Cornerstone Home's bank buy gets final approvals

Cornerstone Home Lending moved one step closer to completing the acquisition of Roscoe (Texas) State Bank following receipt of all necessary regulatory approvals.

The Houston-based nonbank expects the transaction to close on or about Oct. 1, subject to completion of the remaining closing conditions. This deal was first announced in June 2021.

This deal will create Cornerstone Capital Bank, which will have more than $380 million in consolidated capital and over $1.5 billion in consolidated assets. Its three business segments will be mortgage lending and servicing; commercial and retail banking; and institutional banking.

Roscoe State Bank was founded in 1906 with three banking centers. In addition to one located in Roscoe, the bank has offices in Sweetwater and Bastrop.

"Our experience as a technology innovator will create a category-defining experience that will expand our scope of services to customers, complement and diversify our business, and lower our cost of funds," Cornerstone Home Lending Chairman and CEO Marc Laird said in a press release. "Additionally, we plan to add seasoned commercial bankers to complement our existing team of mortgage lending professionals and offer more products and services to our customers."

In April, Cornerstone announced it would start bringing its mortgage servicing function in-house.

While these transactions are not common, nonbanks that have purchased depositories often note that a key benefit to doing so is that gives them options beyond warehouse lines for funding mortgage loans.

In addition, banks have the ability and funds to hold mortgages on their balance sheet. Thus they can keep products, especially adjustable-rate or jumbo mortgages, in portfolio as investments or until a secondary market execution becomes advantageous. Most nonbanks lack the capital to do this.

An example of a mortgage nonbank buying a depository involved the Stitt Family Trusts, the parent company of Tulsa, Oklahoma's Gateway Mortgage, purchasing Farmers Exchange Bank of Cherokee, Oklahoma, in 2018. The mortgage company was merged into the bank and renamed Gateway First Bank.

(Former Gateway Mortgage CEO and current Oklahoma Governor Kevin Stitt is part of the Stitt Family Trusts.)

However, when Pittsburgh-based Victorian Finance CEO Sonny Bringol invested in Farmers Bank in Parsons, Tennessee, he did not combine those businesses. Bringol became chairman of the bank earlier this month.

He is planning to grow Farmers' mortgage business and pointed out its advantages versus nonbanks included a lower cost of funds.

Sometimes these transactions do not work out. Both Countrywide and its former corporate sibling IndyMac acquired depositories as part of their growth spurts. OneWest Bank, the former IndyMac business, is now owned by CIT.