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by Compiled by Steve BillsBank of New York Co. has received a British patent for a system its BNY, SmartSource uses to help investment managers communicate with the banks, that, settle securities transactions for institutional clients., A U.S. patent application is pending, the bank said Monday., The system provides a standardized way to communicate on behalf of, clients that use different banks as custodians, said Stella Vanguestaine, managing director for marketing and client relations at BNY SmartSource., An investment manager may need to communicate with 30 to 100 custodians, on behalf of different customers, very, difficult for the investment manager to know who wants Swift messaging, wants you to go in through their Web portal, or who can only take a fax, said., Swift, the Society for Worldwide Interbank Financial Telecommunication, provides more than 360 standard types of transaction messages, including, payment instructions and information about settlements. BNY SmartSource, uses, a standing-instruction database to automate broker clearing and custodian, The system provides a single communications system for investment, managers working with foundations, endowments, and other institutional, investors, each of which may select its own custodian, The system now connects to 125 custodians worldwide, Ms. Vanguestaine, said. She would not say how many investment managers use it., RCM (UK) Ltd., a London unit of Allianz AG, is the first company to use, the technology in Britain, Bank of New York said. RCM went live with it in, the United States in September 2004 and in England last October., Ms. Vanguestaine said Bank of New York does not plan to license its, The bank started BNY SmartSource in 1999 to offer outsourcing to, investment companies.
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by Laurie KulikowskiCredit Suisse First Boston Corp. downgraded the group of large-cap, banking companies it covers -- and the stocks of three of those companies, whose prices it said remain too high for companies trying to deal with, fundamental business issues., Christopher Mutascio, an analyst at CS First Boston, downgraded the group, and wrote in a research, note, that investors have bid up bank stocks in the belief that the Federal, Reserve, Board will cut interest rates this year., We think the potential for Fed cuts in 2006 is overly optimistic, wrote., Regions Financial Corp. was one of the three banking companies whose, The $84.6 billion-asset Birmingham, Ala., company's net interest margin, which expanded last quarter while those of other companies contracted, stop expanding if the Fed stops raising rates, he wrote., Also, because Regions has finished integrating Union Planters Corp., cost, savings from the June 2004 acquisition will likely be 41% lower this year, than, the $110 million Mr. Mutascio predicts it will report for 2005., Regions is scheduled to report its first-quarter earnings Jan. 20., Mr. Mutascio also wrote that some on Wall Street are overly optimistic, about the strength of the economic recovery in areas stricken by Hurricane, Katrina, where Regions has operations. He cut his earnings estimate for, this, year by 3 cents a share, to $2.55., Mr. Mutascio also cited valuation for his downgrade of shares of BB&T, Corp. of Winston Salem, N.C. The $107.1 billion-asset company also has a, higher risk of missing consensus estimates for this year, despite the, expectations for average earnings growth., The continued flattening yield curve, as well as a shift in deposit and, loan pricing pressures and increased loan-loss provisioning, will likely, hurt, BB&T's net interest margin, he wrote., He lowered his earnings estimate for the company for this year by 2 cents, a share, to $3.20 a share. BB&T is scheduled to report earnings Jan. 19., Mr. Mutascio downgraded Fifth Third Bancorp for valuation reasons and, because of continued competition in the Midwest and a contracted net, interest, with, significant management turnover and poor growth over the past few years, wrote., He cut his earnings estimate for this year by 4 cents a share, to $2.76., Fifth Third is scheduled to report earnings Jan. 17., Kevin P. Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, said, Wednesday that the flat yield curve likely made earnings tough for most, banking companies last quarter., BB&T does not face any more pressure than other companies, he is concerned that it may announce a large deal that could dilute, earnings,, After abstaining from deals for 20 months, BB&T announced Dec. 15 that it, would buy Main Street Banks Inc. of Atlanta for $622.7 million of stock., deal is set to close next quarter., Mr. Fitzsimmons said he is more optimistic about Regions, because he, rating on the stock., Jennifer Demba, an analyst at SunTrust Robinson Humphrey, is also, optimistic about Regions' results. She upgraded the stock Dec. 16 to, In a note issued at that time, she wrote that Regions is focusing on, profitability improvement rather than earnings growth, since the Union, Planters integration has been completed. However, new strategic initiatives, have not been completely formulated yet, she wrote. Regions, BB&T, Fifth, Third declined to discuss the notes Wednesday.
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by Luke MullinsThis month Diana L. Taylor, the New York State banking superintendent, under, a program meant to stimulate development in low-income communities., One immediate beneficiary will be Carver Federal Savings Bank, which, operates the only branch in the district., Under a 1998 law, banks and thrifts in communities the state designates, as underserved are rewarded with millions in state and municipal deposits, which the $650 million-asset Carver intends to use to make more loans --, generate more profits., The branch is Carver's third in a banking development district. A branch, in Queens was designated as a banking development district in *2004-, and in, 2001 Carver opened a branch on Malcolm X Boulevard in Harlem, largely to, take, advantage of the law that created the districts. That branch received $50, million of state deposits and another $5 million from New York City., Deborah C. Wright, the savings bank's chairman and chief executive, that comes with, opening a branch. Even in more affluent neighborhoods, most new branches, take two to three years to break even, but the Malcolm X Boulevard branch, New York is the only state that awards large deposits to banks and, thrifts that open or stay in neighborhoods that other banks fled long ago., Since Gov. George Pataki signed the law, the state has established 18, banking, development districts, primarily in New York City, but also in Buffalo and, some smaller upstate communities., Carver, a black-owned thrift established in *1948-, has a history of, serving low-income communities. Ms. Wright said that the banking, development, district designation is helping to stimulate economic activity in these, neighborhoods by providing banks with funds that would otherwise take years, to accumulate., The deposits should also help accelerate Carver's growth, Ms. Wright, its first, We're a publicly traded, Andrew Dorn, the president and CEO of Greater Buffalo Savings Bank, takes, a different view of the districts., Its branch in a district in Buffalo is a way to provide a low-income, neighborhood with financial services and jobs, not something that will, drive, the savings bank's earnings, Mr. Dorn said., Since it opened in 1999 the branch has received about $35 million of, state deposits, but only about $5 million from the community., Quite frankly, very few of the people who live in that community have, Banks that receive state funds have to return the money eventually, they would need to bring in tens of millions of dollars from the community, remain profitable. Still, Mr. Dorn said his $770 million-asset savings, bank is, planning to open another branch in a banking development district in, Buffalo, this summer., The banking development districts gives us a chance to help the, When Carver opened the Malcolm X Boulevard branch, it set out to raise, $30 million of deposits from the community in its first three years., The savings bank missed the target date by two years -- largely on, account of the Sept. 11 attacks, Ms. Wright said -- but by Sept. 30, *2005-, the branch had taken in more than $29 million from the community., Under its agreement, Carver will return the $50 million to the state in, September. Ms. Wright said that the Malcolm X branch has enough deposits to, be profitable without the state's help., The deposits were really a bridge for us to give the community time to, Ms. Taylor said that banking development districts were not created to, force banks to choose between making money and serving the underbanked., From a regulatory standpoint, I don't want branches that are not going, to be profitable. It's not good from a safety-and-soundness perspective, said., In New York City, at least, Ms. Wright said Carver can do good and do, well. The improving economic conditions in the inner cities create, opportunities for both residential and commercial lending, The inner city is booming. There is a lot more business than just, You have to have the fundamental belief that the
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by Christine BuurmaM&T Bank Corp.'s purchase of a Maryland agency last week moved its, insurance operation for the first time into the Middle Atlantic region it, entered with a big bank deal in *2003-, and it may have nearly doubled the, unit's revenue., The deal for Hess Egan Hagerty & L'Hommedieu Inc., a commercial insurance, specialist in Chevy Chase, fits M&T Insurance Agency Inc.'s focus on, commercial insurance as well as the parent's expansion into Maryland, Virginia, and Washington, D.C., said John Rumschik, the unit's president, chief operating officer., Mr. Rumschik declined to specify his unit's revenue or Hess Egan's, he told American Banker last March that the property and casualty business, was generating $10 million of annual revenue. And Hess Egan's annual, revenue, has been estimated at $5 million to $10 million. Mr. Rumschik also declined, to discuss revenue goals., M&T Bank Corp. expanded dramatically outside its upstate New York home, region with its $3 billion purchase of Baltimore's Allfirst Financial Inc., then a unit of Allied Irish Banks PLC. Before the Hess Egan deal, Insurance had agency operations only in Buffalo and Syracuse, N.Y., This is a significant acquisition in terms of the size of it, said, James Campbell, an analyst at Reagan Consulting Inc. in Atlanta who has, They're able to expand their insurance distribution, through, Mr. Rumschik declined to discuss any future acquisition plan, but in an, interview last year, York, central Pennsylvania, and the Maryland-Virginia-District of Columbia, markets where it operates., Commercial insurance has been the primary focus for M&T's insurance arm, and the Hess Egan purchase is strategically located for the bank, said., When considering agency deals, M&T evaluates the quality of the agents, their brand-name recognition within the market, business strategy, commercial product lineup, Mr. Rumschik said. The Hess Egan deal presents, Hess has a strong reputation in delivering quality property and casualty, We can now offer, those, M&T has been in the insurance business about six years, Mr. Rumschik, said, and the bank likes it because it is relatively low-risk and bolsters, fee revenue. Insurance has been a successful product line because M&T's, commercial bank clients want commercial insurance
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by Matt Ackermannfter more than doubling its variable annuity sales through banks last, year, John Hancock's bank annuity operation expects double-digit growth, this, year, its president says., Hancock's bank variable annuity sales grew 106% last year, to $1 billion, a company record. This made the Boston-based unit of Manulife Financial, Corp., the fifth-largest seller of variable annuities through banks, up from 11th, 2004, according to data from Kenneth Kehrer Associates., Kenneth Kehrer, the president of the eponymous Princeton, N.J., consulting firm, said that only one other company -- Lincoln National, whose, bank sales grew 220% last year, to $384 million -- set a faster pace than, Hancock., This is substantial in a time when variable annuity sales have been more, I think it is unreasonable to expect another 100% increase, said Fred, Nicholas, the president of Hancock's bank annuities channel, but I think, expect a meaningful increase as we get into more banks and gain more, awareness [of] the vast appeal of these products in the banks that we are, currently in. ... I clearly see double-digit growth not just because of our, Mr. Nicholas said Hancock was able to deepen penetration in the channel, because key components came together last year. The company used brand, recognition, its track record, and some innovative products to push ahead, said., We came out with a simple, straightforward message about retirement, income solutions and built a story to help brokers in banks appeal to the, Hancock also expanded its wholesaler force in the channel from 15 to 25, and Mr. Nicholas said he expects to add more. The company also added five, banks to the group of 15 through which it distributed in 2004. Mr. Nicholas, said he expects to add at least five more this year., Clearly we are targeting the largest banks in the country with the, largest retail presence, but we are also equipped and have the coverage to, We are providing, coverage, nationally. Our wholesalers are geographically distributed so they work, with, Analysts were skeptical that Hancock could have this kind of success when, Manulife bought it for $11 billion in 2004. At the time, Hancock sold fixed, annuities through banks but was not considered a player in variables., Toronto-based Manulife was a successful distributor of variable annuities, but its prowess seemed limited to Canada., Mr. Kehrer said Hancock was able to achieve this growth because it, focused its resources on variable annuity sales., In variable annuity sales, the name of the game is really getting, distribution agreements with the very largest banks and developing market, Hancock has done well in, getting access and gaining market share in five of the top 10 banks. Their, momentum will depend in part on whether they can add one or two more major, Mr. Nicholas said another key driver has been Hancock's Principle Plus, for Life variable annuity rider, which offers retirees guaranteed income, life that can grow with favorable performance by the product's underlying, investments. The rider was chosen on more than 75% of annuity contracts, sold, last year., Variable annuities with unique riders have the bank channel buzz, said., Today, it is about income, People are looking for a source of income with upside benefits. They want, something that is predictable, sustainable, and potentially increasing. It, used to be about asset performance. Now it is about converting assets to, In addition to the annuity withdrawal benefit, the company's Lifestyle, portfolios -- diversified asset allocation funds-of-funds -- have driven, bank, sales growth. About 70% of variable annuity premiums and deposits are, flowing, into the Lifestyle portfolios., Mr. Nicholas said Hancock would try to add products and services, strategically in order to develop additional wallet share through banks., We have established a presence in the bank marketplace and increased, awareness about who Hancock is with our variable annuities, Once, we have established that presence, it puts us in a good position in bring, other products such as our Lifestyle portfolios. We want to offer not only, variable annuities but also mutual funds, 529 plans, and 401(k) programs to, Mr. Kehrer said Hancock could succeed with this strategy because banks, are interested in limiting the number of underwriters they work with., Hartford Financial Services Group Inc. used a similar strategy, become the leading provider of variable annuities through banks and a, company, that can also provide other products., Banks, eager to offer a wider array of nonproprietary products, receptive to offering more Hancock products, according to Mr. Nicholas., First, we had to establish that we can bring value and that our products, Once we can convince that we can, help a bank grow their business and we have established credibility, we can
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by Steve BillsFiserv Inc., its fourth-quarter revenue swelled by a contract termination, that will bite this year, will no longer issue quarter-by-quarter earnings, guidance, its new president and chief executive said Tuesday, Instead, Jeffery W. Yabuki said, each quarter the technology vendor will, update its estimates of full-year figures., The pressure to meet quarterly estimates could distort decision making, said Mr. Yabuki, who took the reins in November. He said he wants, decisions, He spoke during a conference call with analysts., The Brookfield, Wis., company reported a fourth-quarter profit of $150.5, million, up 54% from a year earlier. The per-share figure was 81 cents., Meeting analysts' expectations, Fiserv said adjusted earnings from, continuing, operations totaled 56 cents per share., Revenue rose 14%, to $987.7 million, though that included a $26.3 million, I'd rather have no termination, fees, because of the impact it has on our future earnings, Mr. Yabuki, said., Last year the company reported the termination of three contracts that, collectively brought in about $40 million a year of revenue. It did not, identify the customers., Full-year profit grew 37%, to $516.4 million, or $2.70 a share. Revenue, increased 11% to $3.71 billion., Fiserv projected 2006 earnings of $2.46 to $2.53 per share. It estimated, that revenue from current operations would grow at a mid-single-digit, percentage rate in its financial and investment segments and a, low-double-digit rate in the health segment., This year, Mr. Yabuki said, Fiserv will concentrate on developing its, payments operations in areas where it has not focused in the past. These, include online bill payment (building on the August acquisition of, BillMatrix, Corp. of Dallas) and card processing, including credit, debit, stored-value cards., New areas of focus will also include consumer-directed health care, Yabuki said. In January the company bought CareGain Inc. of East Windsor, N.J., which offers integrated technology for administering various kinds of, health-finance accounts., One thing will remain the same as under his predecessor, Leslie M. Muma:, Our appetite remains -- what, would, Fiserv, founded in 1984,, has bought more than 135 companies.
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by Bill StonemanThere is nothing unusual in having security procedures, as the $21, billion-asset Associated Banc-Corp does, to ensure that consumers are who, they claim to be., But what it does when customers sign up for online banking or forget their, passwords is another story., Associated, of Green Bay, Wis., is among a few dozen U.S. banks using, voice-recognition software to verify the identities of customers or, employees., Like fingerprints, an individual's voice is unique, and its unique, characteristics can be measured and plotted in mathematical terms, scientists say., Industry experts predict that the widest use for voice-recognition systems, will likely be to authenticate identities for telephone-based transactions, ranging from change-of-address requests to overseas wire transfers., Associated, however, is currently using its system to safeguard online, banking transactions. When customers forget their passwords, an automated, phone system calls and asks for a few pieces of information. The system, provided by Authentify Inc. of Chicago, compares the reply with a voice, sample recorded when the customer signed up., We wanted something beyond the traditional 'What's your account number?, What's your Social Security number? And there's your password, said, Leonard Rowe, a senior vice president at Associated and its director of, e-banking., He would not say what the system cost to buy but said ongoing costs come, to less than $1 a year per customer., Before Associated installed the voice-recognition system, it had mailed, new passwords as a safety measure, but Mr. Rowe said asking customers to, wait days to check their balances wasn't a good idea., There are other potential uses for voice-recognition technology in the, financial services industry, say experts., Mark Greene, a vice president for financial services at International, Business Machines Corp. in Armonk, N.Y., said merchant acquiring banks, card, transactions, such as online purchases. Such a purchase could, trigger a call to the cardholder's phone - or, as more computers come, equipped with microphones, the voice connection could be made online., The $885 million-asset International Bank of Miami is using a, voice-recognition system by Diaphonics Inc. of Halifax, Nova Scotia, verify the identity of employees who need new passwords to get into the, bank's computer network., Ricardo Perez-Reinaldo, a senior vice president for private banking, said, this frees information technology employees from spending time on the, phone to reset passwords., International Bank plans to start using the system in the next few months, to authenticate the identities of customers requesting international wire, transfers., A lot of banks here in the Miami market cater to nonresident alien, customers, primarily from Central and South America and the Caribbean, And there's a lot of fraud coming out of those, places. We get calls from people trying to pass themselves off as our, It is hard to break out what the bank paid for the system because it was, acquired with other telephone equipment, Mr. Perez-Reinaldo said. But Andy, Osburn, Diaphonics' president and chief executive, said installation of a, basic Diaphonics system starts at about $50,000., Annual maintenance fees range from 15% to 20% of the installation price, and pricing is based on the number of concurrent telephone calls the, system can support, Mr. Osburn said., First Horizon National Corp. of Memphis is also using voice recognition, for employee authentication, according to Mike Feehan, a senior vice, president for customer contact. For customer applications the $38, billion-asset company will probably use a system built by PassMark, Security Inc., but only after gaining confidence in how it works, Feehan said,, About two dozen companies sell voice-recognition systems, according to the, New York consulting firm International Biometric Group. Though the, mechanics vary from one vendor to another, most systems require an, individual to provide an initial voice sample as a point of comparison., The systems measure characteristics including pitch, resonance, and even, speech mannerisms., Voice recognition is not perfect. Estimated error rates range from about, 2% to 15%. Sometimes imposters get through, sometimes legitimate customers, do not. Vendors suggest using the technology in combination with or as a, backstop to such widely used techniques as asking customers for their, address, Social Security number, or mother's maiden name., Text-dependent voice recognition, which requires the speaker to repeat, some specific words when prompted, is better developed, according to Samir, Nanavanti, an International Biometric Group partner. But such systems may, for example, a thief might, record a customer's voice. Anyway, systems that simply analyze the voice, with no specific text, will get better, Mr. Nanavanti said., Mr. Osburn of Diaphonics said banks generally are not eager to talk about, security measures they use. But Agustin Abalo of Banco Santander, International in Miami said it will initially use its new Diaphonics, system for resetting employees' passwords. (The vendor announced the, arrangement with the bank, owned by Banco Santander Central Hispano SA of, Madrid, in January.), We estimated that the cost of implementation of the Diaphonics system in, our bank is roughly equivalent to the average cost of one fraudulent wire, said Mr. Abalo, Banco Santander International's, chief information officer and a senior vice president, in an e-mail., PassMark, of Menlo Park, Calif., acquired Vocent Solutions last year. Its, voice-recognition customers include Washington Mutual Inc., Deutsche Bank, AG, and U.S. Bancorp., Financial companies are not the only users of voice biometrics, of course., Some prisons are using it to make sure that inmates call only authorized, numbers, said Robert Kassel, a senior manager with Nuance Communications, Inc. of Burlington, Mass., which makes voice-recognition systems and other, tools to automate corporate telephone activity. He said railroad companies, are also using voice recognition to ensure that only authorized people, take possession of shipments at, for example, a factory loading dock., In October the Federal Financial Institutions Examination Council told, depository institutions that single-factor authentication is inadequate, for high-risk transactions, and that they must perform a risk assessment, the end of 2006. But the consortium of federal regulatory agencies gave, no deadline for implementing tougher measures and has taken no position on, what kind banks should use., Not surprisingly, vendors say that if federal regulators extend two-factor, authentication to phone-based banking, voice recognition could become very, popular. But observers note that phone-based fraud has not been a huge, problem - maybe because current authentication works reasonably well., Just the same, the technology soon will be within easy reach of the nearly, 000 and credit unions to which Intervoice Inc. of Dallas provides, automated telephone systems. The upgrade added optional speech recognition, and voice recognition to its main product, Obvious Speech Banking, which, replace operators in handling customer calls., None of Intervoice's customers are yet using the biometric features, said, Jonathan Eisenzapf, a product marketing manager. (In fact, for unrelated, reasons they have been slow to move to the upgrade, will be easy for those who decide that voice recognition is a good way to, Mr. Stoneman is a freelance writer in Albany, N.Y.
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by Ben JacksonFederal regulators are worried about banks like First National Bank of, Artesia in New Mexico., First National's loan portfolio is heavily weighted toward commercial, real estate and regulators, mindful of past real estate downturns, have, proposed guidelines that ask banks with high concentrations of commercial, real estate loans to hold more capital against them., But W. Everett Crawford, the $392 million-asset First National's chairman, and chief executive officer, said the guidelines unfairly target banks with, assets below $1 billion., Commercial real estate loans are these banks' bread and butter. Mr., Crawford said the capital requirements would eat into their profits and, make, it harder for them to compete against larger lenders -- most of which have, more diverse loan portfolios and would be exempt from the guidelines., The guidelines, proposed in January, would only add to small banks', regulatory burden and could be the last straw for some that might be, More and more, community, banks are being forced to be sold because of stricter regulations, said., Many others share his anxiety., As of March 2 about two dozen community bankers had submitted comment, letters protesting the guidelines, and America's Community Bankers has, requested that the comment deadline be extended for another 30 days to give, its members more time to respond., The comment period is set to end March 14, but regulators have hinted, that it could be extended., The four federal banking regulators drafted the guidelines in response to, steadily rising commercial real estate concentrations -- especially at, banks, in fast-growing markets in the West and the South East. In a speech at the, Financial Services Institute in Washington last month Susan Bies, a Federal, Reserve governor, said that concentrations are now at record levels and, that, regulators fear risk management at banks and thrifts is not keeping pace., Banks, in order to attract new business and sustain loan volume, may be, inclined to occasionally make some compromises and concessions to, Ms. Bies said., According to recent reports from Moody's Investors Service Inc. and, Standard & Poor's Corp., commercial loans outstanding now account for 15%, the U.S. gross domestic product. The amount has not been that high since, last peak of the last commercial real estate cycle, in 1988., It was around then that the commercial real estate market crashed, leading to the collapse of hundreds of banks and thrifts and a massive, government bailout. The concern is that there could be another large, downturn, or that a large number of commercial real estate borrowers could go bust, when, balloon payments on interest-only loans come due., The proposed guidelines would consider a bank or thrift at risk if: its, total loans in construction, land development or other land represent 100%, more its capital, or if total loans secured by multifamily and, nonresidential, properties and loans for construction, land development, and other land, exceed 300% of capital., Observers have said that as many as one-third of all banks and thrifts, would meet one of the two criteria and have to comply with new guidelines., But regulators have said the actual number would be much lower because the, guidelines would exclude loans on properties occupied by their owners., The vast majority of these at-risk banks have less than $1 billion of, assets and many are in vibrant areas of the Southeast and the West with, booming commercial real estate markets., First National's ratio of commercial real estate loans to capital was, 431% at the end of the fourth quarter, according to Federal Deposit, Insurance, Corp. statistics. Many banks in fast-growing states such as Arizona and, Nevada, have ratios well above 500%., If a bank or thrift exceeds one of these thresholds, then the regulators, would want it to have formal risk management plans and capital beyond, normal, regulatory requirements., Minimum levels of regulatory capital do not provide institutions with, sufficient buffer to absorb unexpected losses arising from loan, the proposed guidelines say. They do not specify how much, additional capital a bank would have to hold., Also, directors would need to explicitly approve the institution's, commercial real estate strategy, periodically review the portfolio and, justify high concentration levels, and management would need to establish, formal procedures to identify and control commercial real estate risks and, prove it has systems in place for risk management, market analysis, stress-testing the loan portfolio., John S. Poelker, the managing director of Poelker Consultancy Inc. in, Atlanta, said commercial real estate lending is especially important to, start-ups because it is hard for them to get loan business from companies, with established banking relationships. Larger banks have more branches and, technology, which means more convenience for commercial customers, On the other hand, commercial real estate developers in, fast-growing markets are always looking for financing on projects that are, In Denver, Tampa, Atlanta, there is so, much development going on you can make $2 million, $3 million, or $4, million, loans that are very safe in the sense that they are well collateralized, Poelker said., Many banks would probably fall below the 300% threshold if owner-occupied, real estate were excluded. But the guidelines do not say what percentage, of a, building would have to be owner-occupied in order for the loan to be, excluded., Moreover, current regulatory reporting does not require them to separate, out owner-occupied from other types of real estate. Under the new, guidelines, the onus would be on banks to show that the amount of owner-occupied real, estate in their portfolio brings their ratios below the regulatory, thresholds., Dennis P. Angner, the president and CEO of the $706 million-asset IBT, Bancorp Inc. in Mount Pleasant, Mich., said he is concerned the examiners, would expect all banks to adopt the same formal controls and policies, regardless of whether they exceed the 300% threshold., Mr. Angner said., (IBT's ratio of commercial real estate loans to capital is 225%.), Jim Randall, the chairman of the $526 million-asset Northside Community, Bank of Gurnee, Ill., said complying with the guidelines would disadvantage, Northside because commercial real estate loans would require more, documentation, which would lengthen loan approval times. The guidelines are, another example of regulation distracting bankers from their primary, business, Mr. Randall said., Some, however, say the guidelines would not force much of a change, because they already do most of the things that would be required., Robert Disotell, the chief credit officer at the $1.2 billion-asset, Cascade Bank in Everett, Wash., said that as long as long as examiners do, take the guidelines to extreme, most of the proposal is palatable., The things they are asking banks to do in terms of risk management, Mr. Disotell said. Cascade, had a 508% ratio of commercial real estate loans to capital on Dec. 31., Still, needing to hold more capital. There is no objective standard on how much, capital would be required, and the costs of raising additional capital, could, Those that don't have the ability to raise more capital would have to, stop lending and, in some cases, sell off portfolios to get back in line, regulators take a very firm stance on what would require more capital, Disotell said., Ray D. Tooker, the senior vice president for loan administration at the, $1.9 billion-asset Macatawa Bank Corp. in Holland, Mich., said the, additional, capital requirements seem to ignore that institutions also manage risk with, their loan-loss provisions., They talk about capital levels, but loan-loss reserve is the first line, of defense in protecting shareholders and depositors as well, Mr. Tooker, said. Macatawa's ratio of commercial real estate loan to capital was 450%, Dec. 31, its loan-loss reserves were 3% of its commercial real estate, loans., First National's Mr. Crawford said the regulators seem to be targeting, banks in high-growth areas. He would like banks and trade groups to send in, enough comment letters that the regulators abandon the industrywide, guidelines and focus on banks that may have flaws, If you have a, problem, instead of coming after the industry, why not go after the banks, Mr. Crawford said.
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by Matthias RiekerTD Banknorth Inc. said on Wednesday that it has acquired Hudson United, Bancorp, of Mahwah, N.J., Also, TD Banknorth said it has increased its stock buyback program by 2, million shares, it is now authorized to repurchase 10.5 million., Toronto-Dominion Bank, which holds a majority stake in TD Banknorth, said, it also would begin buying stock to offset dilution of its ownership in the, Portland, Maine, company from the deal., Shares issued in connection with the Hudson United acquisition lowered, Toronto-Dominion's stake in TD Banknorth to 53.2%, from 55.3%., commence open market purchases ... to at, least maintain its ownership percentage in TD Banknorth at the level prior, the acquisition of Hudson United or, as market conditions warrant, TD Banknorth also announced several changes to its board and executive, ranks in connection with the acquisition. The company gave its chief, operating officer, Peter J. Verrill, the additional role of vice chairman, head of all fee businesses and administration. Wendy Suehrstedt became the, Middle Atlantic region president, and Mark W. Wetmiller became the head of, retail banking operations in the company's other markets., David A. Rosow and Brian Flynn, who were directors of Hudson United, joined TD Banknorth's board., TD Banknorth's shares rose as much as 4% Wednesday.
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by Joe AdlerThe House passed legislation 415 to 2 on Wednesday that would ease, regulations, for banks and thrifts, but it remains unclear if the bill can be enacted, this, year., The Senate has yet to introduce its version, and lawmakers have a short, legislative calendar in the face of upcoming midterm elections. Industry, representatives are also worried the bill could be sidetracked by other, issues, including Wal-Mart Stores Inc.'s application for an industrial loan, company charter., It is also uncertain if Senate Banking Committee leaders will support a, key industry request to reduce required anti-money-laundering filings., Industry sources said Wednesday that Senate Banking Chairman Richard Shelby, may oppose a provision that would let banks stop filing, currency-transaction, reports on seasoned business customers. Currently, banks and thrifts must, file one for any cash transaction of more than $10,000., The provision -- included in the House bill -- was lauded by lawmakers, from both parties during the vote Wednesday., We heard from Fincen [the Treasury Department's Financial Crimes, Enforcement Network] that the masses of useless CTRs impeded law, enforcement, said Rep. Carolyn Maloney, D-NY., Rep. Michael Oxley, the chairman of the House Financial Services, transactions., Many in the industry consider the provision central to the, regulatory-relief effort. But industry sources said that Sen. Shelby has, expressed reservations about it., would have to, the reporting procedures in case new standards, a negative consequence on our efforts to combat terror finance and, Sen. Michael Crapo, R-Idaho, who is writing the Senate's relief bill, said last week that he hoped to have it introduced and voted on by the, committee this month. Sen. Crapo said he supported creating more exemptions, for CTR filing., But the Senate bill faces problems over other issues., The House bill contains a provision that would make interstate branching, and mergers easier for banks but would prohibit interstate branching by, industrial loan companies that are owned by commercial firms., The provision was the result of a compromise among House lawmakers. It, would extend ILC branching powers only to parent companies with at least, of their revenue from financial service activities., The provision was spurred by concern that Wal-Mart would apply for an, it finally did so last summer. The retail giant said it would use its, Utah ILC for back-office processing of debit and credit cards, community, bankers -- and many lawmakers -- fear it intends to use the bank to open, branches in its stores., The situation creates a unique problem on the Senate Banking Committee, where Sen. Robert Bennett, R-Utah, the second-highest ranking Republican on, the panel, is a strong advocate for ensuring that ILCs have the same powers, as banks. Industry observers are unsure if Sen. Bennett will support the, House compromise. A spokeswoman for him did not return calls seeking, comment., Industry representatives said they hope the bill will not be scuttled, while lawmakers debate the issue., There's plenty of other issues to discuss without dragging the ILC issue, said Steve Verdier, the director of congressional, relations, That's been a sticking, House lawmakers said Wednesday that their compromise addresses the, problem., It remains my belief that these institutions need to be reined in, that the historic wall between banking and commerce should remain strong, said Rep. Paul Gillmor, R-Ohio., And Ben Bernanke, the chairman of the Federal Reserve Board, said, Wednesday that Congress should consider barring commercial companies from, owning ILCs, because their doing so would breach that wall., Congress has made it clear that they've affirmed the principle of, keeping banking and commerce separate. This loophole circumvents that, Mr. Bernanke said Wednesday in a question-and-answer session at, It would be good, Stacy Kaper and Katie Kuehner-Hebert contributed to this article.
Published in American Banker (2006)
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by Stacy KaperNearly two months after the National Association of Realtors began lobbying, Congress to rein in the Office of the Comptroller of the Currency, banking industry has yet to respond with a coordinated strategy., Since Feb. 16 the Realtors have sent 216, 000 letters (from 75, individuals) to members of Congress on the issue. In contrast, the banking, industry appears to have sent only one letter to all members of Congress., The difference in approach has not gone unnoticed. Staff members for, House Financial Services Committee Chairman Michael Oxley told lobbyists, last, week that the industry has not taken the issue seriously enough and has, left, the Ohio Republican alone to fight against the Realtors, according to, several, participants at the meeting., It's clear the banking industry needs a wake-up call on this, said a Republican congressional aide, who, spoke, When you are trying to lead on an issue,, it is, Some banking groups said they will respond., The industry got the message from the prodding by the staff meeting on, said Diane Casey-Landry,, to the, Realtors., You can't overlook someone who's got enough money and weight to throw, The issue began in December, after the OCC allowed three banks to develop, and own commercial real estate projects. The Realtors said that the OCC had, overstepped its authority, and that the approvals violated the ban on, mixing, banking and commerce., The group immediately began meeting with lawmakers on the issue and have, urged them to pass legislation to bar similar approvals., On Friday the group drafted another letter to the OCC demanding more, information on its decision to let Union Bank of California own 70% of a, wind, farm. Last week the agency said that some supervisors had raised concerns, about the approval at the staff level, but the concerns were resolved, before, the project was approved., The Realtors also plan to raise concerns about American Banker's report, last week that JPMorgan Chase & Co. had submitted an application to, directly, invest in the revenue streams of oil and natural gas reserves., Karen Shaw Petrou, a managing partner with Federal Financial Analytics, of the controversy., The Realtors have also sought to link the OCC letters to Wal-Mart Stores, Inc.'s application to charter an industrial loan company in Utah. The group, argues that both would violate the mixing of banking and commerce., Ms. Petrou said that strategy improves the changes for legislation, though the group still could face an uphill fight., While the assault continues, the banking industry is divided on exactly, how -- or whether -- to respond., Some industry representatives contacted for this story said it did not, need to respond, because the OCC had a strong legal case. Several, supported the view that it was within its authority to grant such, approvals,, said the Realtors were confusing the agency's actions with the five-year, fight over whether national banks can engage in real estate brokerage., But such differences can often get lost on Capitol Hill, and so far only, one lawmaker -- Rep. Oxley -- has defended the OCC approvals. At least a, dozen others have signed a letter condemning the agency's actions, and the, Realtors is hoping more will follow suit., Floyd Stoner, the American Bankers Association's executive director of, congressional relations and public policy, said in an interview that it, does, have a strategy for responding to the realty group., Last week the ABA sent a letter -- the only letter to date sent by the, industry -- attempting to educate lawmakers on the issue, and it hosted a, conference call encouraging bankers to become more involved., We are going to explain in various ways to members of Congress the, potential impact of the Realtor campaign, and we will be working to have, what is at stake, Mr. Stoner said., As the Realtors have become ever more aggressive and expansive in their, erroneous campaign, we have ratcheted up our educational campaign, said., But some industry representatives said other issues -- including data, security and regulatory relief -- have been more of a priority., I think in the coming weeks you'll see more people in the industry, coming together ... but there are a lot of things that are actually, happening, said Steve Verdier, the top lobbyist for the Independent, Community Bankers of America., Steve Cook, a vice president of public affairs at the Realtors, said the, certainly a top issue for our million members, and I'm, for the banking industry., One industry lobbyist, who spoke on the condition of ity, fair to say that no one understood the implications of, I think, that, is no longer the case. People have woken up., The thing on the, Realtors' side is 1.2 million members and enough money to hit the maximum, In separate letters, both dated Dec. 5, the OCC gave Bank of America, Corp. and PNC Financial Services Group Inc. the green light to own and, develop real estate projects. B of A will own a hotel in Charlotte, while, is expanding to include a building with ground floor retail and restaurant, space, as well as a hotel., A letter dated Dec. 21 gave Union Bank of California (which is majority, owned by Mitsubishi UFJ Financial Group Inc.) permission to own 70% of a, wind, farm., The Senate Banking Committee has requested documents on the three, approvals -- and the JPMorgan Chase application. The OCC has argued it has, acted appropriately.
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by David BreitkopfPulse EFT Association LP has agreed to be the exclusive PIN debit network, for U.S. point of sale transactions for First Horizon National Corp.'s, First, Tennessee Bank., The seven-year agreement was announced Wednesday. Pulse, which Morgan, Stanley's Discover Financial Services acquired last year, will also be, First, Tennessee's primary automated teller machine network in the United States., Visa U.S.A. Inc.'s Plus ATM network will be the Memphis bank's network of, last resort., The bank has about 500, 000 PIN debit cards. All PIN debit transactions, made on those cards in the United States will be switched and settled on, Pulse., Leah Henderson, the executive vice president of sales for Pulse, said its, but she conceded, there is, a chance a retailer's terminal will not accept Pulse cards for PIN debit, transactions. In such a case, the customer would have to use another form, The First Tennessee deal is not Pulse's first such arrangement with a, Henderson said. The network serves about 4, 200 banks and credit unions., Mike Marzec, the manager of electronic banking for First Horizon, said, First Tennessee is reissuing cards to reflect the arrangement with Pulse., Until this year First Data Corp.'s Star was the bank's primary PIN debit, network, and Pulse was its secondary network., Mr. Marzec was named to Pulse's financial institution oversight, committee., First Tennessee has been a Pulse member since *1997-, and Fred Spratlin, the bank's former senior vice president and manager of electronic banking, was the network's chairman from May 2001 to February 2004. (Pulse no longer, has a board.)
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by Paul DavisLike other large banking companies, First Horizon National Corp. of, Memphis has put costs under the microscope., A program first announced in October is intended to cut $50 million of, continuing expenses this year. That is a relatively modest goal compared to, some peers' cost-cutting, and this is the first initiative of its kind at, $36.6 billion-asset company., And in contrast to the many such plans undertaken each year by financial, services companies, First Horizon's is less about job cuts than, standardizing, technology and other infrastructure across its businesses., Sarah Meyerrose, the executive in charge, says the program will bring, some significant changes., midyear the company plans to have a single team managing its mortgage, servicing platforms, six loan, origination, offices will be consolidated into three, letting First Horizon merge five, origination platforms., The consolidation in both origination and servicing should save roughly, $6 million, Ms. Meyerrose said., Next month, Citrix Systems will install centralized servers for, software updates and virus protection. That will save $10 million a year, said, Ms. Meyerrose, who is also the company's executive vice president of, operations and technology., Also this quarter, First Horizon will close a check-servicing center in, Maryville, Tenn., saving roughly $2 million a year, savings will come from using a centralized procurement and a single travel, First Horizon has identified ways to cut 90% of the targeted $50 million, We believe that as this initiative becomes part of, everyone's day ... we will get more ideas of what we can continue to do, added., The entire initiative may cut 100 to 150 jobs, Ms. Meyerrose said, much of the total will come through attrition, and displaced workers will, allowed to apply for other jobs at the company., First Horizon unveiled the initiative in October as a way to help it in a, difficult operating environment. The $50 million is just 3% of its *2005-, noninterest expenses, which totaled $1.67 billion., of factors led to the initiative, Ms. Meyerrose said, Monday. Net income fell 4% last year, to $438 million, as the flattened, yield, curve challenged growth in the mortgage and capital markets businesses. The, net interest margin shrank 10 basis points, to 4.19%., The company is also expanding. In the last year it entered the Atlanta, and northern Virginia markets, the Atlanta move required a $32 million, acquisition to comply with state regulations., Kenneth Glass, chairman and chief executive, said Jan. 19 on its earnings, call that the company plans to increase its mortgage sales force by 8% this, year to counter an expected industrywide slowdown., should offset most of the impact, from the further expected flattening of the yield curve, allowing our, strategic earnings growth to be more reflected on the bottom line, Glass, When the yield curve stops flattening, Among those with significantly larger economy drives are the $521, billion-asset Wachovia Corp. of Charlotte and the $92 billion PNC Financial, Services Group Inc. of Pittsburgh. Wachovia expects to cut 4, 000 jobs and, $600 million to $1 billion of annual expense by late 2007. PNC plans to, eliminate 3,000 jobs and $300 million., Jacqueline Reeves, an analyst at BankAtlantic Bancorp Inc.'s Ryan Beck &, said First Horizon's expansion strategy may explain the modesty of its, Major restructuring initiatives are often disruptive and, costs could interfere with the expansion, Ms. Reeves said., not an, I don't believe, that, they are looking to overhaul their business structure, but they are trying, In this operating, Ms. Meyerrose said First Horizon went for $50 million in one year to get, employees used to looking for ways to save money. It may exceed the goal, said, and it might announce another efficiency initiative for *2007-, though, there are no plans to do so., Gary Townsend, an analyst at Friedman, Billings, Ramsey & Co. Inc., said, Tuesday that First Horizon is also doing other things to help fund its, expansion., He noted the Jan. 31 announcement that it would sell its merchant, processing business to a unit of U.S. Bancorp for a pretax gain of $340, million. (First Horizon also said in December that it would sell its First, Funds family of funds to a unit of Goldman Sachs Group Inc. It did not, disclose the price.), The company said those sales are not part of the $50 million economy, drive., There are headwinds that First Horizon will still face, with a good part, We see a, relatively high cost of funding, and we see them as liability-sensitive and, That will start to change when the rates stops rising, Mr. Townsend, said.
Published in American Banker (2006)
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by David Gosnell (ATM & Debit News)For decades several small electronic funds transfer networks have, provided financial institutions on the geographic fringes of the country a, vital link for switching automated teller machine and debit card, transactions., For example the Isle Share EFT network, owned by the Bank of Hawaii, once a prominent network for financial institutions in the state, and the, Alaska Option network, owned by Alaska USA Federal Credit Union, provides, debit transaction links to financial institutions there., But as larger EFT networks move in, card issuers are using these regional, networks less often., Last month the NYCE network, owned by Metavante Corp. of Milwaukee, announced that American Savings Bank of Honolulu had joined it. American, Savings, with 65 ATMs and about 200, 000 debit cards, is one of Hawaii's, largest debit card issuers, though its debit cards and ATMs will continue, carry the Isle Share logo, NYCE will switch its debit card and ATM, transactions., Abel Malczon, a senior vice president of operations at American Savings, said it went with NYCE for a host of strategic reasons, a key one of which, that the bank already uses Metavante as a transaction processor., American Savings plans to introduce several new card products, including, debit cards attached to tax-deferred health savings accounts and payroll, debit cards, Mr. Malczon said. Metavante already has a, transaction-processing, system in place for payroll and health savings account card transactions, using NYCE as a network on these cards makes issuing them less expensive, than, Also, NYCE's interchange rate structure will provide more revenue for the, Interchange is one of the main reasons why we formed this, Mr. Malczon said., American Savings also liked the idea that millions of tourists from the, U.S. East Coast already carry debit cards with the NYCE logo on them, said., In recent years other Hawaiian issuers have also switched to networks, such as NYCE or First Data Corp.'s Star Networks Inc. The shift is cutting, into Isle Share's transaction volume, according to Bob Makahilahila, Isle, Share vice president., In *1981-, when his network was formed, there were no other shared EFT, networks on the islands, Mr. Makahilahila said. Now Star, NYCE, and Visa, U.S.A.'s Interlink PIN-debit POS network all compete for issuers there --, indeed, even Bank of Hawaii uses Star as its preferred network. As a, result,, Isle Share now has little transaction volume., Many issuers in the region want to keep the Isle Share logo on their, cards and ATMs as a backup in case communications with the mainland fail, Makahilahila said. Though the network may eventually fade away, there are, NYCE's president, Steve Rathgaber, called American Savings a key win for, NYCE, which has been an important debit network for East Coast issuers such, as Citigroup Inc., Geography is now playing a smaller role in the major EFT networks', ability to attract debit card issuers, Mr. Rathgaber said, strategic value, now important., Metavante, which acquired NYCE in *2004-, has helped it expand into regions, such as the West Coast and Hawaii, Mr. Rathgaber said. Metavante's, when his network, approached, Alaska Option was created in 1983. Its PIN debit point of sale, transaction volume, which grew 29.3% in *2004-, was flat last year, according, to ATM&Debit News' annual EFT Data Book., Demand for geographically linked networks such as Isle Share and Alaska, Option will continue to fall, said James A. Hanisch, the executive vice, president for network operations and corporate development at the credit, union debit company Co-op Network of Ontario, Calif., Such local networks were once the only choices available to issuers and, ATM deployers in some regions, but this is no longer the case, Mr. Hanisch, Mr. Gosnell is the editor of ATM&Debit News.
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by Patrick Rucker and Rob BlackwellThere is no clearer sign that Dan Mudd, the chief executive of Fannie Mae, is taking a different approach from his predecessor than the way Mr. Mudd, discusses his company's mission., For years the government-sponsored enterprise loudly told lawmakers and, anyone else who dared to fault it that doing so was blocking people from, American dream of homeownership., Mr. Mudd says that such comments were untrue and a tactical mistake., Mission became a little bit of a shield against criticism, and that is not, During an hour-and-a-half interview with American Banker last week, spoke forcefully on topics ranging from the legislative effort to rein in, Fannie's massive mortgage portfolio to his attempts to change the GSE's, culture., But some of his most striking comments concerned Fannie's mission, which, for years was the centerpiece of former CEO Frank Raines' public relations, campaign. He frequently invoked images of low-income and credit-challenged, borrowers who were finally able to own a home because of Fannie's help., According to Mr. Mudd, the result was an inaccurate image of what the GSE, does., Maybe we have gotten ourselves a little boxed in here on the thought, that the mission is only lending money to people that nobody else is going, That's an important part of it, but it's an, Criticizing opponents by arguing that they were hurting homeownership, also cost Fannie credibility with Congress and others, Mr. Mudd said., It turns out that if an assertion is not really true and people don't, In some ways, it, kind, of debases your own message ... We're on good standards if we drop back to, what we know we're supposed to be doing and know to be true, and we're, The new approach is evident in how Mr. Mudd is tackling a host of, challenges., Fannie's earnings restatement is months away, and a special exam from its, regulator is expected to be released soon. The White House is pressing, Congress to limit the GSE's mortgage portfolio -- a key source of income --, while the Treasury Department is contemplating unilateral action to limit, debt., Mr. Mudd said Fannie is making strides in changing how it relates to, lawmakers, customers, and even its own employees., During the 2004 legislative debate on creating a new GSE regulator, Fannie was often accused of publicly supporting a bill while quietly, working, to derail it. On the eve of a Senate Banking Committee vote, the GSE aired, commercials that showed a family worrying that they would not be able to, buy a, new home because of pending legislation., Since becoming the acting CEO in December *2004-, Mr. Mudd (who took the, job permanently in June) said he has worked to prevent those kind of, activities at the company., We have not done any ... kind of stuff to increase the temperature, We have been trying to decrease the temperature. And we have, insisted, in every single meeting that the tone and the manner with which we approach, it be constructive and respectful of both sides of the issue., Our voice has been discredited through this whole process, so we have to, be careful about not getting up on the high hog on this, Mr. Mudd said., We'd, like to have a bill. We've said that, and we've tried to make the music and, When asked how he has changed the perception that Fannie's lobbying team, You reverse the reality before you, Still, that does not necessarily mean agreeing to the White House's, version of a bill. Though Federal Reserve Board Chairman Ben Bernanke and, predecessor, Alan Greenspan, argue that the $1.5 trillion mortgage, portfolios, at Fannie and Freddie Mac are a systemic risk, the two GSEs have continued, oppose any measures that would require a regulator to limit the portfolios., The issue has stalled progress on a bill, with the White House opposing a, House version it says does not adequately address the portfolios, Democrats opposing a Senate version they say gives the regulator too much, power over the portfolios., Mr. Mudd makes no apologies for his defense of the portfolios. He said, Fannie was comfortable with a bill that would create a new regulator with, similar authority to the federal banking and thrift agencies., The portfolio limits, to me, moves beyond a strong, bank-like regulatory, regime and says 'We're going to dictate the size and shape and lines of, That is an entirely different, He also noted that Fannie has reduced the portfolio in recent years, part because the Office of Federal Housing Enterprise Oversight required, GSE to hold 30% more minimum capital while it restated its financial, results., We have liquidated the equivalent of the 10th-, maybe 11th-largest bank, in America in response to a capital requirement from the regulator, said., Whether there is a systemic risk or not a systemic risk goes to the, He rejects arguments that the portfolio is not consistent with Fannie's, mission. Instead, he argues that the portfolio helps the company provide, liquidity to the mortgage market., We do have an affordable housing mission, and we also have a liquidity, The liquidity mission requires us to be in the, mortgage market providing liquidity, 24 by 7 by 365. That is written down, Critics have also argued that the portfolio exists only to boost GSE, profits, but Mr. Mudd said there is nothing wrong with using the portfolio, make money., When the company was established, they said it was OK to make money, along the way, [and] they said 'One way that you can make money -- in fact, the first way that you can make money -- is by running a mortgage liquidity, In order to provide liquidity to the largest, capital, market in the country, you know, you are going to have to be relatively big, The vast majority of the portfolio is mission-related, Mr. Mudd said., Every single asset that is in the portfolio -- except for a 5%, short-term liquidity portfolio -- is a mortgage in the conforming loan, It's not third-world junk bonds. It's not hedge fund, The debate over the portfolios is sure to continue as the Treasury, considers using its authority to limit the GSEs' debt issuances, which fund, the growth of the portfolios. Treasury officials have said they may use, such, authority if Congress does not pass legislation., Mr. Mudd said he has no idea if the Treasury would use the authority, he has made plans for that and other contingencies., I'm the guy who's supposed to handle a bunch of different things. I had, a meeting the other day, they said, 'What would happen if you had to, evacuate, Washington and still operate your business?' Do I think that will happen?, but you pay me to be prepared for that. Stockholders pay me to be prepared, Also coming soon is the report from OFHEO on the company's accounting, problems. The agency began its exam in *2003-, shortly after Freddie, announced, it would restate $5 billion of earnings. OFHEO released its initial, findings, in September *2004-, alleging, among other things, that Fannie executives had, managed earnings to boost compensation and misapplied several accounting, standards., The Securities and Exchange Commission ultimately required Fannie to, restate its earnings from 2001 through *2003-, a process that is ongoing., diligently to try and fix them., get ourselves into, We are literally... inside the penalty, until we get that done. Whatever else we do with the business and culture, does, He said he is pleased with some of the progress Fannie has made., There are things that you're really happy about, and then there are, other areas where you are just boxing your way through a pile of cotton, candy, I love the senior management team that we have on, board now. Of the top 50 people in the company, 75% of them are in a new, job., Of those, Efforts to alter the company's culture -- previously viewed as insulated, and arrogant -- have gained publicity, but Mr. Mudd provided some more, specific details than he has revealed previously on how he is pushing, change., The GSE has held workshops for employees, and senior executives have drawn, a pledge of best behavior for the company. The pledge includes several, raise and disclose issues, and, constructively, It also says that managers are accountable for their actions, should, apologize for mistakes, and should resolve issues in a timely manner., The company has also conducted employee satisfaction surveys and is, encouraging personnel to give honest feedback., One of the things to be careful ... [to avoid] is being real sure that, and everyone else is wrong, Mr. Mudd said. One way to avoid, the questions used to be, 'Mr. Mudd, I am John, Smith from the Dallas office, and I would be very interested in knowing, your, You know, Dan, I'm John Smith, and I'm from Dallas, and I, have to tell you that some of the decisions that you are making up there, don't get down to us for three or four days, and that has an impact on the, I'm not losing sight, of the fact that there's a ton more to do. ... It's hard, and some days you, want to kick the dog and all that, but you come out of it with a company, that
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by Luke MullinsThe Banc Corp. in Birmingham, Ala., announced its second acquisition deal, in two months Monday, saying it had agreed to buy the $566 million-asset, Community Bancshares Inc. in Blountsville, Ala., for $98 million in cash, stock., Community has 14 branches in The Banc Corp.'s footprint in the, fast-growing northeast quadrant of Alabama, where it has said it wants to, bulk up. In all, the buyer would have nearly 40 branches in 17 Alabama, counties once the sale is completed., The Banc Corp., a $1.4 billion-asset thrift company, said March 6 that it, would pay $71.2 million in stock for the $325 million-asset Kensington, Bankshares Inc. in Tampa. Kensington's 13 branches would nearly triple its, branch network in Florida., Both deals are expected to close late this year. Community Bank, the sole, banking subsidiary of Community Bancshares, and First Kensington Bank, banking subsidiary of Kensington Bankshares, would be merge into The Banc, Corp.'s Superior Bank., The holding company plans to change it own name to Superior Bancorp in, mid-May. Stan Bailey, its chief executive officer, said Monday that it is, done acquiring., We were looking either for banks that are in high growth-markets, such, as Kensington in Tampa, or have a very low-cost deposit structure and, like Community, Mr. Bailey, said., Community Bank was in the news several years back when some former, executives were accused of bank fraud, conspiracy, and misapplication of, funds., In a June 2003 settlement with the Federal Deposit Insurance Corp., officers and directors agreed to pay fines in excess of $3 million., The bank lost $11.8 million that year., Mr. Bailey said he is confident that Community is now is sound financial, condition. It made $2.3 million in *2004-, according to FDIC data.
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by Matthew QuinnMacquarie Bank Ltd., the Australian investment bank, has largely confined, its U.S. activities to specialized institutional businesses like selling, shares of Asia-Pacific companies and advising on mergers and acquisitions, the oil and gas industry., The exception is a unit that has made home loans through intermediaries, since 2002. Now that unit, Macquarie Mortgages USA, plans to expand into, direct-to-consumer lending., The unit, whose chief executive, Linda P. Henley, used to run, correspondent lending at Chase Home Finance, has also been trying to better, acquaint American consumers with products that have been successful Down, Under, particularly a first-lien home equity line of credit called the, Macquarie Asset Manager., Recently a big U.S. lender, Countrywide Financial Corp., announced an, interest in capitalizing on what it sees as untapped demand for similar, loans., As in Australia, the first-lien HELOCs are marketed here mainly as a way, to save on interest payments. Borrowers are advised to use their entire, paycheck to pay down the loan balance and then draw money from the line as, they need it., Even if borrowers withdraw everything but what they would normally pay, the small savings on the interest they would have paid on the amount drawn, mortgages work in a similar way, by crediting, borrowers for funds in a deposit account with the lender. Pacific Trust, Bank, of Chula Vista, Calif., introduced such a program last year., At an March 30 investor conference, Stan Kurland, Countrywide's, about its plans to introduce reverse, mortgages this year -- its first public admission that it will do so -- and, Mr. Kurland's description actually made the version that Countrywide, nation's top home lender, will offer sound more like the U.K. version. He, said, that Countrywide would make use of the technology it had developed to, handle, the loans in its British joint venture with Barclays Bank PLC., Macquarie Mortgages currently offers loans in 35 states but plans to be, in all 50 by July. That month it will begin pilot testing the, retail-channel, offering in Florida. The test will last 90 to 120 days. After that the, retail, channel will be rolled out in New York, New Jersey, Connecticut, Illinois, California, and the District of Columbia., Its retail lending will be done strictly online (at least at first), because the lender believes the U.S. population is now sufficiently, comfortable with the Web, Ms. Henley, who joined Macquarie last year, said, an interview last month., Her unit also intends to establish affinity relationships with large, corporations to offer products to their employees., is a buzzword around the mortgage market,, Macquarie is set on growing organically, advantage of market fragmentation to expand through acquisitions, Macquarie, Last year it originated $1 billion of mortgages, and three to five years, from now it expects to fund that much a month, Ms. Henley said. By then it, expects to be getting about 65% of its business through correspondents, through brokers, and the rest through the retail channel, Her unit currently has about 125 employees and is recruiting for all, three of its channels., Macquarie is setting up a call center in Memphis and needs to hire a head, for its retail channel, as well as four regional retail managers. It is, also, wholesale account executives and hopes to double, In a crowded mortgage market -- and one where volume is widely expected, to drop significantly this year -- Macquarie is seeking to appeal to savvy, In terms of product offerings, the retail channel will focus on the, Macquarie Asset Manager, which offers interest-only payments for the first, years of a 30-year term. Like most HELOCs, the product has no restrictions, the number of checks written. However, there is no minimum redraw amount, either -- a less common feature., access equity throughout the, life of the loan without the cost of refinancing incurred with standard, loans., In the underwriting process, Macquarie makes sure borrowers could handle, 98% of its loans are priced below the prime rate published in The Wall, Street, Journal, while comparable products on the market are priced above it., The product is aimed at high-end borrowers -- the average FICO score is, 740. Ms. Henley said the average would not change as Macquarie moves into, retail., Because of the product's complexity, borrowers will tend to have a, certain business acumen, as well as a solid financial history, appeals to the experienced borrower who, understands, Keith Gumbinger, a vice president with the mortgage research firm HSH, Associates, said at least two lenders introduced similar products in, California last year, including CMG Financial Services of San Ramon, Calif., (Many lenders, including Countrywide and Wells Fargo & Co., offer, first-lien, HELOCs without emphasizing their potential for interest savings.), To believers, such programs look like no-brainers. Hans Ganz, Pacific, Customers can save thousands, dollars in interest rate charges, build equity in their home, and pay off, However, they do usually come, with variable rates, which, as borrowers have learned recently, carry, downsides., According to Mr. Gumbinger, selling such products to the public is a, hybrid, I can't imagine trying to explain this to the average, Ms. Henley said Macquarie has developed a CD-ROM to educate would-be, borrowers about its products, and it is designing an interactive online, program., Macquarie is still hammering out how to get customers to walk through its, virtual door. This month it hopes to decide on its mix of advertising, media,, The unit's Australian parent, which has roughly $89 billion of assets, under management, believes in investing in down markets, particularly in, We have as recently as, last, We don't have broad, Coming from JPMorgan Chase & Co., which was built through the acquisition, of numerous lenders, Ms. Henley said she was happy to start from scratch., Without legacy systems, Macquarie could build an origination process that, minimizes the number of people touching a loan file. From the very, beginning, of its U.S. operations, it has accepted loan documents electronically., Though it uses Dovenmuehle Mortgage Inc. of Schaumburg, Ill., subservicing, No one takes, care, Ms. Henley said., John LaRose, the chief executive of CompuLink Corp., a Lansing, Mich., subservicer, which does business as CeLink, said he has never seen such an, arrangement in his 20 years in the business., Because of the logistical difficulties in separating customer service, the contract language would have to be, Macquarie has also been interested in offering here another product, popular in Australia, portable mortgages, but Ms. Henley said it has not, been, able to navigate the different disclosure and regulatory requirements in, each, state., According to Mr. Gumbinger, Chase Manhattan Corp. introduced the portable, Mortgage, in 2003. Such products are wrought with headaches for servicers, Portable mortgages never gained much popularity among U.S. borrowers but, generated good publicity for the lenders that offered them, Mr. Gumbinger, I bet you'll find ... [E-Trade] did five of those things, but they, (E-Trade would not say how many of the loans it, made.), Macquarie Mortgages is currently headquartered in Memphis but said that, it would move to Jacksonville, Fla., next quarter. The new headquarters, will, house about 50 employees within the next few years, Ms. Henley said., As far as establishing storefronts for the retail operations, We're always open to the right way to do things. If ... [bricks and, mortar], turns out to be the best way to reach consumers, that's something we'll, Marc Hochstein and Jody Shenn contributed to this report.
Published in American Banker (2006)
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