Final Post

I do work for the company I have been blogging about, and they have been good to me. US Bank has paid for the majority of my education. I have a job that I love, which continually challenges me, and provides a great deal of flexibility for my family and myself.

Had I invested $100 at the beginning of the semester, and I were to sell today, I would have earned about $4. Considering what has been happening in the financial industry and the economy lately, just the fact that the stock price has stayed strong, even increased, is pretty amazing.

US Bank plans to sell newly acquired branches

According to a recent U.S. Bank press release:


U.S. National Association announced Tuesday, November 25, 2009, that it was seeking buyers for the three Texas banks, Citizens National Bank of Teague, Madisonville State Bank of Madisonville, and North Houston Bank of Houston, acquired from the FDIC October 30, 2009. The three banks were a part of the acquisition of the banking subsidiaries of FBOP Corporation of Oak Park, Illinois. These three banks were acquired along with six other banks in California, Illinois, ans Arizona, which will remain a part of U.S. Bank. After these three banks are sold, US Bank will have no retail locations in Texas. The sales are expected to be completed early in the second quarter of 2010.

US Bank Stock Price

Stock Quote

USB (Common Stock)
Price 24.33 Change + 0.20
Volume 9,626,910 % Change 0.83%
Intraday High 24.44 52 Week High 29.90
Intraday Low 23.86 52 Week Low 8.06
Today's Open 24.26 Currency US Dollar
Previous Close 24.13 Exchange NYSE

12/01/09 2:28 p.m. ET Pricing delayed 20 minutes

Cyber Crooks and U.S. Businesses

According to Brian Krebs with The Washington Post,

The FBI reports that cyber criminals have stolen over $40 million from U.S. small and mid-size firms since 2004, with the majority of them happening since the end of 2008.

The bad guys steal the victim's online banking credentials using malicious software distributed through spam. The crooks then make unauthorized money transfers, just under the banking reporting limits. The money is put into the account of a "money mule". A money mule is a willing or unwilling individual recruited over the Internet, usually through work-at-home job scams. The mules are instructed to pull the money out of their account and wire it to the bad guys, typically via Western Union or MoneyGram. These criminal groups operate in counties like Moldova, Russia, and / or the Ukraine.

Businesses that bank on-line are not covered by the same protections as consumers who bank on-line. Typically, when a consumer is defrauded, the bank will make them hole. Businesses bear more responsibility / liability.

The full article may be viewed at:

http://voices.washingtonpost.com/securityfix/2009/10/fbi_cyber_gangs_stole_40mi.html

CIT Bankruptcy

Based on an article in The Times,

CIT group is a leading lender to small businesses. CIT filed for chapter 11 bankruptcy Nov. 1, 2009.

CIT is a 101 year old company. They were given $2.3 billion, yes BILLION, in bail out money from the government. CIT group asked for more, but the Obama administration turned them down.

Preferred shareholders, including the US Treasury, which received preference shares in return for the TARP money, will be repaid only if there is money left over after paying the bondholders. Ordinary share holders will be automatically wiped out.

Link to the complete article at:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6898854.ece

US Bank Stock Quote

USB (Common Stock)
Price 23.38 Change - 0.1
Volume 17,994,756 % Change 0.43%
Intraday High 23.89 52 Week High 29.90
Intraday Low 23.18 52 Week Low 8.06
Today's Open 23.78 Currency US Dollar
Previous Close 23.48 Exchange NYSE

11/16/09 4:01 p.m. ET Pricing delayed 20 minutes

ABA's Ten Tips to Spot Borrower Trouble

An interesting article was recently published by the American Banking Association (ABA), discusses the transparency of the BORROWER, providing ten tips to help a LENDER spot trouble.

(1) Failure to confront changed circumstances.
(2) Just listen.
(3) Observe "local business indicators."
(4) Mind the deposits.
(5) Look for any change in overdraft behaviors.
(6) Watch for late financial statements.
(7) Spend more time out of the bank and in the customers' places of business.
(8) Try to see the world as the customer sees it.
(9) Get your ducks in a row.
(10) Be mentally prepared for the worst.

See the entire article at:
http://www.ababj.com/blog/311.html

New FDIC rule

NEW FDIC RULE MAY QUICKEN THE DEMISE OF WEAK BANKS
Beginning Jan. 1, 2010, banks the FDIC regards as short of "well capitalized" will not be allowed to pay more than 75 basis points above the U.S. average rate for deposits, a new hurdle that could hinder their ability to compete for customers and threaten their liquidity and a development that industry observers say could lead to a sudden rise in failures early next year.
Referenced Tickers: MBR APAB
11/10/2009 3:51 PM ET

FDIC scam alert

The FDIC put out an alert October 27, 2009 about a rescent email scam. Bogus e-mails fradulently claiming to be from the FDIC are attempting to trick recipients into installing unknown software on their personal computers. The email does not ask the recipient to input any account numbers or specific information, but these eamils falsely indicate that recipients should download and open a "personal FDIC insurance file" to check their deposit insurance coverage. The "insurance file" appears to be a form of spyware intended to collect personal, confidential information as the user later logs into their actual banking web site, or enters credit card numbers for web purchases, etc.

Information about counterfeit items, cyber-fraud incidents and other fraudulent activity should be sent to:

FDIC's Cyber-Fraud and Financial Crimes Section
550 17th Street, N.W., Room F-3054
Washington, D.C. 20429

or transmitted electronically to alert@fdic.gov

The full article may be accessed at:
http://www.fdic.gov/news/news/SpecialAlert/2009/sa09183.html

Peer bank downgraded

This morning S&P downgraded the long term rating of Regions' parent company one notch to BBB from BBB+. Regions' long term rating at the bank level was also downgraded one notch to BBB+ from A-. Both the parent company and bank were placed on negative outlook.

US Bank acquires FBOP Corporation subsidiaries

October 30, 2009 US Bank announced they had acquired the banking subsidiaries of FBOP Corporation of Oak Park, Illinois, from the FDIC. This transaction includes nine different banks with more than $18 billions in total assets and 150 branches in California, Illinois, Arizona and Texas. The nine banks that are part of this acquisition are: BankUSA, N.A.; California National Bank; Citizens National Bank; Madisonville State Bank; North Houston Bank; Pacific National Bank; Park National Bank; San Diego National Bank; and Community Bank of Lemont.

U.S. Bank will receive approximately $18.4 billion of assets and assume approximately $18.3 billion of liabilities, including $15.4 billion of both insured and uninsured deposits, of the nine different banks that are part of FBOP.

The nine banks involved in this transaction will continue to operate under their current names and will be re-branded as U.S. Bank branches in the near future.

Prior to this announcement, U.S. Bank had 570 branch offices in California, 75 branch offices in Arizona and 127 branch offices in Illinois. U.S. Bank currently does not have a retail banking presence in Texas.

US Bank Stock Price

It will be interesting to see what happens to the stock price this week, with CIT declaring bankruptcy yesterday. US Bank also announced its acquisition of 9 banks through an FDIC facilitated transaction. More details on both to follow.

Stock Quote

USB (Common Stock)
Price 23.75 Change + 0.53
Volume 244,494 % Change 2.28%
Intraday High 23.77 52 Week High 32.35
Intraday Low 23.55 52 Week Low 8.06
Today's Open 23.55 Currency US Dollar
Previous Close 23.22 Exchange NYSE

11/02/09 9:30 a.m. ET Pricing delayed 20 minutes

Government Bail Out and Salary Cuts

The Obama Administration has appointed Kenneth R. Feinberg to review and reduce the salary of the executives for the following 7 companies: Citigroup, Bank of America, General Motors, Chrysler, GMAC, Chrysler Financial, and American International Group. These 7 companies have received a total of approximately $250 in bail out funds from the Troubled Assets Relief Program (TARP).

Feinberg’s official title is Special Master on Compensation, bestowed upon him be the Obama administration. Feinberg has sole discretion to set compensation for the five top senior executives plus the next 20 highest-paid people at each of the seven companies.

Feinberg’s plan will reduce cash salaries of the executives at these companies by an average of 90%. Other reductions will include eliminating the use of corporate jets for personal travel, chauffeured drivers, and payment of country club memberships.

The official announcement of these cuts is supposed to be announced by The Treasury Department on Thursday, October 29, 2009.

Resources:

Murakami, Tomoeh and Dennis, Brady. U.S. to cut pay for bailed-out bosses. The Washington Post. 22 Oct. 2009. Viewed 27 Oct. 2009. http://www.washingtonpost.com/wpdyn/content/article/2009/10/21/AR2009102102719.html

US Bank Stock Quote

Stock Quote

USB (Common Stock)
Price 24.25 Change + 0.10
Volume 15,095,698 % Change 0.41%
Intraday High 24.35 52 Week High 32.35
Intraday Low 23.92 52 Week Low 8.06
Today's Open 24.30 Currency US Dollar
Previous Close 24.15 Exchange NYSE

10/27/09 4:00 p.m. ET Pricing delayed 20 minutes

U.S. Bank & H1N1

I feel as though I am working in a hospital, with all the hand sanitizers outside every bathroom door, behind the teller line, even randomly along the hallway.

U.S. Bank has a dedicated intranet site, where H1N1 information is posted, and related questions are answered. Many “staying well” tips are posted on the site, most of which I am sure you have heard on the local news, i.e. wash your hands frequently, cough or sneeze into your elbow, not your hand, and STAY AT HOME IF YOU ARE SICK. If you are a cash handler, you are to wash / sanitize your hands hourly, at a minimum.

We have had meetings with management to review contingency plans, the mechanics of how to work from home, with your home computer, and plans for staff shortages.

The bank is also having a flu clinic, providing free flu vaccines for employees, Oct 22, 2009. At this point, I have not been able to determine if these vaccines are for the seasonal flu, H1N1, or both. Given the limited availability of the H1N1 vaccines, I would anticipate the vaccines are for the seasonal flu strand. In years past, there has barely been enough participation in the flu clinics to have the clinic. This year, the organizers had to add additional time slots to the schedule.

If employees are absent due to the H1N1 flu, they must take sick time. As would be the case with any illness. If an employee has no sick time left, unpaid time off may be taken.

Stock Price

Price 23.41 Change - 0.6
Volume 13,848,655 % Change 2.50%
Intraday High 23.59 52 Week High 32.35
Intraday Low 23.23 52 Week Low 8.06
Today's Open 23.53 Currency US Dollar
Previous Close 24.01 Exchange NYSE

10/16/09 4:03 p.m. ET Pricing delayed 20 minutes

U.S. Bank / vertical integration

U.S. Bank is much more vertically integrated than smaller financial institutions. I would suspect most large financial institutions are in similar positions.

Over the 14 years I have been at the bank, we have gone from a locally owned financial institution to the 6th largest bank in the U.S. Through these mergers, I have seen the bank’s processes become more and more vertically integrated.

When we were Citizens Bank and Trust, our computer system was outsourced through Computer Services Industries (CSI), here in Paducah. As a small town bank, many divisions including the credit card sector, merchant processing group, and our investment / brokerage division, were outsourced through other companies. Employees for those companies would work inside the bank, service Citizen’s Bank customers, but they truly worked for another company. All of these processes are now in house.

Some functions are still outsourced. An outside company does our shredding, and various companies service our armored car needs. Both of these areas of business have significant, and expensive, insurance and security requirements. Someday these processes may be brought in house, but for now, they are still vendor serviced.

U.S. Bank competitive strategy

Our text describes a best-cost provider strategy as a strategy representing an attractive combination of price, features, quality, service, and other appealing attributes.

This tactic best describes US Bank’s competitive strategy - US Bank attempts to provide customers with more value for the money. One of the main ways in which US Bank attempts to provide increased value is through superior customer service, incorporated in everything from our core values, detailed in an earlier post, to our five quality customer service steps. In every teller class I teach, I always emphasize how people can get the same basic banking products from a variety of financial institutions, but what differentiates US Bank from competitors is them, the employee, and the service they provide our customers.

The text also states “the target market for best-cost provider is value-conscious buyers – buyers who are looking for appealing extras at an appealing low price.”

US Bank offers appealing extras like internet banking, mobile banking, and internet bill pay at no additional costs. US Bank caters to an expanding Hispanic market by offering bi-lingual brochures, disclosures, and often, bi-lingual employees. Other extras include cash back on certain debit and credit card purchases, discounted loan rates and increased earnings rates, based on a customer’s total relationship with the bank.

The company’s culture is not completely focused on price and price alone. Granted, price is a consideration, but it is not the only consideration, nor would I want it to be, when dealing with my current financial status or financial future.

Stock Price

USB (Common Stock)
Price 21.11 Change - 0.75
Volume 22,432,664 % Change 3.43%
Intraday High 21.85 52 Week High 37.31
Intraday Low 21.11 52 Week Low 8.06
Today's Open 21.75 Currency US Dollar
Previous Close 21.86 Exchange NYSE

10/01/09 4:02 p.m. ET Pricing delayed 20 minutes

Banks Respond

In an effort to get out in front of the overdraft legislation discussed in my last blog, several banks have announced new overdraft policies. Banks may be trying to comply with most of the proposed overdraft legislation to keep this area from being governmentally regulated.

Beginning today, October 1, 2009, Bank of America will not charge their customer’s any overdraft fees if the customer’s account is overdrawn less than $10 for one day. The bank will continue to charge a $35 fee if the account is not brought into the positive within five days. Customers will be allowed to opt out of the overdraft program. BofA will charge their customer’s a maximum of four overdraft fees per day. Interestingly enough, BofA had just increased the maximum overdraft fees charged to customers’ accounts from 5 to 10 earlier this year.

Effective first quarter of 2010, JPMorgan Chase will make customers opt-in if they desire overdraft protection. JPMorgan Chase will not charge customers a fee if they are overdrawn $5 or less, and the maximum overdrafts fees charged per day will be decreased from the current cap of 6 to 3.

Effective first quarter of 2010, US Bank will not charge customers any overdraft fees if they are overdrawn $10 or less. Overdraft fees will be limited to 3 a day. New customers will choose to opt-in or opt-out of overdraft privileges. Existing customers will continue to be able to opt-out of overdraft privileges. US Bank will also establish an annual cap on the amount of overdraft fees that can be charged on any single account.

References:

Dale, Steve. “US Bank Restructures Overdraft Policies and Fees.” 24 Sept. 2009. News Release received via internal email.

Woelfel, Joseph. “BofA, JPMorgan to Limit Overdraft Fees,” The New York Times, 23 Sept. 2009.

Overdraft Fee Limitations / Proposed Banking Legislation

Currently, banks legally must offer customers the option to opt out of over draft programs. So, upon customer request, the bank must code a customer’s account, not paying items when the customer does not have efficient funds to cover items attempting to come through. The problem is the average customer does not know this is even an option. They don’t know to ask to opt out of overdraft programs.

Senate Banking Committee Chairman Chris Dodd is drafting a bill to limit or regulate the overdraft programs at financial institutions. Among other things, the bill would require financial institutions to get the consent of the customer to overdraft services before the bank could charge overdraft fees.

In the House, Rep. Carolyn Maloney has been working on a similar bill, called The Maloney bill. This bill would require banks to give consumers notice and a chance to cancel a transaction at the point of sale or at an ATM machine when the transaction would trigger an overdraft fee.

Both bills are looking at prohibiting banks from manipulating payment priority of items. Many banks pay the largest to smallest items, stating that the larger items are more important items, like a house payment or a car payment. Critics claim that this is just ploy to maximize the collection of fees since the consumer might have multiple smaller checks that clear the same day. If the first transaction overdraws the account, each subsequent charge will incur a fee.

Dodd’s bill is being supported by Sen. Charles Schumer, D-N.Y., the No. 3 Democrat in the Senate. Schumer stated that overdraft fees should be proportional to the amount of the overdraft.

From the financial industry perspective, it is difficult to make money in “straight banking” and must be supported by fee based products. Although I am not sure how true this is, I do know that the spread between what we charge on loans and what we pay for deposits has continued to shrink every year I have been in banking.


References:

Kaper, Stacy. “Dodd Preps Bill to Limit Fees on Overdrafts.” American Banker. 18 Sept. 2009. Viewed 27 Sept. 2009. http://www.prosperityagenda.us/node/1877.

US Bank's Mission Statement:

"We Put the Power of US to Work for You!"

US Bank Stock Quote

USB (Common Stock)
Price 22.82 Change + 0.65
Volume 17,747,803 % Change 2.93%
Intraday High 22.86 52 Week High 42.23
Intraday Low 21.99 52 Week Low 8.06
Today's Open 22.24 Currency US Dollar
Previous Close 22.17 Exchange NYSE

09/16/09 4:00 p.m. ET Pricing delayed 20 minute

US Bank's Core Values:

*Take Ownership

*Make it Personal

*Add Value to Every Interaction

*Make Customer Courtesy Common

*Share You Knowledge

*Hire the Right People

The World of Banking - Never a Boring Day!

Bank of America (BofA) entered into an agreement to purchase Merrill Lynch about a year ago. Merrill, with the knowledge of Bank of America executives, paid Merrill employees $3.6 billion in bonuses just before the deal closed on Jan. 1, 2009. When attempting to buy Merrill Lynch, BofA told shareholders that Merrill would not pay year end bonuses without BofA’s consent. What BofA did not share with their shareholders, at least according to The Securities and Exchange Commission (SEC), is that BofA had already authorized Merrill to pay up to $5.8 billion in year end bonuses.

Merrill lost $27.6 billion last year, which obviously impacted the earnings at BofA, not to mention that Bank of America was one of the largest recipients of government bail out money aka TARP funds. This type behavior is infuriating. So many of us in the banking industry are taking the heat, taking pay cuts, or losing our jobs, because of this type dishonest, immoral activity.

The SEC and BofA had reached a settlement agreement of $33 million dollars. Federal judge Jed Rakoff gave this proposed settlement a big no go today, Sept. 14, 2009. Rakoff said this settlement was unacceptable. It allowed the SEC to act as if they had exposed the bad guys, BofA, and allowed BofA to act as if they had been “coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth." Rakoff also wants the SEC to explain why they are not attempting to press charges against BofA executives. Good for Rakoff! This is unchartered water in the legal arena, but I am so glad that this judge is calling bullshit – it is about time.

In a separate court proceeding, New York Attorney General Andrew Cuomo's office is preparing to file charges against these BofA executives, as they failed to provide full disclosure in their purchase of Merrill Lynch.

These executives should be held accountable. It would appear they could certainly use any “reform” prison can offer.

References:

Bernard, Stephen. “Judge Overturns Bank of America-SEC Settlement of Merrill
Bonuses.” The Huffington Post. 14 Sept. 2009. Viewed 14 Sept. 2009. http://www.huffingtonpost.com/2009/09/14/judge-overturns-bank-of-a_n_285947.html.

Mobile Banking

A few weeks ago, as I was listening to NPR, I heard about a new iPhone application that would allow you to take a digital photo of a check, send it to your bank from your cell phone, and get the check deposited into your account.

My first thought was of the huge fraud potential of this iPhone application. Preventing, reducing, and recovering fraud losses are a significant part of my job, and this news made me more than a little nervous. So, I decided to investigate.

According to a New York Times article written by Susan Stellin, published August 10, 2009, the only bank currently offering this iPhone application is USAA, which is a privately held bank and insurance company. For the past three years, USAA has allowed their customers to deposit checks from home using a scanner. One reason USAA has such success with these scan and email type products is due to their clientele, comprised of mostly military personnel. A customer must pre-qualify to use the eProducts discussed above by satisfying eligibility requirements for credit approval and having some type of insurance through USAA.

US Bank does have a similar version of mobile banking that can be downloaded to a smart phone or an iPod, called Mobile Wallet. Mobile banking is typically used to check account balances, transfer money, make payments, and locating ATMs. All of these functions are available through US Bank's Mobile Wallet. A customer may also sign up to get alerts, or text messages, when their electronic statement is available, when their balance gets low, or when a payment is due. Mobile Wallet is not limited to Apple's iPhone; it is available for a variety of mobile carriers and phones including Blackberries, with additional allowable mobile devices being added each week. According to the US Bank web site, eventually, more than 100 mobile phones will be supported. A customer must sign up and download the application from the US Bank web site to their phone.

Regions v/s US Bank stock trends

After reading Richard Webb's blog on Regions bank, where he reviewed the bank's decline in stock price over the last two years, I was curious to compare the same trend at US Bank.

Richard's blog states the following stock information:

8-29-07 stock closed at $31.44
8-29-08 stock closed at $9.27
8-28-09 stock closed at $5.97

Regions' stock price has declined 81% over the last two years.

US Bank closing stock price:

9-3-09 stock closed at $20.95
9-3-08 stock closed at $32.95
8-31-07 stock closed at $32.35

These figures, taken from the US Bank web site, represent a 35% decline in stock price over the same two year period. Given the issues that have taken place in our economy, and in the banking industry in particular, I was glad to see such a comparatively small decline in value.

US Bancorp

US Bancorp is the parent company of US Bank, with 2,850 branches, 5,173 ATMs, and $266 billion in assets. US Bank is the 6th largest commercial bank in the United States, located in 24 states.

US Bancorp common stock opened today, 8/31/09, at $22.05 per share, closing at $22.62 per share.

US Bancorp has 13 members on their board of directors, including 2 females and 2 African American gentleman. Richard K. Davis serves as Chairman, President, and C.E.O. I was pleased to discover the diversity among our board of directors.

Information courtesy of http://www.usbank.com/