Banks and Lenders Buying Each Other & Financial Services Companies - Does it Make Sense?
For LOs who feel "enough is
enough" with regard to the proposed Pre-Licensure Education Expiration Policy on education, timelines, and requirements, here is your chance to comment through NMLS.
in California the Bank of Marin ($1.8 billion in assets) said it will
discontinue the mortgage brokerage operation it acquired from Bank of
Alameda (CA), after determining the activity was too commodity-based to make a reasonable return. It
is certainly hard to earn the small revenues that a commodity business
generates if a company is trying to offer a specialized product!
But folks are trying different combinations. KeyBank ($88B, OH) will
acquire investment bank and capital markets firm Pacific Crest
Securities. Guaranty Bank and Trust Co. ($2B, CO) will acquire Cherry
Hills Investment Advisors for an undisclosed sum. Cherry boosts
opportunity for the bank in the investment advisory business. Boston
Private Bank & Trust Co. ($6.5B, MA) will acquire wealth management
firm Banyan Partners LLC for about $60mm in cash and stock. Banyan has
$4.3B of client assets under management. Boston plans to create a new
subsidiary that will combine its existing wealth management business
with Banyan's business.
The FDIC tells us that of the 6,730 FDIC-insured banks nationwide, the 22 largest hold 62% of the $12.75 trillion of assets controlled by all domestic commercial banks and savings institutions as of 3/31/14. Each
of the 22 banks has at least $100 billion of assets. And the big are
becoming bigger: every week there are fewer banks as they seek to
increase efficiencies, lower costs, and expand geographically through
joining forces with others. Announcements during the last week include
(in Texas) First Bank & Trust Co. ($624mm) acquiring Texas Savings
Bank ($78mm) and Vantage Bank Texas ($328mm) will acquire D'Hanis State
Bank ($47mm). Yesterday Columbia Banking System, Inc. and Intermountain
Community Bancorp jointly announced a merger - the combined company will have approximately $8.2 billion in assets with over 150 branches throughout Washington, Oregon and Idaho.
Indiana First Merchants Bank ($5.4 billion) will acquire Community Bank
($272mm) for $46mm in cash and stock. Nearby in Iowa First Security
Bank and Trust Co. ($464mm) will acquire Hampton State Bank ($74mm).
Michigan's mBank ($579mm) will acquire The Peninsula Bank of Ishpeming
($131mm) for $13.3mm in cash and stock. Up in Massachusetts Cape Ann
Savings Bank (468mm) will acquire Granite Savings Bank ($70mm).
to Ohio (home of Akron, rubber capital of the world), the Vinton County
National Bank ($766mm) will acquire The Citizens Bank of Ashville
($105mm) for about $12.2mm in cash or 1.4x tangible book. Farmers Bank
& Trust Co. ($840mm, AR) will acquire 1st
Bank ($309mm, TX). In nearby Louisiana Catahoula - LaSalle Bank
($121mm) will acquire Bank of Jena ($72mm). Last but not least, out in
California Bank of the Sierra ($1.5B) will acquire Santa Clara Valley
Bank ($127mm) for $15.3mm in cash.
First Mountain Bank ($137mm, CA) and First National Bank of Southern
California ($177mm, CA) have terminated their previously announced
merger after the OCC would not approve the sale under the agreement's
legal terms and conditions. First Interstate Bank ($7.6B, MT) will close
eight branches following its acquisition of Mountain West Bank ($634mm,
MT) due to close proximity to existing branches. And Florida's Landmark
Bank ($279mm) will close one branch it recently acquired from its
takeover of failed Valley Bank (there are valleys in Florida?). And last
Friday Eastside Commercial Bank, Conyers, Georgia, was closed and
business transferred to Community & Southern Bank of Atlanta,
an owner of a midsize independent mortgage banking company, what is the
feasibility of negotiating an economically attractive sale of your
enterprise under current market conditions? Jeff
Babcock (STRATMOR Group) addressed this topic at the recent Western
States Secondary Marketing Conference. (STRATMOR is an active player in
the M&A space, specializing in transactions within the midsize
market sector.) Citing the current STRATMOR transaction pipeline as the
source of his observations, Babcock reported that, "There is very strong
investor demand for well-managed retail origination platforms. These
buyers are motivated to acquire (rather than to build through recruiting
which can be slow, expensive and risky) to achieve their ambitious
scale objectives. Today's mortgage company buyers are generally larger
independents and regional bank-owned
lenders who offer a qualified seller strategically attractive and
impactful acquisition synergies. While there remain some private equity
investors exploring for opportunities, STRATMOR has found that existing
lenders can justify better values, bring cultural compatibility and
offer more synergies."
note continued. "By 'qualified sellers,' we mean retail lenders with a
high purchase share for 2014 YTD, sustainable earnings track record in
2012-2014 YTD span and a solid reputation with counterparties and
prospective sellers may find that they have greater enterprise value by
merging than continuing to struggle for market share as an independent.
Every deal in the STRATMOR transaction pipeline involves a substantial
premium value to be paid to the seller. STRATMOR's marketplace
experience confirms that it's a misconception that all deals today
involve necessitous mortgage company sellers who command no premium
What have the states been up to lately?
Florida recently enacted provisions regarding consumer collection practices in House Bill 413. Under HB 413, "a
person may not engage in business in Florida as a consumer collection
agency without first registering in accordance with the law, and
thereafter maintaining a valid registration."
Further, the Financial Services Commission may adopt rules requiring
electronic submission of forms, documents and required fees as well as
establish time periods during which a consumer collection agency is
barred from registration due to prior criminal convictions of, or guilty
or no contest pleas by, an applicant's control persons, regardless of
Hawaii recently amended several provisions of the Secure and Fair Enforcement for Mortgage Licensing Act in Senate Bill No. 2817. The bill clarified definitions such as "elder," "sole proprietorship", and became effective on July 1, 2014.
is going on in Utah? Recently FINCEN, that would be the Financial
Crimes Enforcement Network by the way, published the first issue of SAR Stats (SAR
= Suspicious Activity Report). The release examines only data contained
on the more than 1 million unique FinCEN SAR's with filing dates
between March 1, 2012 and December 31, 2013. The adoption of the new
unified SAR form and the implementation of e-Filing enable the financial
industry to report suspicious activity more swiftly and with more
specificity. The changes also mean the data presented in this issue are a
new baseline for financial sector reporting on suspicious activity. The
overall 1.4 million data points retrieved for this report are organized
and presented by industry. So what exactly is going on in Utah? Well
according to SAR Stats, the state ranks first in 'Filings Ranked by U.S.
States for "Other" Financial Institutions' (between May 2012 and
December 2013) with 7,256 overall filings, constituting 25.3%
overall....California is a distant second with 3,450 filings.
A correction! Yesterday I mentioned an underwriting clause that addressed VA loans, moving, and equity. (I wish I could say that I put that in just to see who was reading the commentary, but I can't.) It turns out that the VA requires no equity to offset the rent payment. In other words, the VA does not require equity in a departing residence to offset the mortgage payment with new rental income. Many lenders have that overlay, but it is not a VA requirement.
And here is a note from a lender: "We are mini-corr lenders and sell
most of our VA loans to Flagstar. Here is what Flagstar's VA guides say
regarding the departure of a current residence: 'Rental income from the
property the borrower is vacating may be used to offset the current
mortgage payment, provided there is no evidence the property will be
difficult to rent; Document the rental income with a current lease
agreement; Under no circumstances, may rental income be included in the
borrower's income; If there is no current lease agreement, the
underwriter may offset the payment with prospective rental income,
provided there is evidence the local rental market is very strong. To
demonstrate the amount of the prospective rent and the local rental
market is strong, obtain one of the following in writing: appraiser's
analysis or analysis from a real estate agent having no interest in the
transaction. The analysis may not come from the listing or selling
realtor or any realtor who is employed with either realtor.'" Thanks
in line with government loans, the Collingwood Group's Managing
Director Karen Garner published a blog titled "FHA Enforcement: The Real
Cost of Non-Compliance." The post
outlines the issues lenders and servicers may face if they fail to
perform certain tasks required by FHA as well as the potential penalties
that could be sanctioned if a violation is found. Lenders and
servicers have recently come under increased scrutiny from the U.S.
Department of Housing and Urban Development (HUD) to ensure they are
complying adequately with FHA requirements.
"Is volatility going to pick up in October?"
Plenty of smart people think that it will. We've had a long spate of
the markets not doing much of anything, regardless of economic news,
overseas buyers, religious turmoil, geopolitical conflicts. Volatility
has been so low - like rates, it has nowhere to go but up, right? With
QE 3 ending, and the gentle hand of the Fed being lifted out of the
demand equation, things will go back to pre-QE. And yes, capital markets
staffs are dreading dusting off the extension and renegotiation
polices. Experts think that banks will absorb most of the excess net
supply the Fed doesn't - we'll see.
for now, steady as she goes: sure, we have some intra-day buying and
selling induced rate movements, but I can't remember the last time I saw
a gaggle of investors change prices intra-day. The Fed continues to buy
about $2 billion of agency paper a day, and selling by originators is
thought to be less than that. Agency MBS
prices closed down/worse about .125. The National Association of
Realtors (NAR) reported a 2.6 percent month-over-month rise in
existing-home sales last month to a seasonally adjusted annual rate of
5.04 million. May sales were revised slightly upward to a rate of 4.91
news today we'll have Initial Jobless Claims (expected slightly higher)
and New Home Sales (expected down about 5%). At 11AM EST the Treasury
announces details of next week's auctions of 2-, 5- and 7-year notes (e:
$93 billion). For numbers the 10-yr closed at 2.46% and today is sitting at 2.48% with agency MBS prices worse about .125.
the jobs front, a large Irvine based California mortgage banker is
expanding. It was recently recognized as "the #1 independent mortgage
banker by purchase volume in Southern California, America's Top 100
Mortgage Companies by Mortgage Executive Magazine, and multiple
recipients of "Best Places to Work" awards by the OC Register and the OC
Business Journal. New
American Funding is adding operational staff in all of their growing
branch locations which include N&S California, Tustin as well as
Nevada, Arizona, Colorado, Texas, Washington and Missouri. New
American Funding is especially interested in VA underwriters and is
currently offering a signing bonus for Underwriters who possess their
LAPP and SAR. Interested candidates should submit confidential resumes
or inquiries to Recruiters@Nafinc.com.