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Archive for the ‘Personal Loans’ Category

If you are like most consumers, you make regular monthly payments on a variety of personal loans. These personal loans may be secured loans like a home mortgage or logbook loans, and they may be unsecured loans like credit cards and certain types of bank loans. Managing these loans involves ensuring payments are made on time, ensuring the debt you carry does not negatively affect your credit rating and paying them off in the most strategic way possible. Here are a few top tips for better managing your many personal loans:

Automatic Payment Options

All loans will require you to make regular payments, and these payments typically will be allocated towards interest charges as well as pay down of principal debt balances. With some types of loans, such as credit cards, failure to make the payments on time may result in an interest rate hike. Late fees will be assessed on most types of loans if a payment is not made by the due date, although some loans do have a grace period associated with them. Further, making payments late may lower your credit rating. It is in your best interest for many reasons to make monthly payments on time. One way to ensure this happens each and every month is to schedule automatic payments. This can be done through the use of a bill pay feature with online banking or by contacting each of your lenders to establish an automatic payment plan.

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Concentrate on Paying Off One Loan at a Time 

While only the minimum scheduled payments are due each month on a loan, it is in your best interest to pay the loan balances off more quickly. If your budget allows you to pay additional money towards loan payments, it is best to concentrate on paying off one loan at a time. Consider focusing on unsecured debts first, such as credit cards. Some people find it beneficial to pay off a high interest account first while others find it more motivating to focus on an account with a lower balance. Paying accounts off earlier than scheduled reduces the amount of interest you pay over the life of the loan. Keep in mind that some interest, such as on student loans and home mortgages, may be tax deductible. So it may be advisable to pay these balances off after other debts have been paid off.

Understand Consolidation Options and Benefits

Many people make numerous monthly payments on debts each month. It can be a chore to keep track of these payments. Further, some of the debts may have disadvantageous loan terms, such as a high interest rate and a revolving term. In some cases, you may benefit from consolidating certain debts. For instance, you may reduce monthly payments and lower total interest charges by consolidating high interest credit card debt into a single, low interest rate personal loan with a fixed term. This is not advantageous in every situation, however. For example, it is not wise to consolidate a credit card with a low balance into a personal loan with a long fixed term, as more interest will be charged on this balance over time. You should review your own financial situation and consider if consolidating some of your own loans may be advantageous to you.

Use Online Financial Tools Regularly

Many people have numerous questions about their finances, and there are various financial tools available online to help you make wise decisions. For instance, you may wonder if it is more advantageous for you to pay off a specific credit card, a student loan or your car loan first. Online calculators can be used to help you determine which option will provide you with the greatest savings in interest charges. This is just one example of many online financial tools that can be used to help you make wise loan management decisions.

Learn How Personal Loans Affect Credit Scores

Your credit rating is important for so many reasons. It affects your ability to obtain affordable financing, and it may also be reviewed when you apply to rent a new home or for a new job. Loan management plays a major role in your credit rating, but how your credit rating is determined is complicated. For example, a credit rating is determined in part by how timely payments are made, the amount of available credit you have access to, your ratio of unsecured debt to secured debt and more. Understanding what these factors are and how your credit rating is affected by them can help you to make better financial decisions.

Personal loan management has significant effects on your life. It can affect your credit rating, your monthly budget and your long-term financial plans as well. Put these tips into action today to improve your own personal loan management efforts.

About The Author

This article was written by Phill representing CompareLogbookLoans.co.uk – an independent financial website where you can compare logbook loans.

Popularity: 1% [?]

Cash Cow Advances is a leading nationwide service provider of cash advances and payday loans.

SAN ANSELMO, Calif., Apr 23, 2012 (GlobeNewswire via COMTEX) –
Consumers are demanding more value in exchange for service fees. Banks and credit unions need to reduce the risks associated with fee choices and balance those factors against the need for incremental income from services. In response, Market Rates Insight, Inc. (MRI,
www.marketratesinsight.com ), a leader in pricing intelligence for deposits, personal loans, mortgages, and fees, has created a unique research study designed to reduce risks and uncertainty and help financial services avoid a repeat of the failed debit-fee attempt, and to uncover value-added services consumers want and are willing to pay for.

Traditionally, decisions on service fees were based on a survey of the competitive landscape. Such an approach is no longer valid due to the increased risk associated with the uncertainty about consumers’ reaction to changes in service fees. The newly designed Integrated Study by MRI combines consumers’ preference and price sensitivity with competitive landscape information for a more balanced approach to decisions on service fees. This first-ever Integrated Study helps financial executives reduce the risk of poor decisions and increases the probability of generating incremental income from services.

This twice-annual Integrated Study is specifically designed to identify new and innovative services that consumers value and are willing to pay for. It is scheduled for release in the second quarter of this year, and will specifically assess consumer preference and perceived value for services such as credit score monitoring, identity theft alerts, mobile banking services, personalized couponing services, person-to-person payments, and other services. The Study will gauge likelihood to use and willingness to buy mapped against demographic data such as age, income, and gender. And the Study includes a review of the same service categories compared to the top five U.S. banks for competitive analyses.

“Financial institutions can no longer afford the risk of arbitrarily deciding on new services or fees,” said Dan Geller, Ph.D. Executive Vice President of Market Rates Insight. “Poor service fee decisions can be very costly in loss of customers, damage to reputation and now involvement of the newly established Consumer Financial Protection Bureau.”

The first Integrated Study on Service Fees is scheduled for release in May 2012. It is being offered as an integrated study across all seven services, or as individual studies on each of the seven service areas. Individual studies will be available on credit score services, identify theft protection, personalized couponing, prepaid reloadable cards, overdraft protection, personal money transfer, and mobile remote deposit capture. Each study features consumer research on preferences and perceived value, as well as demographic segmentation

For more information, contact Market Rates Insight at info@marketratesinsight.com.

About Market Rates Insight

For more than two decades, Market Rates Insight (MRI) has been helping clients price with precision by providing banks, thrifts, credit unions, and other financial institutions with comprehensive market intelligence on deposits, loans, and fees. MRI uses deposit surveys, mortgage and consumer loan surveys, fees and features studies, new product alerts, benchmarking and market share analysis to give subscribers the intelligence needed to strategically position products, optimize pricing and react to emerging trends. MRI’s products include web-enabled, customizable report programming, proprietary product research tools, searchable databases, market alerts, and online dashboards that aggregate key client data to provide real-time interactive views on how they rank against their specific competitors.

Market Rates Insight is located in San Anselmo, California. For more information, see
www.marketratesinsight.com .

Photos available upon request.

This news release was distributed by GlobeNewswire,
www.globenewswire.com

SOURCE: Market Rates Insight

CONTACT: Tom Woolf
Market Rates Insight
(415) 259-5638
tom.woolf@marketratesinsight.com

(C) Copyright 2010 GlobeNewswire, Inc. All rights reserved.

Financial Glossary

Words used in this article:

Cash Cow Advances is a leading nationwide service provider of online cash advances and payday loans.

GASTONIA, N.C., Apr 23, 2012 (GlobeNewswire via COMTEX) –
Citizens South Banking Corporation

/quotes/zigman/89034/quotes/nls/csbc CSBC
+0.44%

, the holding company for Citizens South Bank (the “Bank”), released its unaudited results of operations and other financial information for the three-month period ended March 31, 2012. The Company reported a net loss allocable to common shareholders totaling $2.3 million, or $0.20 per diluted share, for the quarter ended March 31, 2012, compared to a net loss allocable to common shareholders of $1.1 million, or $0.10 per diluted share, for the quarter ended March 31, 2011. The loss was attributable to $6.4 million in loan charge offs resulting primarily from the completion of our internal loan review initiated in the fourth quarter of 2011. Our internal loan review is now complete. The Company’s pre-tax, pre-credit earnings of $3.5 million for the first quarter of 2012 were $905,000 higher than the Company’s pre-tax, pre-credit earnings in the first quarter of 2011.

Other highlights during the quarter included:

— The successful completion of the Bank’s first examination by the Office
of the Comptroller of the Currency (“OCC”).
— Improvement of the Company’s net interest margin to 3.88% for the first
quarter of 2012, an increase of four basis points on a linked quarter
basis, and an increase of 46 basis points compared to the first quarter
of 2011. This represents the second consecutive quarter of margin
expansion for the Company.
— Non-covered past due loans 30 to 89 days delinquent and still accruing
interest totaled $5.4 million, or 0.92% of total non-covered loans, at
March 31, 2012. This represents the fifth consecutive quarter that past
due non-covered accruing loans have been less than 1.0% of total
non-covered loans.
— The Bank’s non-covered classified loans increased by $3.4 million during
the first quarter 2012 to $32.1 million. Non-covered classified loans
had decreased by $6.6 million during the fourth quarter 2011.
Non-covered classified assets, which includes both classified loans and
other real estate owned, increased by $6.5 million to $44.1 million.
— On a linked quarter basis, nonperforming non-covered assets increased by
$6.3 million to $34.0 million, or 3.18% of total assets at March 31,
2012, compared to 2.57% of total assets at December 31, 2011.
— The Company’s non-time core deposits grew by $12.6 million, or 10.9%
annualized, during the first quarter of 2012 to $475.9 million at March
31, 2012.

President Kim S. Price stated, “While disappointed with the loss in the first quarter, we are pleased to have completed our internal loan review and to have completed our first exam by the OCC. Both had an impact on our first quarter results but both reassure us that our balance sheet is strong and that our management has in place the processes to manage assets effectively even in challenging economic conditions. The completion of these two initiatives sets the stage for improved financial metrics and long-term profitability.”

First Quarter Financial Results:

Asset Quality

During the first quarter of 2012 the Company recognized net loan charge-offs of $6.4 million. These charge-offs resulted from re-valuations on some collateral properties and also from resolutions of problem assets where a portion of the loan was charged-off. The elevated level of net charge-offs recognized over the past two quarters is largely the result of an internal loan review which is now complete. Despite the elevated level of loan charge-offs during the first quarter 2012, the Company had an overall increase in nonperforming non-covered assets from $27.7 million, or 2.57% of total assets at December 31, 2011, to $34.0 million, or 3.18% of total assets at March 31, 2012. This increase was largely due to a $3.1 million increase in other real estate owned and a $3.2 million increase in nonaccrual loans. The increase in nonaccrual loans was due to the addition of several real estate loans that have a current payment status, but were placed on nonaccrual status for non-payment related reasons. Also as a result of the items described above, our classified assets, which totaled $37.7 million at December 31, 2011, increased to $44.1 million at March 31, 2012.

Loans and Core Deposits

We are experiencing positive trends in local economic conditions and loan demand continues to improve gradually in our markets. Total non-covered loans increased by $5.7 million on a linked quarter basis, or 4.0% annualized. The Company originated $40.2 million in loans during the first quarter of 2012 and the Company’s loan pipeline remains strong. Management continues to focus on increasing business loans to the professional market, owner-occupied commercial real estate loans, and residential and personal loans. Our realigned lending team continues to be more effective in developing quality business relationships and we are on target with our Small Business Lending Fund initiative which has reduced our preferred stock dividend rate from 5.0% to 1.3%. We expect to continue to expand our small business lending in 2012, which should ultimately reduce our dividend rate to the 1.0% minimum rate.

The Company continues to experience strong non-time core deposit growth. On a linked-quarter basis, non-time core deposits increased by $12.6 million, or 10.9% annualized.

Capital Position

The Company’s capital position continues to be a source of strength. At March 31, 2012, the Bank’s total risk-based, Tier 1 risk-based, and Tier 1 leverage capital ratios were 15.5%, 14.2%, and 9.4%, respectively, compared to 16.7%, 15.4%, and 9.9% respectively, at March 31, 2011. The Bank exceeded the regulatory minimum capital ratios to be considered well-capitalized by 155%, 237%, and 188% for total risk-based capital, Tier 1 risk-based capital, and Tier 1 leverage capital, respectively, at March 31, 2012.

Increasing Net Interest Income and Net Interest Margin

The Company’s net interest income for the first quarter of 2012 increased by $921,000, or 12.2%, as compared to the first quarter of 2011. The primary reason for this growth was a 46 basis point increase in the Company’s net interest margin from 3.42% for the three months ended March 31, 2011, to 3.88% for the three months ended March 31, 2012. The improvement in the net interest margin was due to a 40 basis point decrease in the Company’s cost of funds and a 13 basis point increase in the Company’s yield on assets. On a linked quarter basis, the Company’s net interest margin increased by four basis points. Given the Company’s high level of liquidity, coupled with strong core deposit growth, we have been able to repay maturing time deposits or reprice these time deposits at lower market rates at maturity.

Noninterest Income and Expense

Noninterest income increased by $1.5 million to $2.9 million for the quarter ended March 31, 2012, as compared to the quarter ended March 31, 2011. Excluding the effects of the loss from acquisition ($255,000 for first quarter 2011) and the gain on sale of investments and other assets ($664,000 for first quarter 2012 and $12,000 for first quarter 2011), noninterest income increased by $561,000, or 32.6%, for the first quarter of 2012 compared to the first quarter of 2011. We continue to improve our deposit account revenue and our mortgage banking revenue.

Excluding valuation adjustments and other expenses on other real estate owned ($1,597 for first quarter 2012 and $873,000 for first quarter 2011) and acquisition and integration expenses ($45,000 for first quarter 2011), noninterest expense increased by $560,000, or 8.3%, during the respective first quarter periods. This increase was primarily due to costs related to the Bank’s acquisition of New Horizons Bank in April 2011.

About Citizens South Banking Corporation and Citizens South Bank

Citizens South Bank was founded in 1904 and is headquartered in Gastonia, North Carolina. Deposits are FDIC insured up to applicable regulatory limits. At March 31, 2012, the Company had $1.1 billion in assets with 21 full-service offices in the Charlotte and North Georgia regions, including Gaston, Iredell, Rowan, Mecklenburg, and Union counties in North Carolina, York County in South Carolina, and Towns, Union, Fannin, and Gilmer counties in Georgia. Citizens South Bank is an Equal Housing Lender and Member, FDIC. The Bank is a wholly-owned subsidiary of Citizens South Banking Corporation, and shares of the common stock of the Company trade on the NASDAQ Global Market under the ticker symbol “CSBC.” The Company maintains a website at
www.citizenssouth.com that includes information on the Company, along with a list of products and services, branch locations, current financial information, and links to the Company’s filings with the SEC.

The Citizens South Banking Corporation logo is available at

http://www.globenewswire.com/newsroom/prs/?pkgid=7099

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures. Management believes that these non-GAAP measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under accounting principles generally accepted in the United States (“GAAP”), and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation, or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

Cautionary Statement Regarding Forward-looking Statements

This news release contains certain forward-looking statements which include, but are not limited to, statements of our earnings expectations, statements regarding our operating strategy, and estimates of our future costs and benefits. These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Forward-looking statements speak only as of the date they are made and the Company is under no duty to update these forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements or to reflect the occurrence of unanticipated events. A number of factors could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, changes in general economic conditions — either locally or nationally, competition among depository and financial institutions, our ability to continue to expand our small business lending and thereby reduce the dividend rate on our SBLF preferred stock, the continuation of current revenue and expense trends, significant changes in interest rates, unforeseen changes in the Company’s markets, and legal, regulatory, or accounting changes. The Company’s reports filed from time to time with the Securities and Exchange Commission, including the Company’s Form 10-K for the year ended December 31, 2011, describe some of these factors.

Quarterly Financial Highlights
(unaudited) At and For the Quarters Ended
———————————————————-

2012 2011
———- ———————————————-

December September
March 31 31 30 June 30 March 31
————————————- ———- ———- ———- ———- ———-
(Dollars in thousands, except share
and per share data)

Summary of Operations:
Interest income – taxable
equivalent $ 10,528 $ 11,089 $ 11,308 $ 11,488 $ 10,457

Interest expense 2,016 2,304 2,554 2,826 2,855
———- ———- ———- ———- ———-
Net interest income – taxable
equivalent 8,512 8,785 8,754 8,662 7,602

Less: Taxable-equivalent adjustment 59 65 62 69 70
———- ———- ———- ———- ———-
Net interest income 8,453 8,720 8,692 8,593 7,532

Provision for loan losses 6,300 4,635 1,350 1,700 3,000
———- ———- ———- ———- ———-
Net interest income after loan loss
provision 2,153 4,085 7,342 6,893 4,532
Noninterest income 2,946 1,985 1,990 5,886 1,478

Noninterest expense 8,911 8,779 8,931 9,270 7,672
———- ———- ———- ———- ———-
Net income (loss) before income
taxes (3,812) (2,709) 401 3,509 (1,662)

Income tax expense (benefit) (1,672) (1,172) 28 1,213 (771)
———- ———- ———- ———- ———-
Net income (loss) (2,140) (1,537) 373 2,296 (891)
Dividends and accretion of discount
on preferred stock 122 767 247 256 256
———- ———- ———- ———- ———-
Net income (loss) available to
common shareholders $ (2,262) $ (2,304) $ 126 $ 2,040 $ (1,147)
========== ========== ========== ========== ==========

Per Common Share Data:
Net income (loss):
Basic $ (0.20) $ (0.20) $ 0.01 $ 0.18 $ (0.10)
Diluted (0.20) (0.20) 0.01 0.18 (0.10)
Weighted average shares
outstanding:
Basic 11,469,525 11,470,599 11,462,107 11,455,642 11,491,734
Diluted 11,469,525 11,470,599 11,462,107 11,455,642 11,491,734
End of period shares outstanding 11,506,324 11,506,324 11,506,324 11,506,324 11,508,750
Cash dividends declared $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01
Book value 6.04 6.27 6.44 6.44 6.22
Tangible book value 5.93 6.15 6.31 6.29 6.09

Selected Financial Performance Ratios
(annualized):
Return on average assets (0.85)% (0.85)% 0.05% 0.73% (0.44)%
Return on average common equity (12.86)% (12.45)% 0.68% 11.00% (6.39)%
Noninterest income to average total
assets 1.10% 0.73% 0.72% 2.12% 0.56%
Noninterest expense to average
total assets 3.34% 3.24% 3.23% 3.34% 2.91%
Efficiency ratio 78.17% 82.01% 83.61% 64.02% 85.15%
Operating Earnings (Non-GAAP):
Net income (loss) available to
common shareholders $ (2,262) $ (2,304) $ 126 $ 2,040 $ (1,147)
(Gain) loss on acquisition, net of
tax — (15) 29 (2,695) 155
(Gain) loss on sale of investments,
net of tax (405) — (67) — –
Other-than-temporary impairment on
securities, net of tax — 22 — — –
Acquisition and integration
expenses, net of tax — 584 86 345 27
———- ———- ———- ———- ———-

Net operating income (loss) $ (2,667) $ (1,713) $ 174 $ (310) $ (965)
========== ========== ========== ========== ==========

Operating net income (loss) per
common share:
Basic $ (0.23) $ (0.15) $ 0.02 $ (0.03) $ (0.08)
Diluted (0.23) (0.15) 0.02 (0.03) (0.08)

Pre-tax, pre-credit earnings (1) $ 3,543 $ 3,545 $ 3,545 $ 3,902 $ 2,638

Operating return on average assets (1.00)% (0.63)% 0.06% (0.11)% (0.37)%
Operating return on average equity (11.72)% (7.29)% 0.73% (1.30)% (4.13)%
Operating efficiency ratio (2) 68.13% 69.52% 67.52% 65.92% 72.99%

(1) Calculated using net interest income plus noninterest income less noninterest expense
adjusted for the following items: 1) gains or losses from acquisition or sale of investments or
sale of other assets; 2) other-than-temporary impairment on securities; 3) amortization of
intangible assets; 4) other real estate owned valuation adjustments and expenses; and 5)
acquisition and integration expenses.
————————————————————————————————-
(2) Calculated by dividing noninterest expense by net interest income plus noninterest income
excluding the following items: 1) gains or losses from acquisition or sale of investments; 2)
other-than-temporary impairment on securities; 3) other real estate owned valuation adjustments
and expenses; and 4) acquisition and integration expenses.

Quarterly Financial Highlights (unaudited) At and For the Quarters Ended
———————————————————-

2012 2011
———- ———————————————-

December September
March 31 31 30 June 30 March 31
——————————————- ———- ———- ———- ———- ———-
(Dollars in thousands, except per share
data)

Credit Quality Information and Ratios:
Allowance for loan losses – beginning of
period $ 11,713 $ 12,956 $ 12,742 $ 12,006 $ 11,924
Add: Provision for loan losses 6,300 4,635 1,350 1,700 3,000

Less: Net charge-offs 6,430 5,878 1,136 964 2,918
———- ———- ———- ———- ———-

Allowance for loan losses – end of period $ 11,583 $ 11,713 $ 12,956 $ 12,742 $ 12,006
========== ========== ========== ========== ==========

Assets not covered by FDIC loss-share
agreements:
Past due loans (30-89 days) accruing $ 5,362 $ 4,933 $ 4,479 $ 5,687 $ 5,692
Past due loans (30-89 days) to total
non-covered loans 0.92% 0.86% 0.77% 0.99% 0.97%

Nonperforming non-covered loans:
One-to-four family residential $ 2,698 $ 2,407 $ 1,556 $ 1,406 $ 2,373
Construction — — — — 72
Commercial land 3,852 2,631 3,176 3,167 4,653
Residential development 3,742 6,474 6,459 5,155 4,675
Other commercial real estate 8,924 4,173 6,602 10,306 9,636
Commercial business 1,086 168 306 201 309

Consumer 1,750 2,958 2,426 2,440 2,639
———- ———- ———- ———- ———-
Total nonperforming non-covered loans 22,052 18,811 20,525 22,675 24,357

Other nonperforming non-covered assets 11,987 8,936 8,208 10,723 8,463
———- ———- ———- ———- ———-

Total nonperforming non-covered assets $ 34,039 $ 27,747 $ 28,733 $ 33,398 $ 32,820
========== ========== ========== ========== ==========

Allowance for loan losses to total
non-covered loans 2.00% 2.04% 2.23% 2.22% 2.05%
Net charge-offs to average non-covered
loans (annualized) 4.44% 4.07% 0.79% 0.66% 2.00%
Nonperforming non-covered loans to
non-covered loans 3.80% 3.28% 3.53% 3.95% 4.15%
Nonperforming non-covered assets to total
assets 3.18% 2.57% 2.61% 2.99% 3.15%
Nonperforming non-covered assets to total
non-covered loans and other real estate
owned 5.75% 4.76% 4.87% 5.72% 5.51%

Assets covered by FDIC loss-share
agreements:
Past due loans (30-89 days) accruing (3) $ 2,726 $ 5,372 $ 6,430 $ 12,987 $ 7,006
Past due loans (30-89 days) to total
covered loans 1.83% 3.36% 3.81% 7.34% 5.09%

Total covered nonperforming loans (4) $ 40,582 $ 44,056 $ 37,074 $ 35,830 $ 24,791

Other covered nonperforming assets 9,447 8,746 12,765 14,127 8,225
———- ———- ———- ———- ———-

Total covered nonperforming assets $ 50,029 $ 52,802 $ 49,839 $ 49,957 $ 33,016
========== ========== ========== ========== ==========

Classified Assets (5)
Non-covered classified loans $ 32,147 $ 28,727 $ 35,357 $ 41,515 $ 42,915

OREO and other nonperforming assets 11,987 8,936 8,208 10,723 8,463
———- ———- ———- ———- ———-

Total classified assets $ 44,134 $ 37,663 $ 43,565 $ 52,238 $ 51,378
========== ========== ========== ========== ==========

Tier 1 capital $ 100,757 $ 102,539 $ 104,487 $ 105,088 $ 102,628

Total classified assets to Tier 1 capital 43.80% 36.73% 41.69% 49.71% 50.06%

(3) The contractual balance of past due loans covered by FDIC loss-share agreements totaled $7.7
million $13.7 million, $8.2 million, $7.0 million and $3.5 million at December 31, 2010, March 31,
2011, June 30, 2011, September 30, 2011, December 31, 2011 and March 31, 2012 respectively.
——————————————————————————————————-
(4) The contractual balance of nonperforming loans covered by FDIC loss-share agreements totaled $31.2
million, $28.7 million $39.3 million $48.8 million, $55.4 million and $46.2 million at December 31,
2010, March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011, and March 31, 2012
respectively.
(5) Excludes loans and OREO covered by FDIC loss-share agreements.

Quarterly Financial Highlights
(unaudited) At and For the Quarters Ended
———————————————————-

2012 2011
———- ———————————————-

December September
March 31 31 30 June 30 March 31
———————————- ———- ———- ———- ———- ———-
(Dollars in thousands, except per
share data)

Net Interest Margin (annualized):
Yield on earning assets 4.75% 4.81% 4.84% 4.95% 4.62%

Cost of funds 0.92% 1.01% 1.11% 1.23% 1.32%
———- ———- ———- ———- ———-
Net interest rate spread 3.83% 3.80% 3.73% 3.72% 3.30%
Net interest margin (taxable
equivalent) 3.88% 3.84% 3.76% 3.78% 3.42%

Selected End of Period Balances:
Loans covered by FDIC loss-share
agreements $ 148,713 $ 159,688 $ 168,940 $ 177,047 $ 137,758
Loans not covered by FDIC
loss-share agreements 579,812 574,100 582,065 573,603 586,897
———- ———- ———- ———- ———-
Total loans, net 728,525 733,788 751,005 750,650 724,655
Investment securities 121,411 147,899 132,443 156,328 154,006
Total interest-earning assets 890,456 895,003 913,910 927,463 887,706
Total assets 1,070,992 1,080,460 1,098,974 1,117,993 1,041,444
Noninterest-bearing deposits 97,437 88,077 87,413 82,305 78,342

Interest-bearing deposits 775,209 787,979 801,167 822,273 754,461
———- ———- ———- ———- ———-
Total deposits 872,646 876,056 888,580 904,578 832,803
Total borrowings and other debt 104,080 103,939 105,778 108,011 107,646
Shareholders’ equity 90,010 92,659 94,782 94,771 92,276

Selected Quarterly Average
Balances:
Loans covered by FDIC loss-share
agreements $ 154,344 $ 164,314 $ 173,755 $ 170,580 $ 142,353
Loans not covered by FDIC
loss-share agreements 579,224 578,083 576,846 583,294 583,993
———- ———- ———- ———- ———-
Average loans, net 733,568 742,397 750,601 753,874 726,346
Investment securities 128,086 140,846 146,017 157,513 135,645
Average interest-earning assets 880,073 906,064 920,932 918,118 902,141
Average total assets 1,068,689 1,084,313 1,107,687 1,110,740 1,053,747
Noninterest-bearing deposits 90,024 87,770 84,001 81,617 72,235

Interest-bearing deposits 777,621 789,233 810,469 814,736 769,152
———- ———- ———- ———- ———-
Average total deposits 867,645 877,003 894,470 896,353 841,387
Average borrowings and other
debt 103,181 105,872 106,696 107,872 109,385
Shareholders’ equity 91,057 94,028 94,711 95,116 93,533

Capital Ratios:
Total equity to total assets 8.40% 8.58% 8.62% 8.48% 8.86%
Tangible common equity to
tangible assets 6.38% 6.56% 6.61% 6.49% 6.73%
Total Risk-Based Capital (Bank
only) 15.50% 15.60% 17.32% 17.29% 16.70%
Tier 1 Risk-Based Capital (Bank
only) 14.24% 14.35% 16.06% 16.03% 15.44%
Tier 1 Leverage Capital (Bank
only) 9.41% 9.44% 9.53% 9.42% 9.89%

CITIZENS SOUTH BANKING CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION (unaudited)

Amount Percent

March 31, December 31,
2012 2011 Change Change
——————————- ———— ———— ———- ——–
(Dollars in thousands)

ASSETS
Cash and cash equivalents: 115,422 88,344 27,078 30.65%
Investment securities available
for sale, at fair value 20,947 52,136 (31,189) -59.82%
Investment securities held to
maturity, at amortized cost 100,464 95,763 4,701 4.91%
Federal Home Loan Bank stock,
at cost 5,067 5,067 — 0.00%
Presold loans in process of
settlement 4,666 2,146 2,520 117.43%
Loans:
Covered by FDIC loss-share
agreements 148,713 159,688 (10,975) -6.87%
Not covered by FDIC
loss-share agreements 579,812 574,100 5,712 0.99%
———— ———— ———- ——–
Loans, net of deferred fees
and costs 728,525 733,788 (5,263) -0.72%

Allowance for loan losses (11,583) (11,713) 130 -1.11%
———— ———— ———- ——–
Loans, net 716,942 722,075 (5,133) -0.71%
Other real estate owned 21,433 17,571 3,862 21.98%
Premises and equipment, net 25,671 25,888 (217) -0.84%
FDIC loss share receivable 30,704 38,931 (8,227) -21.13%
Accrued interest receivable 2,577 2,773 (196) -7.07%
Bank-owned life insurance 18,554 18,978 (424) -2.23%
Intangible assets 1,251 1,373 (122) -8.89%

Other assets 7,294 9,415 (2,121) -22.53%
———— ———— ———- ——–

Total assets $ 1,070,992 $ 1,080,460 $ (9,468) -0.88%
============ ============ ========== ========

LIABILITIES AND SHAREHOLDERS’
EQUITY
Deposits:
Noninterest-bearing demand
deposits $ 97,437 $ 88,077 $ 9,360 10.63%
Interest-bearing demand and
savings 378,421 375,160 3,261 0.87%

Time deposits 396,788 412,819 (16,031) -3.88%
———— ———— ———- ——–
Total deposits 872,646 876,056 (3,410) -0.39%
Securities sold under
repurchase agreements 9,919 9,787 132 1.35%
Borrowed money 78,697 78,688 9 0.01%
Subordinated debt 15,464 15,464 — 0.00%

Other liabilities 4,256 7,806 (3,550) -45.48%
———— ———— ———- ——–
Total liabilities 980,982 987,801 (6,819) -0.69%
Shareholders’ Equity
Preferred stock 20,500 20,500 — 0.00%
Common stock 124 124 — 0.00%
Additional paid-in-capital 63,941 63,888 53 0.08%
Retained earnings,
substantially restricted 5,477 7,854 (2,377) -30.26%
Accumulated other comprehensive
income (32) 293 (325) -110.92%
———— ———— ———- ——–

Total shareholders’ equity 90,010 92,659 (2,649) -2.86%
———— ———— ———- ——–
Total liabilities and
shareholders’ equity $ 1,070,992 $ 1,080,460 $ (9,468) -0.88%
============ ============ ========== ========

CITIZENS SOUTH BANKING
CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited)

Three Months Ended

March 31,
———————- Amount Percent

2012 2011 Change Change
———- ———- ———- ——–
(Dollars in thousands)

Interest Income:
Interest and fees on loans $ 9,646 $ 9,461 $ 185 1.96%
Investment securities:
Taxable interest income 736 790 (54) -6.84%
Tax-exempt interest income 38 69 (31) -44.93%

Other interest income 49 67 (18) -26.87%
———- ———- ———- ——–
Total interest income 10,469 10,387 82 0.79%
Interest Expense:
Deposits 1,236 2,002 (766) -38.26%
Repurchase agreements 8 18 (10) -55.56%
Borrowed money 669 763 (94) -12.32%

Subordinated debt 103 72 31 43.06%
———- ———- ———- ——–
Total interest expense 2,016 2,855 (839) -29.39%

Net interest income 8,453 7,532 921 12.23%

Provision for loan losses 6,300 3,000 3,300 110.00%
———- ———- ———- ——–
Net interest income after
provision for loan losses 2,153 4,532 (2,379) -52.49%
Noninterest Income:
Service charges on deposit
accounts 1,055 957 98 10.24%
Mortgage banking income 317 237 80 33.76%
Commissions on sales of
financial products 86 67 19 28.36%
Income from bank-owned life
insurance 184 182 2 1.10%
Gain (loss) from acquisition — (255) 255 -100.00%
Gain on sale of investments,
available for sale 664 — 664 n/a
Gain (loss) on sale of other
assets — 12 (12) -100.00%

Other 640 278 362 130.22%
———- ———- ———- ——–
Total noninterest income 2,946 1,478 1,468 99.32%
Noninterest Expense:
Compensation and benefits 3,846 3,648 198 5.43%
Occupancy and equipment 908 828 80 9.66%
Data processing and other
technology 255 183 72 39.34%
Professional services 275 253 22 8.70%
Advertising and business
development 68 54 14 25.93%
Loan collection and other
expenses 251 290 (39) -13.45%
Deposit insurance 418 334 84 25.15%
Amortization of intangible
assets 122 139 (17) -12.23%
Office supplies 60 70 (10) -14.29%
Telephone and communications 106 97 9 9.28%
Other real estate owned
valuation adjustments 1,000 509 491 96.46%
Other real estate owned
expenses 597 364 233 64.01%
Acquisition and integration
expenses — 45 (45) -100.00%

Other 1,005 858 147 17.13%
———- ———- ———- ——–
Total noninterest expense 8,911 7,672 1,137 14.82%

———- ———- ———- ——–
Loss before income tax benefit (3,812) (1,662) (2,150) 129.36%

Income tax benefit (1,672) (771) (901) 116.86%
———- ———- ———- ——–
Net loss (2,140) (891) (1,249) 140.18%

Dividends on preferred stock 122 256 (134) -52.34%
———- ———- ———- ——–

Net loss allocable to common
shareholders $ (2,262) $ (1,147) $ (1,115) 97.21%
========== ========== ========== ========

This news release was distributed by GlobeNewswire,
www.globenewswire.com

SOURCE: Citizens South Banking Corporation

CONTACT: For More Information:
Gary F. Hoskins, CFO
(704) 884-2263
gary.hoskins@citizenssouth.com

(C) Copyright 2010 GlobeNewswire, Inc. All rights reserved.

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CSBC

Citizens South Banking Corp.

US

: U.S.: Nasdaq

$
4.75

+0.02
+0.44%

Volume: 1,182
April 26, 2012 1:56p

P/E RatioN/A
Dividend Yield0.84%

Market Cap$54.52 million
Rev. per Employee$222,370

Financial Glossary

Words used in this article:

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By Zulkiple Ibrahim

KUALA LUMPUR, April 20 (Bernama) — In 2003, Abdul (not his real name) had applied for a personal loan from a financial institution where the monthly repayment period extended to seven years.

However, four years later, a financial emergency forced Abdul to apply for a fresh loan from the same financial institution. One of the conditions imposed by the lender was that funds from fresh loans had to be used to settle the balance of the original loan.

This is known among financial institutions as an overlapping facility. The monthly instalments for Abduls fresh loan were not only bigger, but the period of repayment for the new loan extended for another 10 years.

On the one hand, Abdul had managed to secure some funds to resolve his immediate financial woes, but on the other hand, he is now saddled with a much larger loan amount that he has to settle within 10 years with a much larger monthly instalment.

Personal loan

Financial consultant Ng Lai Wai noted that there are several reasons why people apply for loans.

Usually, they borrow money to purchase a house, buy a car or start a business. Often, applying for a loan is necessary because most do not have the financial resources they need to make a purchase, he said.

He remarked that there are currently many financial institutions in Malaysia that offer a personal loan facility without the need for a guarantor or collateral.

Applicants need only submit the relevant documents and wait for the loan to be approved. Sometimes the approval comes very fast, less than seven working days from the date of the loan application, he stated.

Ng explained that a personal loan is an unsecured loan, which means the borrower does not have to raise any collateral or security deposit to guarantee the repayment of the loan.

However, since there is no collateral involved, personal loans tend to carry higher interest rates as compared with loans secured by collateral such as a home.

The relatively high interest rate compensates for the fact that you are not guaranteeing repayment of the personal loan with some kind of asset, and for this reason alone, personal loans tend to carry high interest rates, he asserted.

Lower interest rate

If a borrower owns a home, one alternative for a loan with a lower interest rate is a home equity loan. However, this option requires that the borrower put up his or her home or other real estate as collateral.

Ng acknowledged that loans of any type are often used to finance a large, one-time purchase or expense. The borrower is given all the money at once, and he or she agrees to pay a certain amount per month until the debt is fully repaid.

The monthly payment includes both principal (the amount borrowed) and interest, he said.

A personal loan may be the only option for people who have poor credit or for those who do not own a house, real estate or other assets that can be used as collateral.

Ng noted that a personal loan may be a sensible alternative to financing a major expense as compared with credit cards, which may charge even higher interest.

Consolidate debt

Personal loans can also be used to consolidate debt. If the interest rate on the loan is lower than the interest rate on your credit cards, it may make sense to pay off your debt with a personal loan.

If you have a low credit score, however, it may be more difficult to get a personal loan with an interest rate low enough to improve your debt situation

One way to secure better terms is to have a family member or other responsible person co-sign with you, guaranteeing repayment. In this situation, the co-signer agrees to make payments on your loan if you default, so you get the benefit of a lower interest rate.

If you default (fail to repay the loan), the co-signer is responsible for repaying the entire remaining debt. Lenders also have the right to seize any assets that are securing the loan in the event of a default, Ng stated.

He explained that unsecured loans are advanced on the basis of the borrowers credit history and ability to repay the loan from personal income.

Repayment is usually arranged through fixed-amount instalments over a fixed term.

Commitment

Since getting a loan is a commitment, a borrower has to be very careful with his decisions. Ng advises borrowers to choose the right lender.

There is more to picking a lender than just looking for one with the lowest interest (rate). Keep in mind that those with low interest (rates) require longer periods (of repayment).

Remember, when choosing a lender, check its stability, its flexibility, repayment schemes and interest rates, he asserted, adding that if a person decides to get a loan, it is important to review the loan advantages and disadvantages.

Ng says that using loans gives borrowers a greater amount of money to fulfil their objectives.

In exchange for this money, you have to pay interest on your monthly amortisation.

Maybe loans give borrowers the sense that they can easily solve any problems with the money. This is why even though people will typically find it hard to pay for these loans, they still want to apply for them, he adds.

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Aubrey K. McClendon is one of the most successful energy entrepreneurs of recent decades. But he hasnt always proved popular with shareholders of the company he co-founded, Chesapeake Energy Corp. (CHK), the second-largest natural gas producer in the United States.

McClendon, 52, helped cause Chesapeake shares to plummet amid the financial crisis when he sold hundreds of millions of dollars in stock to raise cash for himself. Later, to settle a lawsuit by shareholders, he agreed to buy back a $12 million map collection that hed sold to Chesapeake.

His approach to running his company also is renowned: Among other employee perks, on-site Botox treatments are available at its headquarters in Oklahoma City, Oklahoma.

Now, a series of previously undisclosed loans to McClendon could once again put Chesapeakes CEO and shareholders at odds.

McClendon has borrowed as much as $1.1 billion in the last three years by pledging his stake in the companys oil and natural gas wells as collateral, documents reviewed by Reuters show.

The loans were made through three companies controlled by McClendon that list Chesapeakes headquarters as their address. The money is being used to help finance what could be a lucrative perk of his job the opportunity to buy into the very same well stakes that he is using as collateral for the borrowings.

The size and nature of the loans raise concerns about whether McClendons personal financial deals could compromise his fiduciary duty to Chesapeake investors, according to more than a dozen academics, analysts and attorneys who reviewed the loan agreements for Reuters.

If Mr. McClendon has $1 billion in debt through his own companies — companies operating in the same industry as Chesapeake — he has or could have a high degree of risk for conflicts of interest. As in, whose interest will he look out for, his own or Chesapeakes? said Joshua Fershee, an associate professor of energy and corporate law at the University of North Dakota.

The revelation of McClendons bout of borrowing comes as he is scrambling to help Chesapeake avert a multi-billion-dollar cash shortfall amid a plunge in natural gas prices.

It also exposes a potentially serious gap in how US regulators scrutinize corporate executives, a decade after those rules were tightened in the wake of major accounting scandals.

The loans portend a number of possible problems, the analysts said. McClendons biggest lender is simultaneously a major investor in two units of Chesapeake. That connection raises questions about whether Chesapeakes own financing terms could be influenced by its CEOs personal borrowing.

Another concern: A clause in the deals requires McClendon to take all commercially reasonable action to ensure that other owners and operators of the wells including Chesapeake comply with…covenants and agreements of the loans. Such clauses are common in energy-finance deals. But it is rare for the CEO of a major energy company to be personally subject to one involving the corporation that he runs. That means McClendon could have an incentive to influence Chesapeake to act in the interest of his lenders, rather than of his shareholders.

Basically what you have here is a private transaction that could potentially impact a public company, depending on the manner in which the clause is interpreted and applied, says Thomas O. Gorman, a partner at law firm Dorsey amp; Whitney in Washington, DC, and a former special trial counsel at the Securities and Exchange Commission (SEC). That may create a conflict of interest.

As a result, the loans should have been fully disclosed to Chesapeake shareholders, the academics, attorneys and analysts said.

NO CONFLICT

Both McClendon and Chesapeake say the loans are purely private transactions that the company has no responsibility to disclose or even to vet. And they disputed the view that the deals could create a conflict of interest.

I do not believe this is material to Chesapeake, McClendon said in an email response to questions. There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way.

Chesapeake general counsel Henry Hood said in a statement that the clause in the loan agreements questioned by analysts called Compliance by Operator is typical boilerplate language used in oil and gas mortgages. It requires borrowers to exercise their rights with operators of wells, such as Chesapeake, on behalf of the lender.

Neither the existence of McClendons loans nor their terms create the possibility of a conflict of interest, Hood said, in part because the company has a first lien on McClendons share of company wells. That would mean Chesapeake gets paid before all other creditors in the event that McClendon defaults on his debt.

Any loans are Mr. McClendons personal business and not appropriate for review or monitoring by the company or public comment, Hood said.

The company has many checks to protect against conflicts, Hood said. Among them: Some of the worlds largest energy companies own a share of Chesapeake wells and monitor the actions of the Company via well audits, government filings and participation in development plans, Hood said.

He added that Chesapeake now employs more than 13,000 people and drills more than 2,000 wells per year, all of which minimizes the ability of any one person McClendon included to influence actions on any single well.

Less than four years ago, a personal transaction by McClendon did negatively influence the company.

To buy more Chesapeake stock, McClendon borrowed money from his brokers whats called buying on margin. In October 2008, just after the financial crisis erupted with the bankruptcy of Lehman Brothers, he was forced to sell more than 31 million Chesapeake shares for $569 million to cover margin calls from those brokers. The companys stock fell nearly 40 percent the week of McClendons share sales. McClendon issued an apology but the companys credibility with many shareholders suffered significantly.

Chesapeakes board of directors is aware that McClendon has borrowed against his share of company wells, Hood said, but the board did not review or approve the transactions. Nor did the company vet the loan terms for possible conflicts. If there were any conflicts of interest, Hood said, they would have surfaced by now.

Chesapeake board members contacted declined to comment. Marc Rome, Chesapeakes vice president for corporate governance, did not respond to requests for comment.

WELL INVESTMENT PLAN

The loans reveal how McClendon is using an unusual corporate incentive as collateral. The perk, known as the Founder Well Participation Plan, grants Chesapeakes billionaire co-founder a 2.5 percent stake in the profits and makes him pay 2.5 percent of the costs of every well drilled during each year he decides to participate.

Today, Chesapeake is the only large publicly traded energy company to grant its CEO the opportunity to take a direct stake in wells it drills. Chesapeake says the well plan is a uniquely powerful incentive because it aligns McClendons personal interests with those of the companys.

The well plan does not allow McClendon to select the wells in which to invest; Chesapeake says the program is an all-or-nothing proposition so that McClendon cant cherry-pick only the most profitable wells.

He has to eat his own cooking here, said company spokesman Michael Kehs.

But because McClendon is using the loans to finance his participation in the well plan, he defrays his risks. Two of McClendons lenders, both private equity firms, in turn spread the loan risks to other investors by raising money from state pension funds and other investors to fund them. Those insights emerge from a February 2011 document detailing a meeting between McClendons largest personal lender and a prospective investor.

If he hasnt had to put up any of his own money, how is that alignment of McClendon and Chesapeakes interests, asked Mark Hanson, an analyst with Morningstar in Chicago.

Chesapeake said McClendons loans are well disclosed to company shareholders. General Counsel Hood cited two references in the companys 2011 proxy. In them, the firm refers to McClendons personal financing transactions, including one in a section entitled Engineering Support that discusses McClendons use of Chesapeake engineers to assess well reserves.

Nowhere in Chesapeake proxy statements or SEC filings does the company disclose the number, amounts, or terms of McClendons loans. Veteran analysts of the company said they were never aware of the loans until contacted for this article.

We believe the disclosures made by the company have been appropriate under the circumstances, particularly since the disclosure of the loans is not required in any event, Hood said in a statement.

THROUGH THE CRACKS

Legal experts say the size and terms of McClendons borrowing are unusual and highlight a gap in regulatory scrutiny of American corporate executives.

In the past, major Wall Street banks formed separate companies or special purpose vehicles, just as McClendon has to allow select employees to borrow from the employer and make investments. The WorldCom accounting scandal was, in part, fueled by more than $1 billion in loans taken out by former chief executive Bernard Ebbers that were secured by his shares of company stock. And energy giant Enron used off-balance-sheet entities to hide debt from investors. New accounting and corporate governance laws and regulations banned such transactions or required their disclosure.

In September 2006, the SEC revised its related-party transaction rules to require companies to disclose when executives pledged corporate stock as collateral for loans. These circumstances have the potential to influence managements performance and decisions, the SEC wrote.

McClendons loans backed not by stock but by stakes in company wells arent covered by the SEC rule. Because they have decided to compensate him with a business interest, it kind of falls through the cracks, says Francine McKenna, an accounting expert and author of the accounting-related blog re: The Auditors.

As a result, no SEC regulation precludes McClendon from using his well plan stake as loan collateral. The SEC declined to comment on the McClendon loans.

TEETH WHITENING

Tall and thin, McClendon is a tireless booster for the oil and gas industry and of his company. At an energy conference in November in Houston, he sported a tie printed with tiny drilling rigs. His daring deals and stirring speeches to investors have attracted some adoring followers.

During one speech last September, McClendon said opponents of a controversial drilling technique called hydraulic fracturing were interested in turning the clock back to the Dark Ages.

What a great vision of the future! he said sarcastically. Were cold, its dark, and were hungry!

McClendons investor presentations are standing-room-only. But he often bristles when his business model is questioned by analysts, frequently arguing that Wall Street does not understand the company.

That tension has intensified as Chesapeake scrambles to shed more than $10 billion in debt through the rapid-fire sale of assets amid the lowest natural gas prices in a decade. This year, it has done a series of deals to try to close a cash shortage estimated by analysts to be as high as $6 billion.

McClendon continues to treat his employees well. In recent years, he built a 50-acre red-brick campus in Oklahoma City as Chesapeake headquarters. It boasts a 72,000 square-foot state-of-the art gym, visiting doctors who provide lunchtime Botox treatments for employees, and dentists to whiten teeth.

A part owner of the NBAs Oklahoma City Thunder and supporter of charitable causes in the state capital, McClendon holds considerable sway in Oklahoma. Former US Senator Don Nickles and former Oklahoma Governor Frank Keating, both Republicans, are members of the Chesapeake board.

McClendons close relationship with the board hasnt left him immune to tensions with stockholders.

After Chesapeakes board agreed to buy McClendons map collection in 2008 for $12.1 million, shareholders sued. The lawsuit was settled in November 2011, when McClendon agreed to refund the $12.1 million, plus interest, and hold stock worth 500 percent of his annual salary and bonus. Chesapeake also agreed to hire Rome, the vice president of corporate governance, and an executive compensation consultant to evaluate corporate pay packages.

The well participation plan, which was approved by shareholders in 2005 and cannot be discontinued until 2015, has remained unaffected.

Disgruntled investors continue to launch challenges. On March 13, New York Comptroller John C. Liu and the $113 billion New York Pension Funds called on Chesapeake to let large long-term shareholders put up their own nominees for the board of directors.

UNTANGLED

Key aspects of McClendons loans remain hidden from shareholders. Because promissory notes underpinning the loan agreements are private, the interest rate, the exact amount borrowed and other terms of the transactions are not publicly known.

But the loan agreements demonstrate the extent to which McClendon has leveraged his interests: He has pledged as collateral almost every asset associated with his share of Chesapeake wells. Oil, gas and land interests, platforms, wells and pipelines, hedging contracts, geological and business data, and intellectual property are among scores of well-related assets that can be seized should McClendon default.

Chesapeake said it would be unaffected by any dispute between McClendon and a lender in the event of a default because of its first lien on oil and gas production, equipment and land leases.

The company also said that McClendons share of related assets pledged as collateral such as business data and hedging contracts associated with wells is completely separate from similar assets owned by Chesapeake. That means Chesapeake would not become entangled should McClendon default, the company said.

Chesapeake does not have an interest in the (McClendons) related assets … and Mr. McClendon does not have an interest in the companys related assets, general counsel Hood said in a statement.

In explaining why Chesapeakes board isnt obligated to monitor McClendons personal loans, Hood cited a September 2003 decision by a Delaware Chancery Court. The ruling in Beam v. Stewart found the board of Martha Stewart Living Omnimedia did not breach its fiduciary duty to shareholders by failing to monitor her personal investments. (Stewart served five months in prison in 2004 following her conviction for obstruction of justice in an unrelated insider-trading case.)

Given the size, scope and complicated terms of the loans, their particulars constitute important stockholder information and therefore should be more fully disclosed, said David F. Larcker, a professor of accounting at Stanford Universitys Graduate School of Business.

Some shareholders agree. While recognizing (McClendons) right to privacy, the more information the company releases to shareholders the better particularly when its such a large amount of money and related to the oil and gas business, said Mike Breard, oil and gas research analyst at Hodges Capital Management in Dallas, which owns Chesapeake shares.

LOAN TRAIL

As with a mortgage on a residential home, state law requires that ownership rights to physical property be recorded with county clerks.

Reuters found McClendons loan agreements by following the trail of well and land lease transfers from Chesapeake to three companies that list McClendon as their corporate representative, according to state deed records.

In county courts in Louisiana, Texas, Arkansas, Pennsylvania and Oklahoma, where Chesapeake operates thousands of wells, the company regularly files a form called a conveyance. In keeping with the corporations well participation program, the conveyance grants McClendon a 2.5 percent share of each well and of the leased land on which it is drilled.

For years, Chesapeake has distributed 2.5 percent shares in wells and land to three McClendon-controlled companies Chesapeake Investments LP, Larchmont Resources LLC and Jamestown Resources LLC.

Since he co-founded Chesapeake in 1989, McClendon has frequently borrowed money on a smaller scale by pledging his share of company wells as collateral. Records filed in Oklahoma in 1992 show a $2.9 million loan taken out by Chesapeake Investments, a company that McClendon runs. And in a statement, Chesapeake said McClendons securing of such loans has been commonplace during the past 20 years.

But in the last three years, the terms and size of the loans have changed substantially. During that period, he has borrowed as much as $1.1 billion an amount that coincidentally matches Forbes magazines estimate of McClendons net worth.

The $1.1 billion in loans during the past three years breaks down this way:

In June 2009, McClendon agreed to borrow up to $225 million from Union Bank, a California lender, pledging his share of wells as collateral.

In December 2010, he borrowed $375 million from TCW Asset Management, a private equity firm.

And in January 2012, McClendon borrowed $500 million from a unit of EIG Global Energy Partners, a private equity firm formed by former TCW executives.

It is unclear how much, if any, of those loans have been repaid.

Randall Osterberg, a senior vice president at Union Bank who signed the loan agreement, declined to comment. TCW and EIG also declined to respond to questions.

REAL LOSS?

At first blush, what the company tells shareholders suggests the well plan is a money-loser for McClendon.

In its proxy statements, Chesapeake says McClendon lost $116 million in 2009, and $141.9 million in 2010.

Its unclear whether McClendon has suffered any real losses, however. Asked about the calculations, Hood said McClendons net loss is a byproduct of his drilling costs being front end loaded, while his revenues accrue over many years.

If they are showing that kind of negative cash flow, the wells dont have value, said Phil Weiss, oil analyst at Argus Research who has a sell rating on the companys shares. But given that McClendon has borrowed more than $1 billion based on the value of his well stakes, I really dont think (the companys disclosures) tell me much, Weiss said.

Chesapeake has resisted attempts by regulators to get more information on McClendons well-participation plan before. In 2008, the SEC requested more information about McClendons benefits from the well plan as part of a review of the companys 2007 annual report.

From May to October that year, Chesapeake and SEC officials exchanged at least eight letters and held negotiations on the issue. After first refusing to provide more information, Chesapeake ultimately agreed to provide shareholders a chart detailing well plan revenues and costs, a review of the letters shows.

Chesapeakes Hood said in a statement that the companys disclosures are fully compliant with all legal and regulatory requirements. The chart and other SEC filings contain all material facts that Chesapeake was required to disclose, he said.

A spokesman for the SEC declined to comment.

BIG LENDER

McClendons biggest personal lender, EIG, has been a big financer for Chesapeake, too.

In November, Chesapeake raised $1.25 billion from a group of investors including EIG through the sale of perpetual preferred shares in a newly formed entity, Chesapeake Utica LLC, which controls about 800,000 acres of oil and gas-rich land in Ohio. The sale offers lucrative terms to EIG investors, paying an annual dividend of 7 percent and royalty interests from oil and gas wells, according to analysts.

On April 9, the company announced a nearly identical deal to raise another $1.25 billion from EIG and other investors, in another new subsidiary called CHK Cleveland Tonkawa.

Dividends on preferred shares are controversial because they are paid before regular dividends owed to common shareholders. Basically its a form of more expensive debt, Morningstars Hanson said. It makes it appear that its not debt, but it sits on top of obligations to the common shareholder.

The fact that McClendons largest personal lender received favorable terms on its Chesapeake investments caused some Wall Street analysts to call for more information about McClendons loans.

I think the company should disclose this information. One reason is that the CEO is taking out loans from at least one entity, EIG, which recently provided financing to Chesapeake, said Joseph Allman, oil and gas industry analyst at JPMorgan in New York, who reviewed the loan agreements. In the same way that investors want to know the counterparty to significant Chesapeake transactions, they would want to know if one of those firms has significant private dealings with the CEO.

Chesapeakes Hood acknowledged there could be some theoretical possibility of a conflict of interest with the company and its CEO borrowing from the same lender. But because Chesapeake does not believe there is an actual conflict of interest, more disclosure is not required, Hood said.

CLOSING A GAP

McClendons personal loans highlight a gap in current SEC rules governing disclosures of related-party transactions, say accounting experts. The SEC requires disclosure of any transaction over $120,000 involving a company and a related party, such as the CEO, directors and certain family members, with direct or indirect material interest.

Chesapeake said the SECs related-party rule doesnt apply to McClendons loans only to his participation in the well plan. Thats because Chesapeake believes the loans do not constitute a material transaction with Chesapeake or even involve Chesapeake, Hood said.

That disclosure gap may be closing. A proposed new standard, released for public comment by the Public Company Accounting Oversight Board on February 28, would require auditors to identify and evaluate significant unusual transactions with executives connected to publicly traded firms. The board defined such transactions as those outside the normal course of business or that otherwise appear to be unusual due to their timing, size or nature.

Board chairman James R. Doty described the proposal as a way to scrutinize transactions that have played a recurring role in financial failures. The oversight board declined to comment on McClendons loans.

For now, said analyst Weiss, Chesapeake and McClendon are pushing the limits. If Chesapeake were trying to make things muddy and unclear without breaking the law, this would be a good way to do it.

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As a last resort, you can always put it on plastic. But dont forget, credit cards carry some of the highest rates around. Personal loans from a bank, which like credit cards are an unsecured form of credit, also tend to carry high interest rates. Many borrowers underestimate just how long it will take them to repay a high-interest loan, particularly when it involves the type of money needed to do most home improvement projects.
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Home buyers with a lot of credit card debt may find that a mortgage loan is out of reach, even if they make enough money to afford the payments. Based on our ongoing surveys of mortgage lenders in the United States, we are seeing a rise in the number of borrowers being turned down for having too much credit card debt.

Further evidence of this trend comes from the home buyers themselves. We receive about two-dozen questions every week, mostly from first-time buyers. Many have shared stories about being pre-approved for a mortgage loan, only to see the deal fall through later due to their debt ratios. The frequency of such stories has risen sharply over the last couple of years.

Make no mistake. Mortgage lenders today are very concerned with how much credit card debt a borrower has. In fact, debt levels are one of the top factors that can make or break a persons chances of getting a loan. Credit scores and down payments are also high on the list.

Credit Card Debt Statistics

How much credit card debt do you have? More importantly, how much of your income does it eat up every month? These are two questions mortgage lenders will want to know right off the bat, before they even send your package to the underwriter.

If youre like most Americans, you are probably carrying some kind of outstanding balance right now. Here are some disturbing statistics. In 2000, the total amount of outstanding credit card debt in the United States was $680 billion. In 2012, that number is projected to reach $870 billion (source: US Census Bureau, Statistical Abstract of the United States: 2012). Thats about $2,700 for every man, woman and child in the United States. We are truly a nation of debtors, and more so today than ever before.

The rise in credit card debt can be attributed to the financial crisis of the last four years, at least in part. Millions of Americans had to learn on their credit cards to get through troubled times job loss, reduced income, foreclosure. This is when the bubble began to swell at an alarming rate. Today, credit card and student loan debt are poised to be contributing factors of the next financial crisis in this country. They will also put mortgage loans out of reach for millions of would-be home buyers.

By itself, credit card debt wont necessarily hurt your chances of getting a mortgage. More important is the amount of total debt a person is carrying. For instance, if youre using more than 50% of your take-home pay to cover your combined debts, you may have trouble qualifying for a mortgage loan. Lenders grow more concerned once you exceed the 50% mark, and some set the bar of acceptability even lower. This brings us to another key concept in the mortgage world, the DTI ratio.

How Your Debt Affects You When Applying for a Mortgage

When you apply for a mortgage loan, the lender will look at two key numbers. Theyll want to know (A) how much money you earn each month, and (B) how much you spend to cover your various debts. In this context, Im talking about the types of debt that show up on your credit reports. This generally includes car loans, student loans, personal loans, and yes credit card debts.

(Side note: If youre not sure which debts are showing up on your credit reports, you can find out by obtaining your reports through AnnualCreditReport.com. Learn more)

Specifically, mortgage lenders want to know how much of your gross (pre-tax) income you are paying toward your debts each month. This is referred to as your debt-to-income ratio, or DTI. These ratios have always been used during the loan approval process. But they are receiving more scrutiny today, as are most aspects of mortgage qualification. If you carry a lot of credit card debt, it could tip the DTI scales too far into the red. This can hurt your chances of qualifying for a mortgage loan.

The Mortgage Lenders Response: Conditions vs. Denial

If you have too much credit card debt to qualify for a mortgage loan, youll find out in one of two ways. The loan officer might tell you up front, when screening your application. Or you might not find out until later on, after youve been pre-approved for a loan. In the second scenario, it is the underwriter who raises the red flag. The underwriter is like a financial detective who examines your loan documents to ensure you meet the lenders guidelines for approval. This process generally comes later, after youve been pre-approved for a certain amount.

Regardless of who raises the red flag, there are two possible outcomes:

• The lender might deny you for the loan.
• The lender might give a conditional approval that requires certain actions from you.

In the first scenario, youre simply out of luck and will have to apply through a different lender. In the second scenario, you will have to satisfy certain conditions before receiving the final approval. One of those conditions could pertain to your credit card debt. For instance, the lender might say they can only approve the loan if you pay off a certain card balance (or otherwise reduce your debt-to-income ratio). This happened to one of our writers last year. You can read his story here.

What Borrowers Can Do to Be Proactive

Home buyers should do a certain amount of research before applying for a mortgage loan. Debt ratios should be a key part of that research. You can calculate your DTI by using any number of free calculators online. You have two of these ratios, by the way. The front-end ratio only looks at your housing costs. In the case of home buyers, this would be the monthly mortgage payment that would result from the loan. You also have a back-end ratio that includes your housing costs in addition to all of your other recurring debts (car payment, credit cards, etc.).

Lenders are most concerned with the back-end DTI. If this ratio exceeds 40% with the addition of the home loan, you may have trouble qualifying for the loan. Just bear in mind that DTI guidelines are rarely set in stone, especially when it comes to FHA loans. Allowances can be made for otherwise qualified borrowers.

Some home buyers attempt to pay down their credit card debts, before applying for a mortgage loan. But this is a trade-off that must be weighed carefully. If you use too much of your liquidity to reduce your debts, you might not have enough for the closing costs and down payment associated with your loan. So it may be best to apply for a loan first, before tapping your savings to pay down those debts. You might meet the lenders guidelines as-is.

Still, you should at least find out where you stand. You should know how much debt you currently have, in relation to your income. This kind of awareness will help prevent any unpleasant surprises down the road.

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If you are looking forward to improving your house, start like this

What do you need to change?
It is important to finalise the aspects you are going to work on. And it requires to be well reasoned. If you are looking to sell your house in the short term, then it logical to avoid renovation or at least an expensive one. This is so because buyers may not want to pay for it. They may rather want to spend on renovating the house their way.

However, it is also often argued that improvements help in increasing the value of the property, which would help in realising better valuations at the time of sale.

How much can you spend?
Once you know what all needs to be redone, make a budget accordingly. Write down every detail and the cost involved. You could seek help from friends / relatives who might have done up their houses recently or check with furnishing shops to ascertain costs. Remember it wont be an easy task. Although budget for renovating your house could vary from what this homework depicts (depending upon different estimates provide by different sources of information), but a written budget prepared beforehand will help in securing a general understanding of the entire process. And keep some basic costs in check.

Adequate attention has to be paid to the cost of finished products, cost of labour and contractor expenses. Decent buffer (approximately 10 to 15 per cent) should be provided for any escalations in costs or new developments that may unfold during the actual process.

More importantly, decide on how much of the cost prepared are you willing to spend and try to stick to it.

How will I accumulate the funds?
Depending on the budget, you may consider the funding options. Two basic ones would be borrowing or utilising savings. There are plenty of other financing options also available, but the optimum choice depends on your financial situation.

Loans: Most banks and financial institutions offer home improvement loans. These loans facilitate internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electrical works and much more. Some banks extend these loans for purchase of furniture / furnishings and electronic items like fans and air conditioners.

Typically, banks and institutions fund up to 80 per cent of the cost of renovation, depending upon the value of the property. The interest rate ranges between 10.50 to 14 per cent. These loans are given for up to 15 years depending on your age. Some can extend it to 20 years if you are young also taking into consideration your qualification and hence profession, repayment capacity, savings habits, and so on.

This scores over personal loans as they are secured and, hence priced 3-4 per cent lower than personal loans. A loan is also ideal as your savings can continue earning returns. Another advantage is that the interest paid is deductible from your taxable income up to Rs 30,000 for self-occupied properties and any amount in case of a let-out property under Section 24 of the Income Tax Act.

Credit card(s)/personal loan: These are some alternative source of raising funds. However, these loans would be quite expensive in terms of the interest rates charged, unless the borrower is prepared to repay the loans using an accelerated repayment strategy.

Cash: Inspite of the tax benefits on home improvement loans, it would be a prudent option to fund the project using ideal cash. Additional debt for this purpose will not only lower your networth but will also have an impact on the domestic budget. If funds for this purpose are not available immediately, you may defer the expenditure for some time. But this period should provide the much needed time to plan the improvement, line up the contractors and look at some cost cutting measures.

The biggest financial challenge during the execution of a home improvement project is sticking to the budget decided upon.

The writer is a certified financial planner

Cash Cow Advances is a leading nationwide service provider of cash advances and payday loans.