...they file an 8k declaring they're closing a mortgage origination branch in Denver...a branch which accounted for something like 20% of their profits...no press release...not a word of explanation as to why...very strange...
That doesn't make sense. This branch is 1 of 16 branch offices responsible for 4%, 5%, and 6% of loan origination volume in 2010, 2011, and 2012. It can't be responsible for 20% of profits. It must be something like an impairment charge for the closed branch compared to the company's operating profit or something. I agree that some clarification from the company would be welcome.
The extremely fat margin to resell loans was under pressure for the past few months. Some time in 4Q12 a WPO article said mortgage bankers were making three times (my words) the normal profit on reselling loans. The problem then was that demand for the paper was high but the pipeline to produce these mortgage loans could not keep up. Real estate attorneys were overwhelmed by the volume of refi, for example. It sometimes took 90 days to close.
The feeding frenzy started long ago, we may be into a period of full reversal. I believe that mortgage origination and reselling is still a viable business but won't be nearly as profitable going forward. For one thing, refi was over four times the volume of purchase financing. But once rates stabilize or perk up, refi volume would shrink dramatically.
This may be the reason why ANCX decided to close Colorado branch, and per my thinking other branch closing may follow as well.
ANCX has been very aggressive in pursuing opportunities. However, mortgage banking dwarf all other revenue combined. This reversal of profitability in mortgage sector will cut deep into the bottom line, and may for a long time.
I still like the bank. It's genetically programmed to grow. It'll find ways to grow again. But before then, some investors may sell the shares and move on.
...I know nothing about the company...I happened to see it on the losers list and was basically just referring to what the 8K said:
"As such, this event is considered an asset disposition under Item 2.01 of Form 8-K as the effects of the Branch closure exceed 20% of the Corporation's consolidated income before income tax as reported for the year ended December 31, 2012."
...it's extraordinarily vague..."exceeds" 20%????...well, that cerainly leaves a lot of room for speculation...