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 (i) a presentation made at an event organized by the Canadian
Embassy and held in Toronto, Ontario on June 28, 2010 and (ii) communications sent to employees of
The Toronto-Dominion Bank and/or TD Bank, Americas Most Convenient Bank on June 29, 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. The Toronto-Dominion Bank and The South Financial Group, Inc. have filed with the
SEC a Registration Statement on Form F-4 containing a preliminary proxy statement/prospectus and
each of the companies plans to file with the SEC other documents regarding the proposed
transaction. Shareholders are encouraged to read the preliminary proxy statement/prospectus
regarding the proposed transaction and the definitive proxy statement/prospectus when it becomes
available, as well as other documents filed with the SEC because they contain important
information. Shareholders may obtain a free copy of the preliminary proxy statement/prospectus,
and will be able to obtain a free copy of the definitive proxy statement/prospectus when it becomes
available, 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 definitive proxy statement/prospectus and the filings with the SEC that will be
incorporated by reference in the definitive proxy statement/prospectus can also be obtained, when
available, without charge, by directing a request to TD Bank Financial Group, 66 Wellington Street
West, Toronto, ON M5K 1A2, Attention: Investor Relations, 1-866-756-8936, 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,
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, and the above-referenced Registration
Statement on Form F-4, which was filed with the SEC on June 10, 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, is contained in the above-referenced Registration Statement on Form F-4, which was filed with the SEC on June 10, 2010,
and other relevant materials to be filed with the SEC when they become available.
THE FOLLOWING IS A PRESENTATION MADE AT AN EVENT ORGANIZED BY THE CANADIAN EMBASSY AND HELD IN TORONTO, ONTARIO ON JUNE 28, 2010
Presentation to Rising
State Leaders
June 28th, 2010
Howie Millard
Director of Government Relations
TD Bank Financial Group
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Caution regarding
forward-looking statements
From time to time, The Toronto-Dominion Bank (the Bank) makes written and oral forward-looking statements, including in this presentation, in other
filings with Canadian regulators or the U.S. Securities and Exchange Commission (SEC), and in other communications. In addition, representatives of the
Bank may make forward-looking statements orally to analysts, investors, the media and others. All such statements are made pursuant to the "safe
harbour" provisions of applicable Canadian and U.S. securities laws, including the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, among others, statements regarding the Bank's objectives and priorities for 2010 and beyond and strategies to achieve them, and the
Bank's anticipated financial performance. Forward-looking statements are typically identified by words such as "will", "should", "believe", "expect",
"anticipate", "intend", "estimate", "plan", "may" and "could".
By their very nature, these statements require the Bank to make assumptions and are subject to inherent risks and uncertainties, general and specific.
Especially in light of the uncertainty related to the current financial, economic and regulatory environments, such risks and uncertainties - many of which
are beyond the Bank's control and the effects of which can be difficult to predict - may cause actual results to differ materially from the expectations
expressed in the forward-looking statements. Risk factors that could cause such differences include: credit, market (including equity, commodity, foreign
exchange and interest rate), liquidity, operational, reputational, insurance, strategic, regulatory, legal and other risks, all of which are discussed in the
Management's Discussion and Analysis (MD&A) in the Bank's 2009 Annual Report. Additional risk factors include changes to and new interpretations of
risk-based capital guidelines and reporting instructions; increased funding costs for credit due to market illiquidity and competition for funding; the failure
of third parties to comply with their obligations to the Bank or its affiliates relating to the care and control of information; the use of new technologies in
unprecedented ways to defraud the Bank or its customers and the organized efforts of increasingly sophisticated parties who direct their attempts to
defraud the Bank or its customers through many channels; the ability to obtain the approval of the proposed transaction with The South Financial Group,
Inc. by its 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.
We caution that the preceding list is not exhaustive of all possible risk factors and other factors could also adversely affect the Bank's results. For more
detailed information, please see the Risk Factors and Management section of the MD&A, starting on page 65 of the Bank's 2009 Annual Report. All such
factors should be considered carefully, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements,
when making decisions with respect to the Bank and undue reliance should not be placed on the Bank's forward-looking statements. Finally, there can be
no assurance that the Bank will realize the anticipated benefits related to the acquisition of the South Financial Group, Inc.
Material economic assumptions underlying the forward-looking statements contained in this presentation are set out in the Bank's 2009 Annual Report
under the heading "Economic Summary and Outlook", as updated in the Second Quarter 2010 Report to Shareholders; and for each of the business
segments, under the headings "Business Outlook and Focus for 2010", as updated in the Second Quarter 2010 Report to Shareholders under the headings
"Business Outlook".
Any forward-looking statements contained in this presentation represent the views of management only as of the date hereof and are presented for the
purpose of assisting the Bank's shareholders and analysts in understanding the Bank's financial position, objectives and priorities and anticipated financial
performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. The Bank does not undertake to
update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf, except as required under
applicable securities laws.
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Additional Information
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. The Toronto-Dominion Bank and The South Financial Group, Inc. have filed with the SEC a Registration Statement
on Form F-4 containing a preliminary proxy statement/prospectus and each of the companies plans to file with the SEC other documents regarding the
proposed transaction. Shareholders are encouraged to read the preliminary proxy statement/prospectus regarding the proposed transaction
and the definitive proxy statement/prospectus when it becomes available, as well as other documents filed with the SEC because they contain
important information. Shareholders may obtain a free copy of the preliminary proxy statement/prospectus, and will be able to obtain a free copy of the
definitive proxy statement/prospectus when it becomes available, as well as other filings containing information about The Toronto-Dominion Bank and The
South Financial Group, Inc., without charge, at the SEC's Internet site (http://www.sec.gov). Copies of the definitive proxy statement/prospectus and the
filings with the SEC that will be incorporated by reference in the definitive 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 Bank's 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, 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, and the above-referenced Registration Statement on Form F-4, which was filed with the SEC on June 10, 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, is contained in the above-referenced Registration Statement on Form F-4,
which was filed with the SEC on June 10, 2010, and other relevant materials to be filed with the SEC when they become available.
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TD's Vision and Strategy
Our vision is to be the better bank. We will be the best run, customer-
focused, integrated financial institution, with a unique and inclusive
employee culture.
Deliver legendary customer experiences
Be an extraordinary place to work
Operate with excellence
Understand our business
Take only risks we understand and can manage
Enhance our brand
Increase shareholder value
We have a strong focus on risk discipline
Only take risks we understand
Systematically eliminate tail risk
Robust capital and liquidity management
Culture and policies aligned with risk philosophy
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Key Businesses
At a Glance
"P&C" refers to Personal and Commercial Banking.
TDBFG had a reported investment in TD Ameritrade of 44.8% as at April 30, 2010.
Wholesale
Wealth Management
Global Wealth
TD Ameritrade2
Wholesale
U.S. Retail
Canadian Retail
Canadian P&C1
U.S. P&C1
Business
Segments
Earnings
Mix
Brands
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Building the Better Bank
TD made a strategic decision to exit the structured product area in 2005
TD is now a top 10 bank in North America
One of the few Aaa rated banks on the NYSE
More than 17 million customers worldwide, of which 6.5 million are in the
United States
Tier 1 Capital Ratio of 12%
Continued personal, small business and business lending through the
recession
Strong earnings through the recession, including C$1.2 billion in adjusted
earnings in the last quarter, for the period ended April 30, 2010
Recently announced acquisitions in Florida and the Carolinas
1.As at April 30th, 2010
2. Where applicable; 3 Year Target not adjusted as explained in the next sentence. The Bank's financial results prepared in accordance with GAAP are referred to as "reported" results. The Bank also utilizes non-GAAP financial measures referred to as
"adjusted" results (i.e., reported results excluding "items of note", net of income
taxes) to assess each of its businesses and measure overall Bank performance. Adjusted net income, and related terms used in this presentation are not defined terms under GAAP and may not be comparable to similar terms used by
other issuers. See "How the Bank Reports" and "Business Segment Analysis - U.S. Personal and Commercial Banking" in the relevant Annual Report (td.com/investor) for further explanation, a list of the items of note and a reconciliation of
adjusted earnings to reported basis (GAAP) results
1
2
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Recent U.S. acquisitions
TD has focused on growth in the U.S. P&C market
On April 16th 2010, TD acquired certain assets and liabilities from the
FDIC as receiver of 3 Florida banks: Riverside National Bank of
Florida, First Federal Bank of North Florida and AmericanFirst Bank
Covered 69 stores and 80 ATMs in Central Florida with the opportunity to develop new
stores at 40 planned expansion sites
Purchased US$3.8 billion in assets, including US$2.1 billion in loss covered loans (FDIC
covers 50% of loan losses up to an agreed threshold and 80% after that)
On May 17th 2010, TD announced a definitive agreement to purchase
100% of the common shares of the South Financial Group Inc
South Financial has a network of 176 stores
83 stores in South Carolina
66 stores in Florida
27 stores in North Carolina
When this deal closes TD Bank, America's Most Convenient Bank, will
have more than 1200 stores stretching from Maine to Florida
1. The acquisition of the South Financial Group is expected to close in July or August 2010, subject to regulatory and South Financial Group shareholder approvals
1
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Recent U.S. acquisitions Recent U.S.
acquisitions
TD has focused on growth in the U.S. P&C market
On April 16th 2010, TD acquired certain assets and liabilities from the
FDIC as receiver of 3 Florida banks: Riverside National Bank of
Florida, First Federal Bank of North Florida and AmericanFirst Bank
Covered 69 stores and 80 ATMs in Central Florida with the opportunity to develop new
stores at 40 planned expansion sites
Purchased US$3.8 billion in assets, including US$2.1 billion in loss covered loans (FDIC
covers 50% of loan losses up to an agreed threshold and 80% after that)
On May 17th 2010, TD announced a definitive agreement to purchase
100% of the common shares of the South Financial Group Inc
South Financial has a network of 176 stores
83 stores in South Carolina
66 stores in Florida
27 stores in North Carolina
When this deal closes TD Bank, America's Most Convenient Bank, will
have more than 1200 stores stretching from Maine to Florida
1. The acquisition of the South Financial Group is expected to close in July or August 2010, subject to regulatory and South Financial Group shareholder approvals
1
1
1
1
1
1
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Significant Scale and Attractive
Footprint1
More than 1,200 stores in 15
states and the District of Columbia
Located in top MSAs
Presence in 10 of the 15 wealthiest
states2
Strong positions in our markets
Top 5 in deposits in 8 states3
Solid entry point for growth in North
Carolina
All measures on this slide are pro-forma completion of the South Financial Transaction.
Based on Investable Personal Assets per Households. Source: Branchscape 2008, Novantas.
Source: SNL Financial as at June 30, 2009.
Top 10 in deposits in the U.S.3
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The Canadian Economy has
Outperformed
One of the 10 most competitive economies
Soundest banking system in the world
Canadian economy outperformed over the last decade
Average annual real GDP growth of 2.7% from 1997 to 2009
Canadian economy beginning to show signs of recovery
Strong Canadian housing market
Cyclical pressure on Canadian real estate due to the financial crisis, not structural
Canadian market improving since the second half of 2009
Unemployment rate remained below prior recessionary peaks
Strongest fiscal position among G-7 industrialized countries
Lowest projected deficits
Lowest overall debt level
1. The World Economic Forum, Global Competitiveness Report, 2009-10
1
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Solid Financial System in Canada
Strong retail and commercial banks
Conservative lending standards
All major wholesale dealers owned by Canadian banks, with stable retail earnings base to
absorb any wholesale write-offs
Responsive government and central bank
Proactive policies and programs to ensure adequate liquidity in the system
Updated mortgage rules moderate the market and protect consumers
Judicious regulatory system
Principles-based regime, rather than rules-based
One single regulator for all major banks
Regulator focuses on understanding risk management processes, including the role of the
Board
Conservative capital rules, requirements above world standards
Capital requirements based on risk-weighted assets
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Important differences between the
Canadian and US systems
Unlike U.S. regulatory structures, Canada has one regulator for all major banks
- the Office of the Superintendant of Financial Institutions (OSFI)
OSFI has focused on capital, and particularly the quality of capital
Basel II was in place before the crisis
Before the crisis OSFI required a Tier 1 ratio of 7%, of which 70% had to be common equity, in order to
be considered 'well capitalized'
Banks had ongoing dialogue with OSFI through the crisis and OSFI showed flexibility
Based on robust internal capital adequacy discussions Canadian banks have pushed their Tier 1 ratios
up, with most above 10%
OSFI uses a principle based approach to risk
Rather than a rules-based regime, the regulator focuses on ensuring that banks know and understand
the risks that they are taking, since banks own the risks that flow from those decisions
In Canada the large dealers are owned by the major banks, so there isn't an
equivalent to Bear Stearns or Lehman
Canada's mortgage market was a source of strength during the recession
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Differences between the Canadian
and U.S. mortgage markets
Canada
Products
Conservative product offerings: Fixed or variable
interest rate option
New regulations on default insured mortgages
implemented in April 2010 have moved the qualifying
rate to a 5 year fixed rate on loans with variable rates
or terms less than 5 years.
2% of the mortgage credit outstanding estimated to be
non-prime
Underwriting
Terms usually 5 years or less, renewable at maturity
Amortization up to a maximum of 35 years (40 years
no longer available since Oct. 2008)
Mortgage insurance mandatory if LTV over 80%,
covers full loan amount
Regulation and Taxation
Mortgage interest not tax deductible
Lenders have recourse to both borrower and property
in most provinces
Sales Channel
External broker channel originated up to 30%
U.S.
Products
Outstanding mortgages include earlier exotic products
(interest only, options ARMs)
Borrowers often qualified using discounted teaser
rates, payment shock on expiry (underwriting
standards have since been tightened)
10% of mortgage credit outstanding estimated to be
non-prime
Underwriting
30 year term most common
Amortization usually 30 years, can be up to 50 years
Mortgage insurance often used to cover portion of
LTV over 80%
Regulation and Taxation
Mortgage interest is tax deductible, creating an
incentive to borrow
Lenders have limited recourse in most jurisdictions
Sales Channel
External broker channel originated up to 70% at peak,
now less than 30%
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What are the Big Issues Going
Forward?
Regulatory reform in the United States
New Bank Taxes
Capital reform proposals flowing from Basel
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THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF THE TORONTO-DOMINION BANK ON JUNE 29, 2010
1. Banking on change; Commercial activity, entrepreneurship return to the hood National Post
Spencer Leslie is young for a bank manager. But even at 33 hes wise enough to not expect miracles
overnight. He knows the new Toronto-Dominion Bank branch that he manages in Vancouvers Downtown
Eastside will struggle a bit at first. Some folks down here just dont like or trust the big banks;
theyve been poorly served in the past. A few resent TDs presence, just as they resent the entire
Woodwards development in which the new branch is housed. Spencer Leslie (Branch Manager, TD Canada
Trust) quoted. See full story
2. S&P Revises Toronto-Dominion Outlook To Positive Dow Jones
Standard & Poors Ratings Services raised its outlook on Toronto-Dominion Bank (TD) to positive
from stable, citing the banks success in exporting its strong domestic business model to the U.S.
and its view that TD will also continue to outperform at home. TD mentioned. See full story
3. Canadian banks have to go first in raising capital levels The Globe and Mail
New rules that will force banks to hold significantly more capital, but will not require all
countries to adopt the changes simultaneously, are raising concerns that Canadas banks will be
left at a disadvantage. See full story
4. Overhaul Foes Let Loose Last Volleys The Wall Street Journal
Even as uncertainty over the fate of the financial-overhaul bill swelled Monday, analysts and
investors expressed relief that the proposed changes would end some of the doubts that have dogged
financial stocks for months. See full story
5. G20 blew it, leading economist says The Canadian Press
Beware a repeat of the 1870s and 1930s depressions. The morning after leaders of the big economies
called for bitter medicine to cure the worlds ills, many analysts said the prescription will lead
to slower growth and at least one prominent economist said it could trigger a depression. Craig
Alexander quoted. Similar article in National Post, with a quote from Beata Caranci (AVP and Deputy
Chief Economist). See full story
6. The Third Depression The New York Times
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in
economic history that were widely described as ''depressions at the time: the years of deflation
and instability that followed the Panic of 1873 and the years of mass unemployment that followed
the financial crisis of 1929-31. Editorial written by Paul Krugman. See full story
7. Low rates may be creating zombie banks; Warning from BIS National Post
Central banks run the risk of distorting financial markets and creating zombie banks forever
dependent on government support unless they quickly remove extraordinary measures and record low
interest rates put in place to deal with the financial crisis, says the Bank for International
Settlements. See full story
8. Keep fiduciary rules flexible, RBCs Taft tells U.S. regulators; No one size fits all
National Post (Reuters)
As Wall Street braces for a tougher set of consumer protection rules from U.S. regulators, Royal
Bank of Canadas wealth-management chief says investors and the market would suffer under a
single-standard approach. See full story
9. Feds not where its at, Merrill tells investors The Globe and Mail
Ethan Harris has some advice for investors who are fixating on the U.S. Federal Reserve Board for
clues to the direction of financial markets: Youre hitching yourself to the wrong horse. See full
story
10. Phila. Bank Shifts to Backup Plan American Banker
After its long-running merger talks collapsed in March, Republic First Bancorp Inc. in Philadelphia
today finds itself in a more fortunate position than many banks it has a Plan B. TD Bank
mentioned. See full story
11. Protect your plastic while on vacation The Vancouver Sun
One of the first things anyone planning a long trip from home does is make arrangements to protect
the most important things: a secure money belt, for example, to hold cash and documents, such as
passports. But they tend to be a little more cavalier about their plastic. Joanne Nosworthy (VP,
Account Recovery and Fraud Management) See full story
12. FORGING A NEW POWERHOUSE The Globe and Mail
On the surface, Wabi Iron and Steel Corp. looks like a small company destined to succumb to the
forces that have sent much of Canadian manufacturing to the scrap heap. 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. Banking on change; Commercial activity, entrepreneurship return to the hood
National Post
06/29/2010
BRIAN HUTCHINSON
Pg. A3
Spencer Leslie is young for a bank manager. But even at 33 hes wise enough to not expect miracles
overnight. He knows the new Toronto-Dominion Bank branch that he manages in Vancouvers Downtown
Eastside will struggle a bit at first. Some folks down here just dont like or trust the big banks;
theyve been poorly served in the past. A few resent TDs presence, just as they resent the entire
Woodwards development in which the new branch is housed.
Earlier this month, someone demonstrated his contempt by smashing one of the banks large picture
windows along Hastings Street.
No big deal. Broken glass isnt anything new down here. Its not the worst that happens, either.
Mr. Leslies office is right at Hastings and Abbott St.; drug dealers peddle crack just across the
pavement.
So what is TD doing here? The branch opened in January, one of a few large commercial enterprises
lured to the new Woodwards district by municipal tax breaks and the promise of a prosperity.
Next to the TD branch are a grocery store, part of billionaire Jimmy Pattisons retail chain, and a
London Drugs department store that offers everything from big screen televisions to aspirin.
With their big street-side presence and their extensive marketing campaigns, these large anchor
tenants command lots of attention. But theyre just part of a stunning resurgence in commercial
activity and entrepreneurialism that for decades had defined the Downtown Eastside, until the rot
set in.
Not by coincidence, the renaissance starts at the new Woodwards multi-use development built
where the old, iconic Woodwards department store once stood and spreads in all directions. Its
quite a view, from Mr. Leslies office.
His windows arent covered. The blinds arent coming down, he says. People come up and knock on
the window 20 times a day, he says. Thats okay. Were open for business, and what you see in
here, and from here, is what you get.
No judgments. Thats what Mr. Leslie instructs his youthful banking staff. Treat all customers with
the same degree of respect. The second you stop doing that and look down on people, youve lost
the game, he says.
On my visit one morning, the branch was quiet. A few clients straggled in and were met by smiling
tellers. The branchs two bank machines the only ones around for blocks occasionally spat out
cash. Two days later, business had picked up considerably; it was Welfare Wednesday, also known
in the DTES as Mardi Gras, when social assistance and disability cheques appear and street activity
surges.
Mardi Gras in the DTES is not always a pretty sight but the banking activity seemed a positive
sign. The alternatives are those instant cheque cashing and payday loan centres that keep a high
percentage of payments for themselves. There are also a few dodgy-looking convenience stores
rumoured to charge desperate down-and-out customers $20 just to use their ATMs.
Its better that a proper bank is in the neighbourhood, handling common transactions at competitive
fees and providing other services. Weve had people in their 50s come in and open their first-ever
savings accounts, Mr. Leslie says.
The TD branch competes for their business with Pigeon Park Savings, a six-year-old community branch
of Vancity Savings Credit Union that aims to remove barriers to basic banking services
confronting poor people.
Mr. Leslie also sees an enormous number of young entrepreneurs whove recently set up shops and
restaurants in the neighbourhood. Many began arriving after the Woodwards district began its
multi-phased opening late last year.
Walter Manning represents the new breed of independent businessmen. Hes 31, smart and determined.
And he has a pedigree. His grandfather was at the same age when he opened his general store back in
St. Brides, Newfoundland.
The similarities probably dont stop there.
Mr. Manning, who is not a TD Bank client, has a passion for history, simple pleasures and products
that are tried and true. His store, called the Old Faithful Shop, is filled with throwback
cottage-type goods such as woolen car blankets, lanterns, wooden bird feeders, books of photography
and such.
It is also flat out gorgeous. Mr. Manning and his partner Savannah Olsen looked around the
neighbourhood before finding their Cordova St. storefront; it had sat empty for a year.
The building is 107 years old, with rippled glass windows and brick walls that Mr. Manning worked
hard to expose. The Old Faithful opened six weeks ago; most of his customers, he says, live in the
Downtown Eastside including many who are from the two new condominium towers at Woodwards.
Hes also served people who have lived in the area for decades.
They say theyve seen big changes, and theyre really just starting to happen, smiles Mr.
Manning. Welcome changes.
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2. S&P Revises Toronto-Dominion Outlook To Positive
Dow Jones
06/29/2010
CAROLYN KING
Standard & Poors Ratings Services raised its outlook on Toronto-Dominion Bank (TD) to positive
from stable, citing the banks success in exporting its strong domestic business model to the U.S.
and its view that TD will also continue to outperform at home.
S&P affirmed its ratings on the Toronto-based bank and related entities, including its AA-
long-term and A-1+ short-term counterparty credit ratings.
TD is Canadas second-largest bank.
The ratings agency said TDs substantial domestic market share in deposits and lending have
provided an underpinning of substantial stability and superior operating performance.
It also noted TDs growing retail presence south of the border.
In recent months, TD has expanded its footprint in the U.S. southeast, acquiring troubled South
Carolina-based South Financial Group Inc. and three shuttered Florida banks.
S&P said TD now ranks as the sixth-largest bank in North America by branches and is number four in
North America by deposits.
That growing U.S. presence exposes the bank to potential economic and asset-quality problems and
adds integration risk. However, S&P said it views the banks acquisition strategy in the U.S. as
aggressive but well executed.
It said it hopes the bank will concentrate on organic growth and integration efforts in the short
to medium term. It also said it expects 2010 earnings to remain strong, and asset quality in the
U.S. to improve.
Monday in Toronto, TD closed down 0.9% at C$70.69.
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3. Canadian banks have to go first in raising capital levels
The Globe and Mail
06/29/2010
GRANT ROBERTSON
Pg. B6
New rules that will force banks to hold significantly more capital, but will not require all
countries to adopt the changes simultaneously, are raising concerns that Canadas banks will be
left at a disadvantage.
At the G20 summit in Toronto, leaders of the worlds largest economies pushed ahead with tougher
requirements
on the amount of capital that banks must keep on hand to backstop their lending
operations.
But in a concession made to nations with banking systems reeling from the global credit crisis, the
G20 decided to phase in the changes, since the cost of raising capital levels will be hefty.
Countries unable to meet the original deadline of late 2012 will now have flexibility based on
their own circumstances.
This has caused concerns that Canada and countries such as Australia could be forced to incur the
cost of boosting capital levels immediately, while other banking systems can put it off.
We shouldnt have to go first, when others may not have to go at the same time, Nancy Hughes
Anthony, chief executive officer of the Canadian Bankers Association, said in an interview. It
isnt really fair for the successful banking systems to have to go on new stricter rules while
others arent.
The decision to phase in the higher capital requirements was one of several concessions the G20
leaders made to ease the burden of financial reforms on weaker economies.
The group also excluded Japan from a plan to cut national deficits in half by 2013, after Japanese
leaders argued they would not be able to meet that target.
The G20 was expected to press ahead with higher capital standards for banks, but the staggered
approach was an acknowledgment that one size does not fit all, said CraigAlexander, chief
economist at Toronto-Dominion Bank.
Douglas Porter, deputy chief economist at Bank of Montreal, referred to the shift as a wrinkle in
the original plan.
The specifics of the new capital requirements will be known later this year. The G20 has asked the
Basel Committee on Banking Supervision the international banking communitys regulatory body to
determine the higher standards. The changes will be based on what the global banking system can
handle without crippling their ability to lend, and will be finalized at the next G20 meetings in
Seoul in November.
The amount of capital will be significantly higher and the quality of capital will be
significantly improved when the new reforms are fully implemented, the final G20 communiqué said
on Sunday.
Estimates peg the total cost of raising capital at nearly $400-billion (U.S.) for banks around the
world. Canadian financial institutions have enough capital on their books to exceed current
standards and are unclear what the G20 changes will require.
Some Canadian banks are waiting to see what the new standard will be before freeing up surplus
capital for other purposes, such as expansion, acquisitions or dividend payments.
That is really the new element that came out of the communiqué, and were all seeking further
clarification of exactly what that means, Ms. Hughes Anthony said.
On the other side of the debate, the International Banking Federation praised the staggered
approach, since it gives many of its members breathing room on the new capital requirements.
Economists figure European banks could benefit.
We welcome the fact that the G20 has stepped away from imposing an arbitrary timeline for the
implementation of new measures and has instead agreed to phase-in requirements ... when national
economic conditions allow, the IBF said in a statement.
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4. Overhaul Foes Let Loose Last Volleys
The Wall Street Journal
06/29/2010
ROBIN SIDEL and DAN FITZPATRICK
Pg. C1
Even as uncertainty over the fate of the financial-overhaul bill swelled Monday, analysts and
investors expressed relief that the proposed changes would end some of the doubts that have dogged
financial stocks for months.
Shares of many banks and securities firms slipped Monday, erasing some of their gains Friday after
lawmakers agreed to the bills final language, which could be voted on by the House and Senate this
week.
While bankers still sifting through the legislation said it is less draconian than they initially
feared, a weekend of number-crunching left no doubt that the changes would hurt the bottom line at
thousands of banks, brokerage firms and other financial companies.
This is wrong, and we have one last chance to do something about it, the American Bankers
Association wrote in an email to its members, urging them to write opposition letters to members of
Congress. Financial-industry lobbyists are aiming at Republicans who voted in favor of the Senate
version, hoping to change their position when the final bill comes up for a vote.
You keep playing until the whistle blows, says ABA spokesman Peter Garuccio.
Inside most banks, the mood already has switched to assessing how much revenue and earnings are
likely to evaporate if the bill becomes law and how to make up for the forgone money. Keith
Horowitz, an analyst at Citigroup Inc., estimated the legislation would reduce annual earnings per
share for big U.S. banks by 6%, down from his previous estimate of 11%.
The rules did not include some of the more worrisome potential outcomes that could severely impact
bank profitability or force a new wave of capital raises, Mr. Horowitz wrote in a note to
bank-stock investors.
The landmark legislation touches nearly every corner of the nations largest financial firms by
setting new rules on risky trading, derivatives, consumer lending and even debit cards.
Banks contend they would lose billions of dollars in annual revenue from the new rules, warning
they would have to increase fees paid by customers.
But several changes that emerged last week could shield financial firms from even bigger turmoil.
In particular, banks would be permitted to collect hefty fees from managing hedge funds, private
equity and real-estate funds that contain client money as long as they dont invest more than 3% of
the banks capital in the entities. The impact would also likely be muted because some new rules
wont go into effect for years.
While this may lead to further surprises down the line, we see this as important, as financial
institutions have time to adapt their business models, Goldman Sachs Group Inc. analyst Richard
Ramsden wrote in a report to clients.
David Katz, president and chief investment officer of Matrix Asset Advisors Inc., a
money-management firm that owns shares of Bank of America Corp. and Morgan Stanley, said the banks
will be able to work through it. Even though the changes will hurt earnings, stock prices
mightnt suffer because the banks have been trading so poorly that from current levels, we think
there is [buying] opportunity, he said.
Industry lobbyists expect the final bill to easily pass the House.
In the Senate, though, the bills prospects were clouded Monday by the death of Sen. Robert Byrd
(D., W.Va.) and a statement by Sen. Russ Feingold (D., Wis.) saying he wont vote for the overhaul
when it reaches the Senate floor.
Meanwhile, Sen. Scott Brown (R., Mass.), who previously voted for the bill along with three other
Republicans, indicated Monday he might oppose the final legislation because of a late addition that
would levy roughly $20 billion of new fees on banks.
My fear is that these costs would be passed on to consumers in the form of higher bank, ATM and
credit-card fees and put a strain on lending at the worst possible time for our economy. Ive said
repeatedly that I cannot support any bill that raises taxes, he said in a statement.
In Maine, some bankers and credit unions are applying pressure to Sens. Olympia Snowe and Susan
Collins. The two Republicans also voted for an earlier version of the bill. We want them to go
back to the drawing board, said Chris Pinkham, president of the Maine Association of Community
Banks, who asked bankers to write letters or make phone calls to the senators.
Maines credit unions oppose the bill because it regulates fees, known as interchange, that
financial institutions charge to merchants on debit-card transactions.
We dont support reform as long as interchange is a part of it, says John Murphy, president of
the Maine Credit Union League.
Ms. Snowe and Ms. Collins have been very willing to understand the concerns that have been
raised, he says.
A credit-union trade group saw Mr. Byrds death as an opportunity to push its opposition of
interchange-fee regulation.
Sen. Byrd was a champion of Main Street, and we hope his colleagues will give careful
consideration to the harmful impact the interchange amendment could have on the 92 million
Americans who depend on credit unions for basic financial services, including debit cards, Fred
Becker, president of the National Association of Federal Credit Unions, said in a statement.
Among financial stocks, Bank of America fell 18 cents, or 1.2%, to $15.24 on Monday, while J.P.
Morgan Chase & Co. was down 90 cents, or 2.3%, to $38.54, and Goldman Sachs slipped $3, or 2.1%, to
$136.66. Morgan Stanley sank 49 cents, or 2%, to $24.52. Shares of all four companies rose Friday.
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5. G20 blew it, leading economist says
The Canadian Press
06/29/2010
JULIAN BELTRAME
Beware a repeat of the 1870s and 1930s depressions.
The morning after leaders of the big economies called for bitter medicine to cure the worlds ills,
many analysts said the prescription will lead to slower growth and at least one prominent economist
said it could trigger a depression.
The alarming analysis came from Nobel laureate Paul Krugman, who argued in the New York Times that
by turning on a dime from stimulus to restraint, governments are threatening to turn a recession
into a full-fledged depression.
We are now, I fear, in the early stages of a third depression, Krugman writes. And this third
depression will be primarily a failure of policy. Around the world ... governments are obsessing
about inflation when the real threat is deflation.
The other two recorded depressions lengthy and deep economic contractions occurred in the
1870s and the 1930s.
Even some economists who agreed with the G20 consensus, such as Craig Alexander of TD Bank and
Brian Bethune of IHS Global Insight, wondered if countries such as Germany were
taking austerity too much to heart.
Of course the G20 leaders dont see it that way.
Spooked by Europes debt crisis, leaders in Toronto, with the possible exception of Japan and the
U.S., believe spending cuts to at least halve deficits in the developed world by 2013 are essential
to avert, not cause, a second financial meltdown.
That policy was aimed at preventing what has laid low Greece from striking other indebted
countries, and was pre-endorsed by the International Monetary Fund.
On Monday, the Bank of International Settlements added another official blessing, stating: The
first and most immediate challenge is to make a convincing start on reducing budget deficits in the
advanced economies.
Krugmans response is that by withdrawing stimulus now, when the recovery has barely begun,
countries are repeating the mistake made in the 1930s when governments started tightening at the
first sign of progress, causing the economy to turn south again.
There is only the slimmest of evidence that Europe, the worlds largest market, has escaped
recession, and in North America, both the U.S. and Canada are in the midst of a pull-back just
months after strong rebounds that began last fall.
All the fresh data coming out of Canada suggests Aprils growth, when it is revealed Wednesday,
will fall to about 0.1 per cent from 0.6 per cent in March. Similarly, second quarter growth is now
expected to be less than half the 6.1 per cent pace in the first three months.
Theres little doubt that the recovery, even in North America, remains fragile, says Bethune. But
it is going too far to say fiscal tightening will cause a depression.
He says the damage of government restraint can be offset by stimulative monetary policy that keeps
interest rates as low as possible a policy that Canada should return to. Bethune believes the
Bank of Canadas signals it would raise rates this spring, followed by a 25-basis point hike in
June, caused real rates to rise by one per cent overall and exacerbated the slowdown.
Besides, added Alexander, Europes weak sisters had little choice, although he questioned if
Germany too eagerly embraced the policy.
The fiscal austerity ultimately had to come, he said, since markets were not going to finance
sky-high sovereign debt much longer.
In the case the case of Greece, Portugal, Spain and Ireland, it had to happen now. In the case of
Germany, maybe the government did not have to impose quite as much austerity in the near term.
Krugmans argument is that fiscal restraint is correct when economies are strong. But, under these
circumstances,
restraint actually causes the problem you are trying to solve, since by slowing
growth, governments reduce their tax intake and deficits rise rather than fall.
And he has the example of the 1870s and 1930s to back him.
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6. The Third Depression
The New York Times
06/28/2010
PAUL KRUGMAN
Pg. A19
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in
economic history that were widely described as ''depressions at the time: the years of deflation
and instability that followed the Panic of 1873 and the years of mass unemployment that followed
the financial crisis of 1929-31.
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of
nonstop decline on the contrary, both included periods when the economy grew. But these episodes
of improvement were never enough to undo the damage from the initial slump, and were followed by
relapses.
We are now, I fear, in the early stages of a third depression. It will probably look more like the
Long Depression than the much more severe Great Depression. But the cost to the world economy
and, above all, to the millions of lives blighted by the absence of jobs will nonetheless be
immense.
And this third depression will be primarily a failure of policy. Around the world most recently
at last weekends deeply discouraging G-20 meeting governments are obsessing about inflation
when the real threat is deflation, preaching the need for belt-tightening when the real problem is
inadequate spending.
In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors,
who raised interest rates in the face of financial crisis, the current leaders of the Federal
Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike
governments of the past, which tried to balance budgets in the face of a plunging economy, todays
governments allowed deficits to rise. And better policies helped the world avoid complete collapse:
the recession brought on by the financial crisis arguably ended last summer.
But future historians will tell us that this wasnt the end of the third depression, just as the
business upturn that began in 1933 wasnt the end of the Great Depression. After all, unemployment
especially long-term unemployment remains at levels that would have been considered
catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and
Europe are well on their way toward Japan-style deflationary traps.
In the face of this grim picture, you might have expected policy makers to realize that they
havent yet done enough to promote recovery. But no: over the last few months there has been a
stunning resurgence of hard-money and balanced-budget orthodoxy.
As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe,
where officials seem to be getting their talking points from the collected speeches of Herbert
Hoover, up to and including the claim that raising taxes and cutting spending will actually expand
the economy, by improving business confidence. As a practical matter, however, America isnt doing
much better. The Fed seems aware of the deflationary risks but what it proposes to do about
these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal
austerity but because Republicans and conservative Democrats in Congress wont authorize
additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at
the state and local levels.
Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other
nations around the edges of Europe to justify their actions. And its true that bond investors have
turned on governments with intractable deficits. But there is no evidence that short-run fiscal
austerity in the face of a depressed economy reassures investors. On the contrary: Greece has
agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed
savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which
has been far more reluctant to take the hard-liners medicine.
Its almost as if the financial markets understand what policy makers seemingly dont: that while
long-term fiscal responsibility is important, slashing spending in the midst of a depression, which
deepens that depression and paves the way for deflation, is actually self-defeating.
So I dont think this is really about Greece, or indeed about any realistic appreciation of the
tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to
do with rational analysis, whose main tenet is that imposing suffering on other people is how you
show leadership in tough times.
And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of
unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
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7. Low rates may be creating zombie banks; Warning from BIS
National Post
06/29/2010
JOHN GREENWOOD
Pg. FP12
Central banks run the risk of distorting financial markets and creating zombie banks forever
dependent on government support unless they quickly remove extraordinary measures and record low
interest rates put in place to deal with the financial crisis, says the Bank for International
Settlements.
The comments come a day after Group of 20 leaders agreed that member countries should be allowed to
choose their own direction on tackling ballooning deficits and removing fiscal stimulus.
We cannot wait for the resumption of strong growth to begin the process of policy correction,
Jaime Caruana, the BIS general manager, told the bank s annual general meeting yesterday.
Banks around the world reported bumper profits last year, but the results were distorted by
measures taken by countries in the wake of the meltdown and the financial system is still fragile.
Mr. Caruana said.
The longer governments and central banks wait to boost interest rates and cut deficits, the larger
will be the distortions they create, both domestically and internationally, said the BIS in its
annual report, released yesterday.
The organization is worried that banks will become too dependent on government support to survive
in a normal environment.
Moreover, the distortions are a serious threat to the broader market, leading investors to take on
excessive risks, and encouraging companies to postpone the recognition of losses, which in turn
will set the stage for another
potentially even more serious phase of the financial crisis,
according to the BIS.
To put it bluntly, the combination of remaining vulnerabilities in the financial system and the
side effects of such a long period of intensive care threaten to send the patient into relapse,
the BIS report said.
Based in Basel, Switzerland, the BIS is an association of central banks aimed at coordinating
monetary policy and increasing transparency in the financial system.
Several analysts have raised concerns about the Bank of Canada s low interest-rate policy, warning
that it has led to record levels of household debt and driven house prices close to a record high.
That has left Canada vulnerable if the economy takes another dip, with banks taking it on the chin,
they say.
For its part, the Bank of Canada has laid out a plan to gradually raise interest rates, while the
domestic banks have been tightening mortgage rules. Analysts say the challenge is to do it quickly
enough to head off any potential debt bubbles, but not so quickly as to shock the system and set
off a spike in defaults.
Tim ONeill, a principal at ONeill Strategic Economics, said the central bank has done a good job
of maintaining the right balance.
They are keeping an eye on both the domestic and international front and they have been clear
and unequivocal about telegraphing their intentions to the market, Mr. ONeill said. Its clear
that central banks will have to start reversing course. The question is how the different rates of
reversal will affect fiscal discipline thats going to be the key.
Canada and Australia have already moved [because they were less impacted by the recession]. If
you look at the U.S. or the
U. K, where you are still a long way from full employment, there is a
reasonable lead time for central banks to raise interest rates. They have more runway than a
country like Canada.
But the bottom line is that the global financial system is awash in liquidity and one way or
another, thats got to be sopped up, he said.
Doug Porter, deputy chief economist at Bank of Montreal , questioned the BIS comments. I think
that advice is potentially misguided, given the fragility of the global recovery, he said. I
think the G20 is doing the right thing. We have to make sure this recovery sticks and its being
tested in a very meaningful fashion right now.
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8. Keep fiduciary rules flexible, RBCs Taft tells U.S. regulators; No one size fits all
National Post (Reuters)
06/29/2010
JOSEPH A. GIANNONE
Pg. FP5
As Wall Street braces for a tougher set of consumer protection rules from U.S. regulators, Royal
Bank of Canadas wealth-management chief says investors and the market would suffer under a
single-standard approach.
John Taft said the rules should vary according to the functions that brokers serve, from trading
and planning to insurance and lending.
A one-size-fits-all solution does not work, Mr. Taft, who is also chairman-elect of SIFMA, Wall
Streets lobbying group, said in an interview yesterday. The people who are advocating a one-size
approach to the fiduciary
standard only offer one size: theyre investment advisors.
A fiduciary standard in simple terms requires an advisor to always put his clients interests
first. Brokers are required to make suitable recommendations, a far easier standard.
Following trillions of dollars of losses in the 2008 financial meltdown, regulators pushed Congress
to impose the tougher fiduciary standard on anyone who provides personal financial advice to
individuals.
SIFMA last year said it supported a single standard for brokers and investment advisors.
Congress hammered out financial regulatory reforms last week, but the rules will be written by the
Securities and Exchange Commission following a six-month study.
When the SEC gets to work on drafting therules and Mr. Taft says there is no question a fiduciary
standard is comingit ought to take into account the many ways clients work with full-service
brokers, he said.
If you want to take the standard for investment advisory activity and extend it to a full-service
wealth management firms range of products and services, youve got to change it, he said. It has
to be tailored to different activities.
Mr. Taft, and the brokerage industry, contend that individuals want one-stop shopping for all their
financial services. Under a strict financial advisory standard, he said, brokers would no longer be
allowed to extend credit or sell insurance.
Complicating the matter, Mr. Taft said, is the fact that the fiduciary standard does not appear
in the laws that govern brokers or investment advisors, with the exception of the ERISA public
pension plan rules.
Under the glare of investor and industry scrutiny, the SEC will be under the gun to draft such a
standard. The sparring over a higher standard for all wealth managers, rather than being over, is
simply moving from Congress to a new battlefield.
And the brokerage industry intends to keep fighting.
Whatever you do, dont compromise the ability of individual investors to walk in the doors of a
wealth management firm and get all the products and services they get today in one place, Mr. Taft
said. If you do that, you havent helped the investor, youve harmed him.
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9. Feds not where its at, Merrill tells investors
The Globe and Mail
06/29/2010
DAVID PARKINSON
Pg. B12
Ethan Harris has some advice for investors who are fixating on the U.S. Federal Reserve Board for
clues to the direction of financial markets: Youre hitching yourself to the wrong horse.
My advice to investors is, dont read anything about the Fed these days. Its a non-story, Mr.
Harris, head of developed-markets economics research at Bank of America Merrill Lynch , told
investors and media at the big U.S. investment banks mid-year economic and markets outlook event
in New York on Monday. The Fed is
many, many months from tightening.
In a wide-ranging presentation from Merrills top strategists, the investment bank offered a
cautiously upbeat outlook for the rest of 2010 and into 2011 something of an evolution away from
the bank s more bearish tone of previous years, perhaps reflecting a changing of the guard at
Merrills research department since Bank of America acquired the prominent Wall Street investment
house early last year.
Merrills current group of strategists is telling investors that despite cheap liquidity and high
government deficits, inflation is not a threat in the United States; that the European
sovereign-debt problems look likely to be well-contained; and that government deficit reductions
wont be as difficult or painful as many people fear.
As a result, Merrills experts predict a slow-but-gradual healing of the U.S. economy, solid
growth in emerging economies, relatively stable financial markets and opportunities for equity
investors to cash in.
The odds right now greatly favour the bull, said David Bianco, head of U.S. equity strategy.
Mr. Bianco argued that the markets are pricing in another recession which has left U.S. stocks
undervalued relative to their earnings-growth outlook. He said that even pricing the S&P 500 based
on a modest valuation of 15 times forward earnings estimates, it looks poised for something like
1,300 by the end of 2010 more than 20-per-cent higher than current levels.
And this could happen even in an environment of fairly modest U.S. economic growth, he said,
because the stocks in the S&P 500 have much more exposure to foreign markets than the broader U.S.
economy does meaning more exposure to parts of the world likely to outpace the U.S. economy.
Too often we look at the S&P 500 through a U.S. prism, he said. In reality, 40 per cent of the
U.S. stock benchmarks earnings are derived from foreign markets. It also has a greater exposure to
commodities relative to the U.S. economy, which adds to the influence of economic growth in
developing markets such as China.
Mr. Bianco noted that the S&P 500 does derive 18 per cent of its profits from troubled Europe, but
said most of that is outside the financial sector, and thus less at risk to the sovereign debt
threat.
As long as Europe doesnt go into full-blown recession, S&P European profits should be fine.
Mr. Harris played down concerns that government austerity commitments, the centrepiece achievement
of the G20 summit, threaten the economic recovery. He said they should be able to naturally grow
their way out of the deficits to meet the deficit-reduction targets by 2013, without any stifling
spending cuts or tax increases.
What does that require? They dont have to do anything, he argued.
The one big concern for the U.S. economy, though, remains the still-weak jobs market.
Job growth is essential to the healing process, Mr. Harris said. Its the key to sustainable
growth.
But even there, he sees steady improvement as the year progresses, the U.S. economy shows traction
and companies finally get back to hiring.
We think that people overfired during the recession, he said.
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10. Phila. Bank Shifts to Backup Plan
American Banker
06/29/2010
KATE DAVIDSON
Pg. 1 Vol. 175 No. 99
After its long-running merger talks collapsed in March, Republic First Bancorp Inc. in Philadelphia
today finds itself in a more fortunate position than many banks it has a Plan B.
The $967.5 million-asset company last week raised $28.1 million in fresh capital, which it may use
to add branches and finance loans while it rides out the industry downturn.
Republic First hasnt lost its ambition, either: It still aims to be a leader in the Philadelphia
market. Yet it must shore up its balance sheet before it can focus on growth, analysts say.
It all depends on how quickly we can see credit losses come down here over the next few years,
said Jason ODonnell, an analyst at Boenning & Scattergood Inc. If theyre able to improve in
commercial real estate and construction and landloan losses, then they are going to be sitting in a
situation by mid to late next year where theyll have a nice allocation of excess capital that they
can then think about deploying offensively.
But Republic First is a long way from that point, ODonnell said. It wanted to raise $40 million
but could pull off only $28.1 million.
Its also a long way from its condition in November 2008 when it announced a deal with Metro
BancorpInc.of Harrisburg, Pa., in which Metro would have absorbed Republic Firsts operations.
After several deadline extensions, the deal fell apart in March amid regulatory uncertainty and
Republic Firsts deteriorating credit quality.
The company widened its loss in 2009 to $11.4 million, from a loss of $472,000 in 2008. Its
provision for loan losses nearly doubled, from $7.5 million in 2008 to $14.2 million in 2009. And
its
nonperforming assets ratio has jumped from 1.65% in September 2008 to 4.95% at March 31. Like
others in the Philadelphia market, Republic First faced rising losses in its commercial real estate
portfolio, which makes up 72% of total loans, according to a quarterly filing with the Securities
and Exchange Commission.
On March 15, the companies announced that, with no regulatory approval in sight, they were
abandoning the deal.
Yet a little more than a month later, Republic First announced it was seeking fresh capital to move
forward with its strategy to become a retail-focused bank.
It managed to attract some investors, but couldnot raise as much as it wanted. Also, the offering
was highly dilutive to shareholders, more than doubling the number of shares outstanding, said Ned
Douthat, an analyst at Ockham Research.
Clearly, the market has not given them a whole lot of benefit of the doubt, he said.
Still, the capital-raising effort represents something of a fresh start. Though Republic First did
not return phone calls seeking comment, it said in the prospectus that it plans to begin operating
as Republic Bank, the name under which the bank was incorporated and did business from 1988 until
1996.
Also, over the past two years it has added executives from Commerce Bancorp Inc. of Cherry Hill,
N.J., which was bought by Toronto-Dominion Banks TD Banknorth Inc. of Portland, Maine, in March
2008. Commerce was founded by Vernon W. Hill 2nd, one of Republic Firsts largest shareholders and
a co-founder of Metro Bancorp. The management changes are part of the continuing process of
transforming Republic First Bank into the premier retail bank in the Philadelphia metropolitan
area, Republic Firsts chief executive, Harry Madonna,
said in a statement last month.
For more than a year it has been working to lower its concentration of commercial real estate
loans, reducing the portfolio by 17% in 2009, according to the prospectus. It was also well
capitalized as of March 31, with a Tier 1 capital ratio of 11.9%.
Republic First also said it had applied to open a branch in Haddonfield, N.J., and plans to pursue
more de novo branching opportunities in its market this year.
We continue to believe that an attractive niche exists serving small- to medium-sized business
customers not adequately served by our larger competitors, and we will continue to seek
opportunities to build commercial relationships to complement our retail strategy, it said in the
prospectus.
But with stress in commercial real estate expected to continue, analysts were doubtful that
Republic First will be able to accomplish more this year than working through its credit problems.
I can certainly see them doing that, I just cant imagine that theyre going to be growing
aggressively anytime in the next few quarters, ODonnell said.
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11. Protect your plastic while on vacation
The Vancouver Sun
06/29/2010
KIM COVERT
Pg. C2
One of the first things anyone planning a long trip from home does is make arrangements to protect
the most important things: a secure money belt, for example, to hold cash and documents, such as
passports. But they tend to be a little more cavalier about their plastic.
They check into their hotel room and they would put their passports in the hotel room safe, but if
they were going for a walk, for example, they dont then put their wallet in the safe with their
cards, says Joanne Nosworthy, TD Canada Trusts vice-president of account recovery and fraud
management.
Nosworthy has these tips for travellers:
- Protect your PIN. Just like at home, make sure you shield the hand entering your PIN number.
"[Thieves] need both your card and your PIN to make use out of that card, she says.
Picking your ATM carefully also helps. Regular, well-lit bank branches during office hours are
best. Banks worldwide protect their ATMs, says Nosworthy . They go out every hour on the hour to
make sure nobodys tampered with them, nobodys damaged them, etc., so whenever youre using an ATM
in a popular bank location, obviously those ATMs are being very closely watched and monitored
anywhere in the world. You can also change your PIN number after you return from vacation for
insurance.
- Keep your receipts: Keep track of what you pay for with your card and check the receipts against
the bill when it comes in to make sure that youre only being charged for what you purchased.
- Notify the card issuer that youre going on vacation: Issuers keep an eye out for unusual
spending patterns on your cards and might cancel your card if they dont think its you buying rugs
in Istanbul. Nosworthy says that
issuers will go back to check to see if there are other charges on
the card that can be traced to you to explain the spending airline tickets purchased on that
card, for example, but if youre spreading out the expenses on several cards, no connection might
be apparent.
The good thing about losing your credit cards is that, unlike when your cash is lost, they can be
replaced. Just remember to write down the emergency telephone number listed on the back of the card
and keep it safe.
The [bank] issuers are all really good about finding ways to help people in those emergency
situations, says Nosworthy . If, for example, you were in Mexico and your credit card got stolen
so you were now in a bind, they will work through Visa or MasterCard international to get you some
emergency cash to get you a card within 24-48 hours, depending on where you are in the world.
Youre not totally stranded, theyll find ways to assist, but you need to get to the issuer and if
you dont have your card to turn over its a little more difficult. Make sure youve got some of
those numbers of people that can help you.
Return to Top
12. FORGING A NEW POWERHOUSE
The Globe and Mail
06/29/2010
GREG KEENAN and BRIAN MILNER
Pg. B1
On the surface, Wabi Iron and Steel Corp. looks like a small company destined to succumb to the
forces that have sent much of Canadian manufacturing to the scrap heap.
Wabis factories are almost a century old. Many of its products mining cages, ore loading systems
and pump housings are bound for export markets, a problematic destination when the Canadian
dollar is strong, as it is now. To add to its challenges, Wabi is located in New Liskeard, Ont., in
the heart of Northern Ontario mining country, but thousands of kilometres from mines operated by
some key customers.
None of that bothers Wabi president Peter Birnie. He and his management team thrive on what others
might consider disadvantages.
New Liskeard, in our opinion, is the centre of the world, Mr. Birnie says.
For Wabi, the battle against larger rivals in distant markets such as Chile and Australia starts on
the factory floor with a non-stop campaign to improve efficiency, reduce waste and eliminate
bottlenecks in short, to increase productivity.
Wabis daily fight for higher productivity is being duplicated at many Canadian companies. The
outcome of their struggles will determine how Canada fares in the global market against growing
competition from low-wage countries such as Mexico, China and India.
The G20 summit focused partly on correcting global fiscal and trade imbalances. To help redress the
imbalance on the trade side, Canada must boost its exports. Fixing its lagging productivity would
go a long way to helping the country become more competitive in global markets.
In recent years the bulk of businesses across Canada have done a poor job of doing more with less.
The countrys dismal productivity performance has prompted Bank of Canada Governor Mark Carney to
call out Canadian firms, blaming executives for the poor showing and urging them to increase
investment.
Improving the countrys performance is crucial for all Canadians and not just a theoretical
exercise for economists, Bank of Canada governors, and consultants bearing flow charts. In the
long run, our standard of living is based on the productivity of the country. Its that simple,
says Andrew Sharpe of the Ottawa-based Centre for the Study of Living Standards.
Canadian productivity has inched ahead by only about 0.7 per cent a year over the past decade. And
in 2008, it actually shrank by 0.6 per cent, according to the OECD, which ranks this countrys
performance behind such economic basket cases as Greece and Spain. That same year, the United
States, Canadas biggest trading partner, boosted its productivity by 1.3 per cent, widening an
already large gap.
Toronto-Dominion Bank recently described Canadas record on productivity as appalling. If Canadian
productivity growth remains sluggishover the next 10 years while an aging labour force expands at a
projected annual rate of about 0. 5 per cent, GDP will grow at only slightly more than 1 per cent a
year, or about a third of its historic pace, calculates Craig Alexander, chief economist with the
bank.
Slow growth would, in turn, hurt the ability of governments to raise sufficient revenues to meet
the rising costs of health care, education and other social priorities. This is why productivity
is probably the No. 1 problem facing Canada today, from an economic perspective, Mr. Alexander
says.
Tyler Cowen, an economics professor at George Mason University in Arlington, Va., who specializes
in globalization issues, said: My main worry is that Canada is becoming too resource-dependent
and is not obsessing enough over human capital ... High resource prices have been good for Canada,
but at the same time have given the country too easy a ride.
There are time-honoured ways to boost productivity, including increasing investment capital,
reducing wages and making better use of technology. Failure to tackle the problem can sound the
death knell for any company.
Are there [Canadian] companies that have not succeeded because of productivity? Unfortunately,
yes, says Robert Hattin, president of Edson Packaging Machinery in Hamilton. Mr. Hattin believes
many companies are not willing to invest enough to take advantage of growth opportunities presented
by global markets. Its a mindset within these companies, whether they are branch plants of
multinationals or private companies. You have got to want to play. If youre scared of it, do your
employees a favour. Sell your company to somebody who wants to make it grow.
If Mr. Carney is seeking an example of Canadian companies that are addressing the problem head on,
he should come to Wabi, where Mr. Birnie and his team have discovered that improving productivity
can be deceptively simple, even for smaller companies without access to huge amounts of capital.
When it comes to well-paid jobs, there arent a lot of options in New Liskeard, a town of about
5,000 people and two Tim Hortons outlets, 500 kilometres north of Toronto. But Wabis lean
operating style has enabled the firm to continue employing about 120 people.
Along the east wall of one factory on the site Wabi has occupied since 1912 is a shiny new steel
door. The factory is the home of the companys mechanical business, which makes products including
cages that carry miners down to the depths, as well as giant steel boxes called skips that are
lowered into mine shafts, then filled with ore and rock and hauled back to the surface.
A Wabi team started looking for ways to improve the factory by drawing up spaghetti diagrams that
track the flow of material that goes into assembling products.
The diagrams showed that steel and other raw materials were coming into the shop from the existing
door on the west end of the L-shaped building at the same time as workers were trying to move
finished products out through
the same door.
That was causing a huge mess, says vice-president Stan Gorzalczynski, noting that manufacturing
had been done that way since Wabi started up.
So the company built a road on the east side of the property and installed a new door. Now raw
materials come in the east door and finished skips go out the other end. That has helped cut in
half the amount of time it takes to fabricate a skip.
In the end you look at that and say: Wouldnt you have done that in 1912? Mr. Gorzalczynski
asks. Im embarrassed to say it took us nearly 80 years to decide a door was needed on the other
end of the shop.
Revenue from the mechanical business has tripled since the productivity project began, Mr. Birnie
says. His target for Wabi as a whole is to more than double revenue over the next five to six years
to the $40-million to $50- million range. Revenue in 2009 was about $18-million.
Mr. Birnie, who grew up in New Liskeard, bought the company in 1995 after retiring from accounting
firm Grant Thornton LLP, where he was a member of the national policy board for 10 years.
Wabi is named after an Algonquin chief who established his camp at the head of Lake Temiskaming.
The firm was founded in 1907 when two Englishmen capitalized on the need for a repair shop and
foundry to make parts for local steamboats and sawmills.
The company took off as a mining supplier with the discovery of silver and other minerals in
Cobalt, about 16 kilometres away.
The history is not lost on Mr. Birnie and Mr. Gorzalczynski. While the executives lead a visitor on
a tour of played-out silver mines in Cobalt, Mr. Birnie scrambles to check out a rusted mining car
to determine if it came out of Wabis shop. It did.
During the Second World War, under John McKay-Clements, one of the $1-a-year men who donated their
services as senior executives to help drive Canadian business during the conflict, Wabi turned out
depth-charge racks and other war materials for the RCN. The $1 salary cheques Mr. McKay-Clements
received in 1942, 1943 and 1944 are framed and adorn a small space in the art gallery attached to
the companys head office.
These days, business is international and the pressure to shave costs and improve productivity is
unrelenting. A cheaper work force alone is not the answer.
There is no advantage going to a place where wages are low, if you dont get good value for what
you pay, says Brian Crowley of the Macdonald-Laurier Institute, a public policy think tank in
Ottawa. As a well-known economist used to say, if low wages were the issue, Haiti would be the
manufacturing capital of the world.
The issue, Mr. Crowley contends, is cost relative to performance.
At Wabi, Mr. Gorzalczynski meets weekly with workers to kick around ideas to reduce waste and
increase efficiency. Out of one of these meetings came an idea to reduce the time it takes to weld
components.
The welding machines have a feeder that carries the wiring and the gas and holds the welding gun.
Every time an operator shifted to a different location the entire apparatus had to be moved. So an
employee came up with the idea of suspending the welding machines and moving the parts to fixed
stations, which cut as much as an hour out of the welding time. Thats not management, thats the
shop saying: This will work, Mr. Gorzalczynski says.
The linchpin of the productivity initiative at Wabi is a program called 5S sort, straighten,
sweep, standardize and
sustain. One aspect of 5S involved putting all tools in one location so
workers dont have to wander around the shop looking for them. Any time you have to go find
something, youre not adding value, says manufacturing engineer Isaac Blount.
Employees now have the ability to view parts in 3D on computers in the factory, meaning workers
dont need to walk 100 metres into the engineering office to check dimensions.
But Wabi officials werent sure last year whether what they were doing was making things any
better. So they hired Grant Thornton to quantify the gains and devise a more-rigid schedule for
manufacturing. The sales grew and [they] didnt increase the work force. Thats the equation we
like to see, says Derrick Somers, project chief of productivity improvement for Grant Thornton.
Not surprisingly, Mr. Birnie is an apostle of productivity and lean manufacturing. The Toyota Way,
a study of the auto makers legendary production system, sits on a shelf in his office, next to Six
Thinking Hats, written by innovation guru Edward de Bono.
This is truly a business of pennies, Mr. Birnie says, speaking over the sound of a forklift
grinding away in Wabis yard. How do you take 10 seconds out of an operation?
He is convinced that Mr. Carneys hectoring about productivity, and that of his Bank of Canada
predecessor David Dodge, is not as helpful to Canadian business as would be an increase in the
budgets of Canadian trade offices in some foreign markets
But Mr. Sharpe of the Centre for the Study of Living Standards and a report from TD Bank both
emphasize that Ottawa and some provincial governments have already put in place policies to
encourage productivity, including lower taxes on capital, a stable inflation rate and more
investment in education. Its the businesses that have to do it themselves, Mr. Sharpe says.
Edson Packaging Machinerys Mr. Hattin puts it in stronger language, saying that a change in
mindset is vital if Canada is to build a robust economy and capitalize on the opportunities
presented by rapidly expanding markets in China, India and elsewhere. With all the challenges
that globalization presents to us, we also get to compete in a [global] marketplace that is three
times the size it was only 10 years ago. Canadians cannot watch on the sidelines, waiting for a
better opportunity.
First in an occasional series on Canadas productivity challenge
****
NUTS AND BOLTS OF PRODUCTIVITY
PRODUCTIVITY
At its most simple, productivity is defined as increases in output per hour worked. Its the
production of a service or product with as few labour hours as possible, explains Robert Hattin,
president of Edson Packaging Machinery in Hamilton. To achieve that requires investment of time
[people] and money [equipment and people development.]
CANADAS PERFORMANCE
Canada has been a laggard in productivity since the early 1970s. Between 1947 and 1973,
productivity improved by more than 4 per cent annually. After 1973, the rate of improvement in
productivity slowed to 1.6 per cent annually on average until 2000. Between 2000 and last year, it
slumped again to just 0.7 per cent a year, data
bordering on catastrophe, according to
Toronto-Dominion Bank.
HOW TO FIX IT
Experts agree that government policies in Canada have eliminated many barriers to productivity,
including: major improvements in the fiscal positions of the federal and provincial governments;
the elimination of capital taxes and other drags on business investment; trade agreements that have
exposed Canadian companies to competition and forced them to become more productive. The key now is
for business to invest in measures to improve productivity such as new machinery and equipment -
and work smarter, adopting best practices.
Return to Top
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financial and operating results, the companies plans, objectives, expectations and intentions,
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The proposed merger transaction involving The Toronto-Dominion Bank and The South Financial Group,
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Shareholders are encouraged to read the preliminary proxy statement/prospectus regarding the
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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,
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, and the above-referenced Registration
Statement on Form F-4, which was filed with the SEC on June 10, 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
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activités de The South Financial Group, Inc. à celles de La Banque Toronto-Dominion en temps
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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 sur formulaire 40-F
de La Banque Toronto-Dominion, et dans le rapport annuel de 2009 sur formulaire 10-K de The South
Financial Group, Inc. déposés auprès de la Securities and Exchange Commission (SEC) et disponibles
sur le site Internet de la SEC (http://www.sec.gov).
Lopération de fusion envisagée entre La Banque Toronto-Dominion et The South Financial Group, Inc.
sera présentée aux actionnaires de The South Financial Group, Inc. afin quils lapprouvent. La
Banque Toronto-Dominion et The South Financial Group, Inc. ont déposé, auprès de la SEC, une
déclaration denregistrement sur formulaire F-4 qui contient une circulaire de sollicitation de
procurations/un prospectus provisoire, et chacune des sociétés prévoit déposer dautres documents
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proposée, ainsi que la circulaire de sollicitation de procurations/prospectus définitif, lorsque
disponible, ainsi que dautres documents déposés auprès de la SEC, car ils contiendront des
renseignements importants. Les actionnaires peuvent obtenir un exemplaire gratuit de la circulaire
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de la circulaire de sollicitation de procurations/prospectus définitif, lorsquil sera disponible,
ainsi que dautres documents ayant fait lobjet dun dépôt qui contiennent de linformation sur La
Banque Toronto-Dominion et The South Financial Group, Inc., sur le site Internet de la SEC
(http://www.sec.gov). Des exemplaires de la circulaire de sollicitation de procurations/prospectus
définitif et des documents déposés auprès de la SEC qui seront intégrés par renvoi dans la
circulaire de sollicitation de procurations/prospectus définitif peuvent aussi être obtenus,
lorsquils seront disponibles, sans frais, en soumettant une demande à The Toronto-Dominion Bank,
15th floor, 66 Wellington Street West, Toronto (Ontario) M5K 1A2, à lattention de : Relations avec
les investisseurs, 1-866-486-4826, 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 dirigeants
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procurations relativement à lopération de fusion proposée. Linformation concernant les
administrateurs et les dirigeants de La Banque Toronto-Dominion est disponible dans son rapport
annuel sur formulaire 40-F pour lexercice terminé le 31 octobre 2009, qui a été déposé auprès de
la SEC le 3 décembre 2009, et dans son avis de convocation à son assemblée annuelle et circulaire
de procuration de 2010, qui a été déposé auprès de la SEC le 25 février 2010 et dans la déclaration
denregistrement sur formulaire F-4 susmentionnée, qui a été déposée auprès de la SEC le 10 juin
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. à légard de son assemblée annuelle de 2010, 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, sont inclus dans
la déclaration denregistrement susmentionnée sur formulaire F-4, qui a été déposée auprès de la
SEC le 10 juin 2010, et dautres documents pertinents qui seront déposés auprès de la SEC
lorsquils seront disponibles.
THE FOLLOWING IS A COMMUNICATION SENT TO EMPLOYEES OF TD BANK, AMERICAS MOST CONVENIENT BANK AND THE TORONTO-DOMINION BANK ON JUNE 29, 2010
Daily News Brief
June 29, 2010
Compiled by Brittany Roberge, Corporate and Public Affairs
TD BANK NEWS
1. |
|
Philadelphia Bank Shifts to Backup Plan American Banker |
After its long-running merger talks collapsed in March, Republic First Bancorp Inc. in Philadelphia
today finds itself in a more fortunate position than many banks it has a Plan B. The $967.5
million-asset company last week raised $28.1 million in fresh capital, which it may use to add
branches and finance loans while it rides out the industry downturn. [Toronto-Dominion Bank
is mentioned.]
2. |
|
Now Facing 28 Years, Maybe Paying Taxes Would Be Better
Sarasota Herald-Tribune (FL) |
Carel Chad Prater spent years convincing people that they didnt have to pay federal income
taxes. Prater, a Sarasota County resident, will now spend years behind bars for running a tax
avoidance scheme. [TD Bank is mentioned.]
3. |
|
Bank Expert: Monitor Online Accounts Daily To Stop Fraud
Portland Press Herald (ME) [Similar story appeared on
WMTW-TV (ME).] |
TD
Bank is encouraging its business customers to do their part in preventing fraud by being smart
money managers. We understand theres a lot of crime happening out there. We just wanted to create
awareness, said Celeste Donovan, TD Banks vice president of cash management and district manager.
We feel like its our responsibility.
4. |
|
S&P Revises Toronto-Dominion Outlook to Positive
Dow Jones [Similar article appear on reporterlinker.com and individual.com.] |
Standard & Poors Ratings Services raised its outlook on Toronto-Dominion Bank (TD) to positive
from stable, citing the banks success in exporting its strong domestic business model to the U.S.
and its view that TD will also continue to outperform at home.
5. |
|
THE DAILY- TD Bank Poll: Debit Card Use On Rise NJ Biz |
Debit cards are increasingly used for everyday spending, according to a poll released Monday by
Cherry Hill-based TD Bank. The survey of some 1,500 consumers found 69 percent in the Northeast use
debit cards for daily purchases, with even higher totals elsewhere on the East Coast. [TD Banks
Nandita Bakhshi is quoted.]
6. |
|
Community Calendar: June 30 July 11 Forecaster (ME) |
Page 1 of 18
Volunteers Needed for Aug. 7 TD Bank Beach to Beacon 10K Road Race, Cape Elizabeth, returning
volunteers and/or for best job selection, register by June 15 at beach2beacon.org, volunteers
accepted up until race day.
7. |
|
Barbara Bedell: Family Health Center Opening a Grand Occasion
Times-Herald Record (NY) |
The official opening of the Greater Hudson Valley Family Health Center at 147 Lake St. in Newburgh
was earlier this month, but it was such a grand occasion people are still talking about it. It was
a dream come true for Linda Muller, president and CEO, who has been the centers biggest
cheerleader. [TD Bank is mentioned.]
8. |
|
Eisenhower Park To Host 4th Of July Fireworks LIHerald.com |
Jones Beach will not have fireworks this year. But, as County Executive Ed Mangano publicly pointed
out this week, Nassau has them. The county continues its Fireworks Day tradition with Celebrate
America at Eisenhower Park in East Meadow on Saturday. [TD Bank is mentioned.]
9. |
|
Exeter Around the Town Seacoastonline.com |
Bonnie CLAC (Car Loans and Counseling) has announced its name change to More Than Wheels and the
moving of its headquarters from Claremont to Manchester. The mission of More Than Wheels is to help
break the cycle of poor financial decision-making for individuals and families using the car buying
process as a catalyst to bring change, economic stability and control. [TD Bank is
mentioned.]
10. |
|
Glamour & Grit June 28, 2010 TCPalm.com |
Its all about the feet: Thanks to the combined efforts of the St. Lucie County Firefighters, the
Roundtable of St. Lucie, the Early Learning Coalition and Riverside National Bank (a division of TD
Bank), toddlers from the area will be receiving new shoes this summer.
INDUSTRY NEWS
1. |
|
Overhaul Foes Let Loose Last Volley Wall Street Journal |
Even as uncertainty over the fate of the financial-overhaul bill swelled Monday, analysts and
investors expressed relief that the proposed changes would end some of the doubts that have dogged
financial stocks for months.
2. |
|
The Third Depression New York Times |
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in
economic history that were widely described as ''depressions at the time: the years of deflation
and instability that followed the Panic of 1873 and the years of mass unemployment that followed
the financial crisis of 1929-31.
3. |
|
U.S. Economy: Income Gains Boost Spending, Savings Businessweek |
Incomes grew faster than spending in May, making it possible for American households to
simultaneously increase savings and support the economic recovery. Gains in payrolls,
Page 2 of 18
longer
workweeks and rising pay give Americans more confidence and the means to maintain spending in
coming months.
TD BANK NEWS
1. |
|
Philadelphia Bank Shifts to Backup Plan
By Kate Davidson
June 29, 2010 American Banker |
After its long-running merger talks collapsed in March, Republic First Bancorp Inc. in Philadelphia
today finds itself in a more fortunate position than many banks it has a Plan B.
The $967.5 million-asset company last week raised $28.1 million in fresh capital, which it may use
to add branches and finance loans while it rides out the industry downturn.
Republic First hasnt lost its ambition, either: It still aims to be a leader in the Philadelphia
market. Yet it must shore up its balance sheet before it can focus on growth, analysts say.
It all depends on how quickly we can see credit losses come down here over the next few years,
said Jason ODonnell, an analyst at Boenning & Scattergood Inc. If theyre able to improve in
commercial real estate and construction and landloan losses, then they are going to be sitting in a
situation by mid to late next year where theyll have a nice allocation of excess capital that they
can then think about deploying offensively.
But Republic First is a long way from that point, ODonnell said. It wanted to raise $40 million
but could pull off only $28.1 million.
Its also a long way from its condition in November 2008 when it announced a deal with Metro
Bancorp Inc.of Harrisburg, Pa., in which Metro would have absorbed Republic Firsts operations.
After several deadline extensions, the deal fell apart in March amid regulatory uncertainty and
Republic Firsts deteriorating credit quality.
The company widened its loss in 2009 to $11.4 million, from a loss of $472,000 in 2008. Its
provision for loan losses nearly doubled, from $7.5 million in 2008 to $14.2 million in 2009. And
its nonperforming assets ratio has jumped from 1.65% in September 2008 to 4.95% at March 31. Like
others in the Philadelphia market, Republic First faced rising losses in its commercial real estate
portfolio, which makes up 72% of total loans, according to a quarterly filing with the Securities
and Exchange Commission.
On March 15, the companies announced that, with no regulatory approval in sight, they were
abandoning the deal.
Yet a little more than a month later, Republic First announced it was seeking fresh capital to move
forward with its strategy to become a retail-focused bank.
It managed to attract some investors, but couldnot raise as much as it wanted. Also, the offering
was highly dilutive to shareholders, more than doubling the number of shares outstanding, said Ned
Douthat, an analyst at Ockham Research.
Clearly, the market has not given them a whole lot of benefit of the doubt, he said.
Page 3 of 18
Still, the capital-raising effort represents something of a fresh start. Though Republic First did
not return phone calls seeking comment, it said in the prospectus that it plans to begin operating
as Republic Bank, the name under which the bank was incorporated and did business from 1988 until
1996.
Also, over the past two years it has added executives from Commerce Bancorp Inc. of Cherry Hill,
N.J., which was bought by Toronto-Dominion Banks TD Banknorth Inc. of Portland, Maine, in March
2008. Commerce was founded by Vernon W. Hill 2nd, one of Republic Firsts largest shareholders and
a co-founder of Metro Bancorp. The management changes are part of the continuing process of
transforming Republic First Bank into the premier retail bank in the Philadelphia metropolitan
area, Republic Firsts chief executive, Harry Madonna, said in a statement last month.
For more than a year it has been working to lower its concentration of commercial real estate
loans, reducing the portfolio by 17% in 2009, according to the prospectus. It was also well
capitalized as of March 31, with a Tier 1 capital ratio of 11.9%.
Republic First also said it had applied to open a branch in Haddonfield, N.J., and plans to pursue
more de novo branching opportunities in its market this year.
We continue to believe that an attractive niche exists serving small- to medium-sized business
customers not adequately served by our larger competitors, and we will continue to seek
opportunities to build commercial relationships to complement our retail strategy, it said in the
prospectus.
But with stress in commercial real estate expected to continue, analysts were doubtful that
Republic First will be able to accomplish more this year than working through its credit problems.
I can certainly see them doing that, I just cant imagine that theyre going to be growing
aggressively anytime in the next few quarters, ODonnell said.
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Now Facing 28 Years, Maybe Paying Taxes Would Be Better
By John Hielscher
June 28, 2010 Sarasota Herald-Tribune (FL) |
Carel Chad Prater spent years convincing people that they didnt have to pay federal income
taxes.
Prater, a Sarasota County resident, will now spend years behind bars for running a tax avoidance
scheme.
Prater, 71, was sentenced last week to 28 years in a federal prison. He also was ordered to pay
$440,000 in restitution to the Internal Revenue Service and a $25,000 fine.
A jury in April convicted him on a number of charges, including corrupt interference with IRS laws,
aiding and assisting the filing of false tax returns, criminal contempt and making false
declarations before a grand jury.
Page 4 of 18
The U.S. Attorneys Office in Tampa says Prater sold services that he claimed would legally remove
people from the federal tax system. Plenty of folks apparently bought that argument and his
services Prater pocketed more than $2 million from the scheme from 2000 to 2003.
He sold a version of the so-called Section 861 argument that income earned in this country is not
taxable.
In exchange for payments from clients, he prepared false tax returns and phony documents that were
filed with the IRS and local courthouses. He also advised clients to conceal assets and income from
the IRS, prosecutors said.
The government had been after him for years. In 2002, a federal judge enjoined Prater and an
associate from promoting their business. He had advertised his Tax Escape Service nationally, and
had set up a website.
He violated that injunction and later court orders by continuing to provide tax advice, the U.S.
Attorneys Office said. He also lied to a grand jury investigating his actions when he testified in
October 2008.
Officials had said earlier that he filed nearly 1,300 documents in Sarasota County courts, claiming
they removed his clients from the tax system, court documents state.
The IRS estimated Prater and his associates may have cost $18 million in loss tax revenue.
The courts sentence serves as an important deterrent to others who may be inclined to violate the
federal tax laws, said U.S. Attorney A. Brian Albritton of Tampa.
Shareholders fight TD Bank deal
Not everyone is happy with Toronto-Dominion Banks proposed purchase of The South Financial Group
Inc., which owns Mercantile Bank of Tampa.
Some South Financial shareholders filed suit last week to block the sale, saying the price of $61
million, or 28 cents per share, is too low, according to reports.
The suit also claims the merger details filed with regulators omit key information that
shareholders need to vote on the deal.
The government plans to assist on the merger by selling TD Bank the $347 million in preferred
shares South Financial issued for TARP funds for just $130.6 million.
Sherrill joins Wells Fargo
Gardner Sherrill has joined Wells Fargo Private Bank in Sarasota as a wealth adviser.
He will work with high net-worth clients and families.
Sherrill has 15 years of experience in the wealth management industry, most recently as a wealth
strategist with Northern Trust Bank.
IberiaBank gets boost
Page 5 of 18
IberiaBank got a recent ratings bump from BauerFinancial Inc.
Bauer had rated IberiaBank at 31/2 stars when it released its first-quarter report, which was
published last Monday in Business Weekly.
After further review, the analyst has upgraded the bank to four stars.
Bauer said IberiaBanks fast growth in Florida triggered by the acquisition of the failed
Century Bank of Sarasota and Orion Bank of Naples would normally be a note of concern. But the
bank has loss-share agreements with the FDIC for the bad loans it took on, so the rating went back
up.
Contact John Hielscher at 361-4875 or john.hielscher@heraldtribune.com.
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Bank Expert: Monitor Online Accounts Daily To Stop Fraud
TD Bank hosts a seminar at USM in response to a nationwide 22 percent rise in Internet crime
last year.
By Stephanie Hardman
June 29, 2010 Portland Press Herald (ME) [Similar
story appeared on WMTW-TV (ME).] |
TD Bank is encouraging its business customers to do their part in preventing fraud by being smart
money managers.
We understand theres a lot of crime happening out there. We just wanted to create awareness,
said Celeste Donovan, TD Banks vice president of cash management and district manager. We feel
like its our responsibility.
A nationwide increase in fraud prompted the bank to host a seminar Monday at the University of
Southern Maine. There was a 22 percent increase in Internet crime in 2009, up roughly 6,200
incidents from 2008, according to the Internet Crime Complaint Center. At Mondays seminar were
about 60 people, most with commercial or small-business accounts with TD Bank. Internet fraud was a
particular concern.
Any time were moving money, theres going to be people trying to steal money, said Sean Carter,
senior director of education and rules development for the New England Automated Clearing House.
Its a fact of life.
While bank websites are generally secure, fraudulent activity tends to come from viruses on
customers personal computers that are picked up online or sent via e-mail.
Small steps can be the most effective, said Carter, who suggests banking on a secure Internet
connection that isnt used for Web browsing or e-mail, and therefore isnt susceptible to Trojan
viruses and malware.
Hackers often send e-mails that disable antivirus programs when a document is opened. Others access
computers by asking users to download an attachment or click on a
website.
Page 6 of 18
Monitoring accounts daily and talking to the bank about any discrepancies is key, Carter said.
Guarding important financial information from employees who dont use it can also save a company
from being a victim of fraud.
Make it harder, not easier, for the bad guys, Carter said. Keeping passwords secure and taking
time at the end of the day to reconcile debits is paramount.
Jeffrey Winchenbach, director of financial services for Maine Medical Center, said he heard many
things that he would take back to the office with him and tell other employees, mainly about not
opening suspicious e-mails and having a designated computer for financial transactions.
Its just another layer of security we could use, he said. Its up to us to share this.
Brian Coffee, a Secret Service agent, discussed counterfeit bills and skimming, stealing credit
card information by running a card through a small electronic device that can be handheld or
affixed to an ATM or a gasoline pump.
Other officials discussed organized credit card theft and insurance.
Presenters also noted that the blame for fraud cant continually be put on banks when users fail to
take necessary precautions.
The key to risk management is really shared responsibility, said Carter. You just need to be
more aware of whats going on.
TIPS TO PREVENT FRAUD
Consider
a separate computer with secure Internet for banking transactions
only. |
|
Dont
share passwords. Make sure your password contains a special symbol
and a number. |
|
Dont open
suspicious-looking e-mails or attachments or click on uncertain
links. |
|
If you own a
company, hire an IT staff to wipe viruses from your computers
regularly. |
Staff
Writer Stephanie Hardiman can be contacted at 791-6301 or at:
shardiman@mainetoday.com
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S&P Revises Toronto-Dominion Outlook to Positive
By Carolyn King
June 29, 2010 Dow Jones [Similar article appear on reporterlinker.com and individual.com.] |
Standard & Poors Ratings Services raised its outlook on Toronto-Dominion Bank (TD) to positive
from stable, citing the banks success in exporting its strong domestic business model to the U.S.
and its view that TD will also continue to outperform at home.
S&P affirmed its ratings on the Toronto-based bank and related entities, including its AA-
long-term and A-1+ short-term counterparty credit ratings.
Page 7 of 18
TD is Canadas second-largest bank.
The ratings agency said TDs substantial domestic market share in deposits and lending have
provided an underpinning of substantial stability and superior operating performance.
It also noted TDs growing retail presence south of the border.
In recent months, TD has expanded its footprint in the U.S. southeast, acquiring troubled South
Carolina-based South Financial Group Inc. and three shuttered Florida banks.
S&P said TD now ranks as the sixth-largest bank in North America by branches and is number four in
North America by deposits.
That growing U.S. presence exposes the bank to potential economic and asset-quality problems and
adds integration risk. However, S&P said it views the banks acquisition strategy in the U.S. as
aggressive but well executed.
It said it hopes the bank will concentrate on organic growth and integration efforts in the short
to medium term. It also said it expects 2010 earnings to remain strong, and asset quality in the
U.S. to improve.
Monday in Toronto, TD closed down 0.9% at C$70.69.
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THE DAILY- TD Bank Poll: Debit Card Use On Rise
By Beth Fitzgerald
June 28, 2010 NJ Biz |
Debit cards are increasingly used for everyday spending, according to a poll released Monday by
Cherry Hill-based TD Bank.
The survey of some 1,500 consumers found 69 percent in the Northeast use debit cards for daily
purchases, with even higher totals elsewhere on the East Coast. While 42 percent of people in the
Northeast said they were using their credit cards less for everyday spending, 39 percent said they
are using credit cards more.
Nandita Bakhshi, head of deposit products for TD Bank, said customers who rely more on debit cards
may do so because they can manage their expenses more closely, and budget themselves when using
their debit card for everyday purchases.
Still, Bakhshi said, there are sticking points between banks and customers.
Consumers continue to express their unhappiness with checking fees. It is important for banks to
offer customers options and choices when it comes to fees and products, Bakhshi said. It is no
longer a one-size-fits-all banking game.
The poll was conducted online between March 19 and 31.
E-mail Beth Fitzgerald at bfitzgerald@njbiz.com
Page 8 of 18
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Community Calendar: June 30 July 11
June 28, 2010 Forecaster (ME) |
Volunteers Needed for Aug. 7 TD Bank Beach to Beacon 10K Road Race, Cape Elizabeth, returning
volunteers and/or for best job selection, register by June 15 at beach2beacon.org, volunteers
accepted up until race day.
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Barbara Bedell: Family Health Center Opening a Grand Occasion
By Barbara Bedell
June 28, 2010 Times-Herald Record (NY) |
The official opening of the Greater Hudson Valley Family Health Center at 147 Lake St. in Newburgh
was earlier this month, but it was such a grand occasion people are still talking about it.
It was a dream come true for Linda Muller, president and CEO, who has been the centers biggest
cheerleader.
The $15 million project constructed by local workers, built by a local construction company and
financed by two of Orange Countys premier banking institutions, TD Bank and Orange County Trust,
was given its start with an anchor grant of $2.5 million from philanthropist William Kaplan and the
Kaplan Family Foundations.
The Kaplans were among the more than 200 people who gathered for the ribbon-cutting in front of the
centers Kaplan Family Pavilion.
The center has been treating more than 17,000 patients annually, and is expected to serve more with
the additional space and staff.
To reach the center, call 563-8000. Services also are available at the centers sites, including
the dental building at 100 Broadway in Newburgh, 569-8412, the Center for Recovery at 100
Commercial Place in Newburgh, 220-2146, and the Primary Health Care at 91 Blooming Grove Turnpike,
New Windsor, 563-8000.
The administrative offices will continue to be at 2570 Route 9W, Suite 10, in Cornwall, a
cost-effective decision, said Muller. The capital campaign continues with James Moss as the
chairman. For information, call Regina McGrade at 220-3152.
Coming up
The annual nonperishable food drive to benefit all Ulster County food pantries and feeding programs
is under way through Monday. Donations can be left at your workplace or place of worship. Checks
can be mailed to Mid-Hudson Coalition to End Hunger c/o United Way of
Page 9 of 18
Ulster County, 450 Albany
Ave. in Kingston 12401. For information, contact United Ways Su Marcy at 331-4199.
The seventh annual Francis Currey Day, a salute honoring all veterans and named in honor of World
War II Medal of Honor recipient Currey, a Sullivan County native, will begin at 1 p.m. Saturday at
Morningside Park in Hurleyville. The rain date is July 4. For information, call 434-8810.
The Keystone Community Club in Matamoras, Pa., will host its annual Ducks Down the Delaware River
Race at 10 a.m. July 4. To purchase a plastic duck at $5, call Linda Kozak at 570-491-2172, Jane
Drake at 570-491-4202, or Helen Gassmann at 570-491-4003.
This and that
Five students in the Monticello and Fallsburg School Districts have received scholarships from the
Rotary of Monticello. They are Marina Lombardi, Kate Oldfield and Tiffany Sheerer of the Monticello
School District, and Stephen Bedik and Sierra Spachler of the Fallsburg School District.
Congratulations.
The John T. Kenney Memorial VFW Post 973 of Newburgh recently installed new officers. They are Pete
Orsino, senior vice commander, Frank Fisher, junior vice commander, Jerry Zemantauski,
quartermaster, and Jim Fayo, adjutant. The post was notified by the New York State Department VFW
that it was awarded all-state status, and Zemantauski was named all-state quartermaster. For
information, call 562-4163.
Barbara Bedells column appears daily. Reach her at 346-3125 or by e-mail: bbedell@th-record.com.
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Eisenhower Park To Host 4th Of July Fireworks
By Mike Caputo
June 28, 2010 LIHerald.com |
Jones Beach will not have fireworks this year. But, as County Executive Ed Mangano publicly pointed
out this week, Nassau has them. The county continues its Fireworks Day tradition with Celebrate
America at Eisenhower Park in East Meadow on Saturday.
For the fourth year, the event is sponsored by TD Bank. The fireworks display will be put on by the
Grucci family.
There will also be a musical performance by The Beach Bummz, a Beach Boys tribute band.
The entire event is free. However, free tickets are required for entry to the Harry S. Chapin
Lakeside Theater. Tickets can still be picked up at any TD Bank location in Nassau County.
Gates open at 6:30 p.m. The musical performances is slated to begin at 7:30 p.m., with the
fireworks display to start at 9:30 p.m. There is no formal seating at the Lakeside Theater, so
visitors are urged to bring blankets or chairs to sit on. Space and parking at the theater is
limited. Overflow areas for viewing and parking will be available. The county encourages visitors
to arrive early.
I encourage you to come out early and stake out a spot with friends and family and enjoy a
beautiful night at Eisenhower Park, Mangano said.
Page 10 of 18
The Harry S. Chapin Lakeside Theater is located at Eisenhower Parks Parking Field 6 and 6A. There
are entrances on Merrick Avenue and Hempstead Turnpike. For more information, call Nassau County
Parks at (516) 572-0200, the special events line at (516) 572-0223, or visit the Nassau County
website at www.nassaucountyny.gov/parks.
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Exeter Around the Town
June 29, 2010 Seacoastonline.com |
EXETER Bonnie CLAC (Car Loans and Counseling) has announced its name change to More Than Wheels
and the moving of its headquarters from Claremont to Manchester. The mission of More Than Wheels is
to help break the cycle of poor financial decision-making for individuals and families using the
car buying process as a catalyst to bring change, economic stability and control.
More Than Wheels also announced a new program and partnership with TD Bank. The program has three
components and will assist in helping meet the transportation needs of the community throughout New
Hampshire. The first area is a grant in the amount of $100,000 that will provide assistance to More
Than Wheels clients through a matching savings program and the remainder will be used for
operating assistance for the organization. The grant is made possible through the N.H. Community
Development Finance Authority and its tax credit program.
Part two of the program will allow for volunteers from TD Bank to teach Financial Fitness classes
to More Than Wheels clients which is a requirement for completing the program. Part three of the
program allows for employee volunteers from TD Bank to provide technical assistance More Than
Wheels Client Consultants on credit analysis.
Based on a study from the Carsey Institute, clients enrolled in the More Than Wheels program saw a
65 percent increase in the use of checking accounts, a 50 percent increase the use of online
payments and a 45 percent increase in the use of family budgets. There was also a 45 percent
decline in the usage of emergency food outlets and a 57 percent drop in the use of a hospital
emergency room for themselves and their children.
Increase in fee
for marriage licenses
Due to legislative changes incorporated in the state budget, fees for marriage licenses and vital
record certified copies will increase on July 1. The marriage license fee will increase to $50. The
vital records certified copy fee will increase to $15 for the first copy, with a subsequent copy
fee of $10.
Town offices closed July 5 for the holiday
Town employees will be observing the Independence Day holiday on Monday, July 5. All town offices
will be closed. There will be no change in the trash/recycle pick-up schedule.
For more information call the Department of Public Works at 773-6157.
Page 11 of 18
Pine Road closed
for construction
Weather permitting, the Exeter Public Works Department and Bell & Flynn will be reconstructing the
Exeter side of Pine Road. Road closure is expected to start Monday, July 12, and is anticipated to
remain closed for approximately two weeks.
In a letter sent to Exeter residents and business owners dated June 23 Jay Perkins, highway
superintendent, stated the importance of avoiding the road and on-street parking until the project
is complete. Any vehicles that interfere with the project may need to be removed at the owners
expense.
For more information contact Perkins at 773-6157 ext. 163 or e-mail jperkins@town.exeter.nh.us.
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Glamour & Grit June 28, 2010
By Sydney Liebman
June 28, 2010 TCPalm.com |
Its all about the feet
Thanks to the combined efforts of the St. Lucie County Firefighters, the Roundtable of St. Lucie,
the Early Learning Coalition and Riverside National Bank (a division of TD Bank), toddlers from the
area will be receiving new shoes this summer. Fundraising efforts have begun, with firefighter
boots located at any St. Lucie County Riverside National Bank office for donations. Staff from the
Early Learning Coalition and Healthy Start will identify 300 children, infants to pre-kindergarten
age, in need of shoes. Then in August, the children will be taken to two participating Payless
Shoesource stores in St. Lucie County to shop for their new shoes.
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INDUSTRY NEWS
1. |
|
Overhaul Foes Let Loose Last Volleys
By Robin Sidel and Dan Fitzpatrick
June 29, 2010 Wall Street Journal |
Even as uncertainty over the fate of the financial-overhaul bill swelled Monday, analysts and
investors expressed relief that the proposed changes would end some of the doubts that have dogged
financial stocks for months.
Shares of many banks and securities firms slipped Monday, erasing some of their gains Friday after
lawmakers agreed to the bills final language, which could be voted on by the House and Senate this
week.
Page 12 of 18
While bankers still sifting through the legislation said it is less draconian than they initially
feared, a weekend of number-crunching left no doubt that the changes would hurt the bottom line at
thousands of banks, brokerage firms and other financial companies.
This is wrong, and we have one last chance to do something about it, the American Bankers
Association wrote in an email to its members, urging them to write opposition letters to members of
Congress. Financial-industry lobbyists are aiming at Republicans who voted in favor of the Senate
version, hoping to change their position when the final bill comes up for a vote.
You keep playing until the whistle blows, says ABA spokesman Peter Garuccio.
Inside most banks, the mood already has switched to assessing how much revenue and earnings are
likely to evaporate if the bill becomes law and how to make up for the forgone money. Keith
Horowitz, an analyst at Citigroup Inc., estimated the legislation would reduce annual earnings per
share for big U.S. banks by 6%, down from his previous estimate of 11%.
The rules did not include some of the more worrisome potential outcomes that could severely impact
bank profitability or force a new wave of capital raises, Mr. Horowitz wrote in a note to
bank-stock investors.
The landmark legislation touches nearly every corner of the nations largest financial firms by
setting new rules on risky trading, derivatives, consumer lending and even debit cards.
Banks contend they would lose billions of dollars in annual revenue from the new rules, warning
they would have to increase fees paid by customers.
But several changes that emerged last week could shield financial firms from even bigger turmoil.
In particular, banks would be permitted to collect hefty fees from managing hedge funds, private
equity and real-estate funds that contain client money as long as they dont invest more than 3% of
the banks capital in the entities. The impact would also likely be muted because some new rules
wont go into effect for years.
While this may lead to further surprises down the line, we see this as important, as financial
institutions have time to adapt their business models, Goldman Sachs Group Inc. analyst Richard
Ramsden wrote in a report to clients.
David Katz, president and chief investment officer of Matrix Asset Advisors Inc., a
money-management firm that owns shares of Bank of America Corp. and Morgan Stanley, said the banks
will be able to work through it. Even though the changes will hurt earnings, stock prices
mightnt suffer because the banks have been trading so poorly that from current levels, we think
there is [buying] opportunity, he said.
Industry lobbyists expect the final bill to easily pass the House.
In the Senate, though, the bills prospects were clouded Monday by the death of Sen. Robert Byrd
(D., W.Va.) and a statement by Sen. Russ Feingold (D., Wis.) saying he wont vote for the overhaul
when it reaches the Senate floor.
Page 13 of 18
Meanwhile, Sen. Scott Brown (R., Mass.), who previously voted for the bill along with three other
Republicans, indicated Monday he might oppose the final legislation because of a late addition that
would levy roughly $20 billion of new fees on banks.
My fear is that these costs would be passed on to consumers in the form of higher bank, ATM and
credit-card fees and put a strain on lending at the worst possible time for our economy. Ive said
repeatedly that I cannot support any bill that raises taxes, he said in a statement.
In Maine, some bankers and credit unions are applying pressure to Sens. Olympia Snowe and Susan
Collins. The two Republicans also voted for an earlier version of the bill. We want them to go
back to the drawing board, said Chris Pinkham, president of the Maine Association of Community
Banks, who asked bankers to write letters or make phone calls to the senators.
Maines credit unions oppose the bill because it regulates fees, known as interchange, that
financial institutions charge to merchants on debit-card transactions.
We dont support reform as long as interchange is a part of it, says John Murphy, president of
the Maine Credit Union League.
Ms. Snowe and Ms. Collins have been very willing to understand the concerns that have been
raised, he says.
A credit-union trade group saw Mr. Byrds death as an opportunity to push its opposition of
interchange-fee regulation.
Sen. Byrd was a champion of Main Street, and we hope his colleagues will give careful
consideration to the harmful impact the interchange amendment could have on the 92 million
Americans who depend on credit unions for basic financial services, including debit cards, Fred
Becker, president of the National Association of Federal Credit Unions, said in a statement.
Among financial stocks, Bank of America fell 18 cents, or 1.2%, to $15.24 on Monday, while J.P.
Morgan Chase & Co. was down 90 cents, or 2.3%, to $38.54, and Goldman Sachs slipped $3, or 2.1%, to
$136.66. Morgan Stanley sank 49 cents, or 2%, to $24.52. Shares of all four companies rose Friday.
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The Third Depression
By Paul Krugman
June 28, 2010 New York Times |
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in
economic history that were widely described as ''depressions at the time: the years of deflation
and instability that followed the Panic of 1873 and the years of mass unemployment that followed
the financial crisis of 1929-31.
Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of
nonstop decline on the contrary, both included periods when the economy grew.
Page 14 of 18
But these episodes
of improvement were never enough to undo the damage from the initial slump, and were followed by
relapses.
We are now, I fear, in the early stages of a third depression. It will probably look more like the
Long Depression than the much more severe Great Depression. But the cost to the world economy
and, above all, to the millions of lives blighted by the absence of jobs will nonetheless be
immense.
And this third depression will be primarily a failure of policy. Around the world most recently
at last weekends deeply discouraging G-20 meeting governments are obsessing about inflation
when the real threat is deflation, preaching the need for belt-tightening when the real problem is
inadequate spending.
In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors,
who raised interest rates in the face of financial crisis, the current leaders of the Federal
Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike
governments of the past, which tried to balance budgets in the face of a plunging economy, todays
governments allowed deficits to rise. And better policies helped the world avoid complete collapse:
the recession brought on by the financial crisis arguably ended last summer.
But future historians will tell us that this wasnt the end of the third depression, just as the
business upturn that began in 1933 wasnt the end of the Great Depression. After all, unemployment
especially long-term unemployment remains at levels that would have been considered
catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and
Europe are well on their way toward Japan-style deflationary traps.
In the face of this grim picture, you might have expected policy makers to realize that they
havent yet done enough to promote recovery. But no: over the last few months there has been a
stunning resurgence of hard-money and balanced-budget orthodoxy.
As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe,
where officials seem to be getting their talking points from the collected speeches of Herbert
Hoover, up to and including the claim that raising taxes and cutting spending will actually expand
the economy, by improving business confidence. As a practical matter, however, America isnt doing
much better. The Fed seems aware of the deflationary risks but what it proposes to do about
these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal
austerity but because Republicans and conservative Democrats in Congress wont authorize
additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at
the state and local levels.
Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other
nations around the edges of Europe to justify their actions. And its true that bond investors have
turned on governments with intractable deficits. But there is no evidence that short-run fiscal
austerity in the face of a depressed economy reassures investors. On the contrary: Greece has
agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed
savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which
has been far more reluctant to take the hard-liners medicine.
Its almost as if the financial markets understand what policy makers seemingly dont: that while
long-term fiscal responsibility is important, slashing spending in the midst of a
Page 15 of 18
depression, which
deepens that depression and paves the way for deflation, is actually self-defeating.
So I dont think this is really about Greece, or indeed about any realistic appreciation of the
tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to
do with rational analysis, whose main tenet is that imposing suffering on other people is how you
show leadership in tough times.
And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of
unemployed workers, many of whom will go jobless for years, and some of whom will never work again.
Top
3. |
|
U.S. Economy: Income Gains Boost Spending, Savings
By Bob Willis
June 28, 2010 Businessweek |
June 28 (Bloomberg) Incomes grew faster than spending in May, making it possible for American
households to simultaneously increase savings and support the economic recovery.
Gains in payrolls, longer workweeks and rising pay give Americans more confidence and the means to
maintain spending in coming months. The Federal Reserves decision last week to keep interest rates
unchanged may help households weather the fallout from the European debt crisis, unemployment
hovering near a 26- year high and tight credit.
The consumer is finally starting to see some positive wage gains as the job market starts to
improve, said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut.
Consumer spending isnt going to propel the recovery forward, but it should be more than enough to
sustain it. Overall, this was a fairly solid report.
Stocks dropped as shares of energy producers fell in conjunction with oil prices. The Standard &
Poors 500 Index decreased 0.2 percent to close at 1,074.57. Treasury securities jumped, sending
the yield on the benchmark 10-year note down to 3.02 percent at 4:09 p.m. in New York from 3.11
percent late on June 25.
Exceeds Forecast
The median estimate of 61 economists surveyed by Bloomberg news called for a 0.1 percent gain in
spending. Projections ranged from an increase of 0.3 percent to a 0.5 percent drop.
Consumers are less cautious than they were previously, Robert Niblock, chief executive officer at
Lowes Cos., the second-largest home-improvement chain, said in a June 23 teleconference. But they
still know that were still not out of the woods yet.
Lowes last month said it will add more than 1,400 positions for employees to visit customers
homes to sell them windows, doors and other products. The retailer is filling those jobs internally
and hiring new employees, Maureen Rich, a spokeswoman for the Mooresville, North Carolina-based
company said in a May 28 interview.
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Wages and salaries rose 0.5 percent in May for a second month and were up 1.3 percent since March,
the biggest three- month gain since December 2007, the month the recession
began. The median estimate of economists surveyed called for a 0.5 percent advance in incomes.
Savings Rate
The savings rate increased to 4 percent last month, the highest level since September, to $454.3
billion.
The U.S. consumer remains resilient, said Sal Guatieri, a senior economist at BMO Capital Markets
in Toronto, which correctly forecast the gain in spending. As long as jobs are coming back people
will continue to spend. Americans will also remain focused on paying down their debts and
rebuilding their savings.
The report showed prices stabilized. The inflation gauge tied to spending patterns increased 1.9
percent from May 2009 after a 2 percent increase in the 12 months through April.
The Feds preferred price measure, which excludes food and fuel, rose 0.2 percent in May from the
prior month, exceeding the 0.1 percent median estimate of economists surveyed.
The Fed last week said the labor market is improving gradually, changing Aprils assessment that
it was beginning to improve. Consumer spending still remains constrained by joblessness and
tight credit, it said.
Durable Goods
Adjusted for inflation, purchases rose 0.3 percent last month after little change in April.
Price-adjusted spending on durable goods, including automobiles and appliances, increased 1.1
percent after a 0.5 percent drop. Demand for nondurable goods decreased 0.2 percent, the first
decline this year, while spending on services increased 0.3 percent.
Confidence among U.S. consumers rose in June to the highest level since January 2008, indicating
the decline in stock prices prompted by the European debt crisis has failed to weigh on sentiment,
figures from Thomson Reuters/University of Michigan showed last week. The groups final sentiment
index increased to 76 from 73.6 in May. The index has averaged 84.5 over the past decade.
Consumer spending grew at a 3 percent annual pace in the first three months of 2010, less than
previously estimated, the Commerce Department said last week. The report showed the economy grew
2.7 percent in the first quarter.
Economists surveyed this month projected purchases will expand at a 3 percent rate in the
April-to-June period and 2.6 percent in the second half of the year.
With assistance from Chris Burritt in Greensboro, North Carolina. Editors: Carlos Torres,
Christopher Wellisz
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
Page 17 of 18
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