Mergers and Acquisitions

Residential and commercial originator United Financial Mortgage Corp., Oakbrook, Ill., recently announced it signed a definitive agreement to acquire retail mortgage banker Vision Mortgage Group Inc. of Rockford, Ill. Terms of the transaction were not disclosed.

United Financial, which according to its president had mortgage production of $2.7 billion and a servicing portfolio of $1.4 billion during its fiscal year ended April 30, said it expects that the acquisition will be non-dilutive and immediately accretive to its earnings.

“We are excited about incorporating Vision Mortgage’s business model, which is focused on developing realtor and builder relationships, into our retail origination network,” said United Financial CEO and president Steve Khoshabe in a written statement. “We also anticipate that we will improve Vision Mortgage’s financial performance as a result of our secondary market execution, lower cost of warehouse financing and the introduction of administrative synergies.”

In 2003, Vision reportedly originated $148 million in mortgage loans and through the first seven months of this year generated volume of $78.6 million, of which purchase money mortgages accounted for 65%.

The Rockford mortgage lender’s three Illinois branches and one in Washington will reportedly bring the buyer’s total of retail branches to 33.

All 55 Vision employees will continue to be employed by the buyer, Khoshabe said. Upon consummation of the acquisition, Vision will be a subsidiary of United Financial and its founders, Cass Wolfenberger and Michael Urnezis, will respectively serve as president and senior vice president, according to the announcement.

Vision’s Wolfenberger described the transaction as a “a perfect fit,” adding that United Financial provides “the financial foundation necessary” for growth.

Joining the merger wave was Citigroup Inc., which announced it will acquire Texas-based First American Bank, SSB. The companies did not disclose the terms of the transaction, but said they expect it to be immediately accretive to Citigroup’s earnings and to close in the first quarter of 2005.

Although Citigroup has major finance operations in Texas such as Citimortgage and subprime lender CitiFinancial, it has no retail banking operations in the state, according to the announcement. As “one of the largest independent financial institutions in Texas,” First American, which is also a mortgage lender, will reportedly give Citigroup over 100 branches, $3.5 billion in assets and approximately 120,000 new customers.

“We are strongly focused on investing in the future growth of Citigroup’s businesses,” Citigroup president and CEO Robert Willumstad said in a written statement. “Texas is a highly attractive market, and expanding Citigroup’s Citibank retail distribution franchise in the U.S., especially in important geographies such as this, is a key element of our strategy. To accomplish our goals, we intend to drive the growth of the retail banking operation in Texas with our successful consumer banking model, complementing First American Bank’s already powerful commercial banking engine.“

First American chairman and CEO Donald Adam said he was “very pleased” with Citigroup’s decision. “As the world’s financial services leader, I feel as though Citigroup is the clear choice to lead our bank into becoming a leading financial services provider in Texas,” he added.

The New York financial institution — which employs 16,000 people in Texas throughout its different businesses — said it currently plans to retain all of First American’s sales staff and branches, which will be converted to Citibank Financial Centers under the Citibank brand name after the acquisition.

While no job cuts are in sight at Citigroup or United Financial, one transaction that has resulted in mortgage employee reductions was that between Virginia-based United First Mortgage Inc. and Access National Bank.

United First’s parent company, First Community Bancshares Inc., announced last week that it closed on the sale of 100% of the subsidiary’s stock, which it expects will give it a third quarter after-tax gain of approximately $350,000.

United First’s ongoing loan origination channels in Midlothian, Fredericksburg and Staunton, Va., will reportedly be consolidated into Access National Mortgage Corp. Prior to consummation of the transaction, First Community and United First set into motion actions necessary to close and wind down all other operations of the sold subsidiary, including the termination of several mortgage employees.

About 60 days prior to the sale, approximately 10 mortgage employees were laid off, and immediately before the consummation of the acquisition, another 10 were dismissed, said Bob Schumacher, chief financial officer of First Community. Only 15 employees were acquired by Access, according to spokesman Michael Clarke.

First Community’s closed transaction succeeds its announcement last month that it had terminated the agreement to sell United First to certain members of the company’s management team, and that the subsidiary would maintain the retail business, but exit the wholesale business.

The acquisition of United First provides Access with 50 broker relationships that it intends to utilize to accelerate the expansion of a recently launched wholesale mortgage division, Clarke said.

One lender that has defied the wave, for the moment at least, was Cendant Corp. The franchise conglomerate had announced last month it was discussing the potential sale of its mortgage operations with an undisclosed party, but last week said it called off talks with the potential purchaser. Cendant “will continue the process of receiving proposals and holding preliminary discussions with other parties regarding the sale of such business and, as previously stated, is also considering other strategic alternatives for the business,” it said.