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Some Firms Saved by Mergers

Recent mergers, earnings and corporate activity

November 11, 2008

By SAM GARCIA


Mergers have picked up steam as several mortgage companies teeter on the brink of insolvency. Some of the mergers are forcing changes at the top of the executive ranks. Meanwhile, losses continue to pound financial firms -- forcing regulator actions at some.

Dick Kovacevich will stay on as chairman of Wells Fargo & Co. even though he has reached the company's mandatory retirement age of 65, a recent statement said. The interim move was made at the request of Chief Executive Officer John Stumpf to ease the integration of Wachovia Corp. when Wells acquires it next month.

Dean T. Holt has been named president and CEO of Domestic Bank. Holt graduated from New York University and has worked in banking for 35 years, including a stint at Fleet Bank.

HSBC reported impairment charges on its U.S. consumer loans of $4.3 billion during the third quarter, rising $0.7 billion from the second quarter. The provisions were primarily tied to its residential loans -- especially the 2006 and 2007 vintages -- and credit cards. HSBC's mortgage services portfolio was $29 billion on Sept. 30, down from $49 billion in December 2006.

National City Corp. restated its third-quarter loss to $2.1 billion from $0.7 billion originally reported. The move reflects $1.3 billion in additional write downs to goodwill. The Cleveland-based bank said its Chairman, President and CEO Peter E. Raskind will leave the company once it is acquired by The PNC Financial Services Group Inc.

MBIA reported an $807 million third-quarter loss, primarily reflecting a $961 million increase to loss reserves for second lien exposure.

Beleaguered Thornburg Mortgage Inc. reported a $140 million third-quarter profit. Impairment on the mortgage-backed securities portfolio of $655 million were more than offset by a $595 million fair-value gain on senior subordinated secured notes and a $160 million fair-value gain from the principal participation agreement and additional warrant liability. Still, negative shareholder equity was $323 million on Sept. 30.

An investor class action was commenced against Fannie Mae in U.S. District Court for the District of Columbia, Charles H. Johnson & Associates announced Monday. The lawyers seek to include investors of common stock from April 17, 2007, until now.

The Federal Reserve Board announced last week an agreement with Paramount Bancorp Inc. to improve management, clean up its books and conserve capital. The company will need to report back on its progress.

A similar agreement was reached by the fed with Currie Bancorporation Inc. in Currie, Minn.

The fed issued a cease-and-desist-order against CapitalSouth Bancorp in Birmingham, Ala.

Lenders One Mortgage Cooperative announced a licensing agreement with Warner Bros. Consumer Products to use images and audio from The Wizard of Oz for advertising and marketing.

The U.S. Department of the Treasury will take a $6.6 billion preferred stake in U.S. Bancorp under the Capital Purchase Program of the Emergency Economic Stabilization Act of 2008, a recent news release said. The deal includes warrants, will enable the bank to lend more and will be done at an initial rate of 5 percent annually then increase to 9 percent after five years.

Diversified Mortgage Workout Corp. said today it has agreed to acquire a 23 percent interest in an off-shore hedge fund that specializes in distressed mortgages and discounted mortgage securities. The $20 million deal includes an option to increase its stake to 49 percent within a twelve months.

All of the assets and operations of Countrywide Financial Corp. and subsidiary Countrywide Home Loans Inc. were transferred on Nov. 7 to Bank of America Corp., a Securities and Exchange Commission filing yesterday said. The transfer has BoA assuming $16.6 billion in Countrywide liabilities.

The Federal Reserve Board Monday provided expedited approval for credit card issuer American Express Co. and American Express Travel Related Services Company Inc. to become a bank holding companies. The transaction calls for the conversion of American Express Centurion Bank to a bank. It also includes the retention of non-banking subsidiary American Express Bank FSB.

In its own announcement, AmEx said it will fundamentally operate the same, have improved access to capital and be regulated by the Federal Reserve.

Residential Capital LLC painted a bleak picture of its ability to stay open in an SEC filing yesterday. A seemingly endless list of risk factors were detailed -- possibly laying the ground work for parent GMAC Financial Services to let ResCap collapse. Its tangible net worth fell below $1 billion, triggering a $200 million margin call from Fannie and the necessity to sell $12.7 billion in servicing.

"In light of our liquidity and capital needs, combined with volatile conditions in the marketplace, there is substantial doubt about our ability to continue as a going concern," ResCap said in the filing. "If our parent no longer continues to support our capital or liquidity needs, or we are unable to successfully execute our other initiatives, it would have a material adverse effect on our business, results of operations and financial position."

The New York Stock Exchange has notified American Mortgage Acceptance Co. that it will be delisted because its liabilities exceeded the value of its remaining assets, an announcement last week said. American Mortgage does not expect that it will be able to continue in operation. Shareholders would likely receive nothing in a liquidation.

PlainsCapital Corp. will acquire First Southwest Holdings Inc., an announcement today said. PlainsCapital, parent to $3.4 billion PlainsCapital Bank, and First Southwest, an investment banker, are both based in Dallas.

"The acquisition brings together Texas' second-largest privately held commercial bank and the second-ranked public finance advisory firm in the United States to create a full-service middle market bank for Texas and the Southwest," according to PlainsCapital -- which is also parent to PrimeLending.

JWH Holding Company LLC will be merged into real estate investment trust Hanover Capital Mortgage Holdings Inc., a press release Monday said. Walter Investment Management Corp. will be the surviving entity.

Fidelity National Financial Inc. has agreed to acquire LandAmerica Financial Group Inc. in a stock-swap deal, a press release Friday said.


Written Agreement by and among Paramount Bancorp Inc., Farmington Hills, Michigan, Paramount Bank, Farmington Hills, Michigan, Federal Reserve Bank of Chicago, Chicago, Illinois, and Michigan Office of Financial and Insurance Regulation, Lansing, Michigan.
Docket Nos. 08-033-WA/RB-HC and 08-033-WA/RB-SM, Oct. 23, 2008 (Board of Governors of the Federal Reserve System, Washington, D.C.)

In the Matter of CapitalSouth Bancorp, Birmingham, Alabama, and CapitalSouth Bank, Birmingham, Alabama.
Docket No.s 08-034-B-HC and 08-034-B-SM, Nov. 4, 2008 (Board of Governors of the Federal Reserve System, Washington, D.C., and State of Alabama State Banking Department)

Written Agreement by and between Currie Bancorporation Inc., Currie, Minnesota, and Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota.
Docket No. 08-030-WA/RB-HC, Oct. 31, 2008 (Board of Governors of the Federal Reserve System, Washington, D.C.)


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]


The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.



Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.


Mortgage REIT news | REIT Directory
Coverage of real estate investments trust companies, litigation and corporate activity.




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