ANB Financial Purchases Two United Bank Mortgage Offices

Bentonville-chartered ANB Financial N.A. purchased two mortgage processing offices from Springdale thrift United Bank in late June.

What’s the catch for the two Northwest Arkansas banks?

The loan operations are in Little Rock and Conway.

The deal closed on June 16, just seven business days after officials from both banks began talks. Financial terms of the transaction were not disclosed, but Dan Dykema, chairman and CEO of ANB, said the two offices in central Arkansas process about $15 million a month in residential and wholesale residential loans nationwide.

ANB closes about $50 million a month in loans, Dykema said, so the operation could add 20 percent or so to the 12-year-old bank’s mortgage business.

Jim Bell heads up the two offices and is a former senior vice president of UB. He doesn’t yet know what his title will be under the Bentonville ownership.

Bell said the offices processed about $120 million in loans in 2005. He didn’t know exact figures, but he guessed that was down “significantly” from a boom his two offices experienced in 2004.

In May the offices closed $9.5 million in loans, Bell said, but he’s seen the operation close as much as $30 million in a single month.

The mortgage offices are not merely central Arkansas loan production offices (LPOs), but are mostly national wholesale clearinghouses that underwrite, process and close loans for other banks, then typically sell loans to investors, or secondary market lenders.

“We’re a turnkey operation,” Bell said.

The offices have a niche in “high loan-to-value” loans, or investment loans, like non-owner occupied homes (rental properties) or 100 percent mortgages on vacation homes, Bell said.

The deal is complete on paper, and ANB has taken responsibility for the offices, Dykema said. But the two offices will operate under the UB name until contracts with secondary market lenders can be re-inked and the offices can be technologically linked to ANB’s computers. There was a 60-day limit written into the contract, he said, so by Aug. 16, even superficial parts of the transaction should be complete.

The Little Rock office employs about 15 and the Conway office about five. The offices had been a separate income stream for United Bank and its umbrella, United Holding Co.

Dykema has no plans to close the offices or change the staff in any way, he said.

Gray Matters LLC of Springdale, the parent company for the Northwest Arkansas Business Journal, leases about 5,500 SF of office space from UHC. The publication operates in the same building as the financial holding company’s offices.

Dykema said the central Arkansas operation no longer fit UB’s strategy, and fit very well with ANB’s strategy of expanding outside of Northwest Arkansas.

In January 2005, ANB opened a loan production office in St. George, Utah and another this January in Jackson, Wyo.

 

ANBin’ It

“It’s a modest line of production,” said Randy Dennis, president of DD&F Consulting Group of Little Rock. But, he said, “Mr. Dykema is a sophisticated buyer.”

DD&F Consulting helps banks with mergers and acquisitions, marketing, compliance training and strategic planning. Dennis said his firm had nothing to do with the transaction and that it would’ve been a fairly straightforward purchase anyway.

“You’re buying people and their ability to generate business,” he said.

Dennis wouldn’t speculate on the new income for ANB or what the average “spread” on the operation’s purchase of loans and the selling of those loans on the secondary market might be.

“Jim’s been around a long time,” Dennis said, so he deals in all manner “of prime and sub prime paper,” meaning the spreads will vary.

Dykema said the new mortgage arm will give ANB some new products that it hasn’t yet developed, such as the non-owner occupied mortgage, and that ANB will allow the central Arkansas offices more lending options.

The two offices will now have the ability to do new construction and development lending, he said.

“We’re a real estate lender,” Dykema said about his bank’s overall focus.

Also, “the wholesale operation may drive us right into other places we might like to expand,” he said.

The hope is that having a relationship through the Little Rock operation to lay the groundwork beforehand may give the little Bentonville bank a leg up outside the state.

ANB has made quiet moves into other markets, and Dykema has said he has an eye on some prime targets for more loan production offices.

He won’t say how well the St. George office has done, only that he’s pleased with it.

But information published on the St. George Chamber of Commerce’s Web site said the office closed $375 million in loans before the end of its first year.

Coincidentally, St. George is located in Utah’s own Washington County, and the Chamber claims about 1,000 people move to the area each month, a number that echoes statistics on Northwest Arkansas’ growth.

Various title companies in the town of about 60,000 wouldn’t divulge a dollar figure, but some did confirm that ANB was “going gangbusters.”

But despite the westward reach of the ANB arm and hints that the bank is just starting its venture into new territories, Dykema said he’s not interested in taking ANB public.

The bank closed 2005 with $966 million in assets, up 53 percent from a year before and up 100 percent from 2001.

 

UB Jammin’

The Little Rock and Conway mortgage offices had operated as part of United Bank since Aug. 1, 2004.

Before that, the locations had been separate from the bank and operated as United Mortgage under the United Holding Co. umbrella.

In July 2004, the Office of Thrift Supervision issued cease-and-desist orders to United Bank and to United Holding Co.

The order to UHC said, “The OTS finds that the holding company has engaged in unsafe and unsound practices” based on a March 2004 examination by the agency.

The order to the bank cited 13 violations of the OTS’s regulations, including record-keeping issues, financial policies and transactions with affiliates, truth in lending regulations and equal credit opportunity regulations.

Both the bank and the holding company promised to take corrective action immediately, and part of that included rolling the mortgage operations into the bank’s business, which it did in August.

Craig Young, CEO of UHC spoke to the Business Journal about the transaction with ANB because the bank’s president and CEO, Jeff Lynch was on a family vacation at press time.

Young said United Bank retained the rights to do wholesale lending across state lines, but he didn’t think it would pursue that business much.

The bank is focusing on its business in Washington and Benton counties, he said.

“We’ve got all the products and services the other banks have,” Young said. “We can pretty much, in 15 to 20 minutes, get our people together [to approve a deal]. We can react faster.”

United Bank had asset growth of 7 percent from 2004 to 2005, ending the year with $147.2 million. Since 2001, the bank has grown its assets by 76 percent.

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Click here for a chart detailing ANB’s growth.