National Commerce Financial Corp. will double its mortgage business and speed its Atlanta expansion by acquiring BancMortgage Financial Corp.
Memphis-based National Commerce, which has assets of $21 billion, began an ambitious expansion in the Atlanta market in April. Its deal to buy BancMortgage Financial, announced Wednesday, will give it a mortgage originator and wholesaler that has its headquarters in the city and operates in Georgia and Virginia.
BancMortgage is a division of Habersham Bancorp, a $550 million-asset community bank in Cornelia, Ga. Besides originating mortgages through its own offices, it sells through third-party mortgage brokers and operates a construction lending division focusing on residential development in Atlanta.
National Commerce said it expects to have 60 branches open or under development in the Atlanta area by the end of 2003, including 30 in Kroger Co. grocery stores and eight in Wal-Mart stores. (The BancMortgage deal is expected to be completed this year. The price was not disclosed.)
National Commerce said that buying the mortgage outfit would add to its own earnings in the first year of operations. It noted that BancMortgage originated $1.4 billion of mortgages in 2001, equaling what National Commerce did across its entire Southeast territory last year.
BancMortgage was founded in 1995 and has grown rapidly. Its loan volume has grown 43% a year compounded, double the national average. In the third quarter it recorded $448 million of new loans.
William R. Reed Jr., National Commerce's chief operating officer, said in an interview Wednesday, "This expands us into Atlanta in a way equal to or actually better than most of our [Southeast] footprint, in terms of offering our retail customer base the opportunity for home mortgages or secondary mortgages."
Jefferson Harralson, an analyst at Keefe, Bruyette & Woods Inc., in New York, said, "This mortgage acquisition is evidence that National Commerce is layering on additional services much quicker in their de novo expansion in Atlanta than they have in past" expansion efforts.
Mr. Harralson said the deal also points to a "slight change of model" since the company was created two years ago in the merger of National Bank of Commerce with CCB Financial Corp., of Durham, N.C.
The strategy is to enter a market through grocery store branches and to add traditional branches and other services, such as mortgage and commercial lending.
National Commerce's ratcheting up in Atlanta apparently came at just the right time for Habersham, which struggled to keep up with rapid growth at BancMortgage Financial in the mortgage and refinancing boom.
Habersham said in a Nov. 14 securities filing that it was in negotiations to sell the mortgage business to BancMortgage vice chairmen Robert S. Cannon and Anthony L. Watts. Because the business was growing faster than Habersham's ability to supply capital, the bank in early November began negotiating to sell it to the two executives.
Mr. Cannon and Mr. Watts are to continue running the business, which is to keep its name and 204 employees, including 51 mortgage originators in eight offices.
National Commerce is to buy BancMortgage Financial in two steps. Habersham is to sell the business to Mr. Cannon and Mr. Watts. Their contracts with Habersham gave them an option to buy the business at book value, which was $9.46 million as of Sept. 30, according to a securities filing. After closing the initial deal, Mr. Cannon and Mr. Watts are to sell BancMortgage Financial right away to National Commerce.
