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Mixed Results for Mortgage Bankers

Mixed Results for Mortgage Bankers

Recent mergers, acquisitions and corporate activity

July 31, 2006

By COCO SALAZAR

photo of Coco Salazar
An Internet-based bank is struggling to overcome higher losses and analysts’ favor while a California nonprime giant is glowing. Meanwhile, two big mortgage entities have merged into one.

Ohio’s National City Corp. will buy Fidelity Bankshares Inc. in a $1 billion-deal expected to close in the first quarter 2007, according to an announcement Thursday.

National City said it will gain a 92-branch network along Florida’s east coast with Fidelity and the pending deal with also-Florida-based company Harbor Florida Bancshares Inc., which was announced earlier this month.

Access National Corp. executed on Thursday an underwriting agreement to sell 2 million shares of common stock, which will generate net proceeds of $17.3 million that it said it will use “for general corporate purposes including investments in the company’s subsidiary bank to support continued growth in loans and deposits.”

The company, whose umbrella encompasses Access National Mortgage Corp., additionally announced the agreement also calls for 135,000 shares to be sold by shareholders and that an option has been granted to purchase an additional 320,250 shares to cover over-allotments.

First American Corp. was recently named as a strategic business information and title services partner for the National Association of Real Estate Brokers. The alliance will help increase homeownership opportunities in traditionally under-served African-American communities, the companies reported.

Its five-point plan to increase the homeownership rate includes providing first-time buyer downpayment assistance to low-income families through the companies’ partnership with municipal housing agencies in 10 urban areas, and giving Realtists a Web-based, point-of-sale, loan origination technology platform that will enable them to deliver the “best possible mortgage financing options to their homebuyer clients with unprecedented speed and ease,” the announcement said.

Citigroup announced it recently combined its two first mortgage businesses, CitiMortgage and CitiFinancial Mortgage, under the CitiMortgage name. Prior to the alignment and combining of the business functions, CitiMortgage originated prime residential mortgages through retail, wholesale and correspondent channels, while CitiFinancial specialized in nonprime residential loans.

“This integration … allows us to present a consistent face to the market, increase our national presence via greater distribution and offer more complete solutions to customers,” a CitiMortgage executive said in the announcement. “All of this is critical in the challenging market we are in today.

The combined entities’ headquarters will be in CitiMortgage’s base in St. Louis, Mo., although CitiFinancial will continue to have significant human resources, marketing and originations operations in Dallas, Texas, where it was previously headquartered.

Citigroup said 2005 volume for CitiMortgage, CitiFinancial Mortgage and Citi Home Equity was over $130 billion.

New Century Financial Corp. reportedly made Zacks Growth and Income Profit Track, a stock-picking strategy that looks for stocks with unusually high dividend yields.

Zacks.com of Zacks Investment Research Inc. noted that the second-quarter dividend of $1.80 the Irvine, Calif.-based subprime lender declared in early May is 5 cents per share more than the prior-quarter amount and represents the sixth consecutive increase since the company elected to become a REIT in the fourth quarter 2004. New Century yielded 15.70%, the investment research firm said.

A pending transaction facing opposition from watchdog group Fair Finance Watch is Wachovia Corp.’s proposed $25.5 billion acquisition of Golden West, according to the Sacramento Business Journal.

Fair Finance reportedly made allegations to the Federal Reserve Board that Wachovia’s 2005 mortgage data showed minorities, more than whites, were confined to higher-cost loans, and it asked the Fed to hold public hearings on that matter, as well as on the merger’s potential to raise prices.

Wachovia said it looked “forward to building on our legacy of community excellence and extending the reach of our community programs and products in Golden West Financial’s markets,” the Journal reported.

In a filing Tuesday with the Securities and Exchange Commission, NetBank warned it expects an after-tax loss of 65 cents to 70 cents per share for the second quarter — way worse than analysts’ loss expectations of 5 cents to 10 cents. The announcement follows a net loss of loss of $11.0 million or 24 cents per share reported for the first quarter.

Days after the warning, a financial analyst of Keefe, Bruyette & Woods lowered his rating of NetBank and said the bank’s “poor fundamental performance increases the likelihood that the company is for sale,” according to the Atlanta Journal-Consitution.

After talks with management, the analyst reportedly concluded that “there is risk of additional erosion in tangible book value.”

Douglas K. Freeman, NetBank chairman and chief executive, reportedly said the company was focused on a strategy to restore profits.

Another analyst at FTN Midwest Research had reportedly downgraded NetBank’s rating to “sell” a day after the filing.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.e-mail: MortgageWriter@aol.com

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