National Commerce Bancorp is seeking a larger share of Tennessee's home mortgage market.
Last week the $5.8 billion-asset Memphis company said it would buy privately held Southeastern Mortgage of Tennessee for an undisclosed amount. If the deal is approved by regulators, National Commerce would take control of four offices in and around Nashville, Southeastern's home base.
William Reed, a National Commerce vice chairman, said it hopes the deal will allow it to become a more active player in Tennessee's mortgage market.
"We've been a very below-average mortgage originator, and our customers and the bank are unhappy with the way we've managed that business," he said. "I think Southeastern is going to stimulate our ability to process and service our home origination business. We know the market is much bigger ... and we just haven't had the systems and processes in place."
L.E. Holland, National Commerce's chief financial officer, said the bank presently controls a "tiny" percentage of Tennessee's mortgage market.
Mr. Reed said Southeastern was attractive because National Commerce had come to know it through business dealings as a highly competent shop. He added that Southeastern's personnel will stay on board to guide the mortgage expansion plan.
"We intend to leverage their skills and knowledge throughout the bank," he said. "So we basically are just going to move our mortgage company into theirs and let them run it."
Though the banking company seeks a larger slice of Tennessee's mortgage pie, Mr. Reed said National Commerce will not buy more mortgage originators. "We think this one acquisition will help take care of all our needs and help us be a much more substantial player in the business," he said.
David Trone, an analyst for Credit Suisse First Boston in New York, expressed approval of the deal despite a recent rise in interest rates that could hamper the mortgage market.
"National Commerce has been a prudent buyer of businesses in the past," he said, "and one would only assume that they've taken the recent decline in the mortgage business into account when they paid for this company."
This article first appeared on American Banker Online.