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Mortgage banking M&A activity increases in Q1 after deal drought

Two mortgage banking M&A deals were announced in the first quarter of 2022, following a two-year stretch with just one mortgage banking M&A deal announcement.

Wisconsin-based mortgage banking company Thompson Kane & Co. LLC announced on March 23 its pplanned acquisition of Wisconsin-based Benton State Bank. Edelman & Co. Ltd. is the financial adviser to Thompson Kane on the deal, which is expected to close by the end of 2022.

"We can satisfy a large chunk of what consumers demand today but … it's difficult to do home equity loans," John C. Thompson, president and CEO of Thompson Kane, said in an interview.

"We can do 30-year fixed-rate mortgages for the government entities [including] Fannie Mae, Freddie Mac, FHA, VA, USDA and 30-year fixed-rate jumbo loans but anything other than that, we have a tougher time helping the customer accomplish simply because we don't have the deposits," Thompson said.

With the acquisition of Benton State Bank, Thompson Kane's ability to lend has now expanded significantly.

"We can, in essence, [now] lend 10 times more money," Thompson said.

The other mortgage banking M&A deal announcement in 2022 came in the first week of January, when Mortgage Solutions of Colorado LLC, formerly known as Freedom Financial Services, announced its planned acquisition of Colorado-based First American State Bank on Jan. 7.

First American State Bank had $265.6 million in assets at the time of the deal, which marked the highest total assets figure for any target company involved in a mortgage banking M&A deal since 2017.

Along with the two aforementioned deals, Cornerstone Home Lending Inc.'s acquisition of Texas-based Roscoe State Bank is the only other mortgage banking M&A deal awaiting completion. The deal was announced June 14, 2021.

The Cornerstone-Roscoe deal ended a mortgage banking M&A drought that spanned nearly three years. The last mortgage banking deal announced before that was on Aug. 22, 2018, when Luminate Home Loans Inc., formerly known as American Mortgage & Equity Consultants Inc., acquired American Equity Bank, formerly known as Equity Bank. That deal closed Aug. 22, 2019.

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The American Mortgage-Equity deal was one of four mortgage broker and bank deals announced in 2018, which is the most deals announced in any year since at least 2017.

One of those four deals, Ruoff Financial Corp.'s acquisition of SBB Bancshares Inc., was ultimately terminated March 5, 2020. On the same day the deal was officially terminated, Piper Holdings Inc. announced its acquisition of SBB Bancshares in a deal that closed in July 2020.

The only other mortgage banking M&A deal to be terminated in the past five years was Atlantic Bay Mortgage Group LLC's acquisition of Virginia Community Bank in 2018. The companies agreed to a mutual termination, and in March 2019, Blue Ridge Bankshares Inc. announced an agreement to acquire Virginia Community Bancshares in a $42.5 million deal that closed in December 2019.