL’S INSURANCE INCOME DROPS ON AGENCY SALE

Starkville, MS-based, $1.8 billion-asset Cadence Financial Corp. reported third-quarter insurance brokerage fee income dropped 25.9% to $1.06 million, down from $1.43 million in third quarter 2008, reflecting the August 31, 2009 sale of its insurance agency. Trust fee income decreased 2.8% to $527,000, down from $542,000, and comprised 7.8% of noninterest income, while insurance earnings comprised 15.8% of that revenue, which rose 8.0% to $6.73 million, up from $6.23 million, helped by $500,000 in gains tied to the insurance agency sale. Loan loss provisions, which jumped 76.9% to $20.7 million, up from $11.7 million, impacted a net interest loss of $9.12 million, compared to net interest income of $1.84 million a year ago. The company reported a net loss of $13.1 million, more than double the net loss of $5.3 million in third quarter 2008. Cadence Chairman and CEO Lewis Mallory said, “We are making real progress in reducing Cadence’s exposure to high risk real estate loans. We took aggressive steps to clean up our nonperforming loans and charged off $22.5 billion in loans in the third quarter.” Cadence has entered into an agreement with the Office of the Comptroller of the Currency (OCC) to improve its practices and raise its regulatory capital ratios for Total Risk-Based and Tier 1 Leverage Capital to 12% and 8%, respectively, by September 30, 2009. Mallory said this timetable could not be met but “we are working on steps that will lead to our compliance in the future.” In 2008, Cadence Financial reported $5.03 million in insurance brokerage income, which comprised 6.8% of its noninterest income. The company ranked 36th in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

TOKIO MARINE ENTERS INDIA’S LIFE MARKET

Tokyo, Japan-based Tokio Marine Holdings (Tokio) and Mumbai, India-based Edelweiss Capital Limited have agreed to establish Edelweiss Tokio Life Insurance Ltd. to be 26% owned by Tokio Marine and 74% owned by Edelweiss Capital. The Mumbai-based life insurer plans to begin operations with 5.5 billion rupees ($116.7 million) in capital in January 2011, pending regulatory approval. As of March 2008, India’s life insurance market was served by 23 life insurers, reported JPY4 billion in premium and showed a compound annual growth rate of 26%. Tokio Marine said it plans to capitalize on the opportunity this presents and contribute “strong insurance expertise” to its planned join venture. Edelweiss Capital, it said, will contribute “strong brand recognition and a broad client base.” Tokio Marine is currently partnering with Indian Farmers’ Fertilizers Cooperatives (IFFCO) in IFFCO-Tokio General Insurance Co., a property and casualty insurance company that began operations in 2000. Tokio Marine said it wants “to become a global top-tier insurance group” and sees enlarging its international insurance business as key to attaining that goal. Toward that end, it has acquired London, England-based Kiln Ltd. and Bala Cynwyd, PA-based Philadelphia Consolidated Holding Corp. and is looking to acquire operations in Asia and Brazil.

FDIC REPORTS INSURED INSTITUTIONS’ NET INCOME MORE THAN TRIPLES

The Federal Deposit Insurance Corporation (FDIC) reported that net income earned by FDIC-insured U.S. banks and savings institutions in the third quarter more than tripled to $2.8 billion, up from $879 million in third quarter 2008. This increase occurred despite a 22% climb in loan loss provisions to $625 billion; a 80.8% jump in net charge offs to $50.8 billion, up from $28.1 billion, and a $34.7 billion increase in noncurrent loans and leases to $366.6 billion, or 4.94% of all loans and leases, the FDIC reports. Noninterest income topped net interest income in growth, increasing by $4.8 billion or 6.8%, while net interest income rose 4.8% or $4.6 billion, on an average net interest margin of 3.51%. Fifty institutions failed in the third quarter; 47 were absorbed by mergers and acquisitions, and banks on the “Problem List” grew 32.7% from 416 to 552. Only three institutions were newly chartered, the smallest quarterly number since World War II. The FDIC’s Deposit Insurance Fund (DIF) balance fell below zero for the first time since 1992, dropping to a negative $8.2 billion, reflecting the setting aside of $38.9 billion in a contingent loss reserve with a positive balance of $30.7 billion. The FDIC expects to build the DIF with $45 billion in pre-paid premiums due in December. FDIC Chairman Sheila Bair said, “Today’s report shows that, while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance.” Bair said that if the industry addresses the problems banks face head on, “we will see clear sign of improvement in bank earnings and lending in 2010.” To read the FDIC’s Quarterly Banking Profile, click here.

RECORD INSURANCE BROKERAGE INCOME DRIVES NONINTEREST EARNINGS AT ONEIDA

Oneida, NY-based, $601.3 million-asset Oneida Financial reported third-quarter insurance brokerage fee income grew 11.5% to a record $3.5 million, up from $3.14 million in third quarter 2008, and drove noninterest income forward 6.7% to $4.8 million, up from $4.5 million, with insurance earnings comprising 27.1% of that revenue. Net interest income on a 3.73% net interest margin grew 8.8% to $12.23 million, up from $11.24 million, and the company reported net income of $696,000, compared to a net loss of $4.4 million a year ago, when Oneida took a $7.04 million charge tied to its Freddie Mac preferred shares. Oneida Financial President and CEO Michael Kallet said, “Oneida Financial Corp. as a banking and financial services company is in the business of managing risks. Market risks … are managed through a diversified business model. Our insurance and financial services subsidiaries continue to report a record level of revenue while the traditional banking services of Oneida Savings Bank have seen record levels of mortgage originations and deposits.” In 2008, Oneida Savings Bank reported $8.48 million in insurance brokerage income, which comprised 80.2% of its noninterest income. The company ranked 2nd in insurance brokerage earnings among U.S. banks with assets between $500 million and $1 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE BROKERAGE & BOLI COMPRISE 31% OF PENNS WOODS’ NONINTEREST INCOME

Williamsport, PA-based, $678 million-asset Penns Woods Bancorp reported insurance brokerage fee income in the third quarter dropped 31.0% to $287,000, down from $416,000 in third quarter 2008, while income from bank-owned life insurance (BOLI) grew 19.0% to $144,000, up from $121,000. Insurance earnings and BOLI income comprised, respectively, 20.8% and 10.4% of noninterest income, which jumped 192.4% to $1.38 million, up from $472,000 a year ago, when the company recorded $1.5 million in securities losses. Net interest income on a 4.35% net interest margin increased 5.2% to $5.68 million, up from $5.40 million, despite a more than doubling of loan loss provisions to $270,000. Penns Woods Bancorp President and CEO Ronald Walko said, “We have maintained our focus on sound credit quality and ensuring adequate risk/return trade-off. Continued strong operating earnings, well-capitalized status, and commitment to solid local banking provide a solid foundation for the future.” In 2008, Penns Woods Bancorp reported $1.93 million in insurance brokerage income, which comprised 25.8% of its noninterest income. The company ranked 27th in insurance brokerage earnings among U.S. bank holding companies with assets between $500 million and $1 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.