WSJ Reports Legg Mason To Buy Back $300 Million in Stock

 Legg Mason Inc. (LM) has agreed to buy back $300 million of stock in accelerated share-repurchase deals, part of its $1 billion effort announced two weeks ago.A host of companies have been ramping up buyback efforts in recent months as the perceived need to hoard cash in the wake of the financial crisis recedes. Legg Mason's market value is slightly less than $5 billion.The money manager, when it announced the buyback effort, reported it swung to a fiscal fourth-quarter profit following a prior-year charge as the company said it will cut about 10% of its 3,500-person work force through back-office streamlining.

Shares were up 1% at $30.44 in early trading. The stock is up 64% the past year.

Cellphone Companies Need to Revisit Retail Strategy

The Wall Street Journal published an interesting article on retail stores owned by cell phone wireless carrier companies. Radio Shack has over 4,500 stores and Verizon Wireless has 2,300 locations " With growth shifting from new subscribers to extracting more revenue from existing customers, there is less and less justification for carriers to operate vast networks of stores." The article states that a retail strategy made sense when the goal was to sign up new subscribers but their market goals have changed. Customers still want to come into a retail location to upgrade their phones or looking at newer smartphone technology. But this trend will not last forever.

The costs required to maintain thousands of retail locations is daunting. As reported in the WSJ article, " Dan Hays, a partner with consulting firm PRTM, estimates major carriers' retail stores cost about $500,000 a year to operate each. For AT&T and Verizon Wireless, that adds up to about $1.1 billion annually or 1.7% of 2009 revenue for Verizon Wireless, for instance."

Reducing Retail Locations Greatly Improves Bottom Line

During the divestiture of the Bell Companies- Bell Atlantic found itself with what seemed like a no- win scenario. They had to close or sublease forty branch locations quickly. With cash reserves dwindling, subleasing was no longer an option. David Worrell, Director of Real Estate/Finance of a Bell Atlantic subsidiary, developed a new concept- Negotiated Lease Buyout of Real Estate Leases. Using this strategy he was able to end all of their lease obligations in seven months with an average savings of 68% per lease. He left Bell Atlantic to form Cambridge Consulting Group to help other companies achieve similar results. Cambridge Consulting Group has helped major organizations including Bank Of America, Ford Motor Credit and Key Corp save millions of dollars on their un-needed commercial real estate costs. For more information please visit his website at www.ccgiweb.com.

CFOs Getting Answers on Health Care Reform

The Wall Street Journal reported today that Campbell Soup  earnings fell 3.4% some of it related to absorbing new health care reform costs. CFO Magazine article below discusses how CFOs are reacting to new changes.

By Alix Stuart

Piece by piece, CFOs are getting a clearer understanding of how health-care reform will affect their costs. According to a recent survey by Mercer, 41% of companies expect to see their annual costs increase by 2% or less when the Patient Protection and Affordable Care Act's most immediate provisions — expanded dependent coverage and the end of lifetime coverage limits — take effect next year. Another 25% expect the provisions to add 3% or more to the tab, while a fortunate 3% expect no changes as a result of the required benefits enrichment. (Thirty percent are still unable to tally the additional costs.)

One component of those cost increases will come from the PPACA's mandate to extend coverage to older children of employees. New interim rules from the Departments of Health and Human Services, Labor, and the Treasury recently clarified that companies providing health insurance must offer the coverage to those age 26 or under in new plan years starting on or after September 23, 2010. They also made it apparent that implementing even one of the less-controversial provisions of the bill will not be easy work.
For full article-http://www.cfo.com/article.cfm/14500415/?f=rsspage

Subleasing Unused Space Not A Wise Cost Containment Strategy

Cost containment is still the key trend for companies in 2010. One of the largest cost areas is real estate leased by corporations. Long term leases tie up capital that could be used to fund other corporate activities. Many companies have downsized and have commercial real estate space they are not using. Landlords are facing many financial obstacles and may be more willing to renegotiate or release your firm from any future payments. Corporations can save millions of dollars in saved lease payments by using a newer strategy- Negotiated Lease Buyout. For more information please visit www.commercialleaseterminations.com

New Accounting Rules Effect Subleasing decisions

The Financial Accounting Standards Board (FASB) and
the International Accounting Standards Board (IASB)
are working together to create a common standard
on lease accounting to ensure that the assets and
liabilities arising from lease contracts are recorded and
recognized on the financial statements in a consistent
manner. Under the current regulations, similar
transactions can be accounted for very differently,
reducing both the transparency and comparability for
users of financial statements.
Many industries utilize leasing as an important source
of finance to the business. The proposed lease
accounting standard would require that all operating
leases be treated as capital leases and that assets and
liabilities arising from lease contracts are recognized
on the balance sheet as a “Right of Use”1 asset and
an obligation. It has been estimated that this change
could add over $1 trillion onto U.S. company balance
sheets2 in increased assets and liabilities. The proposed
standard, if adopted, will impact all publicly traded
companies and all companies who produce financial
statements in accordance with Generally Accepted
Accounting Principles (GAAP). While under the
proposed rules, the timing for implementation by
lessees and lessors may differ, eventually both will be
impacted.
The proposed regulations are expected to be
adopted in 2011, but [at the time of publication of this
document] timing on implementation is uncertain.
Once implemented, accounting for leases from the
lessee and lessor perspective, financial reporting for the
commercial real estate industry, as well as any industry
where leasing is utilized, will change.
The purpose of this White Paper is to illustrate the
potential impact on the Lessee’s or Lessor’s

Under the proposed standard, accounting for subleases
will most likely change for both the lessor and lessee.
There are three methods currently under consideration
for lessor sublease accounting, but the FASB and IASB
have not reached a preliminary view on any of the
approaches:
(1) Continue to use existing lessor accounting
standards to subleases but provide additional
guidance.
(2) Exclude the lessor sublease from the scope of the
proposed standard.
(3) Develop a right-of-use model to deal strictly with
subleases.
All three of the suggested approaches have advantages
and disadvantages which will be addressed as the FASB
and IASB consider issuing a new standard to account for

TD Bank Acquires Struggling South Financial Bank

Canada's TD Bank (TD) agreed to buy South Financial (TSFG), a struggling Greenville, S.C.-based bank holding company with $12 billion in assets and 176 branches in the Carolinas and Florida.

TD buys the dip

Toronto-based TD, which previously purchased the Commerce Bank chain in the mid-Atlantic states and owns the TD Ameritrade online broker, said the deal is just the sort of transaction it has been searching for as it expands on the U.S. East Coast.

"We're gaining established commercial banking assets and a solid network of stores in attractive and growing markets within our Maine-to-Florida footprint," said TD Bank chief Ed Clark.

The deal also comes just weeks after South Financial promised to raise capital in a consent agreement with regulators at the Federal Reserve. The terms strongly suggest the clock was ticking for South Financial to find a buyer.

TD will pay just $61 million, or 28 cents a share, to acquire South Financial's stock. That's less than half the price the stock fetched Friday.

http://wallstreet.blogs.fortune.cnn.com/2010/05/17/fdic-scores-in-td-deal/

by Colin Barr

Capital One Announces New President To Oversee Chevy Chase Bank Acquisition

The ubiquitous Chevy Chase Bank signs will be replaced in the fall by the Capital One name, the McLean-based institution said Friday as it announced a new mid-Atlantic president and several new officers in the Washington area.

The bank appointed a new team led by James Jackson to oversee the mid-Atlantic region and integrate the recently acquired Chevy Chase branches into its operations. He replaces longtime Chevy Chase executive Pat Clancy, who will serve in an advisory role as Capital One completes its takeover. A bank spokeswoman said the 247 Chevy Chase branches in the Washington region will be officially rebranded "Capital One" in the fall.

"Contractors are in the process of preparing the internal and external signage replacement in Chevy Chase Bank branches throughout the Mid-Atlantic by installing permanent Capital One Bank signs with temporary Chevy Chase Bank covers," spokeswoman Denise Kazmier said in a statement. "The temporary covers are scheduled to be removed in the fall during the brand change."

Kazmier said Capital One plans to introduce new products to the banks, but still "preserve the unique feel" of Chevy Chase.

In purchasing Chevy Chase in early 2009, Capital One is moving further with its strategy to expand from its credit card business into commercial banking. Its initial forays into commercial banking, involving the North Fork and Hibernia purchases, was rocky when several bank executives quit over what they said was Capital One's inability to meld the cultures.

Analysts, though, say Capital One apparently has learned from that experience and opted to move on the recent acquisition at a measured pace.

"They're to be commended for being careful about this. There have been some horror stories back in '90s acquisitions [involving other banks] that went too fast and were disastrous," said Bert Ely, an independent banking consultant.
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"Computer systems didn't match," Ely added. "Customers had interruptions in basic banking -- getting deposits and accessing cash through the ATM."

In its earnings statement last month, Capital One said its Chevy Chase operations performed as expected. In its overall banking segment, average deposits rose 12.6 percent, to $21.9 billion, from 2009's final quarter.

The company said revenue in its domestic and international credit card segments declined.

But total charge-offs, or the unpaid debts that are recorded as losses for the firm, fell in the first quarter from the fourth quarter of 2009 as commercial, auto and retail banking performance improved, the company said. Those gains offset a higher charge-off rate on domestic credit cards.

Jackson, who was not available for comment, will oversee Capital One's banks and its community outreach programs involving philanthropy and employee volunteer programs, according to the company. He also will continue to serve in his previous position as executive vice president of branch distribution.

Before joining Capital One in 2009, Jackson worked for 25 years at Bank of America. Among his last jobs there was overseeing the Southeast region.

Capital One's new market presidents include:

-- Adam Ostrach, the District.

-- John Allen, Prince George's County.

-- Kimberly Conte, Fairfax and Loudoun counties.

-- David Dineen, Montgomery County.

-- Eric Lawrence, Alexandria and Arlington and southern Fairfax counties.

North American Financial Holdings Inc. May be Large Purchaser of Southern Banks

  
Jacksonville Business Journal - April 12, 2010
/jacksonville/stories/2010/04/12/story1.html

A group of heavyweights in national banking circles could form a bank in Jacksonville by using more than $500 million in capital to buy up failed banks.

The group seeking to form a national bank charter in Jacksonville already has about $528 million in cash, and includes former top executives from Bank of America Corp., an adviser to GMAC LLC and NASA, a managing director at Morgan Stanley and a retired partner of Goldman Sachs & Co., according to the application filed with the Office of the Comptroller of the Currency, a national banking regulator.

The bank holding company, called North American Financial Holdings Inc., could eventually create a multibillion-dollar bank under the proposed name of NAFH National Bank, by acquiring multiple failed banks throughout the Southeast, analysts said.

“This group is experienced in building big banks and there are big bucks behind this group,” said Tony Plath, finance professor at the University of North Carolina at Charlotte.

The proposed board of directors and top executives of the company are mostly former Bank of America heavy-hitters such as Eugene Taylor, whose 38 years at the company included his most recent positions as vice chairman of Bank of America and president of Global Corporate and Investment Banking, and Bruce Singletary, who was senior risk manager of commercial banking for Bank of America’s Florida Bank during his 31 years with the company.

Taylor will be the chairman and CEO of the bank and company, and Singletary will be the chief risk officer, according to its application. Christopher Marshall, who will be the chief financial officer, was a senior adviser to GMAC LLC’s CEO in helping the company restructure, including leading the efforts to cut $1 billion in expenses to get the auto lender giant back on its feet. Marshall was also an adviser in banking sector investments for The Blackstone Group LP, chief financial officer for Fifth Third Bancorp and, before spending five years with Bank of America, he was an adviser to NASA and the chief financial officer of AlliedSignal Technical Services Corp.

None of the principals could be reached for comment.

While there have been reports of former bankers forming groups to buy failed banks, Plath said he had not seen a group of this caliber yet.

“This is far more horsepower than what you would typically see,” Plath said.

As of Dec. 22, the company had $528 million in cash capital. The application stated NAFH National Bank would form “to acquire certain assets and assume certain liabilities of one or more failed depository institutions.”

With half a billion in capital, “they could purchase a pretty good size bank or several smaller banks,” said Stan Smith, finance professor at the University of Central Florida. Smith said that amount of capital could allow them to buy a bank with $2 billion to $5 billion in assets.

The fact that NAFH is seeking a national charter with the Office of the Comptroller of the Currency means that it will be easier for the bank to branch out throughout the Southeast, Plath said. “This is a super regional franchise” that will “likely be in the tens of billions of dollars.”

The portions of the applications made public based on a Freedom of Information Act Request by The Business Journal do not indicate where the bank’s target markets are or where the holding company will be based. However, the Comptroller’s Web site, which listed the application, stated that the proposed corporate and mailing addresses were in Jacksonville at the time it was filed in January.

Analysts said it is likely the acquisitions will start in Florida and Georgia, where banking was historically lucrative and costly. But now those states carry a majority of the failed banks selling for cents on the dollar since the Federal Deposit Insurance Corp. typically covers most of the loan loss.

“Florida banking, for the long term, is going to be an excellent outlook,” said Linda Charity, director of the Division of Financial Institutions at the Florida Office of Financial Regulation.

Charity said she is seeing more interest in forming banks throughout the state. There is also a pending application with her office by a group of national bank veterans and former regulators to form a bank in Ponte Vedra called Bank of the Southeast, which will form to buy failed banks.

Another group primarily of veteran bankers who formed a private equity group, Bond Street Holdings LLC, raised $440 million last year. Bond Street, which bought two failed banks in Florida in January, was among the first private equity groups to acquire failed banks in this recession.

Charity said she is also seeing more experienced groups flush with cash seeking to acquire a failed bank or support a distressed one.

“A year ago people were kicking tires, but there was not enough backing,” she said. “Now, it’s a different time.”

Last May, three New York private equity firms including Fortress Investment Group LLC, where Eugene Taylor was an adviser, had an initial agreement to inject up to $150 million in equity into Boca Raton-based First Southern Bank, owned by First Southern Bancorp Inc. Had the deal gone through, Taylor would have been chairman and CEO of First Southern. But the bank announced in February that it raised $400 million in capital through 25 institutional investors, naming a different former bank president as chairman and CEO.

North American Financial Holdings must get the green light from three regulators before it can begin: the Office of the Comptroller of the Currency to form a national bank, the FDIC to insure deposits and the Federal Reserve to become a bank holding company. The application filed with the Office of the Comptroller is called a shelf charter, which means the regulators will not approve it until the company bids on a failed bank and it’s approved by the regulators.

It is clear that this kind of group and capital backing “puts them in a nice competitive position,” said Jack Greeley, a banking attorney at Smith MacKinnon PA in Orlando. “It’s done in a way that makes a regulatory-approved deal.”
— Rachel Witkowski -rwitkowski@bizjournals.com | 265-2219



Many bank acquisition deals are based on reducing operating costs and redundancy of services/ branch locations. Reducing the number of bank branches can have a tremendous impact on profits, but only if the real estate leases are subleased or terminated. There are many advantages to a negotiated lease buy-out rather than the more risky sub-leasing option. One company, Cambridge Consulting has perfected the art of Negotiated Lease Buy-outs. They  have saved organizations like Bank Of America and Ford Credit millions of dollars in reduced real estate obligations. For more information please visit their website- www.commercialleaseterminations.com