Republicans question BofA settlement funding 'activist groups'

Republican lawmakers are questioning a requirement in recent U.S. Justice Department settlements with lenders, including Bank of America's $16.7 billion accord, that the banks donate money to housing counseling agencies, The Wall Street Journal reported Tuesday.

The Journal reports that the lawmakers want to know how the Justice Department determined that the banks, including Citigroup, be required to donate money to the housing counseling agencies approved by the Department of Housing and Urban Development.

Here's an excerpt from the story:

The groups are meant to help homeowners avoid foreclosure. But in a letter dated Tuesday and reviewed by The Wall Street Journal, Rep. Bob Goodlatte of Virginia and Rep. Jeb Hensarling of Texas describe some of the nonprofits, such as National Council of La Raza and NeighborWorks America, as left-wing “activist groups.”

In their letter, the lawmakers also point out that Bank of America and Citigroup get extra credit toward meeting their consumer-relief obligations when they donate to the housing groups: a $2 credit for every $1 donated. The banks get less credit for actions like forgiving mortgage principal for homeowners who owe more than their homes are worth.

“The settlements appear to serve as a vehicle for funding activist groups rather than as a means of securing relief for consumers actually harmed,” wrote Mr. Goodlatte, who is chairman of the House Judiciary Committee, and Mr. Hensarling, who is chairman of the House Financial Services Committee.

The Justice Department didn’t immediately have a comment, the Journal said.

The Journal also points out that the required donations are a relatively small part of the settlements.

Bank of America must donate at least $20 million to the housing-counseling agencies, out of $7 billion set aside for consumer relief in its settlement. Citigroup, which reached a $7 billion settlement this year, is required to donate at least $10 million, out of $2.5 billion set aside for consumer relief.

Wells Fargo plans to modify student loans for struggling borrowers

At a time when high student loan debt has made national headlines, Wells Fargo has announced a program to lower interest rates on eligible private student loans.

The program is designed to help people with a Wells Fargo private loan who are experiencing "financial hardship or distress," the San Francisco-based lender said in announcing the program this week. The lender said it will review borrowers' financial situations on a case-by-case basis to determine eligibility for a short- or long-term loan modification.

If a borrower is found to be eligible for a modification, Wells Fargo will lower their interest rate to make the loan payment affordable based on their income, the lender said.

The move comes as Wells Fargo has continued to offer student loans even as other lenders have backed away from them. Bank of America, for example, has gotten out of the business.

The modification program also comes as regulators have been scrutinizing the private-loan industry.

For example, earlier this year the Consumer Financial Protection Bureau released a report on complaints about the industry’s practice of placing borrowers in default even when their loans are current and in good standing.

Last month, the bureau's ombudsman said that while federal student loans have various loan modification options to help borrowers avoid default, "private student loan servicers and lenders may not make it easy for borrowers to get help in times of distress, which may have consequences for not only your financial future, but also for the broader economy."

Wells Fargo is not the only lender offering to modify student loans.

Discover, based in Riverwoods, Ill., this week announced it is also looking to introduce a repayment assistance plan for student loans next year. The details of that plan are still being determined, the company said.

Wells Fargo said people who have one of its private student loans and are experiencing financial hardship can go to https://www.wellsfargo.com/student/repay/ or call  (800) 378-5526 to learn about the options to repay.

BB&T CEO: Apple Pay should be subjected to regulations

BB&T CEO Kelly King is among bankers who have expressed concerns about new regulations banks have been subjected to since the financial crisis.

A few years ago, for example, he warned that the Dodd-Frank financial overhaul act will cause thousands of small banks to disappear.

But this week, King called for regulations — for Apple's new payments system, that is.

King said Apple Pay, which Apple unveiled in September, and others like it should be subject to the same regulations as the biggest U.S. banks to head off attacks by terrorists and computer hackers, according to a Bloomberg story on Friday.

Here's an excerpt from that story:

The possibility that a terrorist hacks into the financial system through a third-party payments company is a “greater threat” than if a similar attack were leveled against a community lender, King said yesterday in an interview. “We have to start raising awareness of this issue.”

Regulators should consider whether such firms qualify as systemically important financial institutions, King, 66, said at a panel discussion in New York at the Clearing House annual conference. Such a designation could lead to tighter capital, leverage and liquidity rules like those faced by banks. While King said he favors healthy free-market competition between banks and nonbanks, industry regulations make that impossible, he said.

“We are headed toward a socialist system,” he said, smiling and drawing laughs from the audience. “My hope is that going forward we will have a healthy shadow and regular banking system” all subject to a similar regulatory regime, he said. 

Speaking of the "shadow" banking system, King has talked about that before. For example, he's previously traced the financial crisis to the development of the shadow banking system over the past few decades.

Here's what he said about that in a 2011 interview with the Observer:

Q. A lot of people, though, suffered in the financial crisis and some would say banks didn't look out enough for customers. What would you say to that?

A. I would say there's some truth to that. There are some customers that have been abused, and I'm ashamed of that for the broad financial services industry.

I will say that the vast majority of that occurred in the shadow system, which was not part of what I would call the banking system. These independent brokers that were being paid big fees just to get that little old lady to sign the loan and then ship it off — that's a horrible system. And those people have a right to be mad and those people who perpetrated those injustices should be dealt with.

BB&T is among large banks that have signed on to ApplePay so that their customers can tie the payments system to their bank accounts.

In an October interview with Bloomberg TV, King said BB&T wanted to make ApplePay available to its customers. "We're very happy to be a part of it," he said in the interview.

BB&T is based in Winston-Salem. The regional lender is the third-largest bank by market share in the Charlotte metro area.

On an unrelated note, King, speaking at that same conference where he made the Apple Pay remarks, expressed concerns about the "incredible" risk U.S. banks are taking in corporate and commercial lending. Here's a link to a Reuters story on that.

BofA to get Supreme Court hearing on second mortgages

The U.S. Supreme Court has agreed to hear two cases in which Bank of America has questioned the practice of voiding second mortgages when homeowners file for bankruptcy protection.

At issue is allowing people in Chapter 7 bankruptcy to "strip off" second mortgages on an underwater home -- one for which the mortgage balance exceeds the home's current value. Courts have been divided over the practice.

This week, the Supreme Court agreed to hear two cases involving Florida homeowners with second mortgages held by the Charlotte bank. The bank has argued that the bankruptcy code does not permit the mortgages to be eliminated.

The hearing comes at a time when many homeowners remain underwater since the housing bubble burst.

In the third quarter of this year, 8.1 million U.S. residential properties were "seriously underwater," according to data firm RealtyTrac. That means the amount still owed on each of those properties is at least 25 percent more than their estimated market value.

Wells Fargo names former Wachovia exec to its board

Wells Fargo said Wednesday it has named to its board of directors a former member of the Federal Reserve’s Board of Governors and former Wachovia executive.

Elizabeth Duke will join the board of the San Francisco lender effective at the start of next year and also serve on the board's risk committee. The committee oversees, among other things, how Wells Fargo manages major risks it faces.

Duke was on the Fed's board from August 2008 to August 2013. She was an executive vice president for Wachovia from 2004 to 2005. Wells Fargo acquired the Charlotte-based lender three years later.

In a statement, Wells Fargo said Duke meets New York Stock Exchange standards for an independent director. Under those rules, a director can't be considered independent if they are currently an employee of the company on whose board they sit or have been an employee of that company in the past three years.

Wells Fargo said Duke never worked for Wells Fargo after she left Wachovia.

As a board member, Duke will be automatically be granted a stock award worth about $53,000 on Jan. 2, according to a securities filing.

Last year, total compensation for board members ranged from $114,262 for the lowest-paid member to $344,005 for the highest paid. Those figures include stock awards, among other things.

Duke's appointment increases the number of Wells Fargo board members to 15.

Wells Fargo is not the only big U.S. bank to have a former member of the Federal Reserve’s Board of Governors on its board. Bank of America board member Susan Bies served on the Fed's board from 2001 to 2007.

Staffing firm says banking biz growth created need for bigger offices

Staffing company Ascendo Resources has relocated its Charlotte operation to a larger office, a move the company says was largely driven by growth in its banking business.

The company has moved out of the SouthPark Towers office complex, where it has been since entering the Charlotte market last year, to the Rotunda Building, which is also in SouthPark. The Rotunda Building is at 4201 Congress St.

Although it's a move of only about 400 yards, it gives Ascendo more space. The company said it has gone from 500 square feet at SouthPark Towers to now 2,500 square feet in the Rotunda Building.

A ribbon-cutting for the new office was held last week.

The move follows Ascendo's addition earlier this year of a banking division to its Charlotte operation. The company said it added the banking division to meet rising demand for risk and compliance positions in Charlotte's financial sector.

Nationwide, demand for risk and compliance positions in banking has been growing, in large part because of new regulations created in the wake of the financial crisis.

Since entering the Charlotte market, Ascendo's overall Charlotte operation has grown to seven recruiters, Ascendo said. It says it plans to hire 13 additional people for its Charlotte operation over the next year to meet growing demand to place employees in a variety of industries. 

Here's an excerpt from the company's press release about the new office:

From its new location, Ascendo will focus on placing temporary and permanent candidates throughout several specialized industries. The company’s new office was specifically designed to fit its unique culture and is strategically located within the SouthPark business district of Charlotte, which is home to some of the city’s biggest companies including Coca-Cola and Wells Fargo. Ascendo is actively looking to grow and expand its staff and is looking to hire more sales associates with experience within its targeted industries.

“Charlotte’s strong business climate makes it one of most attractive places for both job seekers and major corporations, so we’re excited to have a more permanent location that reflects our corporate identity,” said Rick Ferretti, managing director and head of Ascendo’s Charlotte office. “Since we began our operations here, we have leveraged our strong industry knowledge to make many great connections for our clients while ensuring a seamless hiring process.”

Report: BofA tops in net branch closures

Bank of America posted the biggest net decline of U.S. branches of any lender during the third quarter, as banks nationwide continue to shed locations, according to a report released Friday.

The Charlotte-based bank posted a net decrease of 41 branches in the quarter, the report by data firm SNL Financial shows. The bank opened one branch in the quarter and closed 42.

To be sure, many of the banks that had large net declines in branches in the quarter are among the biggest lenders in the U.S. 

JPMorgan Chase & Co., the largest U.S. bank by assets, was in second place, with a net decrease of 31 branches (it opened 12). Regional lender SunTrust Banks was in third place, with a net decrease of 22 (it did not open any during the quarter).

Bank of America, like other lenders, has said it does not need as many branches, as more customers use mobile banking and other self-service banking options.

Branches are also expensive for banks to operate at a time when financial institutions nationwide are trying to cut costs. According to SNL, many lenders say branch closures also let them focus on core markets.

Over the past four quarters, Bank of America has posted 148 net branch closures, the report says. So far this year, the bank has completed the sale of 84 branches.

Bank of America, the second-largest U.S. bank by assets, has just under 5,000 branches now, about 700 fewer than at the end of the third quarter in 2011. The bank had 4,975 branches as of Nov. 5.

Bank of America's chief financial officer told investors last month that even as the bank trims branches, customer satisfaction scores continue to improve.

In the past year or so, Bank of America has also eliminated drive-up teller service at some of its branches across the U.S., including in the Charlotte region. The bank said too few people were using the lanes to justify continuing the service.

McColl to be inducted into Entrepreneur Hall of Fame

Former Bank of America CEO Hugh McColl Jr. will be inducted into Queens University of Charlotte's Carolinas Entrepreneur Hall of Fame during an event next week.

McColl helped build Charlotte-based Bank of America into a coast-to-coast banking giant. The Hall of Fame, though, honors people based on entrepreneurship. To that end, McColl's induction is based on the investment bank he launched and the private equity firm he co-founded -- both after leaving Bank of America.

O. Temple Sloan Jr., founder of General Parts International, and Craig Wall Sr. and Craig Wall Jr., both of Canal Industries, will also be inducted during the Nov. 20 event at Quail Hollow Club. The Walls are being honored posthumously.

Queen's business school, which bears McColl's name, founded the Hall of Fame in 2010.

McColl retired as Bank of America's chief executive in 2001. He later launched an investment bank called McColl Partners and co-founded the private equity firm Falfurrias Capital Partners.

BB&T to acquire Pennsylvania bank for $2.5B

BB&T Corp. said Wednesday it is acquiring Pennsylvania's Susquehanna Bancshares, a move that increases the regional lender's footprint in the mid-Atlantic region.

Winston-Salem-based BB&T said the cash-and-stock deal is worth approximately $2.5 billion. It still needs approval from regulators and Susquehanna shareholders.

The deal also marks BB&T's second acquisition of another lender in as many months. It's the latest example of growth for BB&T, which earlier this year entered into agreements to buy branches in Texas from Citibank.

It would be one of the largest acquisitions in the banking industry since the financial crisis. According to data company SNL Financial, it ranks as the sixth-largest whole bank deal since 2009 and the second-largest since 2013.

BB&T said the purchase of the Lititz, Pa., lender will result in the formation of three new banking regions in Pennsylvania and New Jersey, two states in which the bank currently does not have operations.

BB&T said Susquehanna has $18.6 billion in assets, $13.6 billion in deposits and 245 branches in Pennsylvania, Maryland, New Jersey and West Virginia. BB&T currently has about $187 billion in assets.

For some lenders, mergers and acquisitions are an attractive concept. Such growth can, among other things, allow them to spread out regulatory costs that have been rising since the financial crisis.

In an interview with the Observer in September, BB&T CEO Kelly King said regulations put into effect since the crisis, such as those under the Dodd-Frank Act, have slowed bank mergers and acquisitions. But now “sellers are ready to talk,” he said.

The deal is also expected to increase BB&T's costs at a time the lender is trying to lower them.

Its expenses in the third quarter were higher than some analysts expected. BB&T reported $1.6 billion in non-interest expenses, up by $85 million from a year ago. The lender attributed the increase largely to the early elimination of debt.

BB&T cut its headcount companywide by 800 in the third quarter, including an undisclosed figure in Charlotte, as part of an effort to cut expenses.

BB&T said it expects the Susquehanna purchase to result in roughly $250 million in pre-tax merger and integration costs. But BB&T also said it expects to see annual cost savings of about $160 million from the acquisition.

The purchase comes just two months after BB&T Corp. announced a deal to acquire The Bank of Kentucky for about $363 million in stock and cash. That deal marked BB&T’s first acquisition of another lender since it acquired Florida’s BankAtlantic in 2012.

Wednesday's deal also comes after BB&T in September announced plans to buy 41 branches in Texas from Citibank. That announcement came three months after BB&T purchased nearly two dozen Texas branches from Citibank.

BB&T employs roughly 1,900 people in the Charlotte area across various business lines.

It is the third-largest lender by market share in the Charlotte metropolitan area.

Report: Affluent investors prefer BofA, Wells Fargo

Bank of America and Wells Fargo are the most popular primary banks among affluent investors, a new report shows.

According to the annual survey by Spectrem Group, a combined 32 percent of investors with a net worth between $5 million and $25 million prefer Charlotte-based Bank of America and San Francisco-based Wells Fargo over other financial institutions.

New York-based JPMorgan Chase & Co. came in third place, with 11 percent of affluent investors preferring it as their primary bank.

The findings are surely good news for Bank of America CEO Brian Moynihan and Wells Fargo CEO John Stumpf. That's because both banks have been targeting "mass affluent" customers, pushing to sell more products and services at a time when revenue growth for the banking industry overall remains weak.

For example, Bank of America this summer announced a new rewards program as part of Moynihan’s strategy to expand the bank’s relationship with its roughly 8 million mass-affluent customers, meaning those with $50,000 to $250,00 in assets. Bank of America has also been adding employees in its branches to work with such customers, which the bank refers to as its “preferred banking” clients.

Wells Fargo's efforts to increase its business with the mass affluent include a new credit card that offers rewards to world travelers. The bank unveiled the Propel World credit card in May. It is accepted on the American Express network.

According to the Spectrem Group report, the wealthiest of wealthy investors are more likely to pick name-brand institutions for their primary banking services: Among investors with a net worth of $15 million to $25 million, 20 percent use Wells Fargo; 17 percent, Bank of America; 12 percent JPMorgan; and 7 percent, Citibank.

Some other noteworthy findings from the report:

• The youngest affluent investors prefer Wells Fargo as their primary bank. Of investors under the age of 48, 20 percent chose Wells. 
• Older affluent investors gravitate to Bank of America. Of investors over 64, 18 percent chose the lender. Of affluent investors between the ages of 48 and 54, JP Morgan and PNC Financial Services group each had 15 percent.
• Wells Fargo was not as popular among affluent investors as it was in the 2013 report, when 20 percent chose it as their primary bank.
• But Bank of America grew in popularity from the 2013 report, when 14 percent of investors chose it as their primary bank.

Bankers hope Republicans provide regulation relief

Now that Republicans have seized control of Congress, bankers are hoping they might see a loosening of regulations created in the wake of the 2008 financial crisis.

That's certainly the case among some bankers in North Carolina.

This week, I spoke to banking industry officials who told me an easing of regulations ranks high on their wishlist for the new, Republican-controlled Congress.

Among other things, the banking industry is hoping Republicans take aim at the Consumer Financial Protection Bureau, a federal agency created by Congress after the crisis to strengthen protections for consumers.

Thad Woodard, CEO of the North Carolina Bankers Association, said he would like to see more oversight of the bureau.

That's not all that surprising. After all, the banking industry has sought to limit power of the bureau, which has rule-making authority. (One of the bureau's new regulations, which requires mortgage lenders to ensure a borrower can repay the loan, took effect in January.)

Woodard said Democrats have allowed the bureau to function "unencumbered."

“Its lack of oversight and its budgetary process have been of great concern to banks," Woodard said.

Woodard said he is also concerned about "duplicative" post-crisis regulations, which he said are increasing compliance costs for banks and making them less profitable. Regulations, he said, are "sitting like a heavy weight on the banks and inhibiting their ability to do business."

That doesn't mean banks should not be regulated at all, he said.

“Never should the industry not be overseen for the safety of the public and the soundness of the institution," he said.

(You can read more of what Woodard told me here.)

To be sure, banks have seen an increase in regulations since the crisis, the worst economic downturn since the Great Depression. And more regulations are to come: Many of the rules mandated by the Dodd-Frank Act, passed in July in response to the crisis, still have not been written.

What do all those post-crisis regulations cost banks?

Jim Engel, CEO of Cornelius-based Aquesta Bank, told me his bank spends about $200,000 a year to comply with the additional regulations. To put that in perspective, the six-branch, community bank made $1.47 million in profit last year.

Engel said costs to comply with regulations limit the return banks can provide investors, which hurts banks' ability to raise capital and expand.

Any banker hoping for easing of Dodd-Frank regulations in the near future might be in for disappointment, according to Mark Vitner, senior economist for Wells Fargo Securities.

"Reforming Dodd-Frank would really use up a lot of political capital, and it’s just too complex to do” before the next presidential election, he said.

(For more on Vitner's thoughts on the new Congress, click here.)

Engel said regulations are just one issue banks are dealing with. The best thing Congress could do for community banks is pick up the pace of the economic recovery, he said.

Community banks in rural areas are especially struggling from low loan growth, he said. And when banks do make loans, they are at lower rates than in the past, which is hurting their net interest margins, he said.

“No. 1 on most community banks' wishlist is for a continuing improving economy," he said.