e425
Filed by The Toronto-Dominion Bank
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934
Subject Company: The South Financial Group, Inc.
Commission File No.: 0-15083
This filing, which includes communications made available to employees of The Toronto-Dominion
Bank and/or TD Bank, Americas Most Convenient Bank on May 24, 2010, May 25, 2010, May 27, 2010 and
May 28, 2010, may contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and comparable safe harbour provisions of applicable Canadian
legislation, including, but not limited to, statements relating to anticipated financial and
operating results, the companies plans, objectives, expectations and intentions, cost savings and
other statements, including words such as anticipate, believe, plan, estimate, expect,
intend, will, should, may, and other similar expressions. Such statements are based upon
the current beliefs and expectations of our management and involve a number of significant risks
and uncertainties. Actual results may differ materially from the results anticipated in these
forward-looking statements. The following factors, among others, could cause or contribute to such
material differences: the ability to obtain the approval of the transaction by The South Financial
Group, Inc. shareholders; the ability to realize the expected synergies resulting from the
transaction in the amounts or in the timeframe anticipated; the ability to integrate The South
Financial Group, Inc.s businesses into those of The Toronto-Dominion Bank in a timely and
cost-efficient manner; and the ability to obtain governmental approvals of the transaction or to
satisfy other conditions to the transaction on the proposed terms and timeframe. Additional
factors that could cause The Toronto-Dominion Banks and The South Financial Group, Inc.s results
to differ materially from those described in the forward-looking statements can be found in the
2009 Annual Report on Form 40F for The TorontoDominion Bank
and the 2009 Annual Report on Form 10K of The South Financial Group, Inc. filed with the Securities and Exchange Commission and
available at the Securities and Exchange Commissions Internet site (http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial
Group, Inc. will be submitted to The South Financial Group, Inc.s shareholders for their
consideration. Shareholders are encouraged to read the proxy statement/prospectus regarding the
proposed transaction when it becomes available because it will contain important information.
Shareholders will be able to obtain a free copy of the proxy statement/prospectus, as well as other
filings containing information about The TorontoDominion Bank and The South Financial Group,
Inc., without charge, at the SECs internet site (http://www .sec.gov). Copies of the proxy
statement/prospectus and the filings with the SEC that will be incorporated by reference in the
proxy statement/prospectus can also be obtained, when available, without charge, by directing a
request to The Toronto-Dominion Bank, 15th Floor, 66 Wellington Street West, Toronto, ON
M5K 1A2, Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc.,
Investor
Relations, 104 South Main Street, Poinsett Plaza, 6 th Floor, Greenville, South
Carolina 29601, 1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on December 03, 2009,
and in its notice of annual meeting and proxy circular for its 2010 annual meeting, which was filed
with the Securities and Exchange Commission on February 25, 2010. Information regarding The South
Financial Group, Inc.s directors and executive officers is available in The South Financial Group,
Inc.s proxy statement for its 2010 annual meeting, which was filed with the Securities and
Exchange Commission on April 07, 2010. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by security holdings or
otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available.
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES
OF THE TORONTO-DOMINION BANK ON MAY 28, 2010
1. The bar set high, big banks fail to clear it The Globe and Mail
Canadas banks are suffering from the burden of great expectations. Financial results from four of the six big Canadian
banks Thursday suggest that the North American economy has begun to improve. The clearest sign: consumers and businesses
are doing a better job of keeping up with loan payments, allowing the banks to significantly reduce the amount of money
they set aside to cover bad debts and report sharply higher profits than a year ago. Ed Clark, Bharat Masrani and Tim
Hockey quoted. See full story
2. VIDEO CLIP: BNN Headline Business News Network
BNN speaks with TD Banks CFO Colleen Johnston about the banks latest earnings and acquisitions. See link to video
3. Canadas Banks in the Black - Robust Economic Growth Helps Pare Loss Provisions, but Weaknesses Remain The Wall Street
Journal
Canadas banks drew on the countrys strong economic performance to post another quarter of good results. They also said
they had minimal exposure to European nations and financial institutions. Ed Clark quoted. Similar articles in National
Post, The Toronto Star, The Courier Post (Cherry Hill, NJ), and from Bloomberg, The Canadian Press, CBC, and Reuters. See
full story
4. RBC SET FOR NEW RULES: NIXON; CIBC and Royal profits fall short of estimates National Post
Gord Nixon, chief executive of Royal Bank of Canada, said its still too early to predict what the new global financial
rules being mulled over by governments and regulators around the world will ultimately look like or how they will affect
banks market values. But whatever happens, he said he is confident that Canadas largest bank will be better able to cope
with the changes than its peers. TD mentioned. See full story
5. Canadian banks: Go big or go home Fortune
With many of their rivals on the ropes, Canadas major banks are nicely positioned to catapult into the top tier of U.S.
financial institutions for the first time ever. TD mentioned. See full story
6. Banques: des profits en hausse, mais pas assez [Banks: profits up, but not enough] La Presse
Très bien, mais pourrait faire mieux. Cest ainsi que se lit le bulletin du deuxième trimestre de la Banque Royale, de la
CIBC et de la TD, qui ont toutes les trois rapporté hier des profits inférieurs aux attentes. [Very good, but could do
better. Thus reads the entry of the second quarter of Royal Bank, CIBC and TD have all three reported yesterday a profit
below expectations.] See full story
7. Résultats trimestriels Les banques ont fait plus de profits, sauf la Nationale, dont les bénéfices stagnent [Quarterly Results Banks have more profits, but the National, whose profits stagnate] Le
Devoir
La Banque Nationale se retrouve à la traîne de son industrie, avec des profits en définitive inchangés au deuxième
trimestre. Cette relative stationnarité détonne avec la forte poussée observée dans les résultats des autres banques.
[National Bank finds itself lagging behind the industry, with profits relatively unchanged in the second quarter. This
relative stagnation clashes with the surge observed in the results of other banks.] See full story
8. Flaherty reins in online insurance promotion by banks; Level playing field; Insurance brokers say move protects, empowers consumers
National Post (Canwest)
Finance Minister Jim Flaherty said yesterday he will tighten regulations to limit the ability of Canadian banks to sell
insurance online. See full story
9. Divesting Quebec National Post
The federal government has introduced a draft bill in the House of Commons for the establishment of a Canadian securities
regulator. We are opposed to this bill. In our opinion, the bill is unnecessary in light of the effectiveness of the
current framework administered by the provincial regulators. As well, we believe it would have a negative impact on the
financial sector, issuers and economic activity in certain regions of the country, including Quebec. See full story
10. A national regulator, not a federal one National Post
Sir John A. Macdonald borrowed the phrase which says it best: Less is more. Governments would do well to practice such a
wise adage, especially when it comes to securities regulators. Do 33 million Canadians really need 13 securities
regulators? Pierre Lortie argues that we do (A Federal Travesty, May 21). Written by Jim Dinning, Albertas treasurer from
1992-97. See full story
11. Commission unique : Flaherty reçoit quelques appuis [Single regulator: Flaherty receives some
support] Finance et investissement
La commission unique soulève les passions depuis quelques semaines et le gouvernement fédéral reçoit finalement quelques
appuis de la part de la communauté financière canadienne après avoir déposé hier son projet de loi sur la question. [The
single commission has raised passions in recent weeks and the federal government finally received some support from the
Canadian investment community yesterday after tabling a bill on the issue.] See full story
12. Investment Fund Suing for $61 Million Lost in Rothstein Scheme Daily Business Review
An investment fund claiming a $61 million loss in Scott Rothsteins phony settlement financing scheme is suing the
convicted felon and TD Bank, claiming the money disappeared in the final two months before the fraud came crashing down.
Rebecca Acevedo (Corporate and Public Affairs, TD Bank) quoted. See full story
13. CIBC equity issuance picking up The Globe and Mail (Streetwise blog)
The second quarter was one of the weakest that CIBC has had when it comes to new-issue equity finance, Richard Nesbitt,
the head of CIBC World Markets, told analysts on Thursday. See full story
14. Visas PayWave catching on in Canada Contactless News
Visas contactless payWave system has seen steady growth in Canada as more and more merchants implement the new payment
technology. TD Canada Trust mentioned. See full story
15. Province may curb free drugs for seniors; The Toronto Star
Ontario is open to tinkering with drug co-payments for seniors and others on taxpayer-funded pharmacare programs as it
looks for ways to curb the rapidly increasing cost of health care, Health Minister Deb Matthews says. Similar articles
appear in The Globe and Mail, Ottawa Sun, Winnipeg Free Press, and CBC. Don Drummond and Derek Burleton (TD Economics)
mentioned. See full story
16. Editorial: Health budget unsustainable The Toronto Star
When asked whats most important to them, Ontarians routinely rank health care at the top of their list. It is
frightening, then, to learn that spending on our health-care system is growing at an unsustainable rate. TD Economics
mentioned. See full story
Looking for TDs view on articles about the bank or the financial industry? Visit TD News & Views for background on some
stories of the moment that may come up in your discussions with customers, colleagues and friends.
Vous cherchez des opinions et des articles de la TD au sujet du secteur bancaire ou financier? Visitez Nouvelles et
Opinions de la TD pour y trouver de linformation sur certains sujets dactualité qui peuvent être évoqués dans vos
discussions avec des clients, des collègues et des amis.
Full Stories
1. The bar set high, big banks fail to clear it
The Globe and Mail
05/28/2010
TARA PERKINS and GRANT ROBERTSON
Pg. B1
Canadas banks are suffering from the burden of great expectations.
Financial results from four of the six big Canadian banks Thursday suggest that the North American economy has begun to
improve. The clearest sign: consumers and businesses are doing a better job of keeping up with loan payments, allowing the
banks to significantly reduce the amount of money they set aside to cover bad debts and report sharply higher profits than
a year ago.
But the bar was set so high that it wasnt enough to impress the markets, as three of the countrys major lenders missed
analysts profit estimates because of lower revenues and a stronger Canadian dollar, which cut into the profitability of
their foreign operations.
The biggest miss came from the largest bank, Royal Bank of Canada . Its shares dropped 4.4 per cent to close at $56.85 on
an otherwise strong day for stock markets. Canadian Imperial Bank of Commerce also took a pounding, with its stock falling
4.3 per cent to $72.02.
On balance they were disappointing, John Kinsey, a portfolio manager at Caldwell Securities, said of the results from
RBC, CIBC and Toronto-Dominion Bank. Going forward its going to be a good year for them, but not what we thought after
the first quarter.
Investors viewed TDs results as more benign than its counterparts, only taking 0.8 per cent off of its stock price
Thursday. National Bank of Canadas results were in line with expectations.
On the whole, more borrowers are making their payments and the banks provisions for credit losses came in much lower than
forecasts. RBCs provision for credit losses of $504-million was 48 per cent lower than a year ago. TD noted that its
newly impaired loans, a leading indicator of future performance, were down in all of its lending portfolios.
Even in the United States, the market appears to be stabilizing, said Bharat Masrani, the head of TDs U.S. bank.
When a loan goes into workout mode to be dealt with, theres a higher likelihood a solution will be found quickly, he
said.
We have been surprised by the speed of the improvement in the United States, added TD chief executive officer EdClark.
Were more optimistic about the economy on both sides of the border.
And even though the specific amount that CIBC set aside to deal with losses in its credit card portfolio was higher than a
year ago, it fell from the first fiscal quarter, thanks to fewer consumer bankruptcies.
Credit card loans are among the riskiest loans banks can make to consumers and CIBC has the largest Canadian credit card
business.
Sonia Baxendale, the head of CIBCs Canadian lending business, told analysts the bank tried to hold the size of
that business steady over the past few quarters but will now resume a small amount of growth.
Despite the signals that the lending business is healing, the banks did inject a note of caution into their commentary.
TD, for instance, warned that even though the expected rise in interest rates should lift profit margins in its Canadian
personal and business lending business, stiff competition on loan prices will lead to more moderate revenue growth.
And a number of bankers pointed out that mortgage growth should soften later this year as rates head higher. The head of
TDs Canadian lending business, Tim Hockey, said he thinks house prices could fall a bit next year.
On the capital markets side, trading revenues were below expectations. Trading revenue has been one of the key items
keeping bank profits afloat through the financial crisis, with the banks taking advantage of volatility in markets to make
significant money trading in areas like fixed income.
Bank of Montreal posted strong trading revenue Wednesday, giving analysts hope that the sector will be able to sustain
this new revenue.
But Thursdays results argue that might not be the case.
***********
How they fared
|
|
|
|
|
|
|
2010 |
|
2009 |
|
|
|
|
|
Revenue |
|
$2.9-billion |
|
$2.2-billion |
Profit |
|
$660-million |
|
($51-million) |
EPS |
|
$1.59 |
|
(24) |
Loss prov. |
|
$316-million |
|
$394-million |
ROYAL BANK OF CANADA
|
|
|
|
|
Revenue |
|
$6.97-billion |
|
$6.76-billion |
Profit |
|
$1.33-billion |
|
($50-million) |
EPS |
|
88 |
|
(7) |
Loss prov. |
|
$504-million |
|
$974-million |
TORONTO-DOMINION
|
|
|
|
|
Revenue |
|
$4.77-billion |
|
$4.32-billion |
Profit |
|
$1.18-billion |
|
$545-million |
EPS |
|
$1.30 |
|
59 |
Loss prov. |
|
$365-million |
|
$772-million |
NATIONAL BANK OF CANADA
|
|
|
|
|
Revenue |
|
$1.1-billion |
|
$1-billion |
Profit |
|
$261-million |
|
$241-million |
EPS |
|
$1.50 |
|
$1.41 |
Loss prov. |
|
$36-million |
|
$41-million |
Return to Top
2. VIDEO CLIP: BNN Headline
Business News Network
05/27/2010
To play clip in a separate window, click here.
Program: Headline
Station: Business News Network
Date: 5/27/2010
BNN speaks with TD Banks CFO Colleen Johnston about the banks latest earnings and acquisitions.
Return to Top
3. Canadas Banks in the Black - Robust Economic Growth Helps Pare Loss Provisions, but Weaknesses Remain
The Wall Street Journal
05/28/2010
CAROLINE VAN HASSELT
Pg. C2
Canadas banks drew on the countrys strong economic performance to post another quarter of good results. They also said
they had minimal exposure to European nations and financial institutions.
Royal Bank of Canada, the countrys largest bank by assets, and Canadian Imperial Bank of Commerce, the fifth biggest,
recorded profits in the second quarter after year-earlier losses. Toronto-Dominion Bank, ranked No. 2, said profit more
than doubled on strength in its domestic consumer bank and a 55% increase in earnings from its U.S. operations.
Record-low interest rates continued to spur consumer loans and mortgages. Canadas robust economy, on pace to grow 5.5% in
the first quarter, helped banks trim loan-loss provisions and supported them in weaker areas, such as capital-markets
activity and trading. Still, the weak spots led to the banks missing expectations, hurting their shares.
The results are still good but not as good as expected, said Todd Johnson, a portfolio manager at BCV Asset Management
Inc. in Winnipeg. Its just when you set yourself up by consistently beating expectations, eventually when you miss,
people will hit the sell button.
Royal Bank earned C$1.33 billion, or 88 Canadian cents a share. Per-share core cash earnings were 96 Canadian cents, well
short of the Thomson Reuters mean estimate of C$1.09. Revenue rose 3% from a year ago, but
declined 5% from the first quarter. Loan-loss provisions were C$504 million compared to C$974 million.
Profit in Canada rose 27%, while in the U.S., where it owns Raleigh, N.C.-based RBC Bank, it earned C$38 million versus a
year-earlier loss of C$1.24 billion. Trading revenue dropped 49% from a year earlier and fell 36% sequentially, as global
banks, having repaired their balance sheets with taxpayers money, returned to the markets. Profit from its
wealth-management business fell 29% from an accounting issue related to currency conversion. Excluding the accounting
issue, profit rose 20%.
CIBC had net income of C$660 million, or C$1.59 a share. Adjusted cash earnings, a non-GAAP measure, came in at C$1.46 a
share, below the C$1.50 mean estimate. Revenue rose 35% from a year earlier on loan and wealth-management fees, although
capital-markets revenues fell 18%. Loan-loss provisions declined 20%.
TDs profit more than doubled to C$1.18 billion, or C$1.30 a share. Revenue rose 10% from a year ago, but declined 5% from
the first quarter.
The bank, which recently acquired three failed Florida banks and last week agreed to buy Greenville, S.C.-based South
Financial Group Inc. to expand its U.S. footprint, lowered its provisions for U.S. credit losses by 37%. Were getting
lots of good signs out of the U.S., said TD Chief Executive Ed Clark.
Return to Top
4. RBC SET FOR NEW RULES: NIXON; CIBC and Royal profits fall short of estimates
National Post
05/28/2010
JOHN GREENWOOD
Pg. FP1
Gord Nixon, chief executive of Royal Bank of Canada, said its still too early to predict what the new global financial
rules being mulled over by governments and regulators around the world will ultimately look like or how they will affect
banks market values. But whatever happens, he said he is confident that Canadas largest bank will be better able to cope
with the changes than its peers.
The ones likely to have biggest impact are the new capital requirements being laid out under the Basel process.
Speaking on a conference call with analysts yesterday, Mr. Nixon said he thinks Royal is extremely well-positioned
relative to whatever those rules might be and that the bank will likely be able to pass on to its customers many of the
costs associated with meeting the new standard.
And in the United States where major rule changes are imminent, Mr. Nixon said he is pretty comfortable that Royal can
manage around the changes so they wont have a significant impact on the banks operations.
But some observers are questioning whether the push for international regulatory reform will even go ahead now that the
world is dealing with a new crisis around European debt.
Im beginning to think that the Basel overhaul may be pushed out, said Darko Mihelic, an analyst at Cormark Securities.
Banks around the world that lent money to Greece, Spain and other so-called Club Med countries are likely facing
significant losses over the next few years. Forcing them to cope with new regulations at the same time would not make a
lot of sense politically or from a regulatory perspective, Mr. Mihelic said, adding that delaying the rule
update would be the only logical thing to do.
The comments came the same day Royal, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank reported second-quarter
results that fell short of analyst estimates.
Overall we view these as disappointing results ... especially from RBC, and to a lesser extent TD, said Brad Smith, an
analyst at Stonecap Securities. They are particularly disappointing given the strong outperformance we saw from Bank of
Montreal yesterday.
For the three months ended April 30, RBC had net income of $1.329-billion, or 88 a share, compared with a loss of
$50-million (7) as the bank took a $1-billion goodwill impairment charge related to its U.S. operation.
Core cash earnings per share, which include the amortization of intangibles, came in at 94. Analysts were expecting a
per-share profit of $1.09, according to Thomson Reuters I/B/E/S.
Shares in RBC fell $2.62, the largest drop in 10 months, ending the session at $56.85.
CIBC had a profit of $660-million ($1.59) compared with a loss of $51-million (24) in the same period last year. Adjusted
earnings of $1.46 a share missed consensus analyst expectations of $1.50 a share, according to a survey by Thomson
Reuters. It was the CIBCs biggest profit since the fourth quarter of 2007.
TD posted net income of $1.176-billion ($1.30) compared with $545-million (59) in the same year-ago period. Analysts had
expected profit of $1.38 a share, according to Thomson Reuters.
Expectations for a breakout quarter were fuelled partly by U.S. banks results that benefitted greatly from strong trading
revenue. But Canadian banks did not follow suit and they were also affected by the volatility in the Canadian
dollar.
Return to Top
5. Canadian banks: Go big or go home
Fortune
05/28/2010
ERIK HEINRICH
With many of their rivals on the ropes, Canadas major banks are nicely positioned to catapult into the top tier of U.S.
financial institutions for the first time ever.
The main reason is that the countrys banks famously skated through the subprime and derivatives meltdown of 2008 with no
government bailouts and comparatively few writedowns. As a result they replaced their Swiss rivals as the international
standard for banking excellence and readied themselves for cherry-picking the best assets in the distressed banking
industry south of the border.
On the surface, it looks like theyre on a U.S. buying spree. Since mid-April, three major Canadian banks TD Bank
Financial Group, Bank of Montreal (BMO) and Bank of Nova Scotia have collectively acquired six failed U.S.
institutions. All the acquisitions were cautiously negotiated with the U.S. Federal Deposit Insurance Corp. (FDIC), which
is taking on a heavy share of the potential loan losses.
But critics say the Big Five are playing it too safe, content to remain third- and fourth-string players in the U.S.
markets where they operate, when they should be aiming for the No. 1 spot. If ever there was a time to do it, its
now, but Canadian banks dont seem to have the nerve to bust out and become truly global players.
That kind of reticence from the boardroom could be fatal for the future of Canadas major banks, who run the risk of
growing stagnant behind cushy domestic regulations that make it impossible for foreign rivals to compete on an equal
footing. Consider that the six recent acquisitions add up to a mere US$22 billion in new assets for the buyers. Thats
about 1% of total assets for these pillars of Torontos Bay Street little more than a token gesture to make it seem
Canadas banks are not entirely asleep at the wheel.
Analyst Michael Goldberg with Toronto-based Desjardins Securities agrees the U.S. market offers a rich opportunity for
Canadas super-capitalized banks. TD in recent years has been most aggressive in building its U.S. franchise, he says.
But reaction has been mixed. Some investors are very skeptical anytime Canadian companies buy anything in U.S.
Earlier this month, TD Bank (TD) acquired South Financial Group for US$61 million, adding more than 100 branches to its
1,000-plus locations in the Maine-to-Florida corridor. This follows on the heels of buying three small Florida-based
institutions closed by regulators.
BMO (BMO), which bought assets of failed Illinois lender Amcore Bank, adds 52 branches in Illinois and Wisconsin, building
on an existing network of 288 branches at its Harris subsidiary. Toronto-based BMO made its big U.S. push with its C$718
million (US$682.1 million) acquisition of Harris in 1984. It has since spent about C$2.5 billion (US$2.4 billion) buying
U.S. banks, but only reached the No. 3 spot in Illinois by deposits.
Scotiabank (BNS) is the third Canadian lender to take advantage of U.S. government-assisted acquisitions, snapping up R-G
Premier Bank of Puerto Rico, building on the 17 branches it already has on the Caribbean island. However rival Banco
Popular de Puerto Rico acquired the deposits of Westernbank at the same time, securing its position as the largest insured
bank on the island, despite the fact that Scotiabank has been doing business in tiny Puerto Rico for 100 years.
Canadas big banks can afford to casually dabble in foreign markets because their domestic operations are reliable
money-making machines that deliver billions of dollars in profit quarter after quarter.
But those profits come at the expense of Canadian consumers and small businesses, poorly served by a clubby group of banks
whose domestic operations are perhaps the least competitive in the Organization for Economic Co-operation and Development
(OECD), an international group of 31 developed countries, including the U.S., Australia and South Korea, with free-market
economies.
If Canadas major banks are not prepared to go big in the U.S., they should just pull stakes and go home.
Return to Top
6. Banques: des profits en hausse, mais pas assez [Banks: profits up, but not enough]
La Presse
05/28/2010
HÉLÈNE BARIL
Très bien, mais pourrait faire mieux. Cest ainsi que se lit le bulletin du deuxième trimestre de la Banque Royale, de la
CIBC et de la TD, qui ont toutes les trois rapporté hier des profits inférieurs aux attentes.
Malgré dexcellents résultats liés à lamélioration des conditions économiques, deux des trois institutions financières
ont vu leurs titres dégringoler en Bourse à cause de la déception du marché.
À tout seigneur, tout honneur, cest la Banque Royale, plus importante des banques canadiennes, qui a souffert le
plus. Il faut dire que la Royale déçoit les attentes du marché pour le deuxième trimestre consécutif. Son titre était en baisse de
plus de 4% après la publication des résultats. Il a fini à journée à 56,86$, en baisse de 2,64$.
La Royale affiche un profit de 1,33 milliard pour le deuxième trimestre terminé le 30 avril, comparativement à une perte
de 50 millions pour la période correspondante de lan dernier. En 2009, les résultats avaient été affectés par une charge
spéciale de 1 milliard liée aux activités de la banque aux États-Unis.
Le bénéfice net par action est de 96 cents, alors que les analystes consultés par Bloomberg attendaient 1,08$. Les
provisions pour pertes sur prêts sont en baisse de 48% par rapport à lan dernier. La force du dollar canadien, qui a
réduit le bénéfice des activités américaines, a toutefois affecté les résultats, a fait savoir la direction de la Royale.
Banque TD
La Banque TD, de son côté, rapporte une hausse de son profit net de 545 millions lan dernier à 1,18 milliard. À 1,36$ par
action, le profit net est tout de même inférieur de 4 cents à ce que prévoyaient les analystes. Les activités de détail au
Canada ont été très rentables, avec un profit record de 761 millions, en hausse de 29%, mais la force du dollar a réduit
la rentabilité des activités de détail aux États-Unis de 55 millions.
La TD a aussi réduit ses provisions pour pertes de 772 millions il y a un an à 365 millions.
Laction de la Banque TD, après avoir pris une tendance à la baisse, a gagné 57 cents pour clôturer à 73,37$.
La CIBC affiche un profit de 660 millions au deuxième trimestre, son profit le plus élevé depuis le quatrième de 2007.
Lan dernier à pareille date, la banque avait déclaré une perte de 51 millions.
Malgré cette amélioration, le profit par action de 1,46$ est inférieur aux attentes des analystes, qui tablaient sur
1,49$. Le titre de la CIBC a perdu 3,27$ dans la journée dhier, soit 4,34%, à 72,02$.
La bonne tenue de léconomie canadienne, et le rétablissement de léconomie américaine, expliquent lamélioration des
résultats des banques. La croissance de léconomie canadienne a été de 5,4% au premier trimestre.
Mercredi, la Banque de Montréal a surpassé les attentes du marché avec des profits qui ont plus que doublé au deuxième
trimestre. La Banque Laurentienne, pour sa part, a rapporté une augmentation de 36% de sa rentabilité.
La Banque Scotia, la seule des sept principales banques canadiennes à ne pas avoir publié ses résultats du deuxième
trimestre, le fera la semaine prochaine.
Return to Top
7. Résultats trimestriels Les banques ont fait plus de profits, sauf la Nationale, dont les bénéfices stagnent
[Quarterly results bank
Le Devoir
05/28/2010
GÉRARD BÉRUBÉ
La Banque Nationale se retrouve à la traîne de son industrie, avec des profits en définitive inchangés au deuxième
trimestre. Cette relative stationnarité détonne avec la forte poussée observée dans les résultats des autres banques.
La Nationale a mis un terme à son deuxième trimestre, clos le 30 avril, avec un bénéfice net de 261 millions (1,50 $ par
action), contre 241 millions (1,41 $ laction) au trimestre correspondant de 2009, produisant un rendement sur fonds
propres de 18% . En excluant les éléments particuliers, comprenant essentiellement des charges liées aux papiers
commerciaux adossés à des actifs (PCAA), le bénéfice du deuxième trimestre de 2009 se situe à 261 millions.
Après six mois, le bénéfice de la BN atteint 476 millions (2,72 $), contre 310 millions (1,77 $ laction) un an plus tôt.
En excluant les éléments non récurrents, le bénéfice net du premier semestre de 2010 sétablit à 529 millions, contre 514
millions. Les éléments particuliers renferment notamment une sanction administrative de 75 millions liée aux PCAA, ainsi
quun engagement de crédit envers les clients détenant du PCAA de 86 millions, peut-on lire dans les états financiers de
linstitution.
À titre de comparaison, la Banque Royale a annoncé hier un bénéfice net de 1,33 milliard (88 ¢ par action),
comparativement à une perte de 50 millions au deuxième trimestre de 2009. Ce dernier résultat renfermait une charge pour
dépréciation de lécart dacquisition de 1 milliard dans le segment Services bancaires internationaux.
La Banque Royale a inscrit un rendement sur fonds propres de 15,8% et souligné que la vigueur du dollar canadien a eu un
impact négatif sur ses revenus et ses bénéfices, particulièrement dans les secteurs des marchés de capitaux et de la
gestion de patrimoine, en produisant une baisse de revenus de 534 millions et un recul du bénéfice net de 82 millions. En
revanche, une amélioration de la qualité du crédit explique que la dotation à la provision pour pertes sur créance a été
ramenée à 504 millions, en baisse de 470 millions, ou de 48% , par rapport au deuxième trimestre de lexercice précédent.
Après six mois, le bénéfice net sétablit à 2,83 milliards, contre 1,06 milliard au premier semestre de 2009.
Pour sa part la TD a surpris avec un doublement de son bénéfice net, qui passe de 545 millions à 1,18 milliard, ou de 59 ¢
laction à 1,30 $ par action entre les deuxièmes trimestres de 2009 et de 2010. Le rendement sur fonds propres du
trimestre sest élevé à 13% . «Nos activités américaines ont livré de meilleurs résultats, en dépit dun paysage
économique qui demeure moins robuste quau Canada», a souligné le président et chef de la direction, Ed Clark.
Au cumul après six mois, le bénéfice net de la TD se chiffre à 2,47 milliards, contre 1,2 milliard un an plus tôt.
Autre banque à dévoiler ses résultats trimestriels hier, la CIBC a inscrit un bénéfice net de 660 millions (1,59 $ par
action) au deuxième trimestre, contre une perte de 51 millions (24 ¢ laction) au trimestre correspondant de 2009. Son
rendement sur fonds propres a été de 18,8% . Pour les six premiers mois, le bénéfice de la CIBC atteint 1,31 milliard,
contre 96 millions au premier semestre de 2009.
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8. Flaherty reins in online insurance promotion by banks; Level playing field; Insurance brokers say move protects,
empowers consumers
National Post (Canwest)
05/28/2010
ANDREW MAYEDA
Pg. FP2
Finance Minister Jim Flaherty said yesterday he will tighten regulations to limit the ability of Canadian banks to sell
insurance online.
In a letter to the Canadian Bankers Association, the Minister said the new rules will prohibit banks from selling
non-authorized insurance on their websites. Banks will also be banned from using their websites to link to sites of
subsidiaries that sell non-authorized insurance .
Mr. Flaherty said the new regulations will clearly distinguish between authorized financial products, such as credit and
travel-related insurance , and non-authorized products, such as life, property and casualty insurance .
Our job is to make sure theres a level playing field for the distribution of insurance products, Mr. Flaherty told
reporters in a conference call from Peru, where he was meeting finance ministers from the Americas and the Caribbean.
The question of which financial products Canadian banks should be able to sell has been a subject of vigorous debate for
decades. In the early 1990s, as part of a series of federal reforms that knocked down the traditional walls between banks
and insurers, the federal government allowed banks to operate insurance arms, on condition they didnt sell insurance
products at bank branches.
But with many Canadians now doing their banking online, the definition of what constitutes a branch has become less
clear. Several of Canadas biggest banks now advertise insurance on their websites.
Royal Bank of Canadas personal and business banking site, for example, contains an insurance heading that allows
visitors to get more information on RBCs travel, mortgage and loan insurance products. A link called more insurance
information takes visitors to the home page of RBC Insurance , where they can find out about life, home and auto
insurance .
Under the proposed rules, RBC will be able to link to its insurance subsidiary, but only from RBCs corporate home page,
rather than its personal and business banking site.
Last October, Mr. Flaherty warned the banks he was prepared to bring in tougher regulations if banks did not stop
promoting non-authorized products on their sites.
In his letter released yesterday, Mr. Flaherty said the changes were made necessary by evolving use of technology by
banks. The letter was also sent to the Insurance Brokers Association of Canada, which has lobbied the government to clamp
down on the banks, as well as the Trust Companies Association of Canada. The new rules also apply to federally regulated
trust and loan companies.
A spokesman for the Canadian Bankers Association said individual banks will be reviewing these new rules to determine how
they will affect their own online operations and what they need to do to comply with the rules.
Our position has always been that consumers benefit when there is choice and competition in the insurance market, and we
are concerned when restrictions on that choice and competition harm consumers interests. That said, clearly banks in
Canada comply with all aspects of the governments insurance regulations, spokesman Andrew Addison said in an email.
However, a spokesman for the Insurance Brokers Association said the decision both protects and empowers consumers.
The minister is to be recognized for extending consumer protection to the Internet, as this is simply an extension of the
branch, spokesman Steve Masnyk said in an email.
The rules are currently silent when it comes to the web, and he is making sure the correct ones for consumers are in
place.
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9. Divesting Quebec
National Post
05/28/2010
Pg. FP11
The federal government has introduced a draft bill in the House of Commons for the establishment of a Canadian securities
regulator. We are opposed to this bill. In our opinion, the bill is unnecessary in light of the effectiveness of the
current framework administered by the provincial regulators. As well, we believe it would have a negative impact on the
financial sector, issuers and economic activity in certain regions of the country, including Quebec.
In the past decade, the provincial regulators have taken measures to harmonize securities regulation across Canada. This
major initiative has led in particular to the creation of the passport system that enables an issuer to raise capital in
multiple Canadian jurisdictions and meet its regulatory requirements by dealing only with its principal regulator. The
provincial regulators have thus adopted substantially harmonized regulations while addressing the regional needs of the
country. This collaborative effort has succeeded in building a framework that delivers all the benefits of a centralized
system, but without its disadvantages.
The Canadian securities regulatory framework has been widely recognized internationally for its effectiveness. In fact,
the Organization for Economic Cooperation and Development (OECD) ranks Canada second in the world for the quality of
securities regulation, while the World Bank ranks the country fifth for the quality of investor protection, ahead of the
United Kingdom. As well, as Finance Minister Jim Flaherty has rightly pointed out on several occasions, the strength of
our securities regulatory framework has helped Canada weather one of the worst financial crises in history, better than
most other industrialized countries.
We are deeply concerned about the adverse consequences that the federal government proposal would have on Quebecs
financial sector and economy, as well as on Montreal as a financial centre. Inevitably, the establishment of a single
securities regulator would divest Quebec of decision-making authority. The province would lose its ability to introduce
innovative structures, such as it did with derivatives, respond in a timely manner to the specific needs of Quebec
businesses or take urgent action in financing matters, particularly with respect to small-and medium-sized enterprises. In
addition, the proposal would automatically move regulatory activities outside Quebec, without enhancing protection for
investors. As highlighted in a recent SECOR study, this shift would result in the loss of hundreds of well-paid and
value-added jobs that provide corporate and regulatory support (lawyers, accountants, actuaries, computer specialists,
etc.).
We are therefore asking the Government of Canada to forgo its proposal to establish a national securities regulator. In
our opinion, the best approach to further strengthening the securities regulatory framework in Canada is to bolster
collaboration between the federal and provincial authorities. Every effort must be made to ensure that the benefits gained
through regulatory harmonization by the provinces in the past decade are not jeopardized as a result of a futile debate
over powers and structures.
Francoise Bertrand, CEO, Federation des chambres de commerce du Quebec
Jean-Pierre Thomassin, director-general, Association de lexploration miniere du Quebec
Andree Corriveau, president, Association des femmes en finance du Quebec
Me Pierre Chagnon, Batonnier du Quebec , Barreau du Quebec
Michael Sabia, president and CEO, Caisse de depot et placement du Quebec
Alain Lemaire, president and CEO, Cascades
Michel Leblanc, president and CEO, Chambre de commerce du Montreal metropolitain
Liliane Laverdiere, president, Chambre de commerce de Quebec
Luc Labelle, president and chef de lexploitation, Chambre de la securite financiere
Jean Lambert, president, Chambre des notaires du Quebec
Yves-Thomas Dorval, president, Conseil du Patronat du Quebec
Francoise Bertrand, president, Federation des Chambres de commerce du Quebec
Leopold Beaulieu, president and directeur general, Fondaction
Yvon Bolduc, president and director-general, Fonds de solidarite FTQ
Marc Dutil, president and chef de lexploitation, Groupe Canam
Francois J. Coutu, president and CEO, Groupe Jean Coutu
Yvan Allaire, chairman, Institut de la gouvernance dorganisations privees et publiques
Jocelyne Houle-Lesarge, president, director-general and secretary, Institut quebecois de planification financiere
Rene Rouleau, chairman and CEO, La Capitale Groupe financier
Claude Beland, president, Mouvement deducation et de defense des actionnaires (MEDAC)
Pierre-Karl Peladeau, president and CEO, Quebecor
Rene Hamel, president and director-general, SSQ, Societe dassurance-vie
Jean-Marc Eustache, chairman, president and CEO, Transat A.T. Inc.
Francois Olivier, president and CEO, Transcontinental Inc.
Gerald Tremblay, Mayor, Ville de Montreal
Regis Labeaume, Mayor, Ville de Quebec
Jean-Marc Fortier, partner, Robinson Sheppard Shapiro s.e.n.c.r. l/LLP
Pierre Fortin, economist, UQAM
Jean La Couture, administrator, president and director-general, Regroupement des assureurs de personnes a charte du Quebec
Dr. Jacques Saint-Pierre, Professor, Universite Laval
Andrew Molson, vice-chairman, Molson Coors Brewing Co.
Alain Bouchard, president and CEO, Alimentation Couche-Tard inc.
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10. A national regulator, not a federal one
National Post
05/28/2010
JIM DINNING
Pg. FP11
Sir John A. Macdonald borrowed the phrase which says it best: Less is more. Governments would do
well to practice such a wise adage, especially when it comes to securities regulators. Do 33
million Canadians really need 13 securities regulators? Pierre Lortie argues that we do (A Federal
Travesty, May 21).
The needs of an effective market in a modern economy point to the need for just one regulator.
First of all, Canadian markets including investors, issuers, traders, and financial institutions
need a regulatory framework that can keep up with the head-spinning investment products and
services produced globally. Regulators have to be able to respond quickly to change, modifying
existing rules or bringing in new ones. But speed does not characterize the system today. There are
indeed benefits to collaboration, as Mr. Lortie points out, but that can be built into a national
regulator.
Second, we need a regulatory framework that can act quickly in the face of systemic risk. The
tangled integration of global markets exposes all our economies to unpredictable shocks and
volatility, just as we saw in 2008. We need our financial regulators to better monitor these
peril-creating events and act quickly to protect Canadians and their marketplace. But a system of
13 securities regulators cant keep up; its almost built to frustrate effective action. Canada
came through the past financial crisis in reasonably good shape. We may not be so fortunate next
time. We need to streamline the structure to help make rapid decisions.
Third, we need a regulatory framework that can speed up reforms required by structural changes
coming at us, largely from rapidly evolving technologies. The existing system is not designed to
accommodate that, lacking both co-ordination and depth of expertise. Take for example, the
regulatory responseor lack of one to the six electronic alternative trading systems operating
in Canadian equity markets for the past three years or so. These platforms have captured more than
30% of trading volume from the Toronto Stock Exchange. Yet regulators have not effectively
addressed fairness, efficiency and transparency concerns in multiple markets.
All of these requirements for a modern regulatory structure ultimately matter to rank-and-file
investors. A market that fails to address these concerns is a market that will be unable to earn
and retain the confidence of retail investors.
To justify the regulatory status quo, Mr. Lortie raises the federal boogeyman. Lets clear that up:
This is a national regulator thats being proposed, not a federal regulator. The DNA of provincial
and regional markets must be integrated into the decision-making process, right from the outset.
When folks raise the red flag of an Ottawa intrusion, Im reminded of the same diversionary tactics
used in 1997, when 12 governments fixed the Canada Pension Plan and established the CPP investment
fund managed by a CPP Investment Board. The result? A fund that sustains the future pensions of
millions of Canadians, managed cooperatively at arms-length by all participating governments. The
same governance model can work for the new single national regulator for Canadian capital markets.
Ottawa has enough to do; it doesnt need to run this one
too.
Lortie also refers to Canadas high standing in international rankings second in the 2006 OECD
Report and fifth in terms of investor protection in the 2008 World Bank 2008 Report. But neither of
these reports measure the conduct of regulation (such as cost effectiveness, responsiveness,
proportionality and avoidance of unintended consequences).
Well, good for us. Canada gets high marks because of our fair and just system of rule of law. What
would we expect? But when it comes to our regulatory structure, international observers have
something very different to say. The OECD pointed out in its study of Canada two years ago: The
current diversity of regulations, for example, each province has its own securities regulator,
makes it difficult to maximize efficiency, and increases the risk that firms will choose to issue
securities in other countries. A single regulator would eliminate the inefficiencies created by the
limited enforcement authority of individual provincial agencies.
Unquestionably, there are a lot of things right about the way Canada does things. But cost
effectiveness in the capital-raising process could significantly improve with a regulatory
framework that eliminates jurisdictional charges on reporting issuers for inter-provincial
securities distribution.
Charles River Associates estimated in 2002 that additional costs to market participants, both
issuers and registrants, were $128-million, or 36.5%, higher than theyd be under a single
securities jurisdiction. Thats a major reason private market financings in Canada account for more
than 80% of total small business equity offerings. And keep in mind, the additional costs of a
fractured regulatory system ultimately get passed on to the average investor.
If we were to design our securities regulatory structure from scratch, we wouldnt start with
different regulators for every province and territory. We would design a structure that could
address complex issues, keep up with change, and move quickly when required. That is the kind of
system we need and Wednesdays draft legislation is a good start.
- Jim Dinning, Albertas treasurer from 1992-97, is chairman of Canada West Foundation and Export
Development Canada.
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11. Commission unique : Flaherty reçoit quelques appuis [Single regulator: Flaherty receives some
support]
Finance et investissement
05/28/2010
La commission unique soulève les passions depuis quelques semaines et le gouvernement fédéral
reçoit finalement quelques appuis de la part de la communauté financière canadienne après avoir
déposé hier son projet de loi sur la question.
En tête des alliés du gouvernement, on retrouve la Banque Scotia, le Toronto Financial Services
Alliance (TFSA) et lAssociation canadienne du commerce des valeurs mobilières (ACCVM).
Par voie de communiqué, le président et directeur général de la Banque Scotia, Rick Waught, a
souligné que « treize commissions des valeurs mobilières ne sont simplement pas en mesure
dassurer, à léchelle internationale, lévaluation, la réglementation et la coordination de
risques systémique ».
Sans surprise, le TFSA, qui a pour mandat de promouvoir Toronto comme centre financier mondial,
appuie également le projet. Selon lassociation, la réglementation actuelle a un prix important
pour les sociétés qui
opèrent dans plusieurs juridictions en raison de la multiplication des coûts
de conformité.
Quant à lACCVM, le nouveau système « améliorera lefficience et lintégrité des marchés canadiens
et permettra au Canada de profiter des occasions qui se présenteront sur les marchés internationaux
».
Le cabinet du ministre des Finances du Québec a quant à lui poursuivi son combat contre le projet
fédéral en continuant de marteler la position québécoise par voie de communiqué : « Nous ne sommes
pas contre un système pancanadien, mais nous nous opposons à un système central contrôlé par le
gouvernement fédéral. »
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12. Investment Fund Suing for $61 Million Lost in Rothstein Scheme
Daily Business Review
05/28/2010
An investment fund claiming a $61 million loss in Scott Rothsteins phony settlement financing
scheme is suing the convicted felon and TD Bank, claiming the money disappeared in the final two
months before the fraud came crashing down.
A total of $30 million in investment funds from New York-based Emess Capital was cleaned out of
Rothstein Rosenfeldt Adlers TD Bank trust accounts in a six-day period just before the law firm
chairman flew to Morocco, also the destination of a $16 million wire transfer by TD Bank, a federal
racketeering lawsuit filed Wednesday claimed.
Emess received reassuring account printouts and meetings with Rothstein, TD Bank senior vice
president Frank Spinosa, Weston, Fla., branch manager Rosanne Caretsky and Weston branch supervisor
Ricardo Mejia about its investments and the safety of the accounts, Emess attorney David Mandel of
Mandel & Mandel in Miami alleged in the suit assigned to U.S. District Judge Joan Lenard in Miami.
Emess now claims its dealings with the bank were riddled with critical false and fraudulent
representations supporting Rothsteins criminal ventures.
Asked about the lawsuit Thursday, TD Bank spokeswoman Rebecca S. Acevedo said, We just received it
and are reviewing the matter.
Emess noted a similar suit filed by Coquina Investments, another investor in Rothsteins $1.2
billion fraud, against him and the bank is pending before U.S. District Judge Marcia Cooke in
Miami.
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13. CIBC equity issuance picking up
The Globe and Mail (Streetwise blog)
05/28/2010
TARA PERKINS
The second quarter was one of the weakest that CIBC has had when it comes to new-issue equity
finance, Richard Nesbitt, the head of CIBC World Markets, told analysts on Thursday.
Debt finance also slowed during the quarter, which ran until the end of April, he said.
New issues were down and there was one or two notable transactions that we were either not invited in or
decided not to participate in that took us down slightly even further, he said.
The good news, he told analysts, is that there has been a pretty substantial rebound in new-issue
equity activity in May and CIBC has been a big part of that.
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14. Visas PayWave catching on in Canada
Contactless News
05/28/2010
Visas contactless payWave system has seen steady growth in Canada as more and more merchants
implement the new payment technology.
Paywave, which enables Canadians to make quick and secure transactions by simply tapping their card
against a POS reader, is already in place at many popular Canadian establishments, including
SUBWAY, Second Cup, The Jean Coutu Group, Country Style and Coffee Time.
In addition, TD Canada Trust and RBC Royal Bank are now actively issuing Visa payWave cards to
their customers. By the end of 2010, it is expected that there will be several million Visa payWave
cards in the Canadian market.
Visa says it is also working with mobile network operators, phone and chip manufacturers to bring
NFC-enabled mobile Visa payWave transactions to consumers.
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15. Province may curb free drugs for seniors;
The Toronto Star
05/28/2010
Pg. A8
Ontario is open to tinkering with drug co-payments for seniors and others on taxpayer-funded
pharmacare programs as it looks for ways to curb the rapidly increasing cost of health care, Health
Minister Deb Matthews says.
Doctors could also see more efforts to nudge them from a fee-for-service payment model to salaries,
Matthews said Thursday in the wake of a TD Bank report warning of the serious fiscal challenges
facing medicare.
The report said half of government spending on drugs goes to seniors with higher incomes, and
suggested the wealthiest seniors get no drug coverage an idea Matthews flatly rejected.
But while the minister said taxpayer-funded drugs for seniors, the disabled and welfare recipients
would continue under a Liberal government, co-payments for seniors could change based on their
income levels.
We have a bit of that now. There are different premiums and co-pays for people at different income
levels, Matthews told reporters.
Have we got that right? ...I think its something we can look at.
Under the current system, senior citizens with incomes above $16,018 a year and couples with a
combined income above $24,175 now pay their first $100 in prescription costs, and after that may
pay up to the maximum of $6.11 in dispensing fees for each prescription.
Seniors with incomes below those levels may be asked to pay up to $2 for each prescription.
The TD report called for bold changes because at the current rate of growth, health-care costs
would eat up 80 per cent of the governments program spending by 2030, compared with 46 per cent
now and 30 per cent in the 1990s.
We need to have the conversation about the future of health care in Ontario, said Matthews,
echoing a line she has been using for months as the government has moved, as first reported in the
Star, to tie hospital funding to services provided to patients and to link pay for hospital
executives to patient outcomes.
Doctors should be paid more on a salary basis instead of on a fee-for-service basis to make them
better able to consider the cost-effectiveness of their treatment decisions, said the TD report
by well-known economists Don Drummond and Derek Burleton.
I think that is something we should continue to really look at, said Matthews, pointing out that
many doctors on family health teams and in hospital emergency rooms are now on salary.
Speaking for doctors, the Ontario Medical Association said it is reviewing the TD report and
recognizes the sustainability of health care funding is a crucial issue.
We know that there is still more work to be done, association president Dr. Mark MacLeod said in
a statement, welcoming a public debate on reforming the system while protecting the interests of
patients.
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16. Editorial: Health budget unsustainable
The Toronto Star
05/28/2010
Pg. A26
When asked whats most important to them, Ontarians routinely rank health care at the top of their
list. It is frightening, then, to learn that spending on our health-care system is growing at an
unsustainable rate.
On its current trajectory, health care is set to consume 80 per cent of provincial program spending
by 2030, up from 46 per cent today. That would bankrupt the government or crowd out every other
service from schools to subways.
So change is coming. The only question is whether the government will follow the failed path of the
1990s and freeze or severely limit health spending, only to watch the quality of care decline
sharply, or take the politically difficult steps necessary to keep costs down without compromising
quality. A new report by TD Bankeconomists rightly urges the latter and puts forward 10 ideas for
getting there. Most of their recommendations seek to boost cost effectiveness. This means not
just getting more care for the dollar by using health professionals other than doctors to provide a
wider range of services, but also providing smarter care to patients.
Wed all benefit from a health-care system that, through its funding structure, encouraged doctors
and hospitals to avoid ordering batteries of tests or prescribing a potpourri of pills for
patients.
Key to this is getting the computerization of health records back on track. Without an electronic
health record, patients will continue to undergo needless tests or get unnecessary medications that
can send them to emergency rooms with complications.
Ontario is already moving, albeit timidly, on many of the TD economists recommendations, including
electronic health records (stalled by last years eHealth Ontario scandal) and patient-based
hospital funding. Some of the economists other ideas will be politically difficult to implement,
including putting doctors on salary (as opposed to fee for service) and making usage of the
health-care system a taxable benefit. But taken as a package, the TD report is a clarion call to
accelerate reforms already underway and begin a serious public debate about more controversial
changes.
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peuvent différer considérablement des résultats avancés dans les présents énoncés prospectifs. Les
facteurs suivants, entre autres choses, pourraient entraîner de tels écarts importants ou y
contribuer : la capacité dobtenir lapprobation de la transaction par les actionnaires de The
South Financial Group, Inc. (« South Financial »), la capacité de réaliser les synergies prévues
découlant de la transaction selon les montants ou léchéancier prévus, la capacité dintégrer les
activités de The South Financial Group, Inc. à celles de La Banque Toronto-Dominion en temps
opportun et de manière rentable, et la capacité dobtenir les approbations gouvernementales de la
transaction ou de remplir dautres conditions liées à la transaction selon les modalités et
léchéancier proposés. Dautres facteurs qui pourraient faire en sorte que les résultats de La
Banque Toronto-Dominion et de The South Financial Group, Inc. diffèrent considérablement de ceux
décrits dans les énoncés prospectifs se trouvent dans le rapport annuel de 2009, dans le formulaire
40-F, pour La Banque Toronto-Dominion, et dans le rapport annuel de 2009, dans le formulaire 10-K
de South Financial déposé auprès de la Securities and Exchange Commission (SEC) et disponible sur
le site Internet de la SEC (http://www.sec.gov).
La proposition de fusion entre La Banque Toronto-Dominion et The South Financial
Group, Inc. sera présentée aux actionnaires de The South Financial Group, Inc afin quils lexaminent.
Les actionnaires sont invités à lire la circulaire de sollicitation de procurations ou le
prospectus provisoire lié à la transaction de fusion proposée et la circulaire de sollicitation de
procurations ou le prospectus définitif lorsquil sera disponible, ainsi que les autres documents
déposés auprès de la SEC, car ils contiennent des renseignements importants. Les actionnaires
peuvent obtenir un exemplaire gratuit de la circulaire de sollicitation de procurations ou du
prospectus provisoire et ils pourront obtenir un exemplaire gratuit de la circulaire de
sollicitation de procurations ou du prospectus définitif lorsquil sera disponible, ainsi que des
autres documents ayant fait lobjet dun dépôt qui contiennent de linformation sur La Banque
Toronto-Dominion et The South Financial Group, Inc., et ce, sans frais, sur le site Internet de la
SEC (http://www.sec.gov). Des exemplaires de la circulaire de sollicitation de procurations ou du
prospectus définitif et des documents déposés auprès de la SEC qui seront intégrés par renvoi dans
la circulaire de sollicitation de procurations ou le prospectus définitif peuvent aussi être
obtenus, lorsquils seront disponibles, sans frais, en soumettant une demande [à La Banque
Toronto-Dominion, 66 Wellington Street West, Toronto (Ontario) M5K 1A2, à lattention de :
Relations avec les investisseurs, 416-308-9030] ou à The South Financial Group, Inc. Investor
Relations, 104 South Main Street Poinsett Plaza, 6th Floor, Greenville, South Carolina 29601,
1-888-592-3001.
La Banque Toronto-Dominion, The South Financial Group, Inc., leurs administrateurs et leurs
dirigeants respectifs et dautres personnes peuvent être réputés être des participants à la
sollicitation de procurations relativement à la transaction de fusion proposée. Linformation
concernant les administrateurs et les dirigeants de La Banque Toronto-Dominion est disponible dans
son rapport annuel, dans le formulaire 40-F, pour lexercice terminé le 31 octobre 2009, qui a été
déposé auprès de la SEC le 3 décembre 2009, son avis de convocation à lassemblée annuelle et sa
circulaire de la direction sollicitant des procurations, qui a été déposée auprès de la SEC le 25
février 2010. Linformation concernant les administrateurs et les dirigeants de The South
Financial Group, Inc. est disponible dans la circulaire de sollicitation de procurations de The
South Financial Group, Inc. de sa plus récente assemblée annuelle, qui a été déposée auprès de la
SEC le 7 avril 2010. Dautres renseignements sur les participants à la sollicitation de
procurations et une description de leurs intérêts directs et indirects, par titres détenus ou
autres, seront inclus dans la circulaire dinformation/le prospectus et dautres documents
pertinents qui seront déposés auprès de la SEC lorsquils seront disponibles.
THE FOLLOWING IS THE TRANSCRIPT OF A VIDEO CLIP MADE AVAILABLE TO EMPLOYEES OF THE
TORONTO-DOMINION BANK ON MAY 28, 2010.
Colleen Johnston interview with Howard Green
Headline Business News Network
5/27/2010
TD BANK IN THE PATH OF GROWTH
HOWARD GREEN (BNN-TV): Hello, Im Howard Green. Well, its a busy day for bank watchers, Royal,
CIBC and TD are reporting and the three did not live up to street expectations nonetheless they are
all very profitable.
TD may have missed by a couple of cents, but it had adjusted net income of more than $1.2 billion,
up about 200 million from the same quarter last year. All the key divisions reported stronger
results, in particular the bread and butter retail banking division in Canada. Provisions for
credit losses are also coming down.
But since the bank last reported, the Eurozone has unravelled causing global economic unease and TD
has upped its bet on the U.S., picking up the remains of four banks there, adding 245 branches.
Joining us to discuss the latest is Colleen Johnston, TDs CFO. Welcome back to the program,
Colleen.
COLLEEN JOHNSTON (Chief Financial Officer, TD Bank Financial Group): Thanks, Howard.
HOWARD GREEN: So the miss by a couple of cents, what was the problem there?
COLLEEN JOHNSTON: Well, let me start with what went right in the quarter. It was a fantastic
quarter for retail earnings. As you say, TD Canada Trust was up 29%, another record quarter. Total
Canadian Wealth was up 31%. The U.S. was up 45% in U.S. dollars and TD AMERITRADE performed well.
So overall we had 1.2 billion in retail earnings. The wholesale earnings were a little shy...
HOWARD GREEN: So that was it. That was the miss?
COLLEEN JOHNSTON: ... in terms of expectations and our corporate segment loss was a little bit
higher than expected. But the market has responded very positively to our numbers today and in fact
our stock is up today.
And I think when you look at the fundamentals, very strong, credit losses, best performance in the
last six quarters. So loan losses are down. We had a general allowance release, which is a good
leading indicator that credit is performing well and our impaired loans have also performed better,
the best performance in six quarters. So the market really likes those results.
HOWARD GREEN: So as for the bread and butter retail banking here in Canada, you say earnings growth
in Canada is going to moderate, slower volume growth, pressure on margins. How much pressure on
margins and how much slower volume growth?
COLLEEN JOHNSTON: Well, again, I think the message that were trying to give the market today is
were up 29% on a year-over-year basis, which is absolutely phenomenal. The ball is out of the park
on that one. Well still see good growth, but itll slow down. So I think volume growth has been on
fire. We expect to probably see high single-digit rates of volume growth going forward. PCLs are
stabilising to improving, good operating leverage. So I think youre going to see continued good
performance in Canada, but not at the 29% level that you saw this quarter.
HOWARD GREEN: Because of the slowdown in residential real state action, perhaps?
COLLEEN JOHNSTON: I think it will slow down. Again, this kind of heady level of growth wont
continue. And in fact we think thats healthy for the market overall. We have been gaining share
and we expect to continue to see a very good performance in that respect. But we think growth rates
will slow down.
HOWARD GREEN: So in the U.S., your operations, you say delivered improving results. What if there
is a deflationary environment in the United States long-term, a no-growth economy, stagnant
employment and so forth. What about that? I mean, a Japan scenario for the United States. Could
that hit your earnings there?
COLLEEN JOHNSTON: Well, the way we think about the United States is we have a better banking model
and we have a great growth model. So of course you look at the macro environment and all of those
factors, but we have a model where we can outgrow the competition. We have more immature branches,
in other words, younger branches in our network. And of course were adding branches now through
the FDIC-assisted deal we did and
then the South Financial deal. And when we apply our model where we have legendary service and
convenience, we attract more new customers.
HOWARD GREEN: Even in a grow... in a no-growth environment...
COLLEEN JOHNSTON: Definitely.
HOWARD GREEN: ... if it comes to that?
COLLEEN JOHNSTON: Yeah, definitely, because we have a better model and customers like the model and
then we retain more customers because of our outstanding service. So that model is going to mean
that we can outgrow the competition and theres lots of potential in that franchise in particular
as the environment normalises. So as credit loses start to come down and interest rates start to
rise, although we think thats going to take a little bit longer now.
HOWARD GREEN: Yeah.
COLLEEN JOHNSTON: But I think youll start to see those earnings trend up quite nicely.
HOWARD GREEN: If it normalise, because I know, Ed reads David Rosenberg every morning and David
Rosenberg is Mr. Deflation. So does Ed think about deflation in the United States at all?
COLLEEN JOHNSTON: We dont worry about it that much, frankly. Thats not part of our base case
scenario. Again, we think the U.S. longer term for us is going to be a very good market. We
obviously be do a standout job in Canada, but a avenue of growth for us is the United States. And
its actually remarkable. If you go back, it was just over five years ago...
HOWARD GREEN: Yeah.
COLLEEN JOHNSTON: ... we didnt have a U.S. personal commercial bank. And today, once we close
South Financial, well have about 1,300 branches south of the border. So its been a very
impressive entry into the United States, but we do need to improve those returns and were very
committed to doing that.
HOWARD GREEN: So on that... I was noticing that in the retail division, your return on invested
capital is 5.6% in the U.S.
COLLEEN JOHNSTON: Yes.
HOWARD GREEN: In Canada its 33.7%. And when are you going to beat your cost of capital in the
United States.
COLLEEN JOHNSTON: Thats about a three to five year timeframe, I would say, to get up past the 10%
because we have paid the full price for the acquisitions that we made in the United States. But the
organic growth potential is whats really going to make the difference in the U.S.
So as you start to see franchise optimisation, good organic growth, a normalised environment, the
impact of acquisitions, the ones that weve made to-date coming on board, we think we can make a
very good case for how we can more or less, double those returns in the next three to five years.
HOWARD GREEN: What about merging the cultures, because youve not just bought one bank, youve
bought four banks, really. Do you... are you confident you understand the people who run those
banks and can bring them around to the TD way of thinking?
COLLEEN JOHNSTON: We are very confident in that. So first of all, Riverside is FDIC assisted deal,
weve gone and weve looked at those branches, theyre very, very high quality branches and thats
really important to us.
HOWARD GREEN: How long before they make money, each branch?
COLLEEN JOHNSTON: Well, I think obviously the credit losses are behind them now. Those are covered
for our terms, those are covered by the FDIC and by the way, weve marked the books. So we
certainly can make money in that business and we can make money in South Financial.
So the blending of the cultures, were very, very pleased with the South Financial management team.
They are a very strong team. They were actually brought in a couple of years ago to deal with the
credit issues and put the bank on a good footing and they ran out of time and they ran out of
capital. But they are really a strong team. So Lynn Harton, who is the CEO, is going to be joining
Bharat Masranis team, who is our CEO in the United States and hes going to be a key part of the
growth of the bank going forward. So, very pleased with that.
HOWARD GREEN: I want to ask you about one other macro issue before I get to other stuff. Europe,
any meaningful exposure to Europe at TD?
COLLEEN JOHNSTON: The answer is no. But we... so we dont worry about the first order effects of
Europe, but we certainly do worry about the second order effects and youve seen that in the last
number of weeks with some of the upheaval and the instability. If you look at banks worldwide,
hold, for example, about $80 billion worth of great bonds. So if you had a major default there,
youd start to see some of the kind of losses and contraction of capital that you saw back in the
days of the financial crisis. And certainly, I think the European issues have rekindled those
concerns now. Were pretty comfortable that European leaders have the resolve to deal with their
issues, to deal with their deficits and I think what all of that means is you will see a slow down
in economic growth globally is the reality. So... but we... those are the things that we keep an
eye on the second order effects of the European issues.
HOWARD GREEN: Let me move to regulatory. Have you put a line item in your spreadsheets, just in
case there is a bank tax?
COLLEEN JOHNSTON: In the United... in Canada or in the United States or both?
HOWARD GREEN: Well, both. Yeah.
COLLEEN JOHNSTON: It looks pretty certain right now that were not going to have that bank tax in
Canada. I think the minister has been very forthright on that and hes showing tremendously
leadership on a global level.
HOWARD GREEN: There are 19 other countries involved...
COLLEEN JOHNSTON: There are and I think hes got a... he does have a job ahead of him in terms of
convincing others, but... so we dont think that will happen in Canada. In the United States we
think we will be required to pay some of the Obama tax.
HOWARD GREEN: So how much? Have you put a line item in for that?
COLLEEN JOHNSTON: We havent quantified that publicly but we think its a pretty manageable number.
HOWARD GREEN: Not material?
COLLEEN JOHNSTON: No. Not that material.
HOWARD GREEN: And so on other issues related to reform, could TD have to buyback all of
AMERITRADE because you might have to consolidate your assets?
COLLEEN JOHNSTON: We really like the AMERITRADE investment, we currently have an equity investment,
we own about 45%. The new capital rules potentially could be more punishing on how we treat that
particular investment. But theres a lot... theres going to be a lot of water under the bridge
before the capital reforms get settled. And of course in the meantime...
HOWARD GREEN: Yeah.
COLLEEN JOHNSTON: ... our capital levels are quite high at 12% Tier 1, which is what we announced
today. So we have to wait for all of that play out.
HOWARD GREEN: But youre prepared to have to do it if you have to?
COLLEEN JOHNSTON: If we have to, if we did. We... again well wait to see what happens. We think
regulator should really try to deal with the root causes of the financial crisis...
HOWARD GREEN: Yeah.
COLLEEN JOHNSTON: ... the amount of capital, the quality of capital and market risk capital. And
deductions like TD AMERITRADE are in the nice-to-do category and there probably isnt enough
capital to do everything...
HOWARD GREEN: Yeah.
COLLEEN JOHNSTON: ... thats proposed under Capital Reform right now. So I think whats great is
that the Canadian bank CEOs are really taking a leadership role working with our regulator and our
Central Bank Governor to make sure that our voice can be heard on the world stage in terms of
Capital Reform. Because in fact we do have the moral high ground right now...
HOWARD GREEN: Yeah.
COLLEEN JOHNSTON: ... which a lot of banks dont globally.
HOWARD GREEN: I understand youre getting rid of the Waterhouse name in Canada, its going to be TD
Wealth. Are you eventually going to get rid of the AMERITRADE name in the United States?
COLLEEN JOHNSTON: I would be surprised if we did that. I mean, what were focussing on with our
brand is the TD brand and the power of that brand, the power in the shield. So that is really
going to become our primary brand, but obviously more to come on how that might affect individual
businesses. For sure well still keep TD Canada Trust in our Canadian Retail business. And again,
AMERITRADE is a 45% investment for us right now, so.
HOWARD GREEN: News of the day, the finance minister has unveiled the insurance guidelines for the
banks, prohibiting the promotion app, or web links to non-authorised insurance from all banking web
pages. How significant is that for you?
COLLEEN JOHNSTON: Well, in terms of how were dealing with this, we are reviewing the letter right
now and frankly the proposed changes do go beyond the Bank Act restrictions. So...
HOWARD GREEN: So youre going to fight them?
COLLEEN JOHNSTON: Well, we... I think were going to have a spirited discussion with the minister
about all of this. And I think if you are looking at regulation, lets make sure regulation
pertains, not just to the banks but to the insurers as well.
HOWARD GREEN: Whats wrong the link, though? Just a simple link, youd be allowed to have a link,
right?
COLLEEN JOHNSTON: Well, no. I mean thats... the issue is, can you go directly from, for example,
our online banking website into insurance? And I would argue, I think probably most with this,
thats good for Canadians. Its good that you can go in and get information, you can get some
prices, you can look at services. This is good for the Canadian consumer and I think thats the way
the minister has to look at the issue.
So we have other ways of promoting insurance, the Internet isnt the only way we promote insurance.
But as I say, lets have a level playing field for everybody in this.
HOWARD GREEN: Couple of quick ones in the minute left. Dividend, last time you said Pretty
unlikely this year, but never say never. What do you say now?
COLLEEN JOHNSTON: Id probably repeat that answer more or less is that obviously with capital
reform still in flux, we think you have to conserve capital in this environment until we really
know what the new rules look like. So despite the fact that were performing very well, we do like
to have a payout ratio of about 35 to 45%. Currently on a year-to-date basis were at about 41%. So
I think more to come on that. But I think dividend increases are definitely on hold until we have
more clarity on the capital rules.
HOWARD GREEN: And just to finish off, Ed said recently hell likely retire in 2013. Who is the heir
apparent? I am hearing Bharat Masrani.
COLLEEN JOHNSTON: Well, well wait to see how that plays out. I mean, the great news is that we
have very strong bench across the TD senior management team.
HOWARD GREEN: How many on the bench?
COLLEEN JOHNSTON: Theres about 12 of us. So well see how that goes.
HOWARD GREEN: So including you?
COLLEEN JOHNSTON: Well, I am thoroughly enjoying my job as CFO right now.
HOWARD GREEN: All right. Great to have you back with us, Colleen.
COLLEEN JOHNSTON: Good to be here.
HOWARD GREEN: Thanks a lot. Thats Colleen Johnston, CFO of TD Bank.
The information presented may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and comparable safe harbour provisions of
applicable Canadian legislation, including, but not limited to, statements relating to anticipated
financial and operating results, the companies plans, objectives, expectations and intentions,
cost savings and other statements, including words such as anticipate, believe, plan,
estimate, expect, intend, will, should, may, and other similar expressions. Such
statements are based upon the current beliefs and expectations of our management and involve a
number of significant risks and uncertainties. Actual results may differ materially from the
results anticipated in these forward-looking statements. The following factors, among others,
could cause or contribute to such material differences: the ability to obtain the approval of the
transaction by The South Financial Group, Inc. shareholders; the ability to realize the expected
synergies resulting from the transaction in the amounts or in the timeframe anticipated; the
ability to integrate The South Financial Group, Inc.s businesses into those of The
Toronto-Dominion Bank in a timely and cost-efficient manner; and the ability to obtain governmental
approvals of the transaction or to satisfy other conditions to the transaction on the proposed
terms and timeframe. Additional factors that could cause The Toronto-Dominion Banks and The South
Financial Group, Inc.s results to differ materially from those described in the forward-looking
statements can be found in the 2009 Annual Report on Form 40-F for The Toronto-Dominion Bank and
the 2009 Annual Report on Form 10-K of The South Financial Group, Inc. filed with the Securities
and Exchange Commission and available at the Securities and Exchange Commissions Internet site
(http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial Group,
Inc. will be submitted to The South Financial Group, Inc.s shareholders for their consideration.
Shareholders are encouraged to read the proxy statement/prospectus regarding the proposed
transaction when it becomes available because it will contain important information. Shareholders
will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings
containing information about The Toronto-Dominion Bank and The South Financial Group, Inc., without
charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in the proxy
statement/prospectus can also be obtained, when available, without charge, by directing a request
to The Toronto-Dominion Bank, 15th floor, 66 Wellington Street West, Toronto, ON M5K 1A2,
Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc., Investor
Relations, 104 South Main Street Poinsett Plaza, 6th Floor, Greenville, South Carolina 29601,
1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on
December 03, 2009, and in its notice of annual meeting and proxy circular for its most recent
annual meeting, which was filed with the Securities and Exchange Commission on February 25, 2010.
Information regarding The South Financial Group, Inc.s directors and executive officers is
available in The South Financial Group, Inc.s proxy statement for its most recent annual meeting,
which was filed with the Securities and Exchange Commission on April 07, 2010. Other information
regarding the participants in the proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus
and other relevant materials to be filed with the SEC when they become available.
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF TD BANK,
AMERICAS MOST CONVENIENT BANK ON MAY 28, 2010
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To:
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TD Bank Employees |
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From:
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Bharat Masrani, President and CEO |
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Date:
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May 28, 2010 |
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Subject:
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TD Bank Financial Group Second Quarter Earnings |
TD Bank Financial Group Second Quarter Earnings
Yesterday, TD Bank Financial Group (TDBFG) released earnings for the second quarter ending
April 30, 2010. Adjusted net income for the quarter was CDN$1.2 billion, up 21% compared with last
year. As Ed noted, we feel very good about another strong quarter as we move into the second half
of the year, and our investments in future growth will enable us to build on our momentum.
Overall, results for the quarter reflect double-digit earnings growth across all segments,
including a second record quarter in a row from TD Canada Trust. Credit losses are at their lowest
levels in the past six quarters and capital levels remain very strong.
U.S. Personal and Commercial Banking Segment Results
In the U.S., we earned US$241million (CDN$245 million) in the second quarter, up from US$216
million (CDN$227 million) in Q1 2010, and US$166 million (CDN$208 million) in the second quarter of
last year. These are particularly strong results given the economic environment in the U.S.
Highlights for the quarter included (all figures in USD):
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Revenue for the quarter was $1.15 billion, an increase of $58 million from the previous
quarter, and up $117 million from the second quarter of last year. We experienced
broad-based revenue growth across all businesses, including strong retail fee growth. |
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Expenses were up 10% for the quarter compared to Q2 2009, largely due to new Store
expenses, higher FDIC premiums, and credit/collection costs. |
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Loans were up 1.5% from last quarter and 4.1% compared with Q2 2009. Loan growth
was better than the industry average and driven largely by growth in residential
mortgages. |
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Deposits increased 3.4%, or $2.7 billion, on a linked-quarter basis, reflecting
seasonal growth in core retail deposits and solid growth in commercial deposits. |
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Overall asset quality remained better than the industry as a whole, and we continue to
be a positive outlier relative to our peers. |
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The Riverside National Bank of Florida, First Federal Bank of North Florida, and
AmericanFirst Bank acquisitions were not material drivers of Q2 results, but significantly
enhance our presence in Florida and will provide a strong platform for future growth. |
Looking Forward
2010 is shaping up to be a fantastic year! This past quarter, we opened 11 Stores, including
our first green prototype Store in Queens Village, NY, and are on track to open 32 new stores
this year. We accelerated our growth in the attractive Florida market through the acquisitions of
Riverside, First Federal, and AmericanFirst. With the recent announcement of our intent to acquire
The South Financial Group, pending shareholder and regulatory approval, our momentum just keeps on
building! And, we are delivering on critical business as usual initiatives all across the
company.
I am extremely pleased with our second quarter earnings. We continue to attract new Customers
and grow our loans, deposits, and fee income. Overall, our expenses were up marginally and, as we
head into the second half of the year, we need to continue to manage expenses closely and ensure we
are operating as efficiently as possible.
As we reach the halfway mark of 2010, I am extremely proud of our accomplishments. Our success
in this past quarter is a testament to your hard work and dedication to delivering a WOW! Customer
experience each and every day. This is truly an exciting time at TD Bank, Americas Most
Convenient Bank®, and I am looking forward to what lies ahead. Thank you for another excellent
quarter.
Bharat
The information presented may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and comparable safe harbour provisions of
applicable Canadian legislation, including, but not limited to, statements relating to anticipated
financial and operating results, the companies plans, objectives, expectations and intentions,
cost savings and other statements, including words such as anticipate, believe, plan,
estimate, expect, intend, will, should, may, and other similar expressions. Such
statements are based upon the current beliefs and expectations of our management and involve a
number of significant risks and uncertainties. Actual results may differ materially from the
results anticipated in these forward-looking statements. The following factors, among others,
could cause or contribute to such material differences: the ability to obtain the approval of the
transaction by The South Financial Group, Inc. shareholders; the ability to realize the expected
synergies resulting from the transaction in the amounts or in the timeframe anticipated; the
ability to integrate The South Financial Group, Inc.s businesses into those of The
Toronto-Dominion Bank in a timely and cost-efficient manner; and the ability to obtain governmental
approvals of the transaction or to satisfy other conditions to the transaction on the proposed
terms and timeframe. Additional factors that could cause The Toronto-Dominion Banks and The South
Financial Group, Inc.s results to differ materially from those described in the forward-looking
statements can be found in the 2009 Annual Report on Form 40-F for The Toronto-Dominion Bank and
the 2009 Annual Report on Form 10-K of The South Financial Group, Inc. filed with the Securities
and Exchange Commission and available at the Securities and Exchange Commissions Internet site
(http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial
Group, Inc. will be submitted to The South Financial Group, Inc.s shareholders for their
consideration. Shareholders are encouraged to read the proxy statement/prospectus regarding the
proposed transaction when it becomes available because it will contain important information.
Shareholders will be able to obtain a free copy of the proxy statement/prospectus, as well as other
filings containing information about The Toronto-Dominion Bank and The South Financial Group, Inc.,
without charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy
statement/prospectus and the filings with the SEC that will be incorporated by reference in the
proxy statement/prospectus can also be obtained, when available, without charge, by directing a
request to The Toronto-Dominion Bank, 15th floor, 66 Wellington Street West, Toronto, ON M5K 1A2,
Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc., Investor
Relations, 104 South Main Street Poinsett Plaza, 6th Floor, Greenville, South Carolina 29601,
1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on December 03, 2009,
and in its notice of annual meeting and proxy circular for its most recent annual meeting, which
was filed with the Securities and Exchange Commission on February 25, 2010. Information regarding
The South Financial Group, Inc.s directors and executive officers is available in The South
Financial Group, Inc.s proxy statement for its most recent annual meeting, which was filed with
the Securities and Exchange Commission on April 07, 2010. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF TD BANK,
AMERICAS MOST CONVENIENT BANK AND THE TORONTO-DOMINION BANK ON MAY 28, 2010
Daily News Brief
May 28, 2010
Compiled by Brittany Roberge, Corporate and Public Affairs
TD BANK NEWS
1. |
|
Strength of U.S. Economic Rebound Will Depend on Small Business: TD Economics News Release |
Americas small businesses have experienced a greater Great Recession than other business
segments, and the nations prospects for economic recovery depend importantly on the prospects for
those small businesses, according to a new report published today by TD Economics, in partnership
with TD Bank, Americas Most Convenient Bank®.
[TD Economist James Marple and TD Banks Fred Graziano are quoted.]
2. |
|
Royal Bank, CIBC, TD Bank Profits Miss Estimates BusinessWeek |
Royal Bank of Canada, Toronto- Dominion Bank and Canadian Imperial Bank of Commerce, three of
Canadas five biggest banks, reported second-quarter profits that missed analysts estimates.
3. |
|
TD Bank Net Income Scores Big Gain In Fiscal 2Q
Philadelphia Business Journal [Article also appears in Albany Business Journal.] |
TD Bank, the U.S. banking subsidiary for TD Bank Financial Group, more than tripled its net income
during the companys fiscal second quarter, which ended April 30.
4. |
|
The Debit Card Of The Future Is Flat Bankaholic.com |
TD Bank has begun issuing debit cards without raised numbers. Theyre perfectly flat, with the
numbers just printed on the front. Even though some retailers think the cards are fake, theyre not
only legit, theyre probably what all debit cards will look like in a few years.
5. |
|
Canadian Banks: Go Big or Go Home Fortune |
With many of their rivals on the ropes, Canadas major banks are nicely positioned to catapult into
the top tier of U.S. financial institutions for the first time ever. The main reason is that the
countrys banks famously skated through the subprime and derivatives meltdown of 2008 with no
government bailouts and comparatively few writedowns. [ TD
Bank Financial Group is mentioned.]
6. |
|
Parenting Perspective: Summer Slide WPVI-TV (PA) |
I was talking with other Moms during my son Micahs Little League game the other night. The topic
was homework or the lack of it in recent weeks from our sons teachers. Now, Im as ready for
summer as anyone. And believe me, Micahs not complaining. But school
Page 1 of 17
isnt over yet and we all noticed that the teachers have just about given up on giving the kids
work to do after school. And frankly, Im not sure this is a good thing. [TD Bank is mentioned.]
7. |
|
TD Bank Profits Rise 45 Percent Courier-Post (NJ) |
Profits at TD Bank, the U.S. subsidiary of Toronto-based TD Bank Financial Group, rose 45 percent
compared to the second quarter last year, thanks to growing deposits, personal loans and higher
fees. [TD Bank Financial Groups Ed Clark is quoted.]
8. |
|
Investment Fund Suing for $61 Million Lost in Rothstein Scheme
Daily Business Review |
An investment fund claiming a $61 million loss in Scott Rothsteins phony settlement financing
scheme is suing the convicted felon and TD Bank, claiming the money disappeared in the final two
months before the fraud came crashing down.
9. |
|
Southeast Business Briefs - Florida Trend Magazine |
Riverside National Bank of Florida, a 58-branch bank with $3.42 billion in assets and $2.76 billion
in deposits, failed. Its deposits and nearly all assets were sold by the FDIC to TD Bank.
10. |
|
Merrimack Valley in a Minute Eagle-Tribune (MA) |
The Lawrence Public Library was one of 10 libraries in Massachusetts to receive a total of $40,000
from the TD Charitable Foundation.
INDUSTRY NEWS
1. |
|
Battle Over Preemption Hinges on Fine Print American Banker |
While both the House and Senate financial reform bills claim to restore the so-called Barnett
standard for preemption of state law, that has not stopped federal and state regulators from
continuing to battle over the issue.
2. |
|
White House Focuses on Five Regulatory Reform Priorities American Banker |
The Obama administration continued to push its priorities Thursday on what provisions should be
included in the final regulatory reform bill.
3. |
|
Bernanke Extended Period May Be Curtailed as Credit Improves
BusinessWeek |
Consumer delinquency rates are dropping at U.S. retailers and banks such as American Express Co.
and Bank of America Corp., signaling an incipient lending thaw that may spur economic growth.
TD BANK NEWS
Page 2 of 17
1. |
|
Strength of U.S. Economic Rebound Will Depend on Small
Business: TD Economics
May 28, 2010 News Release |
CHERRY HILL, N.J, and PORTLAND, MAINE (May 28, 2010) Americas small businesses have experienced
a greater Great Recession than other business segments, and the nations prospects for economic
recovery depend importantly on the prospects for those small businesses, according to a new report
published today by TD Economics, in partnership with TD Bank, Americas Most Convenient Bank®.
Titled, Small and Medium Sized Businesses Key to U.S. Economic Recovery, and authored by TD
Economist James Marple, the report outlines the characteristics of the recent recession that have
been particularly hard on small businesses, namely acute job losses, the tightening of the credit
markets, and the industrial composition of the economic correction. It also contends that small and
medium-sized businesses are at the forefront of the creative process of powering the economy out of
the downturn.
Marple, who specializes in the factors impacting the U.S. economy, writes, The Great Recession was
not kind to small businesses in America. Small and medium-sized businesses suffered a
disproportionate share of the job losses and many still have difficulty accessing credit from some
lenders. Fortunately, things are beginning to look up.
In the report, Marple also emphasizes the reality that economic growth over the longer-term is
driven primarily by individuals taking risks and making sacrifices in order to bring innovative
ideas to market. If this growth is set in motion, he estimates that by the end of 2011, the U.S.
economy could employ over 6 million more people than it does today.
Fred Graziano, Head of Retail and Small Business Banking for TD Bank, agrees. Clearly, small and
mid-sized businesses are fundamental to the success of the economic recovery, just as having access
to credit is fundamental to the success of those businesses, he said.
Thats why at TD Bank, we continued to lend throughout the downturn, and well continue to help
fuel the upturn, said Graziano. We salute the small business community, which has displayed such
resilience and courage over the past months, and TD Bank stands ready to assist them with the
tools, resources and financial support they need.
The findings of the TD Economics report may also bring some welcome news to the small business
community. Data cited in the report indicates that a broader economic recovery is already starting
to take shape, which may be sooner than many small businesses anticipated. According to a January
2010 survey of small business conducted by TD Bank, a mere 21 percent of small business owners
believed that relief from the recession would arrive by mid-year. Still, 87 percent of small
business owners said they were optimistic that their business would perform at least the same or
better in 2010 compared with 2009, and 36 percent expected to see their business grow this year.
TD Economics provides analysis of global economic performance and forecasting, and is an affiliate
of TD Bank.
For the complete findings of the TD Economics report, click here:
http://www.td.com/economics/us.jsp
Page 3 of 17
For the
results of the TD Bank Small Business Survey, click here:
https://mediaroom.tdbank.com/index.php?s=43&item=213
About TD Bank, Americas Most Convenient Bank®
TD Bank, Americas Most Convenient Bank, is one of the 15 largest commercial banks in the United
States with $152 billion in assets, and provides customers with a full range of financial products
and services at more than 1,000 convenient locations from Maine to Florida. TD Bank, N.A., is
headquartered in Cherry Hill, N.J., and Portland, Maine. TD Bank is a trade name of TD Bank, N.A.
For more information, visit www.tdbank.com.
TD Bank, Americas Most Convenient Bank, is a member of TD Bank Financial Group (TSX, NYSE: TD) of
Toronto, Canada, a top 10 financial services company in North America and one of the few banks in
the world rated Aaa by Moodys.
Top
2. |
|
Royal Bank, CIBC, TD Bank Profits Miss Estimates
By Sean B. Pasternak and Doug Alexander
May 27, 2010 BusinessWeek |
Royal Bank of Canada, Toronto- Dominion Bank and Canadian Imperial Bank of Commerce, three of
Canadas five biggest banks, reported second-quarter profits that missed analysts estimates.
Royal Bank, the countrys largest bank by assets, said profit for the period ended April 30 was
C$1.33 billion ($1.26 billion), or 88 cents a share. CIBC, the fifth-largest bank, reported net
income of C$660 million, or C$1.59 a share. Both Toronto-based lenders had losses a year ago.
Toronto-Dominions profit more than doubled to C$1.18 billion, or C$1.30 a share.
Earnings at Royal Bank and CIBC fell short of estimates because of weak capital markets revenue,
said Barclays Capital analyst John Aiken. Toronto-Dominions U.S. business was hurt by a stronger
Canadian currency.
I would say expectations for the quarter are reasonably high, CIBC World Markets analyst Robert
Sedran said before results were released. Banks have become a victim of their own success.
The profit misses contrast with last quarter, when seven of the eight largest banks topped
estimates after setting aside less money for bad loans. Bank of Montreal, the fourth-biggest bank,
reported yesterday that net income more than doubled, beating estimates.
Royal Bank earned more from consumer lending than a year ago, when a C$1 billion writedown on its
U.S. consumer bank led to the companys first quarterly loss since 1993. The Toronto- based bank
set aside C$504 million for bad loans, compared with C$974 million a year earlier.
Royal Bank
International banking, which includes Raleigh, North Carolina-based RBC Bank, narrowed its loss to
C$27 million from C$1.13 billion a year earlier. The unit has posted eight straight
Page 4 of 17
quarterly losses. Royal Bank has spent a year reorganizing its RBC Bank as Canadian rivals Bank of
Montreal and Toronto-Dominion Bank expand by buying troubled U.S. banks.
Trading Declines
We continue to believe that Royal Bank has limited, if any, interest in expanding its U.S. retail
banking presence and would be more interested in selling its operations when conditions normalize,
BMO Capital Markets analyst John Reucassel said in a May 11 note.
Earnings from the RBC Capital Markets investment-banking unit rose 20 percent to C$502 million from
a year earlier, when writedowns reduced earnings. Trading revenue was C$732 million, down about
half from a year ago.
Declining capital markets revenue and trading were a major weakness for Royal Bank, Aiken wrote
in a note to clients.
This material negative surprise on revenues will likely be frowned upon once again by investors,
he said.
Toronto-Dominions C$1.36 a share adjusted profit missed the C$1.40-a-share average estimate of 10
analysts. The strengthening of Canadas currency caused U.S. consumer-banking profit to drop by
C$55 million in the quarter, Toronto-Dominion said in a report to shareholders.
TD Ameritrade
Domestic consumer-banking profit climbed 29 percent to a record C$761 million as loan-loss
provisions declined and revenue for the unit increased 11 percent. Profit from U.S. consumer
banking climbed 55 percent to C$245 million.
Asset-management earnings, which include the banks stake in TD Ameritrade Holding Corp., climbed
33 percent to C$167 million. TD Ameritrade of Omaha, Nebraska, is the third-largest retail
brokerage by client assets. Investment-banking profit rose 27 percent to C$220 million. The banks
corporate unit had a net loss of C$217 million because of higher expenses and unfavorable
valuations of hedges.
Toronto-based CIBC said adjusted profit was C$1.46 a share, three cents short of the average
estimate of 11 analysts.
CIBC posted its biggest profit since the fourth quarter of 2007 after its investment-banking unit
reversed a year-earlier loss. CIBC World Markets earned C$189 million in the period, compared with
a C$345 million loss on debt-related writedowns.
National Bank
Consumer banking profit rose 12 percent to C$487 million in the quarter, led by personal and
business banking. Trading income of C$225 million compared with a C$391 million trading loss a year
earlier.
National Bank of Canada, the countrys sixth-biggest lender, is scheduled to release results later
today, followed by Bank of Nova Scotia and Canadian Western Bank next week.
Page 5 of 17
Bank of Montreal, the fourth-biggest bank, said yesterday that profit more than doubled to a record
C$745 million, or C$1.26 a share. Laurentian Bank of Canada said earnings rose 34 percent to C$28.3
million.
Royal Bank rose 48 cents to C$59.47 in trading yesterday on the Toronto Stock Exchange.
Toronto-Dominion rose 71 cents to C$72.80, while CIBC rose 34 cents to C$75.29.
(Royal Bank will hold a conference call to discuss second- quarter results at 8 a.m. Toronto time.
Dial +1-888-789-9572 passcode 4285250 or +1-416-695-7806 for the call, or go to
www.rbc.com/investorrelations/ir_events_presentations.html)
(Toronto-Dominion will hold a conference call at 3 p.m. Toronto time. To listen, dial
+1-416-644-3414 or +1-877-974-0445.)
Top
3. |
|
TD Bank Net Income Scores Big Gain In Fiscal 2Q
By Jeff Blumenthal
May 27, 2010 Philadelphia Business Journal [Article also appears in Albany Business Journal.] |
TD Bank, the U.S. banking subsidiary for TD Bank Financial Group, more than tripled its net income
during the companys fiscal second quarter, which ended April 30.
In TD Bank Financials quarterly earnings report Thursday, the company said its U.S. subsidiary
earned $421 million during the quarter, up from $126 million in the same period a year ago and $216
million in the linked quarter than ended Jan. 31.
TD Bank Financial said revenue for U.S. personal and commercial banking rose 11 percent from the
same period a year ago, driven partly by broad-based growth across all businesses and categories.
Strong retail fee growth resulting from a new pricing structure implemented after the integration
of Commerce Bancorp, which it acquired last year, was partially offset by lower prepayment speeds
on loans and securities. Fees resulting from the combined deposit fee structure are expected to
decline as a result of new regulations which take effect later this year.
Provision for credit losses dropped 37 percent to $162 million from $256 million a year ago, and
$191 million from the previous quarter. Nonperforming loans increased to 1.8 percent from 1.1
percent a year ago. TD said the increase was largely because of weakness in the commercial real
estate market and the recession in general.
Loans were up 4 percent, with personal loans up 15 percent largely because of residential
mortgages. TD said business loans declined 1 percent because of low demand.
Deposits grew 26 percent, mostly because of a $20.8 billion increase in TD Ameritrade insured
deposit accounts, formerly known as money market deposit accounts. Without that, deposits would
have increased 6 percent.
During the quarter, TD Bank also acquired certain assets and liabilities of three failed Florida
banks from the Federal Deposit Insurance Corp. and then announced an agreement to buy The South
Financial Group, Inc., a South Carolina-based bank with a large Florida presence
Page 6 of 17
TD Bank Financial (NYSE:TD) said its U.S. loan growth is expected to improve for the remainder of
2010 based on better economic conditions. Organic deposit growth momentum is expected to continue
as stores mature, while regulatory changes are expected to reduce certain transaction fees starting
at the end of the next quarter. For the remainder of the year, the provision for loan loss level is
expected to remain near current levels.
TD Bank Financial (NYSE:TD) reported a net income of $1.17 billion Canadian, compared to $545
million Canadian in the same period a year ago.
TD Bank is the second-largest bank in the Philadelphia area based on local deposits.
Top
4. |
|
The Debit Card Of The Future Is Flat
By Jen Stryker
May 27, 2010 Bankaholic.com |
TD Bank has begun issuing debit cards without raised numbers.
Theyre perfectly flat, with the numbers just printed on the front.
Even though some retailers think the cards are fake, theyre not only legit, theyre probably what
all debit cards will look like in a few years.
Credit and debit cards needed raised numbers back in the day when retailers made carbon copies of
receipts with imprint machines.
But when was the last time you saw one of those?
A spokesperson said TD Bank is switching to flat cards because they can be made in any of its 1,000
branches, from Maine to Florida.
Customers can have a new debit card in their hands in just five minutes, whether theyre replacing
a lost or stolen card, or opening a new account.
No more waiting five to 10 business days for it to arrive in the mail.
How cool is that? I certainly want my bank to do this.
Top
5. |
|
Canadian Banks: Go Big or Go Home
By Erik Heinrich
May 27, 2010 Fortune |
With many of their rivals on the ropes, Canadas major banks are nicely positioned to catapult into
the top tier of U.S. financial institutions for the first time ever.
Page 7 of 17
The main reason is that the countrys banks famously skated through the subprime and derivatives
meltdown of 2008 with no government bailouts and comparatively few writedowns. As a result they
replaced their Swiss rivals as the international standard for banking excellence and readied
themselves for cherry-picking the best assets in the distressed banking industry south of the
border.
On the surface, it looks like theyre on a U.S. buying spree. Since mid-April, three major Canadian
banks TD Bank Financial Group, Bank of Montreal (BMO) and Bank of Nova Scotia have
collectively acquired six failed U.S. institutions. All the acquisitions were cautiously negotiated
with the U.S. Federal Deposit Insurance Corp. (FDIC), which is taking on a heavy share of the
potential loan losses.
But critics say the Big Five are playing it too safe, content to remain third- and fourth-string
players in the U.S. markets where they operate, when they should be aiming for the No. 1 spot. If
ever there was a time to do it, its now, but Canadian banks dont seem to have the nerve to bust
out and become truly global players.
That kind of reticence from the boardroom could be fatal for the future of Canadas major banks,
who run the risk of growing stagnant behind cushy domestic regulations that make it impossible for
foreign rivals to compete on an equal footing. Consider that the six recent acquisitions add up to
a mere US$22 billion in new assets for the buyers. Thats about 1% of total assets for these
pillars of Torontos Bay Street little more than a token gesture to make it seem Canadas banks
are not entirely asleep at the wheel.
Analyst Michael Goldberg with Toronto-based Desjardins Securities agrees the U.S. market offers a
rich opportunity for Canadas super-capitalized banks. TD in recent years has been most aggressive
in building its U.S. franchise, he says. But reaction has been mixed. Some investors are very
skeptical anytime Canadian companies buy anything in U.S.
Earlier this month, TD Bank (TD) acquired South Financial Group for US$61 million, adding more than
100 branches to its 1,000-plus locations in the Maine-to-Florida corridor. This follows on the
heels of buying three small Florida-based institutions closed by regulators.
BMO (BMO), which bought assets of failed Illinois lender Amcore Bank, adds 52 branches in Illinois
and Wisconsin, building on an existing network of 288 branches at its Harris subsidiary.
Toronto-based BMO made its big U.S. push with its C$718 million (US$682.1 million) acquisition of
Harris in 1984. It has since spent about C$2.5 billion (US$2.4 billion) buying U.S. banks, but only
reached the No. 3 spot in Illinois by deposits.
Scotiabank (BNS) is the third Canadian lender to take advantage of U.S. government-assisted
acquisitions, snapping up R-G Premier Bank of Puerto Rico, building on the 17 branches it already
has on the Caribbean island. However rival Banco Popular de Puerto Rico acquired the deposits of
Westernbank at the same time, securing its position as the largest insured bank on the island,
despite the fact that Scotiabank has been doing business in tiny Puerto Rico for 100 years.
Canadas big banks can afford to casually dabble in foreign markets because their domestic
operations are reliable money-making machines that deliver billions of dollars in profit quarter
after quarter.
But those profits come at the expense of Canadian consumers and small businesses, poorly served by
a clubby group of banks whose domestic operations are perhaps the least competitive in the
Organization for Economic Co-operation and Development (OECD), an
Page 8 of 17
international group of 31 developed countries, including the U.S., Australia and South Korea, with
free-market economies.
If Canadas major banks are not prepared to go big in the U.S., they should just pull stakes and go
home
Top
6. |
|
Parenting Perspective: Summer Slide
By Amy Buckman
May 27, 2010 WPVI-TV (PA) |
I was talking with other Moms during my son Micahs Little League game the other night. The topic
was homework or the lack of it in recent weeks from our sons teachers. Now, Im as ready for
summer as anyone. And believe me, Micahs not complaining. But school isnt over yet and we all
noticed that the teachers have just about given up on giving the kids work to do after school. And
frankly, Im not sure this is a good thing.
Linda Gambrell, former President of the International Reading Association, writes Most U.S.
students go to school for nine months each year. Most grow in their knowledge and skills during
this time. When summer comes along, however, many students, particularly those from
low-socioeconomic families, experience summer learning loss.
She adds, Research indicates that struggling learners score significantly higher on standardized
tests taken at the beginning of summer vacation than they do on the same standardized tests taken
at summers end. This loss is particularly evident in reading, and it is most pronounced among
students from low-socioeconomic families, who may not have access to books.
Thats why I think its very important to keep kids reading throughout the summer. Many local
libraries have Summer Reading Clubs. Joining these clubs is free and many give out prizes once
children have read a certain number of books. Even if your child cant read yet, they can count
books you read to them in their total. I remember the excitement all of my boys showed when we
would go to the library each week over the summer to have the Librarian stamp their tally sheets.
The prizes were cheap toys (that usually broke before we even got them home), but the library
program kept them excited about reading, even when they werent in school. The Philadelphia Free
Library will be posting information about its Summer Reading Program at
http://libwww.freelibrary.org/summerreading/.
Now, some bookstore chains are getting in on the act as well. Kids who join Barnes and Nobles
Summer Reading Club can pick a free book after they read eight books, they can get a free book from
the store. Borders has a similar deal, when children read 10 books. Obviously, these stores are
hoping youll shop when your kids bring in their completed book sheets, but you dont have to.
Theres even a bank that will pay your child to read. TD Bank will put $10 into your childs
savings account (or open an account for your child) when he or she reads ten books.
These programs can give kids incentive to read over the summer, but you still may have to push them
a bit. Dr. Joanne Meier, a consultant with Reading Rockets, suggests these tips for parents: Help
your child pick books that are on their reading level (if they can read with five or fewer mistakes
per page, thats a good clue). Listen to your child read aloud every
Page 9 of 17
day (you can do this outside, even by the pool or beach). Let them repeat the books they love. Read
books that are bit more advanced out loud to them.
The people at Reading is Fundamental add that you shouldnt set time limits on summer reading, and
make sure your kids see you taking time to read each day.
The one homework assignment Micah is still getting every night is his 30 minutes of reading. He
loves the Hardy Boys mysteries. And you can be sure Ill be sending them to camp with him ... and
Ill have another supply when he gets home.
Top
7. |
|
TD Bank Profits Rise 45 Percent
By Eileen Smith
May 28, 2010 Courier-Post (NJ) |
CHERRY HILL Profits at TD Bank, the U.S. subsidiary of Toronto-based TD Bank Financial Group,
rose 45 percent compared to the second quarter last year, thanks to growing deposits, personal
loans and higher fees.
Thursday, TD said its U.S. operation netted $241 million. Earnings at TDs Canadian banks rose 29
percent.
Our U.S. operations delivered improving results despite an economic picture that remains less
robust than what were seeing in Canada, CEO Ed Clark said in a statement.
Overall, TD earned $1.12 billion or $1.24 a share, compared to $519.7 million or 56 cents a share a
year ago.
TD also logged its lowest level of loan losses in six quarters.
The bank attributed that to improved credit quality north of the border, as Canadians displayed
greater diligence in repaying their loans.
Loan losses have turned a corner and it seems that the economic recovery is taking hold in
Canada, Clark said.
On the U.S. side of the border, TD batted back provisions for bad loans 37 percent to $162 million
in anticipation of a strengthening economy. Still, TD took a hit in corporate operations due to
higher expenses, going $155.5 million in the red on that front.
Domestic and U.S. retail banking earnings were well above our expectations, Andre-Philippe Hardy,
an analyst with RBC Capital Markets, wrote in a brief to investors, while wholesale and corporate
earnings were well below.
Top
8. |
|
Investment Fund Suing for $61 Million Lost in Rothstein Scheme
May 28, 2010 Daily Business Review |
Page 10 of 17
An investment fund claiming a $61 million loss in Scott Rothsteins phony settlement financing
scheme is suing the convicted felon and TD Bank, claiming the money disappeared in the final two
months before the fraud came crashing down.
A total of $30 million in investment funds from New York-based Emess Capital was cleaned out of
Rothstein Rosenfeldt Adlers TD Bank trust accounts in a six-day period just before the law firm
chairman flew to Morocco, also the destination of a $16 million wire transfer by TD Bank, a federal
racketeering lawsuit filed Wednesday claimed.
Emess received reassuring account printouts and meetings with Rothstein, TD Bank senior vice
president Frank Spinosa, Weston, Fla., branch manager Rosanne Caretsky and Weston branch supervisor
Ricardo Mejia about its investments and the safety of the accounts, Emess attorney David Mandel of
Mandel & Mandel in Miami alleged in the suit assigned to U.S. District Judge Joan Lenard in Miami.
Emess now claims its dealings with the bank were riddled with critical false and fraudulent
representations supporting Rothsteins criminal ventures.
Asked about the lawsuit Thursday, TD Bank spokeswoman Rebecca S. Acevedo said, We just received it
and are reviewing the matter.
Emess noted a similar suit filed by Coquina Investments, another investor in Rothsteins $1.2
billion fraud, against him and the bank is pending before U.S. District Judge Marcia Cooke in
Miami.
Top
9. |
|
Southeast Business Briefs
June 1, 2010 Florida Trend Magazine |
Riverside National Bank of Florida, a 58-branch bank with $3.42 billion in assets and $2.76 billion
in deposits, failed. Its deposits and nearly all assets were sold by the FDIC to TD Bank. TD also
acquired the assets of failed AmericanFirst Bank in Clermont and First Federal Bank of North
Florida in Palatka. The FDIC estimated that Riversides failure would cost its deposit insurance
fund $491.8 million. The failures brought the total in Florida to nine this year.
Top
10. |
|
Merrimack Valley in a Minute
May 28, 2010 Eagle-Tribune (MA) |
The Lawrence Public Library was one of 10 libraries in Massachusetts to receive a total of $40,000
from the TD Charitable Foundation.
The donation from the charitable arm of TD Bank was part of National Library Week celebration in
April, which kicked off the banks Summer Reading Program. The program not only encourages
youngsters to read, but teaches them the importance of saving and money.
Page 11 of 17
TD Bank contributes $10 into a new or existing Young Saver account for each child who reads 10
books throughout the Summer Reading Program, which runs through Sept. 30.
Top
INDUSTRY NEWS
1. |
|
Battle Over Preemption Hinges on Fine Print
Senate language gets industry nod over houses
By Cheyenne Hopkins
May 28, 2010 American Banker |
WASHINGTON While both the House and Senate financial reform bills claim to restore the so-called
Barnett standard for preemption of state law, that has not stopped federal and state regulators
from continuing to battle over the issue.
The Office of the Comptroller of the Currency and the banking industry are backing the Senate
version, which they argue more explicitly restores that standard and would protect decades of
precedent surrounding the issue. State regulators and consumer groups prefer the House provision,
which they view as more flexible and which would force the OCC to take additional steps before
preempting a law.
The Senate bill is in my mind just hugely preferable, said Howard Cayne, a partner at Arnold &
Porter. The benefit of the Senate version is it doesnt reopen for years of litigation questions,
close calls that have been resolved.
At issue is the 1996 Barnett Supreme Court case, which said that the OCC could preempt state law on
a case-by-case basis. Though lawmakers in both chambers claim that is their goal, the Senate bill
explicitly references the Barnett decision, while the House borrows some of its wording but does
not name it.
Instead, the House version says that the OCC can preempt a law if it prevents, significantly
interferes with, or materially impairs the business of banking.
Banking lawyers see that as a big difference, saying its failure to cite the case and addition of
new language could make it harder for the OCC to win a court fight over preemption.
The House bill establishes a new standard for determining if a state law is preempted, said Ray
Natter, a partner at Barnett Sivon & Natter PC. While this standard is intended to be the same as
the standard used by the Supreme Court in the Barnett case, the fact that it does not cite the case
can create some questions.
The House language also would force the OCC to take additional steps before preempting a statute,
including proving that a substantive federal law exists that tackles the same issue the state law
is trying to address. This creates a new requirement not found in current law, and no doubt that
would lead to extensive litigation over whether this hurdle had been met, Natter said. It is for
these reasons that the Senate bill is closer to the stated congressional goal of maintaining the
Barnett case.
Page 12 of 17
Art Wilmarth, a professor at George Washington Law School, said there will be an increase in
litigation no matter which side prevails. If the House bill gets passed, the whole focus is going
to be on the words materially impair, he said. If the Senate language passes, the question is
going to be what is the Barnett standard. Either way, there is going to be a lot of litigation over
what the standard is.
The OCC and bankers said they would have a better shot of winning those court battles if the Senate
version were adopted. By explicitly referring to the Barnett case, the courts will defer to other
precedents concerning that decision. We think its important that precedent thats been in place
for 150 years be preserved, said Ken Clayton, chief legislative counsel for the American Bankers
Association. We think the Senate version is clearer in directing the courts in what Congress
meant.
Several cases since Barnett have relied on that decision, including the 2007 Supreme Court case
Watters v. Wachovia, which said that the operating subsidiaries of national banks enjoy the same
preemption powers from state consumer protection laws as their national bank parents.
What we have with Barnett is a series of court cases that have followed Barnett so we know what
courts would likely do with Barnett, said Robert Cook, a partner at Hudson Cook LLP. You have to
think that a court looking at the House version will first say they didnt adopt the Senate
language, so they must mean something different, so right off the bat you are going to get
something different.
But John Ryan, an executive vice president at the Conference of State Bank Supervisors, said the
point of the bill is not to reaffirm existing law.
By that argument wed really be saying this is all for nothing, he said. I dont think weve had
such a big debate to come to a result that is purely a blessing of what the OCC has already done.
Some industry representatives said that no matter which version is included in the final bill,
bankers have already lost on the issue.
I dont like either quite frankly, because I think both will lead to confusion and litigation,
said Richard Hunt, president of the Consumer Bankers Association. Its like asking which sister do
I want to kiss. ... Dont think we are up here jumping for joy that the Senate measure was a little
more measured than the House language. If they accept the Senate language it will still be
problematic.
The House and Senate preemption provision also differ on how much power to give state attorneys
general. While both bills would give them more authority than they currently have, the House bill
would let state AGs enforce any federal law against national banks. The Senate bill, however, would
only allow states to enforce federal rules promulgated by a new consumer protection regulator. The
Senate bill also limits AGs to actions within their own states.
Although the OCC and bankers oppose both provisions, if forced to choose they would pick the Senate
version. Its not only the law thats out there, but its the types of cases you bring and the
positions you take in court, said Ron Glancz, a partner at Venable LLP. You need uniformity. If
you have 50 AGs, they are going to argue the same federal law, but they are going to have
discretion on their interpretation.
Page 13 of 17
Clayton said that even if the Senate version prevails on that issue, there could be trouble.
We believe its an invitation to politicizing bank regulation, he said. In some respects it may
more greatly complicate it, because now you will have varying states seeking to litigate
enforcement in ways that may or not be consistent with what the [consumer agency] or OCC want to
do.
He suggested the change may not even be necessary if the administration is creating a strong
consumer agency. It does open the question of why you would need to up end the current state of
play of preemption, he said.
But Ryan said national banks should face additional enforcement, like other businesses. Why do
national banks deserve protection that almost no one else in our economy gets? he said. Why do
they get excluded from enforcement at the state level when the biggest car companies, oil
companies, Wal-Mart gets subjected to it? What social function are they performing that would
exempt them from the full range of possibilities our democracy presents?
What version will ultimately prevail remains unclear. Sen. Tom Carper, D-Del., who authored the
provision in the Senate bill, said last week he was confident it would be included in the final
bill. Some analysts agree.
I suspect the compromise on the Senate side will carry the day, said Raj Date, the chairman of
the Cambridge Winter Center for Financial Institutions Policy.
Top
2. |
|
White House Focuses on Five Regulatory Reform Priorities
By Cheyenne Hopkins
May 28, 2010 American Banker |
The Obama administration continued to push its priorities Thursday on what provisions should be
included in the final regulatory reform bill.
Neal Wolin, Treasury deputy secretary, said the administration was focused on several things,
including subjecting retail brokers to a fiduciary duty, preventing auto dealers from being
exempted from consumer protection and ensuring the so-called Volcker Rule is part of the final
bill.
As conferees begin the process of reconciling the remaining differences in the two bills, we will
continue to fight for the strongest financial reform bill possible, Wolin at a speech before the
Financial Industry Regulatory Authoritys conference in Baltimore. And we will oppose any attempts
by particular interests to use the conference process as an opportunity to weaken the final bill.
He said the administration will work to include the Volcker Rules ban of proprietary trading and
limit on the size of financial firms. The Volcker Rule is part of the Senate bill but not
explicitly included in the House.
Page 14 of 17
Wolin also said that the administration will seek to maintain safeguards to prevent resolution
authority being used unless necessary but also maintain flexibility to act in a time of crisis.
In an interview on CNBC before the speech, Wolin once again dodged taking a position on a provision
in the Senate bill that would force banks to spin off their derivatives business. We want to make
sure dealers are well regulated, that we have transparency, central clearing and so forth, he
said.
Top
3. |
|
Bernanke Extended Period May Be Curtailed as Credit Improves
By Bob Willis and Anthony Feld
May 28, 2010 BusinessWeek |
Consumer delinquency rates are dropping at U.S. retailers and banks such as American Express Co.
and Bank of America Corp., signaling an incipient lending thaw that may spur economic growth.
Past-due loans at Bank of America, the second-largest card lender, fell for a fifth month in April
and by the most in four years, while AmExs delinquencies were down 34 percent from a year earlier.
Target Corp., the second-largest U.S. discount retailer, last week reported its lowest delinquency
rate in the latest quarter since the second quarter of 2008.
With fewer tardy borrowers to worry about, banks are more likely to extend fresh credit to American
consumers, whose spending makes up 70 percent of the economy. That may weaken Federal Reserve
Chairman Ben S. Bernankes commitment to an extended period of low interest rates once policy
makers determine the European debt crisis no longer poses a risk to the recovery, said economist
Stephen Stanley.
Then we get back to the scenario where the U.S. banking system is gradually healing, credit
quality is gradually improving and creditworthiness of borrowers is improving, said Stanley, chief
economist at Pierpont Securities LLC in Stamford, Connecticut. Some evidence of stability in the
banking sector is an additional precondition to normalizing monetary policy.
U.S. central bankers on April 28 kept the benchmark federal funds rate in a range of zero to 0.25
percent, where it has been since December 2008, and said subdued inflation and high unemployment
are likely to keep rates exceptionally low. They repeated their assessment that consumer spending
was likely to be restrained by tight credit.
Reasons for Optimism
Bernanke, in a May 6 speech in Chicago, said bankers attitudes on lending may be shifting,
citing as reasons for optimism the economic recovery and expectations among senior loan officers
for a modest reduction in troubled loans. The comments were overshadowed by that days 9.2
percent intraday plunge in the Dow Jones Industrial Average, which was sparked in part by concerns
about euro-zone defaults.
The Fed chairman is getting closer to saying the economy has reached a turning point, and the
confidence he expressed was overlooked due to the markets extreme volatility, said
Page 15 of 17
Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. When we
look back some months from now, his remarks may be seen as prescient in forecasting a sustainable
economic recovery.
Loan Officer Survey
The Feds latest survey of senior loan officers, released May 3, showed the smallest proportion of
banks in two years restricted lending standards in the first quarter. Other Fed data released May 7
showed consumer borrowing unexpectedly rose in March for the second time in three months, signaling
Americans are becoming more optimistic about the recovery.
One of the factors the Fed watches when deciding when its appropriate to begin normalizing rates
is when banks stop tightening lending standards, said Dean Maki, chief U.S. economist at Barclays
Capital Inc. in New York. This is starting to happen.
Economists surveyed by Bloomberg between April 29 and May 10 cut their forecasts for Fed rate
increases to a quarter point rise in the fourth quarter from the half point gain forecast in the
month-earlier survey.
If lending standards start to stabilize, thatll be another reason to remove the emergency
measures, including the zero rate, said Jay Bryson, a senior global economist at Wells Fargo
Securities LLC in Charlotte, North Carolina, who formerly worked at the Fed in Washington.
Target Profits
Minneapolis-based Target reported May 19 that credit-card loans more than 60 days overdue declined
to 5.3 percent of the total in the first quarter, from 6.3 percent in the previous period, helping
it post profits that beat analysts projections.
Citibanks new U.S. card account originations fell 17 percent in March from a year earlier, about
half the 35 percent drop posted in January. Originations climbed 3 percent in February, which was
the first annual gain since the data started being reported in Oct. 2008, according to the
Treasurys monthly lending report.
The fundamentals here in the U.S. are suggesting the Fed should already be on a path towards
tightening, said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in
Philadelphia, which manages about $30 billion in client accounts. They should already be taking
some action to be preparing to raise rates; however, the drama overseas is likely to encourage
policy makers to pursue a cautious path.
Top
The Daily News Brief is published exclusively for the Employees of TD Bank; please do not
distribute outside the company.
The information presented may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and comparable safe harbour provisions of
applicable Canadian legislation, including, but not limited to, statements relating to anticipated
financial and operating results, the companies plans, objectives, expectations and intentions,
cost savings and other statements, including words such as anticipate, believe, plan,
estimate, expect, intend, will, should, may, and other similar expressions.
Page 16 of 17
Such statements are based upon the current beliefs and expectations of our management and involve a
number of significant risks and uncertainties. Actual results may differ materially from the
results anticipated in these forward-looking statements. The following factors, among others,
could cause or contribute to such material differences: the ability to obtain the approval of the
transaction by The South Financial Group, Inc. shareholders; the ability to realize the expected
synergies resulting from the transaction in the amounts or in the timeframe anticipated; the
ability to integrate The South Financial Group, Inc.s businesses into those of The
Toronto-Dominion Bank in a timely and cost-efficient manner; and the ability to obtain governmental
approvals of the transaction or to satisfy other conditions to the transaction on the proposed
terms and timeframe. Additional factors that could cause The Toronto-Dominion Banks and The South
Financial Group, Inc.s results to differ materially from those described in the forward-looking
statements can be found in the 2009 Annual Report on Form 40-F for The Toronto-Dominion Bank and
the 2009 Annual Report on Form 10-K of The South Financial Group, Inc. filed with the Securities
and Exchange Commission and available at the Securities and Exchange Commissions Internet site
(http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial Group,
Inc. will be submitted to The South Financial Group, Inc.s shareholders for their consideration.
Shareholders are encouraged to read the proxy statement/prospectus regarding the proposed
transaction when it becomes available because it will contain important information. Shareholders
will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings
containing information about The Toronto-Dominion Bank and The South Financial Group, Inc., without
charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in the proxy
statement/prospectus can also be obtained, when available, without charge, by directing a request
to The Toronto-Dominion Bank, 15th floor, 66 Wellington Street West, Toronto, ON M5K 1A2,
Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc., Investor
Relations, 104 South Main Street Poinsett Plaza, 6th Floor, Greenville, South Carolina 29601,
1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on December 03, 2009,
and in its notice of annual meeting and proxy circular for its most recent annual meeting, which
was filed with the Securities and Exchange Commission on February 25, 2010. Information regarding
The South Financial Group, Inc.s directors and executive officers is available in The South
Financial Group, Inc.s proxy statement for its most recent annual meeting, which was filed with
the Securities and Exchange Commission on April 07, 2010. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.
Page 17 of 17
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF TD BANK,
AMERICAS MOST CONVENIENT BANK AND THE TORONTO-DOMINION BANK ON MAY 24, 2010
Daily News Brief
May 24, 2010
Compiled by Brittany Roberge, Corporate and Public Affairs
TD BANK NEWS
1. Intelligent Investing With Steve Forbes Transcript/Video: Bharat Masrani
Forbes
Canada Missed Much of Crisis. Steve Forbes: Bharat, very good to have you with us. And first with
the parent, how did TD and others in Canada avoid the excesses that seemed to have flipped the rest
of the world? [TD Banks Bharat Masrani is quoted.]
2. Get Briefed: Bharat Masrani Forbes
About Bharat Masrani. Bharat Masrani is the chief executive officer and president of TD Bank. He is
also a member of the TD Bank board of directors.
3. TD Bank Eschews Holy Grail For Banks and Rides Out Economic Storm
Forbes Blog
In a move that was vilified by the banking community, TD Bank Financial Group the 154 year old
Canadian-based institution got out of the structured products game in 2005 before the entire
financial landscape started to buckle and heave under the weight of a global economic crisis. TD
Banks President & CEO Bharat Masrani speaks about why his company shed some of its financial
baggage in the next edition of Intelligent Investing With Steve Forbes.
4. Horizon Misses Deadline to Disclose Financial Data Herald Tribune (FL)
The parent of struggling Horizon Bank of Bradenton has yet to file its first-quarter earnings
report, prompting a notice to regulators. [TD is mentioned.]
5. Vigil Planned To Oppose Bank Construction News Record (NJ)
The Concerned Citizens of Union County (CCUC) are planning to hold a weekly Friday after noon
vigil, beginning today, to oppose the construction of a TD Bank branch at the corner of Morris and
North Avenues on the Elizabeth, Hillside and Union border. The vigil will take place from 5-6 p.m.
6. Giving News in Brief PhilanthropyJournal.com
TD Charitable Foundation, charitable arm of TD Bank, donated $300,000 in to public libraries from
Maine to Florida.
7. Berkshire Athenaeum Will Offer Summer Plan for Kids Berkshire Eagle (MA)
Page 1 of 21
The Berkshire Athenaeum, and some of its younger patrons, are getting a few extra dollars. TD Bank
has launched a two-pronged initiative through its TD Charitable Foundation to give public libraries
across the country a boost in the wake of dwindling public funds.
8. TD Bank Donates Supplies to Tools for School Program
St. Augustine Record (FL)
Kelly Bland, Vice President of First Federal of North Florida now TD Bank of North America recently
presented the St. Johns County Education Foundations (SJCEF) Tools for School Program with two
truckloads of office supplies.
9. Will Carolina First Owner Aid Communities? The Greenville News
Joel A. Smith, retired dean of the University of South Carolinas Moore School of Business, knows
how the acquisition of a local bank and the loss of a bank headquarters can affect a community.
[Toronto Dominion Bank is mentioned.]
INDUSTRY NEWS
1. Mortgage Rates Decline Wall Street Journal
The financial turmoil in Europe is providing an unexpected windfall for American home buyers, as
international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates
to the lowest levels of the year and back near 50-year lows.
2. Reg Reform Bill Misses Opportunity to Overhaul Agencies
American Banker
Though House and Senate lawmakers still have plenty of issues to work out in the final regulatory
reform bill, one thing is already clear: The legislation will do little to streamline the fractured
financial regulatory framework.
3. Economists See Solid U.S. Growth Wall Street Journal
The U.S. economy should expand at a solid pace this year and next as consumers increase spending,
confident the recession is behind them, a panel of economists said in a survey released Monday.
TD BANK NEWS
1. |
|
Intelligent Investing With Steve Forbes Transcript/Video: Bharat Masrani
TD Bank CEO Discusses The Wow Culture That Makes His Bank Different.
May 24, 2010 Forbes |
Video:
http://www.forbes.com/2010/05/21/masrani-td-canada-intelligent-investing-video.html?feed=rss_europe
Transcript:
Canada Missed Much of Crisis
Page 2 of 21
Steve Forbes: Bharat, very good to have you with us. And first with the parent, how did TD and
others in Canada avoid the excesses that seemed to have flipped the rest of the world?
Bharat Masrani: Well, thanks for having me here and good to see you. Well, we in Canada, obviously
as now is well advertised, you know, avoided most of the financial turmoil that went on around the
world. And the answers are many-fold. But if you look at Canadian banking generally, we have five
or six banks that control most of the banking business in Canada. So the banks are global in scale,
very large, very well managed. Obviously Im biased.
And we also have a regulatory and a competitive structure that allows us to withstand a lot of the
turmoil that you see in the world. For example, in our case, if I take the example of mortgages, in
Canada, banks are encouraged to hold mortgages. Most of those mortgages are low-risk. A lot of them
guaranteed by the government of Canada. And the way our capital rules work, the way our leverage
ratios work, banks are encouraged to carry that. So when you have that, when you have sustainable
earnings, you know, the business models are pretty good. You have low volatility in your earnings.
So most Canadian banks were able to weather the storm profitably and in our case, we were able to
grow our bank through this cycle.
Forbes: Now, a couple years ago, you got out of certain areas that you thought were getting a
little dicey. Can you explain that?
Masrani: Yeah, it was actually about four or five years ago. Ill give you a bit of background. The
TD Bank Financial Group, our banka 154-year-old bank, full-service, quite global and we used to
be one of the top 10 banks in structured products from a global perspective[we] decided four or
five years ago that it was a business where the risk-reward was not obvious. There was lack of
transparency. Markets were not as liquid as people thought they were.
And valuations were very difficult. In fact, you know, most of the valuations were based through
modeling. So when we looked at that, we decided to exit the business. And it was not an easy
decision. In fact, you know, we were vilified by the community saying, You know, you guys are
leaving when this is the next holy grail for banks. We are happy we did. What that did was it
positioned us for this particular cycle in a manner that frankly, you know, it was not an issue for
my bank.
The Wow Culture
Forbes: You touched on [the fact that] youve got a growing presence, dramatically growing
presence, in the United States. And one question we have to ask is, when you bought Commerce Bank
Corp., which was an unusual bank, its culture seems to have overtaken you. Here you are a Canadian
and youre supposed to be much more formal than we in the U.S. And here you are, you have your pin,
you call your branches stores. You have the formal name, Americas Most Convenient Bank. Whats
going on here?
Masrani: Well, you know, there must be something about the Canadian stereotype, and obviously we
are not that. You know, when you look at it, the model we run in Canada is centered around service
and convenience, which is no different than what we have in the United States. You know, now we
have, as you rightly pointed out, 1,100 stores from Maine to Florida. We are TD Bank, Americas
most convenient bank. We believe that the only way to differentiate in our business, to have
sustainable differentiation, is through service and
Page 3 of 21
convenience, you know, products and price can
be matched in a millisecond. So thats our
model. And we believe in the wow culture. You know, thats what we do day in and day out. Our
people matter. You know, for us, we dont make cars. We dont make screwdrivers. We got to reinvent
ourselves every day. So were very happy with our presence in the U.S.
And people ask me, you know, as to how is it going, because the timing from a macro perspective,
some might have suggested this is a difficult time in banking. Frankly, for us, this has been a
fantastic time to grow our bank. And were very happy with how it has turned out. So youre right,
our culture is unique, but that makes the difference. In our case, you know, its our people. Its
the wow culture. And like I suggested to you earlier, try our bank. You know, you will be happy
with what you see.
Forbes: Now some of the things you doand maybe you could answer the question [of] why others
havent done itis you have things like lollipops, dog biscuits for peoples dogs. What other
things do you do? And why dont others have dog biscuits or cat biscuits or whatever?
Masrani: Yeah, so, you know, we could spend hours here and Id enjoy doing that. But from a
big-picture perspective, we are Americas most convenient bank. Most institutions would define
convenience as just hours. And yes, thats an important component. But for us, you know, its
convenient in everything you do with us. You know, if you are married, were going to make it
convenient for you. If you happen to be, you know, have a pet, well make it convenient for you. If
its raining outside, well make banking convenient for you. So we mean what we say. Its not just
a tag line. You know, thats what we do. And so, you know, if you have change, you can walk into
any of our stores and theres a penny arcade, you know, you can have your coins counted for you. We
make it fun for the kids. And for us, this is what wow culture is all about.
Now, you asked me how come others cannot just copy you. I wonder sometimes, but I think it is more
difficult than people realize. So for example, you know, we are open on Sundays in most of our
network, and we are open late. So what does that mean? It means that, you know, your hiring
practices, your training, you know, your staffing models are all unique to fit that particular
model. It is one example I give you. So, you know, I think its not an easy thing to copy. There
are barriers to this model. And Im happy there are because, you know, we are unique in that
regard.
Forbes: You mentioned training. You have, you might call it, a bank university.
Masrani: We do: TD University. Yeah, Mount Laurel, N.J.
Forbes: Which is a little unusual. Describe some of the unusual characteristics of this place.
Masrani: Well it is, frankly, a university. You know, its a great facility. In fact, you know,
obviously Im biased, but we were ranked among the top training places. I forget the exact ranking,
but it was in the top 125 globally. So what we do is, you know, for us culture is critical. So the
day new employees walk in, you know, we go through an intense program of what the bank is all
about. You know, how do we wow our customers? What do we stand for? Service and convenience is
critical. And, you know, what does it take to provide that first-class service day in and day out?
So thats one component.
Forbes: And a training facility is not the usual classroom.
Page 4 of 21
Masrani: Yeah, well, you know, and we have our employees go back to the university on a regular
basis so that, you know, we keep our programs very fresh. And frankly, you know,
we spend a lot of money training our people, you know, having the facility. And its critical for
our model. Its a differentiation. And were happy that were able to do that.
Greece Vs. California
Forbes: Going to a macro question, what do you think will be the knock-on impact of Greece?
Because, as you know here in the United States, we have our Greeces. Some of the states like
California, we all know are in trouble. Many municipalities are in trouble. How do you see all of
that playing out, and what impact is that going to have on economic growth?
Masrani: I mean, obviously what is going on is not pleasant to watch, and there are no easy
answers. These things get developed over many, many years of problems. And we see the culmination
of that. My view is theres no easy way out here.
I think, you know, there is a bailout now, thats what we hear. And Im sure there will be some
impact. But it is going to be difficult. When you have a dislocation of the type weve seen, it
takes a long, long time. And, you know, its unfortunate that a lot of the Europeans will be
suffering through it. So theres no easy answer. I think this will take time. It is going to take a
huge amount of discipline within Europe. In the U.S, there are issues, obviously. You know, we are
here. But there appears to be more flexibility I would say. You know, once the economy starts to
strengthen, Im sure some of the finances in certain states will improve. But there are certain
fundamental issues people will have to grapple with. You know, you cannot run deficits like we have
been. So Im sure there would be implications. But I see over the long term, I feel much better
what can be done in the U.S. than on a macro basis internationally.
Commercial Real Estate
Forbes: Let me ask you on commercial real estate, where everyone knows there are problems there.
How do you see that unfolding?
Masrani: Yeah, so in my banks case, just to give you some sense, you know, recessions hurt banks.
There is no way out of it. You cannot avoid them because we are in the risk-taking business. But
what have we done? In our case, you know, we have been a positive outlier through this cycle. And
how did we do that? So our losses are much less than our peer group such that were, you know,
still very profitable in the U.S. alone.
And we were able to do that by making sure that the conservative risk management culture, you know,
that we are able to maintain that. We made sure that we stuck to our footprint. We did not, you
know, mess around in markets that we did not know. And frankly, we originated our own loans. You
know, we did not go out and buy loans from others. Now, I give you that background is that when you
have that situation, yes, commercial real estate might be difficult, you know, from a macro
perspective. It has been difficult in certain parts of the country. It has been a disaster. But
there are parts of the countrywe are central in the Northeast of the U.S. You know, we have a
growing presence in Florida, but we are pretty small there, so we didnt suffer the Florida market
as such. But that is an issue. But I feel that, you know, the marvel of the United States is that
when the economy turns, you know, the more people come in, theres more confidence.
Im already seeing some signs of deals happening in the market. So Im not as pessimistic. I think
yes, its not going to be smooth sailing. But I dont see a major, major disaster either.
Page 5 of 21
Bank Regulation
Forbes: In terms of bank regulation, are bank examiners easing up a little bit? Because we heard
stories if a bank made a loan, boy, you have to be really ready to defend it. And are they being a
little more reasonable now, more common sense, or is it still a jagged curtain?
Masrani: This might sound unusual, but I think as a bank, were all on the same side. You know,
theres no us vs. them, as long as we do the right things, and so I dont particularly find that
difficulty. In fact, our bank, through this recession, has grown. We are upping our loans when the
whole industry is down.
You know, we are making mortgages and happy to make the mortgages. We are ahead in our HELOC [home
equity line of credit] book. So weve grown our bank through this recession. And Ive had no
difficulty with any of my stakeholders, including the regulators, to execute on that strategy. So,
you know, I read the same, you know, newspapers as you do, but I havent come across, you know, any
major issues in my day-to-day running of how we manage our book or how we grow our book.
Growth and Acquisitions
Forbes: Youve made some acquisitions via the FDIC, [in] Florida and elsewhere. Do you see more
opportunities cropping up with the failed banks that you can move in on?
Masrani: So for us, you know, the great competency we acquiredand weve had that in Canada over
many, many yearsis ability to organically grow. So my bank, in the U.S., we opened 33 new stores
last year. Im not aware of many banks that are opening new locations. We opened 33 new stores.
Were going to be opening 32 this year. Now thats very much part of our network. You know, we
continue to invest in our people. We continue to invest in our brand.
So that allows us to grow organically. But should a compelling opportunity come upand, you know,
my view is Riverside and the two small banks that we bought in Florida were in that categoryof
course we will look at it. You know, weve said that if there is a sensible way to acquire where we
are not going to be taking risks that we do not understand, if there is transparency on the asset
side of the balance sheet, of course we will do that. You know, sad to say, but theres only three
banks listed on the New York Stock Exchange that are AAA rated. One of them is TD Bank Financial
Group. So we have the capital. You know, we have the right strategy from my perspective. And if
there is an opportunity out there that makes sense and that fits our model, of course we will
pursue that.
And thats where Riverside and the two banks you mentioned in Florida that fit that category for
us.
Forbes: So-called reform, regulatory, federal regulatory reform, taxes on banks, thats not going
to be helpful, is it?
Masrani: It is tough to comment on whats going to happen. But, you know, take the tax issue, just
to use that as an example. You know, does it make sense? Perhaps, you know. What should it be?
Maybe, you know, some people much smarter than I will figure that out.
But having said that, now, if you look at the premise, the original premise of the tax, was that,
OK, the funding is going to be used to recoup, you know, some of the TARP funds. It is
Page 6 of 21
to make sure
that, you know, banks that receive favorable treatment that theyre able to, you know, pay back in
some way. Well, say in our case, TD Bank Financial Group, we did
not take one dollars worth of TARP. We did not take any bailout funds from any country in this
world. We grew our bank. Were more profitable. In fact, we announced our results last quarter. We
had record profits, very profitable in the United States, growing our bank. So if the premise is to
recoup, you know, from banks that took TARP, then obviously, you know, it doesnt make sense for my
bank. But if theres some other way to look at this then obviously, you know, we are open to
looking at and whatever the laws are, we will follow them. But, you know, I think this is a more
complicated subject, and whats the premise and, you know, how do banks manage around it?
Need Capital Requirements
Forbes: How should Washington deal with this thing called too big to fail? Is it more sensible
capital requirements? Because it would seem that creating a fund almost guarantees what you saw
with Fannie Mae ( FNM news people ) and Freddie Mac ( FRE news people )whether its one
dollar or a trillion, people know, OK, Uncle Sam is in, different set of rules here.
Masrani: You know, if you go back, just to start off, I think some of form of reform is necessary
to address, you know, what we just went through. But I think it is important to keep in mind what
caused this crisis.
You know, so, was there excess leverage in some lines of businesses, in some banks? The answer is
yes. Otherwise we wouldnt have the problem we have. Was there adequate level of capital in all the
banks to address the risks? With the benefit of hindsight, its obvious that some did not have
enough capital. What was the quality of that capital? Was there consistent application of
regulations around the world? And obviously with the benefit of hindsight, we see that there
wasnt. Was there a test that did not really address the issue? The answer is yes, there were not
adequate level of tests. So when you look back, you know, reform should address those issues. And
frankly, you know, a lot of the suggestions would get there. Now your particular example of too big
and all that, I mean, who knows to define what is big, what is small?
But I think if we were to address leverage, recognize the risks, make sure that the banks are
adequately capitalized, so, you know, I dont want to get into too much [in terms of] technical
points, but what should be tier one? Whats the composition of tier one? How much common equity in
tier one capital for banks? What should be the leverage that you allow in trading books? What kind
of capital are [we] going to ask banks to hold against those trading positions? I think those will
solve the problem, because thats what caused this. And hopefully, you know, the regulations that
will finally emerge from the package that is being debated will address those points.
Forbes: So theres no need to try to turn back the clock to Glass-Steagall or the Volcker rule and
say that banks cant do this, cant do that? Your points a very valid one. If you have adequate
capital ratios, youre not going to put the system at risk.
Masrani: Yeah, some of the rules are necessary, you know, as to what activities. You know, does it
make sense for regulation to capture all the players in the financial services business? ... You
know, when you look back at subprime, in our case, you know, we were not in the subprime business.
But if you look at subprime, you know, how many unregulated entities were there making subprime
loans? So I think, you know, parts of this
Page 7 of 21
are necessary. Rules as to, you know, suitability, you
know, whether the products are suitable for certain types of individuals, obviously is necessary.
But I think the lynch pin in
banking has been capital, has been, you know, definition of a risk-based way of looking at assets
rather than, you know, whether you have a subprime loan on your balance sheet or you have a
Treasury bond on your balance sheet.
You know, we need to find a way to differentiate between the two and make sure banks are encourage
to keep, you know, quality assets on their books.
Forbes: And clearinghouses for things like credit default swaps, does that make sense to you?
Masrani: Yeah, I think some of it does make sense. But as usual, the devil is going to be in the
detail. You know, I mean, these are markets where, some of them are commodity types and does that
make sense that those should, you know, be trading and [have] better transparency?
Now, whether they go through clearinghouses, or there is a better way to create transparency, or
there are better disclosure rules around them, you know, you can come up with various solutions but
I think what this crisis has shown us is that transparency, you know, valuations that make sense,
suitability like how do you make those mortgages, I think those are the issues we need to capture.
And, you know, maybe clearinghouses do address parts of that but not, perhaps, all of what is
required here.
Return of Europe?
Forbes: Quick question going back to Europe, since youve worked in Europe. Whats the future of
the euro? Europe, to be blunt, I can say this, has been an economic, overall Western Europe, has
been something of a backwater given cultural traditions, given the level of education. They were
way behind on technology, way behind on job creation. Can Europe get back in the big leagues again?
Masrani: You know, people right now, because of the crisis, you know, talk a lot about the euro,
for example.
And I think these models do work if, for the most part, you know, each of the players stay within
the band of, you know, so whats going to be the deficit? You know, what kind of, you know, tax
policy are you going to have? And when you somehow, you know, get off that, then it is hard. You
know, traditionally as you know better than I would, how would a country, you know, solve a crisis
as to what we are seeing now? Well, they would just, you know, massively devalue their currency and
hope for the best. Tough to do that when youre part of a common currency. And a huge disparity as
to, you know, what Northern Europe might look like vs.[what] Southern Europe might look like. So I
think there are major issues that need to be addressed here. But as usual, and I think its always
darkest when the crises are there. You know, but these countries, there is resiliency, there is
history.
And Im sure they will come out of it. But it is not going to be the same as we see today. And so
again, maybe Im just an optimist by nature. But I feel that some of these things will result in a
better framework going forward. Now, you know, the proof is going to be in the pudding. The U.S. is
able to do that because, you know, its one country. When you have numerous countries, it is
extremely difficult. So well see how it pans out.
Page 8 of 21
Forbes: Bharat, thank you very much. Thank you for joining us.
Masrani: Thanks very much, good to see you.
Forbes: Good to see you.
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Get Briefed: Bharat Masrani
TD Bank CEO tells Steve Forbes how his bank avoided much of the financial crisis.
By Alexandra Zendrian
May 24, 2010 Forbes |
About Bharat Masrani
Bharat Masrani is the chief executive officer and president of TD Bank. He is also a member of the
TD Bank board of directors.
Masrani started his banking career at TD Bank Financial Group in 1987 as a commercial lending
trainee. Before becoming CEO of TD Bank in 2007, Masrani was chief risk officer at TD Bank
Financial Group. He was also senior vice president and CEO of TD Waterhouse Investor Services in
Europe.
Besides being on TDs board, Masrani is on the board of directors at Maine Medical Center. He also
serves on the Schulich International Advisory Council.
He and his wife, Shabnam, alternate their time between Philadelphia and Portland, Maine. They have
two children.
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TD Bank Eschews Holy Grail For Banks and Rides Out Economic Storm
By Dikenta DikeBio
May 21, 2010 Forbes Blog |
In a move that was vilified by the banking community, TD Bank Financial Group the 154 year old
Canadian-based institution got out of the structured products game in 2005 before the entire
financial landscape started to buckle and heave under the weight of a global economic crisis. TD
Banks President & CEO Bharat Masrani speaks about why his company shed some of its financial
baggage in the next edition of Intelligent Investing With Steve Forbes.
We used to be one of the top ten banks in structured products from a global perspective and
decided four or five years ago that it was a business where risk reward was not obvious, Masrani
tells Steve Forbes. There was lack of transparency. Markets were not as liquid as people thought
and valuations were very difficult.
Page 9 of 21
Masrani says the difficult decision enabled TD Bank to rise above the epic turmoil roiling around
the global banking industry. Insiders chided TD, claiming structured products were the next Holy
Grail for banks. But were glad we did, Masrani says.
The 2007 purchase of New Jersey-based Commerce Bancorp, for a reported $8.5 billion, enabled TD
Bank to scale its footprint in the United States to more than 1,000 branch stores and concentrate
on living up to its moniker as Americas Most Convenient Bank.
We believe the only way to have sustainable differentiation [in banking] is through service and
convenience, says Masrani. We believe in the wow culture. Our people matter. Our culture is
unique. Whether its by way of being open 7-days a week, offering up free penny arcade coin
collection, bank-branded lollipops, dog biscuits, and ball point pens, Masrani says the bank is
reinventing itself everyday and finding ways to wow customers.
Masrani also discusses regulatory reform making its way through Congress and how TD was able to
stave off receiving any TARP funds. As TD Bank largely abides by Canadian regulatory rules (the
TD stands for Toronto-Dominion), it wasnt swept up in the calamity that afflicted many of
Americas storied financial institutions.
In this brief highlight clip, Masrani explains to Steve Forbes why TD Bank should not be burdened
with any potential reforms that levy hefty taxes on banks.
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Horizon Misses Deadline to Disclose Financial Data
By John Hielscher
May 24, 2010 Herald Tribune (FL) |
The parent of struggling Horizon Bank of Bradenton has yet to file its first-quarter earnings
report, prompting a notice to regulators.
Horizon Bancorporation Inc. recently notified the U.S. Securities and Exchange Commission that it
could not submit its required report without unreasonable effort and expense.
Charles Conoley, the companys president and chief executive, told the SEC that the publicly traded
parent companys accounting staff has been fully engaged in working on the banks financials
following a regulatory exam in April.
Horizon, under the gun to raise more capital, is trying to get regulators to approve a proposed
stock sale of up to $8.5 million.
The bank earlier reported a first-quarter loss of $378,000. It lost $7.4 million in 2009.
Regulators issued a prompt corrective action order in March to either restore capital or find a
buyer. Its auditors issued a going-concern warning about the company.
Horizon remains one of the weakest banks in the state. Regulators consider it significantly
undercapitalized, with tier-1 capital at 2.46 percent, less than the 4 percent needed to be
adequately capitalized.
Page 10 of 21
The banks stock is now held by 1st Manatee Bank of Parrish as collateral for a $1.1 million loan
to Horizon in 2008. 1st Manatee initially wanted to sell that stock to recover its money, but later
agreed to wait until June 15 in exchange for $104,000 in cash payments.
Horizon has $200 million in assets and operates four offices in Manatee and Hillsborough counties.
TD buys Mercantile Bank
TD Bank continued its march through Florida last week, buying the parent of Mercantile Bank.
TD Bank, part of the Toronto-Dominion Financial Group, is paying $191.6 million in cash and stock
for The South Financial Group of Greenville, S.C.
Mercantile operates 67 offices with $3 billion in deposits in Florida, including 17 branches in the
Tampa Bay area. Mercantile is part of Carolina First Bank, South Financials struggling bank that
lost $655 million last year.
While Mercantile does not have any retail branches in the Sarasota-Manatee area, it has been an
active real estate lender. In fact, the bank was one of several that loaned to Michael Tringali, a
now-imprisoned flipper who was part of Neil Mohammad Husanis alleged conspiracy to defraud area
banks.
South Financial received $347 million in TARP funds. TD will repurchase those preferred shares from
the U.S. Treasury for $130 million.
Stockholders in South Financial can opt to receive either 28 cents per share in cash or 0.004 share
of TD common stock. The seller was trading at 67 cents before the deal was announced.
TD Bank CEO W. Edmund Clark said the company decided to buy now, rather than wait for a cheaper
FDIC-assisted deal, to preserve the company from failure.
TD Bank in April acquired three failed Florida banks, adding $3.9 billion in deposits and 69
offices to the $1.1 billion in deposits and 29 branches it already operated in South Florida. Those
banks were Riverside National Bank of Florida in Fort Pierce, First Federal Bank of North Florida
in Palatka, and AmericanFirst Bank of Clermont. TD also was a bidder last year for the failed
Colonial Bank, which wound up going to BB&T.
Too much workers comp profit
Sixteen workers compensation insurance companies or groups in Florida were ordered to return a
total of $9.4 million in excess profits to policyholders.
The Florida Office of Insurance Regulation said the insurers earned the excess profits in 2005,
2006 and 2007.
The largest refunds will be issued by St. Paul Travelers Group, $5.2 million; Liberty Mutual
Insurance Cos., $1 million; American Interstate Insurance Co., $867,843; and Guard Insurance Group,
$835,474. All the companies have 60 days to issue refunds or policy renewal credits.
Page 11 of 21
Workers comp rates dropped an average 6.8 percent in January. The decrease, the seventh
consecutive, will save employers $166 million this year, OIR said.
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Vigil Planned To Oppose Bank Construction
May 21, 2010 News Record (NJ) |
UNION COUNTY The Concerned Citizens of Union County (CCUC) are planning to hold a weekly Friday
after noon vigil, beginning today, to oppose the construction of a TD Bank branch at the corner of
Morris and North Avenues on the Elizabeth, Hillside and Union border. The vigil will take place
from 5-6 p.m.
We see this as a threat to the environment, a traffic and safety hazard and a disregard for the
integrity of the Liberty Hall National Historic Landmark, says CCUC spokesperson, Paula Borenstien.
As Union County prepares to host a statewide conference on Historic Preservation in June,
attention should be shown to this immediate threat to the erosion of a national historic landmark.
There has never been commercial development on this landmark property, which is adjacent to the
Ursino Park/Elizabeth River section of the Union County Parks, and it should not begin now. The
Liberty Hall National Historic Landmark was deemed one of the ten most endangered historic sites in
New Jersey by Preservation New Jersey.
Union Township allowed this project to go forward, but other municipalities and residents were
never properly consulted, according to the citizens group. Both Hillside and Elizabeth City
Councils have passed resolutions opposing the construction of the TD Bank, protest organizers said.
We hope that all those concerned with historic preservation and the quality of life in our
neighborhoods will join us at our vigils, says Borenstein.
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6. |
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Giving News in Brief
May 21, 2010 PhilanthropyJournal.com |
TD Charitable Foundation, charitable arm of TD Bank, donated $300,000 in to public libraries from
Maine to Florida.
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Berkshire Athenaeum Will Offer Summer Plan for Kids
By Jenn Smith
May 22, 2010 Berkshire Eagle (MA) |
Page 12 of 21
PITTSFIELD The Berkshire Athenaeum, and some of its younger patrons, are getting a few extra
dollars.
TD Bank has launched a two-pronged initiative through its TD Charitable Foundation to give public
libraries across the country a boost in the wake of dwindling public funds.
The Berkshire Athenaeum was recently surprised to learn it was one of 75 libraries chosen to
receive a $4,000 donation, which will be used locally to purchase new books and materials.
In addition, the library is partnering with TD Bank for the first time, to offer a new summer
reading incentive program in addition to its traditional summer reading program. For those who
register to participate, the bank will contribute $10 into a new or existing TD Young Saver account
for each child who reads 10 books by Sept. 30 to promote both language and financial literacy.
According to a TD Bank spokesperson, the TD Charitable Foundation worked with the Massachusettes
Board of Library Commissioners to identify libraries in the state that offered great community
programming.
Berkshire Athenaeum was the only library in the county and one of 10 in the state to receive this
funding.
Athenaeum Director Ron Latham said though he wont know until next month what kind of funding the
library will get for the next fiscal year, he said, Given the cutback weve had, were heading
into a very difficult year. The mayor has made it very clear that he will be cutting public
services, and I have every reason to expect that hell be cutting the book budget. This is just a
small Band-Aid, but were still very grateful, Latham said.
TD Bank-recommended reading for lessons on money and savings:
A Dollar for Penny by Julie Glass
Bunny Money by Rosemary Wells
Monster Money Book by Loreen Leedy
Lemonade for Sale by Stuart J. Murphy
Money Trouble by Bill Cosby
Rent Party Jazz by William Miller
Jelly Beans for Sale by Bruce McMillan
Millions by Frank Cottrell
The Big Buck Adventure by Shelley Gill and Deborah Tobola
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Page 13 of 21
8. |
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TD Bank Donates Supplies to Tools for School Program
May 23, 2010 St. Augustine Record (FL) |
Kelly Bland, Vice President of First Federal of North Florida now TD Bank of North America recently
presented the St. Johns County Education Foundations (SJCEF) Tools for School
Program with two truckloads of office supplies. This donation included notebooks, pens, pencils,
notepads, and notebooks. St. Johns County School District teachers can recycle these items in their
classrooms. Furthermore, families who cannot afford to purchase school supplies for their children
can take advantage of the donations too! The SJCEF will distribute this donation along with others
to the teachers prior to the beginning of school in August.
Tools for Schools is a program sponsored by the SJCEF where area businesses and the community
donate reusable materials and school supplies.
These donations are distributed free to public school teachers to enhance instruction in their
classroom and promote student achievement.
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Will Carolina First Owner Aid Communities?
By Tim Smith
May 24, 2010 The Greenville News |
COLUMBIA Joel A. Smith, retired dean of the University of South Carolinas Moore School of
Business, knows how the acquisition of a local bank and the loss of a bank headquarters can affect
a community.
Smith was senior vice president for Bankers Trust of South Carolina in Columbia when it merged with
NCNB in 1986 and was president of NCNB of South Carolina when it merged with C&S Sovran in 1991,
creating NationsBank, now Bank of America.If the culture of the acquiring company is similar to
the company being acquired, then you may not see very much difference, Smith said.
That will be tested soon as Canadian-based Toronto-Dominion Bank takes over Greenvilles Carolina
First later this year. TD agreed to purchase Carolina Firsts parent, The South Financial Group
Inc., for nearly $192 million last Monday.
In a previous merger, Smith said NCNB had a strong culture of community support, and so its work in
the arts and community development actually increased for a while.
But over time, he said, that support and involvement can diminish as banks are acquired yet again
and the communities the new corporation serves multiply.
There were more and more communities being served by the bank, and that naturally diluted the
resources and focus of the bank, he said of what happened with NCNB. Over time, that dilution
occurs to the point that the local entity seldom resembles the original headquartered company and
what they do.
Hayne Hipp, former chief executive officer of the former Liberty Corp. in Greenville, said Royal
Bank of Canada hasnt been as actively involved in Greenville as Liberty Life was after
Page 14 of 21
RBC bought
the company in 2000. But he said when RBC purchased a North Carolina bank, it has continued to be
active in the Carolinas in the communities served by the bank.
I think banks are a little bit different than insurance companies, and manufacturing companies are
different from both, he said. The challenge I think a bank has is the importance of local. If
your loan officers are active in the community, then they know who
the good credits are, who runs good operations, and they can make loan decisions on observations at
ground level.
Hipp said losing a corporate headquarters is a significant issue and a challenge that South
Carolina has.
In the 1960s and 1970s, he said, many businesses were built that were later sold in the 1980s,
including banks, insurance companies like Liberty and Colonial Life, and media companies.
You do miss something from a civic point of view when youre calling on a non-South Carolina-based
company as opposed to a South Carolina-based company, he said. Its just a different dynamic, and
you have to adjust from a civic point of view.
Columbia Mayor Bob Coble, who is leaving office this year after 20 years of leading the capital
city, said the mergers and losses of bank headquarters in his city have been part of a new economic
reality that requires cities to be fast on their feet and prepared for change.
I think in todays world, you have to be constantly on the lookout to reinvent yourself, to look
at new opportunities, he said. Theres no sense looking back. Theres no sense crying about it.
Theres no sense in spending one minute reminiscing. Youve got to spend all your energy looking
for new opportunities.
Carolina First has about seven branches in the Charleston area. It also owns the naming rights to
the College of Charlestons basketball arena, an asset that is likely to be transferred to TD Bank.
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INDUSTRY NEWS
1. |
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Mortgage Rates Decline
Home Buyers Get Surprise Boost From Europe Crisis as Loans Drop to Below 5%
By Nick Timiraos
May 24, 2010 Wall Street Journal |
The financial turmoil in Europe is providing an unexpected windfall for American home buyers, as
international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates
to the lowest levels of the year and back near 50-year lows.
A real estate agent leaves an open house for a home for sale in San Francisco. Falling mortgage
rates could lift the U.S. housing market.
The housing industry had been bracing for months for a period of rising mortgage rates, triggered
by the end of the Federal Reserves $1.25 trillion mortgage-securities purchase
Page 15 of 21
program.
Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the
market.
Instead, many in the industry now say rates could drift as low as 4.5% this summer from 4.86% now,
instead of rising to 6% as some economists projected, making for significantly lower payments for
Americans buying homes or refinancing their mortgages.
Refinance business exploded last week, says Jeff Lazerson, chief executive of Mortgage Grader, a
brokerage in Laguna Niguel, Calif. Its schizophrenic. We all had this expectation of higher
interest rates and no more refinances. He says he helped a borrower lock in a 30-year loan with a
4.25% fixed rate last week, the lowest in his 24 years in the business.
Rates on 30-year mortgages averaged 4.84% last week, according to a survey by mortgage-insurance
titan Freddie Mac. Rates were quoted late Friday at 4.86%, the lowest since December 2009,
according to a survey by financial publisher HSH Associates, and down from a high of 5.27% for the
week ended April 9. Rates on 15-year mortgages averaged 4.24% last weekthe lowest since Freddie
began its survey in 1991.
Economists largely attribute the decline in mortgage rates to the European debt crisis and new
concerns about the global economy, which unleashed a massive wave of cash into U.S. bonds from
investors around the world.
This buying pushed down yields on Treasury bonds. Because mortgage rates are closely pegged to
yields on 10-year Treasury notes, which fell to 3.2% Friday, the decline in Treasurys pulled down
mortgage yields. Typically, mortgage yields remain around 1.5 percentage points above yields on
10-year Treasury notes.
Falling mortgage rates can give a powerful lift to the housing market. A general rule of thumb
holds that every one percentage point decline in mortgage rates is the equivalent of roughly a 10%
reduction in the home price for the buyer. So, if the current rates hold, say economists, that
could help stabilize prices and allow current homeowners to sell existing homes without substantial
price cuts.
It isnt clear how much home-buying the lower rates will spur. Demand had fallen in recent weeks
after buyers raced to close sales ahead of last months expiration of an $8,000 federal tax credit
for home purchases. Applications for new-purchase loans hit a 13-year low in the week ending May
14, according to the Mortgage Bankers Association.
Borrowers do face roadblocks. Underwriting standards are their strictest in a decade, and record
numbers of borrowers are underwater, owing more to the bank than their homes are worth. That has
excluded large swaths of borrowers from getting loans at the new lower rates.
Still, lower rates could widen the pool of people who qualify for a mortgage, while others may find
they qualify for a slightly larger loan. They can buy the place with the extra bedroom or the
swimming pool, says Jay Brinkmann, chief economist at the Mortgage Bankers Association.
Falling rates have encouraged some Americans to consider refinancing their existing mortgages to
save money. A one-percentage-point decline in mortgage rates can cut $250 off the monthly payment
on a $400,000 30-year fixed-rate mortgage, giving consumers cash they can use to spend.
Page 16 of 21
Richard Hunsinger plans to refinance two loans on his Potomac, Md., home into a new 15-year
mortgage this week with a 4.37% rate. The 55-year-old dentist is worried that interest rates will
eventually rise sharply, boosting the payment on his home-equity line of credit. His first
mortgage, also a 15-year loan, currently has a fixed rate of 5.25%. And while the rate on his
$240,000 home-equity loan is just 3.25%, it has risen as high as 8% in the past.
Rates cant stay low forever, says Dr. Hunsinger. If they go up over the next year, this will
look like a really bright decision.
By historical standards, rates are incredibly low. Until 2003, rates on 30-year fixed-rate loans
hadnt dipped below 5% since the 1960s. Rates fell to similar points throughout much of the past
year as the government was helping to hold down costs for borrowers.
Nearly half of all borrowers with 30-year conforming fixed-rate mortgages have mortgage rates of
5.75% or higher and could reduce their rates by a full percentage point if they refinanced at
current rates, according to investment bank Credit Suisse.
Many of those borrowers may have tried to refinance last year, only to find that they couldnt
qualify. When rates fell to similar lows in 2003, refinance activity hit a record $2.9 trillion,
compared to $1.2 trillion last year, according to Inside Mortgage Finance, a trade publication.
Now, more private investors are coming into the market for loans, offering better prices for
securities containing mortgages with low rates than they were one year ago. That could lead banks
and brokers to cut upfront origination fees, and borrowers who are able to refinance could find it
cheaper to do so than last year.
Im calling people back and saying, Now its worth it, says Michael Menatian, a mortgage banker
in West Hartford, Conn.
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Reg Reform Bill Misses Opportunity to Overhaul Agencies
By Cheyenne Hopkins
May 24, 2010 American Banker |
WASHINGTON Though House and Senate lawmakers still have plenty of issues to work out in the
final regulatory reform bill, one thing is already clear: The legislation will do little to
streamline the fractured financial regulatory framework.
In the aftermath of the financial crisis, many observers said reform was the best opportunity in
decades to rework the supervisory structure, which includes four banking regulators and 50 states
with overlapping authorities.
But in the end, the final bill is likely to get rid of only one agency the Office of Thrift
Supervision and leave most of the rest of the existing system intact.
Its a huge missed opportunity to restructure our regulatory system in a manner that makes sense,
said Kevin Jacques, the Boynton D. Murch Chair in Finance at Baldwin-Wallace College and a former
Treasury official. Politically, I completely understand why the administration did what it did,
but economically, this is a terrible crisis to have wasted.
Page 17 of 21
Every president in recent memory has tried to revamp the regulatory structure, with many
including proposals from Presidents George H.W. Bush, Bill Clinton and George W. Bush
recommending some form of consolidation.
The Obama administration initially appeared ready to do the same, considering combining the banking
regulators into one agency and merging the Securities and Exchange Commission with the Commodity
Futures Trading Commission. But by the time it released its white paper last June, the
administration had dropped those plans, instead suggesting a merger of OTS into the Office of the
Comptroller of the Currency.
Michael Barr, the Treasury assistant secretary for financial institutions, said that the
administration ultimately had other priorities it wanted to address.
When we were going through the process with the White House, with the [National Economic Council],
to think through what the key issues were, we looked at a range of proposals, including regulatory
consolidation, he said in an interview Friday. Our basic view was wed spend enormous amounts of
political energy and tremendous time with Congress and others on something that wasnt core to
reform.
Though House Financial Services Committee Chairman Barney Frank appeared content with that
approach, Senate Banking Committee Chairman Chris Dodd initially had a much more ambitious plan. He
talked repeatedly in hearings about the alphabet soup of regulators, suggesting that it was
partly to blame for the financial crisis.
In his initial bill, introduced last fall, Dodd proposed combining the banking regulators into one
agency. By this spring, he had amended it to eliminate only the OTS but also to strip the Federal
Reserve Board of most of its oversight of banking companies. By the time the bill passed last week,
however, the Feds supervisory power had been restored.
Even a Senate provision to eliminate the thrift charter is likely to be struck from the final bill
during negotiations with the House.
We changed virtually nothing in terms of the regulatory structure, said Bill Isaac, chairman of
LECG Global Financial Services and a former chairman of the Federal Deposit Insurance Corp. We got
rid of the OTS, but thats something everyone assumed would happen.
Isaac supported Dodds original consolidation idea but conceded that such a move would have
required a huge political battle. Indeed, the Federal Reserve Bank presidents and a phalanx of
community banks protested the proposed reduction in the Feds power, helping Sen. Kay Bailey
Hutchison, R-Texas, to win passage, 90 to 9, of an amendment to keep the central banks authority
intact. Its hard for the government to really eliminate agencies, said Alex Pollock, a resident
fellow at the American Enterprise Institute. A very interesting element of this is the Federal
Reserve, which started off in Dodds original bill as having its authority restricted, and now its
a major winner. There is a lot going on, but it isnt consolidation and streamlining.
Ultimately, with the exception of the OTS, the regulatory agencies are almost certain to gain
power. Under both bills, the Fed would be the systemic risk regulator, and the FDIC gained
resolution authority over systemically important bank holding companies. The OCC, meanwhile, will
now supervise thrifts.
Page 18 of 21
This is not a consolidation bill, said Donald Ogilvie, the chairman of the Deloitte Center for
Banking Solutions. It was an expansion of regulatory authority.
Although eliminating the OTS is significant, its demise had been all but assured for some time.
Within a few months of its creation in 1989, American Banker ran an article
speculating how long the agency would last. With a steady decline in the number of thrifts and
failures and charter conversions at most of the largest savings and loans, few fought to save the
agency. Its clear they failed, but also theyve ceased to have critical mass to be effective,
said William Longbrake, an executive in residence at the University of Maryland and a former vice
chairman at Washington Mutual Inc. Another reason they dont need to exist is, the difference
between the charters is pretty minimal.
By contrast, every other agency had a constituency ready to fight for it. Community bankers
complained to Congress at the very suggestion that the FDIC the regulator of most small
institutions would lose its oversight role, and they defended the Fed as well. Everyone is very
comfortable with the status quo, ... and the lobbying was very, very significant, Longbrake said.
Still, others said the administration should have at least tried for more consolidation.
The financial reform agenda as framed by Treasury last year, and as likely to continue in
conference, reflects monumental lost opportunity, said Rick Carnell, an associate professor at
Fordham University School of Law and a former Clinton Treasury official. There was a huge
opportunity here for real reform, and it was squandered. I think it was fair to say it was
co-opted.
But Barr defended the administrations strategy. The key thing is, the rules of the game are
fixed, he said. Would it have been neater or tidier? There are certainly neater and tidier ways
of setting up the structure, but that doesnt necessarily mean it will be better.
Brian Gardner, a political analyst at KBW Inc.s Keefe, Bruyette & Woods Inc., said the
administration made the right political judgment. You wind up having to spend political capital on
things less important than other issues, he said. At the end of the day, how many regulators
there are is less important than what the powers are.
Top
3. |
|
Economists See Solid U.S. Growth
By Luca Di Leo
May 23, 2010 Wall Street Journal |
The U.S. economy should expand at a solid pace this year and next as consumers increase spending,
confident the recession is behind them, a panel of economists said in a survey released Monday.
The 46 economists surveyed in the National Association for Business Economics report between April
27 and May 7 predicted U.S. gross domestic product would expand by 3.2% in 2010 and 2011.
That is a touch higher than the 3.1% growth predicted for both years in the last survey, released
Feb. 10.
Page 19 of 21
Although risks involving Europe have recently escalated, the outlook in this country has improved
in most respects, said NABE President Lynn Reaser, chief economist at Point Loma Nazarene
University.
Growth prospects are stronger, unemployment and inflation are lower, and worries relating to
consumer retrenchment and domestic financial headwinds have diminished, she said.
Stung by the worst recession since the 1930s, Americans were thriftier in 2009. But consumer
spending, which accounts for more than two-thirds of U.S. GDP, drove the economys growth in the
first quarter of 2010. That should help compensate for fading support from the government later
this year.
The U.S. savings rate should average 3.4% this year, the economists predicted, down from a 4.6%
forecast three months ago.
Spending will be helped by a gradually improving labor market. Employment gains are expected to
remain robust through 2011, except for a slowdown in job creation in the July-September period,
when those working on the 2010 decennial Census count will lose their temporary jobs.
The economists surveyed expect the unemployment rate to fall from 9.9% in April to 9.4% at the end
of this year and to 8.5% by the end of 2011.
The economy in April added jobs at the fastest pace in four years, with strong employment gains in
the private sector.
Personal spending and income data for April, due for release on Friday, are expected to show that
the turnaround in employment is starting to support incomes, according to analysts surveyed by Dow
Jones Newswires.
Business investment also will drive the economys expansion, according to the NABE survey, with
spending on equipment and software buoyed by higher profits. Small companies, which are still
finding it hard to get loans following the financial crisis, are expected to benefit from some
easing of credit conditions.
The panelists expect inflation to remain low for longer than in the previous survey. As a result,
they see the Federal Reserves benchmark lending rate rising to just 0.5% at the end of 2010,
compared with a February prediction that it would increase to 0.75% in the final quarter of this
year. The Fed funds rate at which banks lend to each other overnight currently stands between zero
and 0.25%.
The NABE forecasts are slightly less optimistic than predictions made by Federal Reserve officials
at their last meeting. Fed officials said after the April 27-28 meeting that the economy should
grow by about 3.5% this year and 4% in 2011, with the jobless rate falling to 8.3% at the end of
next year.
On a more negative note, the strength of the housing rebound was downgraded in the latest NABE
survey. Economists no longer expect the sector to outpace the overall economy.
U.S. home construction posted a bigger-than-expected gain in April thanks to the extension of a tax
credit, but the plunge in permits suggested the housing sector would remain a weak spot in the
economy.
Page 20 of 21
Almost half of those surveyed believed Greece would default on its debt over the next year. (The
survey ended a few days before European governments announced a $1 trillion debt-stabilization fund
to prevent the Greek crisis from spreading.)
But the impact on the U.S. economy was still seen as limited by NABE panelists.
Not everyone agrees with this conclusion. Fed governor Daniel Tarullo warned last week that
Europes debt crisis posed serious risks to the U.S. economy because it could hurt U.S. exports and
bank lending, as well as revive stress in global financial markets.
Top
The Daily News Brief is published exclusively for the Employees of TD Bank; please do not
distribute outside the company.
The information presented may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and comparable safe harbour provisions of
applicable Canadian legislation, including, but not limited to, statements relating to anticipated
financial and operating results, the companies plans, objectives, expectations and intentions,
cost savings and other statements, including words such as anticipate, believe, plan,
estimate, expect, intend, will, should, may, and other similar expressions. Such
statements are based upon the current beliefs and expectations of our management and involve a
number of significant risks and uncertainties. Actual results may differ materially from the
results anticipated in these forward-looking statements. The following factors, among others,
could cause or contribute to such material differences: the ability to obtain the approval of the
transaction by The South Financial Group, Inc. shareholders; the ability to realize the expected
synergies resulting from the transaction in the amounts or in the timeframe anticipated; the
ability to integrate The South Financial Group, Inc.s businesses into those of The
Toronto-Dominion Bank in a timely and cost-efficient manner; and the ability to obtain governmental
approvals of the transaction or to satisfy other conditions to the transaction on the proposed
terms and timeframe. Additional factors that could cause The Toronto-Dominion Banks and The South
Financial Group, Inc.s results to differ materially from those described in the forward-looking
statements can be found in the 2009 Annual Report on Form 40-F for The Toronto-Dominion Bank and
the 2009 Annual Report on Form 10-K of The South Financial Group, Inc. filed with the Securities
and Exchange Commission and available at the Securities and Exchange Commissions Internet site
(http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial Group,
Inc. will be submitted to The South Financial Group, Inc.s shareholders for their consideration.
Shareholders are encouraged to read the proxy statement/prospectus regarding the proposed
transaction when it becomes available because it will contain important information. Shareholders
will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings
containing information about The Toronto-Dominion Bank and The South Financial Group, Inc., without
charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in the proxy
statement/prospectus can also be obtained, when available, without charge, by directing a request
to The Toronto-Dominion Bank, 15th floor, 66 Wellington Street West, Toronto, ON M5K 1A2,
Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc., Investor
Relations, 104 South Main Street Poinsett Plaza, 6th Floor, Greenville, South Carolina 29601,
1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on December 03, 2009,
and in its notice of annual meeting and proxy circular for its most recent annual meeting, which
was filed with the Securities and Exchange Commission on February 25, 2010. Information regarding
The South Financial Group, Inc.s directors and executive officers is available in The South
Financial Group, Inc.s proxy statement for its most recent annual meeting, which was filed with
the Securities and Exchange Commission on April 07, 2010. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.
Page 21 of 21
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF TD BANK,
AMERICAS MOST CONVENIENT BANK AND THE TORONTO-DOMINION BANK ON MAY 25, 2010
Daily News Brief
May 25, 2010
Compiled by Brittany Roberge, Corporate and Public Affairs
TD BANK NEWS
1. |
|
TD Bank Goes On Small Business Loan Blitz Hartford Business Journal (CT) |
To combat the view that theres no money available for small businesses, TD Bank plans to increase
its commercial lending portfolio in Connecticut this year by as much as 10 percent, company
officials said. [TD Banks Michael LaBella is quoted.]
2. |
|
State Street Project Gets Boost CBS 3 Springfield News (WSHM-TV) |
[Similar articles appeared in The Republican (MA) and WWLP-TV NBC CH 22 (MA).]
The State Street corridor project is already underway, but it is about to get a big boost from a
local bank. Residents have seen the new federal building and may have even noticed the red
stenciling done on parts of the streets in Mason Square, but all that will pale in comparison as TD
Bank announces itll invest $250,000 into the redevelopment.
3. |
|
TD Bank Kicks Off Annual Summer Reading Program The News Journal (DE) |
In celebration of National Library Week, TD Bank has started its annual Summer Reading Program
encouraging children to read. TD Bank contributes $10 into a new or existing Young Saver account
for each child who reads 10 books from May 3 through Sept. 30.
4. |
|
Greenville News Editorial: TD Bank Will Be a Solid Partner
The Greenville News (SC) |
The sale of The South Financial Group to a Canadian-based firm appears to be the best of a number
of possible outcomes for this key local headquarters that has been a corporate and civic leader.
The news from last week that Toronto-based TD Bank Financial Group will buy the financially
troubled South Financial has brought an understandable degree of concern but also some assurances
of a smooth transition that will leave this community with an engaged banking company eager to be a
strong local partner.
5. |
|
Riverside National Bank Founder Vernon Smith: Im sorry TCPalm.com |
Vernon D. Smith says hes sorry Riverside National Bank, the financial institution he founded in
1982, failed in mid-April. But he contended bank officials did nothing that was not totally above
board. [TD Bank is mentioned.]
6. |
|
Southwest May Give Upstate an Edge in Competition for Corporate Headquarters The Greenville
News (SC) |
Page 1 of 17
The Upstates hopes for bringing more corporate headquarters here got a big boost when Southwest
Airlines decided to add the region to its list of destinations. It couldnt have come at a better
time, as Greenville has lost four high-profile corporate headquarters with offices
downtown, including one last week when financially troubled South Financial Group merged with a
Canada bank. [TD Banks Bharat Masrani is quoted.]
7. |
|
Riverside Founder Sued Over Loans Totaling $22 million TCPalm.com |
Vernon D. Smith, founder of the failed Riverside National Bank, is being sued in Circuit Court for
alleged non-payment of three loans totaling more than $22 million to failed Colonial Bank in
Alabama. [TD Bank is mentioned.]
8. |
|
TD Bank Buy of Mercantile Brings Changes to Business Banking
Baltimore Business Journal |
TD Bank Financial Groups planned acquisition of The South Financial Group is likely to impact the
bottom line of many small and mid-size business customers of Mercantile Bank.
INDUSTRY NEWS
1. |
|
Senators Pick Financial Conferees Wall Street Journal |
Congressional leaders began putting together the team of U.S. lawmakers Monday that will finalize
sweeping changes to U.S. financial markets, and the expected lineup suggests banks could face an
uphill battle eliminating the more onerous curbs on their business.
2. |
|
EU to Propose Tax on Banks for Crisis Fund Wall Street Journal |
The European Commission on Wednesday will propose requiring European Union governments to create
bank crisis funds supported by up-front taxes on financial institutions, EU officials said Tuesday.
3. |
|
Obama to Urge Congress to Pass Small-Business Proposal
Wall Street Journal |
President Barack Obama is expected Tuesday to urge Congress to pass legislation that would create a
$30 billion fund to incite banks to extend credit to small businesses, according to a White House
official.
TD BANK NEWS
1. |
|
TD Bank Goes On Small Business Loan Blitz
By Greg Bordonaro
May 24, 2010 Hartford Business Journal (CT) |
To combat the view that theres no money available for small businesses, TD Bank plans to increase
its commercial lending portfolio in Connecticut this year by as much as 10 percent, company
officials said.
Page 2 of 17
To prove its commitment, earlier this month TD Bank officials embarked on a full-scale blitz,
visiting hundreds of small companies in the state to try to generate new commercial loan business.
Michael LaBella, the Connecticut market president for TD Bank, said its officials visited 108
different companies in Greater Hartford alone, ranging from manufacturers and nonprofits to
professional service firms and restaurants.
LaBella said the company took applications for small business loans on the spot and added dozens of
new prospects.
Small business is a critical part of our growth strategy, LaBella said. As they grow, we want to
build a relationship with them.
TD Bank, which has 82 retail locations in Connecticut, is the fifth largest bank in the state with
$4.7 billion in deposits and 5.2 percent of the market, according to the Federal Deposit Insurance
Corp.
LaBella said small businesses are usually the first to come out of the recession, which is why the
bank wants to expand that book of business.
TD Bank has continued to lend throughout the recession because they didnt get bogged down with bad
loans that sunk the balance sheets of larger banks, LaBella said. He also said the bank is starting
to see an uptick in small business loan applications. The demand is not where it was three or four
years ago, but it has come back from the worst of the recession, he said.
Small business loans, ranging up to $500,000, make up nearly 18 percent of the companys commercial
loan portfolio.
We look at borrowers the same way we always have, LaBella said. Our standards never really
changed.
The lending environment in Connecticut has been a mixed bag since the onset of the financial
crisis. While larger banks have pulled back on making loans, the states community banks have made
capital available.
Bankers say, however, they have seen a decline in business loan demand because companies have been
hesitant to take on more debt in the midst of economic uncertainty.
Many businesses have seen their credit quality deteriorate, making it harder for them to qualify
for loans, especially as banks tighten lending standards.
As the states economy begins a slow recovery from the downturn, however, Connecticuts businesses
say credit conditions are starting to improve.
According to the first-quarter Connecticut Business & Industry Association/TD Bank Credit Survey,
credit conditions are the best theyve been in more than a year and businesses expect continued
improvement.
About 25 percent of the 366 business executives surveyed said credit availability is a problem for
their business. Thats down from 27 percent in the fourth quarter of 2009, and
Page 3 of 17
31 percent in the
third quarter of last year. Additionally 50 percent of survey respondents said current conditions
are average, good, or excellent.
TD Bank isnt the only bank that has announced efforts to boost lending in Connecticut this year.
Webster Bank announced in January that it plans to boost its New England business lending this year
by $400 million.
The Waterbury-based subsidiary of Webster Financial Corp. said it expects to originate more than
$850 million in new loans this year, specifically targeted at small-and-medium sized companies in
the region.
Unbanked
Rate Below Average
Bank regulators say nearly 5 percent of Connecticut households have no access to banking services,
and the problem hits minority families the hardest.
Of the 1.4 million households in Connecticut, 5.3 percent, or 73,000, dont bank at a financial
institution, according to a recent report from Federal Deposit Insurance Corp. Of those, 24,000 or
15.8 percent of black households and 32.8 percent or 37,000 Hispanic households are unbanked.
Thats compared to the 1.1 percent or 11,000 white households that dont put money into a financial
institution, the FDIC report said.
Nationally, an estimated 7.7 percent of U.S. households, or about 9 million, are unbanked. These
households do not have a checking or a savings account.
Top
2. |
|
State Street Project Gets Boost
May 23, 2010 CBS 3 Springfield News (WSHM-TV)
[Similar articles appeared in The Republican (MA) and WWLP-TV NBC CH 22 (MA).] |
The State Street corridor project is already underway, but it is about to get a big boost from a
local bank.
Residents have seen the new federal building and may have even noticed the red stenciling done on
parts of the streets in Mason Square, but all that will pale in comparison as TD Bank announces
itll invest $250,000 into the redevelopment.
Congressman Richard Neal gave a status update to a packed room at the Springfield Museums on
Sunday.
He says the project is already making an impact on the community.
The ease with which we get from one point to another is very important in terms of enhancing
productivity and greater efficiency. State Street today will be more welcoming to commerce than it
ever has been, he says.
Page 4 of 17
The Springfield Museums have opened a new exhibit detailing the State Street corridor project.
The next piece of the project is reconstructing Putnam High School.
Top
3. |
|
TD Bank Kicks Off Annual Summer Reading Program
May 23, 2010 The News Journal (DE) |
In celebration of National Library Week, TD Bank has started its annual Summer Reading Program
encouraging children to read. TD Bank contributes $10 into a new or existing Young Saver account
for each child who reads 10 books from May 3 through Sept. 30. In April, TD Bank executives also
presented 75 public libraries each with a $4,000 donation. In Delaware, awards went to Garfield
Park Lending Library and Harrington Public Library.
Top
4. |
|
Greenville News Editorial: TD Bank Will Be a Solid Partner
May 23, 2010 The Greenville News (SC) |
The sale of The South Financial Group to a Canadian-based firm appears to be the best of a number
of possible outcomes for this key local headquarters that has been a corporate and civic leader.
The news from last week that Toronto-based TD Bank Financial Group will buy the financially
troubled South Financial has brought an understandable degree of concern but also some assurances
of a smooth transition that will leave this community with an engaged banking company eager to be a
strong local partner.
TD Banks announcement was followed by reassuring news on several fronts: The large banking company
has a solid reputation for providing good customer service, and it is widely regarded as a loyal
corporate citizen that eagerly gives back to local communities in many ways.
Even more, TD Bank is not already in this market, and theres every reason to believe many of South
Financials 2,000 employees will retain their jobs. And TD has wisely announced it will keep many
South Financial leaders in place at least for some time, including South Financial Group CEO and
President Lynn Harton.
South Financial, parent of Carolina First Bank, has been under crushing pressure since the
recession severely damaged the real estate market. South Financial, headquartered in Greenville
where it was started in 1986, has locations in South and North Carolina, and does business in
Florida as Mercantile Bank.
The sagging real estate markets on the coast of South Carolina, in western North Carolina and in
Florida have taken a toll on South Financial. According to Greenville News reports, TD will acquire
all South Financials outstanding common shares for $61 million in cash or TD common stock, and the
federal government will sell to TD its $347 million of South Financial preferred stock acquired
under the U.S. Treasury Departments Capital Purchase Program.
Page 5 of 17
The arrangement includes TD paying
about $130 million for the taxpayer funds South Financial received as part of the bank bailout
plan, The News reported.
This merger needs the approval of South Financial shareholders and various regulators. Some
shareholders have already voiced opposition because of the news they can elect to receive either 28
cents in cash or .004 of TD common stock for each outstanding South Financial share.
This news is a lot for the community to absorb given hometown pride in South Financial and Carolina
First, and deep appreciation of what this local connection has meant to Greenville and the entire
state. Most of our downtown success stories, including the newly opened Main@Broad project, relied
on the banks involvement.
The bank has provided a payroll that was important to many communities and eager volunteers willing
to share their expertise and energy helping make a difference in areas where the banks are located.
And in Greenville, Carolina First has been a key player in most everything from helping to recharge
the Palmetto Expo Center that now bears the banks name, to helping with numerous charitable
causes.
But as business and civic leaders noted last week, theres no point in looking in the rear-view
mirror. This is a dynamic community with forward-looking leaders, and they are always focusing on
the next opportunity.
Just one encouraging example can be found in the story told by Joe Erwin on todays op-ed page
the story of how Greenville landed Southwest Airlines. There are many such stories in Greenvilles
past, and there will be more in its future.
Other positives include TD already has signaled it intends to stay here and grow. This
announcement is all about growth, Bharat Masrani, president and chief executive officer of TD
Bank, told The Greenville News . We do not have a presence in South Carolina. Its an important
market for us.
TD Bank officials have eagerly pointed out that giving is important to the company. The companys
charitable foundation contributed almost $14 million to various community groups last year,
according to news reports, and that does not include employee donations and corporate sponsorships.
Theres every reason to believe TD Bank will be a good fit for this community.
Top
5. |
|
Riverside National Bank Founder Vernon Smith: Im sorry
By Tyler Treadway
May 24, 2010 TCPalm.com |
FORT PIERCE Vernon D. Smith says hes sorry Riverside National Bank, the financial institution
he founded in 1982, failed in mid-April. But he contended bank officials did nothing that was not
totally above board.
Page 6 of 17
Anytime youre the CEO of a company and it has problems, you feel badly, Smith said Monday
evening in his first interview since the banks demise. Im sorry that (Riverside) failed. I
certainly wish TD Bank all the success in the world.
The Fort Pierce-based Riverside, which quickly grew in the 1980s from a single office in a trailer
into one of Floridas largest independent community banks with 60 branches from Martin County to
Volusia County by the time Smith retired in January 2009, was seized April
16 by the federal government and sold immediately to TD Bank National Association of Wilmington,
Del.
Two years ago, Riverside was rated excellent by BauerFinancial, a research firm in Coral Gables.
Then the bank lost $139 million in 2008 and $131 million in 2009, although it made a profit in the
fourth quarter. BauerFinancial gave the bank zero stars for the September 2009 and December 2009
reports.
An agreement reached with the Federal Reserve Bank of Atlanta in January gave Riverside 60 days to
submit an acceptable written plan to maintain sufficient capital.
The federal Office of the Comptroller of the Currency closed Riverside because the bank was unable
to maintain adequate capital to operate in a safe and sound manner, according to a statement by
the Federal Deposit Insurance Corp.
Smith blamed the banks failure on what he called a double issue.
Real estate markets dropping meant that homeowners couldnt repay their mortgages.
Banks invest in their communities, Smith said, and when the communities have various issues, it
affects the banks.
That was coupled with bonds the bank owned, that he said, also depressed in value.
Riverside was hit hard when Fannie Mae and Freddie Mac collapsed, making the banks securities in
the mortgage giants worthless.
A lot of banks in Florida are having problems as customers are unable to pay back their loans,
Smith said. In hindsight, a lot of banks in general, and Riverside in particular, would have done
fewer loans and made fewer investments. Obviously, we never realized that the real estate in this
market would sell for half, or even less than half, of what it had been selling for.
Asked if malfeasance by any bank official could also be blamed, Smith replied, Nothing went on at
all that Im aware of that was not totally above board, Smith said. Everybody tried to do the
best possible job they could do.
Still, some longtime shareholders in the bank have complained they were kept in the dark about
Riversides financial troubles until it was too late to sell their stock.
For about 25 years after the bank opened, shares of the privately traded Riverside stock were a
proven money-maker and a hot commodity, paying significant dividends and skyrocketing in value.
By late 2007 and early 2008 the banks published buy-back price was $550 per share, and people were
clamoring to pay much more than that.
Page 7 of 17
In mid-2008, however, the dividends stopped and the bank withdrew its buy-back offer.
The issue was that things got to the point that the bank wanted to retain capital in case the
market got even worse, Smith said. And, in fact, the market did get worse.
But when the bank wouldnt buy its stock, no one else wanted to, either.
What you find in a non-publicly traded company is that you dont have a broad market (for shares
of stock), Smith said. So when a lot of shareholders wanted to sell at one time, there was no
market for them to sell their stock.
Smith said he empathized with shareholders who lost substantial savings.
Absolutely, he said. Im one of them. Obviously, this was a real bad development, the way it
worked out for all of us.
Asked how much money he lost in Riversides failure, Smith replied, a substantial amount of
money.
Smith said he was mostly concerned about the (Riverside) employees and that they retain their
jobs. I do feel that TD Bank will continue to provide jobs for the employees and take care of
customers.
TD Bank officials said they are not looking to lay off any of the approximately 1,100 employees but
would probably hire more people as the company expands branch hours.
Top
6. |
|
Southwest May Give Upstate an Edge in Competition for Corporate Headquarters
By David Dykes
May 24, 2010 The Greenville News (SC) |
The Upstates hopes for bringing more corporate headquarters here got a big boost when Southwest
Airlines decided to add the region to its list of destinations.
It couldnt have come at a better time, as Greenville has lost four high-profile corporate
headquarters with offices downtown, including one last week when financially troubled South
Financial Group merged with a Canada bank.
Southwests recent decision to fly to Greenville-Spartanburg International is a real breakthrough
for recruiting business, Greenville Mayor Knox White said, citing conversations with corporate
headquarters that dissolved over air service concerns while other prospects never showed up
because of the high cost of fares.
While neither White nor County Council Chairman Butch Kirven would discuss specific prospects,
state Rep. Dan Cooper of Piedmont, chairman of the House Ways and Means Committee, told The
Greenville News that there were five projects within Greenville County, three within the city that
were significantly tied to Southwests decision.
Page 8 of 17
Headquarters are considered big prizes among business recruiters not only because of the
high-paying, white-collar jobs attached to them but also because of the vendors that often follow,
such as advertising agencies and information technology firms.
Theres also the corporate philanthropy that comes with headquarters companies tend to be more
generous to their hometowns, supporting charitable causes and the arts.
The loss of four headquarters raises questions about just how much more city and county officials
need to do. In the cases of Liberty Corp., Bowater Inc., Nuvox and South Financial, there was
probably little that civic leaders could have done to prevent their departures.
If you look back at whats happened with some of the headquarters, its really kind of been the
way of the business world in recent years with acquisitions and mergers, said Ben Haskew, chief
executive of the Greenville Chamber of Commerce. Theres very little as a community we can do when
it comes to that sort of thing.
Thats not to say that we shouldnt do the best job that we can do to involve those companies, he
said. There are opportunities for regional headquarters and perhaps once in a while the movement
of a headquarters operation, he said.
A key development will be home-grown companies that will start here, be headquartered here, grow
here, Haskew said.
He cited the success of ScanSource, a Greenville-based distributor of specialty technology that was
founded in 1992. The company has approximately 460 employees in Greenville and 1,150 worldwide.
Local efforts must be directed at technology, high-impact companies that own intellectual
capital, Haskew said. Where are the opportunities to help them grow to become bigger companies
here, headquartered companies here? he said.
In the 1960s and 1970s, many businesses were built that were later sold in the 1980s, including
banks, insurance companies like Liberty and Colonial Life, and media companies, Hayne Hipp, the
former chief executive officer of the former Liberty Corp. in Greenville, told The News last week.
You do miss something from a civic point of view when youre calling on a non-South Carolina based
company as opposed to a South Carolina-based company, he said. Its just a different dynamic, and
you have to adjust from a civic point of view.
In the past, weve missed some opportunities to lure new business and industry to the Upstate
because of our lack of affordable air service, said Minor Shaw, vice chair of the airport
commission. Southwest will help us to change that.
Officials at the Nashville Area Chamber of Commerce, said the arrival of Southwest more than a
decade ago was a big help in making Nashville competitive for headquarters.
Companies thinking about moving their corporate offices invariably study air service as part of
their planning, those officials said.
Veteran site consultants have said communities that expect to win the intense competition for
headquarters relocations must adopt a deliberate strategy and execute it with vigor.
Page 9 of 17
They have pointed to Tennessee, which spent years courting Nissan before the Japanese carmaker
decided to move its North American headquarters to Nashville from Los Angeles in 2005.
Greenville site consultant Jeannette Goldsmith, who represented Nissan in the move, told The News
that Tennessee first identified the best prospects among the companies that were
already doing business in the state and worked to strengthen its relationships with them. Those
included Nissan because of its longtime plant in Smyrna, outside of Nashville.
Tennessees efforts also included a new incentive especially for recruiting headquarters a
credit against the corporate income tax that allows companies to recoup relocation expenses.
The Upstate is home to a handful of high-profile headquarters and main office operations.
In Greenville County, those include the headquarters of Michelin North America, Hubbell Lighting
and Bi-Lo as well as a major campus of Fluor Corp. and the engineering headquarters for General
Electric Co.s Energy unit.
Companies that call Spartanburg home include Dennys, the restaurant chain, and Milliken & Co., the
textiles and chemicals maker.
Nonetheless, Greenville doesnt have the same reputation for being a good tier two headquarters
town when compared with Nashville, Charlotte or Richmond, site consultants have said.
South Financial, which is being sold to Toronto-based TB Financial Group, in 2006 announced plans
for a three-building complex near Interstate 85 and 600 jobs. That was before the global economic
crisis hit.
Last June, South Financial said it would not be moving operations from downtown Greenville to the
new complex. Instead, its trying to sell the I-85 property in a move it hopes will result in a new
corporate headquarters for Greenville.
Lynn Harton, South Financials president and chief executive, told The News those efforts are
continuing.
We had what we thought was a really strong prospect that would have moved their business here,
Harton said, without identifying the company that would have relocated to Greenville from another
region of the country.
It would have been a great situation for everyone, Harton said. We worked hard on it, (state)
commerce worked hard on it, the city worked hard on it. Its a tremendous joint effort. It could
come back up who knows? But for the time being, theyve decided to stay put.
Harton wouldnt speculate on the companys reasons, but said it was nothing negative about the
area or the location because we know they went through an intense search process.
Its an attractive property, he said. Greenville is a very attractive location for business, so
we are continuing to market it and we believe well be successful in it.
Page 10 of 17
Meanwhile, TD Bank officials say their company will be a good corporate citizen. Bharat Masrani,
chief executive of TD Bank, one of the 15th largest commercial banks in the U.S. with $152 billion
in assets, said TDs charitable foundation has about $100 million in funding and last year it
contributed almost $14 million to various community groups. The figure doesnt include community
sponsorships and employee donations.
Giving is very much part of our culture, of our values, Masrani said. In addition, we are a
community bank. We are a local bank. Investing in our communities is a core principle for us, and
we do that in every market that we operate. I see no reason why we would not do that in South
Carolina.
Top
7. |
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Riverside Founder Sued Over Loans Totaling $22 million
By Tyler Treadway
May 24, 2010 TCPalm.com |
FORT PIERCE Vernon D. Smith, founder of the failed Riverside National Bank, is being sued in
Circuit Court for alleged non-payment of three loans totaling more than $22 million to failed
Colonial Bank in Alabama.
Riverside was seized by the Federal Deposit Insurance Corp. in mid-April and sold to TD Bank of
Delaware; Colonial also was seized by the FDIC and sold to Branch Banking and Trust Co. of North
Carolina, which filed the lawsuit against Smith.
Jason A. Rosenthal, an Orlando attorney who filed the lawsuit on behalf of BB&T, said none of the
loans involved Riverside, adding that Colonial made many loans to Mr. Smith and has filed several
lawsuits against him.
According the lawsuit, Smith owes the bank for three promissory notes for:
$1.25 million made June 16, 2006. As of May 1, Smith allegedly owed $1.1 million in principal and
$257,764.66 in interest, with interest accruing at a rate of $757.55 a day.
$20 million made Sept. 14, 2005. As of May 1, Smith allegedly owed $19.75 million in principal and
$3.55 million in interest, with interest accruing at a rate of $13,527.39 per day.
$2 million made Jan. 2, 2004. As of May 1, Smith allegedly owed $1.45 million in principal and
$336,337.07 in interests, with interest accruing at a rate of $992.18 per day.
Smith said Monday evening he had several loans with Colonial that were secured by Riverside Bank
stock, and the bank stock has gone down in value. I had hoped we could settle this matter, but
theyve chosen to go to court.
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8. |
|
TD Bank Buy of Mercantile Brings Changes to Business Banking
By Margie Manning |
Page 11 of 17
|
|
May 21, 2010 Baltimore Business Journal |
TD Bank Financial Groups planned acquisition of The South Financial Group is likely to impact the
bottom line of many small and mid-size business customers of Mercantile Bank.
TD Bank offers a wider array of products and larger loan limits than Mercantile, South Financials
Florida banking operation, but TD Bank might also hike interest rates or make it tougher for
business customers to get credit, banking experts said.
Theyll be getting to know you, Irv DeGraw, professor of finance and banking at St. Petersburg
College, said of TD Banks initial meetings with Mercantiles business customers. They will look
to reestablish relationships with business borrowers. That doesnt mean theyll throw them out, but
they want to get to know them and get comfortable with them.
Underwriting, review will differ
TD Bank has been rapidly expanding in Florida, buying three failed banks in April prior to the May
17 announcement it would acquire South Financial for a steep discount of $191.6 million. The deal
will make TD Bank the seventh largest bank in Florida by locations with 169 offices, including
Mercantiles 17 offices in the Tampa Bay area. TD Bank currently has no offices here.
South Financial was a strong commercial lender caught in the economic downturn, TD Bank said in a
release.
Following the credit difficulties associated with home construction and commercial real estate
development lending, South Financial brought in a new management team in 2008. That team has done a
good job, putting in new operational parameters and risk approaches to the portfolio, said Kevin
Gillen, TD Banks regional president for Florida and the southeastern U.S.
TD Bank will overlay its own credit standards on the remaining troubled loans, Gillen said.
As of March 31, about 4.2 percent of South Financials total assets were nonperforming, primarily
because of the deterioration in residential construction and development-related loans, which are
included in commercial real estate loans, according to an SEC filing by the bank. About 7 percent
of South Financials total CRE loans are in the Tampa Bay area; 9.4 percent of the Bay area loans
were not accruing interest as of March 31, the filing said.
TD Bank will have different processes for underwriting and reviewing loans than Mercantile, and
there will be a period of adjustment for business customers, DeGraw said.
The biggest potential impact will be on small business customers credit lines, said Stanley Smith,
a finance professor at University of Central Florida in Orlando. A bigger bank is more likely to
have specific loan standards that are less flexible than a smaller bank, he said.
The potential effect of the different standards is for the new bank to decide that the customer no
longer meets their standards and decide to terminate the relationship or reduce the size of the
relationship, Smith said. Alternatively the new bank may decide that the loan is riskier and
increase the interest rate on the lending relationship.
SBA focus
Page 12 of 17
Bank acquisitions are a chance to cut costs, including closing branches and reducing staff. Gillen
said Mercantile offices fit well with what TD Bank was looking for and he expects closings to be
minimal. Its too early to comment on headcount, he said.
Staff changes can impact small business customers, who could feel their lending relationship has
been damaged, Smith said. Theres less chance an acquiring bank will lay off staff when
it doesnt have any operations in the area it is buying into, he said.
TD Bank, which has $152 billion in assets, is a much larger bank that can make larger loans and
provide additional services Mercantile was not offering, particularly in treasury services, DeGraw
said.
TD Bank is among the largest Small Business Administration lenders in the area it serves, Gillen
said. The heart and soul of the bank is small to mid-size businesses and closely held
entrepreneurs.
Tampa Bay has a great mix of middle-market businesses with revenue of $5 million to $50 million,
and the bank is especially interested in the areas health care companies, a specialty lending area
for TD Bank, Gillen said.
Theres also an upside for companies that arent satisfied with the changes TD might bring, Smith
said. Thats stepped-up competition for their banking business.
Lending competitors in that market will recognize that some of the old customers will be unhappy
with the new banks standards or personnel and they will try to obtain the small businesses
financial services business relationship, Smith said.
The deal
TD Bank Financial Group (NYSE: TD), the parent company of Toronto-Dominion Bank, said it would
spend about $191.6 million to buy The South Financial Group (Nasdaq: TSFG), headquartered in
Greenville, S.C.
South Financials banking subsidiary, Carolina First Bank, does business in Florida as Mercantile
Bank.
TD Bank agreed to pay 28 cents in cash or 0.0004 shares of TD common stock for each share of South
Financial common stock for a total of $61 million to South Financial shareholders. TD Bank will pay
another $130.6 million for the South Financial preferred stock and warrants held by the U.S.
Treasury that were awarded under the Treasurys capital purchase program.
The deal is expected to close in the third quarter, pending approval of regulators and South
Financial shareholders.
Top
INDUSTRY NEWS
1. |
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Senators Pick Financial Conferees |
Page 13 of 17
|
|
By Victoria McGrane and Damian Paletta
May 25, 2010 Wall Street Journal |
Congressional leaders began putting together the team of U.S. lawmakers Monday that will finalize
sweeping changes to U.S. financial markets, and the expected lineup suggests banks could face an
uphill battle eliminating the more onerous curbs on their business.
U.S. Senate leaders are expected as soon as Tuesday to appoint seven Democrats and five
Republicans. Senate Banking Chairman Christopher Dodd (D., Conn.) and Agriculture Chairman Blanche
Lincoln (D., Ark.) are expected to play a key role for Democrats, while Sens. Richard Shelby of
Alabama and Judd Gregg of New Hampshire are anticipated to be among those representing the GOP.
The roster of Senate Democrats, which is also said to include Sens. Patrick Leahy of Vermont and
Tom Harkin of Iowa, suggests the conference will be dominated by veteran lawmakers. That could
leave few seats for the Democrats elected in recent years who are generally seen as more friendly
to business.
House lawmakers arent planning to name their members to the conference for at least another week
or two. The Democratic delegation will be led by Rep. Barney Frank of Massachusetts, the chairman
of the House Financial Services Committee and the chief architect of the House bill.
The House Democrats on the conference committee are expected to represent the more liberal wing of
the party, including Reps. Maxine Waters of California and Luis Gutierrez of Illinois.
Other Democrats in the mix of possible conferees include Carolyn Maloney of New York, Paul
Kanjorski of Pennsylvania, Mel Watt of North Carolina, Gregory Meeks of New York and Dennis Moore
of Kansas.
Negotiations are expected to ramp up slowly, with House and Senate staff working over the next few
weeks to narrow differences between the House and Senate bills to a core set of issues. The
negotiations, which will be led by Mr. Frank and Mr. Dodd, likely wont intensify until mid-June.
On some issues, the financial services industry cant rely on Republicans for support. Two-thirds
of the expected Senate conferees, including two of the possible GOP senators, voted for a amendment
to the Senate bill that would give retailers greater leverage in negotiations with credit-card
firms and banks over the fees for card transactions.
Banks and credit unions were blindsided by the Senate vote on the swipe fee amendment and have
pledged to fight to eliminate it in conference. House lawmakers did not include such language in
the version of the legislation they passed last December, but the strong support among likely
Senate conferees could hold sway.
Other flashpoint issues include rules overhauling the legislation of derivatives and the process
put in place to avoid federal bailouts of big financial institutions.
Sen. Gregg was not sanguine when asked Monday whether Republicans will be able to play a
constructive role in the negotiations. One would hope [Democrats] would include us in the process,
but weve hoped that all along, Sen. Gregg said, noting the limited success in finding areas of
bipartisan agreement on the bill.
Page 14 of 17
The Senate on Monday voted on a pair of nonbinding motions that could influence the negotiations,
including giving a symbolic victory to auto dealers over the Obama administration and military
groups. Senators voted 60-30 in favor of a motion to instruct that urges the conference to exempt
auto dealers from a proposed consumer protection
agency. The White House and Treasury Department have criticized auto dealers for targeting members
of the military with unfair lending practices.
Formal conference committees were once a commonplace method of reconciling House and Senate
differences on major bills, but have fallen out of fashion in recent years, because they can be
unwieldy and risk putting on display the trade-offs made at the end of the legislative process.
Top
2. |
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EU to Propose Tax on Banks for Crisis Fund
By Matthew Dalton
May 25, 2010 Wall Street Journal |
The European Commission on Wednesday will propose requiring European Union governments to create
bank crisis funds supported by up-front taxes on financial institutions, EU officials said Tuesday.
The proposal from the commission, the European Unions executive arm, would include strict limits
on how the funds can be used. It is intended to ensure that each EU government has the necessary
tools and legal powers to cope with future financial crises without being forced to recapitalize
banks repeatedly.
But the commission expects resistance from national governments, particularly on its insistence
that the funds only be used to pay the costs of resolving a failed bank.
We do not want the funds being used for recapitalization purposes, an EU official said. They
should be there for a dedicated purpose.
EU national governments may not want such limits at a time when they are desperately searching for
revenue to cut their budget deficits.
The commission also suggests that national regulators may need the power to impose haircuts on the
creditors of a bank that is near failure.
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3. |
|
Obama to Urge Congress to Pass Small-Business Proposal
By Jared A. Favole
May 25, 2010 Wall Street Journal |
WASHINGTONPresident Barack Obama is expected Tuesday to urge Congress to pass legislation that
would create a $30 billion fund to incite banks to extend credit to small businesses, according to
a White House official.
Page 15 of 17
The proposal, which Mr. Obama outlined in February, is part of a broad effort by the administration
to spur small-business growth amid a lending slowdown caused by the economic downturn. Such efforts
include several tax breaks and changes to Small Business Administration lending programs.
The legislation will help the government knock down the barriers that prevent small business
owners from getting loans or investing in the future, Mr. Obama will say, according to a copy of
his prepared remarks.
The push for the House and Senate to act on Mr. Obamas proposal comes after a government panel
recently reported that the administrations $700 billion financial bailout may not help small
business growth. The panel also noted in its report that the governments efforts to stabilize the
financial sector havent increased small-business loans.
Mr. Obama is expected Tuesday to host small business leaders from across the country at the White
House and will detail his push for swift passage by Congress. This is an issue of putting our
government on the side of the small-business owners who create most of the jobs in this country,
he will say. Its about unleashing the great power of our economy, and the ingenuity of our
people.
In addition to creating a $30 billion fund, the proposal would increase the maximum loan size for
Small Business Administration loan programs, bring the capital gains tax to zero for small
businesses and let small companies immediately expense investments in new equipment.
Top
The Daily News Brief is published exclusively for the Employees of TD Bank; please do not
distribute outside the company.
The information presented may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and comparable safe harbour provisions of
applicable Canadian legislation, including, but not limited to, statements relating to anticipated
financial and operating results, the companies plans, objectives, expectations and intentions,
cost savings and other statements, including words such as anticipate, believe, plan,
estimate, expect, intend, will, should, may, and other similar expressions. Such
statements are based upon the current beliefs and expectations of our management and involve a
number of significant risks and uncertainties. Actual results may differ materially from the
results anticipated in these forward-looking statements. The following factors, among others,
could cause or contribute to such material differences: the ability to obtain the approval of the
transaction by The South Financial Group, Inc. shareholders; the ability to realize the expected
synergies resulting from the transaction in the amounts or in the timeframe anticipated; the
ability to integrate The South Financial Group, Inc.s businesses into those of The
Toronto-Dominion Bank in a timely and cost-efficient manner; and the ability to obtain governmental
approvals of the transaction or to satisfy other conditions to the transaction on the proposed
terms and timeframe. Additional factors that could cause The Toronto-Dominion Banks and The South
Financial Group, Inc.s results to differ materially from those described in the forward-looking
statements can be found in the 2009 Annual Report on Form 40-F for The Toronto-Dominion Bank and
the 2009 Annual Report on Form 10-K of The South Financial Group, Inc. filed with the Securities
and Exchange Commission and available at the Securities and Exchange Commissions Internet site
(http://www.sec.gov).
The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial Group,
Inc. will be submitted to The South Financial Group, Inc.s shareholders for their consideration.
Shareholders are encouraged to read the proxy statement/prospectus regarding the proposed
transaction when it becomes available because it will contain important information. Shareholders
will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings
containing information about The Toronto-Dominion Bank and The
Page 16 of 17
South Financial Group, Inc., without
charge, at the SECs internet site (http://www.sec.gov). Copies of the proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in the proxy
statement/prospectus can also be obtained, when available, without charge, by directing a request
to The Toronto-Dominion Bank, 15th floor, 66 Wellington Street West, Toronto, ON M5K 1A2,
Attention: Investor Relations, 1-866-486-4826, or to The South Financial Group, Inc., Investor
Relations, 104 South Main Street Poinsett Plaza, 6th Floor, Greenville, South Carolina 29601,
1-888-592-3001.
The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
executive officers and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding The Toronto-Dominion Banks
directors and executive officers is available in its Annual Report on Form 40-F for the year ended
October 31, 2009, which was filed with the Securities and Exchange Commission on December 03, 2009,
and in its notice of annual meeting and proxy circular for its most recent annual meeting, which
was filed with the Securities and Exchange Commission on February 25, 2010. Information regarding
The South Financial Group, Inc.s directors and executive officers is available in The South
Financial Group, Inc.s proxy statement for its most recent annual meeting, which was filed with
the Securities and Exchange Commission on April 07, 2010. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.
Page 17 of 17
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF TD BANK,
AMERICAS MOST CONVENIENT BANK AND THE TORONTO-DOMINION BANK ON MAY 27, 2010
Daily News Brief
May 27, 2010
Compiled by Brittany Roberge, Corporate and Public Affairs
TD BANK NEWS
1. TD Bank and TD AMERITRADE Join Forces in Support of Special Olympics
News Release [TD Banks Fred Graziano and TD AMERITRADEs John Bunch are quoted.]
TD Bank, Americas Most Convenient Bank®, and TD AMERITRADE today announced a joint effort to
support Special Olympics and the 2010 Special Olympics USA National Games scheduled for July 18-23
in Lincoln, NE. TD AMERITRADE has donated to each of the Nebraska, Texas, Utah, New Jersey,
Maryland, Illinois, Southern California and Florida Special Olympics Programs.
2. TD Bank Q2 Profit Up As Loan losses Improve Reuters
Toronto-Dominion Bank (TD.TO) said on Thursday its profit rose in the second quarter as loan losses
fell to their lowest level in six quarters.
3. TD Bank Donates A Dozen Computers To Laptops For KidZ Cape Cod Today (MA)
TD Bank has donated twelve IBM ThinkPad computers to the Masonic Angel Foundations Laptops for
KidZ project. Established in March, Laptops for KidZ (LFK) places laptop computers with local
schools to be sent home with children who would not otherwise have computer access outside school
hours.
4. Bank Plan Doesnt Excite Milford New Haven Register (CT)
A former downtown anchor store, Harrisons Hardware, may become the home of a TD Bank, which left
members of the citys Planning and Zoning and Economic Development commissions a little
underwhelmed.
5. BankWatch: TARP Investments Lead to Huge Losses for U.S. Treasury
DailyFinance.com
As struggling banks get acquired or fail, the U.S. Treasury is shouldering a growing burden: Its
investments in TARP are turning out to be a bust, leading to huge losses. And there are signs of
more trouble ahead. [Toronto Dominion Bank is mentioned.]
6. TD Bank Financial Group Declares Dividends News Release
The Toronto-Dominion Bank (the Bank) today announced that a dividend in an amount of 61 cents
(sixty-one cents) per fully paid common share in the capital stock of the Bank has
Page 1 of 20
been declared
for the quarter ending July 31, 2010, payable on and after July 31, 2010, to shareholders of record
at the close of business on July 6, 2010.
INDUSTRY NEWS
1. BofA, Citi Repos Errors Wall Street Journal
Bank of America Corp. and Citigroup Inc. incorrectly hid from investors billions of dollars of
their debt, similar to what Lehman Brothers Holdings did to obscure its level of risk, company
documents show.
2. Fair Value Plan Could Cost Banks Wall Street Journal
The Financial Accounting Standards Board proposed a requirement that banks use market values for
loans on their books, a controversial move that could cause steep declines in the overall book
value of some banks.
3. Lehmans Bankruptcy Estate Sues J.P. Morgan Wall Street Journal
Lehman Brothers Holdings Inc.s estate sued J.P. Morgan Chase & Co., alleging J.P. Morgan illegally
siphoned billions of dollars from Lehman in the days before the troubled investment bank filed for
the largest bankruptcy in U.S. history.
4. In Feud Over Capital, FDIC Besting Fed American Banker
The battle over an amendment to establish minimum capital requirements in the regulatory reform
bill is the result of a long-standing feud between the Federal Deposit Insurance Corp. and the
Federal Reserve Board.
TD BANK NEWS
1. |
|
TD Bank and TD AMERITRADE Join Forces in Support of Special Olympics
TD Bank kicks off its 2010 Be a FAN! campaign with the help of TD AMERITRADE on June 1,
2010 to raise money for Special Olympics Programs across the country
May 26 2010 News Release |
CHERRY HILL, NJ, PORTLAND, ME, AND OMAHA, NE., May 26, 2010 TD Bank, Americas Most Convenient
Bank®, and TD AMERITRADE today announced a joint effort to support Special Olympics and the 2010
Special Olympics USA National Games scheduled for July 18-23 in Lincoln, NE. TD AMERITRADE has
donated to each of the Nebraska, Texas, Utah, New Jersey, Maryland, Illinois, Southern California
and Florida Special Olympics Programs.
In addition, June 1-July 31 marks the launch of the annual 2010 Be a FAN! campaign, which
encourages customers and employees to support Special Olympics Programs at their local stores. This
year, for the first time, TD AMERITRADE will also partake in the initiative, hoping to bolster
donations through an employee giving program.
We are delighted to be working together with our partners at TD Bank to support such a worthy
cause, said John Bunch, President, Retail Distribution, TD AMERITRADE.
Page 2 of 20
Special Olympics
commitment to help individuals succeed is absolutely consistent with our values, and we are proud
to be a sponsor.
Were incredibly proud to unite under the TD Shield to support such a great cause, said Fred
Graziano, Head of Retail Banking for TD Bank. We encourage our customers, employees and the
community to contribute to this wonderful organization, and we believe this combined effort will
have a positive impact for the athletes and their families across our local communities.
Associates at both TD AMERITRADE and TD Bank have not only been generous with their financial
support, but have also pledged more than 10,000 hours of volunteer time at numerous Special
Olympics events across the country, said Bob Gobrecht, Managing Director for Special Olympics
North America. Together, by joining forces for the 2010 Be a FAN! campaign, we will have an even
greater impact on the lives of people with intellectual disabilitiesraising awareness and
increasing overall support for Special Olympics both at the local and national levels.
For more information on TD AMERITRADE, please visit. www.amtd.com.
For more information on TD Bank, Americas Most Convenient Bank®, please visit www.tdbank.com.
About TD AMERITRADE Holding Corporation
TD AMERITRADE Holding Corporation (NASDAQ: AMTD), through its brokerage subsidiaries,(1) combines
innovative trading technology, easy-to-use and understand trading tools, investment services,
investor education and superior client service to create a market-leading financial services
experience. Now home to the award-winning thinkorswim brokerage and dynamic trading platform(2) and
the Investools investor education program, TD AMERITRADE provides millions of retail investors,
traders and independent registered investment advisors with the tools, service and support they
need to help build confidence in todays rapidly-changing market environment. For more information
and resources for journalists, please visit the TD AMERITRADE newsroom at www.amtd.com.
(1)TD AMERITRADE, Inc., member FINRA (www.FINRA.org) /SIPC (www.SIPC.org) /NFA
(www.nfa.futures.org) and TD AMERITRADE Clearing, Inc., member FINRA/SIPC..
(2 thinkorswim, prior to joining TD AMERITRADE, earned 4.9 stars, the top score, in the category
Trading Technology, and was rated #1 overall online broker in Barrons ranking of online brokers,
3/15/2010. thinkorswim was evaluated versus others in eight total categories, including trade
experience, trading technology, usability, range of offerings, research amenities, portfolio
analysis and reporting, customer service and education and costs. thinkorswim topped the list in
2006, 2007, 2009, and 2010 with the highest weighted-average score. Barrons is a registered
trademark of Dow Jones & Company © 20062010.
About TD Bank Financial Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Financial Group
(TDBFG). TDBFG is the sixth largest bank in North America by branches and serves more than 18
million customers in four key businesses operating in a number of locations in key financial
centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust and
TD Insurance; Wealth Management, including TD
Page 3 of 20
Waterhouse and an investment in TD Ameritrade; U.S.
Personal and Commercial Banking, including TD Bank, Americas Most Convenient Bank; and Wholesale
Banking, including TD Securities. TDBFG also ranks among the worlds leading online financial
services firms, with
more than 6 million online customers. TDBFG had $567 billion in assets on January 31, 2010. The
Toronto-Dominion Bank trades under the symbol TD on the Toronto and New York Stock Exchanges.
About TD Bank, Americas Most Convenient Bank®
TD Bank, Americas Most Convenient Bank, is one of the 15 largest commercial banks in the United
States with $152 billion in assets, and provides customers with a full range of financial products
and services at more than 1,000 convenient locations from Maine to Florida. TD Bank, N.A., is
headquartered in Cherry Hill, N.J., and Portland, Maine. TD Bank is a trade name of TD Bank, N.A.
For more information, visit www.tdbank.com.
About Special Olympics
Special Olympics is an international organization that changes lives by encouraging and empowering
people with intellectual disabilities, promoting acceptance for all, and fostering communities of
understanding and respect worldwide. Founded in 1968 by Eunice Kennedy Shriver, the Special
Olympics movement has grown from a few hundred athletes to more than 3.4 million athletes in more
than 170 countries in all regions of the world, providing year-round sports training, athletic
competition and other related programs. Special Olympics now takes place every day, changing the
lives of people with intellectual disabilities in places like China and from regions like the
Middle East to the community playgrounds and ball fields in every small neighborhoods backyard.
Special Olympics provides people with intellectual disabilities continuing opportunities to realize
their potential, develop physical fitness, demonstrate courage and experience joy and friendship.
Visit Special Olympics at www.specialolympics.org.
Top
2. |
|
TD Bank Q2 Profit Up As Loan losses Improve
May 27, 2010 Reuters |
Toronto-Dominion Bank (TD.TO) said on Thursday its profit rose in the second quarter as loan losses
fell to their lowest level in six quarters.
Canadas second-largest bank said net income was C$1.18 billion ($1.12 billion), or C$1.30 a share,
in the second quarter ended April 30. That compares to C$545 million, or 59 Canadian cents a share,
in the same period a year earlier.
When one-time items are excluded, the bank said adjusted income C$1.36 a share.
Analysts on average were expected a per share profit of C$1.38, according to Thomson Reuters
I/B/E/S.
TD said provisions for credit losses, or the amount of money the bank set aside to cover bad loans,
fell to C$365 million in the quarter from C$772 million a year earlier.
Page 4 of 20
Tier 1 capital, a key measure of the capital adequacy of a bank, was 12.0 percent, at the low end
of Canadian peers but well above most global rivals.
In April, TD completed a small FDIC-assisted acquisition to bolster its U.S. retail banking
operation which is concentrated on the U.S. east coast. The deal for three Florida banks, which was
not expected to be material to earnings, included Riverside National Bank of Florida.
In May, TD bought another troubled U.S. lender, South Financial Group, in an unassisted deal that
expanded its presence in Florida and added a foothold in North and South Carolina. ($1=$1.05
Canadian) (Reporting by Andrea Hopkins; Editing by Derek Caney)
Top
3. |
|
TD Bank Donates A Dozen Computers To Laptops For KidZ
Recently created Masonic Angels organization matches kids in need with technology
May 26, 2010 Cape Cod Today (MA) |
TD Bank has donated twelve IBM ThinkPad computers to the Masonic Angel Foundations Laptops for
KidZ project.
Established in March, Laptops for KidZ (LFK) places laptop computers with local schools to be sent
home with children who would not otherwise have computer access outside school hours.
Shortly after the Masonic Angel Foundation began the Laptops for KidZ pilot test, they met Richard
Brothers, President of the Cape and Islands United Way. While MAF is not a United Way agency,
Brothers saw an opportunity to put some of the businesses with which he works together with LFK to
help out local children. Brothers introduced LFK to some of the bankers and business people who
serve on his Board. One of these was Larry Squire of TD Bank.
TD Bank on Board
The folks at TD Bank had a few questions about the program, all of which were answered by LFK
volunteers with Rich Brothers initially acting as a liaison. Once the bank executives questions
were addressed, Mr. Squire authorized the donation of twelve IBM ThinkPad T41 notebook computers.
Zapped and ready for action
Prior to donating the laptops, TD Bank had the hard drives zapped and the machines reconditioned
by a company that specializes in providing that service for banks retired computer hardware. The
dozen ThinkPads were delivered to the Masonic Angel Foundations offices late Monday afternoon.
The Masonic Angels move fast. The very first ThinkPad is already configured and en-route to a local
school. Quite contrary to the stereotype of New England Freemasons, the all-volunteer Masonic
Angel Foundation is staffed by busy professionals and energetic retirees, all of who scramble when
a child needs something. Indeed, one of the national standards of the Masonic Angel Fund program,
first established at Orleans in 1998, requires that all
Page 5 of 20
requests for assistance be fulfilled within
one business day.
These computers arent doing kids any good sitting in boxes, says LFK project director Mario
Meré. When we learned these laptops were inbound we had our local chapters instruct their school
partners to get their requests ready. Time is of the essence because the school year is almost
over.
Speedy delivery
Speed is also the touchstone of the Laptops for KidZ project. These computers arent doing kids
any good sitting in boxes, says LFK project director Mario Meré. When we learned these laptops
were inbound we had our local chapters instruct their school partners to get their requests ready.
Time is of the essence because the school year is almost over. MAF volunteers contacted their
school partners about the laptops and made one follow-up attempt if they didnt hear from the
school. After that LFK moves on to another school. Schools that didnt move quickly enough will be
approached again when another batch of computers becomes available.
Speaking of speed, the genesis of Laptops for KidZ was accomplished in record time. In early March
some of the Foundations volunteers attended a series of webinars on non-profit computer
refurbishing projects. With the economy in a shambles, Mario Meré realized that if a family cannot
provide basics for their kids (as evidenced by MAF benevolences over the winter) they could not
afford to provide a computer for the childrens use. The further a child progresses through the
grade levels the greater her disadvantage if she doesnt have computer access outside regular
school hours.
A diverse group of donors
Rather than adopting the traditional business model of selling refurbished computers to raise
money, Meré saw an opportunity to refurbish donated laptops to send home with children with a
documented educational need. On March 5th MAF decided to proceed with the Laptops for KidZ project
pilot test. Within ten days a web site was created, separate funding was secured (so as not to
impact existing programs) and the first donated laptops had arrived. Those first computers came
from a diverse group of donors: a retired Army colonel, a local CPA and a local internet media
company.
Quality control: Each of the IBM Thinkpads donated by TD Bank undergoes a rigorous inspection by
Peter, one of MAFs Maine Coon cats, prior to placement in a local school.
The Masonic Angel Foundation was accepted in the Community Microsoft Authorized Refurbisher program
(now called the Microsoft Registered Refurbisher program) on March 15th.
Technology equals speed and efficiency
The entire genesis of LFK was accomplished without a single meeting and with very minimal phone
conference time. In fact, two of the organizers were in different parts of Florida at the time and
the other was on the Cape. In MAF everyone knows their job and performs it with a minimum of
hand-holding. Because the Foundation now oversees 142 chapters in twelve states, much of its
operational work is done via the Internet. The Masonic Angel Foundation has no paid employees. It
is 100% volunteer-operated to keep operating costs low.
Generosity in the business world
Page 6 of 20
The TD Bank ThinkPads that are already spoken for will be configured and distributed to the schools
immediately. LFKs volunteers configure each laptop with Microsoft Windows XP
Professional, provided at a generous charitable discount through the Microsoft Registered
Refurbisher program. Microsoft is astoundingly generous with us, according to Foundation
president and co-founder, Robert Fellows. Through Microsofts citizenship licensing program were
able to install genuine Windows on these laptops at a price thats practically free, Fellows
reports. Most of the application software that the Foundation uses to run its offices is also
donated by Microsoft.
Next week, the Foundation will hold a training session to broaden its group of volunteer computer
refurbishers. Volunteers learn the basics of configuring Windows, software installation and
troubleshooting.
TD Bank has made possible a wonderful learning opportunity for a dozen local kids. The requests we
received so far are significant needs with documented educational solutions. Mario Meré
Most of the laptops will be delivered to the schools configured with Windows XP Professional, Open
Office and Avast anti-virus software. The schools often add specialized software selected to
address one or more educational needs of the child with whom the computer will be placed.
Opportunities made possible by TD Bank
TD Bank has made possible a wonderful learning opportunity for a dozen local kids. The requests we
received so far are significant needs with documented educational solutions, Meré reflected.
Over the next few months, CapeCodToday.com will provide exclusive coverage of the educational
placement and outcomes of the TD Bank Twelve. The articles will be formed with reports from the
school professionals that placed the laptops. The recipient children will, of course, not be
identified. LFKs volunteers hope this coverage will stimulate additional laptop donations.
A childs privacy preserved
As with all activities of the Masonic Angel Fund, the programs volunteers never know the identity
of a recipient child. All transactions are conducted at arms length with the school professionals
working as a go-between to preserve privacy. LFK does not accept direct requests from potential
recipients. All requests must come through a school or other partner agency. LFK computers are
configured in English and are only available to legal residents of the United States. The TD Bank
laptops will be placed between Plymouth and Provincetown through local Masonic Angel Fund chapters.
LFK accepts functional notebook computers. Functional means that it will power up and is
accompanied by its proper AC adapter. LFK does not accept donations of desktops, monitors or any
Apple product. Donations to the 501(c)(3) Masonic Angel Foundation, Inc. are tax deductible.
For more information about the Laptops for KidZ program visit www.laptopsforkidZ.org.
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Page 7 of 20
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Bank Plan Doesnt Excite Milford
By Brian McCready
May 27, 2010 New Haven Register (CT) |
MILFORD A former downtown anchor store, Harrisons Hardware, may become the home of a TD Bank,
which left members of the citys Planning and Zoning and Economic Development commissions a little
underwhelmed.
Economic Development Director Robert Gregory reported to EDC members Wednesday morning that the
owners of the Harrisons Broad Street site recently presented informal plans to the Planning and
Zoning Board.
According to minutes from the zoning meeting, attorney John Knuff, who is representing TD Bank, and
current owners Russ Barton and Brian Aberton wanted to gauge the reaction of zoning members to the
proposal.
Zoning members and the EDC spoke about their preference that the old Harrisons site be redeveloped
for retail purposes in an effort to attract more people downtown. Officials said since Harrisons
closed in 2006 after an arson fire severely damaged the building, the downtown section of the city
has not been the same.
Knuff told zoning members that because the project is along the Green, and the public has
nostalgia for Harrisons, any proposal would be heavily scrutinized. Knuff said Harrisons does
not have any true architectural significance.
The proposal includes demolishing the existing building because it is decayed, and there are
numerous structural deficiencies, according to minutes of the zoning meeting. The site is on
two-thirds of an acre, and the proposed bank would be 2,560-square-feet. A two-lane drive-thru
would be added, along with 12 new parking spaces. There are currently 24 spaces there. No formal
application has been filed.
Stephen McGrane, who is an architect, told zoning members that TD Bank officials would look to be
sensitive to the aesthetics of other downtown buildings. However, some zoning members, according
to the meetings minutes, raised concerns about the design of the proposed bank, and how it might
not fit in with the New England Colonial charm of downtown.
PZB Chairwoman Susan Shaw expressed concern, saying Harrisons was a retail anchor that drew people
downtown, and retail has suffered downtown since it closed in 2006.
The proposed project, not being a retail establishment, will have a negative impact on Broad
Street, Shaw said, according to the meetings minutes.
Other PZB members echoed Shaws concerns, stating that they would like to see a retail use like a
restaurant redevelop the site.
Knuff responded by noting that the property has sat vacant for four years, which best highlights
the market for the land.
At Wednesdays EDC meeting, members discussed TD Banks interest in the Harrisons site, and
members also raised concerns that they would prefer a retail use for the site.
Page 8 of 20
But EDC Chairman Cyrus Settineri said the facts are that the building has sat vacant for four
years, and, by having a bank there, the site could be turned into something that will be a
positive.
It may not be something we wanted, Settineri said.
He said the new owners have been without any rent for the land, and have a right to make money.
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5. |
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BankWatch: TARP Investments Lead to Huge Losses for U.S. Treasury
By Pallavi Gogoi
May 26, 2010 DailyFinance.com |
As struggling banks get acquired or fail, the U.S. Treasury is shouldering a growing burden: Its
investments in TARP are turning out to be a bust, leading to huge losses. And there are signs of
more trouble ahead.
Example: When Canadas Toronto Dominion Bank (TD) bought a South Carolina bank earlier this month,
it came with a hefty price tag for the U.S. Treasury Department a 60% loss in its TARP
investment. T
Turns out, this is only one among several hits that the Treasury and the U.S. taxpayer have taken
recently. In fact the string of losses in TARP, the Troubled Asset Relief Program, isnt only
large, its gathering momentum.
TARP Takes Hits on Its Investments
To wit: The recent acquisition of Pacific Capital Bancorp (PCBC) by Texas billionaire Gerald Ford
means a $145 million, or 80%, loss in the U.S. Treasurys $181 million TARP investment in the Santa
Barbara, California-based bank. And private equity firm Thomas Lees investment in Spokane,
Washington-based Sterling Financial meant a 75% haircut in the $303 million Treasury investment.
These losses showcase how poorly many of the Treasury Departments TARP investments have fared.
Still, on May 21, the Treasury Department grabbed headlines when it notified Congress that the cost
of TARP has decreased by $11.4 billion to $105.4 billion. While that is no small achievement
given that less than a year ago, the estimated cost topped $340 billion it hides the stream of
investment losses that the Treasury is taking almost weekly from several of its TARP recipients,
costing taxpayers dearly.
Just days before, on May 17, the Treasury took a 60% hit to its $347 million TARP investment in a
South Carolina bank named The South Financial Group (TSFG), which was awarded the cash in December
2008. At the time, H. Lynn Harton, CEO of South Financial said: The Treasury Departments
investment is a vote of confidence in TSFG and enhances our ability to support economic growth in
the communities we serve.
In fact, the vote of confidence investment turned out to be a bust. The Treasury Department is
getting just $130.6 million in cash in return for its $347 million TARP
Page 9 of 20
investment. Canadas Toronto Dominion Bank, part of TD Bank Financial Group (TD), is acquiring
South Financial Groups outstanding shares for a mere $61 million.
Losses in Failed Banks Are Mounting
As we are seeing, the story of the TARP losses is being repeated over and over again. Just this
month, the Treasury Department lost all of its $84.8 million TARP investment in Midwest Bank &
Trust of Illinois. The 23-branch bank was seized by the Federal Deposit Insurance Corporation in
mid-May. That was on top of a $2.3 billion loss when CIT Group (CIT) filed for bankruptcy last
year, the $298 million loss at failed bank UCBH Holdings and an additional $4.1 million in Pacific
Coast National Bancorp.
There are signs of more trouble ahead. More and more banks that took TARP funds are under so much
stress that they arent paying dividends to the U.S. Treasury. The failed Midwest bank was just one
of 104 TARP recipients that hadnt paid dividends, according to Neil Barofsky, the special
inspector general of TARP. Barofsky says that as of March, unpaid dividends totaled $188.9 million.
Besides, its anyones guess how many banks that took TARP funds are part of the recently updated
FDIC Problem List of 775 banks at the end of the first quarter of 2010, an increase from 702 in
the previous quarter.
Dont Hold Your Breath
Barofsky also said that its quite unlikely that the Treasury will get back all of the $84.8
billion that it handed out to the auto companies and their financial arms or that it will see much
of the $50 billion thats earmarked for home loan modifications.
Still, Treasury officials like to point out that the primary objective of the Troubled Asset Relief
Program has been achieved.
TARP has succeeded in achieving its intended goal of stabilizing the economy and putting America
back on track for future growth, said Herb Allison, Treasurys Assistant Secretary for Financial
Stability. Not only have we averted an economic catastrophe, were in a stronger position sooner
than anyone predicted.
To be sure, TARP has played a big role in stabilizing the financial system. However, much of the
calming seems to have taken place in the larger banks, while the smaller banks are still reeling
from the economic recession and bad loans. And its still up for debate whether the TARP
investments in hundreds of banks achieved much. After all, TARP funds were later handed out to spur
lending and shore up capital.
Lending Picture Still Dismal
However, as federal regulators numbers show, lending has hardly picked up and banks continue to
weaken as an increased number slide into failure. At last count, the FDIC had seized 238 banks
since 2008, and 73 of the failures occurred just since the beginning of the year.
Indeed, in the most recent widely watched survey of bank loan officers, the Federal Reserve found
that overall lending standards were unchanged in the first quarter since the same time last year.
Whats more, terms on loans to households and businesses, especially from small to mid-size banks,
continued to tighten.
Page 10 of 20
While its true that an economic catastrophe has been averted, as the U.S. Treasurys Allison
claims, as the Fed data shows, its certainly up for debate whether TARP has been successful in
achieving its many goals as the losses mount.
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6. |
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TD Bank Financial Group Declares Dividends
May 27, 2010 News Release |
TORONTO, May 27 /CNW/ The Toronto-Dominion Bank (the Bank) today announced that a dividend in an
amount of 61 cents (sixty-one cents) per fully paid common share in the capital stock of the Bank
has been declared for the quarter ending July 31, 2010, payable on and after July 31, 2010, to
shareholders of record at the close of business on July 6, 2010.
In lieu of receiving their dividends in cash, holders of the Banks common shares may choose to
have their dividends reinvested in additional common shares of the Bank in accordance with the
Dividend Reinvestment Plan (the Plan).
Under the Plan, the Bank determines whether the additional common shares are purchased in the open
market or issued by the Bank from treasury. At this time, the Bank has decided to continue to issue
shares from treasury, at a 1% discount from the Average Market Price (as defined in the Plan) until
such time as the Bank elects otherwise.
Any registered holder of record wishing to join the Plan can obtain an Enrolment Form from CIBC
Mellon Trust Company (1-800-387-0825) or on the Banks website, www.td.com/investor/drip.jsp.
Beneficial or non-registered holders of the Banks common shares must contact their financial
institution or broker to participate.
In order to participate in time for this dividend, Enrolment Forms for registered holders must be
in the hands of CIBC Mellon Trust Company at P.O. Box 7010, Adelaide Street Postal Station,
Toronto, Ontario, M5C 2W9 before the close of business on July 5, 2010. Beneficial or
non-registered holders must contact their financial institution or broker for instructions on how
to participate in advance of the above date.
The Bank also announced that dividends have been declared on the following Non-Cumulative
Redeemable Class A First Preferred Shares of the Bank, payable on and after July 31, 2010, to
shareholders of record at the close of business on July 8, 2010:
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Series M, in an amount per share of $0.29375; |
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Series N, in an amount per share of $0.2875; |
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Series O, in an amount per share of $0.303125; |
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Series P, in an amount per share of $0.328125; |
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Series Q, in an amount per share of $0.35; |
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Series R, in an amount per share of $0.35; |
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Series S, in an amount per share of $0.3125; |
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Series Y, in an amount per share of $0.31875; |
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Series AA, in an amount per share of $0.3125; |
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Series AC, in an amount per share of $0.35; |
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Series AE, in an amount per share of $0.390625; |
Page 11 of 20
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Series AG, in an amount per share of $0.390625; |
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Series AI, in an amount per share of $0.390625; and |
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Series AK, in an amount per share of $0.390625. |
The Bank for the purposes of the Income Tax Act, Canada and any similar provincial legislation
advises that the dividend declared for the quarter ending July 31, 2010, and all future dividends
will be eligible dividends unless indicated otherwise.
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INDUSTRY NEWS
1. |
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BofA, Citi Repos Errors
Disclosures Cite Accidental Misclassification of Borrowings; No Material Impact
By Michael Rapoport
May 27, 2010 Wall Street Journal |
Bank of America Corp. and Citigroup Inc. incorrectly hid from investors billions of dollars of
their debt, similar to what Lehman Brothers Holdings did to obscure its level of risk, company
documents show.
In recent regulatory filings, the banks disclosed that over the past three years, they at times
erroneously classified some short-term repurchase agreements, or repos, as sales when they should
have been classified as borrowings. Though the classifications involved billions of dollars, they
were relatively small amounts for the banks.
A bankruptcy-court examiner said Lehman had been doing the same thing to make its balance sheet
look better before it filed for bankruptcy in September 2008, using a strategy dubbed Repo 105
that helped the Wall Street firm move $50 billion in assets off its balance sheet.
BofA and Citi say their misclassifications were due to errors not an attempt to make themselves
look less risky, which examiner Anton Valukas said was Lehmans motivation. The disclosures, made
after federal securities regulators began asking financial firms about their repo accounting, were
included in quarterly filings this month but not highlighted.
The disclosures come amid a series of revelations about how banks obscure their risk-taking before
reporting their finances to the public, a practice known in the financial world as window
dressing.
Bank of America and Citigroup were among the banks cited in a page-one Wall Street Journal article
on Wednesday detailing how financial firms temporarily shed repo debt at the ends of quarters, when
they report their finances to investors. Since the financial crisis began, both banks often have
reduced their quarter-end repo debt from their average borrowings for the same quarter. That
activity didnt involve misclassifying repo loans as sales.
Repos are short-term loans that allow banks to take bigger risks on securities trades; classifying
the transactions as sales instead of borrowings allows a firm to take assets off its balance sheet
and thus reduces its reported leverage, or assets as a multiple of equity capital.
Page 12 of 20
Federal securities rules bar financial firms from intentionally masking debt to deceive investors.
There is no indication that Bank of America or Citigroup misclassified their repos intentionally or
that the Securities and Exchange Commission will take any action. An SEC spokesman declined to
comment.
The amounts Bank of America and Citigroup cite are relatively small. The misclassifications had
tiny impacts on the banks reported leverage, and none at all on their earnings or shareholder
equity. The banks didnt restate any financial statements.
Bank of America said the misclassified transactions in certain quarters over the past three years
ranging from $573 million to as much as $10.7 billion represented substantially less than 1%
of our total assets and had no material impact on its balance sheet, earnings or borrowing ratios.
Citigroup said the misclassified transactions of $5.7 billion as of the end of 2009, and as much
as $9.2 billion over the past three years involved a very limited number of our business units
that used this type of transaction in very small amounts. It also said its errors were immaterial
to its financial statements. At no point in time was the impact of these sales transactions large
enough to have a noticeable impact on our published leverage ratios.
By comparison, both banks have more than $2 trillion in assets.
The SEC had asked big banks in March for more information about their repo accounting in the wake
of the Lehman bankruptcy report. That inquiry hasnt found any widespread inappropriate practices,
SEC chief accountant James Kroeker told a congressional subcommittee last week.
But Mr. Kroeker said the SEC has asked several companies to provide more disclosure about their
repo accounting in their securities filings. Bank of America and Citigroup indicated they had found
their errors on their own initiative.
More broadly, the SEC is now considering stricter disclosure and a clearer rationale from firms
about quarter-end borrowing activities. The agency may extend these rules to all companies, not
just banks. The potential new rules, disclosed by SEC Chairman Mary Schapiro at a congressional
hearing last month, came two weeks after the Journals initial article about banks debt-masking
activity.
Separately, Bank of New York Mellon Corp. said in a securities filing that it had found some small
errors in its repo accounting over the past three years. The bank said it didnt use Repo 105
transactions.
The errors have been corrected, and none of them were material to the banks financial statements,
the bank said in the filing. A Bank of New York Mellon spokesman declined to comment further.
Top
2. |
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Fair Value Plan Could Cost Banks
By Michael Rapoport |
Page 13 of 20
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May 27, 2010 Wall Street Journal |
The Financial Accounting Standards Board proposed a requirement that banks use market values for
loans on their books, a controversial move that could cause steep declines in the overall book
value of some banks.
If the rule-making panel for accounting procedures approves the change, U.S. banks would have to
adjust the value of their loan portfolios to the ups and downs of the market, instead of the
longstanding practice of using adjusted original cost.
Using original cost is kind of out-of-date, said Robert Herz, FASBs chairman. From a
balance-sheet perspective, a lot of people want to see what things are actually worth now.
Banks have long opposed any shift to so-called fair-value accounting of loans. Most bank balance
sheets are packed with loans held at their original cost. Under the FASB proposal announced
Wednesday, both the fair value of a companys loans and their amortized original cost would have to
be shown on the balance sheet.
Any quarterly changes or fluctuations in fair value would have to be incorporated into the
companys assets, affecting shareholder equity, or assets minus liabilities. Some of the revisions
to shareholder equity could be dramatic given depressed real-estate values and the struggling U.S.
economy.
Edward Yingling, president and chief executive of the American Bankers Association, a trade group,
said the proposal presents significant problems, not only for banks, but also the general
economy. The change would undermine the availability of credit because any bank making a long-term
loan would immediately see that loan lose value under the new accounting standard, he said.
Critics of applying fair value to loans have said the existing use of fair value has deepened the
financial crisis by forcing financial firms to take unjustified losses on assets that shrank in
value when market conditions worsened temporarily.
Banks already disclose the fair value of loans in footnotes filed with their financial statements.
Still, supporters of applying fair value to loans on the balance sheet have said it would help
investors by making bank balance sheets clearer and more accurate.
FASBs move takes a tougher line than the International Accounting Standards Board, which has
proposed that non-U.S. companies carry their loans at amortized cost, as long as their business
model is to hold on to their loans and collect the payments on them rather than selling the loans.
The difference between the two approaches complicates a major effort to bring U.S. and non-U.S.
accounting rules closer together.
FASB is accepting public comments on its proposal until Sept. 30. The accounting board plans to
hold public meetings on the move in October. Possible reconsideration and a final vote by FASB
would come later.
Most of the 7,932 federally insured commercial banks and savings institutions in the U.S. as of
March 31 were small. At many of those institutions, two-thirds or more of the balance sheet is made
up loans held at their original cost.
Page 14 of 20
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3. |
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Lehmans Bankruptcy Estate Sues J.P. Morgan
By Mike Spector and Susanne Craig
May 27, 2010 Wall Street Journal |
Lehman Brothers Holdings Inc.s estate sued J.P. Morgan Chase & Co., alleging J.P. Morgan illegally
siphoned billions of dollars from Lehman in the days before the troubled investment bank filed for
the largest bankruptcy in U.S. history.
The lawsuit alleges that J.P. Morgan Chief Executive James Dimon and other top executives used
inside knowledge to take advantage of Lehman as its financial state worsened. J.P. Morgan, the suit
alleged, coerced Lehman to turn over $8.6 billion in collateral in September 2008, triggering a
liquidity squeeze that contributed to Lehmans collapse. The estate is hoping to recoup billions in
collateral the bank demanded, and billions in other damages.
J.P. Morgan spokesman Joe Evangelisti said the lawsuit is ill-conceived and meritless, and we will
vigorously defend it.
The lawsuit, long expected, contains among the most-significant allegations to date about the
interplay between Lehman and its onetime Wall Street brethren.
J.P. Morgan served as Lehmans main clearing bank, meaning it acted as a middleman between Lehman
and its lenders and investors. In this capacity, it knew more than most market players about
Lehmans financial condition, which was growing more dire in the summer and fall of 2008.
Read More
Lehman-J.P. Morgan lawsuit Lehman Plans a Tough Fight Against Banks on Loss Claims 5/4/2010The Two
Faces of Lehmans Fall 10/6/2008The lawsuit alleges J.P. Morgan used this advantage to squeeze
billions of dollars out of Lehman by demanding more collateral to cover its risks, ensuring J.P.
Morgan would stand ahead of all other [Lehman creditors]not just for its clearance exposure, but
for all possible exposure that could result from [a Lehman] bankruptcy.
Lehman bowed to J.P. Morgans demands, said the suit, claiming Lehman feared that if J.P. Morgan
ceased its clearing activities, it would have triggered the firms immediate collapse.
A bankruptcy-court examiner found in a recent report that Lehman could pursue a legal claim against
J.P. Morgan for making excessive collateral requests, though he labeled it not a strong claim.
The examiner said Lehman could have a legal claim to claw back $6.9 billion of the $8.6 billion
pledged to J.P. Morgan.
The bankruptcy-court examiner assailed Lehman for using certain accounting techniques to mask its
leverage and mislead market participants before its collapse. Meantime, J.P. Morgan was among the
only institutions to continue lending to Lehman before and after its bankruptcy.
J.P. Morgans Mr. Evangelisti said: As the examiners report makes clear, it was the ill-advised
decisions of Lehman itself and its principals to take on perilous leverage and to
Page 15 of 20
double-down on subprime mortgages ... and not any conduct by J.P. Morgan that led to Lehmans
demise and the enormous losses to its various constituencies.
He added that there was absolutely no inappropriate use of confidential information by any
employee.
Lehman outlined a series of events in which it claimed J.P. Morgan took advantage of being the
ultimate insider and contributed to Lehmans tumble into bankruptcy court. The following timeline
is based on Lehmans versions of events contained in the suit:
Experience WSJ professional Editors Deep Dive: Cash Collateral in DisputeENP NEWSWIRE
Goldmans ResponseDow Jones Corporate Filings Alert
Judge OKs Settlement of J.P. Morgan ClaimEconomist Intelligence Unit
No Accounting for DeceptionAccess thousands of business sources not available on the free web.
Learn More In late August, J.P. Morgan, aware that Lehmans situation was deteriorating, asked
Lehman to revise its clearance agreement to give J.P. Morgan added protections.
Not long after, in early September, senior J.P. Morgan and Lehman executives met to discuss
Lehmans upcoming quarterly results. J.P. Morgan was given access to Lehmans books and records.
On Sept. 9, Mr. Dimon met with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank
Paulson to discuss Lehmans fate and the governments intention to avoid rescuing the firm. Those
meetings prompted J.P. Morgan to accelerate efforts to get Lehman collateral, the suit alleges.
The same day, Steve Black, co-head of J.P. Morgans investment banking division, agreed to send a
deals team to Lehman to discuss pumping money into the troubled firman idea Mr. Dimon had
discussed with Lehmans chief executive, Richard Fuld.
But J.P. Morgan instead sent bankers to probe Lehmans records and plans, Lehmans suit alleges.
The team later told Mr. Dimon and others that Lehman wanted a credit line from J.P. Morgan. In an
email, Mr. Black responded by asking about the drugs they apparently have been taking to think
that we would do something like that.
In the evening hours of Sept. 9, J.P. Morgans in-house lawyer, Diane Genova, called Andrew Yeung,
a junior Lehman lawyer, alerting him that J.P. Morgan was drafting a new set of security agreements
Lehman needed to sign before it released earnings results the next morning, the suit alleges.
Executives authorized to sign the agreement, including finance-chief Ian Lowitt, were unavailable,
the suit alleges. J.P. Morgan told Mr. Yeung that Mr. Fuld, Lehmans CEO, had agreed to the new
deals terms in a conversation with J.P. Morgans Mr. Black. Lehman said in the complaint that was
untrue.
The new agreement gave J.P. Morgan broader protections, requiring Lehmans holding company give
broad guarantees to all J.P. Morgans exposures to all Lehman entities, regardless of their nature.
The new deal also canceled Lehmans access to previously pledged collateral through an overnight
account, the suit alleges.
With the threat of J.P. Morgan stopping clearing activities looming, Mr. Yeung sent the agreement
back, signed by Lehman treasurer Paolo Tonucci.
Page 16 of 20
J.P. Morgan demanded more collateral over the next week, culminating in a $5 billion request late
Sept. 11. Senior Lehman officers circulated a Back-Up Contingency Plan that noted J.P. Morgan
continued to ask for collateral. If we dont provide the cash, they refuse to clear, we fail ... ,
part of the plan said.
On Sept. 12, Lehman delivered what was essentially its last available $5 billion in cash, the
complaint said. Over the weekend, Lehman repeatedly requested access to some of the collateral to
stay afloat long enough to sell itself or wind down. J.P. Morgan refused.
The government declined to rescue Lehman. On Sept. 15, the then fourth-largest investment bank in
the U.S. filed for bankruptcy, setting off the financial crisis.
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4. |
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In Feud Over Capital, FDIC Besting Fed
By Donna Borak
May 27, 2010 American Banker |
WASHINGTON The battle over an amendment to establish minimum capital requirements in the
regulatory reform bill is the result of a long-standing feud between the Federal Deposit Insurance
Corp. and the Federal Reserve Board.
The FDIC, which has argued for years that trust-preferred securities are a form of debt, not
equity, successfully convinced Sen. Susan Collins, R-Maine, to add a provision to the Senate reform
bill that would ban banks from counting trust-preferreds as Tier 1 capital a move that would
erase billions of capital from the system.
We dont believe it absorbs losses, said Jason Cave, deputy to the FDIC chairman for supervision
issues, of trust-preferred securities. Citing last years stress tests, he said TRUPS did not
provide meaningful capital support for large banks.
But the Fed argues the amendment goes too far and would undermine its ability to negotiate with
international regulators on the proposed Basel III capital accord. The central bank has long
defined what counts as core capital for bank holding companies, and ruled in 1996 that
trust-preferreds can account for up to 25% of Tier 1 capital.
The Fed was the one that allowed it years ago and they dont admit to any mistakes, said Paul
Miller, an analyst with Friedman, Billings, Ramsey Group Inc. The FDIC doesnt have the regulatory
power to eliminate it. The FDIC by themselves cant shut it down.
The Collins amendment would set minimum capital ratios for holding companies in part by referring
to a 1991 law detailing prompt corrective action standards, which do not include trust-preferred
securities in the ratio of Tier 1 capital to total assets.
The Fed opposes the amendment, which passed with little debate by voice vote, and has joined
bankers in trying to remove or alter it when House and Senate lawmakers meet to hash out
differences between their bills.
The Fed has argued that putting capital ratios into law is a mistake, preferring to leave such
standards up to agency discretion.
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You cant be in the business of dealing with specific capital instruments, particularly hybrid
instruments, in legislation ... thats the wrong place to do it, said Oliver Ireland, a former Fed
lawyer and now a partner at Morrison & Foerster.
But it seems clear that regulators have been moving to eliminate trust-preferred securities as Tier
1 capital on their own. In interviews with current and former regulators as well as industry
officials, few offered any defense of treating trust-preferreds as capital, noting they are a form
of debt.
Regulators have a strong preference for equity as the dominant source of Tier 1 capital, said
Kevin Jacques, the Boynton D. Murch Chair in Finance at Baldwin-Wallace College and a former
Treasury Department official. It is the ultimate loss-absorbing element.
Ireland said investors also clearly favored equity.
What we saw in the recent crisis is the market preferred tangible market equity, he said. The
way they seemed to judge institutions was on tangible market equity. The market was less confident
with other types of capital instruments.
Industry officials and the Fed are trying to ensure any change that does take place has a
transition period.
Suddenly taking something away that has been considered capital can be quite problematic, said
Randall Kroszner, a former Fed governor and economics professor at the University of Chicago. You
really need to give institutions enough time to be able to make adjustments.
The Collins amendment would affect all holding companies immediately if the bill becomes a law as
is. But Collins has said her intention was to limit its impact to holding companies with more than
$500 million of assets. Collins also has indicated that she would support some type of transition
period. The banking industry has argued that existing trust-preferreds should be grandfathered.
The FDIC said it backs phasing in the requirement.
There is some recognition that holding companies that rely heavily on trust-preferreds may not be
able to get out of that immediately, said Paul Nash, deputy to the FDIC chairman for external
affairs. We want to recognize the market realities and give them some time to do it, but there
will be no new trust-preferred issued that will count as Tier 1 capital.
Nash said he expects the final bill will include a transition period to give holding companies the
chance to divest themselves of trust-preferreds and add new capital.
But the Fed is also concerned because the provision hurts its bargaining position on Basel III.
Late last year, the Basel Committee on Banking Supervision proposed eliminating trust-preferreds as
Tier 1 capital, but agreed to continue to talk about the issue.
Many said the Fed had hoped to extract some concessions from international regulators for
eliminating trust-preferreds, a move that would not be possible if they were already not counted as
Tier 1 capital. Theyre currently in negotiations for Basel III and the Europeans are trying to
eliminate TRUPS as capital, Miller said. They really feel this undermines their negotiations.
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Another industry source, who spoke on condition of anonymity, agreed. It really undermines the
U.S. position, the source said. The Europeans can say, Wait a minute, one of your own sister
agencies doesnt believe it should count, and Congress passed it.
Industry representatives said the issue should receive a full airing from Congress and regulators
so that its impact is fully understood. They estimate that roughly 644 banks mostly mid-sized
institutions would be hurt by the provision, and eliminate close to $130 billion in capital.
When you are going to address $130 billion-plus in capital in the banking system it warrants a
hearing, it warrants a discussion, it warrants that people understand the ramifications of what
they are doing before they do it, said Diane Casey-Landry, senior executive vice president and
chief operating officer of the American Bankers Association.
For now at least, it seems likely that some part of the Collins amendment will survive. In a
briefing with reporters on Wednesday, Michael Barr, the Treasury assistant secretary of financial
institutions, expressed support for the measure. We 100% share the goal of the Collins amendment,
he said. The basic goal of the Collins amendment is there should be higher capital in the system
going forward. Large banks and large bank holding companies, particularly firms that are
interconnected should hold significantly more capital than their smaller counterparties.
Still, Barr alluded to unspecified fixes to the provision. Theres some technical issues in the
drafting that we hope to work through in the conference process, he said.
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