The last day of June, and 2016 half over? How did that happen? (Regarding time flying Linda B. writes, “Thank the Good Lord, I am Benjamin Button.”) June for me included time spent in Dallas, Albany NY, Northern California, Las Vegas, New Orleans, Kansas, and now Hawai’i for the MBAH conference. I continue to see hard-working, conscientious, competent people in all ranks of residential lending doing their jobs well. And yet we, as an industry continue to pay the price, both in the press and financially, for problems from years ago. And if you don’t think regulators are teaming up, think again – just ask BancorpSouth (details on its $10.6 million settlement below).

The Fed released the results of its annual stress tests of 33 large US banks that have more than $50 billion in assets. Do non-bank residential lenders have stress tests? No. The stress tests examine what would happen if a bank, or economy, ran into trouble. Last year only Deutsche Bank and Banco Santander did not pass the stress test.

This time around nearly all of the largest U.S. banks are on steady enough footing to increase payouts to shareholders. The two banks that failed - Deutsche Bank Trust Corporation and Santander Holdings USA, have "broad and substantial weaknesses" that persist in their capital planning processes, the Fed said. The Fed also criticized some elements of Morgan Stanley's capital planning process - but still allowed the bank to move ahead with plans for a $3.5 billion stock repurchase program and a quarterly dividend hike while it rectifies the issues.

Analysis by the World Bank finds banks in some countries still need to close branches to boost profits. Some interesting data points by country of the number of bank branches per 100,000 adults are: Columbia #1 (256), Peru #3 (121), Spain #7 (70), Italy #9 (60), Brazil $12 (47), Belgium #17 (40), France #19 (38), Japan #27 (34) and US #31 (32). Of note, the UK is at 25 branches per 100k and Germany is only at 14.

Certainly we've seen consolidation in the financial world. On the banking side of things, Steve Brown with PCBB (Pacific Coast Bankers Bank) writes, "As of the end of 2012, there were 7,083 financial institutions and as of the end of Q1 2016, there were 6,122. That is a decline of 961 over 14 periods or about 73 per quarter based on this simple calculation...the total number of financial institutions operating in the US is continuing to decline. Over the past 3 years, the rate of decline has been about 1% or so from the prior quarter, which is historically about the same level as it has been going back even as far as 10 years or more.

"Therefore, in projecting forward year by year and assuming the 4% decline (i.e. 1% per quarter vs. prior quarter) continues, the industry should shake out something like this in the coming years. As of the end of 2015 there were 6,182 financial institutions (in this case, banks) operating in the US. At the 4% annual decline rate, we would project something around 5,906 at the end of 2016. Looking forward using the same methodology you can logically expect the industry to be 5,643 by the end of 2017; 5,391 by the end of 2018; 5,151 by the end of 2019 and 4,921 by the end of 2020...You cannot count on the past to predict the future, but at least in banking this number continues to holding up quite well."

Along those lines, in the last week it was announced that in Montana the State Bank of Townsend ($58mm) will acquire Dutton State Bank ($56mm). In Georgia First National Bank of Decatur County ($120mm) will acquire Citizens Bank ($33mm). Canada's 5th largest bank, Canadian Imperial Bank of Commerce (CIBC) will acquire The PrivateBank and Trust Co ($17.7B, IL) for about $3.8B in cash (40%) and stock (60%). American National Bank ($3.0B, NE) will acquire Stonebridge Bank ($209mm, MN). First Midwest Bank ($10.6B, IL) will acquire Standard Bank and Trust Co ($2.5B, IL) for about $365mm in stock. Dollar Bank, FSB ($7.4B, PA) will acquire Bank @LANTEC ($112mm, VA). (And yes, that is its name.)

Berkshire Hathaway (BHLB) announced the acquisition of First Choice Bank, in an all stock deal valued at $112 million, representing 109% P/TB, a 1.4% core deposit premium and 18x P/E (2016). This deal brings BHLB to the brink of the $10 billion asset threshold. People's United Bank ($38.9B, CT) will acquire The Suffolk County National Bank of Riverhead ($2.3B, NY) for about $402mm in stock or about 1.95x tangible book.

But Mississippi's BancorpSouth, Inc., the holding company for BancorpSouth Bank, is going to be $10.6 million lighter going forward - although it had already set aside (reserved) more than enough for the settlement. The bank entered into a settlement through the agreement to a consent order (the "Consent Order") with the U.S. Department of Justice ("DOJ") and the Consumer Financial Protection Bureau ("CFPB") related to certain alleged violations of the Fair Housing Act and Equal Credit Opportunity Act. The settlement will fully and finally resolve all previously announced claims by the DOJ and CFPB against the Bank. BancorpSouth has not admitted to any of these allegations or to any liability.

"Since 2012, the Bank has taken a number of steps to enhance its compliance management systems, reduce its fair lending risk, and increase its lending in minority areas. The settlement is an opportunity for the Bank to avoid protracted litigation with the DOJ and CFPB...BancorpSouth has previously announced numerous enhancements designed to further strengthen its commitment to promote affordable lending products in low to moderate income and minority areas including a new Director of Community Lending to oversee ongoing outreach efforts in all markets, including the Bank's continued lending efforts in minority neighborhoods, a Chief Fair Lending Officer who is responsible for developing, evaluating, and implementing its fair lending program, a Community Development Lending Manager within the BancorpSouth Mortgage team, and opened a new branch in Memphis, Tennessee.

"These enhancements, combined with the Bank's centralized underwriting process and pricing, further strengthen the Bank's commitment to develop and promote affordable lending products, in low and moderate income areas and minority areas."

In some temporary good news, the IRS has extended the re-verification deadline for existing clients of IVES vendors from July 1, to midnight July 15. The MBA reports that, "IVES vendors tell us that meeting the July 15 deadline remains a challenge, but this is a significant improvement...(we) have encouraged our members to proactively reach out to their vendors. We appreciate the extension and urge MBA members to complete the re-verification process as soon as possible. If you have already been contacted by your IVES vendor(s), you should continue to make it a priority to complete the process quickly. If you have not yet been contacted by your IVES vendor, you should immediately call your vendor and obtain the re-verification requirements."

While we're on the IRS, Pacific Union Financials' Correspondent Lenders are advised to have established the appropriate security protocol for ordering tax transcripts via the 4506-T as part of the proper delivery process. Per IRS enhanced guideline requirements, 4506-T vendors are required to certify that all of their subscribers comply with new requirements or must disable any subscriber accounts that do not certify their users to the new requirements by midnight on July 15.

Aside from holidays, every Thursday we receive the weekly Initial Jobless Claims figures from the prior week. The flip side, of course, is employment. The Census Bureau's county business patterns says that there are 50 counties in the United States that account for 34.7% of all U.S. employment. Among those 50 counties, San Francisco, CA and Travis, Texas (think Austin) lead the nation in employment growth. Both San Francisco's and Travis's employment grew 5.7%. In San Francisco, the information sector grew 13.6%, the construction sector grew 10.4%. In Travis, the real estate and rental and leasing sector grew 22.3%, and the utilities sector rose 14.6%.

Travis also lead the 50 largest counties in the rate of growth of business establishments, growing 3.6%.  It seems that large California counties are leading the charge in employment growth. 3 of the top 10 large counties with the highest rate of employment gains were in California: Riverside (4.4%), Alameda (4.1%), and Santa Clara (3.9%). In fact, California has the most establishments (889,646), employees (13.8 million), and largest payroll ($797 billion).

And yes, this morning we had Initial Jobless Claims. They were +10k to 268k. Yesterday agency MBS prices ended lower in price and the 10-year note closed .125 lower in price (settling at 1.48%). Yes, since a week ago mortgage rates have moved lower, but not as much as some expected given the Brexit turmoil. Trading desks are seeing prevailing 30-year mortgage rates around 3.5% which would put the primary/secondary spread at 113bps. Fannie's trading desk reports that, "While some lenders have posted 3.375% and 3.25% GNRs on their rate sheets, volume has been understandably limited given the recent market rally...With just roughly $9 billion of available float in the 2.5% coupon, liquidity should improve if we stay at these levels."

Later this morning we'll have the Chicago PMI, projected to rise back above 50 to 50.5 vs. 49.3 previously. For numbers, after Jobless Claims we're at 1.50% on the 10-year and the agency MBS prices are actually slightly better than Wednesday's close.

Here are a couple upcoming events of note.

Lenders One, the largest mortgage banking cooperative, is hosting its annual Summer Conference August 7-10 in L.A.  Originators from across the country will come together to share best practices, learn from top industry experts and help shape the future of the industry. Kyle Manseau, Vice President of Operations at Allied Mortgage Group, shared that "L1 conferences are by far the most organized, structured and productive conferences that I have attended in my 22+ years in the industry."

Save the date for the 21st Annual Western States Loan Servicing Conference and Golf Tournament, August 14th - 16th in San Diego. Details are available on the California MBA website.

Find out the possible effects of "Brexit" regarding implications for Securities and other Financial transactions. This program will provide an overview and discussion of the possible effect of a so-called "Brexit" on EU issuances of securities and transactions in other financial instruments. Register for the July 7th webcast with Peter J. Green and Jeremy C. Jennings-Mares of Morrison & Foerster LLP who will discuss the impact of a Brexit.

Jobs and Announcements

In job news Jordan Capital Finance is hiring a Senior Vice President, Sales & Marketing to lead a sales team and its marketing strategy. "JCF provides private money financing for investors who buy, renovate, sell, and rent residential real estate. We offer lines of credit up to $7.5M and lend in 40 states. We do not lend to home owners. JCF is extremely well funded by Garrison Partners, a premier New York private equity firm, and is on an aggressive growth path. We are a top 5 lender in our industry. Our management has closed $150 billion in mortgage volume. The SVP must have at least 7 years' experience and must have a proven track record of exceptional senior sales management success. The candidate must have a degree from a top 4-year college and be extremely savvy with marketing technology. The position requires a very strong work ethic. The SVP will receive a competitive salary, but a substantial portion of compensation will be incentive based. The candidate reports to the CEO and lives in the Chicago area. For consideration, send resume and salary history tocareers@jordancf. com."

"Arch Mortgage Insurance "is actively seeking two passionate and enthusiastic sales professionals - one for the Utah territory and one for Washington state - to join our dynamic regional sales team! If you are a results-driven sales professional with the ability to develop long term partnerships and build advocacy with key executive-level and branch-level decision makers to grow profitable market share, apply today at resumes@archmi. com. Strong candidates will be able to use their professional sales skills and knowledge to promote Arch MI solutions to expand/sell new business, develop and implement strategies and tactics to achieve NIW growth objectives, and ensure customer loyalty. These positions require travel to customer sites. Arch Mortgage Insurance is the U.S. based mortgage insurance division of Arch Capital Group Ltd., a leading insurance and reinsurance specialty lines underwriting company operating through its subsidiaries located worldwide. We are committed to our employees and offer competitive compensation, valuable benefits and an energized culture of talented professionals!"