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tim johnsontjohnson@nonpareilonline.com

There’s one New Year’s resolution that would be appropriate for almost anyone – regardless of his/her weight, golf handicap, chocolate intake or disgusting habits: Resolving to save more money.

But with so many bills to pay – and most of them going up – how can a person save any money?

“If you’re dedicated to sav-ing, I can guarantee you – you can save,” said Mike Kenealy, president of the Council Bluffs branch of Midstates Bank. “It’s amazing what you can put away, if you decide that’s a priority.”

Perhaps the simplest way is the time-honored method of putting money in a jar when-ever you get a chance, said Steve Swanstrom, senior vice president of retail financial services for Centris Federal Credit Union.

“Any spare change or loose change you get at the grocery store, put that into a jar and then, at the end of the month,

take that to your credit union and deposit it in your savings account,” he said. “People are surprised at how much loose change they can accumulate.”

A more consistent, but still simple, approach would be to have your paycheck depos-ited automatically and have a certain amount diverted into a savings account each pay period, he said. Direct deposit can also help reduce the temp-tation to spend the money right away.

How much should you save? You could start with 1 percent of your paycheck, Swanstrom said.

“It doesn’t have to be big dollars,” he said. “It’s just get-ting into the habit and learn-ing what you can live without. You’d be amazed at what you can learn to live on and live without.”

To find that out, keep a jour-nal of your expenditures for a month, suggested Kenealy.

“You need to have a good understanding of what it costs you to live before you try and save,” he said.

Swanstrom also recom-mended documenting your expenses.

“At the end of the month, you can look back and say, ‘Wow, did I really need to spend X amount on that item?’” he said.

Before saving money for spe-cific purchases, it’s a good idea to establish an emergency fund you can fall back on in case of loss of employment, unex-pected expenses, etc., Kenealy said. The money should be kept in a savings account, money market account or short-term CD – something with low risk and high liquidity.

“You should really try to have six months of your expenses in a savings account for the unexpected expenses ... or six months of your gross earnings,” he said. “That’s pretty daunting. It’d probably take you a year or more to do that.”

The reward, though, is more financial security, Kenealy said.

“It sure makes you feel safer,” he said. “The whole key

is, if you have good savings, you have control of your life.”

A good way to save for the long term – retirement – is

through an instrument like a 401k, Kenealy said.

“If your company is will-ing to match part of that,

you should at least try to put in what your company will match,” he said. “That’s 100 percent return.”

2F Sunday, January 20, 2013 The Daily NonpareilBusiness and Finance

Banker: ‘I can guarantee you – you can save’

Staff photo/Tim Johnson

Mike Kenealy, president of Midstates Bank in Council Bluffs, says knowing where your money is going is a key to saving.

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mike BrownleemBrownlee@nonpareilonline.com

A fraternity of businesses.That’s how one might

describe the Bluffs Referral Exchange Group, an organi-zation of Council Bluffs busi-nesses that trust each other.

Founded in 1990, the group features 18 companies that have been around for at least three years and are in good standing in the community. John Butterbaugh of the But-terbaugh Insurance Center in Council Bluffs said the group is a network of businesses that work together.

“It’s a lot about trusting who you refer,” he said.

On the three-year rule: “A company that’s been around, they’re reputable, so when you refer them you know they’ve been around a while. You can trust them.”

The organization features one representative per indus-try – there’s a chiroprator, bank, door service company, auto parts, carpet cleaning, dentist, attorney, insurance agency, auto repair, model train business, tae kwon do academy, home improvement business, vision specialist, Realtor and others.

“The group started out that way, one of each to get a best of the best grouping,” Butterbaugh said.

Businesses either reach out to the Bluffs Referral Exchange Group to apply or are recruited by a group member. Either way, the exchange’s board has final say on membership.

“If they meet the quali-fiers, have good reputations and we don’t have such a business in our group, there’s a pretty good chance they’ll be approved to join,” he said.

In many ways, the group

exists solely as a tight-knit community of businesses that seek out each other for help. Butterbaugh mentioned when he needs the carpets cleaned at his office, he knows who to call.

When founded, “some busi-nesses got together to do busi-ness with each other. That’s the original premise. Use each other, refer each other.”

And so when asked, But-terbaugh often refers busi-

nesses within the group.“It’s nice for me to be able

to refer businesses within the group; nice for me, personally, that I’m referring someone who can be trusted. When I give someone a referral, that’s as much a reflection of me as the business I’m referring,” Butterbaugh said. “When other businesses get a refer-ral from a business within the group, that’s special. Every-one respects that referral.”

Exchange Referral Group a fraternity built on trust

Staff photo/Mike Brownlee

John Butterbaugh of Butterbaugh Insurance stands in front of his business. The longtime insurance sales-man is part of the Bluffs Referral Exchange Group, an organization that gathers a diverse mix of businesses that refer each other for business. “You can trust them,” Butterbaugh said of the member businesses, all of which have been around for at least three years.

Choosing a financial adviserhoward k. marcus

world-herald news service

OMAHA – Maybe you took a buyout at age 50. Or perhaps you’re just starting out, with retirement many decades in the future.

No matter your stage of life, you probably could use a financial planner.

Lance Jones, immediate past president of the Finan-cial Planning Association of Nebraska, recommends find-ing one as early as possible.

A key time is when people marry and start a family.

“I think it’s really impor-tant to sit down with a finan-cial planner who can help them understand what they should be thinking about in regard to retirement plan-ning, estate planning, insur-ance planning and education savings,” he said.

Finding a planner is a pro-cess, from gathering a list of potential advisers to talking with those whose skills seem to match your needs.

How many planners should you interview?

“As many as it takes until you’re extremely comfortable with one. It could be one, it could be a handful. I don’t think there’s a magic num-ber,” Jones said.

As you look for a planner, gather recommendations from family and friends.

“If someone that you know and trust tells you that they’ve been working with a planner who they trust, who’s doing what’s best for them and has done well for them for quite a while, I think that’s a heck of a reference,” Jones said.

“Without absolute trust in the adviser, knowledge means nothing, which is why ref-erences are so critical. I’ve got great clients because the majority of them have been referred by other clients of mine.”

Compensation is one sub-ject to broach while talking with prospective advisers. Generally speaking, advisers are paid through commis-sions, advisory fees or a com-bination of both.

“I would say, <45>How are you compensated?’ And the adviser better be very transparent,” Jones said. “You should expect that as a client. However, if someone comes into my office and the first question is <45>What are your fees?’ that can be a red flag. Because it often means that fees are all they’re going to be focused on, and they’re not going to see the true value.”

In the end, choosing a financial adviser comes down to finding someone you trust who has the skills to invest your money appropriately.

“The adviser, or hopefully the team that’s supporting that adviser, must have exten-sive knowledge in all areas of financial planning: retirement income planning, estate plan-ning, risk management, etc.,”

he said.The adviser also must

understand your expectations and objectives.

“If the planner believes that your expectations and objectives are not realistic, then the planner must tell you that upfront,” Jones said. “That’s key for a good rela-tionship between a planner and a family.”

Once you select a planner, expect to engage in sometimes lengthy discussions about retirement income needs, cur-rent insurance coverage and the like.

How much time?“For me, it varies quite a

bit. Every client has different needs. A young couple in their 20s or 30s, I might meet with them upfront for a couple of hours, and then once a year. But a couple who is a year away from retirement, I might meet with them once or twice a month for that year,” Jones said.

“It’s not all about how much money they have, either. It’s about their concern for their family’s financial situation, and their willingness to take the steps to get where they want and need to be. I want our expectations to be on the same level. I don’t want there to be any surprises.”

howard k. marcusworld-herald news service

Take the time to understand what training an adviser has.

If you don’t know a CFP from a CIC, you’re not alone. To many potential investors, the designa-tions some financial advisers use can be confusing.

“Most people, to be honest, will not know one designation from another. It’s an alphabet soup,” said Jack Herstein, assistant director of the Nebraska Department of Banking and Finance.

In Nebraska, the department must approve financial designations before advisers can use them on business cards, stationery and in advertis-ing materials.

“We look at everything which is sent to us,” Herstein said. “Whatever the consumer is buying, that’s what we review.”

All booklets, pamphlets and brochures relating to a designation are examined, as are the tests required to obtain the designation and any con-tinuing education needed to keep it.

“What’s the coursework include? The books, what do they cover? How detailed are they? We review everything,” Herstein said.

“We look at the type of training. Is it two-day training, three-day training, or does it take several months or a couple years to complete?” he said.

The range of approved designations is broad, from those that take nine years to finish to those that can be obtained in three or four days.

Herstein has a suggestion for consumers who find that a potential adviser is using a designation that has not been approved.

“They should probably give us a call,” he said. “Because No. 1, the individual can get into trouble, and the firm can get into trouble because the firm should be approving the individual’s designation.”

Regardless of any designations a potential adviser uses, Herstein said consumers have access to resources that can help them learn more about a potential adviser’s background.

“Do your own due diligence on the individual who’s trying to sell you something, whether it be insurance products, securities or what. We can run a background check on anybody we have registered here, and we have 87,000 individuals registered to sell or give advice on securities,” he said.

“We can tell you their background. We can tell you exactly what designations they have. We can tell you their history, their financial history -- how long they’ve been in business. Have they ever been in trouble? Have they ever been arrested? Felo-nies? Bankruptcy? We have those records. It’s all public information.” The department has approved about 40 financial designations. Others are under review.

“It’s always an ongoing process,” Herstein said.

Financial designations can be alphabet soup

Ashlee CoffeyACoffey@nonpAreilonline.Com

In today’s high tech world, many businesses are finding social media to be beneficial in marketing their services.

Social media marketing, according to Sue Pitts, center director of the Iowa Western Small Business Development Center at Iowa Western Com-munity College, is the process of engaging prospects and cus-tomers, and acquiring traffic and visibility through social media sites such as Facebook, Twitter, LinkedIn, Pinterest, Google+, YouTube and Insta-gram, among others.

“Social media marketing is ‘word of mouth on steroids,’” Pitts said. “It enables busi-nesses to share interesting and pertinent information about their business and industry and have that shared again and again via friends and cus-tomers.”

Pitts said she believes social media marketing is an impor-tant – and necessary – compo-nent of running and market-ing a successful small business today.

The positive aspect of social media is that it provides the opportunity to engage a busi-ness’ audience, Pitts said.

“They will ‘like’ or ‘follow’ (your business) and comment or converse with you if you are giving them something they want,” she said. “They will not interact and could possibly ‘unlike’ you if your business only gives them what you want them to know. Your sales, newest product, new employ-ees and accomplishments are nice but not necessarily social media worthy.”

Pitts suggests limiting advertorial posts that directly promote a business to no more than 5 to 10 percent of the business’ updates.

To engage its audience through social media, a busi-ness should ask itself what

would make its customers engage with them. This could include free items, deals, dis-counts and contests.

“This will drive likes and shares but should also only be a small portion of your con-

tent,” she said. “If you offer too many deals, your followers will become bored and you could go broke.”

Businesses can also use their social media outlets to offer tips, advice and statis-

tics about the business or the industry as a way to engage their audience’s interest.

It’s free to sign up for any social media but it does, how-ever, take time to maintain and someone to monitor and

update it, she said.“To keep the time manage-

able, I suggest starting with the most relevant network to your target market first,” she said. “Make a plan of what you will be posting, how often – and implement it. Businesses should also make sure they are paying attention and respond-ing to comments, etc.”

After a business establishes itself within the social media world, they can choose to uti-lize social media advertising and pay to have an advertise-ment on Facebook or other social networks.

While social media is impor-

tant and beneficial to a busi-ness, it shouldn’t be the only thing a business uses, she said. Other traditional forms of marketing include email, tradi-tional media such as newspa-pers and television, a website, a blog, public relations efforts and offline networking.

“Social media just helps everything else work better,” she said.

Southwest Iowa small busi-nesses looking to get started with social media marketing can utilize the Iowa Small Business Development Center as a free resource by calling (712) 325-3350.

Sunday, January 20, 2013 3FThe Daily Nonpareil Business and Finance

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How social media can help area businesses

The positive aspect of social media is that it provides the opportunity to engage a busi-ness’ audience, according to Sue Pitts, center director of the Iowa Western Small Busi-ness Development Center at Iowa Western Community College.

Pitts: Social media marketing is an important – and necessary – component of running and marketing a successful small business today

A new year not only brings a host of new opportunities, but it also brings a host of familiar obligations. One such obliga-tion is paying taxes, which doesn’t have to be done until mid-April. But waiting until the last minute with respect to taxes can make the pro-cess even more difficult, and putting it off certainly won’t help those people who vowed to stop procrastinating in the new year.

Getting a headstart on tax season can be beneficial in numerous ways, not the least of which is avoiding the last-minute rush to file your return come the filing deadline. Even if you have yet to receive your W-2 (which you should have in hand by January 31), there are steps you can take to get ready for the coming tax season.

• Gather your documents. Your W-2 is likely not the only document you will need to prepare your tax return. Statements regarding your investments, student loan pay-ments, mortgage and a host of other documents might be necessary for you to fill out your return. You should start receiving these documents in January, so gather them as they come in and keep them in a convenient place. This will ensure you don’t get frustrated when filling out your return while increasing the chances you earn all of the credits and deductions you deserve.

• Examine past returns. Many people have ques-tions when filling out their tax returns, but those who

wait until the waning days of tax season to prepare their returns ignore those questions in an effort to make the fil-ing deadline. When you start preparing for tax season early, examine past returns and see if there are any questions you wanted to ask in the past that you didn’t have time for. Write these questions down as you comb through your past returns and bring the questions to your tax preparer when the time comes. If you don’t plan on hiring a profes-sional to prepare your taxes, you can contact the IRS with your questions, and the earlier you do so, the more quickly you are likely to have your questions answered.

• Take your time. When you decide to get an early start on your taxes, you allow yourself to take your time preparing your return. This reduces the likelihood of getting stressed when filing your return. Many people get a bit nervous when filing a tax return, but that stress can be even greater if

you leave everything until the last minute. If you’re starting early, take your time when working on your return and don’t succumb to any potential stressors.

• Consider hiring a pro-fessional. Starting early also gives you an opportunity to determine if preparing your own return is too tall a task. If that’s the case, consider hiring a professional to prepare your return. If you decide to hire

a professional, do so early so that person has more time to devote to your return. If you wait too long, chances are the tax preparer will be buried with many other customers’ returns and won’t be able to devote as much time to prepar-ing your return as you would like.

More information about getting ready for tax season is available at irs.gov.

– Metro Creative Connection

4F Sunday, January 20, 2013 The Daily NonpareilBusiness and Finance

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Deciding which financial institution is right for you

TIM ROHWERTROHWER@nOnpaREIlOnlInE.cOM

When it comes to depos-iting their hard-earned money, seeking a loan or meeting other financial needs, people have a choice – traditional banks or credit unions.

Both share many services in common, yet each offers its own special advantages, according to those represent-ing the two institutions.

“There are a lot of simi-larities,” said Jan Kounkel, president of UP Connection Credit Union. “Banks and credit unions offer the same products and services, yet the difference to the con-sumer are in the form of fees and services.”

Service fees are normally lower at credit unions, Koun-kel said. For example, fees imposed when checks are returned due to insufficient funds are generally $30, whereas banks can charge up to $45, she said. Credit unions also offer overdraft privilege programs that allow members to overdraw their checking accounts within pre-established lim-its.

Concerning their check-ing accounts, members have the choice of paying a fee for this service and getting interest on their money in return. Or, if they’re not interested in that, then no fee is required.

“Our interest rates on investments like CDs are better than banks’,” Koun-kel said.

Securing a loan can be faster through a credit union,

she added. In some cases, the loan can be approved with the money available the same day as the request, Kounkel said.

Like banks, credit unions have boards of directors, but these individuals are all vol-unteers.

“They have a vested inter-est,” Kounkel said. “And, the members can vote for the board of directors.”

Accounts are also insured up to $250,000, she added.

“There is a lot of informa-tion consumers don’t know about credit unions,” Koun-kel said.

Banks can keep money safe, as well as providing all of the services of credit unions like checking and savings accounts, loans and investment opportunities like a CD.

“For the consumers, they can get the same products and services from either institution,” said Sharon Presnall, spokeswoman for the Iowa Bankers Associa-tion.

One advantage for banks is that their cap when it comes to commercial loans is higher than credit unions’, she said.

The biggest difference, however, involves taxes that banks must pay, while credit unions don’t have to, she said. When credit unions were cre-ated back in the 1930s, they were exempted from paying federal income taxes as an incentive to serve people of lower incomes. Today, they continue to receive that fed-eral tax exemption and pay only a small amount in state taxes, she said.

There may have been some positive side effects to come from the downturn that began in 2008: It taught many people how to survive in the face of decreased cash flow and limited jobs.

According to a report from the American Bankers Association, credit card customers are now more respon-sible than they have been in more than 10 years. The association found that delinquencies on credit cards issued by banks have dropped considerably – to the lowest level since 2001. Delinquent bank account num-bers are now hovering at 2.93 percent of all bank card accounts, which is much lower than the 15-year average of 3.91 percent. The Federal Reserve Bank of New York identified similar findings and also discovered that credit inquires also fell for the second quarter in a row in 2012.

– Metro Creative Connection

Did you know?

What you need to know for tax season in 2013

Gold, silver and other pre-cious metals have been used as currency throughout his-tory. Paper money is a rela-tively recent method of pay-ment.

Gold and silver still have a position of great financial importance in today’s market. With the value of a dollar fluc-tuating, precious metals may make a more stable invest-ment. But investors who plan to investigate gold and silver should consider a few things before making their decision.

• Look into bullion. Gold and silver bullion are made from 99 percent of the total metal. This helps stabilize the cost and is not dependent on some of the fees or price fluc-tuations resulting from coins issued by various government institutions. Investing in bul-lion can be expensive and will require a high initial invest-ment outlay. Also, you will have to find a secure method of storing and protecting the metal.

• One of the easiest and safest ways to invest in gold and silver is to buy coins. These will be minted from pure metals and are often issued through government-backed mints.

• Consider mutual funds. Rather than purchasing gold or silver outright, you can invest in mutual funds that

then allocate a bulk of the fund’s investment into the purchase of gold or silver.

• While you may not get

the full value of the jewelry, you can take advantage of the rising rates of gold and silver by selling off items you may

not use. Selling extra jewelry requires little work on the part of the seller.

– Metro Creative Connection

A struggling economy can have both instant and long-term consequences. When the economy is suffering, con-sumers tend to spend less in the short term while making financial decisions that affect them over the long haul.

One of the biggest quan-daries men and women face during a recession or economic downturn is how to approach their retirement accounts, most notably a 401(k). When the economy begins to struggle, men and women may notice their 401(k) plans are strug-gling right along with it, losing money that most were count-ing for their retirements. This can induce a certain degree of panic, as account holders worry about their financial futures and how they are going to get by should the reces-sion last and their retirement accounts continue to shrink.

But such panic might be unwarranted. According to the investment management firm Vanguard, participant saving and investing behavior had returned to prerecession lev-els by 2010, and participant account balances actually rose 13 percent between 2005-2010, despite the considerable mar-ket shock that occurred dur-ing the recession of 2008-2009. Those figures illustrate that even during a particularly bad economic swoon investors will return to their typical behav-ior sooner rather than later. Therefore it pays to avoid overreacting at the onset of a downturn and maintain your peace of mind.

While some people manage to maintain a cool head during times of economic struggles, others may lose sleep when the next recession or down-turn rears its ugly head. To avoid succumbing to such stress, consider the following tips to protect your retirement accounts should the economy once again take a turn for the worse.

• Pay attention to your portfolio. Young people just beginning their professional careers are often told to enroll in a 401(k) program as soon as possible, but to avoid mak-ing any changes in the near future once the account has been set up. While no inves-

tors, young or old, should allow a knee-jerk reaction after a bad financial quarter to dictate how they manage their retire-ment accounts, that doesn’t mean you should ignore an account entirely. Pay atten-tion to your portfolio, examin-ing it at least once per year so you can make adjustments to your investments if need be. Just don’t allow a sudden reaction to a bad quarter dic-tate these adjustments, which should only be made after a careful examination of your retirement account’s portfolio and its performance. If you’re happy with the performance, don’t change a thing.

• Reduce your risk as you age. Financial experts can

often predict when the econ-omy will thrive and when it will struggle. But unless you are such an expert, avoid playing with fire. As you age, reduce your risk with regard to your investments. Young peo-ple can afford to take on more risk because they have more time to make up for a risk that doesn’t work out. Men and women age 50 and older have no such luxury and should reconfigure their retirement accounts as they age so their investments are less risky and more conservative. This strategy should be put to use even if you lost a substantial amount of money during a pre-vious recession or downturn. It might be tempting to try to

make up for lost money, but that strategy carries consider-able risk, and you might end up depleting your retirement savings a second time.

• Spread the money around. When contributing to a retire-ment account such as a 401(k), the standard is to deposit 6 percent of each paycheck into that account. If you’re deposit-ing more than 6 percent into your retirement account, con-sider decreasing your retire-ment contribution to the stan-dard amount and depositing the extra money into a high-interest savings account. The savings account won’t put your deposits at risk, and if the economy is faring well, you will still be doing well with your

401(k) while ensuring some of your money won’t suffer should the economy suddenly take a turn for the worse.

• Don’t cash out too early. When the economy struggles, many investors have discov-ered they simply don’t have the stomach for investing. That’s perfectly understandable with certain investments, but a retirement account should not be one of them. Cashing out a

retirement account too early could incur substantial penal-ties that, if your retirement account was affected poorly by a bad year, may only further deplete an account you likely spent years building.

Avoid the temptation to cash out early if your retire-ment account is struggling. It’s often not worth the steep price.

– Metro Creative Connection

Sunday, January 20, 2013 5FThe Daily Nonpareil Business and Finance

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What to do with your retirement account before the next economic downturn

Protecting your financial future

Submitted photo

Investors age 50 and older should begin to reduce the risks associated with their retire-ment accounts, choosing more stable investments as they age.

How to invest in gold and silver

MARCY GORDON AP BusiNess WRiteR

WASHINGTON (AP) – U.S. banks are ending the year with their best profits since 2006 and fewer failures than at any time since the financial crisis struck in 2008. They’re helping support an economy slowed by high unemploy-ment, flat pay, sluggish man-ufacturing and anxious con-sumers.

As the economy heals from the worst financial crisis since the Great Depression, more people and businesses are tak-ing out – and repaying – loans.

And for the first time since 2009, banks’ earnings growth is being driven by higher rev-enue – a healthy trend. Banks had previously managed to boost earnings by putting aside less money for possible losses.

Signs of the industry’s gains:

• Banks are earning more. In the July-September quar-ter, the industry’s earnings reached $37.6 billion, up from $35.3 billion a year earlier. It was the best showing since the July-September quarter of 2006, long before the financial meltdown. By contrast, at the depth of the Great Recession in the last quarter of 2008, the industry lost $32 billion.

• Banks are lending a bit more freely. The value of loans to consumers rose 3.2 percent in the 12 months that ended Sept. 30 compared with the previous 12 months, accord-ing to data from the Federal Deposit Insurance Corp. More lending fuels more consumer spending, which drives about 70 percent of economic activ-ity. At the same time, overall lending remains well below levels considered healthy over the long run.

• Fewer banks are consid-ered at risk of failure. In July through September, the num-ber of banks on the FDIC’s confidential “problem list” fell for a sixth straight quarter. These banks numbered 694 as of Sept. 30 — about 9.6 per-cent of all federally insured banks. At its peak in the first quarter of 2011, the number of troubled banks was 888, or 11.7 percent of all federally insured institutions.

• Bank failures have declined. In 2009, 140 failed. In 2010, more banks failed – 157 – than in any year since the savings and loan crisis of the early 1990s. In 2011, regulators closed 92. This year, the number of failures has trickled to 51. That’s still more than normal. In a strong

economy, an average of only four or five banks close annu-ally. But the sharply reduced pace of closings shows sus-tained improvement.

• Less threat of loan losses. The money banks had to set aside for possible losses fell 15 percent in the July-September quarter from a year earlier. Loan portfolios have strength-ened as more customers have repaid on time. Losses have fallen for nine straight quar-ters. And the proportion of loans with payments over-due by 90 days or more has dropped for 10 straight quar-ters.

“We are definitely on the back end of this crisis,” says Josh Siegel, chief executive of Stonecastle Partners, a firm that invests in banks.

The biggest boost for banks is the gradually strengthening economy. Employers added nearly 1.7 million jobs in the first 11 months of 2012. More people employed mean more people and businesses can repay loans. And after better-than-expected economic news last week, some analysts said the economy could end up growing faster in the Octo-ber-December quarter – and next year – than previously thought.

That assumes Congress and the White House can strike a budget deal to avert the “fiscal cliff” – the steep tax increases and spending cuts that are set to kick in Jan. 1. If they don’t reach a deal, those measures would significantly weaken the economy.

Banks have also been bol-stered by higher capital, their cushion against risk. Banks boosted capital 3.8 percent in the third quarter, FDIC data show. And the industry’s aver-age ratio of capital to assets reached a record high.

On the other hand, many banks are no longer benefit-ing from record-low interest rates. They still pay almost nothing to depositors and on money borrowed from other banks or the government. But steadily lower rates on loans other than credit cards have reduced how much banks earn.

“This interest-rate pressure

on the banks becomes very dif-ficult to overcome,” says Fred Cannon, chief equity strate-gist and director of research at Keefe, Bruyette & Woods. “It’s a big headwind for banks.”

Many banks have reported lower net interest margin – the difference between the income they receive from loans and the interest they pay depositors and other lend-ers. It’s a key measure of a bank’s profitability.

The industry’s average net interest margin fell to 3.43 percent in the third quarter from 3.56 percent a year ear-lier.

Some big banks have also cautioned that their earn-ings are up mainly because they’ve shed jobs, bad loans and weak businesses rather than because of an improved economy. They include JPM-organ Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. All managed to recover from the financial crisis in part because of federal aid.

Small and midsize banks have taken longer to rebound. They held risky commer-cial real estate loans used to develop malls, industrial sites and apartment build-ings. Many such loans weren’t repaid. But as the economy has strengthened, fewer such loans have soured, and many small and medium-size banks have recovered.

For example, at M&T Bank Corp., a regional institution based in Buffalo, N.Y., net income soared in the third quarter. M&T attributed its gain to reduced loan losses and higher mortgage revenue. The bank repaid the remain-ing $381 million of the $600 million in bailout aid it had received during the crisis.

Yet analysts say regional banks are still feeling squeezed from reduced bor-rowing by companies.

Many banks complain they’ve been hampered by new regulations, especially stricter requirements for the capital they must hold to protect against unexpected losses. Rules enacted after the crisis have compelled some banks to move more capital into reserves and reduce the amount available to lend.

Some of the biggest banks say their customers have held off on borrowing in part because of slower global growth and concern about the “fiscal cliff.”

To avoid a collapse, some weak banks have sought mergers with larger institu-tions. In the July-Septem-

ber quarter, 49 banks were absorbed in mergers, up from 45 in the April-June quarter, FDIC data show.

The torrent of failures after the crisis and the increased mergers have thinned the number of banks to 7,181 with about 2.1 million employees as of Sept. 30. That compares with 8,451 banks with 2.2 mil-lion employees in the second quarter of 2008.

“The pressure is on to con-solidate the industry,” says Siegel of Stonecastle Partners. He thinks more than 1,000 banks will be absorbed within five to seven years.

Consider BancTrust Financial Group Inc., based in Mobile, Ala., with around $1.3 billion in assets. Bur-dened with bad loans tied to Florida real estate, the bank couldn’t repay $50 million in federal bailout aid it received during the meltdown, and it struggled to stay profitable. So it decided to put itself up for sale.

It’s now being acquired by Trustmark Corp in Missis-sippi, which has about $9.9 bil-lion in assets. The acquisition will help Trustmark expand in Florida and Alabama.

“Some of the smaller (banks) are just throwing up the flag,” says Cornelius Hur-ley, a former counsel to the Federal Reserve Board who heads Boston University’s Center for Finance, Law and Policy.

6F Sunday, January 20, 2013 The Daily NonpareilBusiness and Finance

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A ‘cliff’ of your own?

The big headline was: Congress Avoids Fiscal Cliff. True, the deal avoided a sud-den tax-and-spending shock – the “cliff” – for the U.S. economy. But millions of taxpayers now will experi-ence mini-cliffs of their own. And there’s the prospect of more bumps to come as Congress keeps wrestling to control the federal budget. If you haven’t been following the bewildering intricacies of the debate, here’s a snapshot of how you may be affected:

Work for a paycheck?Take a look at your first

pay stub of 2013: If Social Security is deducted from your check – as it is for most workers – you’ll see the bite is bigger.

Two years ago, to stimu-late the economy, lawmak-ers and the president tempo-rarily cut the Social Security payroll tax from 6.2 to 4.2 percent. The cliff deal let that “tax holiday” expire.

Result: The tax goes back up and your take-home pay shrinks. For a typical $50,000-a-year worker, the change means $83 less a month.

Pay income taxes?This was the center-stage

item. The cliff deal shields 99 percent of Americans from a tax rate hike. The rest, those at the upper end – yearly income over $400,000+ for individuals, $450,000+ for couples – will see their top rate go up, from 35 percent to 39.6. Folks in this income group also will see a tax hike on their capital gains and dividends, from 15 percent to 20 percent. And, thanks to health care reform, they will see a new surtax of 3.8 per-cent on their capital gains, as well.

Heard of AMT?That’s the Alternative

Minimum Tax, part of a 1969 law intended to make sure the rich can’t use loop-holes to elude income taxes altogether. But because it lacked a built-in inflation adjustment, each year it threatened to ensnare more middle-class taxpayers, requiring Congress to adjust it.

Fear no more. The cliff deal added a permanent inflation adjustment.

Other income tax changes?

There were lots of tweaks, as usual. The cliff deal con-tained none of the “tax reform” and “tax simplifica-tion” that politicians have promised for years – though pressure for that might increase in this year’s bud-get battle.

The cliff deal’s grab bag of changes includes new limits on deductions and exemptions for people with $250,000+ income.

Inheriting a big estate? Or leaving one?

After years of dispute over estate taxes, the cliff deal preserved exemption of the first $5 million in inheri-tance (a decade ago it was $1 million). But on very large estates, the top tax rate rises from 35 percent to 40 per-cent.

What about special-interest tax breaks?Yep, there are dozens,

even though politicians love to denounce them in principle. There are goodies for movie producers. Wind farms. Biodiesel. Plug-in autos. Builders at Ground Zero in New York. Rum dis-tillers.

Out of a job?Extended unemployment

benefits are still available. When the Great Reces-

sion hit, Congress tacked extra benefits onto state unemployment programs, which usually pay for just six months. The federal add-ons – which can make ben-efits last nearly two years in high-unemployment areas – were set to expire but now have been extended for another year.

What’s next?Expect lots more wran-

gling soon. The basic bud-get problem remains: The government spends far more than it takes in. Republicans vow a new assault on spend-ing, especially on entitle-ment programs that make up the biggest share of the budget. For leverage, they are likely to use the need to raise the debt ceiling, which is the national borrowing authority. Democrats say the fight for greater tax pro-gressivity – making the rich pay more – isn’t over.

– World-Herald News Service

Fewer banks failing as industry strengthens

Submitted photo

Banks are lending a bit more freely. The value of loans to consumers rose 3.2 percent in the 12 months that ended Sept. 30 compared with the previous 12 months, according to data from the Federal Deposit Insurance Corp. More lending fuels more consumer spending.

“We are definitely on the back end of

this crisis.” – Josh Siegel

chief executive Stonecastle Partners

Sunday, January 20, 2013 7FThe Daily Nonpareil Business and Finance

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Cindy Gonzalez World-Herald neWs serviCe

OMAHA – Baltazar Sauceda just bought three high-tech cutting machines to outfit a $1.75 million facil-ity that will replace one that can’t keep up with demand for his natural stone used in fire-places and landscaping.

Husker Siding, Windows & Roofing expects to hire three more sales reps whose base will be a new two-story show-room and lab that shows prod-ucts in action.

Meanwhile, Dave Janke Plumbing is busy devising how to replenish skilled trade work-ers.

From mason shops to build-ers, many businesses that adapted during some of the worst years of the construction industry now are reaping ben-efits of a re-energized housing market. While the industry is not back to pre-recession levels a bonanza most doubt they’llנsee again – those who survived say they emerged smarter and prepared for a new year they believe will match or exceed the upturn of 2012.

“Every day, it’s been a step up,” said Sauceda, whose Baltazar’s Stone operation had record sales last year. “I didn’t expect it to be as good.”

Consider these year-end highlights for the Omaha-Council Bluffs metro area:

• For the first time since 2005, the annual number of building permits issued for new single-family houses went up instead of down. City plan-ning records compiled by the Greater Omaha Chamber of Commerce showed a 5 percent increase over 2011.

• Growing at a faster pace was the amount of permits for new apartments, up 25 percent over 2011.

• Jumping 17 percent since 2011 was the sale of existing homes, transactions that often involve property renovations.

Elliot Eisenberg, a Washing-ton, D.C., economist formerly with the National Association of Home Builders, said the national market is rebounding as well, although at a slower pace than in the more conser-vative Omaha market, which didn’t have extreme swings.

“After so many years of being a drag on economic activ-ity, housing is now the fair-

haired child,” along with the auto and energy industries, Eisenberg said.

The good news for the broader community, he and others said, are the rip-ple effects. According to the National Association of Home Builders, for every 100 homes built, an estimated 324 short-term jobs and some $23 million flow into a local community.

“From the moment the ground is dug up to the final landscaping, so many people touch a house,” Eisenberg said. “Moreover, these people who touch a house spend money. They’re buying gasoline, get-ting their hair cut, going to a local restaurants. Add these up and you’ve got a tremendous amount of jobs.”

Jason Henderson, an Omaha economist with the Federal Reserve Bank, said the positive signs he’s seeing will mean job growth and wage gains and a stronger metro economy in 2013.

Among signs he noted: Peo-ple are selling houses quicker (average time on the market in 2012 was 65 days, down from 72 the previous year). Realtors are seeing bidding wars again. Contractors are going back to work. New homeowners are buying furnishings.

“Those are all positive signs,” Henderson said.

Record low interest rates and housing prices are helping to drive the recovery, said Judd Cochran, regional manager of U.S. Bank Home Mortgage in western Iowa and Nebraska.

In volume, Cochran said 2012 was the best year his region had since he took over in 1998 -- and that was with-out a federal stimulus package that boosted business in pre-ceding years.

His Omaha region saw a 15 percent increase in loans for newly constructed or existing home sales, Cochran said, and a similar hike in home refi-nancing business from 2011.

Reflecting, in part, the housing uptick, U.S. Bank in Omaha also saw an 18 per-cent increase in small business lending in the first three quar-ters of 2012 compared with the same 2011 period.

“We’re seeing a renewed injection of capital back into businesses by owners for equipment, lines of credit for payroll, things of that nature,” said Travis Havlovic of U.S. Bank. “We’re happy to see they’ve made it through some tough times.”

Nancy Sempek, who bought Christensen Drywall Construc-tion Co. from her dad, said she noticed a “big change” in busi-ness in 2012. That’s across the spectrum, she said, as her cli-ents include low-income hous-ing for Habitat for Human-ity as well as million-dollar homes.

A chunk of business for the 64-year-old family drywall company, said Sempek, came from residential renovation projects.

Tom Allen, operations manager for Husker Siding, Windows & Roofing in the Elkhorn area, said his firm also dealt with an increased number of homeowners with enough renewed confidence in the housing market to upgrade properties.

“That’s been a real shift,” said Allen, a former mortgage officer. “Homes are a good investment again. No longer is there that crushing fear that houses are going to be upside down, and no way out.”

The 15-year-old Husker Siding, meanwhile, changed its business model, Allen said, and focuses more on refer-ral business from Realtors, lenders and others who work directly with homeowners. He said that emphasis, along with a two-story showroom made to mimic a small village, is expected to pay off in as much as a 20 percent increase in sales.

Last year, Husker saw a 5 percent increase in sales, said Allen, even without hail-related storms that helped the previous year.

Kent Wirges, president of Dave Janke Plumbing, said that while his company is “nowhere near” its 2009 peak, it nearly doubled the amount of new homes it worked on in 2012 compared with a lacklus-ter 2011.

The company cut back from 75 to 45 workers during the slowdown. Wirges said he’s holding off on sizable change until there is clarity on how the health care law and other changes will affect the com-pany. But in anticipation of more work this year, particu-larly in new apartment com-plexes, Wirges and others in the building trades are explor-ing ways to beef up the skilled labor stream.

“There is business out there to be had,” said Larry Peterson of Larry Peterson Construc-tion. He said his contracting business had to turn away work last quarter because of a shortage of qualified framers.

Henderson, the economist, said laid-off craftsmen were forced into other industries after the housing collapse. He said firms now are compet-ing to draw workers back, and training programs likely will be needed.

Despite negative aspects, merchants said the downturn forced them to sharpen opera-tions.

Sauceda added a manu-facturing arm to supplement installation jobs. He marketed his customized natural stone products in other states. He expanded inventory and dis-

play space to show custom-ers what a new stone-accented fireplace or facade could look like.

The masonry operation that started in a house in the mid-2000s is expected to move next summer to seven acres Balta-zar is buying near Sapp Bros.

The immigrant son of a Mex-ican stone worker, Sauceda said that while a rebounding housing market was key to increased demand, his sur-vival didn’t come without long work days and family sacrifice. The company ended 2012 with record gross revenue of about $3 million.

Sauceda says the proposed warehouse would have eight times the outdoor and more than twice the indoor space as the current building at 14981 Grover St.

“At one point we thought we were going to have to close the doors,” he said. “Now here we are.”

Housing tide lifts businessesWHNS

Baltazar Sauceda started Baltazar’s Stone in Omaha. Sauceda came to Omaha after the housing market in Des Moines collapsed.

Is this a good time to refinance?

There may never be a bet-ter time than now to refi-nance your home.

“This past year we saw tremendous loan volume in real estate lending. Histori-cally, there have been very few periods where people could borrow long term money as inexpensively as has been the case recently” said Gary Matters, president and CEO of Frontier Savings Bank.

Some borrowers think that it doesn’t make sense to refinance if they can’t save a certain percentage on their rate. That may not neces-sarily be true since it can be different for everyone.

“At Frontier Savings Bank, we offer a no cost break-even analysis for any-

one who is trying to decide if r e f i n a n c -ing may be right for them. Armed with a few perti-nent pieces of informa-tion about their cur-

rent mortgage, we will show them how many months it would take them to recoup their closing costs,” said Mariel Wagner, vice presi-dent and mortgage lender. “Borrowers who anticipate living in their current home for a long time may have a 60 month break-even and it still makes sense for them to refinance. Other borrowers who anticipate downsizing in the next few years may decide that an 18-month break-even doesn’t make sense for them.”

Reducing the interest rate is just one consider-ation. Borrowers may also change the term of their

mortgage loan. Reducing the term could save thousands of dollars in the long run; just as increasing the term could make their home more affordable.

Some borrowers may be waiting for rates to go down even further. Said Matters, “No one can tell you what will happen to rates with any degree of certainty. In today’s 30-year mortgage rate environment, for every one-eighth of a percent dif-ference on a $100,000 mort-gage loan, your payment will change less than $7 per month. That is typically not a lifestyle changing differ-ence.”

Said Wagner, “Now is a great time to see if refinanc-ing your home would be a good financial decision for your own personal situa-tion.”

Ripple effects of a re-energized market are wide-ranging

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“This past year we saw tremendous loan volume in real estate lending. Historically, there have been very few periods where people could bor-row long term money as inexpensively as has been the case recently” said Gary Matters, presi-dent and CEO of Fron-tier Savings Bank.

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