1: CAST SERVICE HIGHLIGHT

Sales and Distribution Strategy Development
Significantly increase production through independent channels

The financial services industry is in the midst of both major change as well as short term challenges. From new legislation to industry consolidation and convergence, new approaches, products and operational changes are required. CAST believes the industry remains challenged by several key factors. Each requires specific action on the part of industry leaders to remain competitive.  

Factors Driving Distribution Effectiveness
   Targeting the appropriate segments
   Proper positioning of offerings and product elements
   Appropriate service delivery mechanism
   Understanding of customer needs and behaviors
   Consistency of service delivery
   Understanding of channel costs and profitability

Why CAST for Sales and Distribution Strategy Development
   Extensive experience in strategy development
   Demonstrated experience in cost and profitability analysis
   Proven tools for monitoring and measuring performance
   Extensive knowledge of successful service delivery procedures, tools and techniques
   Understanding of detail sales, service and operations activities for the insurance and banking industries
   Knowledge of the inter-relationships of various insurance and financial service products
   Proven, fact-based approach to analysis and implementation 

If you would like additional information, please contact Tom Vleisides at (213) 614-8066 ext. 244 or email tvleisides@castconsultants.com.

2: AMERICAN BANKER - BBVA Compass Sets New Path After Guaranty Deal

American Banker    Friday, March 26, 2010

By Paul Davis

In Guaranty Bank, BBVA Compass scored a rare find -- a failed bank with almost no baggage -- and it plans to make the most of it.

BBVA Compass, the U.S. unit of Banco Bilbao Vizcaya Argentaria SA in Madrid, discovered an eager work force at the Texas bank, but an otherwise blank canvas for consumer products and small-business lending, since the bank had focused primarily on mortgage purchases. Less than a month after converting 164 branches in California and Texas, BBVA Compass is set to begin product promotion in earnest.

Shelaghmichael Brown, the head of retail banking at BBVA Compass, is ready to test what amounts to a whole new creation.

"We get to bring robust products to these branches," she said. "When we got to Guaranty, there was no mortgage lending and no credit cards, some home equity and minute small-business activity. We just need to help drive more traffic."

Brown said BBVA Compass is keen to build branches and buy more U.S. banks to boost distribution for a flurry of new consumer products, and is equipped to proceed if the right opportunity surfaces. "We'd love to do an acquisition in Colorado," she said, and smaller deals in Texas are possible. Longer-term, BBVA will "need more scale" in California and Florida, she said, but there is no rush to double-down in those states.

BBVA Compass closed only two dozen Guaranty branches when they were converted last month. The business model, along with the commanding size of its principal rivals, will nudge the company toward acquisitions that build share in specific markets.

"We'll never have the branch system that some of the major banks have," Brown said this week at American Banker's Best Practices in Retail Financial Services Symposium in Orlando.

In Texas, where BBVA Compass is the fourth-biggest bank by FDIC deposit market share data, executives are focused on four cities: Austin, Houston, Dallas and San Antonio. The company is a distant 14th in Colorado, where roughly a third of its 36 branches are in Denver.

Brown touted several new consumer products BBVA Compass is aggressively pursuing, including small-business loans, offering credit cards branded with a customer's logo and free checking products with features built around the client. In an interview, she said California is a prime area to pitch those products.

"Our branches are well located for small business," she said, adding that many banks in California have focused strictly on consumer products such as mortgages and not small business. BBVA Compass found, for instance, that only a handful of Small Business Administration loans were made last year in Fresno.

BBVA Compass typically defines small-business customers as those with less than $5 million in annual sales and loans of $500,000 or less. It runs small business out of its commercial division, but Brown said the retail network generates 60% of that business.

Curtis Carpenter, a managing director at Sheshunoff & Co., said BBVA Compass will need strong leadership to make inroads in the less familiar California market. "In Texas, you could easily see how they could effectively roll out small-business products," he said. "In California, it seems like more of a boot-up, which could make for a more daunting challenge."

Guaranty was built around the purchase of failed savings and loans in the 1980s and had grown largely by purchasing mortgages from other lenders and funding the assets with borrowings and high-cost certificates of deposits. By the time the FDIC stepped in, the bank had been barred from taking in any more mortgages. Employees were good at service but had never been trained to actively sell products.

Brown said BBVA Compass is instilling a new culture. Managers are in the branches teaching sales practices to employees. Within two years she said Guaranty branches should be selling an average of 4.8 products per customer household -- the level of other BBVA Compass branches.

Matching that performance would be a major accomplishment, given that most Guaranty customers only had one product, which was often a deposit account. Brown would not get into details, but she said BBVA Compass had to balance reducing rates for CD and money market accounts. Reluctant to give amounts, Brown said BBVA Compass has been able to increase checking balances and avoid "severe" CD runoff at Guaranty branches.

Brown said the Guaranty branches this month introduced a product for first-time homebuyers that waives payments for the first three months (with no interest accruing) and requires the completion of a financial literacy course. The branches are also offering two new credit cards: one that is secured by a savings account balance and another that rewards cardholders for good payment behavior. "We've gotten good response across the franchise," she said.

3: AMERICAN BANKER - De Molina: Success Tied to Managing Regulatory Risks

American Banker   Wednesday, March 31, 2010

By Paul Davis

Alvaro G. de Molina had a front-row seat for the financial crisis as the chief executive of GMAC Inc. from March 2008 to last November. The longtime Bank of America Corp. executive -- he rose to chief financial officer there -- oversaw GMAC's launch of Ally Bank, which drew the ire of traditional banks and ran afoul of the Federal Deposit Insurance Corp. for aggressive deposit pricing.

In an interview, while he refused to discuss his sudden resignation from the auto and mortgage lender, de Molina offered his perspective on regulatory issues, the future of banking and how he thinks private-equity groups stack up to traditional banks.

Where is the industry now, and how do you assess the "new normal"?

ALVARO DE MOLINA: After all the capital raises, the industry is in a strong and stable structural position. Regarding operating results, you've got the obvious working through the credit cycle that has to finish off. That's 20% of the question. The other 80% involves how regulation changes the model. What does the model look like and how does each bank respond to that? Those are the bigger questions that deal with valuation and maximizing value. What does the environment look like? I think there will be a lot of changes with a lot of that dealing with what the customer sees. The bank that takes advantage of its strengths in the most customer-friendly way will succeed.

Which proposals from Washington make the most sense?

DE MOLINA: Clarity of mission creep by regulators is of paramount importance. But the most important proposal in terms of the overall stability of the distribution channel is getting as much of the derivative value and risk on an exchange so that there is transparency, adequate initial and maintenance margin and greatly reduced counterparty risk.

What about the so-called Volcker Rule?

DE MOLINA: I don't understand the [necessity of the] Volcker Rule and how it gets applied. I don't understand why proprietary trading was seen as a significant cause of [the financial crisis]. Stopping proprietary trading may reduce risk, but it would also lead to less access to credit. I don't know if the Volcker Rule has any significant positive impact, but I can certainly see the negative impact. Everything that was done [before the financial crisis] was taken to extremes, but at their root there was nothing wrong with the system or the innovation. We just took it too far.

What is your take on having a systemic-risk regulator?

DE MOLINA: I believe the Fed is in a great position to be the primary systemic-risk regulator. They have the most market knowledge and proximity because of the very nature of the roles that they play. They have the talent and the perspective to do it and they have the tools, too. I also think that the fewer regulators you have the better. I don't understand why you need a new agency for consumer products. You can be just as effective having that oversight within another regulatory body.

How do banks make money going forward?

DE MOLINA: Banks provide a necessary and valued service. They will make money the old-fashioned way, by delivering value and competing. Those that do will win. The world doesn't work without banks. They play a very valuable role. All the businesses that banks have -- from wealth management, processing, consumer deposits and lending -- all provide that valuable service. Some are better at it than others. All those things are important.

What about investment banking and the universal bank model?

DE MOLINA: If they're good at it, it is value added. If not, then it is value destroying. It is very difficult to manage an investment bank and a consumer bank under one umbrella -- talking about the JPMorgan Chase, Citi and Bank of America models. It is a bigger challenge but if done well those businesses can provide value to each other. There is nothing wrong with the model. It comes down to the competency of the management

Where do you stand on "too big too fail"?

DE MOLINA: What really leads to crisis-mode intervention due to a failure is really tied to interconnectedness risk, and not normal-functioning-of-the-bank risk. If you lose one bank's lending, it is a big deal, but it takes awhile for it to be felt through the economy. The resolution they come up with will deal with that. The bigger problem was the interconnectedness risk. That needs to be dealt with via more exchanges. If you had an exchange, initial markets and capital to support the system, it would have a dampener on [interconnectedness risk].

What about the wave of former bankers jumping into PE deals to buy banks?

DE MOLINA: There is not a lot of novelty that will come out of different approaches. And when there is novelty, it is copied easily. If you have great management they can execute on any of those strategies. It really comes down to management execution. There is that much or more talent on the traditional banking side, which has all the advantages and the incumbent benefits of capital, scale, etc. If I was running a midsize or larger financial institution, I wouldn't be up at night thinking about XYZ private-equity firm.

What are your plans?

DE MOLINA: I am just taking it easy. I will know the right opportunity when I see it.

4: AMERICAN BANKER - Financial Engines Getting Attention as Trends Shift

Financial Planning   Tuesday, March 23, 2010

By Donna Mitchell

Should financial planners worry about Financial Engines as a competitor?

Last week's initial public offering by the Palo Alto, Calif., company, a retirement plan adviser co-founded by a Nobel Prize winner, affirmed investor belief in a business model offering low-cost sophisticated retirement advice to individual investors.

In its debut, Financial Engines' shares were originally offered at $9 to $11 each, but priced at $12, and closed Monday at $18.55. "The market is looking for quality," said Bill Buhr, an IPO strategist at Morningstar.

Similar to Morningstar, Financial Engines offers retirement planning and investment advice to investors enrolled in company-sponsored defined contribution retirement plans, like 401(k) plans. Launched in 1996, it uses an automated, Web-based platform to collect information from investors and assess their retirement income needs. It then uses mathematical algorithms to make recommendations.

"There is a growing market for financial advice, specifically for defined contribution plans," Buhr said.

In its registration statement filed with the Securities and Exchange Commission in December, Financial Engines said shifting retirement-industry trends would allow it to provide independent and customized portfolio management, investment advice and retirement advice to investors who are not affluent and would not be able to afford personalized services.

Much is said in the financial planning professions these days about how Americans are not preparing for retirement adequately. Now, a 14-year-old company that offers respected Web-based advice has convinced the capital markets that its business model offers a viable way to address that issue.

Financial Engines provides easy-to-understand retirement advice, said Katharine Wolf, a senior analyst at Cerulli Associates in Boston. "What sets them apart is their ability to provide something that is not so much investment focused as it is outlook focused," Wolf said, adding she has heard from broker-dealers who have implemented some of the Financial Engines solutions for their employer-sponsored retirement plan advisory services.

Daniel Deighan, the chief executive of Deighan Financial Advisors in Melbourne, Fla., is not worried about competition from Financial Engines. His company has $150 million of assets under management and serves an affluent client base, and can offer several services that seem out of Financial Engines' reach. Employers would also have to ensure that they are not exposed to potential liabilities for offering just one adviser to their employees.

Financial Engines generates revenue by signing contracts with employers and plan providers like the Valley Forge, Pa., mutual fund company Vanguard Group, which has been using Financial Engines' computer-based advice program since 2001. "We thought highly of their methodology, as a low-cost provider," said Linda Wolohan, a Vanguard spokeswoman. "It made more sense to use a third-party provider for their computer-based model."

Financial Engines is appealing mostly to investors who want to be actively involved in their retirement planning and are comfortable using Web-based financial services, she said.

The company offers two levels of service: Online Advice allows investors to take Financial Engines' recommendations and its Professional Management service is the managed account function that allows Financial Engines to carry out its recommendations.

The managed account service charges a fee of about $60 a year, Wolohan said.

But there are caveats to Financial Engines' success. It has had net income losses every year since 2006, which Buhr attributes to its cost structure, which has not allowed the firm to generate enough scale to be profitable. In addition, its revenue structure depends on three- to five-year contracts, which can be canceled at any time for fiduciary reasons or breach of contract.

At Sept. 30, Financial Engines had signed contracts with 107 Fortune 500 companies, and had $23.5 billion of assets under management from 383,000 plan participants. It plans to increase enrollment in managed accounts by converting plans from active enrollment, which requires the employee to opt in, to passive enrollment, which signs them up automatically.

5: AMERICAN BANKER - How Much Flexibility Should FDIC Have for Big Failures?

American Banker   Wednesday, March 31, 2010

By Stacy Kaper

WASHINGTON -- A key point of contention in the Senate regulatory reform bill comes down to a critical question: How much flexibility should the government have when a systemically important firm falters?

Critics charge that the bill gives the Federal Deposit Insurance Corp. too much latitude, including the option to bail out creditors and use taxpayer money to prop up a big bank.

"The present Dodd bill doesn't go nearly far enough to end too big to fail," said Sen. David Vitter, R-La., a member of the banking panel. "When you look at the exact language, there is a lot broader authority for the FDIC … . I think in a crisis the FDIC could just prop up a company."

But supporters, including the Treasury Department and the FDIC, claim some flexibility is necessary to prevent a major failure from endangering the economy.

"The ultimate resolution authority needs to have some flexibility because you can't ever predict what challenges are going to face our country, the Federal Reserve or the FDIC in the future" said Robert Hartheimer, a former FDIC director of resolutions who now works for Promontory Financial Group. "You need to give the FDIC authority to deal with creditors, particularly because diversified financial holding companies' capital structures are complicated with both equity and unsecured debt."

The issue is one of the key arguments Republicans are using to oppose the bill by Senate Banking Committee Chairman Chris Dodd, which could come to a floor vote shortly after lawmakers return from recess on April 12.

Dodd has already made several changes to constrain how resolution powers would be used. Under the original reform proposal unveiled last June by the Obama administration, the FDIC could have provided open bank assistance to a large, systemically important firm or put the company into a conservatorship instead of a receivership.

But the draft that the Senate Banking Committee approved last week would not give the agency such leeway, requiring receivership for a systemically important company. The Dodd bill even clarified that the FDIC "shall" liquidate a firm, removing earlier legislative language that said it "may" do so.

"These authorities are much more constrained than the original proposal," said a Treasury official who spoke on condition of anonymity. "There is now a clear statutory requirement that a firm be put in liquidation; there is no conservatorship; there is no open bank assistance available."

Under the Dodd bill, bankruptcy would still be used for the vast majority of bank holding companies. But the contingent capital of a systemically significant firm that was insolvent would have to be converted to equity; its management would be fired, and its shareholders and unsecured creditors would have to absorb the first loss. The bill lets the FDIC treat "creditors similarly situated" differently in order to maximize the value of assets and sale proceeds or to minimize losses. Critics have interpreted this to mean that unsecured creditors might be bailed out.

Peter Wallison, an Arthur F. Burns Fellow in financial policy studies at the American Enterprise Institute, said this would continue to give large banks a funding advantage over smaller banks and the concept of "too big to fail" would endure. The bill "fails to recognize that the most important fact is whether the creditors get a better deal from a government rescue than from a straight bankruptcy," he said. "If they see this as a possibility, then they will prefer to lend to big companies that might be rescued by government (and not be sent to bankruptcy) than to small ones. This will give big companies large competitive advantages over small ones."

Vitter favors adding a stricter timetable to the bill to ensure that the FDIC does not operate a bridge bank or take other steps to keep an institution running for a long period. He also wants to ensure unsecured creditors are always subject to losses.

"A time frame needs to be mandated so that this can't just go on and on," Vitter said. "All of this needs to be required because, if there is great flexibility, I think a lot of regulators or agencies in a crisis will just go on and on with support. We saw that in the last year and a half, clearly, that people who should have taken deep losses in many cases got 100 cents on the dollar. It was ridiculous."

But the Obama administration argues that the FDIC must have some wiggle room to ensure the economy is not harmed when a large bank collapses.

Andrew Gray, a spokesman for the FDIC, said Tuesday that the agency's power to treat creditors differently is based on its resolution authority over banks in current law. "The flexibility built into the resolution authority of the Dodd bill mirrors current statutory authority in the FDIC's resolution process as governed by the FDI Act," he said. "It is designed to allow us to package and market the failed institution in a way that maximizes returns."

Gray said creditors would still take a loss.

"Creditors absorb losses under a strict priority system," he said. "It's difficult to make the argument that the FDIC's current resolution process results in bailouts."

An aide to Dodd said the bill would not allow any bailout.

"This bill ends too big to fail bailouts -- period," she said. "We are happy to work with senators and their staff to address their concerns and clear up any misconceptions they may have about the bill."

The Treasury has argued that a certain amount of flexibility is necessary to prevent the government from repeating the American International Group experience -- exactly the case raised by Vitter. When AIG was taken over, the government felt it legally needed to treat all creditors the same, either choosing to bail them out or let the company go into bankruptcy (In the end, AIG's counterparties were made whole.)

"From my perspective it creates a framework which is missing today and allows for an experienced agency such as the FDIC to come up with a plan," said Hartheimer. "You will never be able to legislate for exactly what disaster will occur in the future, but you have to get close, which I think this bill does."

Under the Dodd bill, the FDIC could sell off a holding company's assets in whole or in part and transfer salvageable parts to a bridge bank. The Dodd bill limits the use of a bridge company to five years.

Dean Baker, the co-director of the Center for Economic and Policy Research, said Republicans need to try a different tack if they are serious about ending "too big to fail." He said that, as long as there are megabanks, the government needs some leeway in unwinding them. "The problem is, you have this whole chain where they owe money to other banks and other financial institutions," he said. "I'm sure there are enough loopholes at the end of the day that you can find ways around most of the restrictions in the Dodd bill, and it may not be a bad thing if you are faced with a banking collapse -- then you probably want your regulators to have some room."

He said the only real way to fix the problem is to limit the size of institutions. "That's what I find incoherent with the Republican position," Baker said. "That they are absolutely right that if you want to nail everything down and make sure that taxpayers are not going to be put on the hook again, this bill doesn't do it. But on the other hand, you can't do that as long as you have really large institutions, so those two have to go together."

6: AMERICAN BANKER - Huntington's Steady Rise In Standings

American Banker   Friday, March 19, 2010

By Matt Monks

When Steve Steinour left the top job at Citizens Financial Group Inc. about two years ago, he never imagined he would end up as chief of Huntington Bancshares Inc., an also-ran with big problems.

"I would never have wildly guessed that I would run Huntington -- I had ambitions to do other things; it wasn't, per se, to run a bank," said Steinour, who spent 16 years at Citizens and struck the deal that put the bank's name on the national scene as sponsor of the Philadelphia Phillies' new baseball stadium. "I didn't anticipate, when I left Citizens, being in the role I am today."

Few anticipated where Huntington would be just more than a year after Steinour became chief executive of the Columbus, Ohio, lender: on the cusp of profitability thanks to his new team's overhaul of the $53 billion-asset regional banking company.

The 52-year-old executive -- who started his career helping regulators liquidate failed banks in the early '80s -- is winning praise from investors and analysts for helping rescue one of the Midwest's most troubled lenders. Huntington, with about 600 branches in Ohio and Pennsylvania, has contained a toxic subprime lending arm that pushed it deep into the red. It also plugged a hole in its balance sheet by raising a massive amount of capital last year.

Steinour is putting that cash to work by going on the offensive against his former employer and other banks in the cut-throat Midwestern banking market. The company recently extended branch hours and hired 200 people in Cleveland in an assault on Charter One, a Citizens subsidiary he used to run there. It also poached a commercial lending team in Michigan from Comerica Inc., which has the top deposit share in that state.

"He has remade that company -- they are very competitive in most of their product segments," said Anthony Davis, an analyst who covers Midwestern banks for Stifel, Nicolaus & Co.

"The way he has reenergized the entire culture of the place, I don't think there is any question that they can grow deposit share and loan share."

'CALL ME STEVE'

Steinour has reputation for working brutal hours. In his rare time off, he says he goes jogging with his wife and clay pigeon shooting with his son. He has a daughter, too, and the family has traveled the world together. He lives within walking distance of the office, where he asks employees to call him "Steve." He chatted up branch managers at a recent function while posing for pictures with them. He describes himself as a hands-on boss who keeps close tabs on the performance of his people and the company's business lines.

"I have very high expectations of myself and the management team," he said.

Steinour is the first to acknowledge that Huntington has massive challenges to overcome. Chief among them, analysts said, is executing its ambitious growth plans in states with poor economic profiles like Ohio and Michigan. It also must overcome its status as somewhat of a laggard. Steinour is optimistic. He says Huntington has a good brand name and strong legacy of customer service to build on.

"I am one of the few CEOs that said 2009 will be our worst year -- 2010 will be better," he said. "I remain committed to that outlook. We're getting stronger every day."

His growth strategy is straightforward enough. The aim is to generate higher revenue by cross-selling more products to retail customers. The company is also investing heavily in promising areas like small-business lending in order to take market share from the competition.

Steinour generated headlines in February when he said the company plans to double its small-business lending by loosening underwriting standards. Though that sounded rash, he explained the approach as "common sense" for a bank that wants to boost lending because even sound companies were unprofitable in the depth of the recession.

THE RIGHT RESUME

Analysts said that Steinour's experience makes him a good turnaround executive.

He worked in the Federal Deposit Insurance Corp.'s receivership department and at Bank of New England and Fleet Financial Group before joining Citizens in 1992. He was a favorite lieutenant there of former CEO Lawrence K. Fish, helping him build the company into a regional powerhouse by overseeing acquisitions and risk management, among other things.

Fish said he is not surprised where his protégé ended up. A lot of his former Citizens colleagues bought Huntington stock when Steinour took over, Fish said.

"Steve is the only person I've worked with who could schedule a meeting at 5:45 in the morning," Fish said.

"He is not a man to raise rare orchids or to bum around with the guys on Friday night. He's a worker."

Steinour has his work cut out for him at Huntington, which has a history of getting into trouble in pursuit of market dominance. Though it is one of the country's most innovative banks, it has never found a niche where it could outperform local rivals.

The 144-year-old lender's last two CEOs -- Thomas Hoaglin and Frank Wobst -- were effectively pushed out in the wake of abortive acquisitions.

Hoaglin, who served from 2001 to 2009, was making headway on restructuring the business when he made a disastrous deal that exposed the company to subprime lending.

Wobst, who ran the company from 1981 to 2001, incited the ire of shareholders after bad deals in Florida and Michigan.

It is far from certain that Steinour will succeed as he tries a Midwestern growth play of his own.

So far, investors are giving him the benefit of the doubt because he has delivered something Huntington has lacked for a while: credible leadership. It has a chance to reboot itself as the top player in the Midwest. The recession has disrupted its biggest rival, Fifth Third Bancorp in Cincinnati, and caused another one, Cleveland's National City Corp., to disappear when it was purchased by PNC Financial Services Group Inc. of Pittsburgh.

The market took Steinour seriously when he said in late January that Huntington -- which has lost money for five straight quarters -- would be profitable again this year now that it has a grip on its loan problems.

Its shares have risen 17% since then, outperforming the KBW Bank Index.

"He's a good turnaround banker: He knew what needed to be done, and he's done it," said Fred Cummings, the president of Elizabeth Park Capital Management Ltd. in Beachwood, Ohio.

"Huntington's core profitability is pretty solid, and that number should improve."

7: AMERICAN BANKER - Meet the MBS Industry's New Nemesis

David Grais, the lawyer behind FHLB suits against Wall Street

American Banker   Thursday, March 18, 2010

By Jeff Horwitz

He's not a state attorney general, but David Grais may soon become the lawyer that Wall Street hates most.

His New York firm, Grais & Ellsworth, is behind several of the most prominent investor lawsuits against securities dealers over mortgage-backed bonds issued during the boom years that have since soured. This week, Grais filed suit on behalf of the Federal Home Loan Bank of San Francisco, seeking to push $19.1 billion of failing securities back into the hands of the companies that issued or underwrote them. The defendants include Bank of America Corp., JPMorgan Chase & Co. and several U.S. and foreign investment banks.

The case comes after a similar suit he brought in December for the Seattle FHLB, which wants to make B of A and several others eat $4 billion of mortgage-backed paper they sold.

Suits like these may be an inevitable byproduct of a financial crisis, but observers say the prominence of the plaintiffs shows that the cases are more than mere nuisances.

"One of the real hanging questions is the extent to which large institutional players remain on the sidelines," said Jeff Nielsen of Navigant Consulting, a firm that tracks and analyzes litigation over mortgage-backed securities. "When the Federal Home Loan banks are coming forward, that's conspicuous participation."

Grais' firm is arguing that, under both state and federal law, the securities dealers were obliged to ensure that the mortgages they securitized during the housing boom's waning months met the underwriting standards stated in each bond's prospectus.

"We think they'll have a hard time proving that," Grais said Wednesday. The Federal Home Loan Bank of San Francisco is suing under a state "blue sky" law, meaning that it would not have to prove misconduct or negligence to make its case.

"The only question is whether they correctly described the collateral, and if they didn't, it doesn't matter whether the dealer did or should have known," Grais said.

Bank of America declined to comment on the suits. JP Morgan Chase did not respond to a request for comment.

The suits in some ways seek to turn on its head contractual language intended to shield the securities' issuers. For example, the prospectuses for bonds that Countrywide Financial Corp. sold to the Seattle and San Francisco FHLBs permitted the lender to include in the pools loans that did not meet the bond offerings' stated underwriting guidelines, so long as there were "compensating factors … demonstrated by a prospective borrower." Grais is challenging the idea that there were such compensating factors. (Countrywide is now a part of B of A.)

If Grais can get the suits into discovery, observers say, the banks will have trouble on their hands.

Litigating, or even settling, such cases would require what Navigant's Nielsen described as "trench warfare" -- an across-the-board defense of a bank's lending standards on a granular level.

"That's not necessarily a desirable path to walk down for anybody," he said, "but the dollars at stake are enormous."

Others in the industry say that the FHLB suits may significantly change the dynamic for repurchase cases against banks.

Though mortgage insurers are seeking to force banks to take back mortgages on similar grounds, major institutional investors have long stayed on the sidelines, said securities lawyer Talcott Franklin of Talcott Franklin PC in Dallas.

The litigation has taken a long time to start, Franklin said, because of a "free rider problem" -- no institutional holder wanted to take on the burden of a major suit by itself. But given continued feuding between investors and mortgage servicers, and a few precedents, "the reasons to stay on the sidelines are continually being eroded."

To many observers, a settlement seems out of the question. Franklin, the author of "The Mortgage and Asset-Backed Securities Litigation Handbook," noted that Grais started his career by battling out insurance cases in an era when it was common for them to go to court.

Grais, 57, turned his attention to the securitization field in 2007, shortly after he and a small team of lawyers left Dewey Ballantine LLP. At a lunch with his friend Jim Grant, the editor of Grant's Interest Rate Observer, Grais said he was looking into finding new areas of law to pursue.

"I told him I was interested in finding a class of assets which was very complicated and was going to run up massive losses," Grais recalls.

Grant suggested collateralized debt obligations. That got Grais started, and he and his new firm eventually settled on the underlying assets.

Not all of Grais' clients can argue they were duped about the quality of the securities they purchased. In a 2007 case he brought against Countrywide, his client, the hedge fund Greenwich Financial, bought the mortgage-backed securities only after Countrywide agreed to modify the underlying mortgages as part of a settlement of predatory lending charges brought by 11 states. Greenwich claimed that agreeing to modify the loans obliged Countrywide to repurchase the loans, boosting the securities' value.

There is nothing unseemly about that, Grais said. His clients simply read the pooling and servicing agreements governing the securities and noted they said "the value will rise if Countrywide honors its obligation." The Greenwich case is pending.

8: AMERICAN BANKER - Moves at SunTrust Could Hint at CEO Succession

American Banker    Wednesday, March 24, 2010

By Matt Monks

SunTrust Banks Inc. announced a wide-ranging management shuffle Tuesday that put two high-ranking regional executives in charge of a new consumer banking division and a revamped retail operation.

It also shifted oversight of the Atlanta company's investment bank to its president from its chief financial officer.

Market watchers speculated that the moves could represent everything from the grooming of a potential successor to Chairman and Chief Executive James M. Wells 3rd to the company's laying the groundwork for dealing with new competitive and regulatory pressures.

"Certainly on the consumer banking side, there have been several issues coming up" related to regulatory changes, said Adam Barkstrom, an analyst with Sterne, Agee & Leach. "I don't know if it has anything to do with that or if this is just more of a typical management transition issue."

Wells said in a press release that the change was part of an "ongoing evolution" of SunTrust's organizational structure to ensure that the $174.2 billion-asset lender is "taking maximum advantage of the current and post-recession growth opportunities."

SunTrust spokesman Mike McCoy declined to discuss the reasons behind the moves beyond what was stated in the press release.

Bert Ely, an independent banking consultant in Alexandria, Va., said the changes could be intended to test the mettle of potential successors to Wells, who is 63.

"If a company has a rising star it will shift some responsibilities to [him or her] to develop them further as a successor," Ely said.

SunTrust may also be streamlining operations as it tries to cross-sell more products in light of stiffer competition from Wells Fargo & Co. Most banks are also spending a lot of time refining their product lines to gear up for a regulatory crackdown on overdraft fees that will hurt income, Ely said.

If the changes are part of succession planning, a beneficiary appears to be SunTrust President William H. Rogers Jr., 52. Market watchers pegged Rogers as an heir apparent when he assumed the presidency from Wells in December 2008, though SunTrust denied that speculation at the time.

Rogers already oversaw most of the core banking operations, including retail, commercial, mortgage and wealth management. When the changes announced Tuesday take effect April 1, the head of the investment bank will report to Rogers, too. The investment bank chief previously answered to CFO Mark A. Chancy, 45.

Some of Rogers' top deputies were given new responsibilities in the reorganization.

C.T. Hill, 59, was named to run a new consumer banking arm that puts him in charge of its deposit and lending products. Hill used to run the Middle Atlantic division.

The company will have seven regional retail bank groups instead of three. The seven groups -- and their 1,700 branches in 11 states and Washington, D.C. -- will be led by Thomas G. Kuntz. Kuntz, 53, previously oversaw SunTrust's banking operations in Florida as well as its commercial business line.

In other changes: Amy Medendorp, 48, takes over the commercial business line from Kuntz. She was a co-head of the investment bank. The other co-head of the investment bank, Hugh S. Cummins 3rd, 47, is taking over full leadership of the group.

Hill, Kuntz, Cummins and Medendorp will report to Rogers.

9: AMERICAN BANKER - RBS Takes Cautious Road to Expansion in the U.S.

American Banker    Tuesday, March 30, 2010

By Paul Davis

Royal Bank of Scotland is looking to expand in numerous U.S. markets, but plans to do so in its trademark cautious way, a top retail executive at the company said.

RBS plans to open more branches in markets where it has a small presence and to test the waters in Florida, the Carolinas and several other Southeastern states with automated teller machines, said Martin Bischoff, a vice chairman who runs consumer and business banking for RBS' U.S. operation.

But don't expect any of those expansion efforts to debut a new RBS-centered brand. There are no plans to put the company's imprint on Citizens Bank in the Northeast or Charter One Bank in the Midwest.

"We're not sure putting 'RBS' in front of Citizens would enhance the brand," he said during an appearance last week at American Banker's Best Practices in Retail Financial Services Symposium in Orlando.

In a follow-up interview, Bischoff talked more about the company's expansion plans in the U.S., saying that RBS wants to correct an "imbalance" of traditional and in-store branches in several markets.

RBS has about 1,500 branches in 12 states, with two-thirds being traditional branches. Bischoff said there are markets such as Long Island where RBS needs more traditional branches to complement a strong network of locations in Stop & Shop supermarkets. Around the New York City metro area, RBS had 36 branches and $370 million in deposits at June 30, or 0.04% market share, according to data from the Federal Deposit Insurance Corp.

"We look for a blend and in that market we clearly need more traditional branches," said Bischoff, who is no relation to former Citigroup Chairman Win Bischoff.

A recent agreement to put Citizens Bank ATMs in Sunoco convenience stores would provide RBS with data to evaluate several markets that could fit its long-term plans.

"We're not desperate" to expand, Bischoff cautioned. "Clearly we have a strong foothold and are strong in all of our markets." The immediate focus for RBS involves strengthening its position in established markets, he said.

Ken Thomas, an independent bank consultant and economist in Miami, said RBS has good timing to expand now compared with five years ago. Many of the companies that were aggressively buying or renting real estate, including Commerce Bancorp, North Fork Bancorp and Washington Mutual Inc., have been sold. He also said that the cost of adding branches is likely 15% to 25% less now. "Prices have definitely come down and people are willing to make deals," he said.

Still, Thomas, a longtime skeptic of in-store branches, would prefer to see RBS and others pare back those locations to strike a balance.

Bischoff strongly supported the model during comments at the symposium, calling it a crucial strategy to secure top-five market share. "It is the double whammy. It is the kicker," he said, warning that failure to become a big player in any given market often leaves a company "running uphill."

Establishing brand and gathering data are also important, and both will be at work as the company places ATMs in several East Coast markets. RBS earlier this month reached a deal to put Citizens-branded machines in 487 Sunocos, with roughly 25% planned in states where it lacks branches. The biggest concentration is in Florida, with 57, but RBS will also have ATMs in Maryland, North Carolina, South Carolina, Virginia and the District of Columbia.

Bischoff said the $148 billion-asset Providence, R.I., company has no immediate plans to buy or build branches in any of those states. (RBS, which bought Citizens in 1988 and Charter One in 2004, has avoided U.S. bank deals since it purchased GreatBanc Inc. in February 2007 to expand in the Chicago area.)

"This is about convenience and retention" of existing customers, Bischoff said in the interview. "But it is also about developing brand recognition."

Thomas said he does not see the Sunoco relationship as a harbinger for an aggressive expansion because such locations are typically geared toward travelers and tourists. Thomas said he would watch to see if RBS eventually expands its ATM network to supermarkets or pharmacies, which would target residents and give a strong hint as to the company's future plans.

The ATMs will have the Citizens brand, and for now the company's strategy is to keep the Charter and Citizens names despite legally consolidating them as RBS Citizens in 2007. Leaving the visible names untouched would run counter to the actions of other foreign banks. Bischoff, meanwhile, emphasized that RBS does not need a consistent brand to be successful.

"The important thing is for the customer to have a consistent experience," he said.

10: AMERICAN BANKER - Strategically, Wells Fargo Has Empire State in Mind

American Banker   Thursday, March 25, 2010

By Jeff Horwitz

Related Graphic

Wells Fargo & Co. has rarely felt the need to make major incursions into markets occupied by entrenched competitors. In fact, its bread-and-butter strategy dictated the opposite.

But when a company makes a big purchase, like Wells' acquisition of Wachovia at the height of the financial crisis, it has to figure out what to do with businesses it might not have embraced otherwise.

Case in point for Wells: the branch network Wachovia left it in New York City.

During the decade before its demise, Wachovia Corp. moved beyond its roots of Southeast dominance to pry junior shares from the country's biggest markets, from Los Angeles to New York. Wachovia's Western forays have simply added to Wells' already dominant status on its home turf, but its new positions in some Middle Atlantic and Northeast markets leave it playing the unusual role of local underdog.

Nowhere is the change more stark than in the greater New York area -- where it is sixth in deposit market share.

How the company manages the New York market may have important implications for its national strategy.

"There was a time not all that long ago, when people said that some markets were intrinsically so good, even if I don't have a strong position, I'm just happy to be there," said Christopher Leech, head of McKinsey & Co.'s consumer and small-business banking practice. But industry sentiment has shifted in the last couple of years, Leech said. Research by his firm and others suggests local scale plays the preeminent role in separating highly lucrative franchises from marginal ones, and that presence in a hot market accounts for only 20% of a branch's success.

While it is possible to earn a return with a smaller share by targeting a distinct client base, "it's actually frustratingly important to be a leader," Leech said.

Joe Kirk, regional president for New York and Connecticut at Wells, said the New York-area Wachovia network will pay dividends and bolster Wells in further-flung markets. (The company intends to bring the branches into Wells' network next year.)

"The real value is in the national banking franchise that Wachovia and Wells gives us," Kirk said. "It's a substantial advantage to our customers that are mobile. Our commitment to the market is strong."

Wells' exposure to the area's high level of competition, though, comes as the rest of the industry seems to be adopting Wells' traditional focus on market concentration over market presence.

Like many outcomes of the financial crisis, Wells' leap to the East Coast had more to do with a sudden opportunity than a long-term plan. "My guess is we'll do some more smaller deals," CEO John Stumpf told National Public Radio in June 2008, five months before Wells bought an institution slightly larger than itself.

NOT THE OLD SCHOOL

Stumpf's reluctance wasn't just that mergers were messy. Wells had been successful with organic growth and "smaller infield acquisitions," he said, and had no intention of changing. "Part of the cost of [big deals] is 'What does it do to the organic strategy?' "

It was a concise summary of a model that had built the biggest branch network of any bank in the West while avoiding pricey market-share battles in popular markets. Even before the Wachovia acquisition, for instance, Wells had the most California branches of any bank, even though it was outdone by Bank of America Corp. with the borders of Los Angeles and in Wells' hometown of San Francisco (where B of A also has historic roots). Instead of picking a fight, the bank made up the difference in markets like San Diego and San Jose.

Wells stuck to that model outside of California, too. While it has settled for a solid second in prized markets like Phoenix and Dallas, it has a demonstrable hold on Albuquerque and Minneapolis.

"Local concentration is the game, and Wells has always known that," said Columbia University Business School Professor Bruce Greenwald, who has studied Wells' and Wachovia's development as a case study in geographic economies of scale and barriers to entry. Federal Reserve surveys show that concentration draws borrowers, and it lowers per-branch marketing and operating costs. Like Wells, the North Carolina-based Wachovia thrived on local dominance, though it expanded more aggressively after being sold to First Union Corp.

"You can always tell when someone thinks they're a genius and they're not, is when they open in New York without viable share," Greenwald said.

To be sure, trying to gauge the success of a bank's branch network in a major market does not produce exact answers. There can be variation in how banks match deposits to branches. And while fees and product sales generally accompany deposits, it's possible for them to diverge. Moreover, maintaining a foothold in a high-traffic destination city like New York may help retain customers who either visit or move.

A TEMPTING APPLE

Rick Spitler, a managing director for Novantas who handles retail distribution strategy, said that establishing an institution in the New York market can be worth the effort. Deposits per branch significantly outstrip the rest of the country, and its demographics for income, density and growth attract the nation's top banks.

"How could you ignore 10% of the country by ignoring the New York metro areas?" he asked.

Deposit statistics bear out that New York is fertile ground. Nationally, a typical branch for one of the country's four biggest banks brings in deposits of around $50 million, according to SNL Financial. The median for every large bank operating in the New York market exceeds that.

Where some institutions distinguish themselves, however, is by how much. Citigroup Inc.'s median deposits per branch yields a phenomenal $150 million for locations open more than three years, according to SNL's data. Wells' Wachovia branches are in the middle of the pack with a median of $72 million, JPMorgan Chase & Co. clocks in at $60 million, and Bank of America follows with $59 million.

But those numbers don't tell the whole story.

Judged solely on Manhattan, JPMorgan Chase's numbers are almost as superlative as Citi's. But the company's median has plunged over the last few years as it doubled its New York branch locations through acquisition and organic growth, much of it focused on the lower-watt suburbs. In short, it's sacrificed its per-branch numbers and created significant excess capacity to preempt any other institution from rivaling its scale.

While Bank of America (9.3%) has now surpassed Citi (7.8%) to grab the second largest New York market share, Greenwald says its struggle to escape single-digit market share should be a warning to the recently arrived Wells.

"If they do not get rid of the subscale local branch networks, it means they've abandoned their sensible policy of understanding regional and local policies of scale in banking."

A spokeswoman for the bank said that its national strategy is only an updated version of its West Coast habit of building where it is strong. And according to Kirk, the combined company doesn't need to start an un-Wells-like market-share fight to make its branches in the New York market worthwhile.

"It was more of a niche presence that we were focused on," he said, adding that the company will differentiate itself through a united platform and customer service. "As Wells Fargo, we have a great story to tell, and we're going to tell it often," he said.

11: ANNOUNCEMENTS - Wells Fargo to Purchase GMACs North American Factoring Portfolio

SAN FRANCISCO--(BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC) announced today that Wells Fargo Bank, N.A. has entered into a definitive agreement to purchase substantially all of the North American factoring portfolio of the Commercial Services Division of GMAC Commercial Finance Group. The portfolio consists of approximately 150 small and middle-market clients that primarily serve the retail channel, representing approximately $4 billion in annual volume of factored receivables. Wells Fargo Bank will also acquire the client service application system currently used to manage these relationships. The portfolio and client service application system will become part of the Trade Capital division of Wells Fargo Capital Finance upon the closing of the transaction. Terms of the purchase were not disclosed.

“Wells Fargo is committed to helping small and middle-market businesses succeed”

“We are pleased to welcome these new clients and their customers to Wells Fargo,” said Stuart Brister, president of the Trade Capital division of Wells Fargo Capital Finance. “We look forward to being able to help them achieve success through the expertise we’ve gained in more than 50 years in factoring and through all the additional financial products and services Wells Fargo has to offer.”

“Wells Fargo is committed to helping small and middle-market businesses succeed,” said Bill Mayer, president of the Commercial & Retail Finance Group at Wells Fargo Capital Finance, of which the Trade Capital division is a part. “Being able to provide continuous service and financing for these clients during these uncertain times is another example of how we deliver on that commitment.”

12: BANKINSURANCE.COM - AON Consulting to Acquire JP Morgan Compensation...

...and Benefits Strategies

 NEWS IN BRIEF - MARCH 29 - APRIL 4, 2010

Chicago-based Aon Corporation subsidiary Aon Consulting has agreed to acquire J.P. Morgan Compensation and Benefits Strategies (“JPMorgan Comp”), a unit of J.P. Morgan Retirement Plan Services.  JPMorgan Comp offers compensation, retirement and healthcare actuarial services, as well as expertise in compliance, financial modeling and actuarial-based employer benefits plan designs.  Aon Consulting CEO Kathryn Hayley said, “With this acquisition, we strengthen our presence in key markets [including New York City, Boston, Chicago, St. Louis, Dallas, Denver, Los Angeles and San Francisco] … in such areas as complex union negotiations, benefit reimbursements for government contracts and benefit issues unique to law firms and other professional services firms.”  The deal is expected to close on March 31, 2010.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

13: BANKINSURANCE.COM - BNY Mellon to Acquire Germany's BHF Asset Servicing Gmbh

NEWS IN BRIEF - MARCH 22 - 28, 2010

 New York City-based, $212.3 billion-asset BNY Mellon has agreed to acquire Frankfurt, Germany-based BHF Asset Servicing Gmbh and its fund administrator affiliate, Frankfurter Service Kailalanlage-Gesellschaft mbH (FSKAG) from Frankfurt-based BHF Bank Aktiengesellschaft and Sal. Oppenheim Jr. & Cie. S.C.A.  BHF Asset Servicing and FSKAG will bring $472 billion in assets under custody and administration and $128 billion in depotbanking volume when they merge into BNY Mellon Asset Servicing, creating an operation with $642 billion in assets under custody and administration and $163 billion in depotbanking volume.  The German companies also add German domestic custody and KAG fund administration capabilities to BNY Mellon’s operations, when the $343 million deal closes in the third quarter, pending regulatory approval.  BNY Mellon Asset Servicing Co-CEO Tom Keaney said, “This transaction expands markets, positioning BNY Mellon at the forefront among securities servicing providers in Germany and creating a strong platform for growth across over business.”

14: BANKINSURANCE.COM - Citi Holdings to Spinoff Primerica in IPO

NEWS IN BRIEF - MARCH 29 - APRIL 4, 2010

Duluth, GA-based Primerica, a subsidiary of New York City based Citi Holdings, has filed a registration statement with the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO).  Primerica will continue to administer term life policies in place through reinsurance contracts with Citi as of December 31, 2009, and Citi will continue to receive income from this business after the IPO and Citi’s divestment of all Primarica stock are completed.  Primerica co-CEO Rick Williams said, “Becoming a public company is an opportunity to align the interests of our independent sales force and our employees with our future performance.”  Primerica’s 100,000 registered representatives offer mutual funds, variable annuities, loans and other financial products, including term life insurance, which Primerica underwrites.  Citi Holdings will receive all the proceeds from the Primerica IPO.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

15: BANKINSURANCE.COM - Dodd's Regulatory Reform Bill Creates Office...

...of National Insurance and More

NEWS IN BRIEF - MARCH 22 - 28, 2010

Last week Senate Banking Committee Chairman Christopher Dodd released his proposed financial industry regulatory reform bill.   Among other actions, the bill creates the following: (1) an Office of National Insurance headed by a director appointed by the Treasury Secretary and housed within the Treasury Department.  (2) a Consumer Financial Protective Bureau housed within the Federal Reserve and led by a director appointed by the President and approved by the Senate.  (3) a nine-member Financial Stability Oversight Council chaired by the Treasury Secretary and including representatives from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Securities and Exchange Commission (SEC), Commodity Futures Trading Commission, Federal Housing Finance Agency, Consumer Financial Protection Bureau and Office of National Insurance.  For excellent summaries of the bill’s implications for bank insurance, read the ABIA Legislative Update by clicking here and the ICBA’s brief.  To read the bill, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

16: BANKINSURANCE.COM - Expense Management Trumps Expansion

NEWS IN BRIEF - MARCH 22 - 28, 2010

Life insurers who focus on expense management rather than growth are most profitable during both up and down markets, according to a new study, Life Insurance Expenses: Breaking through the Edge of Efficiency, by Hartford, CT-based Conning Research.  Currently, life insurers are dealing with declining premiums and low investment yields.  In this market, Conning found, “Insurers that outperform use a rigorous and consistent approach to expense analysis and control to ensure long-term profitability.”

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

17: BANKINSURANCE.COM - Financial Advisors Favor Guaranteed Insurance Products...

...and About Taxes

NEWS IN BRIEF - MARCH 29 - APRIL 4, 2010

More than three quarters (77%) of financial advisors plan to allocate more of their clients’ assets to guaranteed insurance products in 2010, according to the 2010 Brinker Barometer based on a recent survey conducted by Berwyn, PA-based Brinker Capital.  These same financial advisors said they are concerned about tax increases (63%), believe the government should not regulate executive compensation (75%), and advise that the Bush-era tax cuts be extended (66%).

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

18: BANKINSURANCE.COM - Huntington Bancshares Expands Brokerage Unit

NEWS IN BRIEF - MARCH 15 - 21, 2010

Columbus, OH-based, $52 billion-asset Huntington Bancshares’ subsidiary Huntington Investment Company is expanding in Central Ohio, hiring veteran financial advisors and opening new offices in Dublin and New Albany.  Huntington Executive Vice President Daniel Benhase said, “We are creating an environment where investment professionals can succeed in delivering a broad base of products to ensure our customers are receiving excellent investment advice.”

In 2008, Huntington Bancshares reported $63.6 million in investment program income, which comprised 7.4% of its noninterest income, and ranked 6th in investment program earnings among U.S. BHCs in the Midwest and 23rd among all U.S. BHCs, according to the Michael White Bank Investment Program Fee Income Report.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

19: BANKINSURANCE.COM - Insurance Associations Blast Blast Healthcare Annuity Tax

NEWS IN BRIEF - MARCH 29 - APRIL 4, 2010

The American Council for Life Insurers (ACLI), National Association for Fixed Annuities (NAFA), Insured Retirement Institute (formerly NAVA), National Association of Insurance and Financial Advisors (NAIFA) and National Association of Health Underwriters (NAHU) have sent a joint letter to members of the U.S. Congress urging them to remove the tax on individual annuities called for in H.R. 4872, aka The Healthcare Bill.  In the letter the associations said: “The 3.8% Medicare contribution on income received from individual annuities would serve as a disincentive to save on a product that uniquely allows an individual to accumulate retirement savings and to guarantee that savings can never be outlived.”  The associations noted, “In the wake of the worst economic crisis since the Great Depression, this is not the time to discourage responsible retirement planning.”  To read the letter, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

20: BANKINSURANCE.COM - Insurance, Trust, Annuity and Investment Fee Income Down...

...at Hancock Holdings

NEWS IN BRIEF - MARCH 15 - 21, 2010

Gulfport, MS-based, $8.7 billion-asset Hancock Holding Company reported fourth quarter 2009 insurance brokerage fee income slid 5.7% to $3.33 million, down from $3.53 million in fourth quarter 2008.  Investment and annuity fee income fell 17.4% to $1.66 million, down from $2.01 million, and trust fees slipped 1.7% to $3.94 million, down from $4.01 million.  Insurance brokerage, investment and annuity, and trust fee income comprised, respectively, 5.3%, 2.6% and 6.2% of noninterest income, which more than doubled to $63.36 million, up from $30.41 million a year ago, helped by a $33.6 million gain on its FDIC-assisted acquisition of Panama City, FL-based, $1.72 billion-asset Peoples First Community Bank.  Net interest income rose 1.3% to $47.87 million, up from $47.26 million, as loan loss provisions increased over $2.4 million; and net income, bolstered by noninterest earnings, more than doubled to $31.78 million, up from $15.22 million.

For the year 2009, Hancock Holding’s trust fees declined 10.3% to $15.13, down from $16.86 million in 2008.  Insurance brokerage earnings fell 13.2% to $14.36 million, down from $16.55 million, and investment and annuity fees dropped 24.0% to $8.22 million, down from $10.81 million.  Trust, insurance brokerage, and investment and annuity fee income comprised, respectively, 9.6%, 9.1% and 5.2% of noninterest income, which jumped 23.1% to $157.33 million, up from $127.78 million in 2008, reflecting the aforementioned gain on acquisition.  Net interest income increased 1.5% to $185.9 million, up from $183.1 million in 2008, despite an over $8.2 million increase in loan loss provisions.  Net income, especially supported by noninterest earnings, grew 14.4% to $74.8 million, up from $65.4 million in 2008.  Hancock Holding Company President and CEO Carl Chaney said, “The Company was able to take advantage of a strategic growth opportunity that we had positioned ourselves for by expanding into the Panhandle and the North Central Florida regions with the acquisition of Peoples First Community Bank….  This further expands Hancock’s current Florida footprint into attractive, long-term growth markets.”

In 2008, Hancock Holding’s insurance brokerage income comprised 9.1% of its noninterest income and 3.4% of its net operating revenue.  The company ranked 17th in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

In 2008, Hancock Holding’s investment program income (including securities brokerage and annuity income) comprised 8.8% of its noninterest income and 3.3% of its net operating revenue.  The company ranked 5th in investment program earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White’s Bank Investment Program Income Report.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

21: BANKINSURANCE.COM - MetLife Expands International Reach with ALICO Purchase

NEWS IN BRIEF - MARCH 15 - 21, 2010

New York City-based MetLife has agreed to acquire Wilmington, DE-based America Life Insurance Company (ALICO) from New York City-based American International Group (AIG) for $15.5 billion, including $6.8 billion in cash and $8.7 billion in stock.  MetLife Chairman, President and CEO Robert Henrikson said, “With this acquisition, MetLife is delivering on its strategy to accelerate international expansion as a powerful growth engine for the company.”  ALICO manages $89 billion in assets and services 20 million customers through 60,000 distribution points in over 50 countries.

When the deal closes at the end of 2010, pending regulatory approvals, MetLife expects to become a leading competitor in Japan and a top-five life insurer in Central and Eastern Europe, the Middle East and Latin America.  AIG will use the cash from the sale to reduce the Federal Reserve Bank of New York’s (FRBNY) interest in the ALICO special purpose vehicle and will use the proceeds from gradual MetLife stock sales for the same purpose.  AIG Chairman Harvey Golub said, “The sale gives AIG greater flexibility to move forward with our restructuring and rebuilding efforts and focus on enhancing the value of our key insurance business.”

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

22: BANKINSURANCE.COM - Minnesota Fines American Equity Investment Life...

...for Alleged Improper Annuity Sales

NEWS IN BRIEF - MARCH 22 - 28, 2010

The Minnesota Department of Commerce (MDC) has fined Des Moines, IA-based American Equity Investment Life Insurance Company $275,000 for allegedly selling 541 annuity contracts on forms unapproved by the state between 2002 and November 2008.  The MDC has also ordered American Equity to revise the contracts’ surrender charge provisions to comply with Minnesota state law, which allows up to a 9% surrender charge for a 9-year period.  American Equity must notify by mail all annuity purchasers of these revisions and reimburse those annuity purchasers who surrendered their contracts for any amount they overpaid.  In addition, American Equity must create and maintain procedures to ensure that all their policies are issued on state-approved forms and that all producers comply with state law regarding these matters.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

23: BANKINSURANCE.COM - Minnestoa Life's Sales Jump 57% in 2009

NEWS IN BRIEF - MARCH 22 - 28, 2010

St. Paul, MN-based Minnesota Life Insurance Company announced its individual life sales, driven by sales of its indexed universal life product, jumped 57% in 2009 over the year before.  The company’s performance was in sharp contrast to what LIMRA found was a 16% drop in 2009 life insurance sales compared to 2008, saying, “The industry has not seen a decrease in such magnitude since 1942.”  According to the MIB Index compiled by Braintree, MA-based MIB Group, however, U.S. applications for individually underwritten life insurance was flat in 2009 compared to 2008.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

24: BANKINSURANCE.COM - Most Adult Americans Not Convinced Our Aging Population...

...is "A Good Thing"

NEWS IN BRIEF - MARCH 22 - 28, 2010

Not quite half (47%) of adult Americans believe it is “a good thing” that there will be “many more old people alive in ten or twenty years,” and 20% think this will be “a bad thing,” according to a Harris Interactive survey of 2,576 Americans aged 18 and older conducted in January.  More people (38%) thought the country will not be able to afford “people living until they are 80, 90 or even 100” than thought the country will be able to afford the cost (33%).  To deal with the increasing social security and Medicare costs associated with an enlarged elderly population, 47% agreed people should be encouraged to work past age 65; 30% recommended increasing the eligibility age for social security and Medicare, and 21% were willing to increase taxes to deal with the issue.  When asked to pick the top two solutions, 61% chose working past 65, and 46% chose increasing the eligibility age.  More than two-thirds (68%) said that as a society, we are not prepared to spend more years caring for aging parents than we spend caring for growing children, the Harris survey found.  To access the survey, click here.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

25: BANKINSURANCE.COM - Pay Czar Sets 2010 Salaries for "Exceptional" TARP Executive

NEWS IN BRIEF - MARCH 29 - APRIL 4, 2010

U.S. Treasury’s Troubled Asset Relief Program (TARP) Special Master on Compensation, aka “Pay Czar,” Kenneth Feinberg issued new rulings on 2010 pay for the top 25 executives at the five firms that received exceptional assistance from TARP but have not yet paid back the loans.  Feinberg has told these companies that cash salaries for the executives in question must be cut on average by one-third from 2009 levels and has ordered that any additional compensation be in stock that must be held over time.  To oversee the companies and determine whether executive pay has been inconsistent with the public interest, Feinberg has sent letters to the companies requesting compensation information regarding the executives in question, National Underwriter and BestWire report.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

26: BANKINSURANCE.COM - Retirement Income a Veil of Possibilities

NEWS IN BRIEF - MARCH 29 - APRIL 4, 2010

Less than 70% (69% to be exact) of workers say they and their spouse have saved for retirement; 60% say they are currently saving for that purpose; 27% say they have less than $1,000 in savings; and 54% say their total savings, excluding the value of their home and defined benefit plans, is less than $25,000.  At the same time, 77% of workers expect to receive retirement income from social security; 56% expect to receive that income from defined benefit plans; 75% expect to rely on employer-sponsored retirement plans; and 77% expect to earn their living by staying employed past age 65.  Of those workers who have calculated their financial needs during retirement, 54% say they will need at least $500,000, according to a survey of 1,153 adults conducted in January by the Employee Benefit Research Institute (EBRI) and Matthew Greenwald & Associates.

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

27: BANKINSURANCE.COM - Retiring Affluent Americans Self-Direct...

...Conservative Investment Programs

NEWS IN BRIEF - MARCH 15 - 21, 2010

Affluent pre-retirees and retirees with a minimum $100,000 in investable assets prefer to manage their own retirement income using traditional certificates of deposit (CDs) and bond laddering strategies, or, as a second choice, investing in variable annuities.  Significantly, they show little interest in target payout or absolute return funds, and appear unenthusiastic about specific product providers, according to Cambridge, MA-based Cogent Research’s In- Retirement Income 2010 report.  No one firm stood out as a firm of choice, but Fidelity Investments and Vanguard were named by the largest percentage (17%).  Thirty other firms, including Wells Fargo, Morgan Stanley Smith Barney, Charles Schwab, Ameriprise and Merrill Lynch were each cited by 5% or less of the affluent group.  Cogent Research Project Manager Carrie Merrick said, “While this level of confusion and indecision around retirement income products and providers is no doubt disheartening to providers, it’s also an exciting opportunity for the firm or firms who eventually get it right.”

BankInsurance.com News in Brief' is provided each Thursday courtesy of Michael White Associates @ www.BankInsurance.com.

28: K@W - It's a Long Way to 4G Nirvana

Spurred by the data consumption of devices like Apple's iPhone, Motorola's Droid and the latest smartphones, wireless carriers are planning to upgrade their networks. Companies such as Verizon, AT&T and others have announced ambitious plans to make fourth generation (4G) services available to their customers over the next two years, enabling a wide range of new applications involving rich media such as video. Still, experts at Wharton and elsewhere note that 4G will take time to become a mass market phenomenon, in part because wireless spectrum is in short supply.

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2454.cfm 

Reproduced with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania. All materials copyright of the Wharton School of the University of Pennsylvania. http://knowledge.wharton.upenn.edu 

29: K@W - Repay the Taxpayer

Kenneth Feinberg and Executive Compensation: 'My Number-one Priority: Repay the Taxpayer'

This month, all of Wall Street is paying close attention to Kenneth Feinberg, President Obama's "pay czar." Having determined the 2009 pay for executives at companies that took federal bailout money, Feinberg is expected to unveil his 2010 determinations in the next few weeks. His mission, he said during a recent talk at Wharton, is clear: "I can't be vindictive; I can't be vengeful; I can't punish. I have to make sure that the companies have the individuals necessary so that [they] will thrive and repay the taxpayer."

LINK TO FULL ARTICLE: http://knowledge.wharton.upenn.edu/article/2448 

Reproduced with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania. All materials copyright of the Wharton School of the University of Pennsylvania. http://knowledge.wharton.upenn.edu 

30: MISCELLANEOUS - Americans Say They Missed Market Surge

Bloomberg National Poll

Wall Street Disliked While Washington Not Trusted to Make Fixes

NEW YORK--(BUSINESS WIRE)--Americans are negative on the economy and markets even as stocks and growth indicators are up, according to the Bloomberg National Poll, a quarterly survey of Americans.

A 57 percent majority of Americans believe the economy has worsened rather than improved during the past year even though a bull market has driven up the benchmark S&P 500 U.S. stock index more than 73 percent and the economy has grown at a 5.9 percent annual pace. A sense of gloom pervades perceptions of the economy and nation; barely one-in-three Americans say the country is on the right track. Just 9 percent of those polled say they believe the economy will be strong again within a year and 4 percent of Americans who cut back on spending now say they are confident to start back up.

LINK TO FULL ARTICLE: http://eon.businesswire.com/portal/site/eon/permalink/?ndmViewId=news_view&newsId=20100323007321&newsLang=en

31: MISCELLANEOUS - Crazy Things You Can’t—And Can—Deduct On Your Tax Return

Helping friends and family members prepare their tax returns, financial planner Paul Jacobs, CFP®, with Palisades Hudson Financial Group, has heard everything.  

“You name it, I’ve had people ask me if they can deduct it,” says Jacobs, who is based in the firm’s Atlanta office and holds the IRS’s Enrolled Agent designation.

“Some friends want to deduct clothes; others, magazine subscriptions. They all want to deduct their cell-phone bills,” he says.  “When I ask if the expense is business-related, they mumble something about how ‘it’s all semantics.’ When I tell them that I won’t put a personal expense on their tax return, they pout.”

Some ask how much they can report for charitable deductions without the IRS questioning it.  Jacobs replies, “You can deduct the amount you actually gave to charity.”

Self-employed people get huffy when they learn that besides paying income tax they have to pay taxes for Social Security and Medicare.  

People tell Jacobs he’s a great tax preparer if they have a refund coming.  “I try to explain to them that by overpaying originally and then getting a refund, they actually gave the government an interest-free loan,” he says.  “They roll their eyes.”

If they owe the government, they wonder if he knows what he’s doing.

Odd and not-so-odd things you can deduct

But some people can take unusual deductions, Jacobs says.  If you’re self-employed, even part-time, and file Schedule C, you can deduct all legitimate business expenses—like business-related cell-phone bills.  You probably can deduct your subscription to, say, Sports Illustrated if you have a sports-promotion business.  

Did you install energy-efficient windows, a solar energy system or a geothermal heat pump in your home last year?  You may be eligible for a nice tax credit.  Ditto if you bought a house for the first time.

Be sure your tax preparer is competent

Almost 60 percent of taxpayers pay someone else to do their taxes.  But anyone can offer his or her services as a tax preparer, no questions asked.

“We’ve all heard horror stories of unqualified tax preparers making costly mistakes with people’s tax returns,” Jacobs says. “For every tax preparer like me, who says, ‘You cannot deduct that,’ there are other tax preparers who will say, ‘No problem.’  But if you get audited, it can be a big problem.”

Preparers who hold the CPA or enrolled agent designation are normally safe bets.  If your preparer doesn’t have one of these credentials, ask a lot of questions, he says.

32: MISCELLANEOUS - Take Advantage of Unique Tax Planning Strategies

Consider Deferring Deductions Into 2011 — Second in a Series

This tax season provides some unique planning opportunities for retirement and financial planning purposes, according to Robert Fishbein, a vice president in Prudential Financial’s (NYSE:PRU) Tax Department.

“A deduction that saves you $39.6 of tax for every $100 of income (that is, the value of a 2011 deduction at the highest tax bracket) is more valuable than a deduction that saves you $35 for every $100 of income (that is, the value of a comparable 2010 deduction)”

LINK TO FULL ARTICLE: http://www.news.prudential.com/article_display.cfm?article_id=5666

33: MISCELLANEOUS - Washington Mutual Files Chapter 11 Plan

After Reaching Agreement with JPMorgan

Washington Mutual Inc. filed a Chapter 11 reorganization plan, two weeks after resolving a $4 billion dispute with JPMorgan Chase & Co. and the Federal Deposit

The FDIC seized Washington Mutual's flagship bank in 2008 and sold its assets to JPMorgan for $1.9 billion. The sale resulted in the two banking companies and the government agency trading lawsuits over roughly $4 billion in disputed deposit accounts following the largest bank failure in U.S. history.

LINK TO FULL ARTICLE: http://ca.news.finance.yahoo.com/s/27032010/2/biz-finance-washington-mutual-files-bankruptcy-plan-reaching-agreement-jpmorgan.html

34: PERSONNEL CHANGES - Bank of America Merrill Lynch Names Hayley Boesky ...

Vice Chairman of Global Markets

Bank of America Merrill Lynch today announced that Hayley Boesky will join the company as vice chairman of Global Markets. In this newly created role, Boesky will work to strengthen the company's client relationships by leveraging her unique expertise and extensive contacts with the world's largest institutional investors and the official sector. She will also play a leading role in business development.

LINK TO FULL ARTICLE: http://newsroom.bankofamerica.com/index.php?s=43&item=8663

35: PERSONNEL CHANGES - Bank of America Merrill Lynch Strengthens Global ...

... Corporate Banking Platform with Seven Key Hires

Firm to Significantly Grow Corporate Banking Platform around the World

Bank of America Merrill Lynch today announced a series of new hires to its Corporate Banking platform around the world. They are, in London, Carole Berndt and Wayne Scott; in New York, Denise Menelly; in Hong Kong, Charles Alexander, Ivo Distelbrink and Tim Fleming; and in Singapore, Percy Batliwalla.  

The company is an industry leader in corporate banking in the U.S. with No. 1 positions across a range of categories, including treasury management and merchant services and is aggressively growing its corporate banking capabilities globally.

LINK TO FULL ARTICLE: http://newsroom.bankofamerica.com/index.php?s=43&item=8665

36: REGULATORY - Republicans Plan Broad Attack On Financial Reforms

A wide assault on a plan by Democrats to overhaul U.S. financial regulation is planned by Republicans for Monday as a Senate panel begins drafting a much-disputed bill, documents obtained by Reuters show.

About 300 amendments from Republicans will seek to weaken or kill key provisions of legislation that was unveiled on March 15, after months of informal negotiation, by Senate Banking Committee Chairman Christopher Dodd, a Democrat.

Targeted for watering down by Republicans are a proposed inter-agency council to monitor financial system risk, a fund for liquidating distressed firms, and a plan to shift oversight of hundreds of small banks out of the Federal Reserve.

While Republicans are certain to adjust their plans, the documents suggest Dodd may be hard-pressed to complete debate and bring the bill to a final vote this week as he hopes.

LINK TO FULL ARTICLE: http://www.foxbusiness.com/story/markets/market-overview/rpt-exclusive-republicans-plan-broad-attack-financial-reforms/  

37: REPORT - Bank Sold Annuities Plummet To Record Lows In January

Windsor, CT, March 25th, 2010… Annuity sales through banks got off to a poor start in 2010, according to the Kehrer-Jackson Monthly Bank Annuity Sales Survey.  Both fixed and variable annuity sales dropped significantly in January.

“We haven’t seen total annuity sales fall this low in a decade” said Janet Cappelletti, Associate Research Director at Kehrer-LIMRA. “Dollars invested in both fixed and variable annuities through the bank channel continue to slide.”

Financial institutions sold $2.4 billion of fixed and variable annuities in January, 17 percent below December sales and 44 percent down from the previous January when annuity sales totaled $4.2 billion.

LINK TO FULL ARTICLE: http://www.commercialrecord.com/news137604.html

38: REPORT - Capital Investment and Hiring Plans Show Hints ...

of Recovery, but Optimism About the Economy Weakens

One in Five Businesses say They've Thrived in Spite of the Rough Economy; Positive Cash Flow Separates These Growth Firms from the Rest of the Pack

This spring, some hopeful signs are emerging among small business owners, who remain skittish about the overall economic climate. Nearly half (48%) plan to make capital investments in their businesses, up from 42% last fall and nearing spring 2008 levels (53%) when investment plans began a steady decline amid the worsening economy.

LINK TO FULL ARTICLE: http://home3.americanexpress.com/corp/pc/2010/open_recovery.asp

39: REPORT - Employers Shifted More Costs in 2010

Wells Fargo Insurance Services releases 2010 Marketplace Survey

CHICAGO--(BUSINESS WIRE)--Pressured by rising health care costs and a recession, more U.S. employers used cost shifting in 2010 than the prior year, according to the Wells Fargo Benefits Marketplace Survey. According to the report, employers also continue to offer Consumer Directed Health Plans (CDHPs) and wellness programs in order improve health and lower costs.

“As inflationary adjustments from insurance companies remain in the 10-11 percent range and companies continue to struggle in today’s economy, many employees are being asked to share a greater percentage of overall healthcare costs.”

LINK TO FULL ARTICLE: http://www.marketwatch.com/story/new-survey-employers-shifted-more-costs-in-2010-2010-03-24

40: REPORT - M Squared Survey Reveals That Consultants Are Cautiously Optimistic

Annual Poll Also Finds No Consensus on Issue of Healthcare Reform

SAN FRANCISCO--(BUSINESS WIRE)--After a challenging 2009, professional consultants are cautiously optimistic about the business climate in 2010, according to the latest annual survey conducted by M Squared Consulting, the professional services firm that helps clients attain market leadership through the intelligent use of the high-end flexible workforce. The recent online survey attracted a record 1,600 responses from members of the M Squared Consulting network.

“The most dramatic change in our 2010 consultant survey results is that the overall economic forecast has shifted - guardedly but assuredly - back to a positive outlook”

LINK TO FULL ARTICLE: http://www.msquared.com/news/new_releases.html?bpid=265

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