Shares in Lancaster banking firm Sterling Financial Corp. fell more than 2.5 percent this morning after it postponed its 2007 annual shareholder meeting and said it expected to restate its financial statements from 2004 through 2006 because of financial irregularities at a commercial financing subsidiary. See story.
Tier Technologies Inc. is being investigated by the Philadelphia office of the Securities & Exchange Commission.
Last May, the Reston, Va.-based company received a subpoena requesting documents "related to financial reporting and personnel issues," the company said today in a filing with the SEC.
Tier Technologies, which offers business and financial processing software, said it's fully cooperating with the investigation. Last year, the company restated results from the 2002, 2003 and 2004 fiscal years after finding accounting errors. -- Jonathan Berr
For the head of a big bank, Vernon W. Hill has had an unusual problem lately -- finding new suppliers for the two million dog biscuits his pet-friendly Commerce Bank branches hand out in a year. Hill, a dog lover, has had to switch suppliers twice after recent recalls for contaminated wheat gluten. He said Monday that the current biscuits are "all natural and small, so the little ones can eat them, too." -- Harold Brubaker
It hasn't been a good year to be employed in the finance business in Pennsylvania. Jobs in the sector fell from 336,400 in April 2006 to 333,900 last month, a loss of 2,500. Maybe the bankers are moving to Jersey. Some 2,600 financial jobs were added there during the year, bringing Jersey's April payrolls to 282,900. Delaware also added financial jobs during the year, the U.S. Labor Department said. -- Jane M. Von Bergen
Beneficial Mutual Bancorp Inc. says in an SEC filing today that it's looking for even more takeover opportunities in New Jersey. Beneficial already has an agreement to buy the parent of Farmers & Mechanics for $183.2 million. (Most Farmers & Mechanices branches are located in Burlington County.) It calls acquisitions "a strategic objective" and says it "will continue to evaluate other opportunities" especially in the N.J. suburbs of Philadelphia. -- Jonathan Berr
Fox Chase Bancorp Inc. (Nasdaq: FXCB), a small Hatboro-based chain that emerged last June from regulatory supervision for unsound banking practices, reports its quarterly results in almost chastened tones today. Says president Tom Petro: “We have created a corporate culture where ethical behavior is expected and where men and women are expected to conduct themselves with integrity. We think that such a culture fosters candor and trust, and establishes a climate of doing the right things.” He says the chain has opened three branches and reduced problem loans. And its 2007 goal: “Shift from the much needed clean-up mandated by the Cease and Desist Order to growth and profitability." Amen. -- Thomas Ginsberg
The Economist this week has a decent roundup of changes stalking the world's major financial exchanges, including the Philadelphia Exchange. It notes that NASDAQ has been talking to the PHLX in its quest to open an options market.
Brian Campbell of West Chester is a director of First Chester County Corp., of West Chester, which owns First National Bank of Chester County. Separately Campbell is a vice president and co-owner of Beiler-Campbell Inc., a local real estate and appraisal firm. Now, according to First Chester's SEC disclosure today, Campbell's companies have begun doing business with each other. First Chester disclosed that, on May 8, its First National Bank of Chester County entered into a lease agreement with Beiler-Campbell for the lease of land in Kennett Square. (The site is on Route 1, in a shopping center being developed near Longwood Gardens.). The 10-year agreement provides for annual rent payments of $120,000 for the first five years, escalating over years 6 to 10 to $162,000. There also are three optional five-year renewal periods and one optional four-year period. The bank also paid Beiler-Campbell an $80,000 fee at the start of the lease. If all this seems cozy, make note of Beiler-Campbell's slogan on its website: "Serving the real estate needs of our friends and neighbors ...." In response to PhillyInc, Campbell, who joined the bank's board in January, said he had nothing to do with the selection of the Kennett Square site. He described himself as a partner in Beiler-Campbell. - Jonathan Berr
Sovereign Bancorp Inc. (NYSE: SOV), whose share price is down 10 percent so far this year, reports in an SEC filing today that a major shareholder, Meridian Capital Funding Inc., intends to sell up to 3.6 million shares of the bank. It says Meridian may sell at market prices or through privately negotiated deals. Sovereign won't receive any proceeds from the sale. - Jonathan Berr
For several years while working as a bank branch manager in Sicklerville, N.J., Susan Barrett of nearby Sewell allegedly helped herself to "hundreds of thousands" of dollars from a dead customer's account. This delicious little yarn in the Camden Courier Post today says Barrett pled guilty in federal court. But interestingly, she only pled to a "single count of stealing more than $1,000." The case was handled by U.S. Attorney Chris Christie.
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But just imagine if American automobile, electronic or clothing manufacturers had been successful in blocking competition from imports. Some manufacturing jobs would have survived. But the Philadelphia public would have lost by paying higher prices for less desirable merchandise. Competition is (ultimately) good for us all. Except, apparently, for bankers.
Wal-Mart's new plan is to expand the number of branches where it operates “financial service” centers from 225 to roughly 1000 stores by year-end 2008. Its MoneyCenters offer a limited variety of bank-like services such as check cashing, money orders and a prepaid debit card. Offering these services does not require a banking charter. Wal-Mart estimates it is offering these services at fees 25 percent to 50 percent less than competition and estimates they have saved consumers $450 each.
Just imagine the reduction in overdraft fees if Wal-Mart were to get a bank charter and offer checking accounts! The current $30 or so OD fee would surely be reduced. To $20 or even $15. This indeed would be competition for banks who make a bundle of money from customer mistakes and their need for ultra-short term credit until checks clear/paychecks are deposited. Preserving their monopoly on overdraft fees is indeed worth the fight for traditional American banks, at the expense of the Philadelphia consumer.
- Larry Jilk is a former Pennsylvania bank executive, who does not own stock in Wal-Mart but does own stock in several Philadelphia area banks.
Opinions expressed by contributors to PhillyInc are exclusively those of the contributors.
 Hill in 2005 with Duffy |
Commerce says replacing Hill will be:
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The Company has engaged in certain transactions with entities, which would be considered related parties. Payments for goods and services, including legal services, to these related parties totaled $340,000, $413,000 and $259,000, in 2006, 2005 and 2004, respectively. Management believes disbursements made to related parties were substantially equivalent to those that would have been paid to unaffiliated companies for similar goods and services.
Related party, as in InterArch? Impossible to tell, and no names of related partes are listed. Such a relationship with the parent firm in New Jersey underlied the ouster. InterArch's flashy flash web site, www.inter-arch.com, does not list or show any clients or properties in Harrisburg. Then again, it doesn't list anything about the spousal relationship among the owners, either, including the small share that InterArch itself held at one point in COBH itself. Stay tuned.
- Larry Jilk is a former Pennsylvania bank executive, who does not own any COBH or CBH but does own stock in several commercial banks headquartered in Pennsylvania.
Opinions expressed by contributors to PhillyInc are exclusively those of the contributors.
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Even in Philadelphia, which has not been a top destination for new immigrants this century, is the home to a plethora of banks serving a rapidly growing Asian community.
Continue reading "Commentary: Targeting immigrant depositers" »
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Here's the top of the Pennsylvania version (Download) of its press release:
Ryan has been CEO of Yardville, based in Hamilton, N.J., since 1992. He will receive a cash payment of $2.6 million "in settlement of any and all obligations and liabilities under his current employment agreement with Yardville and in consideration of restrictive covenants set forth in the agreement," according to the 8-K from June 6. Another $4.03 million is for "full settlement of any and all obligations and liabilities under any non-qualified deferred compensation plans, programs, or arrangements." Plus, he's getting $20,000 per month for a 12-month consulting gig with Yardville, uh PNC.
Ryan's departure isn't surprising. CEOs of acquired companies often don't stick around. Plus, Yahoo Finance pegs his age at 62, indicating he may be interested in retiring. The bank didn't return a phone call from PhillyInc.
He isn't the only Yardville executive doing well. F. Kevin Tylus, the bank's president, whom PNC is hiring as regional president of Hunterdon and Mercer Counties, will be getting a base salary of $330,750. And in January, he will be getting a cash payment of $1.6 million "in consideration of a covenant not to compete." There's also a "special payment" of $166,667 for compensation due to him under his existing contract with Yardville. And he's receiving a restricted stock grant in January valued at $2.45 million that will vest in three years. Yardville's first senior vice presidents, including Ryan's son, Patrick L., also have employment contracts with the bank that enable them to be eligible for severance equal to two times their highest salary.
Founded in 1925, Yardville has 33 branches in New Jersey and Pennsylvania. Filings for today's acquisition of Sterling should be available in the next week or so.
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Look at the facts: The FDIC shows that the top deposit-gatherers in the Greater Philadelphia area -- Philadelphia, Montgomery, Bucks, Chester, Delaware, Lehigh, Berks and Lancaster counties -- held a 52.92 percent market share as of June 30, 2002. In four years since then, these top five banks showed a more-than-respectable deposit share increase to 57.33 percent (as of June 30, 2006). Now with PNC's proposed acquisition of Bank of Lancaster County (the lead bank of Sterling Financial), these Big Five will control 58.45 percent of all deposits in these counties. That's a 10 pecent growth in their collective market share over five years. Here's the FDIC's percentage-share breakdown of the Big Five in Philly and the seven surrounding Pennsylvania counties:
From my perspective, that level of banking concentration in greater Philadelphia creates too much temptation on the part of the big boys to reduce deposit rates. Or to increase loan rates. Just a little, mind you, but changes nonetheless. I’m certainly not suggesting collusion! It’s just that banking options are seemingly getting concentrated, creating the opportunity for the Big Banks to test the price sensitivity of the marketplace. And if we’re not there now, based upon deposit trends, we soon will be.
I also wonder if there is a cost to this success for the big banks. The CEOs of the two best-performing banks over this period have recently left their employ: Jay Sidhu at Sovereign and Vernon Hill at Commerce, although for different reasons.
- Larry Jilk is a former Pennsylvania bank executive, who does not own any stock in the Big Five but does own stock in several commercial banks headquartered in Pennsylvania.
Stay tuned for more action at Harleysville National Corp. (Nasdaq:HNBC). An SEC filing last weel notes that John Eisele, exec v.p. of Harleysville National Bank as well as president of Millennium Wealth Management, their money management/trust operation, has entered a Separation Agreement with the bank dated July 19. This occurred just several days after a new CEO, Paul Geraghty, was appointed. More coming? Or a frustrated candidate for the CEO position?
This is the second change in the leadership of Harleysville’s Millenium Wealth Management in several years. David Sparks, former president of this business, resigned several years ago. Does this revolving chair suggest a problem in their trust operation?
Harleysville's recently announced earnings are put in a favorable spin, but profits for the second quarter 2007 were off 24 percent compared to the comparable 2006 quarter. Looks like Geraghty has his work cut out for him. Let the games begin!
- Larry Jilk is a former Pennsylvania bank executive, who own stock in several community banks including HNBC.
| CORRECTION: This post has been removed. We have learned that the American Banker article ($ req) on which it was based was erroneous. We are checking with the magazine to see whether it will run a correction. |
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So we too, as bankers, we must constantly ask ourselves: Are any of my products/services doing any harm to my customers or the local or global community, on a short or long term basis, even though the service/product is permitted by current laws or regulations? Does my bank have any skills/resources/processes that can reasonably be used for the betterment of my customers or the local or global community, on a short or long term basis, even though this activity is not legally or regulatorily required? Can my bank genuinely contribute to community betterment while still meeting its primary responsibility to shareholders -- to earn a respectable return on the equity entrusted to them?
To answer these questions, I suggest more banks establish a Corporate Responsibility Committee. Such a Committee might scrutinize a bank's practices in a variety of areas. For example:
These are just some of the ways a Corporate Responsibility effort can be helpful. But first a bank and its CEO must appreciate that laws and regulations are not the only limitations imposed on (or restraining) their companies in their never-ending struggle for ever-increasing profits. Banks and other businesses must recognize that they have responsibilities and limitations beyond the law or regulations. They must "do no harm' and "do good."
Hippocrates pledged this to "Apollo, Asclepius, Hygieia and Panacea." Should we pledge our God any less?
- Larry Jilk is a former Pennsylvania bank executive who owns stock in several banks.
The NYT chimed in today with its Vernon Hill wrap-up. The paper didn't get an interview with the ousted chief of Commerce Bancorp. But it does get N.J. politicos to describe Hill's place in the South Jersey empire of George Norcross. And it finds a few more digs, literally, at Shirley Hill.
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Here's why:
Continue reading "Commentary: Give me your tired, your under-banked" »
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SECRET No. 1: A bank advertises a high-rate money market account that truly is a good deal compared to competition. So you open a new account. Great! As months pass, the bank develops a large numbers of accounts in this high yielding money market category. Great again! Then the bank starts a new money market type of account slightly different from the type you’re invested in. Say it permits only four withdrawals per month. Or no interest on balances under $100. Or some other insignificant change. It pays the top rate on this new category to attract new customers and gradually reduces the rate on the money market category that you and thousands of others are invested in. As a result, after several months, you have an inferior yielding account although the bank is still offering an attractive rate on accounts to generate new business. And later still, when the new money market account has a large number of customers with large balances, tthe bank starts yet another money market category, say with e-statements only and, again, pays the top rate on this account while gradually reducing rates on its “old” money market categories.
After decades in banking, James J. Lynch, vice chairman of Sovereign Bancorp Inc., will walk away with $2 million in severance at the end of September, the Wyomissing bank disclosed in a regulatory filing today. As of June 25, Lynch, who gave up his job as chairman and CEO of Sovereign’s Mid-Atlantic division, took an annualized salary cut from $525,000 to $100,000, the filing said.
Parents, did you drop your children off at college this week? Feeling a little bit sad? Here's some news that will make you even more blue:
Business professionals are still paying off student loans -- with nearly one in five owing more than $50,000. Beyond.com, the King of Prussia company that runs niche job network sites, asked visitors across its network of 15,000 sites whether they still had students loans they were paying off. More than 3,100 visitors responded, and of those, about a third are still in debt.
Of those respondents with student loans, nearly 47 percent owe between $10,000 and $25,000, 31.69 percent owe $25,000 to $50,000, 19.06 percent owe more than $50,000, and 2.36 percent owe less than $10,000.
- Jane M. Von Bergen
Perhaps it was inevitable, but Vanguard Group and four other big money managers now have become the targets of a stepped-up divestment campaign aimed at ending the "genocide" in Darfur. A group called the Save Darfur Coalition (www.savedarfur.org), based in NYC, announced the second stage of its divestment campaign today. The other investment firms are Franklin-Templeton, J.P. Morgan Chase, Capital Group-American Funds and Fidelity Investments. The group says the aim is get the firms to withdraw their funds from companies doing business with Sudan "to exert financial pressure on the government of Sudan to change its policies and bring peace to the people of Darfur." We're putting in a call to Vanguard. A bunch of Inquirer and Daily News stories are here on Darfur and local divestment drives. More to come.
Pray for Gerald Cuddy. He runs Philadelphia’s newest public banking company, Beneficial Bank, which is also one of its oldest. And, believe it or not, it's now the largest Philadelphia based bank with over $3.5 billion in assets. Beneficial Bank was known as Beneficial Savings Bank until July 26, 2007. It was established in 1853 and has a most interesting history of serving the immigrant Irish population of Philadelphia.
Beneficial Bank's parent, Beneficial Mutual Bancorp (NASDAQ:BNCL) recently had a public offering of 44 percent of its stock to affect the acquisition of FMS Financial Corp. (NASDAQ:FMCO) of Burlington Township (owner of Farmers & Mechanics Bank of the same city) as well as add to its capital for additional expansion. So far so good!
However, looking at Beneficial’s recent performance, one can understand why the directors sold only 44 percent, thereby keeping the controlling interest to themselves: performance has been dismal. For the second quarter of 2007, the company reported earning $1.9 million, or a paltry annualized 2.72 percent on average equity. That compared with $2.4 million for the same quarter last year. You can earn more in a money market account. And for the first six months of 2007, it earned $3.7 million versus $5.2 million for the same period in 2006.
Continue reading "Commentary: Cuddy's conundrum at Beneficial" »
The Morning Call says today that Gene Sobol, the retiring CFO of KNBT Bancorp (NASDAQ:KNBT), which is selling itself to National Penn Bancshares Inc. (NASDAQ:NPBC) of Boyertown, stands to $1.4 million in lump-sum payments and $16,000 per month for up to 18 months to work as a consultant to National Penn. As a consultant, he also will get an automobile allowance of $900 per month and continued medical insurance coverage. The paper says the other KNBT executives getting a nice payday from the transaction include CEO Scott Fainor, who will stay to work at National Penn) and Executive Vice President Sandra Bodnyk, who also is staying at National Penn.
Back in June on the heels of Vernon W. Hill's ouster from Commerce Bancorp Inc., we pondered whether Pennsylvania Commerce Bancorp Inc. (NASDAQ: COBH) and/or its principal subsidiary, Commerce Bank/Harrisburg N.A, also somehow may have been involved in some of the transactions that lead of Hill's removal as CEO of Commerce Bancorp Inc. (NYSE:CBH) in New Jersey.
Well, it turns out the Feds may have had the same idea. Pennsylvania Commerce Bancorp Inc. announced two weeks ago in an SEC filing that the U.S. Office of the Comptroller of the Currency (OCC), the bank's federal regulator, is conducting an "investigation" of its subsidiary, Commerce Bank/Harrisburg, N.A. “that includes transactions related to (i) Bank premises, (ii) Bank officers and directors including their affiliates; and (iii) current and former officers and directors of Commerce Bank, N.A.” News story on the investigation is here.
That may or may not involve Hill, the former CEO of Commerce Bancorp. Inc. and/or his wife’s design firm, InterArch Inc. but it will be interesting to find out. Perhaps there is nothing amiss and the Feds simply want to spend some time in the Harrisburg area during fall foliage.
One good thing about our securities laws is that public companies are legally bound to disclose significant events affecting their business. Often we think the disclosure laws do not go far enough. But half a loaf is better than none at all.
Stay tuned.
- Larry Jilk is a former Pennsylvania bank executive, who does not own any COBH or CBH stock but does own stock in several commercial banks headquartered in Pennsylvania.
That's a Bryn Mawr home of Jack Bogle, founder of Vanguard Group Inc. and one of the most-admired CEOs (albeit former) in the Philadelphia area. It has recently gone up for sale at an asking price of $2.35 million, according to various listing services.
Is Bogle bugging out? Moving across town? Sensing an even bigger drop in the real estate market? We've put in a call to his office.
The home is known as the Jay Gates Residence, according to the Philadelphia Architects and Buildings web site. Here's the description of the house from Prudential Fox and Roach:
Located on one of the Main Line's most desirable and private lanes...this handsome stone & stucco colonial is a one-of-a-kind property. A blend of old and new with large inviting rooms, high ceilings and three fireplaces. Some special features include deep Jefferson windows and French doors, spacious eat-in Kitchen with large island and skylights. Adjoining the Kitchen is a magnificent Family Room with vaulted ceiling and large stone fireplace with raised hearth, first floor office and bright Playroom. Lovely terraces, 2 car Garage, circular drive and original 100 year old 'Smokehouse' complete this magnificent 1 1/2 acre estate.
And what does George E. Norcross III get from this Commerce-TD Bank deal? In the least, Commerce will be "negotiating" to sell its insurance division back to the South Jersey Democratic powerbroker, who had started and ran the division. Norcross is chairman and chief executive officer of Commerce Banc Insurance Services Inc. and is still a director on the Commerce board. The statement today said the side deal with Norcross is still "subject to the approval of TD Bank Financial Group." Commerce said the sale to Norcross was part of its effort to "take certain actions with respect to its balance sheet."
Vernon Hill had brought in Norcross to run Commerce Bank's insurance division. And Hill evidently played a very active role picking up the pieces and looking for a buyer after Hill's removal. "People who underestimate George Norcross make a lot of mistakes in life." That's how Orin Kramer, the investor and N.J. Democratic Party powerbroker and fundraiser (and chairman of New Jersey's state pension fund), reacted to the news of Norcross' deal in a conversation today with Joseph Distefano of The Inquirer.
O Canada
Our home and native land!
True patriot love in all thy sons command.
Thousands of bankers in Philadelphia and New Jersey may soon be learning the lyrics of their new owner's national anthem. Commerce Bancorp (NYSE:CBH) has signed an agreement to be purchased by TD Bank Financial Group (NYSE:TD), one of Canada's largest banking and financial companies.
From the Philadelphia region's perspective, this sale is probably good. It puts Commerce in the hands of some very deep-pocketed folk who can fund, if they wish, continued branch and employment expansion. It lets Commerce move past the era of Vernon Hill and any drag he may still have on the bank after his resignation. And, possibly most importantly, it gets the regulators out of the boardroom and leaves management time to manage.
But all that glitters is not gold. Both customers and employees will likely see new policies. And shareholders will be subject to a new risk: currency exchange risk. As a Canadian business with most of its earnings in Canadian dollars, TD Bank shareholders in the United State will see the value of their stock rise or fall in part based on exchange rates between the U.S. and Canadian dollars. And, as the Canadian dollar is near historic highs against the U.S. dollar, we may well expect to see some strengthening of the U.S. dollar in the years ahead, to the detriment of owners of Canadian businesses including TD Bank.
If I were a gambling man, I'd now keep an eye on Commerce's Pennsylvania look-alike bank, Commerce Bank/Harrisburg N.A. (NASDAQ:COBH). It may follow its parent and minority owner in joining with TD Bank. TD Bank will own 10.8 percent of Commerce/Harrisburg stock and 100 percent of its Series A preferred stock. And it's a logical direction for TD Bank to expand. Wait and see! Such a move would certainly be most welcome by many Pennsylvania regional banks who may be looking for a "sugar daddy" to buy them out and solve their credit, sub-prime mortgage, earnings and other challenges.
- Larry Jilk is a former Pennsylvania bank executive, who does not own any CBH or COBH but does own stock in several commercial banks headquartered in Pennsylvania.
For years the U.S. banking industry has been fighting the tax exemption enjoyed by credit unions. A recent report from the Treasury Department ($ sub required) suggests credit unions are avoiding paying some $19 billion in taxes each year.
Credit unions respond that if taxed they would have to decrease their savings and CD rates and increase their loan rates, both of which are generally more favorable than banks. This, they say, would negatively affect primarily the average Joe or Jane - the man or woman on the street. And credit unions argue that their presence in a community creates more competition for banks, forcing them to keep their loan rates and fees lower than they otherwise would.
Banks, in turn, argue that credit unions are exempt from the requirements of the Community Reinvestment Act (CRA) that requires banks to serve areas of the community that may not be fully profitable but do some societal good. Credit unions argue they work in the under-served marketplace on a daily basis.
Most credit unions are membership credit unions which are limited to serving individuals and their families who work for a particular company or institution. For their part, credit unions are lobbying for reduced membership requirements so they may serve anyone from a specific geographic area. And, not surprisingly, the banking industry is suing to prevent this liberalization of membership requirements.
Now the battle has gone to the Internet. Several sites have recently sprung up that show short videos showing the differences between banks and credit unions in a humorous fashion - naturally focusing on those areas credit union excel (low fees, etc) and emphasizing the perceived weaknesses of banks (greedy, corrupt, etc). The site www.bankerspank.com has several parody videos that take-off of the Mac/PC commercials. Here's one:
And the fight goes on. The Philadelphia area is indeed fortunate to have its share of credit unions that have done a wonderful job of helping the working person and his/her family. But $19 billion buys a lot of tanks and bullets. How will it all come out? It may take several decades. But at least we're getting some good video humor out of it along the way.
- Larry Jilk is a former Pennsylvania bank executive.
Beneficial Mutual Bancorp (NASDAQ:BNCL), parent of Beneficial Bank, has recently announced its intention to buy back 5 percent of its stock, subject to approval of its regulators. Remember, BNCL led by Gerald Cuddy had a stock offering several months ago in July 2007, where it sold 23,606,625 shares at $10 each.
Now why would a company pay legal and investment banking fees of a minimum of $3,716,000 and incur a substantial commitment of management time to sell shares, then just three months later start the process to buy some of them back? And not just a few shares, but a number equal to the maximum permitted by the Office of Thrift Supervision?
Continue reading "Commentary: Buyback Mystery at Beneficial" »
Well, listen to a story about a man named Vern ... as in Vernon Hill, founder and ousted chief of Commerce Bancorp (NYSE: TD). The Courier-Post reported today that Hill has gotten part of his large residential property in South Jersey declared farmland and has claimed roughly $60,000 in tax credits (his property tax bill was $270,331). What does he harvest? Roughly $1,000 per year in firewood. We'll give him a call.
The Atlanta Business Chronicle apparently got ahold of an internal memo from Wachovia Corp. (NYSE: WB) that details an executive shake-up, including the promotion of mid-Atlantic region CEO Hugh Long to north region CEO. A Wachovia spokeswoman confirms this to the Philadelphia Business Journal. It says Long will oversee Connecticut, New Jersey, New York, and Norfolk and Richmond, Va., in addition to current responsibilities in eastern Pennsylvania, Delaware, Maryland and Washington. Unclear who will succeed Long as mid-Atlantic CEO. Wachovia's current president of Greater Philadelphia and Delaware is William Knott.
Commerce Bancorp Inc., whose founder Vernon Hill was ousted in June, says in a preliminary proxy filing that suitors didn't exactly line up to buy it afterward. Only two got as far as stating a price they would pay, and only TD Bank Financial Group's $8.5 billion offer included a premium. The proxy also spells out the payday for executives who stick around for three years: bank chairman Dennis DiFlorio would get $7.63 million, bank chief executive officer Robert Falese would get $7.33 million, and insurance division chairman George E. Norcross III would get $7.59 million.
PNC Financial Services Group Inc. has jumped hard on the environmental bandwagon, and actually acquired a legal trademark for the name "Green Branch." This is a telling, though perhaps logical, result of environmentalism's new cache in corporate marketing and growth strategies. PNC announced the moniker last week to drive home its claim to have more numerous "certified environmentally friendly buildings than any other company on Earth." The bank said the U.S. Patent and Trademark Office granted its request because, essentially, it's a term few others would commonly use about a bank. At least in environmental terms. Plenty are named for green things (Valley Green Bank in Chestnut Hill, for instance.) Some color themselves green (Citizens Bank, for instance). But PNC went further, even if it couldn't grab the ultimate prize: "Green Bank" is a name already owned by Green Bancorp Inc. of Houston, says the trademark office.
It looks like the real estate mess is starting to hit the Philadelphia area. Royal Bancshares of Pennsylvania Inc. of Narberth, led by Joseph P. Campbell, announced about 10 days ago in an SEC filing that it is holding up releasing its third-quarter results pending a review of its loan portfolio. This doesn't look good. The company says that at a minimum it will take a $5.2 million charge related to an equity position in a condominium development (unknown which one). It says it also has hired an outside consultant to assist in evaluating its loan portfolio and determining a loan loss provision for the third quarter. Ugh!
Then the bad news hit RBPAA stock, which dropped 20 percent last week, although note that two insider directors, John M. Decker and Sam Goldstein, seemed to consider it a buying opportunity.
At first read, I was fearful the charges were related to Royal's newest banking subsidiary, Royal Asian Bank (Also, see story here about community banks). The company has two banking subs: Royal Asian Bank and Royal Bank America, the original Royal Bank. However, a review of the Sept. 30 FDIC's Call Report (enter "Royal Asian Bank, Philadelphia, Pa.") shows no delinquencies and no non-accruals. That's an unbelievably stellar record.
No, the problem seems to be at Royal Bank America, according to the FDIC Call Report (enter "Royal Bank America, Narberth, PA"). It notes: "Past Due Loans 30 days through 89 days and still accruing" in the construction, land development and other land loan category. It skyrocketed to $10,224,000 from a respectable $763,000 since just June 30 this year. Wow!
Hopefully this represents more than one deal. Royal Bank's legal limit is around $16 million, or 15 percent of its capital. So Royal could legally make a $10 million deal. But, as they say, that's a lot of eggs in one basket. I would hope this new loan problem represents several deals that just happened to go delinquent at the same time.
Certainly I can't tell why this happened, or the outcome of this situation. But I do think it's a harbinger of things to come at other Philadelphia area banks. Some of these banks have been pretty active in the real estate development market: good loan volume; good fees and good interest rates. Have they "reached" from time to time? Sure! In a vibrant economy delinquencies and losses were well controlled at Royal and most other banks. But in a weak real estate market?
I suspect over the next several quarters we will see large increases in real-estate related delinquencies, non-accruals and ultimately loan charge-offs. Unfortunately it's a sign of the times: tighter credit standards being applied to individuals who want to buy homes; higher gas and energy prices; difficulty in selling existing homes to upgrade; less consumer optimism and all that.
If I were at a credit desk today, I'd certainly want to upgrade my credit standards for new loans and try to tighten up some of my existing relationships. Things may soon get messy for Philadelphia-area banks with large construction and land loan portfolios. If you have any contrary or supporting thoughts, I'm all ears.
- Larry Jilk is a former Pennsylvania bank executive, who does not own any RBPAA stock but does own stock in several commercial banks headquartered in Pennsylvania.
Vernon W. Hill II is back in business. The ousted founder and ex-CEO of Commerce Bancorp Inc. is setting up a new private-investment firm in Chevy Chase, Md., to invest in mid-cap banks. His partner is Gary Townsend, former bank analyst at Friedman Billings Ramsey Group Inc. in Virginia, and a vocal Commerce fan whose deep voice could be counted on to ask some of the more understanding questions during Hill's often-tense quarterly earnings calls. They're calling the firm Hill-Townsend Capital (press release is here).
Will they be activist investors? "Vernon is long-term. That remains part of his thinking," Townsend told us. Yes, but will they push reluctant bank managers to shape up or sell out? "It's too early to say." Hill, who has a palatial home in Moorestown, couldn't be reached at his office. Bloomberg News notes that his stock holdings in Commerce (which has agreed to be purchased by Toronto-Dominion Bank) were worth roughly $177 million as of yesterday.
When small businesses fell behind on their Advanta Corp. credit cards in greater numbers than expected this fall, someone had to pay. It was Christopher J. Carroll, chief credit officer since 2001 at Advanta, which is run by Dennis Alter.
Carroll was gone as of last Thursday, Nov. 29, two days after the Spring House firm -- whose shares have fallen 72 percent in the last two months -- shocked investors by commenting that its effort to gauge trends in credit quality is a "guessing game." Carroll's replacement is Chad Blue, a 10-year Advanta veteran, the company said in an SEC filing.
The Financial Times of London ran a generally admiring profile yesterday of Vanguard Group CEO Jack Brennan. FT writer Deborah Brewster talks about Brennan's long-hours-at-work philosophy and his preference for yogurt in the cafeteria. It quotes him denying he uses a "General Electric-style" rating system for employee productivity. And it has this line about his personnel management and promotion system:
He favours promotion from within on the grounds that it reduces the risk of making recruitment mistakes, particularly if you know candidates well. "I've been here so long so that I have already identified most of the really good people. I have a practice where I will tap someone on the shoulder and they will work with me for 6 months. I will have an important project and I will have them work for me, I get to see them up close, to see how they think. It's a great way to get to know people."Another of his practices is to move managers systematically around the business. "Our former head of IT now runs our retail business. The man who runs marketing used to be our external institutional [sales] person. The man who ran Europe just came back to head internal audit. We want to round people out so they can be as effective as they can."
And it still gets voted best place to work. What's that tell you?
Robert E. Turner, chief of Turner Investment Partners Inc., gets big-league compensation, and then some. His firm's SEC disclosure for its IPO last month (we finally noticed it yesterday) says its founder will get $2 million in base salary plus a possible $4 million bonus. That $6 million would be a higher percentage of its total assets under management -- $27.6 billion -- than several bigger firms pay their chiefs.
Baltimore's Legg Mason Inc. has $1 trillion under management and is paying Raymond A. Mason about $13.7 million total. Janus Capital Group Inc. of Denver has $193.5 billion under management and pays Gary D. Black about $14.5 million. Pittsburgh's Federated Investors Inc. has $276 billion under management and pays J. Christopher Donahue about $3.6 million.
Turner's office says no comment.
Christopher J. Carroll quit as chief credit officer at Advanta Corp. just after Thanksgiving, replaced by Chad Blue. In an SEC filing yesterday, Advanta said it has agreed to give Carroll separation pay of $305,787 -- slightly more than a year's salary -- plus health insurance and job-hunting services. In return, Carroll cannot sue or bad-mouth Advanta.
This morning, Bank of America agreed to rescue Countrywide Financial from the widening hole that is the credit crisis. The huge Charlotte, N.C. bank says it will operate Countrywide as a separate brand so don't look for those loan origination offices to change nameplates.
The deal also won't affect Bank of America's rank as the sixth-largest in the Philadelphia area by local deposits. Countrywide, which holds a savings and loan charter, doesn't have deposits in the region.
Most shareholders won't come out ahead on this transaction. Certainly those who bought at Countrywide's 52-week high of $45.03 last February and held through the August global credit crisis won't be happy. But something (shares of Bank of America) is better than zero.
Another group not happy about the deal is the Service Employees International Union which calls it "bad for consumers, bad for business, and bad for America." Did they leave anyone out of that?
Don Gayhardt, president of Dollar Financial Inc. , will resign as of May 31.
The Berwyn operator of check-cashing stores said that Gayhardt, who's been an executive there since 1990, will be pursuing "opportunities in the private equity industry."
In a news release, Dollar Financial CEO Jeff Weiss says:
"While it is with great regret that we announced Don's resignation, I look forward to continuing to benefit from Don's counsel on company matters relating to corporate strategy, acquisitions, and regulation."
Weiss says he and Gayhardt built Dollar Financial from a small chain with $14 million in annual revenue to one with more than 1,400 locations and revenues of $409.9 million for its fiscal year ended June 30.
Gayhardt, who will also step down from the board of directors, will not be replaced. A filing with the SEC says that he will be paid "an amount equal to his base salary" and contribute to the cost of his health insurance premiums for one year.
According to Dollar Financial's most recent proxy statement, Gayhardt earned a salary of $475,000 for its most recent fiscal year.
Shares of Dollar Financial were down about 3 percent, or 84 cents, to $22.23 shortly after noon.
Investigations by the Office of the Comptroller of the Currency led the board of Commerce Bancorp Inc. to oust Vernon W. Hill II, its chairman and CEO last year, according to a federal lawsuit filed by Hill last week.
Now, the regulator who oversaw that investigation just got a promotion. Tim Long was named senior deputy controller for bank supervision policy. (He's succeeding a 42-year veteran of the agency who's retiring in April.)
Citibank opened its latest branch in Center City at 1211 Walnut St., its first this year in the Philadelphia region where it has 13 branches.
But a story in this morning's Wall Street Journal indicates parent company Citigroup Inc. is "abandoning a push to open as many as 100 branches a year in the U.S."
Why? The new top management isn't convinced Citibank can leapfrog competitors who have dominant shares in various markets. Philadelphia, the Journal says, could be one of the markets where Citibank retreats. Market leader Wachovia has 207 branches in Philadelphia area, while Bank of America has 117 branches.
Journal reporter David Enrich writes that Citigroup executives are:
... pleased with with Boston branches, but are less impressed with the Philadelphia experiment, according to one person familiar with the situation.
The news release from this morning's branch opening in Philadelphia quotes William E. Brown, Citibank's market leader here, as saying:
Philadelphia is a priority market for Citi and we are committed to expanding our presence here.
A call is in to a Citibank spokesman.
Denying a report in today's Wall Street Journal, the Citibank official in charge of the Philadelphia market says that the big bank is here to stay.
William E. Brown said in an interview this afternoon that Citibank, which has opened 21 full-service branches in the region in the last 15 months, is committed to Philadelphia.
"Citigroup recognizes this is a region that we want to be in," Brown said.
He would not specify how many branches the bank intends to open here in 2008, saying only that two branches are under construction: one in Doylestown and the other in Plymouth Meeting.
Citigroup executives have expressed "no disappointment with how the branches are performing," Brown said.
Vanguard Group captured the title of best-selling fund group for 2007.
Financial Research Corp., which tracks the mutual fund industry, calculated that the Malvern-based mutual fund firm attracted $76.2 billion last year, compared with $42.7 billion the year before.
Vanguard squeaked past American Funds, which saw $74.7 billion flow into its funds in 2007. In contrast, American Funds attracted $74.0 billion in 2006.
American Funds still has more assets than any other mutual fund family at $1.15 trillion at the end of December. Vanguard's assets totaled $1.08 trillion.
And what was Vanguard's best-selling fund last year? Investors poured $16.9 billion into its Total Stock Market Index fund. That fund had assets of $104.7 billion as of the end of December.
This being earnings season, there are a lot of investor conference calls held by management.
They tend to be very dry, even for reporters who love to dive into financial statements. The presentations by top managers is scripted, and the question-and-answer session often provides more questions than answers.
And the calls can be lengthy. Sometimes, we just wait for the transcript to be filed with the Securities and Exchange Commission.
So it brought a smile to read the last question of most recent call by National Penn Banchares Inc., of Boyertown. The following is an exchange by Michelle Debkowski, who handles investor relations for the bank, and Glenn Moyer, the bank's CEO:
Michelle Debkowski: Thank you, Mike and one last question for you, Glenn, who will win the Super Bowl?
Glenn Moyer: You know, there you are. This is the one that's closest, is a clear forward-looking statement, but I've got to go with perfection in New England, but it could be close.
You heard from the banking sector: The Patriots in a close game.
The only member of the Federal Open Market Committee to vote against Wednesday's 50-basis point cut in the federal funds rate was Richard W. Fisher, president and CEO of the Federal Reserve Bank of Dallas.
Fisher gave a speech in Philadelphia earlier this month at an event organized by the Global Interdependence Center. Yes, it was about monetary policy - all the rage now.
But he began with a nice anecdote about what Philadelphia and the Girard Trust means to him:
First, a word about Philadelphia. I spent a tad more than my Fed per diem last night and stayed at the Ritz Carlton at Broad and Chestnut. Before it became a hotel, that monumental building housed the old Girard Trust Company. True Philadelphians know the rock-solid financial legacy of Stephen Girard. In 1811, he bought the remaining shares in the First Bank of the United States and renamed it Girard's Bank. History footnotes Girard's Bank as the key financial backer of the U.S. during the War of 1812. According to one estimate, the value of Girard's net worth at his death in 1831 was roughly $2 trillion in today's dollars. Imagine: Girard made Warren Buffett look like a piker! He and his bank were so financially solid that the saying "In Girard we trust" was later morphed into the Girard Trust Company.
Not a day goes by without the financial sector being rocked by news involving write-downs, downgrades and defaults.
It was a relief to read Alfred P. West Jr.'s quote in Wednesday's earnings announcement for SEI Investments Co.:
We continue to be satisfied with the progress we are making, even in the face of difficulties created by the capital and credit markets.
West is the chief executive officer of the Oaks provider of automation systems to financial-services companies and transaction-processing services for money managers. His company was profiled in Monday's Business section.
All SEI did in 2007 was increase revenue 16 percent to $1.37 billion while its net income grew 10 percent to $259.8 million.
That net income was lowered by a $25.1 million charge related to two SEI-sponsored money market funds that owned securities issued by Cheyne Finance L.L.C. , a structured investment vehicle that was declared insolvent last fall.
So even a brush with some tainted collateralized debt obligations and mortgage-backed securities couldn't ruin SEI's solid year.
Last fall, Vernon W. Hill II set up a new private-investment firm in Chevy Chase, Md. with a former bank analyst.
Now, the founder of Commerce Bancorp Inc. has been named co-chairman of Bankstocks.com, a Web site started by a hedge fund manager. According to a post, Hill will be writing about the financial services industry for the Web site:
You may agree with Vernon or disagree with him - but you'll rarely fail to find his views thoughtful and provocative.
But apparently he'll be more than a "content provider." The post by Bankstocks.com co-founder Thomas Brown says that "Hill will apply his considerable enterpreneurial skills to help transform Bankstocks.com into the 'go-to' site for financial services executives and employees."
Brown positively gushes about Hill, calling him "perhaps the most successful and innovative banker of his time."
While he recounts "the Vernon Hill story" in the post, he omitted a chapter: Hill was ousted by the board of Commerce Bancorp last summer.
Reason No. 359 for why I love Form 8-K filings:
Ace Ltd. , the Bermuda-based insurer with major operations in Philadelphia, announced that its former CEO, Brian Duperreault, resigned from the board Jan. 29.
Old news, I know. But today Ace filed its 8-K on the announcement and it provides this morsel:
In connection with Mr. Duperreault's resignation, the Compensation Committee approved a cash severance payment to Mr. Duperreault in the amount of $4,950,000 as compensation for his past service to ACE Limited.
So not only did Duperreault get a new job - CEO of Marsh & McLennan Cos. Inc. - but also a nice parting gift. (Still waiting for Marsh to file its 8-K on what it's paying Duperreault.)
New blogger and veteran banker Vernon W. Hill II writes that he voted against the pending $8.5 billion acquisition of Commerce Bancorp Inc. by Toronto-Dominion Bank.
The deal was approved by Commerce shareholders Wednesday afternoon at a meeting at the bank's Commerce University in Mount Laurel at which lots of shareholders aired their concerns over the sale.
Hill, who did not attend the meeting, called the day "bittersweet."
On the one hand, we created a huge amount of value for our shareholders over the years. On the other, the magic of Commerce and the bond among its incredible team members and customers will soon begin to slowly fade away. Nothing, however, can take away our accomplishments and our legacy of reinventing of retail banking.
And he writes that he's been hearing about cost-cutting that Toronto-Dominion is planning "to chip away at the Commerce magic":
As T-D (whether it realizes it or not) transforms Commerce into just another bank, I'm afraid it might lose more in customer goodwill than it picks up in savings.
Hill joined the Bankstocks.com Web site as both a co-chairman and a contributing writer in January. And it doesn't look like this will be his last word on the bank he founded in 1973. The banking blog intends to maintain a "Commerce Watch" on its site.
As big as it is, Citigroup Inc. probably does a lot of deals all over the world that barely make a ripple outside of the trade press.
Last month, it bought a small company that has the kind of Philadelphia story we don't hear enough of.
Citigroup acquired a Bala Cynwyd company called PayQuik, which has developed a money transfer system that banks and other financial services firms use to allow customers to transfer money internationally.
PayQuik is focused on remittances, the payments by migrants to families back home - Latin America, India, China, wherever home is. Migrants' options typically are to send the money with someone traveling to their hometown, use a money transfer service such as Western Union or MoneyGram, or go to a bank.
In 2006, 150 million migrants worldwide sent more than $300 billion to their families in developing countries, according to research commissioned by the International Fund for Agricultural Development. One analyst projects that figure could grow to $500 billion by 2010.
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