New South Federal Savings Bank - Retail, Wholesale, Warehouse

Recent news in the Wall Street Journal and the Birmingham Business Journal point to more troubles for New South Federal Savings Bank. What is not being reported is that the bank has apparently ceased all mortgage lending.

Numerous sources have written us to report that the remaining retail mortgage lending operation was shut down on 2009-11-05. One tipster said, "they received an after hours email late last week informing them that they were closing the mortgage division effective immediately and no new loans would be accepted and that only loans that were locked would close." A call to one of the branches confirmed the bank is not accepting any new loan applicants at this time.

After shuttering its warehouse lending division and "suspending" wholesale and correspondent lending channels in January, the retail division continued to originate considerable volume. Thrift Financial Reports on file with the Office of Thrift Supervision for the quarter ended 2009-06-30 indicate the unit produced approximately $102 million per month in new residential loans. Wholesale loan purchases totaled $65,000 for the first quarter; there was no wholesale production for the second quarter of 2009 and the site link to the wholesale division is no longer working.

One source indicated that there had been negotiations underway to obtain a buyer for the mortgage unit, but that regulators had blocked a deal from being made. Employees are reportedly searching for work elsewhere while the division is being wound down. The bank's mortgage unit employed "roughly 187" people and had 40 mortgage branch locations at one time according to a prior report.

Original Listing - 2009-01-13: We contacted New South Federal Savings Bank to follow-up and see if they had resumed portfolio lending, and were told by the person who answered the phone that there was "no broker wholesale being done." When we asked to speak to someone in authority who could provide confirmation, we were put on the line with Jeff Martin, V.P. Wholesale Lending Division, who declined to comment saying, "We don't talk to companies like yours."

Original Ailing Listing - 2009-01-13: In separate announcements sent to clients, New South Federal Savings Bank gave notice it was shuttering its Warehouse lending division effective 2009-01-16, and "temporarily" suspending its Wholesale operations. Conforming wholesale was discontinued entirely, and new loan submissions for their non-prime portfolio products may resume "within the next 24 to 48 hours" pending updates to their rates and product matrix according to the memo. The information we have coming in, however, indicates that wholesale is most likely done entirely.

One broker wrote: "They were one of the last subprime lenders around. (They would still do 12 months bank statements, 500 score borrowers, etc.)" A number of sources reported their AE's had told them wholesale was discontinued, including correspondent channels. Emails we continue to receive also indicate nearly all of the division's staff were laid off. By one account, three high level execs were let go while another tipster said New South Federal "fired all but a handful of underwriters." Yet another source confirms, "only 4 people left in Wholesale to "clean up" they are definitely shut down." All of the AE's are gone.

Headquartered in Birmingham, AL (their sole full-service depository location), New South Federal Savings Bank averaged more that $64.5 million in overall loan originations per month in 2007. A tipster told us the wholesale division had been doing $25 to $30 million per month a couple months ago. Specific information on the scope of their warehouse lending was not readily available. We're told the retail operations will remain intact, which appeared to be the bulk of their production in the past. From a 2003-10-01 article about former CEO Rob Couch:

"The residential production operation is sizable, and between 90 percent and 95 percent of it is done through a retail branch network. Couch says of the 655 total employees of the thrift, roughly 187 are in the mortgage branches. As of the summer of 2003, the company had about 40 retail production branches from Virginia to Las Vegas. Yet the strength of its mortgage retail network is in Alabama, where New South has roughly 10 branches."

A source familiar with New South Federal indicated the bank itself may be in trouble. "They have drastically cut back on their auto financing as well, which was a huge part of the banks business."

We are working to get details on the layoffs and confirm the status of their wholesale platform. If you can help fill in the blanks, please drop us an email.