The Bank United of Texas-Midcoast Mortgage deal illustrates two widely strategies for handling the current mortgage industry consolidation.
Bank United, the Dallas-based thrift, has been loading up on production at a time when volumes are off deeply from last years highs.
Midcoast Mortgage, in selling its northeastern production offices to Bank United, is hunkering down.
Under the terms of the agreement, announced last Thursday, Bank United of Texas will pick up 17 loan production offices that last year produced $1.7 billion of home mortgages. The purchase price was not disclosed. No servicing is included in the deal.
"This is an excellent acquisition for us," said Barry Burkholder, president of Bank United, noting that the offices acquired were in "key markets that we have targeted for expansion."
This deal follows closely on the heels of Bank United's September 16 purchase of Tidewater First Financial Group, a Virginia mortgage brokerage outfit. That deal brought the company four offices that last year produced more than $200 million.
The Midcoast offices will operate under the name Commonwealth United Mortgage, its moniker outside of its banking trade area.
With some prices for mortgage banking sales coming in lower than expected recently, was Midcoast pleased with the transaction?
"Well the buyer always thinks he paid too much and the seller thinks he got too little," said Willard Soper, president of Midcoast.
Midcoast Mortgage is, however, happy to have monetized its assets.
The Long Island-based mortgage bank, owned by venture capitalists TA Associates, has been laboring under more than $35 million in term debt. Along with the Bank United deal the company has sold $700 million of Ginnie Mac loan servicing rights.
"By the end of the year we should be down to $18-19 million in debt with a tangible net worth of between zero and negative $2 million," said Willard Soper, Mid-coast president. "That's from having a tangible net worth of negative $19 million six months ago."
But Midcoast will be a much different company.
Its only remaining production will be six offices in Florida which should produce about $200 million this year. And it will have a $3.5 billion conventional loan servicing portfolio.
The plan? Some growth in the Florida region, but on a much sounder financial basis.
For now, Midcoast has not decided if it will move its offices, though that is believed by sources to be on the back burner.
