(Thanks to Stephen S. for this
one.)
At the end of the college year,
a star football player celebrated by attending a late night campus party.
Soon after arriving, he became
captivated by a beautiful coed and eased into a conversation with her by asking
if she met many any "potential dates" at the party.
"Oh, I'm much more attracted
to the strong academic types than to the party animals," she said.
"What's your G.P.A.?"
Grinning from ear to ear, the
jock boasted, "I get about 25 in the city and 40 on the highway."
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).
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.
Speaking of Brexit, and
upheaval, the Fed released the results on 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.
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