Resource Bancshares Mortgage Group cannot find a buyer, market sources say, but it does not need to in the favorable environment for mainstream mortgage lenders.
The Columbia, S.C., company is said to have been shopping itself around since September. But global market turmoil has made deals difficult to achieve.
"Given what's gone on in general for the market for financial stocks, the currency of potential buyers has become a little less valuable," said Rick Lawson, vice president of Wallace R. Weitz & Co., an Omaha firm that owns 2.7 million shares-or about 11.5%-of Resource.
Still, the South Carolina lender is not hurting as are the many subprime lenders that have been unable to find buyers. Its niche in the world of prime-quality mortgages-aggregating servicing rights for sale to larger lenders-has proven quite lucrative this year. It earned $13 million in the third quarter, more than five times its profit in the same period last year.
Steve Herbert, Resource's chief financial officer, said $4.1 billion of the company's $9.7 billion servicing portfolio has been sold in advance to other companies, and the rest is "available for sale."
The company intentionally keeps only a modest portfolio. "For us to choose to be a megaservicer, we would need to raise substantial additional capital," Mr. Herbert said. "In the end the economics don't work." Instead, Resource enters forward contracts to sell servicing to the giants.
And the giants sure need it. Though many large servicers also originate loans, "most are not able to originate an amount equal to what will probably run off this year," said Michael McMahon, an analyst at Sandler O'Neill & Partners. "If they want to grow their portfolios, they need to buy servicing."
Mr. Herbert would not comment on the talk of Resource's search for an acquirer. "My sense is that earlier this year they were probably looking for a sale in the low to mid-20s per share, predicated on three or four solid quarters," Mr. McMahon said.
Resource's stock price peaked in mid-July at $22.5625. Since then, the markets' plunge has taken its toll. In early October mortgage stocks were especially battered, and Resource dipped to $9.75 a share. It has recovered a bit since, closing Thursday at $14.0625 and trading at midmorning Friday at $14.75.
"I think management would have a hard time accepting a 25% premium to the current share price," Mr. McMahon said. "There's no need to sell right now. They have the luxury of waiting a few more quarters."
Resource has originated $11 billion of conventional mortgages and $400 million of subprime loans this year, Mr. Herbert said.
