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 a communications made available to employees of The
Toronto-Dominion Bank and/or TD Bank, Americas Most Convenient Bank on June 7, 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 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 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 TD BANK,
AMERICAS MOST CONVENIENT BANK AND THE TORONTO-DOMINION BANK ON JUNE 7, 2010
Daily News Brief
June 7, 2010
Compiled by Jimmy A. Hernandez, Corporate and Public Affairs
TD BANK NEWS
1. |
|
Why interns really matter Philadelphia Business Journal |
Robert Smiths first professional work experience came after his junior year at Northeast High
School. He landed a paid internship at TD Bank working as a greeter, through the WorkReady Summer
Internship program.
2. |
|
TD Charitable Foundation Presents $25,000 Gift To Newark Museums Early Childhood Initiative
Program The Alternative Press (NJ) |
Thanks to a $25,000 grant from the TD Charitable Foundation, the charitable giving arm of TD Bank,
more than 1,300 Newark preschoolers and 50 of their teachers participated in the Newark Museums
innovative educational initiative, Shapes, Colors, and Lines Oh My!
3. |
|
Charlotte seen as a likely target as TD Bank grows Charlotte Business Journal (NC) |
Canada banks U.S. unit acknowledges interest in building presence in N.C. The next time a
Charlotte-area bank looks for a buyer, expect Bharat Masrani to be one of the suitors. [TD Banks
Neil Parmenter is also quoted.]
4. |
|
Mary Ann Pires: Greenvilles future can change for the better Greenville News (SC) |
Right, Yogi. As usual, baseball icon Yogi Berra has an observation thats perfect for the occasion.
The future, with the pending arrival of TD Bank Financial Group as new owner of South Financial
Group, will likely not be what it used to be. Yet, it could be at least as good or even better.
Only time will tell.
5. |
|
5 Banks That Might Get Burned by Reform The Street |
A controversial provision in the current version of the Senates financial reform bill could lead
to dilutive common equity raises at several large banks. [TD Bank is mentioned.]
6. |
|
Goss wins cycling championship; Teutenberg wins womens race Philadelphia Inquirer |
Page 1 of 18
After more than six hours of racing on a hot and humid Sunday afternoon, the 26th TD Bank
Philadelphia International Cycling Championship came down to a sprint to the finish line.
INDUSTRY NEWS
1. |
|
Which Provisions Are Likely to Stay In and Get Stripped Out of Financial Reform
American Banker |
With lawmakers intent on sending a final regulatory reform bill to President Obama by July 4, much
of the legwork is already happening behind the scenes on how to tackle a host of unresolved issues,
including a proposed swaps ban, a stringent capital requirement, interchange fee regulation and a
consumer protection agency.
2. |
|
Bank of America Merrill Relaunches Small-Business Platform American Banker |
Bank of America Merrill Lynch has relaunched a retirement services platform for companies with
fewer than 100 employees. The Advisor Alliance platform will allow Merrill Lynch advisers to sell
recordkeeping and retirement plan administration services to small-business owners.
3. |
|
Credit Unions: A Better Bet Than Banks? The Wall Street Journal |
Interest rates are low and could be heading lower. Bank failures are on the rise. And credit unions
couldnt be happier.
TD BANK NEWS
|
1. |
|
Why interns really matter
By Stephanie Gambone and Christopher Parker
June 7, 2010 Philadelphia Business Journal |
Robert Smiths first professional work experience came after his junior year at Northeast High
School. He landed a paid internship at TD Bank working as a greeter, through the WorkReady Summer
Internship program. Roberts managers were so impressed they asked him to stay on during the school
year and offered him a full-time position upon graduation. Two years later Robert works as
assistant head teller in TDs Andorra branch or store. He is excited about continuing to move up
at TD and a career in banking, a path he had never considered before his internship.
For young people like Robert, this first professional experience can be life-changing. That is why
we support the efforts to encourage all regional employers from large companies to small
businesses to provide a paid internship for a Philadelphia high school student this summer. Over
the past three summers, 3,500 young people have worked at universities and museums, corporations
and radio stations.
Internships allow urban teens to see opportunities beyond their neighborhoods, help them learn
important job skills, and teach them the value of going to work every day and earning pay.
Page 2 of 18
Each year, however, there arent enough internships for many qualified and ambitious young people.
In recent years, teen job losses have far exceeded that of other age groups. This joblessness has
long-term consequences for the future of our city. Research shows that
kids with work experience are more likely to go on to college, stay in our work force, earn bigger
paychecks and become productive citizens and employees.
Stephanie Gambone is chair of the Greater Philadelphia Chamber of Commerces Young Professionals
Network and vice president of business Partnerships for Philadelphia Youth Network (PYN), which
manages the summer internships program. Christopher Parker is vice chair of the network and store
manager and assistant vice president of TD Bank, the chambers corporate sponsor for summer
internships.
Top
2. |
|
TD Charitable Foundation Presents $25,000 Gift To Newark Museums Early Childhood Initiative
Program
June 6, 2010 The Alternative Press (NJ) |
Thanks to a $25,000 grant from the TD Charitable Foundation, the charitable giving arm of TD Bank,
more than 1,300 Newark preschoolers and 50 of their teachers participated in the Newark Museums
innovative educational initiative, Shapes, Colors, and Lines Oh My!
This new curriculum-based program for 4-5 year olds, designed to complement the Museums
groundbreaking modernist exhibition Constructive Spirit: Abstract Art in South and North America,
1920s-50s, enabled preschoolers to explore basic geometric shapes, color and lines from a fresh
perspective, according to Ted Lind, the Museums Deputy Director for Education. The program also
served to enhance critical thinking skills and offered a forward-thinking approach to primary
literacy development, he said.
The TD Charitable Foundation is proud to have partnered with the Newark Museum to create an
interactive educational activity that strives to instill an early appreciation of art, said TD
Market President Nick Miceli. It has been our pleasure to help introduce Newark pre-schoolers to
their neighbor, the Newark Museum, and to the formative joys of the Museum experience.
Top
3. |
|
Charlotte seen as a likely target as TD Bank grows
By Adam ODaniel
June 7, 2010 Charlotte Business Journal (NC) |
Canada banks U.S. unit acknowledges interest in building presence in N.C.
The next time a Charlotte-area bank looks for a buyer, expect Bharat Masrani to be one of the
suitors.
Page 3 of 18
Masrani, chief executive of TD Bank, the U.S. subsidiary of Canada-based Toronto-Dominion Financial
Group, says he is happy with his new foothold in North Carolina. But he also isnt
backing away from speculation that TD Bank will seek to grow by acquisition in North Carolina and
Georgia as it enters Southeastern banking markets.
One never wants to say never, Masrani recently said in a conference call with investors. We are
very happy with the footprint that we have. But should a compelling opportunity come up, we will
certainly look at it.
Observers speculate Masranis expansion plans will focus on the only major markets where his bank
doesnt have a presence along the Eastern seaboard: Charlotte, Raleigh and Atlanta.
Last month, TD announced plans to buy Greenville, S.C.-based The South Financial Group. South
Financial owns 22 Carolina First bank branches in western North Carolina, 83 branches in South
Carolina and 66 Mercantile Bank branches in central and northern Florida.
The acquisition is part of TDs rapid expansion into the Southeast from its core territory in the
Mid-Atlantic and Northeast, where it is a top-10 bank in most major markets. Before striking a deal
with South Financial, TD already this year had acquired three failed Florida banks from the Federal
Deposit Insurance Corp.
Filling gaps in its market
The deals, once finalized and integrated, will give TD a strong presence from South Florida to
Maine. But obvious holes remain in North Carolina. The proposed acquisition of South Financial
gives TD Bank a firm footing only in sleepy mountain communities. It also inherits a few branches
in Wilmington.
But beyond five branches in S.C. counties near Charlotte, it lacks any presence in the Queen City,
the largest banking market in the Carolinas.
Masrani told investors his companys presence in the mountains will serve as a beachhead from
which to grow in North Carolina.
A TD Bank spokesman confirms the bank wants to grow in North Carolina.
Are we interested in continuing to grow in the Carolinas? Yes, spokesman Neil Parmenter tells the
Charlotte Business Journal. What will that look like? Its too early to say.
TD Bank started building its U.S. franchise six years ago with the purchase of New Englands
Banknorth Group. It followed up the 2007 acquisition of New Jersey-based Commerce Bancorp.
Today, TD Bank has about $155 billion in assets in the United States. And analysts believe the bank
isnt finished making deals.
The next leg of the U.S. expansion for TD will be much more centered on the U.S. Southeast rather
than the Northeast, says Sumit Malhotra, a banking analyst at Macquarie Equities Research.
Page 4 of 18
UNC Charlotte finance professor Tony Plath says TD Bank will need to complete two or three
acquisitions to gain a foothold in Charlotte and Raleigh, plus three more purchases to gain ground
in Georgia.
Theyre not done yet, he says. TD is going to build a complete Southeastern footprint.
Few acquisitions available?
The challenge to entering the Charlotte market for TD Bank and its peers is the lack of a good
target, Plath says. Charlotte is dominated by Wachovia Bank and Bank of America Corp., which
together control about 90% of all local deposits. Regional banks BB&T, Fifth Third and SunTrust
round out the top five. Most community banks in the area operate only a few branches and have less
than $600 million in assets.
TD Bank also has signaled its willingness to grow organically, something it may be forced to do in
Charlotte.
Im not aware of many banks that are opening new locations, Masrani told Forbes.com last week.
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.
TD Bank boasts the slogan Americas most convenient bank. It focuses on accessible branches,
longer business hours than competitors and high-level customer service.
The bank avoided some of the worst challenges of the 2008 credit crisis because of its roots in the
more conservative Canadian banking culture. It maintained higher-than-average capital ratios
through the recession and did not participate in the U.S. Treasurys Troubled Asset Relief Program.
But it did inherit some loan problems. The banks U.S. holding company recently reported a net loss
of $19 million in the first quarter, after setting aside nearly $163 million for anticipated loan
losses.
The Boston Business Journal, a sister publication of the Charlotte Business Journal, contributed to
this report.
Top
4. |
|
Mary Ann Pires: Greenvilles future can change for the better
By Mary Ann Pires
June 5, 2010 Greenville News (SC) |
The future aint what it used to be.
Right, Yogi. As usual, baseball icon Yogi Berra has an observation thats perfect for the occasion.
The future, with the pending arrival of TD Bank Financial Group as new owner of South Financial
Group, will likely not be what it used to be. Yet, it could be at least as good or even better.
Only time will tell.
Page 5 of 18
Personally, from where I sit in the bleachers, Im guardedly optimistic. Having been through
similar experiences as an acquired employee, a past resident of Westchester County, New York,
which saw the departure of many headquarters companies, and for the past 24 years as a management
consultant, things can go either way for the affected com munity. Its too early to tell.
Its premature because this is one area where my profession of public relations has done a good
job. Weve advised acquiring companies to be reassuring and weve advised the acquired to sound
optimistic. Wonder of wonders, most have listened. That, combined with the fact that many things
remain to be resolved in a deal like this, makes for what weve heard in recent weeks.
Im glad to hear it, especially from folks close to the decision-makers who say theyve been
favorably impressed. We should be particularly inclined to take Greenvilles newest corporate
citizen at its word, because it has a huge opportunity here and seems savvy enough to know it. In
fact, there are multiple opportunities inherent in the pending TD acquisition.
The first, of course, is TDs: to expand its already-successful enterprise in a new U.S. footprint.
Likewise, to continue the legacy of one of the most generous citizens in a generous community.
Greenville is a place where giving back carries a cache that Ive seldom seen, nationwide. TD will
have a center spot in the philanthropic spotlight to fill. Thats their business-cum-corporate
citizenship opportunity.
But what of other businesses in Greenville? They have an opportunity too. This transition is an
ideal time for them to jump into the grantor pool and really be noticed.
When I chaired the Greater Greenville Chambers first corporate giving conference in 2006, our goal
was to expand the field of business donors, to get more companies involved. We still have a way to
go, despite some good effort. Its frustrating to see whole business sectors, as well as certain
professional groups, still on the philanthropic sidelines. All the while, ruts have been worn to
the entrances of the more generous companies.
Nows the time to change that. New givers, as well as businesses that step up their giving even a
little understanding that it has everything to do with the bottom line will benefit inordinately
in these hardscrabble times. Needs are great, grantee appreciation is high and theres less donor
competition.
A third opportunity exists for our business, economic development and tourism entities: an
opportunity to walk the talk. Every one of them touts the areas cultural, artistic and human
services organizations as they work to attract others to Greenville. Theyre justifiably proud of
them.
So, why not support them? Yes, with a little green. On the occasions Ive suggested this, its
resulted in startled looks. But why not? If business organizations and others think these entities
are such assets and use them to promote the area, then why not help the best of them stay afloat?
Theres a fourth opportunity for area nonprofits. If the local philanthropic landscape shifts some,
as TD and future newcomer-companies put their respective stamps on local giving, isnt this a great
time for them to repackage their ask? Are some new strategies called for, when the contacts are
no longer the same old same old? Might it be timely to look at further collaboration even
consolidation?
Page 6 of 18
Six years after moving here, I continue to marvel at how Greenville supports so many nonprofits,
all doing much the same thing only with different leadership. How long it can go on is anyones
guess. Ive seldom seen its like in 25 years of strategic philanthropy work. Its both good and
bad, in my view. A reflection of so-called philanthropic
entrepreneurialism, for sure. But with a whole lot of redundancy and drain on the resource base.
Greenville is blessed with great wealth, but is it limitless?
Change is unsettling. But its also liberating. After all, Greenville has been all about thoughtful
change for 25 years. Why stop now?
Top
5. |
|
5 Banks That Might Get Burned by Reform
By Philip van Doorn
June 4, 2010 The Street (FL) |
A controversial provision in the current version of the Senates financial reform bill could lead
to dilutive common equity raises at several large banks.
The amendment, which was introduced to the Restoring American Financial Stability Act of 2010 by
Sen. Susan Collins (R-Maine) and approved on May 15, would exclude trust preferred securities, or
TruPS, from bank holding companies regulatory capital ratios. A vote on the full banking reform
bill is still to come.
A bank holding companys Tier 1 capital also known as core capital is a conservative regulatory
capital measure, which excludes non-qualifying preferred stock, unrealized gains on securities,
goodwill, and other intangible items including deferred tax assets, but many TruPS are included.
Because of their seniority over other share types, TruPS are thought of as essentially debt by
some analysts and investors. The Federal Deposit Insurance Corp. has long been against including
TruPS as part of Tier 1 capital, although the Federal Reserve determined in 1996 that up to 25% of
a bank holding companys Tier 1 capital could be comprised of this type of equity.
The largest U.S. bank holding companies, including Bank of America (BAC), JPMorgan Chase (JPM),
Citigroup (C) and Wells Fargo (WFC) had relatively small portions of their reported Tier 1 capital
in TruPS as of March 31, and the group would see little impact from the amendment.
But some holding companies that have higher portions of Tier 1 capital in TruPS look vulnerable and
could need to raise additional common equity, depending on how the exclusion ends up being enacted,
if it happens at all.
In a gently-worded statement, Rochdale Securities analyst Richard Bove said the provision would
require that American banks withdraw from the global financial system because Americans would not
be allowed to compete. He went on to say that enacting the amendment as written would result in
the loss by America of the worlds core currency and the shrinking of the American economy.
Page 7 of 18
Using data supplied by SNL Financial, the following five banks had the highest levels of qualifying
trust preferred securities as part of their Tier 1 capital among the largest 50 U.S. bank holding
companies as of March 31. The list excludes South Financial Group (TSFG) because its since agreed
to be acquired by TD Bank Financial Group (TD).
The Tier 1 risk-based capital ratio needs to be at least 6% for a bank to be considered well
capitalized under ordinary circumstances. Regulators are still mulling what appropriate capital
levels should be for the industry, especially for holding companies that owe the government bailout
money received through the Troubled Assets Relief Program, or TARP, or are facing significant loan
losses.
5. M&T Bank Corp (MTB) of Buffalo, N.Y. had $1.15 billion in qualifying trust preferred securities
as of March 31, or 20% of Tier 1 capital, according to SNL Financial. The company owes $600 million
in TARP money and its Tier 1 risk-based capital ratio was 8.9% as of March 31.
The companys largest shareholder is Allied Irish Banks PLC(AIB), which recently announced plans to
sell its reported 22.5% stake in M&T during 2010.
In a recent report on the effect of the possible exclusion of trust preferred securities from Tier
1 capital on large regional bank holding companies, Credit Suisse analyst Craig Siegenthaler said
that since M&Ts capital levels were already relatively low, the amendment poses an additional
headwind for MTB as its Tier 1 ratio will decline to 7.1% vs. [the Regional Banks peer] group
average of 10.6%.
M&T stands out among the large banks still owing TARP money because it has remained profitable
through the credit crisis and has decent loan quality. M&Ts ratio of non-performing assets to
total assets as of March 31 was 2.07%, which was the lowest for the five holding companies being
discussed here, and compared favorably with the national aggregate nonperforming assets ratio of
3.43% reported by the FDIC.
The companys first-quarter ratio of net charge-offs (actual loan losses) to average loans was a
low 0.73%, with loan loss reserves staying way ahead of the pace of loan losses, to cover 1.73% of
total loans. M&Ts charge-off ratio was the lowest among the group of five holding companies by
far, and compared to a national aggregate of 2.84%.
The risk to M&Ts shareholders is that regulators could require a raise in common equity before the
company pays its off TARP tab, since a Tier 1 risk-based capital ratio of 7.1% (excluding TruPS)
wouldnt greatly exceed the 6% benchmark for a well capitalized bank. Shares closed Wednesday at
$79.67, up 21% year-to-date.
4. Fifth Third Bancorp (FITB) had a Tier 1 risk-based capital ratio of 13.4% as of March 31 the
highest among our group of five. The company had $2.8 billion worth of qualifying trust preferred
securities, or 21% of its Tier 1 capital.
Excluding TruPS, Credit Suisse estimates Fifth Thirds ratio would decline to 10.6%, which would
still be high for a regional bank holding company in a normal credit environment.
In June 2009, after regulatory stress tests were completed, Fifth Third raised $1 billion in common
equity. The company had previously raised $1.1 billion through a preferred offering in June 2008,
and it still owes $3.4 billion in TARP money.
Page 8 of 18
Fifth Thirds first-quarter results showed the company clearly turning a corner with reduced loan
losses, lower nonperforming assets, and excess capital to ride through the latter stages of the
credit crisis and repay TARP. But throw in an unexpected $2.8 billion Tier 1 capital hit, and Fifth
Thirds common shareholders would likely be facing yet another dilutive secondary offering.
Fifth Thirds shares closed at $13.05 Wednesday, up 34% this year.
3. BB&T Corp.(BBT) had $3.5 billion in qualifying trust preferred equity as of March 31. This would
come to 25.6% of Tier 1 capital, although current reporting rules require the company to limit the
TruPS component of their reported Tier 1 capital to 25%.
BB&Ts Tier 1 risk-based capital ratio was 11.6% as of March 31 and Credit Suisse estimates that if
trust preferred securities were excluded, the ratio would drop to 8.6%, which is still a pretty
high level. Also in the banks favor is that it has already repaid TARP, so it wouldnt face extra
regulatory pressure to raise capital.
The bank has remained profitable through the crisis, although earnings have been hurt by elevated
loan loss provisions. While nonperforming assets continued to increase in the first quarter, the
pace of increase slowed, and BB&T reported declines in early-stage loan delinquencies.
Hilliard Lyons analyst Ross Demmerle was neutral on BB&T in a report published on April 26, saying
the shares were fairly valued at $34.28. The stock has pulled back 10% from there to close at
$30.73 on Wednesday, although they were still up 22% year-to-date.
At these levels, the shares arent especially cheap, selling for 2.1 times tangible book value and
19.7 times the current average estimate of analysts polled by Thomson Reuters for 2010 earnings of
$1.50 a share. However, for investors with long term horizons, the stock is attractively priced at
right around 9.6 times Wall Streets current 2012 consensus view for a profit of $3.10 a share.
2. Capital One Financial (COF) had $3.6 billion in qualifying trust preferred securities as of
March 31. The companys ratio of qualifying trust preferred securities to Tier 1 capital was a
whopping 31.6%, although reporting rules require the company to limit the trust-preferred component
of reported tier 1 capital to 25%.
Capital Ones Tier 1 risk-based capital ratio stood at 9.6% as of March 31. Credit Suisse estimates
the ratio would drop to 6.5% if trust preferred equity was completely and immediately excluded from
Tier 1 capital.
A heavy-handed and quick implementation of the Collins amendment would make a dilutive secondary
offering of common shares a real possibility for Capital One, but given a little time the company
should be able to sufficiently boost its capital through earnings.
Capital Ones first-quarter net income came in at $636 million, or a return on average assets of
1.39%, and a return on equity of 12.15%. Those excellent numbers (in the current environment)
reflect the companys determination that the quality of its credit card portfolio had improved
enough for it to reduce its quarterly provision for loan loss reserves to $1.47 billion, even
though net loan charge-offs totaled $2 billion during the quarter. Continued releasing of
reserves bodes well for both subsequent quarters and the Tier 1 risk-based capital ratio.
Page 9 of 18
A company spokesperson told TheStreet: its premature to speculate on the pending legislation.
Shares closed at $41.75 Wednesday, up 9% this year, after pulling back from a high of $46.73 on
April 23. At that level, the stock was trading at 1.8 times tangible book value and
11.2 times Wall Streets average 2010 earnings estimate of $3.60 a share.
1. Out of the 50 largest domestic bank holding companies, Popular, Inc. (BPOP), of San Juan, Puerto
Rico had the highest ratio of qualifying trust preferred equity to Tier 1 capital as of March 31,
at 33.6%. Qualifying trust preferred equity totaled $814 million.
The companys Tier 1 risk-based capital ratio was 9.5% as of March 31, and based on a calculation
that removes the allowed 25% of reported Tier 1 capital that was comprised of TruPS, the ratio
would drop to 7.1%. However, that excludes the effect of the companys recent acquisition of $9.4
billion in assets from the failed Westernbank Puerto Rico, and a preferred equity raise of $1.1
billion that has already been converted to common equity and will be included as Tier 1 capital.
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Popular converted the $935 million in TARP money it owed to trust preferred securities in August
2009.
Another recent development was Populars announcement that its received a number of bids to sell a
majority stake of its Evertec technology subsidiary. According to B. Riley & Co. analyst Joe
Gladue, the sale would permit Popular to recognize a gain of $700 to $750 million.
For Popular, the major concern is loan quality, as nonperforming assets comprised 7.43% of total
assets as of March 31, although reserves appeared adequate, covering 5.51% of total loans, while
the net charge-off ratio was 3.84%. Puerto Ricos unemployment rate exceeds 16% and Populars
management has said that nonperforming loans could continue to increase for several quarters, so it
remains to be seen when the company will turn a corner.
Despite the bank being in flux, Gladue is bullish on the shares with a 12-month price target of
$4.25. Shares closed at $2.95 Wednesday, up 31% year-to-date.
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6. |
|
Goss wins cycling championship; Teutenberg wins womens race
By Kevin Tatum
June 6, 2010 Philadelphia Inquirer |
After more than six hours of racing on a hot and humid Sunday afternoon, the 26th TD Bank
Philadelphia International Cycling Championship came down to a sprint to the finish line.
It was anybodys race, and anybody turned out to be Matthew Goss of Australia and the HTC-Columbia
team.
Page 10 of 18
It was Goss third attempt at winning the 156-mile classic, and he won this one in 6 hours, 15
minutes, 46 seconds.
The victory made it the second year in a row that HTC-Columbia won both the mens and womens
races. Ina Teutenberg of Germany and HTC-Columbia won the womens Liberty Classic.
In the mens race, Slovak Peter Liquigas Sagan of the Liquigas-Doimo team and Norways Alexander
Kristoff of the BMC Racing team came in second and third, respectively. All three leaders finished
with the same time.
No fewer than 33 other riders were vying with Goss in a desperate sprint at the end.
I was in good position coming out of [Logan Circle], said Goss, who received a winners share of
$13,500 of the $51,690 prize money. I made my move with 180, 200 meters to go.
More than 200 riders participated in the mens race, but only 67 were listed in the final results.
Australias Nathan ONeil had the lead with nine laps to go on a course that started and ened on
the Benjamin Franklin Parkway and ran along Kelly Drive, through Manayunk, up the famous Manayunk
Wall and back through Fairmount Park.
With five laps remaining, Will Routley of Canada was setting the pace. At one point, he had a lead
of 1:30 on his closest rival. But, on his last trip up the Wall in Manayunk, Routley struggled, and
the pack that was chasing him caught up.
That waa when Goss teammates on HTC-Columbia helped push him to the front.
Coming off the Wall behind the first group, it wasnt the best situation, Goss said. But, its a
long way to go from the top of the Wall, so I kind of knew [the leaders] would come back. We missed
some big breaks every time and had to do a lot of work at the end. Its nice to some out with the
win.
Episcopal Academy graduate Tyler Wren was 42d in 6:28.06.
While Goss won the mens event for the first time, Teutenberg captured her fourth title in the 16th
womens Liberty Classic. Her time of 2:31:39 in the 57.6-mile.race put her on top of a field of 120
competitors that was the races largest ever.
It was the second straight year that Teutenberg earned the womens crown, which she also claimed in
2007 and 2005. This year, a group of 22 riders was packed together as the end of the race neared.
In the final stretch, Teutenberg beat out Shelly Evans of the Peanut Butter and Co. Twenty12 team,
who was attempting to become the first American to win the Liberty Classic.
Out of [Logan Circle on the final lap], Shelly jumped a little early, and she was flying, said
Teutenberg, who received $2,210. I was able to get back on top of it. It was a great race.
Top
INDUSTRY NEWS
Page11 of 18
1. |
|
Which Provisions Are Likely to Stay In and Get Stripped Out of Financial Reform
By Stacy Kaper
June 7, 2010 American Banker |
With lawmakers intent on sending a final regulatory reform bill to President Obama by July 4, much
of the legwork is already happening behind the scenes on how to tackle a host of unresolved issues,
including a proposed swaps ban, a stringent capital requirement, interchange fee regulation and a
consumer protection agency.
Interviews with analysts, industry representatives, academics and other sources point to a growing
consensus on how some of these issues will play out. American Banker offers the following answers
to frequently asked questions as a guide to the conference committees work.
When does the conference committee start?
It will kick off Wednesday with opening statements. While lawmakers have promised the negotiations
will take place in public, that appears unlikely, with negotiations already taking place behind
closed doors.
Nothing is going to happen in conference. Everything is going to happen beforehand. The conference
is just going to kind of rubber-stamp it, said Kip Weissman, a partner in the law firm Luse Gorman
Pomerenk & Schick. Its not a question of openness; its a question of ceremony. ... Its very, very
rare for there to be true negotiations in conference.
House Financial Services Committee Chairman Barney Frank is expected to chair the conference, but
the Senate bill is expected to be the base text, which gives an advantage to provisions already
included in that version.
Opening statements are likely to go on through next week, and substantive public discussion wont
begin until June 15.
What are the most critical issues?
The House and Senate bills are similar in many ways, but the Senate version has several provisions
not found in the House bill, including ones that would force banks to spin off their derivatives
trading operations, regulate interchange rates on debit cards, eliminate the thrift charter and
stop trust-preferred securities from counting as Tier 1 capital.
The two bills also confront national bank preemption in slightly different ways and differ on where
a consumer agency should be housed and how it should be funded.
Will the derivatives provision survive?
The measure is expected to be heavily watered down or even dropped. Several regulators have argued
that forcing banks to spin off their swaps desk would increase, not decrease, risk in the system,
and the Obama administration is thought to oppose it.
The most likely scenario is that lawmakers will beef up the Senate bills language on the Volcker
Rule to ban proprietary trading to ensure it covers derivatives activities. Under the compromise,
regulators could ban risky trading activities.
I think ultimately the derivatives language and the Volcker language will end up sort of
meshing, said Josh Rosner, a managing director at the research firm Graham Fisher & Co.
Page12 of 18
Banks will be allowed to hedge for themselves and theyll be allowed to for customers, but
anything that falls outside of that on the derivatives trading side i.e., that is not for
economic business purposes will end up being forced outside the bank holding company.
What about the provision on trust-preferreds?
That, too, is likely to be moderated. At the behest of the Federal Deposit Insurance Corp., Sen.
Susan Collins, R-Maine, added a provision to stop trust-preferred securities from counting as Tier
1 capital. (The FDIC argues its really debt and doesnt absorb losses.)
But implementation of that ban would cause a huge drop in Tier 1 capital, a prospect that has many
in the industry panicking.
While it could be stripped from the final bill, many expect such a restriction to be phased in
gradually and existing trust-preferreds may be grandfathered. But conferees must tread carefully.
Collins is one of only four Republicans who voted for the bill in the Senate and her vote on final
passage will be crucial.
But the interchange amendment will be taken out, right?
Dont bet on it. Although state treasurers have joined bankers in opposition of the provision by
Sen. Richard Durbin, D-Ill., that would require the Federal Reserve Board to ensure interchange
fees on debit cards are reasonable and proportional, the odds of removing the provision are slim.
Durbin and a slew of retailer groups are lobbying hard to keep the measure in the final bill, and
argue the Senates 64-to-33 vote on it is proof that it enjoys considerable bipartisan support.
I dont expect significant watering down, said Brian Gardner, an analyst with KBW Inc.
You could see some tightening of the language of what reasonable and proportional means, how you
define what the actual costs are for the issuers and the networks. ... But I think the guts of the
amendment, which is to instruct the Fed to regulate these fees ... stays in place.
Both bills would eliminate the Office of Thrift Supervision, but what about the thrift charter?
It is likely to survive.
The House would keep the thrift charter while the Senate would grandfather existing thrifts but
close off the charter to new applicants.
Senate Banking Committee Chairman Chris Dodd resisted efforts by Sen. John Kerry, D-Mass., to
preserve the thrift charter during the regulatory reform vote, but most observers think he did so
to preserve a bargaining chip for conference, not because he is committed to the issue.
Frank, meanwhile, has repeatedly said he wants to preserve the thrift charter.
What about the consumer protection agency?
That issue appears to be in flux. While the House would create a stand-alone agency, the Senate
would place an independent bureau underneath the Fed. The Senate version may prevail simply because
it has an easier funding mechanism it would just draw money from the central bank.
Page13 of 18
I thought the preemption provisions in both bills would restore the Barnett standard. Why is there
still a fight?
Both bills would allow the Office of the Comptroller of the Currency to preempt state laws on a
case-by-case basis, but the Senate bill explicitly references the 1996 Barnett Supreme Court case,
while the House uses its own language designed to emulate it.
The House bill also would add provisions that would require the OCC to prove a substantive federal
standard addresses the same issue a state law attempts to tackle before it could be preempted.
The House would give the state attorneys general the ability to enforce any federal law against a
national bank, while the Senate bill restricts them to just enforcing new rules from the consumer
protection regulator.
Raj Date, the chairman of the Cambridge Winter Center for Financial Institutions Policy, said: The
Senate language is going to prevail. Sometimes I wonder whether the distinction is as big of a deal
as the industry and the OCC lead themselves to believe, but I dont think its going to be a big,
contentious issue.
Top
2. |
|
Bank of America Merrill Relaunches Small-Business Platform
By Matt Ackermann
June 7, 2010 American Banker |
Bank of America Merrill Lynch has relaunched a retirement services platform for companies with
fewer than 100 employees.
The Advisor Alliance platform will allow Merrill Lynch advisers to sell recordkeeping and
retirement plan administration services to small-business owners.
Advisers can use the portal to review the investment performance of retirement plan funds and
generate customizable quarterly plan sponsor investment review reports for small-business owners.
Through this reporting and online dashboard view of a retirement plan portfolio, advisers can
help plan sponsors determine on an ongoing basis how funds are performing relative to their peers
and, when appropriate, present alternative funds to replace poor performers.
More than 8,000 of Merrills 15,000 advisers are working with small-business owners. This year
there have been more than 1,400 small-business client referrals into the Bank of America Merrill
Lynch institutional retirement business from Bank of Americas global commercial bank.
The relaunch of the platform was announced on June 3.
Top
Page14 of 18
3. |
|
Credit Unions: A Better Bet Than Banks?
By Jane J. Kim
June 4, 2010 The Wall Street Journal |
Interest rates are low and could be heading lower. Bank failures are on the rise. And credit unions
couldnt be happier.
With their fatter yields and lower fees, credit unions are having little trouble attracting
depositors these days. Many also are positioning themselves as a more wholesome alternative to Wall
Street bailouts, bank seizures and predatory lending scandals, offering trustworthy advice and good
customer service.
As with banks, credit-union deposits are insured up to $250,000 by the federal government.
A few weeks ago, Samantha Johnson of Madison, Wis., left M&I Bank, where she had banked for 12
years, in favor of Summit Credit Union. Lower fees were one factor: Summit, unlike M&I, didnt
charge a fee for its checking accounts if, for example, her balances fell below certain levels.
Another draw, she says, was the credit unions willingness to spend time with her to set up a
financial plan.
You could never walk into a bank and have them spend so much time with you, says the 33-year-old
pricing analyst at an insurance firm.
Credit unions are seeing big growth in their deposits, as their share of the total U.S. household
savings climbs. Credit unions share of the total household-savings market climbed to 10% in March,
from 9.5% a year earlier, according to a Wall Street Journal analysis of data from the Federal
Reserve, the National Credit Union Administration and the Treasury Department. At Otero Federal
Credit Union in Alamogordo, N.M., which has $221 million in assets and some 32,000 members, deposit
growth has been about 8% to 10% in the past year.
Some bankers say credit unions market-share gains are a bit misleading. The American Bankers
Association points out that all depository institutions have seen a flight to quality in recent
years. Deposits have not been hard to get for the banks or credit unions, says Wayne Abernathy,
executive vice president for financial institutions policy.
Of course, credit unions, which have 91.5 million members, arent for everyone. Consumers have to
meet membership requirements, usually based on where they live or work. And those looking for more
complicated wealth-management advice or trust services may have to look elsewhere. Credit unions
focus mainly on deposit products, such as checking, savings accounts and certificates of deposit
(known as share certificates), and consumer loans, such as mortgages and auto loans.
And credit unions havent escaped the financial crisis entirely. Many are seeing higher loan
losses, while several corporate credit unions which provide services to retail credit unions
took big losses in mortgage-backed securities, prompting a government bailout.
We have been collateral damage just like everyone else, says Bill Hampel, the chief economist at
the Credit Union National Association, a trade group. Even the good, old-fashioned standard
conventional mortgages were severely affected by the sharp declines in home prices.
Page15 of 18
That is why it is important to check out the financial health of any institution with which you are
planning to do business. The National Credit Union Association, a regulator akin to the Federal
Deposit Insurance Corp., provides detailed financial information at ncua.gov. Beyond that, there
are various ratings services that grade the safety and soundness of financial institutions.
Bankrate.com and BauerFinancial.com, for example, grade financial institutions.
Here are some ways to get more yield on your money or cut your interest payments:
Deposits
You can generally find higher rates on certificates of deposit, checking and savings accounts at
credit unions than at traditional banks. In May, for example, the average yields on one- and
five-year CDs at credit unions were 1.19% and 2.73%, respectively, compared with 0.70% and 2.12% at
banks and thrifts, according to Bankrate.com.
Credit unions are more likely to offer free checking at a time when more banks face legislation
that is expected to cut into overdraft fees, a profitable source of revenue. With regulatory
changes on the horizon, thats going to be a game changer for free checking, says Greg McBride,
senior financial analyst at Bankrate.com, which recently found that 39 of the 50 largest credit
unions offer free checking.
Credit unions are paying high yields on so-called reward checking accounts when people make a
certain number of debit-card transactions and direct deposits, and agree to get their statements
online. Interra Credit Union of Goshen, Ind., is paying 4% on deposits of as much as $10,000 in its
My Rewards Checking account. The catch: If you fail to meet all of the monthly requirements, the
yield drops to 0.10% for that month.
Credit unions also are rolling out new products aimed at younger savers. In 2009, Navy Federal
Credit Union, based in Vienna, Va., launched a one-year EasyStart CD with a 2.9% yield that
allows people to buy a CD with as little as $50.
Mortgages
Credit unions are dropping rates on loans even as they expand into new areas, such as student and
small-business loans.
One of the fastest-growing loans at Pentagon Federal Credit Union is its 5/5 adjustable-rate
mortgage, which offers a 3.88% rate for five years and then adjusts every five years with no
origination fees and covers most of the lenders fees. Mortgage-loan activity has picked up at
Interra Credit Union, which plans to offer a $250 Visa gift card to members who purchase or
refinance a mortgage starting next week.
In general, the rates on primary mortgages are usually about the same for credit unions as for
traditional banks, because the secondary market plays such a big role in mortgage rates and
availability. Closing costs, however, are likely to be lower at credit unions than at banks.
Home-equity lines of credit could be a better deal at credit unions than at banks. In May, the
average rate on home-equity lines of credit was 4.47% at credit unions and 5.63% at banks,
according to Bankrate.com.
Cars and Credit Cards
Page16 of 18
Credit unions usually offer better deals on auto loans, too. In May, they charged an average of
5.73% on a four-year new-auto loan, versus 6.98% at their banking counterparts, according to
Bankrate.com.
Navy Federal is offering a 1.99% rate on 36-month new car loans, while Otero Federal Credit Union
is running a promotion in which it will beat the rate of outside auto loans by up to 3 percentage
points with a floor of 3.49% for up to 60 months. Others are throwing in sweeteners. FAA Credit
Union in Oklahoma City, which is offering a rate of 3.6% on car loans up to 72 months, is throwing
in $25 gasoline cards as referral bonuses.
Credit unions also are building up their credit-card businesses. While most cards have variable
rates, meaning their rates will move higher once market rates move up, some credit unions still
offer fixed rates and have been launching more no-fee rewards cards. Navy Federal recently launched
a no-fee card that offers 1% cash back on the first $10,000 spent each year and 1.5% after that.
Penalty fees also are likely to be lower at credit unions. A recent Bankrate survey found that
while the cash advance and balance-transfer fees on bank-issued cards have been rising up to 5%
of the transaction in some cases only about half of credit unions charged such fees, and in most
cases the fees stayed the same, says Mr. McBride of Bankrate.
Interras Platinum credit card, for example, has a fixed-rate of 8.9% and a cash-advance rate of
8.9%. A late fee of $17 is only assessed if the user is more than 10 days past due, compared with
late fees of $39 that are typical in bank-issued cards.
Its not an all-or-nothing proposition. You can have a checking account at one place, a high-yield
savings account someplace else, and a safe deposit box at the third, Mr. McBride says. Sometimes
it pays to be a free agent to make sure youre getting the best terms on each product.
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
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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
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Financial Group, Inc.s results to differ materially from those described in the forward-looking
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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.
Page17 of 18
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.,
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statement/prospectus and the filings with the SEC that will be incorporated by reference in the
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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
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The Toronto-Dominion Bank, The South Financial Group, Inc., their respective directors and
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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
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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.
Page18 of 18