Add Sterling Bancorp (STL) in New York to the growing list of community banks ramping up in residential lending.
The $2.6 billion-asset company announced Thursday that it has acquired Universal Mortgage, a 21-year-old firm based in Brooklyn. Louis J. Cappelli, Sterling's chairman and chief executive would enhance Sterling's fee income while giving the bank a physical presence in Brooklyn.
Universal has two offices in Brooklyn. Sterling's offices are in Manhattan, Queens and Long Island.
With record low interest rates generating a boom in refinancing activity, many commercially focused community banks have been beefing up their mortgage operations either by hiring teams of mortgage lenders from larger rivals or acquiring smaller mortgage operations. The $4.5 billion-asset Berkshire Hills Bancorp (BHLB) in Pittsfield, Mass., recently expanded its mortgage lending into the Boston area with its acquisition of Greenpark Mortgage of Needham, Mass., and Eagle Bancorp (EGBN) in Bethesda, Md., Cardinal Financial (CFNL) in McLean, Va., and Washington Trust Bancorp (WASH) in Westerly, R.I., are among the banking companies that have been aggressively adding staff and opening mortgage offices.
Sterling did not disclose the terms of the acquisition, which was completed this week. Universal's mortgage lending team, led by its principals Norman Calvo and Edward Ades, will join Sterling, effective immediately.
The old 3-6-3 savings banker adage/jibe is now .25-3.75-5. Longer workday (ha!)and better spread by 50bps but risk x 10. All of the rush to acquire more entities to "cash in" on the refi run-up, may be a rush to get bought. While community banks are proud to call themselves that, those that are not mutual really want to please stockholders. The old joke Q: "How long have you been President of XYZ Corp?" A: "5 quarters" is a more valid truism than ever before.
Community Banks of the stock variety such as $BHLB have to grow large enough that the stockholders get a good return during independence and a nice premium when the institution is sold. Mutuals are fighting to compete. No ability to raise capital except through Mutual Holding Company and that's not good vehicle these days. Without the capital to build infrastructure, especially electronic, they can muddle along serving the public without much growth. That's fine so long as the customer base remains level or grows slightly. That requires that the Bank stay competitive on products. Rates can be a tad higher and the product mix slightly smaller but all of the everyday convenience EFT/ACH offerings have to be in place.
The $BHLBs of the world are no longer community banks. They may be based in a community but the focus is on growth and pleasing stockholders. That's fine but it's not community banking.
Mortgage lending is the tip of the iceberg. The new Titanic is "just around the corner"
Richard Isacoff
isacofflaw@msn.com