If you are still using Windows XP

Microsoft ended support for Windows XP on April 8, 2014. This means that after that date Microsoft no longer provides security updates or technical support for the Windows XP operating system. It is important that you migrate to a current operating system so you can receive regular security updates to protect your computer from malicious attacks. Failure to upgrade to a current operating system puts you at an even greater risk for viruses, spyware and other malicious software. For more information please visit http://windows.microsoft.com/en-us/windows/end-support-help

Heartbleed Bug Susceptibility

HeartbleedYou may have read or received information concerning the “Heartbleed Bug”, a vulnerability in the OpenSSL cryptographic library which is used by roughly two-thirds of all websites on the Internet. BNC’s web servers do not use OpenSSL. In addition, BNC has verified that websites hosted by BNC’s service providers are not vulnerable to the Heartbleed Bug. BNC still encourages customers to use precautions to protect themselves by frequent password changes, securing confidential information, using anti-virus and anti-malware products, avoiding suspect websites, and ignoring and deleting any emails from unknown entities. If you are concerned whether or not any of the websites you use are affected by the Heartbleed Bug, you can use the following Security check tool from LastPass.

Do you know your FICO Score? When was the last time you checked your credit?

Fico1 By JR Rohr, Vice President Mortgage Retail Sales, jrohr@bncbnationalbank.com

Some times what you don’t know can hurt you. Your FICO Scores play an important role in a majority of major purchases. Your FICO Scores can affect what you pay for a home loan, a car loan, insurance, student loans, etc.

The FICO® Score is calculated from several different pieces of credit data in your credit report. This data is grouped into five categories as outlined above. The percentages in the chart reflect how important each of the categories is in determining how your FICO Score is calculated.

Before you make your next purchase, do a little research. There are multiple websites available that can help you monitor your FICO Score. Make sure you know your FICO Score and how it is calculated.

What’s Your Credit Score?

Excellent
Good
Fair
Average U.S. Score
Uncertain
Poor
750 and Up749 - 720719 - 660678659 - 620619 or Below

FICO information obtained from www.myfico.com

Return on Invested Capital

By Mark E. Peiler, CFA – Senior Vice President, Chief Investment Officer, mpeiler@bnccorp.com

On March 6, 2009 the S&P 500 index reached an intraday low just under 667, nearly 58 percent below its 1,576 October 11, 2007 high. Five years after the 667 low, the S&P 500 closed at 1,877 on March 6, 2014. The table that follows summarizes the results from an equity screening process of the broader Russell 3000 index for each of these three dates.

 
Oct. 11, 2007
March 6, 2009
March 6, 2014
S&P 5001,5766671,877
Russell 3000 Stocks With ROIC > 15% and EV/EBIT < 10X11631157
Russell 3000 Stocks With ROIC > 15%484403318
Russell 3000 Stocks With EV/EBIT < 10X3111,274220
Source: Bloomberg

Observation #1: The share of the Russell 3000 stocks with a Return on Invested Capital (“ROIC”) greater than 15 percent is relatively stable between 10 and 20 percent of the stocks in the index. This scarcity is why a high ROIC is one of the foundations in BNC Wealth Management’s value investing process. Presently, stocks with a ROIC greater than 15 percent are rarer than in the two other dates presented.

Observation #2: In contrast, notice how changes in valuation can dramatically impact the availability of stocks with low multiples of Enterprise Value to Earnings Before Interest and Taxes (“EV/EBIT”). The number of stocks with an EV/EBIT multiple of less than 10X increased from 311 (approximately 10 percent) on October 11, 2007 to 1,274 (over 40 percent) on March 6, 2009. Five years after the S&P 500’s March 6, 2009 trough, only 220 (approximately 7 percent) possess an EV/EBIT multiple of less than 10X. Furthermore, only 57 stocks currently exhibit a ROIC greater than 15 percent AND an EV/EBIT multiple of less than 10X, down from 311 on March 6, 2009.

Takeaway: The opportunity set of solid businesses available at low valuations was highest at the market’s low point when fear and bearishness were also running high. In contrast, high bullish sentiment typically coincides with periods following recent market strength. Unfortunately, it is these environments when the ability to own solid businesses at low valuations is extremely limited.

Confusion about SBA financing

CloudsBy Tim Collins, Senior VP – SBA Lending, tcollins@bncbank.net

There seems to be much confusion in the marketplace as to what kind of business can qualify for an SBA loan. Much of this confusion is caused by SBA lenders who have a specific “credit box” that they will lend in, and these lenders like to tell borrowers that if they don’t fit into their banks “credit box”, they cannot get an SBA loan.

Let me clarify what can and can’t be done. A business that generally CAN get an SBA loan is one that is organized for profit, is a start-up or an existing business, has a net worth of less than $15.0 million or has average taxable net income over the last two years of less than $8.0 million. A business that CANNOT get an SBA loan is a business engaged in gambling, lending or a speculative real estate type of business, a business with a net worth over $15.0 million or average taxable net income over the last two years of more than $8.0 million.

The key to getting a straight and accurate answer is not always going to the “biggest” SBA lender in the marketplace, but a lender who has a dedicated SBA department who is big enough to handle your business needs and small enough to remember how to take care of a customer. At BNC National Bank, we are one of the leading SBA lenders and our lending team has over 85 years of combined SBA lending experience.

For more information about SBA financing, visit our SBA Lending page.

What is a Health Savings Account and do I qualify?

Pig$A Health Savings Account (HSA) is a tax-advantaged account established for the purpose of paying medical expenses in conjunction with a high-deductible health care plan (HDHP).

You do not need permission or authorization from the IRS to establish an HSA, as this account can only be set up through a trustee or custodian. A qualified HSA trustee or custodian can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee or custodian
of individual retirement arrangements (IRAs) or Archer Medical Savings Account (MSA).

To qualify for an HSA, you must meet the following requirements:

• Be covered under a high deductible health plan (HDHP)
• Have no other health coverage
• Not enrolled in Medicare
• Cannot be claimed as a dependent on another person’s tax return

Any eligible individual can contribute to an HSA. A person may be self-employed, unemployed, or employed and contribute to his or her own HSA.

Family members or any other person may also make contributions on behalf of an eligible individual. Contributions to a HSA may not be made in the form of stock or other property unless it is a rollover or transfer.

The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. If you have family HDHP coverage, you can contribute up to $6,550. Individuals age 55 or older are allowed to make special “catch-up” contributions in addition to their regular HSA contributions for 2014. The “catch-up” contribution is $1,000.

For more information about HSA accounts or to find out if you are eligible to participate, contact BNC National Bank.

When should I start saving for retirement?

RetirepostitBy Scott Sheldon, VP–Wealth Management, ssheldon@bncbank.com

The answer to this question is simple; as soon as you can.

The sooner you begin saving, the more time your money has to grow. Each year’s gains can generate their own gains the next year. This is an example of what the Wealth Management Team refers to as “the power of compounding.”

Here is an example of what a difference starting young can make. Say you start at age 25, and put aside $3,000 a year ($250/month) in a tax deferred retirement account for 10 years, and then you stop saving … completely … by the time you reach 65, your $30,000 investment will have grown to more than $472,000 (assuming an 8% annual return), even though you didn’t contribute a dime beyond the age of 35.

Now let’s say you put off saving until you turn 35, and then you save the same $3,000 a year for 30 years! By the time you reach 65, you will have set aside $90,000 of your own money, but it will grow to only about $367,000, assuming the same 8% annual return. That is a huge difference.

Example One: Save $3,000 for 10 years ($30,000) = $472,000
Example Two: Save $3,000 for 30 years ($90,000) = $367,000

Start
End
Annual Contribution
Total Contribution
Investment Return
Final Value
20 65 $5,000 $225,000 8% $1,932,528
30 65 $11,215 $392,525 8% $1,932,532
40 65 $26,435 $660,875 8% $1,932,556

Please remember that it is never too late to start planning for retirement and if you have any questions about saving options, speak to a member of our Wealth Management Team.

Online Banking Security Tips: Mobile Device

Online SecurityBy Shawn Cleveland, Chief Operating Officer & Compliance Officer, scleveland@bnccorp.com

Configure your device to require a passcode to gain access if this feature is supported in your device.

Avoid storing sensitive information. Mobile devices have a high likelihood of being lost or stolen so you should avoid using them to store sensitive information (e.g. passwords, bank account numbers, etc.) If sensitive date is stored than encryption should be used to secure it.

Keep your mobile device’s software up-to-date. These devices are small computers running software that needs to be updated just as you would update our PC. Use the automatic update option if one is available.

Review the privacy policy and data access of any applications (apps) before installing them.

Disable features not actively in use such as Bluetooth, Wi-Fi, and infrared. Set Bluetooth-enabled devices to non-discoverable when Bluetooth is enabled.

Delete all information stored on a device before the device changes ownership. Use a “hard factory reset” to permanently erase all content and settings store on the device.

“Sign out” or “Log off” when finished with an app rather than just closing it.

Use Your Cell Phone to Watch for Credit Card Deception

GuardianLogoIf you know how to text using your cell phone then you’re ready to activate SMS Guardian, a free service that monitors and sends you text alerts directly to your phone or other SMS-enabled device. When your debit card has been used for certain transactions this added layer of security alerts you to possible fraudulent use of your card.

Enrolled customers will receive a text when their debit card has been used in one of the following ways:

• For International Transactions or transactions greater than $500

• When your debit card is not present in the transaction (ex: online shopping)

• Eight or more transactions in a 24-hour period

• When your card is used in another state

• When your card is declined

If you receive a text about a transaction that you think could be fraudulent you can follow the instructions in the text to stop the current transaction and block your card from further activity.

This is a free service through BNC, although your carrier’s message and data rates will still apply. To sign up click on the Guardian Logo found next to your account page listing in your online banking or find the link on the Card Services page under the Personal Services tab on the BNC Website.

Return on Invested Capital

Invested-CapitalBy Mark E. Peiler, CFA – Senior Vice President, Chief Investment Officer

Investing in equity securities involves risk, which Benjamin Graham defined as a “permanent loss of capital”. Therefore, when searching for equity investment opportunities, it is important to concentrate on those businesses that demonstrate the ability to provide a satisfactory reward in exchange for assuming equity risk.

Return on Invested Capital (“ROIC”) provides the measurement of reward sought by equity investors. ROIC is a gauge of how efficiently a firm allocates the money invested in its operations towards profitable investments. It is calculated as a company’s earnings before interest, taxes, and depreciation divided by total capital (or common and preferred stock plus long-term debt). ROIC provides a concrete way to compare companies based on the feasibility of their products and the competency of their management.

Companies with the ability to generate high returns on invested capital are not easy to find. A recent screen of the 2,993 companies in the Russell 3000 Index for those with a ROIC of greater than 15 percent resulted in only 401 matches (less than 14 percent of the companies). This scarcity is why a high ROIC is one of the foundations in BNC Wealth Management’s value investing process.