Cash Is King

With Treasuries at all-time lows and bank lending still declining, companies are reorganizing their treasury operations in record numbers as they strive to increase efficiency, reduce costs and make best use of their internal cash. According to a recent survey by JP Morgan Treasury Services, 61 percent of companies polled had either just completed a treasury restructuring, were in the process of restructuring, or were building the business case for a restructuring.

The poll of 182 treasury executives—primarily from large corporations--found that 35 percent were implementing systems that would allow the company to get a global cash balance, 25 percent were reorganizing their bank account structures to reduce their number of banking partners, and 19 percent were restructuring their cash concentration programs to make use of extra cash for self-funding or debt repayment.

The need to make more efficient use of existing cash balances has been a growing theme throughout the crisis and continues to be a big driver of corporate treasury reorganization, as we discussed last week.  Swiss logistics company Panalpina, for example, recently went through a restructuring and treasury refocusing to reduce group-wide operating costs and better manage FX and interest rate exposures in the current market. The firm underwent a full review of its foreign exchange management and investment policies in order to more efficiently manage counterparties and instrument tenors, and better hedge FX exposures. The next step, according to the company, is to move to a single global treasury management system that is integrated with its ERP.

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Sponsor:Cambridge Consulting Group was formed more than 10 years ago to help large organizations reduce their  costs by eliminating their leasing obligations for excess commercial real estate space. Founded by Dave Worrell, a former Corporate/Facility Director, Cambridge Consulting Group offers companies a better option than subleasing office space they no longer need or use. Using a newer financial strategy- Negotiated Lease Buyouts, Cambridge Consulting has saved Fortune 500 companies millions of dollars in commercial lease obligations. For more information please visit their website- www.ccgiweb.com

Mutual Of Omaha Expanding Number of Locations

Going Against the Grain

US Banker  |  June 2010

By David Lagesse
  
Mutual of Omaha isn't the first or largest insurance company to venture into banking, but it could soon be the most visible.

While competitors like Nationwide and State Farm rely heavily on the Internet and their own agents to generate deposits and loans, Mutual of Omaha Bank is building its customer base in a more traditional way: through acquisitions and de novo branching.

Just three years old, the bank already has $4.1 billion of assets and nearly 40 branches in six states, and it isn't done yet. Jeffrey Schmid, the bank's chief executive, says his goal is to create a brick-and-mortar franchise stretching from Washington State to the Carolinas, and with the backing of a deep-pocketed parent, he has the resources to do it.

"We're in a position now where we can look at every deal that becomes available," Schmid says.

Still, building a nationwide banking franchise one deal at a time is one thing, managing it profitably is another. Mutual of Omaha Bank's strategy is less about establishing critical mass in a handful of states than it is having small branch networks in multiple states. That's not always the most efficient way to run things, as several banking companies have painfully discovered.

And the bank's long-term plans to cross-sell banking products to insurance customers, and vice versa, is alsoeasier said than done, observers say.

Yet perhaps more than most acquisition-minded companies, Mutual of Omaha can afford to be patient; as a mutual owned by its policy holders, it's under less pressure than publicly traded firms to generate profits quickly.

With strong name recognition—particularly in the Midwest—it is also positioned well to take advantage of growing customer dissatisfaction with big banks. Mutual of Omaha is an iconic brand, untainted by a financial crisis that has sullied the reputations of so many financial firms.

"The thing that gives us a huge amount of momentum is the brand," Schmid says. "We don't have to spend a lot of time telling people that they should trust us."
Mutual of Omaha Bank is the brainchild of Schmid's boss, Daniel Neary, the chairman and CEO of Mutual of Omaha Insurance Co.

Neary, a lifelong insurance industry executive, had studied banking up close as a director at Commercial Federal Bank in Omaha and was struck by the similarities with the insurance business. Both pay interest on money taken in from customers, collect interest on money loaned to others, and try to profit on the margin. Neary also saw that banks were becoming a key channel for selling insurance, while insurers were starting to offer bank products, such as certificates of deposit, loans and credit cards, to their policyholders.
http://www.americanbanker.com/usb_issues/120_6/going-against-the-grain-1019451-1.html


Sponsor:Cambridge Consulting Group was formed more than 10 years ago to help large organizations reduce their  costs by eliminating their leasing obligations for excess commercial real estate space. Founded by Dave Worrell, a former Corporate/Facility Director, Cambridge Consulting Group offers companies a better option than subleasing office space they no longer need or use. Using a newer financial strategy- Negotiated Lease Buyouts, Cambridge Consulting has saved Fortune 500 companies millions of dollars in commercial lease obligations. For more information please visit their website- www.ccgiweb.com

Forbes Article on Need for HQ Office Space

Commentary
Why Companies Don't Need Headquarters
David F. Carr, 06.03.10, 6:00 AM ET

James Sinclair, head of the hospitality industry turnaround firm OnSite Consulting, says one of the biggest challenges his employees have had adapting to the way he runs his business is answering the question, "But where is your company based?"

The answer: Wherever the work needs to be done. "We have 65 people, and we have no office," Sinclair explains. Headquarters is a post office box; he also has an Internet-based phone and unified communications system.

Sinclair used to have an office. "Sure, we picked out a nice office with a conference room and people working away. But our clients don't want to see our office, don't want to see the conference room. They want us to come to them," he says.

OnSite is in the business of reviving restaurants, hotels and casinos that are in trouble, sometimes on the verge of bankruptcy. In past years the company has bought and rehabilitated some facilities, but today it focuses on working with current owners on overhauling management and operations. Sinclair himself has long been a road warrior, and was rarely in the office anyway. When he did come in, he believed employees felt obliged to pepper him with issues they had been managing just fine while he was away. Or he saw them doing busywork solely to impress him with their industriousness.

Sponsor:Cambridge Consulting Group was formed more than 10 years ago to help large organizations reduce their costs by eliminating their leasing obligations for excess commercial real estate space. Founded by Dave Worrell, a former Corporate/Facility Director, Cambridge Consulting Group offers companies a better option than subleasing office space they no longer need or use. Using a newer financial strategy- Negotiated Lease Buyouts, Cambridge Consulting has saved Fortune 500 companies millions of dollars in commercial lease obligations. For more information please visit their website- www.ccgiweb.com

About 18 months ago Sinclair decided to send all his employees into the field, where they could be more productive. That made a lot of sense for consultants and salespeople. But Sinclair went further, also dispersing his administrative workers. The person who handles billing, for example, now has a desk at the site of a longtime client.

"At first a couple of clients did say something like, 'Let me get this straight: You gave up your office so you can use our office for free?'" Sinclair concedes. But he convinced them that any employee he parked at their location could at least serve as a point of contact, helping ensure a smoother working relationship.

Although employees found the "Where is your headquarters?" question awkward at first, Sinclair likes to turn it around, telling potential clients the OnSite consultants will be, well, on site 90% of the time, precisely because they don't have an office to retreat back to.

The technologies Sinclair uses include Microsoft's Office Communications Server for Internet call-routing and integration with other communication modes, such as e-mail and instant messaging. He also relies on Microsoft SharePoint for collaboration and BlackBerry Enterprise Server for mobility. OnSite has no IT staff of its own, so the technology is all managed and hosted under contract with 123together.com.

I heard a similar story from Doane Hadley, president of BizTech Solutions. I'm never quite as impressed when technology companies turn out to be showcase users of the technologies they promote, and BizTech had been a longtime beta tester for Microsoft SharePoint before adopting Office Communications Server.

Still, when Hadley decided to get rid of the firm's office in New Jersey, he did it for his own reasons. Once his company had adopted unified communications, it became easier to tell people it was OK to work at home more--especially as gas prices spiked or the weather was bad. When his office manager announced she was moving to North Carolina, Hadley decided she could work from home.

"It got to the point where there weren't a lot of people in the office anyway, and there didn't need to be," Hadley says. So he did away with it, and now all his employees work from home or from client sites.

Hadley has an agreement with a shared office facility in New Jersey, where he has one person stationed more or less full-time, and where he can have the use of a conference room if he needs it. But instead of running servers in his own data center, he now rents space in a commercial data center. "At the end of the day it's better, because we have guaranteed uptime and higher connectivity," he says.

OnSite's Sinclair believes the decision to do away with his office has been worth more than $1 million in savings, supplemented by the increased business he has netted from a more productive workforce.

One of the side benefits is that people who were formerly confined to back-room tasks are now in contact with customers, giving them the opportunity to prove their worth. And employees are happier as a result, Sinclair says. "Some of them are earning double what they were a couple of years ago--because they've proven that they should be."

David F. Carr is Forbes' columnist on technology for small to midsize businesses. Contact him at david@carrcommunications.com.

CMBS Market Will Impact landlords

Securitized office mortgages, which initially were somewhat insulated from the market distress, are increasingly being dragged down as well.

Deteriorating office loans were the impetus behind big spikes last month in special-servicing and delinquency rates for commercial MBS loans.

The percentage of CMBS loans in special servicing, by balance, jumped to 11.7% at the end of May, from 11.3% a month earlier, according to Trepp. Meanwhile, the 60-day delinquency rate soared by 49 bp, to 7.97%, Fitch reported. The increases dashed hopes in April that the measures of credit deterioration were starting to peak.

The amount of office mortgages in special servicing climbed by a net $2.3 billion last month, or 12%, to $21 billion. That accounted for three-fifths of the overall $3.7 billion increase in special-servicing volume. For the first time in this cycle, office loans are the largest category of loans in special servicing, exceeding retail mortgages, whose total declined by 3.4%, to $20.2 billion, because some loans to General Growth Properties were removed after modifications.

And the actual amount of office loans in special servicing is much higher. Late in May, a massive $4.9 billion mortgage was transferred to special servicing, according to Fitch. That transfer occurred too late to be included in the servicer reports that Trepp uses to compile its figures. Also, about $800 million of a $2.7 billion loan to Beacon Capital Partners hasn't yet shown up in the figures. Counting those loans, the amount of office mortgages in special servicing skyrocketed by $8 billion, or 43%, from the end of April, to $26.7 billion.

Office loans also drove the rise in delinquencies. Fitch's index now includes $6.6 billion of office mortgages, up $1 billion, or 19%, from the end of April. The agency said 44 office loans were classified as 60 days past due in May, including 14 with balances exceeding $20 million.

Sponsor:Cambridge Consulting Group was formed more than 10 years ago to help large organizations reduce their  costs by eliminating their leasing obligations for excess commercial real estate space. Founded by Dave Worrell, a former Corporate/Facility Director, Cambridge Consulting Group offers companies a better option than subleasing office space they no longer need or use. Using a newer financial strategy- Negotiated Lease Buyouts, Cambridge Consulting has saved Fortune 500 companies millions of dollars in commercial lease obligations. For more information please visit their website- www.ccgiweb.com 

Office mortgages are the dominant category of CMBS loans, accounting for $213.6 billion, or 30.1%, of the $709.4 billion of outstanding mortgages. But so far during the downturn, they have represented a disproportionately small portion of the loans in special servicing. The reason: Office buildings tend to have long-term leases that have provided some protection from the struggling economy.

But Trepp and Fitch have long predicted that office mortgages would face growing distress as leases rolled over. Now that is coming to pass.

"As expected, office-loan delinquencies have begun to increase and will continue to rise well into next year," said Mary MacNeill, a Fitch managing director. "Landlords are being pressured by tenant downsizing and must offer significant concessions and reduced rent to maintain their existing tenant bases."

Office loans now account for 25.4% of the loans in special servicing, by balance, up from 17.8% at the end of last year. And 9.8% of all securitized office mortgages are in special servicing - almost double the 5.5% rate at yearend.

The $4.9 billion mortgage that was transferred to special servicing in late May is backed by office properties that a Blackstone Group fund assumed via its $39 billion takeover of Equity Office Properties in 2007. The loan, which had an original balance of $6.9 billion, was securitized via a stand-alone deal (GS Mortgage Securities Corp. II, 2007-EOP).

The Blackstone loan and the $2.7 billion Beacon loan, which is backed by office properties in Seattle and Washington, D.C., are still current on their payments. But Fitch noted that if the loans become delinquent, the office delinquency rate would soar by 400 bp, from the current 4.59% level, and the overall delinquency rate would climb by 135 bp.

The largest office mortgage classified as 60-days delinquent in May was a $380 million loan to Beacon on the 1.5 million-square-foot Columbia Center complex in Seattle. Morgan Stanley securitized that loan via a $2 billion pooled deal (Morgan Stanley Capital I Trust, 2007-HQ12).

Other big office loans that turned delinquent included a $181 million mortgage on the so-called DRA-CRT Portfolio 1, which encompasses 16 properties in Florida, Maryland and North Carolina, and the $165 million senior portion of a $200 million loan to Maguire Properties on the 566,000-sf building at 550 South Hope Street in Los Angeles. The DRA-CRT loan was securitized via a $2.7 billion pooled offering (J.P. Morgan Chase Commercial Mortgage Securities Corp., 2005-CIBC13). The Maguire loan was securitized via a $7.6 billion offering (GS Mortgage Securities Trust, 2007-GG10).

The $3.7 billion net increase in special-servicing volume last month was the largest since the $4.3 billion spike in February, reversing a downward trend. The number of loans in special servicing rose by 175, or 4%, to 4,627 - the biggest jump since the 341 increase in February.

The delinquency rate also rose for other property types last month, but to smaller degrees. The rate climbed to 18.63% for hotel loans (up 21 bp), 13.65% for multi-family mortgages (up 5 bp), 6.03% for retail loans (up 20 bp) and 5.07% for industrial loans (up 47 bp).

The overall delinquency rate has climbed virtually nonstop from a low of 0.27% in January 2008, reaching levels not seen since Fitch began maintaining the data on a monthly basis in 2004.

The delinquency index tracks loans in U.S. securitizations rated by the agency that are overdue by at least 60 days or in foreclosure. At the end of May, 2,938 loans totaling $35.4 billion were in that category - up from 2,885 loans totaling $33.5 billion a month earlier. Another $4.2 billion of loans were delinquent by 30-59 days at the end of May, up from $3.6 billion a month earlier. Overall, Fitch rates $443.8 billion of U.S. CMBS transactions backed by about 40,000 commercial mortgages.

FASB and IASB Change Dates On Accounting Changes

U.S. and international accounting rule makers said on Wednesday they are developing a "modified strategy" to come up with a single set of global accounting rules.

The chairmen of the U.S. Financial Accounting Standards Board and London-based International Accounting Standards Board sent a letter on Wednesday to the G20 group of industrialized and emerging countries, which set a June 30, 2011, target for the boards to align major areas of accounting.

In the letter, FASB Chairman Robert Herz and IASB Chairman Sir David Tweedie said they will keep a June 2011 target date for many projects where converged accounting rules are "urgently required," but said a few projects will extend into the second half of 2011.

 Sponsor:Cambridge Consulting Group was formed more than 10 years ago to help large organizations reduce their  costs by eliminating their leasing obligations for excess commercial real estate space. Founded by Dave Worrell, a former Corporate Facility Director, Cambridge Consulting Group offers companies a better option than subleasing office space they no longer need or use. Using a newer financial strategy- Negotiated Lease Buyouts, Cambridge Consulting has saved Fortune 500 companies millions of dollars in commercial lease obligations. For more information please visit their website- www.ccgiweb.com

FASB Changes Could Have Huge Impact on Banks

From CFO.com

The Financial Accounting Standards Board's new exposure draft on accounting for financial instruments, if adopted, could have adverse consequences for commercial banks, according to lobbyists and bank CFOs who are assessing its ramifications. Almost immediately after the proposal was published last Thursday, bankers began questioning its logic, particularly the requirement that even plain-vanilla loans held for collection be marked to market. Bankers say the ripple effects are numerous and include damping origination of long-term, variable-rate loans; spooking bank investors; and increasing procyclicality in the financial system.

"This is really a jaw-dropping proposal," says Donna Fisher, senior vice president of tax and accounting at the American Bankers Association.


The proposed accounting changes, which would take effect in 2013 for banks with assets of more than $1 billion, would force companies to use market prices to value almost all financial instruments, including loans to corporations and consumer loans like credit-card debt, and record any changes on the balance sheet. That's a significant departure from current accounting practice for banks, which record held-to-maturity loans on the balance sheet at amortized, or historical, cost. The changes to fair value will not flow to net income, FASB says

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Cambridge Consulting Group was formed more than 10 years ago to help large organizations reduce their  costs by eliminating their leasing obligations for excess commercial real estate space. Founded by Dave Worrell, a former Corporate/Facility Director, Cambridge Consulting Group offers companies a better option than subleasing office space they no longer need or use. Using a newer financial strategy- Negotiated Lease Buyouts, Cambridge Consulting has saved Fortune 500 companies millions of dollars in commercial lease obligations. For more information please visit their website- www.ccgiweb.com

200 Wachovia Branches in Atlanta Will Convert to Wells Fargo in October

As reported in Atlanta Business Chronicle

As the leaves change colors this fall, Wachovia’s familiar blue and green logos will change into Wells Fargo’s red and yellow in Atlanta.

San Francisco-based Wells Fargo & Co. (NYSE: WFC) said Wednesday Wachovia signs and systems will convert to Wells Fargo in late October at almost 200 bank branches in Atlanta and nearly 280 locations across Georgia.

After the conversion, Wells Fargo will be the second-largest bank in metro Atlanta with $21.6 billion in deposits and a 19 percent market share. Wells Fargo also noted it has hired more than 200 tellers and bankers across Atlanta and more than 300 across Georgia in a shift to the Wells Fargo model.

Sponsor:Cambridge Consulting Group was formed more than 10 years ago to help large organizations reduce their  costs by eliminating their leasing obligations for excess commercial real estate space. Founded by Dave Worrell, a former Corporate/Facility Director, Cambridge Consulting Group offers companies a better option than subleasing office space they no longer need or use. Using a newer financial strategy- Negotiated Lease Buyouts, Cambridge Consulting has saved Fortune 500 companies millions of dollars in commercial lease obligations. For more information please visit their website- www.ccgiweb.com

Atlanta will remain headquarters for the company’s Southeast region, which includes Alabama, Tennessee and Mississippi. The three neighboring states to Georgia will change to Wells Fargo in late September. Other states in the East will follow.

Wachovia merged with Wells Fargo on Dec. 31, 2008. Wachovia Securities has already become Wells Fargo Advisors and Wachovia Mortgage is now Wells Fargo Home Mortgage.

Wells Fargo’s first-quarter profit dropped 16 percent to $2.55 billion. The company has $1.2 trillion in assets and provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 10,000 stores and 12,000 ATMs.