Citizens Bank is buying the assets of the Tennessee-based Franklin American Mortgage Co.
The bank announced this morning that it would pay over $500 million for the mortgage company, valuing it at approximately 1.1 times tangible book value.
Franklin American managed a $41.4 billion mortgage servicing portfolio and generated approximately $13.7 billion in annualized originations for the first quarter 2018, nearly 100 percent of which was conforming.
The addition of Franklin American Mortgage triples the size of Citizens’ off-balance sheet mortgage servicing portfolio, providing significantly more balance sheet leverage. The transaction also more than doubles Citizens’ origination platform while significantly diversifying its origination capabilities with the addition of correspondent and wholesale channels, which complement Citizens’ strong retail capabilities.
“This transaction takes our mortgage business to the next level, expanding our reach and adding immediate scale in servicing as well as innovative correspondent and wholesale solutions,” Brad Conner, Citizens’ vice chairman and head of consumer banking, said in a statement. “Franklin American Mortgage’s strong history of excellence in customer service is a great cultural fit with our organization and we are excited to welcome a new group of colleagues to Citizens.”
Upon closing Citizens will become a top-15 bank-owned, residential mortgage servicing and origination platform. The company will also add numerous servicing households and wholesale-broker relationships, expand its origination presence and greatly improve its mix of conforming originations.
The combined mortgage business will be led by Eric Schuppenhauer, current president of home mortgage at Citizens. Following the completion of the transaction, Scott Tansil, CFO and COO of Franklin American Mortgage, will lead the acquired correspondent and wholesale origination businesses headquartered in Franklin, Tennessee.
“We view this transaction as an opportunity to add scale and capital to the outstanding platform and customer-centric culture that our employees have created,” Dan Crockett, owner, president and CEO of Franklin American Mortgage, said in a statement. “Citizens shares our deep and enduring focus on delivering for customers, as well as our strong commitment to colleagues and communities, which Franklin American Mortgage employees have long embraced. Together, we’ll be able to increase our positive impact on customers and grow the business platforms that are a great source of pride for us.”
Franklin American Mortgage has approximately 900 employees and Citizens expects to maintain a significant presence in Tennessee and Texas associated with the expanded distribution platform of the combined business. Dan Crockett will remain involved in the business in an advisory role with Citizens Home Mortgage.
The transaction is expected to close in the third quarter of 2018, subject to customary closing terms and conditions and regulatory approval.
