Fed questions BofA on move to lower hedge fund taxes

Bank of America has been questioned by U.S. regulators over a strategy that helps hedge funds and other clients reduce taxes owed on dividend payments.

The strategy, "dividend arbitrage," involves a bank transferring ownership of a client's shares to another jurisdiction before the client collects dividends on the shares. The move allows the clients to reduce the taxes they must pay on the dividends.

The Federal Reserve Bank of Richmond, which oversees Bank of America, has looked into the practice at the Charlotte-based bank.

"In the course of our regular and intensive supervision of Bank of America, we identified dividend arbitrage trading as an activity that required further examination of the risk and governance of the business," Richmond Fed spokesman Jim Strader said in an email to the Observer. "Bank of America has cooperated with our examination of the practice."

A Bank of America spokesman declined to comment.

According to The Wall Street Journal, which reported on the Fed's examination of Bank of America earlier Monday, the maneuver typically enables bank clients to reduce taxes from as much as 30 percent of the dividend payment to about 10 percent -- or sometimes to zero. The client, bank and entities that take ownership of the shares then divide up the savings.

It is unclear if other banks have also been questioned about the strategy.

On Monday, in an unrelated matter, the Securities and Exchange Commission said Bank of America has agreed to pay a $7.65 million civil penalty to settle charges resulting from the bank’s multibillion-dollar miscalculation of its capital ratios.

Yadkin Bank to pilot smaller branch

Yadkin Bank could become the latest lender to cut costs through smaller branches.

The Raleigh-based lender, which has operations in Charlotte, plans to open a 1,000-square-foot branch in Raleigh some time next year, Yadkin CEO Scott Custer told me Friday. The branch will be opened as part of a pilot project, and it's unclear whether Yadkin will open more of the small branches.

It's not unusual for banks to be experimenting with smaller branches these days. That's being driven by two key factors:

First, banks are trying to reduce costs as they struggle with weak revenue growth. Second, banks see less need for the large, expensive-to-run branches of the past at a time when consumers can do many basic banking activities on their phones and computers.

Bank of America and Wells Fargo are among big banks that have rolled out smaller branches in the past year and a half.

Yadkin represents a smaller bank taking a hard look at how it might reduce its branch costs as consumer habits change.

The bank's test branch will about one-third the average size of a Yadkin branch, which is 3,500 square feet. Custer said it will be staffed by two full-time employees and one part-time employee.

Smaller branches could allow the bank to operate less-expensive branches while also ensuring it has enough locations to provide convenience for its customers, he said.

Yadkin bank is part of Yadkin Financial Corp.

In July, Elkin-based Yadkin Financial Corp. merged with Raleigh-based VantageSouth Bancshares, forming North Carolina's largest community bank.

The merged bank holding company kept the Yadkin Financial Corp. name.

Custer, who was VantageSouth's president, became CEO of the combined company.

Wells Fargo names market president for Gaston, Cleveland counties

Wells Fargo said it has a new market president for Gaston and Cleveland counties.

Bill Ingram, who joined Wells Fargo in 2012 as a relationship manager for the Lake Norman area, will also serve as business-banking manager for the two counties.

Ingram

Market presidents serve as the face of Wells Fargo in the areas they oversee. They also make final decisions on how the bank spends money on philanthropic efforts in their markets.

Ingram replaces Janet Sarn, who retired.

Wells Fargo employs approximately 22,100 people in various business lines throughout the Charlotte metropolitan area.

Hugh McColl: Financial crisis caused by greed

Former Bank of America CEO Hugh McColl shared his thoughts on the origins of the financial crisis during a panel discussion Tuesday night, saying it largely stemmed from too much greed.

McColl also said the nation's biggest banks continue to grow as smaller banks are going away. And he warned that there might be trouble ahead for the U.S. economy as a result of too much money being put into circulation.

McColl was among the participants in the discussion organized by the Federal Reserve Bank of Richmond, which is celebrating its 100th birthday this year.

Panelists (left to right): Gantt, McColl, Martin and Rothacker 

Former Charlotte Mayor Harvey Gantt; Matthew Martin, the Richmond Fed's regional executive in Charlotte; and Charlotte Observer reporter Rick Rothacker were the other participants at the event held at the the Levine Museum of the New South.

The focus of the panel talk was the history of banking in Charlotte.

McColl said big banks are getting bigger, despite concerns from regulators and others about financial institutions deemed "too big to fail."

"The facts are that since the Great Recession, the too-big-to-fail banks have gotten much, much larger, and the little banks are disappearing," McColl said.

McColl retired as Bank of America CEO in 2001, before the financial crisis. The "No. 1 underlying cause" of the crisis, he said, was greed.

"You could argue that people borrowed money (for residential mortgages) knowing they wouldn't pay it back. You could argue people made the loan available to them knowing they couldn't pay it back," he said.

McColl said one "great fallacy" that helped spark the crisis was "people believed they could get rid of risk by selling it to somebody else."

"If (there's) nothing else people should have learned out of this collapse is the risk is always there and just because you gave it to somebody else doesn't mean it isn't coming back," he said.

McColl said too much money being put into circulation as a result of fiscal and monetary policy could prove problematic for the U.S. economy, perhaps in the form of future inflation.

"Once it gets into circulation, something's going to happen to it," he said. "It's going to get loaned or invested. We may be sitting on a time bomb of too much money being printed and all this will come home at some point."

"When you get too much money chasing too few good deals, that's when you get problems," he said.

Charlotte has had a Federal Reserve branch since 1927.

McColl called the opening of the branch "the most important" milestone in Charlotte's development into a banking center.

But he also said the region's banking industry expanded along with the economic growth that took place across the South following school desegregation in the 1960s.

"You take '63 forward, the South outgrew the rest of the nation" in terms of incomes, jobs and population, McColl said. "We were growing like gangbusters. ... We just happened to be in the right place at the right time and took advantage of it."

First Citizens merger wins shareholder OK

Shareholders on Tuesday approved the merger of Raleigh-based First Citizens BancShares and Columbia, S.C.-based First Citizens Bancorp.

The deal is expected to create the largest family-controlled bank in the U.S. and the sixth-largest bank headquartered in the Southeast.

Plans for the merger were announced in June. Under the deal's terms, the Columbia lender will be merged into the Raleigh lender.

The combined lender is expected to have $30.7 billion in assets, $26.1 billion in deposits and more than 575 branches in 18 states and the District of Columbia.

Regulators have approved the deal, a First Citizens Bancorp. spokeswoman said. The merger is expected to be completed in the fourth quarter.

Certus Bank looks to sell mortgage, wealth divisions

CertusBank said Monday it has entered into agreements to sell its mortgage and wealth divisions as the troubled bank winds down a restructuring strategy.

The Greenville, S.C.-based bank said AmeriSave Mortgage Corp. has submitted a letter of intent to acquire a large portion of Certus’ mortgage business. Separately, Eximius Holdings has submitted a letter of intent to acquire Certus Securities and Certus Investment Advisors.

The deals are not yet finalized.

Monday’s announcement comes as Certus has been seeking to exit certain business lines under a restructuring plan while at the same time battling a high-profile lawsuit brought by former top executives fired earlier this year.

The restructuring, led by new CEO John Poelker, is designed to return Certus to a more traditional community-banking model. The bank, whose headquarters were once in Charlotte, said Monday the sale of the two divisions brings the restructuring effort to a close.

Poelker was named interim CEO and president in April after the executives were fired over mounting losses at the bank and shareholder questions about expenses.

The executives – Milton Jones, Walter Davis and Angela Webb, former Bank of America and Wachovia executives who had led CertusBank since its formation – sued the bank and a hedge fund manager, alleging the hedge fund manager persuaded a majority of the bank’s board members to fire them.

The executives claim the hedge fund manager, Benjamin Weinger, sought to defame them with racial statements. Jones, Davis and Webb are black. Certus has maintained that the decision to fire the executives was based on a review of their performance at the bank and had nothing to do with race. In court filings, Weinger has denied making racial comments about the executives.

The lawsuit is pending in federal court in Greenville.

Poelker was named permanent CEO last month. In a statement Monday, he said the sale of the two divisions will better position Certus “for ongoing improvement in our financial performance.”

The acquisition by Atlanta-based AmeriSave is expected to include a majority of Certus’ mortgage employees and facilities, Certus said. New York-based Eximius Holdings is seeking to acquire Certus’ brokerage and investment advisory platform, in a deal expected to include many employees who work in those operations.

The impact of the deals on those employees is not immediately known, Certus said. In the Charlotte metropolitan area, Certus’ mortgage and wealth operations employ approximately 40 people, according to the bank.

The announcement of the deals comes after Certus reported its losses in the second quarter more than doubled from the same period a year ago. The lender posted a loss of $15 million in the quarter, up from a loss of $7.1 million a year earlier.

Certus said the higher losses stemmed from expenses related to its restructuring.

CommunityOne announces departure of CEO Brian Simpson

Charlotte-based CommunityOne Bancorp said Friday that CEO Brian Simpson is leaving the bank holding company he helped return to profitability.

Simpson, 51, has led the lender for three years. CommunityOne President Bob Reid, 58, is expected to take over as CEO.

Simpson became CEO when the holding company still went by the name FNB United Corp. and was headquartered in Asheboro.

FNB United changed its name to CommunityOne Bancorp last year after it completed the merger of its two banks, Granite Falls-based Bank of Granite and Asheboro-based CommunityOne Bank, as part of an effort to help it return to profitability.

CommunityOne Bancorp was the last lender based in the Charlotte area still part of the federal bailout of the financial system. U.S. taxpayers pumped $51.5 million into then-FNB United in the wake of the financial crisis.

The recent second quarter marked the fourth profitable quarter in a row for the lender, which has struggled to become profitable since the crisis.

Simpson's last day as CEO will be Sept. 30.

Gastonia becomes 100th location for BofA's new ATMs

A Bank of America branch in Gastonia will have the distinction of being the 100th site equipped with the Charlotte bank's new automated teller machines that allow customers to interact with a teller via a video screen.

The bank unveiled the new "Teller Assist" ATMs in April of last year. The machines work like typical ATMs but with added functions. For example, by pushing a button, customers can receive real-time assistance from tellers stationed in call centers in Delaware and Florida. 

Bank of America is installed the ATMs only in the U.S. at this time. So far, the machines are in 12 markets nationwide. 

On Wednesday, the Gastonia Main branch, at 355 S. New Hope Road, will become the 100th site to have the Teller Assist ATMs, spokeswoman Tara Burke said. Three of the machines will be installed there. 

For the Charlotte metro area, that will bring the number of sites with the Teller Assist ATMs to 10 and the number of the machines to 22. Burke said the bank plans to add at least seven more of the ATMs to the region by the end of the year.

Bank of America plans to reach another milestone at some point this weekend, when it is expecting the number of Teller Assist transactions to hit 1 million.

Chanticleer Holdings buys The Burger Co.

Charlotte-based Chanticleer Holdings said it has bought The Burger Co., a restaurant whose only location is in uptown, in a $550,000 deal.

The purchase, made of $250,000 in cash and the rest in Chanticleer stock, was finalized Wednesday, one day after the companies entered into a purchase agreement.

The Burger Co. is at 1500 W. Morehead St., just west of the Interstate 277 loop. Its owner is David Smith. According to the restaurant's website, it was established in 2009 and grinds its own beef in-house daily.

It's the latest restaurant to be bought by Chanticleer, an investment company that has made multiple acquisitions of other restaurants in the past year as it seeks to achieve profitability.

Chanticleer, whose business model was once based entirely on owning and operating Hooters outside the U.S., changed that focus last year as it began buying other restaurant brands. Chanticleer has said it plans to expand some of those brands into foreign markets.

The Burger Co. is not the first burger restaurant to be bought by Chanticleer. In October, it finalized its purchase of Charlotte-based American Roadside Burgers.

Chanticleer said Wednesday that it has domestic and international franchise plans for The Burger Co.

“This acquisition is an integral step in our strategic growth plan as we prepare to take the better-burger category into our international markets," Chanticleer CEO Mike Pruitt said in a statement.

BB&T to acquire Bank of Kentucky for $363M

BB&T Corp. said Monday it has signed an agreement to acquire The Bank of Kentucky for about $363 million in stock and cash.

Winston-Salem-based BB&T will enter the northern Kentucky and Cincinnati markets through the deal. BB&T already has branches in Kentucky but not in Ohio.

In announcing the deal, BB&T said it will create a new banking region that encompasses northern Kentucky and Cincinnati. The region becomes the 24th for the regional lender.

The deal, which is expected to close in the first half of next year, still needs approval from regulators and Bank of Kentucky shareholders.

Park Sterling launches 1st major branding campaign

Park Sterling Corp. is launching what it calls its first major branding campaign since the Charlotte-based lender was founded in 2006.

The holding company for Park Sterling Bank announced the campaign, "Answers You Can Bank On," on Monday.

The campaign comes as the largest community bank headquartered in Charlotte continues to expand by acquiring other banks and opening in new markets.

Four months ago, Park Sterling bought Rock Hill-based Provident Community Bancshares. Also this year, Park Sterling entered the Richmond, Va., market when it opened a loan-production office that it has converted into a full-service branch.

As it grows into a larger lender, Park Sterling is seeking to portray itself as still being able to provide the personalized service that smaller banks are known for.

On Monday, the lender said its branding campaign aims to build awareness for its "ongoing mission to provide customers with the kind of answers that can only be found when large bank resources are effectively combined with the high-touch, flexible and personalized service of a community bank."

The campaign, which includes radio and newspaper ads, is being debuted in the Charlotte metropolitan area and Greenville, S.C., markets.

BB&T buying more Texas branches from Citigroup

BB&T Corp. is again adding branches to its Texas footprint, announcing on Wednesday a deal to buy 41 branches in the state from Citibank.

The Winston-Salem lender said it has signed an agreement to acquire the branches in the Dallas, Houston, Midland and Odessa markets. Through the deal, BB&T will also acquire $2.3 billion in deposits and $87 million in loans.

Wednesday's announcement comes just three months after BB&T purchased nearly two dozen Texas branches from Citibank, the largest banking subsidiary of New York-based Citigroup.

It's the latest push by BB&T, the third-largest lender by deposits in the Charlotte region, to grow its presence in Texas, which it entered through its 2009 takeover of Colonial Bank after the Alabama bank failed.

Wednesday's deal boosts BB&T's branches in Texas to 123 and its deposits in the state to $5.3 billion. In a separate deal completed in June, BB&T acquired 21 Citibank branches in Texas.

Citigroup said Wednesday that its footprint of branches in Texas didn't provide the scale to capture future growth and market share in traditional retail banking.

"We see the retail banking industry rapidly evolving beyond a purely branch-based model, and so we will dedicate our resources and investments on a more focused branch footprint in our major urban markets and on expanding our digital channels nationally," spokesman Andrew Brent said in a statement.

Brent said Texas remains "a vibrant growth state" for Citi and is home to the lender's second-largest concentration of employees in the U.S.

He said the sale announced on Wednesday is expected to close in the first quarter of 2015.

In addition to traditional banking, BB&T has other operations in Texas, including services offered by its insurance brokerage and other subsidiaries. The latest Citibank deal brings BB&T's total employees in Texas to about 2,050.

During a presentation to investors in September, BB&T CEO Kelly King called Texas a “big, whopping opportunity for us.”

Plexus Capital names new managing partner

Plexus Capital said Tuesday that Michael Painter has been named the managing partner for the Charlotte investment company.

He replaces Bob Anders, who had served as managing partner since the firm was launched in 2005. Anders will remain a full-time partner and member of the privately held firm's investment committee.

Painter

Painter is one of five founding partners. The firm said his promotion was part of a transition strategy that was long-planned.

Under Anders’ leadership, Plexus invested $365 million, partnered with 61 small businesses and raised more than $550 million, the firm said.

Plexus has offices in Charlotte and Raleigh. It specializes in providing capital to middle-market businesses looking to grow.

The firm has $550 million currently under management.