Ten years after one U.S. insurer-owned bank beefed up its forward and reserve residential mortgage lending capabilities through M&A, another is trying its hand at inorganic expansion in those businesses.
Mutual of Omaha Bank, a subsidiary of Mutual of Omaha Insurance Co., said May 3 that it entered a definitive agreement to acquire Synergy One Lending Inc., a San Diego-based provider of a suite of residential financing products and services with licenses to operate in 45 states. The deal is evocative of a series of transactions executed in early 2008 by MetLife Bank NA, the then-banking subsidiary of MetLife Inc., in terms of the primary focus of the acquirer's owner in the insurance business and the capabilities the target brings to bear.
Data reported under the Home Mortgage Disclosure Act show that Synergy One funded $682.3 million in mortgages in 2016, up from $414.3 million in 2015. It also was a leader in reverse mortgages, with U.S. Department of Housing and Urban Development data ranking the company as the nation's No. 6 lender based on the number of Home Equity Conversion Mortgage, or HECM, endorsements through the first four months of 2018. The U.S. government insures reverse mortgages under the Federal Housing Administration's HECM program.
Mutual of Omaha Bank Chairman and CEO Jeff Schmid said that Synergy One and his company are "extremely complementary" from cultural and strategic perspectives. The mortgage lender will continue to operate under its existing name, and it will benefit from Mutual of Omaha's financial resources and national presence,
Acquisitions contributed to Mutual of Omaha Bank's initial expansion in the late 2000s through FDIC-assisted transactions involving a collection of failed banks. Most notable among them was its July 2008 deal to assume deposits from Nevada and California subsidiaries of Scottsdale, Ariz.-based First National Bank Holding Co.
At about the same time, the former MetLife Bank bought the national residential mortgage division of First Horizon National Corp.'s First Tennessee Bank NA in August 2008. The deal, which was intended to make MetLife a major player in the mortgage market, gave the acquirer a presence in both origination and servicing with 230 retail and wholesale offices, more than 3,000 employees and no loans held for investment at a time in which such assets faced particular scrutiny. Three months earlier, the bank acquired EverBank Reverse Mortgage LLC, which at the time ranked as the No. 9 lender in that business based on HECM endorsements through the first five months of 2008.
Financial crisis-era circumstances ultimately led MetLife to divest the depository business of MetLife Bank in an agreement announced in December 2011 as part of its effort to deregister as a bank holding company. Several other former insurance company owners of depository institutions pursued a similar strategy around the same time. Prior to closing the sale of the bank, MetLife announced that it would exit the reverse mortgage business and sell the associated servicing portfolio to Nationstar Mortgage Holdings Inc.
Mutual of Omaha explained that dramatic changes to the HECM program in 2013 have made the reverse mortgage program more consumer-friendly and a valuable financial planning tool for senior citizens.
Though reverse mortgages were not widely held among depository institutions, according to 2017 call report data, at least one of the entities classified for the purposes of this article as a U.S. insurer-owned bank maintains some exposure to that asset class. TIAA FSB, the successor to EverBank following that institution's June 2017 sale to TIAA, reported $103.9 million in HECM reverse mortgages and $18.3 million in proprietary reverse mortgages as held for investment as of Dec. 31, 2017.
Based on March 31 total deposits, TIAA FSB ranked second only to United Services Automobile Association's USAA Federal Savings Bank among the U.S. insurer-owned banks. Mutual of Omaha Bank was fifth, behind State Farm Mutual Automobile Insurance Co.'s State Farm Bank FSB and UnitedHealth Group Inc.'s Optum Bank Inc.