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Insurer-owned bank returns to securitization market after nearly 5 years

The surviving banking institution from TIAA's June 2017 acquisition of EverBank Financial Corp grew its balance sheet modestly in the fourth quarter of 2017 and is poised to conduct its first securitization of prime jumbo mortgage loans since the spring of 2013.

TIAA FSB, which conducts business under the EverBank and TIAA Direct brand names, ended the year with total assets and deposits of $34.30 billion and $22.94 billion, respectively, up from $33.27 billion and $22.88 billion as of Sept. 30, 2017. Both figures ranked second-highest to United Services Automobile Association's USAA Federal Savings Bank among the 23 banks and thrifts deemed to be owned or controlled by U.S.-based companies primarily considered to be engaged in the business of insurance.

Closed-end one-to-four family first mortgages of $15.72 billion as of Dec. 31, 2017, accounted for 54.3% of the consolidated loans and leases at TIAA FSB. The company, a specialist in jumbo loans through its EverBank heritage, classified nearly $1.06 billion in closed-end one-to-four family first mortgages as held-for-sale as of Dec. 31, 2017, up from $917.6 million on Sept. 30, 2017.

Rating agency DBRS put TIAA FSB's full-year 2017 residential mortgage origination volume at $7 billion through the combination of consumer direct, correspondent, and retail channels, down from $8.9 billion in 2016.

EverBank conducted two prime jumbo mortgage-backed securitizations in the first half of 2013, with the most recent of those transactions being the $303.3 million June 2013 EverBank Mortgage Loan Trust 2013-2. It was absent from the market as the issuance of new-issue, private-label RMBS ebbed and flowed in years thereafter as bank officials opted to engage in whole-loan sales.

EverBank Mortgage Loan Trust 2018-1 is backed by 551 30-year, fixed-rate, first-lien loans with an aggregate outstanding balance of $381.5 million, according to a DBRS presale report. The deal is larger than either of the first two EverBank transactions.

DBRS said that the ownership by Teachers Insurance & Annuity Association of America represents one of the securitization's strengths, given the rating agency's view that TIAA FSB is "strategically important" to the insurer. It noted that the insurer ranks "among the highest-rated financial institutions globally."

TIAA FSB's limited mortgage securitization history is among the challenges and mitigating factors listed by DBRS, though the rating agency characterized the performance of the two EverBank securitizations and the bank's non-securitized prime jumbo production between 2012 and 2016 as "stellar."

The securitization, which DBRS expects to close Feb. 23, would not be the first of its kind for an insurer-owned bank. USAA Federal has been a regular sponsor of auto securitizations for a number of years, including a $481 million deal in September 2017. That entity ended 2017 with total assets and deposits of $80.52 billion and $71.14 billion, respectively, up 3.6% and 2.7% from Dec. 31, 2016.

TIAA FSB's total deposits as of year-end 2017 marked growth of 16% on a year-over-year basis from the result reported by the former EverBank. But they declined 2% from the combined year-end 2016 totals of EverBank and the former TIAA-CREF Trust Co. FSB, despite sequential growth observed in the third quarter of 2017.

The pro forma result would render Auto Club Insurance Association's Auto Club Trust FSB as the fastest-growing insurer-owned bank on the basis of year-over-year deposit growth, despite news that the institution, which operates as AAA Bank, planned to shutter its remaining Omaha, Neb.-area branch. It continues to operate an office at its parent's Dearborn, Mich., headquarters and offers online banking products and services to AAA members in various states.

Auto Club Trust once operated three Omaha-area branches before closing two of them in May 2017. The third closed in December 2017 as the Omaha World-Herald reported that its foot traffic essentially succumbed to the broader evolution in consumer preferences towards mobile banking.

The remaining brick-and-mortar location had $63.9 million in deposits as of June 30, 2017. The three Omaha-area branches had combined deposits of $62.4 million on the same date in 2016. The year-over-year growth rate in Omaha deposits slowed from 104.6% at mid-year 2015 to 21.2% at mid-year 2016.

While branch-level deposit data is not available at year-end, the Omaha closures may have impacted Auto Club Trust's overall expansion in 2017. Its growth rate was the lowest the bank had posted in a calendar year since receiving regulatory approval in 2011 to expand the scope of its products and services.

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