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by Greg AbelLike a growing number of community banks nationwide, First Mariner Bank in Baltimore is in the middle of an online marketing experiment., The $1.4 billion-asset unit of First Mariner Bancorp recently relaunched a Web site, marketing campaign on the Google and Yahoo search engines., First Mariner plans to monitor and tweak the site's content and sponsored search terms as the campaign evolves, to move itself up the pecking order on both sides of the results page., said Kevin Lynch, First Mariner's senior vice president and director of e-commerce, First Mariner has committed to a three-month trial with a budget of $5, 000 a month, Mr. Lynch said. The Baltimore search-marketing consulting firm DMW Communications helped choose and edit the search terms and create site content, such as blogs, to maximize hits., The campaign is indicative of a growing, but still nascent, trend among community banks to leverage targeted online search marketing and advertising campaigns. Long the domain of large national or online-only banks with proportionately large budgets, campaigns using search engines, community Web sites, and other online vehicles are just starting to gain momentum among smaller banks as technology improves and awareness of effective tactics increases., The Web definitely has great potential for community banks, because you can target ads to local areas, said Jim Bruene, For the first decade bank advertising on the Internet was mostly national in scope. But all that changed in the last few years, As more and more people turn to the Web for financial research and resources, Mr. Bruene and other industry observers said, it makes sense for community banks to make sure consumers and businesses can find their institutions when looking for specific products in specific markets., If someone is moving to a new city or state, in the past they might go visit the nearest branch. Now that first search is done online, Mr. Bruene said., While First Mariner is using search engines to reach Web users, others are marketing their services through specific sites., For example, a popular online wedding planning site, The Knot, and its new companion site for newlyweds, The Nest, have become effective advertising vehicles for banks of all sizes., Alisha Johnson, a senior vice president and the director of marketing at the $411 million-asset Highland Bank in St. Paul, said that The Knot has helped her bank develop meaningful leads for its mortgage products., The site is national in scope but allows advertisers to target local communities by focusing on selected ZIP codes. More significantly, it lets banks and others focus on a demographic in the middle of making life-changing financial decisions., We're talking to an audience that is definitely in transition, A couple of years ago we wouldn't have even thought about it, That's music to the ears of David Liu, the chief executive and a co-founder of The Knot Inc., who sells national and community banks on the powerful notion that they can reach an audience with specific financial decisions looming., When consumers come back from their honeymoons, it's very predictable what's going to happen in that first year, Mr. Liu said, reeling off a list of transactions they are likely to make: buying a home, buying a car, buying insurance, and merging their finances., We've been able to create a destination that's very rich on the local level, Mr. Liu said. Six percent of his company's revenue comes from local advertisers, We are also the only media company that knows the moment a couple becomes married, Some community bankers say they do not see much value in using global search engines for local advertising, but Google Inc. is trying to convince them otherwise., The Mountain View, Calif., company, which reported an astounding $2.25 billion of revenue for the quarter that ended March 31, has targeted community banks as an area for growth. Jon Kaplan, its vertical head of financial services, said community banks have not leveraged search marketing as much as they could and need to take the time to understand what it offers., Our technology allows advertisers to target by a variety of geographic mechanisms - by market or state or radius around branch locations, Mr. Kaplan said. National banks have taken the lead in search advertising, but by doing so they have created an opening for the smaller guys., for example, a community bank's ad could appear showing not only its name and services but also a map indicating its location, Most of our advertisers find this to be the most cost-effective medium they advertise in, They are only reaching customers in the market for their products and services. There is no waste. These people have raised their hands and said, 'I'm interested in a checking account, One bank trying to do just that through a search campaign is Viking Bank in Seattle. The 13-year-old bank, which has six branches and two more on the drawing board, launched a Google Adwords campaign in November., Emily Cornwell, the $318 million-asset Viking's marketing director, bring in traffic., Part of the beauty of search advertising is its transparency, according to Ms. Cornwell. For example, she knows that in April, 000 searches made through Google brought up a results page that included Viking Bank, Of those 124, 000 searches, 105 resulted in clicks to Viking's site, of 0.1%. Viking's monthly fee? $300., We haven't gotten far enough to know if people are opening accounts, but we are seeing more traffic than last year, We want to get as much Web site exposure as we can, but we want customers to come into the branch, The desire for face-to-face interaction, though, has kept many community banks away from online advertising campaigns. Nearly every bank has a Web site, and many offer online banking, but anecdotal research suggests that the vast majority of community banks have not begun to consider online campaigns beyond e-mail offers to current customers., Perhaps owing to the community banking industry's proudly held reputation for relationship building and know-your-name customer service, some bank marketing executives said they see no need for online campaigns., With our style of community banking, people are real close to us, said Mike McDonald, a senior vice president at the $1.7 billion-asset Ameris Bancorp, a multibank holding company in Moultrie, We have not felt the need to advertise on the Web, Still, others are dipping their toe into online advertising., K Bank in Randallstown, We've been working with a few nonprofit and local community sites where people can find us as a resource, said Nicole Topper, K Bank's vice president of marketing and advertising., which is largely devoted to radio, billboard, and newspaper campaigns., The $621 million-asset bank is not experimenting with search marketing, Given we are a regional bank in Maryland, Otto Suarez, the president and marketing director at the Miami financial services marketing firm Oz Communications Inc., said he believes it is just a matter of time before community banks start advertising online en masse., Banks are often slower to react and adapt to new technologies and changing times. I think it's a great avenue, Mr. Abel is a freelance writer in Baltimore
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by Katie Kuehner-HebertA Westport, Conn., banking executive is following in the footsteps of Martha Stewart., appears Saturdays on local cable and will soon hit the air on network TV., Mr. Jennings became a lifestyle guru by accident, while a regional manager for the $9 billion-asset Hudson United Bancorp. of Mahwah, N.J., before it was bought this year by TD Banknorth Inc. of Portland, Maine. (He is now a senior vice president of Harbor Bank, a private bank being organized in Southport, Conn.), In 2002 he was asked to show his home and garden in a home tour for a local charity, Dress for Success. Soon after, many started coming to him not only for banking needs but for tips on how to decorate bathrooms or prune shrubs., That's when the lightbulb went off and I said, 'I should be doing more of this, Mr. Jennings, started his second career by doing guest spots on other home-and-garden TV shows, he launched his own last year. North Star Media of Studio City, Calif., recently agreed to syndicate it nationally, and several network stations in Connecticut and New York were to start broadcasting it this month., He has also launched a Web site, featuring tips on how to find antique shutters, and make corn, avocado, and tomato salad., Stephen M. Carta, the president and chief operating officer of the proposed Harbor Bank, said Mr. Jennings has developed quite a following on the Connecticut shore, He said Mr. Jennings' reputation should be good for Harbor, which organizers aim to open this year once they get a final nod from regulators and raise as much as $20 million of capital., the kind of respect and following you would hope to have in a community like Fairfield County, especially when you're the new guy on the block, Mr. Carta said.
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by Katie Kuehner-HebertWhen Dan McAllister, the San Diego County treasurer, tax collector, was campaigning for the job in *2002-, he told community bankers he would steer some county money to them., Now he's doing it., Most of the funds in a multibillion-dollar investment pool that Mr. McAllister's office manages for the county and other local agencies such as school and water districts, are invested in securities or deposited at big banks such as Bank of America or Wells Fargo Bank. But last month Mr. McAllister announced that his office had bought a $100, 000 certificate of deposit from each of 17 San Diego-area banks., For years, banks here have been trying to attract the attention of the county to do business locally, and now that my term is almost up, I thought I should work something out with them - as long as we get acceptable rates that we don't have to haggle over, Mr. McAllister said., Normally the money would have been invested in Treasury bills, Mr. McAllister said. The banks agreed to pay 5 basis points more than the going rate on a one-year T bill, Stephen G. Andrews of Bank of Alameda said the county, like other government entities, realizing that when they invest in larger banks, Paul Smith, senior counsel of regulatory policy at the American Bankers Association, said some states and big cities, including New York, often based on Community Reinvestment Act or similar ratings, when choosing where to deposit funds., They want to use the banks they think have been the best to their community, Mr. Smith said., The $777 million-asset Pacific Trust Bank in Chula Vista, Calif., is among those that sold a CD to San Diego County., It's a good start, but they need to expand it to say $1 million to $2 million for each bank to really make an impact, said Hans Ganz, the bank's president and CEO.
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by Jim Cole and Matthias RiekerCorporate Ladder, of John Kanas -- but reporting to him is a different matter., As chief executive, Mr. Boydstun sold Hibernia Corp. of New Orleans to Capital One Financial Corp. in November. Under the merger agreement, he was guaranteed a job as the McLean, company's highest-ranking banking executive., But Capital One quickly decided to add another banking company to the mix, announcing in March that it was buying North Fork Bancorp. Inc. of Melville, N.Y. That deal, set to close in the fourth quarter, will put an end to Mr. Boydstun's tenure as banking chief of Capital One, because Mr. Kanas is to become Capital One's president and head of banking. (Both men are 59.), It wasn't the first time that Mr. Boydstun relinquished the chief executive post for a role in a bigger company. In 1994 he sold a small community bank, First Bancorp of Louisiana, And when we sold to Capital One I went from being a CEO to a non-CEO, I was very supportive in doing the North Fork deal, knowing that it would probably impact me personally, Capital One's chairman and CEO, I am very fond of John, I am very fond of Rich. ... But as the North Fork deal comes into place, my reporting would go down and I would be reporting to John, In the Right Spot, Location, location, location., It's local, it's right there in San Francisco, and I just bought a condo in the St. Regis, On Monday, Mr. Hazen, the chairman of the specialty finance company KKR Financial Corp. of San Francisco, joined the board of Prosper Inc., which was started in February by Chris Larsen. Mr. Larsen is a founder and former CEO of E-Loan Inc., which is now a division of Popular Inc., In a phone interview Monday while vacationing in Hawaii, Mr. Hazen, said Mr. Larsen's involvement and the concept of a Web marketplace where individuals can borrow or offer to loan money appealed to him., The private equity fund Accel Partners of Palo Alto, Calif., invested in Prosper after Mr. Hazen praised the concept. Mr. Hazen is also the chairman of Accel-KKR LLC, a Menlo Park, Calif., private equity firm created in 2000 by Kohlberg Kravis Roberts & Co., Though Prosper's management and strategy caught his eye, Mr. Hazen said he also liked its proximity to his house in Pebble Beach, 100 miles south of San Francisco. He spent 30 years with Wells Fargo and retired in 2001 as its chairman and chief CEO., He is also on the boards of Vodafone PLC of Newbury, U.K., Xstrata PLC of Zug, Switzerland, Willis Group Ltd. of London, and Safeway Inc. of Pleasanton, Calif.
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by Daniel WolfeCashEdge Inc. and Yodlee Inc. both say a legal ruling has given them the advantage in their patent-infringement battle., However, most of the decisions in the ruling, over how to interpret a variety of disputed patents, favored Yodlee, and one analyst said it likely would give the Redwood City, Calif., aggregation software vendor the upper hand., Still, CashEdge said that some of the most important issues were decided in its favor, and that it expects these issues to be an important factor in its fight against Yodlee., Yodlee filed a patent-infringement suit against CashEdge in April *2005-, asserting that six of its patents had been infringed. CashEdge invoked three other Yodlee patents in its defense of that suit, and it filed a countersuit in March., On Friday, Judge Susan Illston of the U.S. District Court for the Northern District of California, who is hearing Yodlee's suit, issued a so-called Markman ruling, which defines the basic patent issues at stake in an infringement case., (The Markman hearing for the CashEdge case is expected to take place next year.), Joseph Polverari, Yodlee's senior vice president of strategy and development, said in an interview Wednesday, From our perspective, The judge favored Yodlee's interpretation of six of the nine patents in dispute, Sanjeev Dheer, the chief executive of CashEdge, of New York, said that even though the judge favored Yodlee's interpretations of most of its patents, the few interpretations in his vendor's favor are critical, because they undercut several of Yodlee's key assumptions about how its technology works., The issue has come up before, in a pair of suits pitting Yodlee against Block Financial Corp. Block sued Yodlee in January *2002-, and Yodlee countersued in September 2003. The two companies settled out of court last year., In the Markman hearing for Yodlee's suit against Block, as data that cannot be accessed or retrieved without some kind of verification method., in the suit against Block., According to Mr. Dheer, However, The sheer volume of issues that went in Yodlee's favor indicate that the vendor has the stronger case, Yodlee's suit includes 149 claims of infringement, all we need to nail them is one infringement of one of these 149 claims, Out of 149 claims, It's very important, as a party, Oftentimes, Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, CashEdge's aggregation software is integrated with several online banking products, including Online Resources Corp.'s Money HQ., However, aggregation is only part of CashEdge's business, said Mr. Schatt, who was the general manager of Yodlee's data services business from 2002 to 2004. For example, its account-opening and funding software is an important part of its business and relies very little on aggregation, I think that CashEdge is going to be ultimately forced to be out of the aggregation business, get something positive out of something that's pretty strongly in favor of Yodlee, Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said the case may eventually be resolved not in the courts, but by an acquisition. In another recent patent-infringement fight, Solidus Networks Inc. of San Francisco and BioPay LLC of Herndon, resolved their legal issues in January, when Solidus purchased BioPay., for Yodlee and CashEdge to consolidate
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by Christopher WoodMIDDLE ATLANTIC, Signature Bank of New York has hired Vincenzo Iannucci as an investment group director and a vice president at its broker-dealer unit, Signature Securities Group Corp., Mr. Iannucci was a financial adviser at Chase Investment Services Corp., a unit of JPMorgan Chase & Co., for the past three years. Before that he had worked for 11 years at Citigroup Inc., He has 16 years of financial services experience., Signature Bank has $4.7 billion of assets., SOUTHEAST, Regent Bank of Davie, Fla., has named Neill LeCorgne its president., He will remain the chief operating officer, a job he has had since joining the $236 million-asset unit of Regent Bancorp Inc. last year as an executive vice president., which First Union bought in 1990., Mr. LeCorgne has 22 years of banking experience., Bank of Hampton Roads of Norfolk, has hired Lynn K. Pierce as a senior vice president and senior lending officer., Mr. Pierce joined the $411 million-asset unit of Hampton Roads Bankshares Inc. from Resource Bank, where he had been a senior vice president and the city executive for Chesapeake., Before that he had worked at Central Fidelity Bank until *1998-, when the old Wachovia Corp. bought it., He has 30 years of bank management and lending experience., WEST, Washington Trust Bank of Spokane has hired Linda Williams as a senior vice president and its private banking team leader for Oregon., Earlier she had been a commercial banking executive at Wells Fargo Bank and, earlier, at First Interstate Bank, which Wells bought in 1996., Washington Trust Bank is a $3 billion-asset unit of W.T.B. Financial Corp., Centennial Bank Holdings Inc. of Denver has hired Margaret d'Emery as the executive vice president of deposit services for the company and two of its three banking units, Guaranty Bank and Trust Co. and Centennial Bank of the West., Ms. d'Emery was the manager of deposit services for the commercial real estate division at U.S. Bank, where she had worked for 21 years., The $2.9 billion-asset Centennial Bank Holdings' other unit is Collegiate Peaks Bank., First Republic Bank of San Francisco has hired Greg Linvill as its head of business banking., Mr. Linvill, who also has been named a senior vice president and a member of the $10.4 billion-asset bank's senior management team, was a senior vice president and senior credit administrator at City National Bank of Los Angeles., Earlier he had worked at Bay View Capital Corp., Silicon Valley Bank, and Wells Fargo Bank., Legacy Bank of Campbell, Calif., has hired Kim Chavez as a senior vice president and its loan operations manager., Ms. Chavez was an internal bank auditor at Heritage Bank of Commerce of San Jose. Before that she had been the president of Kim Kumparak Consulting Inc. for 10 years.
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by Jody ShennFirst-quarter earnings at Downey Financial Corp. fell 14% from a year, earlier, to $44.8 million, or $1.61 a share, as it made less on sales of, loans and mortgage-backed securities and raised its provisioning for credit, losses., In its earnings report Tuesday, the $18 billion-asset Newport Beach, Calif., thrift company also warned of coming pressure on asset levels, which, rose 5.4%, because it recently raised start rates on option adjustable-rate, mortgages., Downey said it moved the initial rates on the ARMs -- and hence, their, because of rising interest rates and signs that the housing market is, softening., Last quarter Downey got about 28% of its loan interest income from, negative amortization from such loans, versus 24% in the previous quarter, 11% a year earlier. Outstanding negative amortization rose 36% from, yearend,, to $182 million, and made up 1.31% of its option ARM balances on March 31., Downey nearly quintupled its credit provision from a year earlier, $10.1 million, despite essentially flat net chargeoffs. It said it did so, because of the weaker housing markets in California and expectations that, some option ARM borrowers will hit limits on negative amortization and then, go delinquent., Net interest income rose 10% from a year earlier, to $103.6 million, as a, result of a 7.4% rise in interest-earning assets and a widening spread, caused, slower prepayments, less teaser rates, and the return to dividends by, Federal Home Loan Bank of San Francisco. Loan originations fell 33%, $2.8, billion.
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by analysts and a MasterCard executive said., Some analysts said the plan announced this week is also another indication that MasterCard, which went public in May, has become less beholden to its former bank owners. Certainly, the move, and the company's explanation, demonstrate a desire to appear that way., Some merchant lawyers and trade groups, who had dismissed other attempts at retailer placation by MasterCard and Visa U.S.A., had positive things to say about the decision., Joshua Peirez, MasterCard's president of global public policy, disclosing interchange fees ... provides the merchants what the bank has to pay to the bank of the cardholders for the transaction, something we discussed, as a general matter, with our banks, Paul Hartwick, a spokesman for JPMorgan Chase & Co., Bruce Cundiff, an analyst at Javelin Strategy and Research in Pleasanton, Calif., said the disclosure of interchange rates will alter the relationship between merchants and their acquirers -- and may not sit well with the latter., essentially relied on acquirers to provide them with all of the background and essentially how much interchange they're paying on a transaction-to-transaction basis, Now that MasterCard is publishing this and established this direct 'pipeline' with merchants, Mr. Cundiff said., Jody Soper, a spokeswoman for First Data Corp., said acquirers offer merchants a lot of services., We can't really theorize how the merchants will react to interchange pricing, K. Craig Wildfang, a lawyer at the Minneapolis firm Robbins Kaplan Miller & Ciresi LLP and the lead attorney on the merchants' consolidated lawsuit against MasterCard and Visa, said knowing the interchange structure can help merchants in the long run., To the extent merchants understand the terms -- how these things work, Jeff Lenard, a spokesman for the National Association of Convenience Stores (which is one of the plaintiffs), Visa indicated that it would not follow suit. In a prepared statement, There is full visibility of pricing within the Visa system. Retailers do know, and always have known, those fees are called the merchant discount, interchange is the portion that the merchant's bank passes on to the card issuer.), Matthew Park, an analyst at Prudential Equity Group, of its former bank owners
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by Erick BergquistIndyMac Bancorp Inc.'s third-quarter earnings fell short of expectations as the company got more of its loans through the lower-margin conduit channel., The Pasadena, Calif., thrift company said Thursday that it made $86 million, 11% more than a year earlier. Earnings per share climbed 3% to $1.19, 8 cents short of the average estimate of analysts., Michael Perry, IndyMac's chief executive, said on a conference call that it is still on track to make $5 a share this year, it will hit its target of earning $8 a share in 2008., The market was tougher than what we expected at the beginning of the year, especially given the yield curve and competition, including production volume, which rose 41%, to $23.96 billion, In an interview after the call, Richard Wohl, the president of IndyMac's bank, Morgan Stanley analyst Suzanne Schiavelli calculated that IndyMac's gain-on-sale margin fell 15 basis points from a year earlier, to 82 basis points, in the third quarter., in an otherwise strong quarter, as she had expected a gain-on-sale margin of 100 basis points., On the call, Mr. Wohl said the recently issued federal interagency guidance for exotic loan types, such as option adjustable-rate mortgages, for IndyMac., If you look at the three areas of the guidance -- underwriting, risk management portfolio practices, Mr. Wohl said., IndyMac's originations, In the interview, When the yield curve is flat or inverted, the price of a fixed-rate loan is more similar to an ARM loan, Media coverage of option ARMs has also gotten to borrowers, You've seen some articles that are unfair that are casting them in very negative terms, lower than most of their competition. Wamu was at 69 basis points, Countrywide was at 88 basis points, On the call, might have a couple percent negative impact on our production, but if we pick up share, That IndyMac's regulator is the Office of Thrift Supervision puts it in a better position than many of its competitors, Mr. Perry said., They are the regulator you want to have, because their mission is housing
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by Barbara A. RehmPopular Inc. is dropping its New York banking charter and shifting its $12.2 billion of assets on the U.S. mainland to a national charter., The nearly $50 billion-asset Puerto Rican company's decision followed similar moves by other banking companies that have converted to national charters, mainly to gain flexibility to operate across state lines., But chairman and chief executive Richard L. Carrion said Popular is converting its Banco Popular North America to a national charter mainly to reduce its funding costs., Popular plans to move its mainland consumer finance subsidiary, Popular Financial Holdings, and E-Loan Inc. the Pleasanton, Calif., Internet lending operation it bought last year, to the new national charter., Consolidating those units under a national charter would let them be funded by bank deposits, a cheaper, more streamlined source of funding than the capital markets., Beyond New York, Banco Popular North America has 140 branches in five other states: Illinois, Florida, New Jersey, Texas, and California. It aims to add another 100 branches by the end of 2008., Popular's main banking subsidiary, Banco Popular de Puerto Rico, will keep its $26.1 billion of assets in a Puerto Rican charter and will remain a member of the Federal Reserve System., Mr. Carrion said in an interview this summer, after the decision to make the charter switch but before all the paperwork had been filed., Though there is plenty of speculation about how much lobbying regulators do to persuade banks to keep or adopt their charters, Mr. Carrion said the Office of the Comptroller of the Currency did not solicit the conversion. What's more, It is always a disappointment to face the prospect of losing one of our state-chartered banks. However, choosing a charter is a business decision, The most recent large banking company to announce such a move was Citigroup Inc., which said it would consolidate 12 charters into four. The biggest shift: $120 billion of assets from a federal thrift charter to a national bank one., In May, The McLean, company's credit card assets will remain under its Virginia charter. Capital One will inherit a second national bank charter used by North Fork's $927 million-asset Superior Savings of New England., As more large companies choose the national charter, responsibility for oversight is being concentrated at the OCC. Assets under the agency's control have increased by 75% since 2000. Today it supervises 1, 799 banks with $6.27 trillion of assets
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by Compiled by Steve BillsFirst Financial Credit Union in West Covina, Calif., said outsourcing the work of calling borrowers to remind them to pay their bills has reduced its loan delinquencies and improved its sales for other accounts., The $637 million-asset credit union began using SoundBite Communications Inc., a Burlington, Mass., automated dialing service provider, in 2004 to deliver the messages., G. Donald Gross, the vice president in charge of information technology, collections, and lending audits at First Financial, said in an interview last week that delinquencies have dropped nearly 80%, to $3 million in the first quarter, since it started using SoundBite., The sooner you call the people, the more likely you are to get them on the right path, The credit union has also pulled back from the troublesome business of indirect auto lending to subprime borrowers, and it wrote off some bad loans, Chargeoffs are high, because of the nature of the business, Mr. Gross said, but they might be two or three times higher if First Financial were not using the service., First Financial outsourced the work to SoundBite because the automated system is more efficient than hiring collections staff to make the calls, and buying and installing the equipment would have taken more time and money than handing off the work to the vendor, The credit union had $14 million of loans more than 60 days past due when he joined it in June 2004 from a credit union in Florida, First Financial also uses the service for sales and special promotions, Mr. Gross said. For example
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by Kate BerryThough H&R Block Inc. said it will consider a sale or spinoff of Option One Mortgage Corp., the tax-preparation giant has not thrown in the towel when it comes to diversifying into other financial services, even mortgages., The decision marks a reversal for H&R Block, whose top executives said in August they were not inclined to pursue a sale. Public comments aside, a realignment this spring by the company may have made a sale easier to execute. Its financial adviser, bank, and retail mortgage units were placed under a new consumer financial services group separate from the wholesaler Option One., On Tuesday, H&R& Block pointed to the reorganized group as the core of its new approach to financial services., to enhance our service offerings to be more competitive, Mark Ernst, the company's chief executive, said at an investor conference. The $750 million-asset savings bank, which H&R Block got federal approval to charter in March and opened in May, is being used to deliver value to speed-of-refund clients and financial advisers to supplement higher-end client needs, Mr. Ernst said., H&R Block Mortgage, and it could continue to buy them from Option One after it is sold, On Monday the Kansas City, company revealed that Option One was for sale, and it cut earnings guidance for this fiscal year, is purely related to the pricing environment in the mortgage business, Mr. Ernst said., We believe that as the market is evolving there may be a better owner for this asset than what we can do as a monoline or stand-alone operator, for Option One, of Irvine, Calif., which it bought in 1997 for $190 million., (In August, moves for Option One.), Kyle Cerminara, a financial services analyst at T. Rowe Price & Associates, said the mortgage unit has distracted H&R Block's management from its U.S. tax business, Their strategy was to go into financial services, but I'm not sure shareholders necessarily agreed with that, The consumer financial services group is newly created, but they're getting rid of most of the mortgage business, H&R Block Mortgage is much smaller than Option One, with only four retail outlets and eight district offices in the United States at the end of June. (In August, moves for Option One.), John Neff, an analyst at William Blair & Co., said Mr. Ernst, who did not accept a bonus this year, for a possible disposition, Mr. Neff said Tuesday at the investor conference. (Mr. Ernst said H&R Block continues to use its free cash flow to increase its dividend and repurchase shares.), for H&R Block investors., Assuming the mortgage business generates positive earnings, their removal reduces the stock's intermediate potential upside as well, he wrote in a research note issued Tuesday., During the last fiscal year Option One generated 25% of H&R Block's revenue and originated $40 billion of nonprime residential mortgages. It is the sixth-largest subprime lender, according to National Mortgage News, and services about $74 billion of subprime loans., In the first fiscal quarter, for which H&R Block posted a loss of $131 million and said revenue dropped 40% from the fourth quarter, increase in loan repurchase requests, because of early-payment defaults., In the quarter H&R Block added $85 million to repurchase reserves, and it added roughly $17 million to repurchase loans sold into the secondary market., Option One will be competing for buyers' attention with a number of mortgage companies, including Champion Mortgage, which KeyCorp put on the block several months ago, and possibly HomeBanc Corp., which has hinted that it is considering a sale., Brenda White, a managing director at Deloitte & Touche Corporate Finance LLC, said it remains unclear whether the market can absorb so many mortgage lenders in play at the same time., Valuations aren't great right now, because of the lack of profitability in the market and the repurchase requests, Matthew Howlett, an analyst at Fox-Pitt, Kelton Inc., compared with other lenders, including Saxon Capital Inc., which Morgan Stanley has agreed to buy for $706 million, and MortgageIT Holdings, which Deutsche Bank AG has agreed to buy for $429 million., We think the most likely suitor will be an investment bank, Mr. Howlett wrote in a recent note issued Tuesday., is likely to drive down pricings, given supply pressures, At the same time, He valued Option One at roughly $1.7 billion -- $910 million to $1.1 billion for the origination platform, $481 million to $629 million for the servicing portfolio
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by Matthias RiekerThe recent pickup in big-bank deals has shone a light on an emerging, trend: Buyers appear to be focusing more on revenue synergies., Take Wachovia Corp. During a conference call with investors Monday to, discuss its $25.5 billion deal for the Oakland, Calif., thrift company, Golden, West Financial Corp., G. Kennedy Thompson, Wachovia's chairman, president, chief executive, made only a brief reference to anticipated expense cuts., Tom Wurtz, Wachovia's chief financial officer, modest, of about 9% of the $125 billion-asset Golden West's cost, base., zero, very, very confident, for his $541.8, billion-asset Charlotte company. The deal, announced May 7, is expected to, close in the fourth quarter., During a conference call Friday, Mr. Wurtz outlined $230 million in, revenues synergies in *2009-, by expanding Wachovia's broader product set to, Golden West customer, cross-sell option adjustable-rate mortgages to, Wachovia, Gary L. Perlin, the chief financial officer of Capital One Financial, Corp., was up front when he discussed the McLean, credit card lender's, agreement to purchase the $58 billion-asset North Fork Bancorp. Inc. of, Melville, N.Y., We expect revenue synergies of approximately $130 million, About 40% of those synergies would come from cross-selling North Fork's, mortgage offerings to customers of Capital One and Hibernia Corp., the New, Orleans banking company it acquired November. About 40% would come from, selling Capital One's cards to North Fork customers, and about 10% would, come, from cross-selling opportunities in small-business banking., The $14.6 billion deal, announced March 12, is expected to close in the, fourth quarter., Though Mr. Perlin also outlined $110 million of cost cuts resulting from, the deal, observers said there appear to be a change in mentality among, acquiring companies., Nobody is out there saying, 'Here is this big slash-and-burn cost cut, Robert B. Albertson, the chief strategist at, That era may, Investment bankers share this view., I don't think anybody is looking to take out capacity, Andrew M., Senchak, a vice chairman and the president of Keefe, Bruyette & Woods Inc., Many observers said that desire for expansion also fueled JPMorgan Chase, & Co.'s decision to swap its corporate trust business -- and $150 million, cash -- for Bank of New York Co. Inc.'s retail and middle-market banking, business., There is increasing evidence of the benefits of size and scale in terms, of capital efficiency, marketing advantages, and cost structure, John, Mahoney, a co-head of the U.S. bank group at Goldman Sachs Group Inc., said, in an interview Tuesday., Mr. Senchak and others said the focus on revenue also shows up in smaller, recent acquisitions., narrowly defined, of Wachovia and Capital One, but they are following, same broad trend of revenue growth, Richard A. Schaberg, a partner with the, law firm Thacher Proffitt & Wood LLP, Your, rank-and-file thrift or bank sale to yet another bank or thrift is more, about, ... let's just take that customer base and service it better, more, Two examples observers cited from last month are TD Banknorth Inc.'s, $480.6 million deal to buy Interchange Financial Services Inc. of Saddle, Brook, N.J., and the $55 million deal that $980 million-asset Alliance, Financial Corp. in Syracuse, N.Y., announced April 24 to buy the $225, million-asset Bridge Street Financial Inc. of Oswego., The reasons to sell have not changed., What we have seen and heard over the last two years: The economic, reality of just how tough the operating environment is, is weighing very, John Chrin, the head of financial, institution mergers and acquisitions at JPMorgan Chase, said in an, interview, Tuesday., Pressure on revenue from the continually slowing mortgage business, pressure on loan spreads from the flat yield curve, are cited most often as, reasons to look for a buyer. Slower deposit growth makes it harder -- and, more expensive -- for some to fund loan growth, and worsening credit, quality, later this year may well require many bankers to increase reserves to cover, loan losses., The cost of regulation, the cost of computerization, the cost of, marketing is just driving a lot of the smaller banks to want to find a, William J. Ryan, the $40.9 billion-asset TD, Banknorth's chairman and CEO, told American Banker in an interview April, just after his Portland, Maine, company announced its deal to buy the $1.6, billion-asset Interchange., The deal would provide TD Banknorth with ample cost savings, Mr. Ryan, said, but his company would expand Interchange's offerings, particularly in, insurance products and wealth management services., Even the decisions by Herbert and Marion Sandler, the co-founders and, co-CEOs of Golden West, and John A. Kanas, the chairman and CEO of North, Fork, to sell their companies reflect the desire to increase revenue rather, than a simple response to competition., said Mr. Sandler, during the conference call announcing Golden West's deal to sell itself to, But the negative is that we are, in fact, a monoline company., Golden West found its match in Wachovia's dedication to service and its, Mr. Kanas told American Banker in an interview March 13, a day after the, Capital One deal was announced, asset, that North Fork needs to withstand an inverted yield curve., Many analysts and investment bankers said both companies had years to go, before hitting an earnings wall., Neither one is really indicating that they couldn't go alone. It is just, Mr. Albertson said., Observers said the sellers met the revenue expectations of the buyers., one investment banker, I don't think that it is totally random that they chose now to, And the fact that neither had to sell makes predictions about who could, follow their lead particularly difficult, investment bankers said., Kenneth Bruce, a Merrill Lynch & Co. Inc. analyst, wrote in a report, issued last week that investors may now look at Washington Mutual Inc. and, Countrywide Financial Corp. as potential targets., Countrywide, by all accounts a formidable mortgage originator, narrowly focused and lacks branches. But David Hendler, an analyst at, CreditSights Inc., wrote in a report issued Thursday that Countrywide is an, unlikely seller., Analysts and investment bankers also disagree on whether Wamu is more, likely to buy or sell. Several investment bankers said the $348.7, billion-asset Seattle thrift company could be a long-term survivor, especially if it chooses its targets well., Last year Wamu bought the San Francisco credit card lender Providian, Financial Corp., and last month it announced it would buy Commercial, Capital, Bancorp Inc. an Irvine, Calif., thrift company that specializes in, multifamily lending., But the research team at Keefe Bruyette added the Seattle thrift company, to its list of potential takeover targets on May 10. Wamu is, under-earning,, merger, One investment banker said that the $37.3 billion-asset First Horizon, National Corp. may consider putting itself on the block., The large Memphis mortgage lender, which has sizable exposure to capital, markets, issued a messy first-quarter report. The company may provide a, buyer, with an attractive entry into the fast-growing southern banking markets., Observers are divided on whether the current pace of deal-making in, financial services will continue. SNL Financial LC said that as of May 5, bank, thrift, and specialty finance deals had been announced this year, more than in the same period last year., against concluding that the pace will pick, Kevin S. Pierre, an analyst with AllianceBernstein LP's Sanford C., We believe that at, current bank valuations, it is quite difficult to find attractive deal, What we are seeing is a fairly, I frankly don't see that, All of the investment bankers interviewed for this story, as well as Mr., Schaberg, advised on at least one of the deals mentioned in this story., Spokespeople for Countrywide, Wamu, and First Horizon declined to, comment.
Published in American Banker (2006)
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