Bank Mergers, Vendor and Tech Updates

By rchrisman@robchrisman.com

 

(Thanks to Stephen S. for this one!)

Little Johnny asks his father, "Where does the wind come from?"

"I don't know."

"Why is the earth round?"

"I don't know."

"Why do dogs bark?"

"I don't know."

Little Johnny pauses for a beat, "Does it disturb you that I ask so much?"

"Not at all son. How else are you going to learn?"

 

For various reasons the announced bank mergers and acquisitions continue to a much greater degree than de novo bank creation. In just the last week it came to light that Citizens National Bank ($1.7B, TX) will acquire Kilgore National Bank ($83mm, TX). In nearby Louisiana four-bank holding company Louisiana Community Bancorp Inc. ($934mm) will acquire Tri-Parish Bank ($208mm). In the home of the Pittsburgh Pirates DNB First ($749mm) will acquire East River Bank ($311mm) for about $49mm in cash (13%) and stock (87%) or about 1.6x

tangible book. State Bank and Trust Co ($3.5B, GA) will acquire The National Bank of Georgia ($375mm, GA) for about $68mm in cash and stock. Westfield Bank ($1.3B, MA) will acquire Chicopee Savings Bank ($677mm, MA) for about $110mm in stock. United Community Bank

($9.6B, GA) will acquire Tidelands Bank ($466mm, SC) for about $2.2mm in cash. First Interstate Bank ($8.7B, MT) will acquire Flathead Bank of Bigfork ($232mm, MT) for about $34.2mm.

 But plenty of banks are interested in other lines of business, and it isn't against the law (yet) to pursue them. Ally Bank ($111B, MI) will acquire online wealth management and brokerage company TradeKing Group for about $275mm. Trade King provides online trading tools for

Self-directed trading of stocks, bonds, options and mutual funds to individuals and manages $4.5B in client assets. The management team of The Palisades Group, an investment advisor subsidiary of Banc of California ($8.2B, CA) will pay an undisclosed sum to buy out the subsidiary company. Union Bank & Trust ($7.7B, VA) will acquire independent registered investment advisory firm Old Dominion Capital Management (VA). Old Dominion manages about 300 client relationships.

 While we're on bank business models, I found this article particularly enticing considering the change in banking/regulatory models over the last few years, and the downside risk for anyone with a "The Buck Stops Here" plaque on their desk. Stephen Morris and Ambereen Choudhury write, "London's banks that were once among the most coveted employers in the global financial system are struggling to fill top roles because potential penalties are seen to outweigh the perks....Bankers are concerned about regulations that could see executives thrown in jail for failing to spot serious misconduct on their watch, which has shifted the City of London's reputation from a light-touch Babylon to a risky place to work. Combined with British politicians' desire to name and shame, an unforgiving press and diminishing cash compensation, the nation's banks have been left struggling to fill senior positions, lawyers and recruiters said."

 

What's new with some of those crafty vendors and rascally tech firms?

 

LoanCraft has rolled out some new OCR technology to improve turn time on its Tax Return Analysis. Typically, you get a full analysis of tax returns for personal and business in less than four hours, and the standard price is only $25. This is a nice complement to its transcript analysis service, and it can sure save your underwriter time, which I'm sure they will welcome.  Contact Ron George at rgeorge@loancraft.net.Vantage Production, the nation's leading innovator of mortgage-specific CRM, automated marketing, and sales acceleration released the updated version of its VIP technology this week-VIP 2.0. The upgrade includes preconfigured best practices, as well as a simple, fast and focused user interface and experience, designed to prioritize loan originators' days most efficiently by putting their most valuable opportunities and information at their fingertips, on one dashboard!

 Indecomm has launched its new proprietary Income Analyzer, Web-based platform that electronically reads documents using sophisticated Optical Character Recognition (OCR) technology. It reads and analyzes data, calculates qualifying income associated with the mortgage loan, and alerts the lender to underwriting conditions. Agency income documentation and calculation messages are clearly and visually presented to users, providing a consistent methodology for the successful approval of loans. Lenders now face an increase in the period from application to closing. Income Analyzer recaptures the lost time. Some highlights of its Income Analyzer includes, calculating and analyzing income by extracting data from income documents. Customized alert messaging reducing errors and adding efficiency through processing and underwriting. Income Analyzer also streamlines self-employed borrower underwriting. Visit the Indecomm website for more information on its Income Analyzer technology.

 DebtX has been awarded a five-year contract by the U.S. General Services Administration (GSA) to provide loan sale advisory, valuation and due diligence services to federal government agencies. Effective through February 2021, DebtX has been approved to act as Program Financial Advisor, Transaction Specialist, and Due Diligence & Support Services provider.

 loanDepot, has partnered with Orchard Platform, a technology and data provider for marketplace lending. Under the agreement, loanDepot will integrate its industry-leading performance data into the Orchard U.S. Consumer Marketplace Lending Index and Market Data products. Through this partnership, the U.S. investment community will gain deeper insights into the strong performance of loanDepot personal loan products relative to other marketplace lenders and the industry as a whole.

 My cat Myrtle realizes that the CFPB has its benefits and its detriments, and she is closely following events in the PHH/CFPB hearing. On Tuesday, PHH and the CFPB presented oral arguments to the DC Circuit Court in the on-going litigation saga. Questions posed by the court included inquiries about the authorities of the CFPB, statutes of limitations, and, of course, RESPA.

 Jonathan Fox at Lenders Compliance Group writes, "This is the litigation where PHH appealed to the DC Circuit Court because the Bureau's Director Richard Cordray raised an administrative law judge's $6 million penalty for mortgage insurance kickbacks to $109 million. Here is one aspect of the litigation: the implications of the court's view of an administrative agency led by a single director rather than the more typical commission structure. Entitled Going after the Big Cheese (PHH takes on CFPB's Director)," Jonathan's article is worth reading.

 And Fred Small with Compass Point Research and Trading echoed what others have said. "The opening oral arguments in the PHH vs. CFPB case increased our conviction in the probability of a positive outcome for PHH. The CFPB's argument was met by a clearly unsympathetic bench and our view is the U.S. Court of Appeals for D.C. is set to deliver PHH a victory. We think there is a 75% probability that the CFPB's $103M increase to the original PHH fine will be substantially reduced or vacated entirely. Regardless of the appeals court decision, we think an appeal is likely. Link the audio recording of the hearing. (71 min)

 "While we expected a positive outcome for PHH in court, the degree to which Judges Kavanaugh and Randolph appeared to question the CFPB's administrative order surprised us (note: Judge Henderson was not in attendance but is still hearing the case). Outside of the broader arguments about the CFPB's structure and authority, the key points against the increased fine revolve around the CFPB's re-interpretation of the industry's 'settled expectations' regarding RESPA and its use of an administrative action to avoid any statute of limitations. Judge Randolph asked several questions focused on the statute of limitations, noting that in other venues where no statute of limitations exists it is borrowed from somewhere else. Judge Kavanaugh focused on the lack of 'fair notice' given standard industry practices and expectations regarding RESPA that were in place at the time.

 "We expect a decision early this fall. Our view is that no matter the outcome of this decision, the odds of an appeal are high which suggests that the legal road ahead is still long and winding."

 "Beyond the direct impact on PHH, our view is that a CFPB loss in this case would force a near-term retrenchment of the bureau's enforcement and rulemaking efforts which would be viewed positively for auto lenders, the entire mortgage complex, student loan servicers, and payday lenders. Furthermore, we believe that a CFPB loss in this case would significantly strengthen legislative efforts to shift the bureau's leadership from a single director to a commission.

 "'You're concentrating in a single person a huge amount of power and the president has no authority over that. - Judge Kavanaugh"

 Turning to the markets... there isn't much to turn to. Steady as she goes. Aside from some intra-day chop among securities and coupons, we ended Wednesday about where we were at the close of Tuesday. In fact, there hasn't been much movement at all, which is fine with capital markets folks.

 Today we've already had the latest decision on rates from the Bank of England where the BoE left its "target rate" unchanged at 0.50%. And we've had Thursday's usual Initial Jobless Claims (-13k to 253k), March CPI (+.1%, slightly less than expected, year over year core +2.3%), and March real earnings (last -0.5%). At 1:00pm, the final leg of this week's set of auctions will be completed when the Treasury auctions $12 billion of reopened 30-year bonds. We closed the 10-year yesterday at 1.76% and in the early going it's at 1.78% with agency MBS prices worse a tad.