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.
In
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).
Going
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.
But
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,
Georgia.
As
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."
Jeff's
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
competitors. Such 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 value." (For a
confidential discussion regarding your specific situation, feel free to reach
out to Jeff.)
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 adjudication.
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.
What
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 everyone!
Keeping
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.
But
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 million.
For
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.
http://globalhomefinance.blogspot.com
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