Mergers & Acquisitions

Citizens Financial Buys Franklin American Mortgage

As the pace of mortgage lending slows, Citizens acquires a servicing portfolio that produces fee income.
William SprouseJune 4, 2018
Citizens Financial Buys Franklin American Mortgage

Citizens Financial Group has agreed to buy Franklin American Mortgage for $511 million in cash, the companies announced.

Citizens said that the deal would triple the size of its off-balance-sheet mortgage-servicing portfolio and position it as one of the country’s top-15 bank-owned mortgage servicing and origination companies.

The deal will also more than double Citizens’ mortgage origination platform and diversify its lending channels, the bank said.

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“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.

“Franklin American Mortgage’s strong history of excellence in customer service is a great cultural fit with our organization.”

Citizens gets assets with a net book value of about $488 million, including a mortgage servicing rights portfolio worth $550 million, the companies said.

Servicing homeowners’ monthly loan payments “is the part of the mortgage industry that typically performs well in a rising-rate environment,” said National Mortgage News.

Franklin American originated $5.8 billion in mortgages in 2017, the trade publication reported, citing federal Home Mortgage Disclosure Act data.

Eric Schuppenhauer, Citizens’ president of home mortgage, will head the combined mortgage business. Franklin American’s chief financial officer and chief operating officer, Scott Tansil, will run the correspondent and wholesale origination businesses headquartered in Franklin, Tenn.

Franklin American will maintain a significant presence in Texas and in Tennessee. Citizens is headquartered in Rhode Island.

“We are extremely pleased with the financial and strategic opportunities the acquisition of Franklin American Mortgage creates for Citizens,” Citizens Chief Financial Officer, John Woods, said.

“The combined platform will provide significant additional fee income opportunities with enhanced channel diversification, as well as opportunities to realize efficiency gains.”

The deal is expected to close in the third quarter.