Bank of America exits mortgage lending; Premier Financial stock climbs; Fidelity shares dip

By Sheri Kasprzak

New York, Oct. 25 - The credit crisis has taken its toll on yet another mortgage lender. Bank of America is not only scaling back its investment banking operations but has also decided to leave the mortgage-lending game.

Bank of America's president of consumer real estate and insurance services, Floyd Robinson, said in a statement released Thursday that the company's best opportunities lie outside of the mortgage-lending sector.

Shares of Bank of America slipped by 48 cents on Thursday to settle at $47.00 and had gained 20 cents after hours (NYSE: BAC).

The move will cost 700 people their jobs, the investment bank reported Thursday.

"It really has reached the investment banks," said one sellside trader of the credit crisis. "It's not the small-name mortgage lenders; it's not even the bigger mortgage lenders. You've got major investment banks now, so it's a serious, serious problem. Still, it's probably the smartest thing they could have done."

"While we are extremely proud of our strong track record in the wholesale business, we believe our long-term opportunity lies in maximizing our more competitive retail channels," Robinson said in a statement.

Countrywide shares fall

Earlier this year, Bank of America helped bail out troubled mortgage lender Countrywide Financial Corp. to the tune of $2 billion.

Shares of Countrywide fell on Thursday by 76 cents, or 5.5%, to close at $13.07, losing another 5 cents after hours (NYSE: CFC).

And speaking of Countrywide, investors are getting antsy over the company's anticipated third-quarter earnings, which are set to come out on Friday.

Analysts said they expect Countrywide to lose $1.26 per share on $231.8 million in revenues.

Elsewhere, Premier Financial Bancorp, Inc. agreed to buy Citizens First Bank, Inc. Thursday, sending shares of Premier up Thursday.

Shares of Premier were up on Thursday after the purchase announcement, which one sellside trader said wasn't that surprising.

"There's always some bigger bank buying out some smaller bank," said the sellside trader Thursday afternoon. "It really isn't anything new. It seem like a pretty standard deal, if you ask me."

Premier agreed to buy Citizens First for up to $11.7 million in a stock and cash offering. Premier will pay up to $5.3 million in cash in the offer and will pay $29.25 per share.

Citizens First is a community bank based in Ravenswood, W.Va. Premier is a Huntington, W.Va.-based bank holding company.

In other news, Fidelity National Information Services, Inc. is spinning off its mortgage services line into a separate, publicly traded company. Shares of Fidelity ended down Thursday.

The company said the move will provide the company more flexibility.

Premier to buy Citizens for $11.7 million

In Premier Financial's acquisition of Citizens First Bank, the bank holding company will pay $5.3 million in cash and will issue stock for the rest of the overall $11.7 million price tag. The company will pay $29.25 per share for Citizens' stock.

Shares of Premier climbed by 30 cents on Thursday to end at $14.63 (Nasdaq: PFBI).

"Citizens First Bank is a fast-growing, vibrant franchise and we are proud to have the chance for them to join the Premier family of community banks," said Robert W. Walker, Premier's chief executive officer, in a statement.

"We hope to be able to help Tom [Lookabaugh, co-founder of Citizens First,] and Scott [Miller, co-founder of Citizens First,] continue their franchise and help them to reach the level of financial performance enjoyed by our other affiliate banks."

"We believe Premier can give us a competitive edge by providing 'behind-the-scenes' expertise in the areas of compliance, auditing, IT and cost management while allowing us to remain community bankers and serve our customers as we always have," said Lookabaugh in a news release. "Also, through Premier's network of affiliate community banks, we will be able to offer a wider range of products and services as well as better serve larger loan and deposit customers."

In the transaction, Premier will issue a total of 480,000 shares and will pay $5.3 million in cash. The acquisition is set to close in the first quarter of 2008.

Fidelity to spin off mortgage processing biz

Under the terms of Fidelity's spinoff of its mortgage processing business, the company will contribute the assets of the Lender Processing Services division into a subsidiary for 100% of the new company's common stock and about $1.6 billion in the new company's debt securities.

Fidelity's stock dipped by 43 cents, or 0.92%, to close at $46.22 (NYSE: FIS).

"Transaction Processing Services and Lender Processing Services each have strong, competitive positive positions; robust, organic growth track records; and excellent potential for future growth," said William Foley, Fidelity National's executive chairman, in a statement.

"However, they are distinct and unique businesses that serve different customers, operate in different markets and attract different investors. We believe the proposed separation will provide more company flexibility and dedicated management focus with respect to product development, capital investment and strategic initiatives, which should ultimately drive higher value to our customers and shareholders."

Once the subsidiary is spun off, Fidelity said it plans to retire the debt exchanged for the new company's debt securities.

The spinoff is expected to be completed in mid-2008.

Fidelity said it will file a ruling request with the IRS to operate the spun off subsidiary on a tax-free basis.

The exact managerial details of the subsidiary have not yet been determined, a statement from Fidelity said Thursday.

Fidelity's Transaction Processing Services business provides core processing, e-payments processing, item processing and card processing solutions to financial institutions. The Lender Processing Services business provides integrated data, servicing and technology solutions to large-scale mortgage lenders.

Fidelity, based in Jacksonville, Fla., provides technology services to financial institutions.

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