Magazine article American Banker

Deals Show Small Banks' Appetite for Retail Channel

Magazine article American Banker

Deals Show Small Banks' Appetite for Retail Channel

Article excerpt

Executives involved in two small deals announced Wednesday share a common view: Despite declining refinancing volumes, home loans are an important offering for community banks.

But as mortgage margins shrivel and commercial lending picks up, small banks are reconsidering the value of a wholesale channel, especially one that serves borrowers outside a bank's main markets, observers said.

In agreeing to sell George Mason Mortgage LLC to Cardinal Financial Corp., United Bankshares Inc. of Parkersburg, W.Va., stressed that it would remain a retail mortgage lender -- by sending requests fielded by branch employees to another division of United.

"The part I want to emphasize is we're still very much in the business," said Steven E. Wilson, the chief financial officer of the parent of United Bank, which has $3 billion of assets and 91 offices in four states and the District of Columbia.

United and analysts discussed how the deal would eliminate earnings volatility from George Mason's wholesale channel, which had hurt the company's shares.

Mr. Wilson said loans from brokers, correspondents, and joint ventures with builders made up 50% of George Mason's $4 billion of originations last year.

But Bernard H. Clineburg, Cardinal's chairman, president, and chief executive, said he liked George Mason because most of its production comes from the retail channel.

The $47 million sale is expected to close by the end of next month. United said it would use the proceeds to repay long-term Federal Home Loan Bank advances.

George Mason has nine offices in the Washington area. Mr. Clineburg said that a company that has strong relationships with builders and real estate agents has "an opportunity to touch a lot more people and cross-sell products" such as insurance -- especially in Virginia, where residential real estate markets are hot. …

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