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Merger Activity Strong

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Two investment companies have purchased stakes in companies that capitalize on distressed mortgages. In other merger news, several financial institutions have acquisitions in the works.

MP Thrift Investments L.P.has agreed to purchase 250,000 Flagstar Bancorp Inc. convertible participating voting preferred shares for $250 million — bringing its investment in the Troy, Mich.-based bank to 70 percent. Once Flagstar shareholders approve an increase in outstanding shares, MP’s shares will automatically convert into 312,500,000 shares of Flagstar common stock at a conversion price of $0.80 per share.

After the investment is made, Flagstar Chairman Thomas Hammond and Chief Executive Officer Mark Hammond will each invest $2 million in the company, while other executives may invest an additional $1 million.

Silar Advisors has taken a 7 percent stake in Liberty Capital Asset Management, a press release last week said. Silar has a 60-day option to purchase more equity in Liberty, which acquires pools of nonperforming mortgages and rehabilitates them for resale.

Earlier this month, JAM Equity Partners LLC announced a $2.5 million investment in distressed mortgage servicer Wingspan Portfolio Advisors. The capital will be used for the company’s servicing and technology platform. Wingspan, which launched in October, helps servicers turn non-performing loans into performing mortgages.

“We believe there are very few servicers that can match Wingspan’s expertise in servicing distressed second mortgages and low balance first mortgages, a huge opportunity that is especially problematic,” JAM Partner Mike Sekits said in the announcement.

Investors Bancorp announced Monday an agreement to acquire American Bancorp of New Jersey Inc. for $140 million in stock and cash. Between both New Jersey-based firms, combined assets are $7.6 billion and combined deposits are $4.4 billion.

Investors Bancorp cited increased market share in its decision to make the acquisition, which is expected to closed during the second-quarter 2009. Both boards of directors have approved the deal, though it is still subject to approval by regulators and American Bancorp’s shareholders.

REAL Financial Credit Union has agreed to merge with Royal Credit Union, a press release today said. The deal, expected to close this month, has been approved by the National Credit Union Administration, Minnesota and Wisconsin regulators and REAL’s membership.

Eau Claire, Wis.-based Royal has 113,000 members, while Edina, Min.-based REAL reports 7,500 members. The combined credit union will have more than $1 billion in assets.

The deal was prompted by rising loan defaults at REAL — which has incurred $2.5 million in unpaid loans since 2006. REAL’s members — primarily Realtors, their administrative support employees and their families — have struggled in the housing downturn.

PNC Financial Services Group Inc. has agreed to divest 61 branches of National City Corp. so that it can win Justice Department approval to acquire the troubled Cleveland-based bank, an announcement last week said. In addition, PNC agreed to divest around half of National City’s middle-market lending business.

The acquisition — which will make PNC the fifth largest U.S. bank — will give Pittsburgh-based PNC about $289 billion in assets and $180 billion in deposits. The Board of Governors of the Federal Reserve System still must approve the transaction.

CapitalSouth Bancorp said last week that it retained investment banker Sterne, Agee & Leach Inc. to help it identify and assess strategic alternatives that include a merger or an asset sale. The move follows the Federal Reserve Board’s issuance of a cease-and-desist-order against CapitalSouth last month.

Birmingham, Ala.-based CapitalSouth said in last week’s statement that a 7.5 million subscription rights offering saw 1.9 million valid subscriptions submitted for $3.7 million. Almost all of the shares were subscribed by CapitalSouth directors and senior executives.

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