TheMReport

January, 2013

TheMReport — News and strategies for the evolving mortgage marketplace.

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Local Edition s e c on da r y m a r k e t a na ly t ic s se r v ic i ng Or ig i nat ion SECONDARY MARKET How Will Banks Expand in 2013? According to Crowe Horwath's findings, financial institutions are focused on retaining lending portfolios and tweaking acquisition strategies to promote growth. Illinois // It seems more banks are eyeing the possibility of expansion in 2013, according to a survey sponsored by Crowe Horwath. The 2013 Bank Director & Crowe Horwath LLP M&A survey was completed by 224 CEOs, senior officers, and directors of banks across the country. An analysis of the survey will appear in the Q1 2013 issue of Bank Director magazine, scheduled for release this month. According to the results, 57 percent of banks intend to make some form of acquisition this year, up from 52 percent in the previous survey. Of those planning to acquire another institution, 45.5 percent are interested in buying a healthy bank, 20.6 percent are looking at branches, and 17.2 percent intend to buy an FDIC-assisted institution. About 9.9 percent said they intend to acquire a loan portfolio. Furthermore, many bankers expressed interest in acquisitions outside of their core banking franchises. Out of the banks looking at expanding, 28.8 percent said they intend to acquire a residential mortgage origination business in 2013. That comes as little surprise, Bank Director says in a release. "Mortgage companies that weathered the financial crisis are in a relatively strong position, particularly those that specialize in refinance," the release said. That may be easier said than done, however. While more bankers are interested in making acquisitions, 88.9 percent have no intention of selling any aspect of their business. Of those willing to sell, most intend to part with branches or loan portfolios—only 2 percent intend to put their actual bank on the block. 78 | The M Report There are other barriers to expansion as well. The majority (61.7 percent) of respondents consider unrealistic price expectations one of the top three hurdles stopping their acquisitions. Asset quality is another major concern, with 58.6 percent of bankers saying they're worried about the asset quality of their potential targets. The thirdmost cited barrier was limita- people are still committed to independence, not wanting to have your hometown bank owned by somebody else. There's still a lot of pride in that." Out of those who may be willing to sell, 20.8 percent said they would do so if the experience of leading the bank no longer provided the same satisfaction. Regulation was another driver for potential sellers, with (D-Massachusetts) is already making waves in Washington. The Huffington Post reports Warren has been selected to fill a soon-to-be-open seat on the Senate Banking Committee. The position is just the latest in a string of regulatory oversight roles for Warren, who has built a political career out of being "a tough cop on the beat" for Wall Street. As one of the creative minds behind the Consumer Financial Protection Bureau (CFPB), she was widely considered the natural pick to lead the agency until growing opposition drove her away. Unnamed sources also told The Huffington Post that Sen. Joe Manchin (D-West Virginia) will be filling the committee's other available seat. The positions will be open after the retirement of Sens. Herb Kohl (D-Wisconsin) and Daniel Akaka (D-Hawaii) this year. Hensarling Elected Chair of House Financial Services Committee Sen. Elizabeth Warren (D-Massachusetts) tions set by capital demands (34.4 percent). Pricing was also a major worrying point for sellers—of course, their concerns went in the other direction. Most potential sellers (71.1 percent) said the current pricing is just too low. Economic and regulatory uncertainty were the second- and third-most common responses. "I think people aren't as interested in selling as the pundits would say," said Rick Childs, director at Crowe Horwath. "Yes, regulation is depressing, and banking is not as fun [as it used to be]. But I think these 19.8 percent saying the high cost of regulation would bring them to the market. Warren to Serve on Senate Banking Committee The newly elected Senator and controversial Wall Street opponent has been chosen to join the powerful committee. Massachusetts // Although she just claimed her congressional chair, Sen. Elizabeth Warren The Texas representative is taking leadership of the congressional committee, as Rep. Spencer Bachus ends his six-year tenure as chair. Texas // Rep. Jeb Hensarling (R-Texas) has been elected chairman of the House Financial Services Committee. Hensarling replaces Rep. Spencer Bachus (R-Alabama), who headed the committee for six years. "I want to thank Chairman Spencer Bachus for his outstanding service on this committee," Hensarling said upon his appointment. "He has been a tireless proponent of free enterprise and free markets, and it has been a pleasure to serve under his leadership." Hensarling previously served as vice chairman of the House Financial Services Committee. Like Bachus, he is a conservative supporter of a limited government and a free market economy.

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