My Georgia cousin has two tickets for the
2017 SUPER BOWL, both box seats. He paid $3,000 for each ticket, but he didn't
realize last year when he bought them, it was going to be on the same day as
his wedding.
If you are interested, he is looking for
someone to take his place.
His fiancé's name is Heather, she's 5'6,
roughly about 120 lbs., good cook too...it's at Bethel Church in Macon at
1PM...she'll be the one in the white dress.
Who's up for helping him out?
Supply and demand ("the invisible hand") are the
driver of many things in life, as are perceived shortages. So it was with
great concern that Chris C. and Joe W. sent this breaking news from Kansas City
about... the bacon reserve hitting a 50-year low!? Like Beyoncé
announcing she's having twins, or oil where the government has strategic
reserves to be released, there must be ways to increase supply.
In potentially favorable news for lenders, in Minnesota
State Court defendants won a partial Summary Judgment (no loan-level damages on
a repurchase claim) over RFC. Phil
Stein wrote to say, "Rob, this is from the high-stakes RFC/ResCap
Liquidating Trust cases in Minnesota. The order and opinion (published
Feb 1., Court File No. 27-CV-14-3111) granting partial summary judgment to the
state court defendants is a welcome development for the many correspondent
lenders currently defending against claims filed by RFC, and the many
others threatened with new lawsuits. This state court order could very
substantially limit the amount of damages RFC could recover if it were to
prevail on its claims, and it is by no means clear that it will prevail. Along
with some other helpful statements throughout the attached order, footnote 7
lays out one of the reasons from a legal standpoint this decision is
potentially very important: RFC can't simply invoke a contractual right to
declare a default, and then demand a repurchase and seek related damages
according to a formula. Instead, it must establish causation and prove actual
damages. In other words, it may face a significantly tougher path to victory
than it previously hoped."
Bank, or pseudo-bank, news!
As lenders and community banks struggle with aging owners
and the high cost of regulation, some are giving serious consideration to the
possibility of mergers and acquisitions in 2017. We've already seen it with
Home Point & Stonegate. Every week I list the announced deals, and it is a
steady stream. But most bank executives believe that the current environment is
unfavorable for deals, and there is even recent evidence that seems to point
out that M&A deals are rarely good for investors. While a major motivation
for M&A involving community banks in the past was to increase the acquiring
bank's geographic reach, this is not always the case anymore since customers do
more of their banking online and through mobile apps. Does anyone disagree that
traffic at bank branches has steadily declined?
It seems that the motivation for M&A deals has
changed. On the banking side of things, one of the biggest drivers for
acquiring a bank is to obtain experienced staff with a book of coveted
commercial lending business. In fact, 41% of respondents told Bank Director
that the ability to acquire experienced commercial lenders is a major reason
they are considering M&A deals. But many M&A deals will fail to
generate the value acquirers hope for. Late last year global strategy consulting firm L.E.K. noted that not only
do the majority of M&A deals fail to generate the
shareholder value that companies initially expect, more than 60%
of them are harmful to shareholder value.
Among the biggest reasons that many M&A deals, whether
it is depository banks or non-depository mortgage banks, don't work out as
planned is the fact that acquiring companies often fail to perform adequate due
diligence, they are too optimistic about increased revenues from the
acquisition, or they simply underestimate the difficulty of merging employees
from two different business cultures. Steve Brown with PCBB observes that,
"When it comes to community bank M&A deals in particular, one of the
most important factors in determining a deal's likelihood for success, besides
the price of a deal, is whether the target bank's previous efforts to boost its
revenues had led to looser underwriting standards. Among banks that have
recently abandoned plans to acquire community banks, 28% told Bank Director
that they walked away because of underwriting standard concerns of the target
banks."
But announced mergers and acquisitions continue. In the
last week or so word was spread that Old Line Bancshares, Inc., the parent
company of Old Line Bank, and DCB Bancshares, Inc., the parent company of
Damascus Community Bank, announced the execution of a definitive merger
agreement that provides for the acquisition of DCB Bancshares by Old Line
Bancshares for stock in a deal valued at approximately $40.7 million, or
approximately $25.22 per share of DCB Bancshares common stock. Pinnacle Bank
($11.1B, TN) will acquire Bank of North Carolina ($7.4B, NC) for about $1.9B in
stock (100%) or roughly 2.9x tangible book. The move vaults Pinnacle into the
top 50 public US banking franchises in assets post deal, with $20B in assets.
First Guaranty Bank ($1.5B, LA) will acquire Synergy Bank, SSB ($154mm, TX) for
about $21mm. Bank of Hope ($13.5B, CA) will acquire UniBank ($255mm, WA) for
about $48.8mm in stock (100%).
Central Bank Illinois ($617mm, IL) will acquire The First
National Bank & Trust Co. of Rochelle ($278mm, IL). First Merchants Bank
($7.1B, IN) will acquire The Arlington Bank ($305mm, OH) for about $75.8mm in
stock (100%) or about 2.15x tangible book. In Illinois, Midland States Bank
($3.2B) will acquire Centrue Bank ($978mm) for about $175.1mm in cash (35%) and
stock (65%).
In Florida Harbor Community Bank ($1.8B) will acquire
Jefferson Bank of Florida ($296mm) for in about $40mm in cash (20%) and stock
(80%). Simmons Bank ($8.4B, AR) will acquire Southwest Bank ($2.0B, TX) for
about $462mm in cash (15%) and stock (85%). And on the flip side of things, in
Chicago Seaway Bank and Trust Company was closed, and its deposits transferred
to State Bank of Texas, Dallas. And SunTrust said it would close 99
branches and open 8 for a net reduction of 91 by Q2 of this year. That is about
a 7% decrease overall.
And Reuters reports that SoFi, which has made a name for
itself in residential lending in recent years, "has found a way to add
bank accounts - only without the bank." SoFi is buying Zenbanx, a five-year-old firm that offers novel
multicurrency accounts. "SoFi won't yet get the benefit of cheap deposit
funding. Still, it's the closest thing so far to merging Main Street and
Silicon Valley.
Banking has its advantages, and Reuters notes the,
"...the hiccups last year in parts of the alternative-lending market,
which led hedge funds and fickle wholesale financiers to pull back from funding
the sector, reinforced how valuable deposits can be as a source of funds. SoFi
weathered the storm, concentrating on lending to creditworthy borrowers and
spending time burnishing its reputation, including in the asset-backed market.
Deposits, though, remain the cheapest form of funding and, calamities aside,
are usually stable. And in the United States at least, getting them requires a
banking license.
"That in turn comes with tangles of red tape. The
Office of the Comptroller of the Currency is trying to streamline things. Last
month the watchdog published a white paper outlining how it might grant
special-purpose national bank charters to fintech firms. Zenbanx, which works
with officially sanctioned banking groups in the United States and Canada but
isn't one itself, is a canny compromise. It allows SoFi to test the
deposit-taking water without the attendant annoyances. The deal also snares an
industry expert, Zenbanx founder Arkadi Kuhlmann, who set up the successful ING
Direct online bank. It'll help tee SoFi up for when it decides to take the
final plunge." SoFi Chief Executive Mike Cagney said the transaction means
"we're moving one step closer to becoming the center of our members'
financial lives by adding SoFi deposit, money transfer and credit card products
to our offerings for members."
The bond market, determiner of mortgage rates
As expected, yesterday the markets were dominated by the
FOMC and we learned that the Federal Open Market Committee was on hold this
meeting and voted to keep the federal funds rate unchanged at ½ to ¾
percent. While citing a strengthening labor market and signs of
inflation, the statement noted economic activity is still expanding at a
moderate pace and overall inflation remains low. Additionally, continued
softness in fixed investment was noted as a balance to labor and consumer
strength, and all considered, conditions support only a gradual increase in
rates going forward.
Yet the U.S. economic data released yesterday morning was
very strong, particularly ADP's estimate of 246K private sector jobs added in
January - but its correlation to tomorrow's number is poor. This morning we've
had the usual Thursday Initial Jobless Claims (-14k to 246k) and also the
Challenger Job-Cut Report (46k, down nearly 39% from last year) and
Productivity (+1.3%) and Costs (+1.75%). This morning the 10-year is down to
2.44% and agency MBS prices are better by .250 versus last night.
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