Magazine article American Banker

Arkansas Sale of Servicing Illustrates Industry Trend

Magazine article American Banker

Arkansas Sale of Servicing Illustrates Industry Trend

Article excerpt

The mortgage subsidiary of First Commercial Bank in Little Rock bought a $1.2 billion servicing package from another Arkansas bank, Simmons First National Bank.

The purchase, coming as Regions Financial Corp. is about to buy First Commercial's parent company, exemplifies a trend: Smaller servicers either expanding their portfolios or leaving the increasingly competitive and consolidated business.

"If you have a servicing portfolio of $1.2 billion these days and you're relatively small, there are others out there who could probably service it at a lower cost," said Geoffrey Glick, executive vice president at Hamilton, Carter, Smith & Co., a servicing broker. "It's worth more in their hands than retaining it."

First Commercial Mortgage Co. has been trying to increase its portfolio for several years. The Simmons deal would boost it to $8 billion, from $7 billion last year and $3 billion in 1994.

Regions expects to buy First Commercial Corp. this quarter. The deal would increase its servicing portfolio to $23 billion, putting it among the top 25 in the business.

"Getting bigger enables you to give greater returns to your shareholders," said Jack Fleischauer, chairman, president, and chief executive officer of First Commercial Bank.

For Simmons, however, selling the servicing rights to First Commercial was an exit strategy.

"Because the competitive environment has changed, the margin of profit has dropped significantly," said CEO Thomas May. …

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