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Lenders Launched, Closed & Merged

Lenders Launched, Closed & Merged

Recent mergers, earnings and corporate activity

January 29, 2008

By COCO SALAZAR

photo of Coco Salazar
The government shut down one bank and approved a merger between two others. Meanwhile, as Countrywide Financial Corp. grapples with losses and the exit package for its chief, a Florida mortgage company was launched and a Texas-based mortgage company is investing in adjustable-rate loans.

Capstead Mortgage Corp. today said it plans to offer 6.5 million common stock shares to the public. Underwriters have a 30-day option to purchase an additional 975,000 shares of common stock from the Dallas, Texas-based company. Aside from general corporate purposes, Capstead expects to use the proceeds to finance purchases of residential mortgage securities backed by government-guaranteed adjustable-rate mortgages.

Bear Stearns & Co. Inc. and Deutsche Bank Securities Inc. are acting as joint book-running managers for the offering, with Keefe, Bruyette & Woods,Inc. and JMP Securities LLC acting as co-managers, Capstead said.

Florida Bank Group Inc. announced it hired Randy Freese to lead its residential mortgage efforts under the name Florida Bank Mortgage. The bank also reportedly combined its operations in the greater Jacksonville area and will now operate them as Florida Bank of Jacksonville, which it acquired in September under the name of Cygnet Private Bank and recently combined with Bank of North Florida. Along with moving its headquarters to Jacksonville, Thomas E. Gibbs was appointed chairman and J. Stewart Baker was named president and CEO of the combined operation.

Florida Bank Group also said it opened Florida Bank of Sarasota on Thursday.

In connection with its proposed sale to Bank of AmericaCountrywide Financial Corp. said on Monday that its Chairman and Chief Executive Officer Angelo R. Mozilo decided to “voluntarily relinquish” his rights to $37.5 million in severance compensation.

He will not receive any cash payments in the merger or upon any related employment termination other than retirement benefits and deferred compensation he has already earned, the Calabasas, Calif.-based mortgage giant said, additionally noting Mozilo’s forfeiture is much less than the $115 million “some third parties” had estimated for Mozilo’s severance package pay.

“My primary focus today — as it has been for the past 40 years — is to do what is in the best interests of Countrywide’s employees, customers and shareholders,” Mozilo said in the prepared statement. “I believe this decision is the right thing to do as Countrywide works toward the successful completion of the merger with Bank of America.”

The pending merger was also cited as the reason behind Countrywide’s decision to cancel Tuesday’s fourth quarter and full-year 2007 earnings Web cast and conference call.

But in its earnings report today, the company announced a fourth quarter net loss of $0.4 billion, better than the $1.2 billion loss in the prior quarter but worse than the $0.6 billion profit a year earlier. For the full year, the net loss was $0.7 billion, worse than the $2.7 billion profit during 2006.

Earnings were impacted by a $0.4 billion write-down of $7.0 billion in nonconforming loans transferred to its held-for-investment portfolio, 0.1 billion in restructuring charges

“Countrywide’s results for the fourth quarter of 2007 were adversely impacted by further credit deterioration across the industry and continued illiquidity in the secondary mortgage markets,” Mozilo said in the report. “These factors resulted in increased charges associated with the building of higher loss reserves on our residential loan portfolio as well as impairment related to HELOC securitizations that exceeded those previously anticipated by the company.”

Countrywide noted that it recorded impairment losses of $704 million during the latest quarter as a result of deferred repayments from home equity line-of-credit securitizations for advances. The delay resulted from rapid amortization which is triggered when loan losses increase beyond a specified threshold or duration, leaving reimbursement for advances outstanding until senior bondholders and monoline insurers are paid.

Friday also saw the Office of the Comptroller of the Currency close down Douglass National Bank and name the Federal Deposit Insurance Corp. as the receiver. The office cited the Kansas City, Kan.-based bank had experienced “substantial dissipation of assets and earnings due to unsafe and unsound practices,” and was likely incur further losses that would deplete potentially all of its capital, making it unlikely that it would become adequately capitalized without federal assistance.

The FDIC said the failed bank’s deposits of $53.5 million were transferred to Liberty Bank and Trust Co., which reopened the failed bank’s three offices as its own branches Monday.

As for Douglass’ $58.5 million in assets, New Orleans, La.-based Liberty Bank will reportedly purchase $55.7 million at book value, less a discount of $6.1 million, while the FDIC will retain $2.8 million for later disposition.

Meanwhile, The PNC Financial Services Group Inc. is getting closer to acquire Sterling Financial Corp., as the Federal Reserve Board has approved their merger application. While a commenter of the merger proposal had alleged the banks’ mortgage lending to low- to moderate-income minority in the New York-New Jersey-Pennsylvania regional area was insufficient, the Fed’s examiners found the lending practices to be compliant. The reported $565 million stock-and-cash deal must be consummated by April 25, the Fed’s announcement indicated.


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