RED BANK, N.J.
Aug. 6, 2014
/PRNewswire/ -- ZAIS Financial Corp. (NYSE: ZFC) ("ZAIS Financial" or the "Company") today announced that it has entered into a definitive agreement to acquire GMFS, LLC ("GMFS").
GMFS is a privately-owned mortgage company that originates residential mortgage loans, primarily in the southern U.S., and holds the servicing rights on those mortgages. Founded in 1999, GMFS is headquartered in
Baton Rouge, LA
and is licensed as a mortgage banker in 29 states. In 2013, GMFS originated approximately
in mortgage loans, generating net income of approximately
December 31, 2013
, GMFS held a portfolio of mortgage servicing rights ("MSR") of approximately
in unpaid principal balance.
GMFS is an approved Fannie Mae Seller-Servicer, Freddie Mac Seller-Servicer,
issuer, Department of Housing and Urban Development ("HUD") / Federal Housing Administration ("FHA") Mortgagee, U.S. Department of Agriculture ("USDA") approved originator and U.S. Department of Veterans Affairs ('VA") Lender. GMFS currently originates loans that are eligible to be purchased, guaranteed or insured by Fannie Mae, Freddie Mac, FHA, VA and USDA through retail, correspondent and broker channels. GMFS also originates and sells reverse mortgage loans as part of its existing operations.
The purchase price will consist of cash payable at closing, estimated at approximately
, two contingent
deferred premium payments payable in cash over two years, plus potential additional consideration based on future loan production and profits which will be payable over a four year period if certain conditions are met. The cash payable at closing will reflect the actual market value of GMFS's MSR portfolio, which was
June 30, 2014
and the actual value of GMFS's net tangible assets at closing. The
of deferred premium payments is contingent on GMFS remaining profitable and retaining certain key employees. The additional contingent consideration is dependent on GMFS achieving certain profitability and loan production goals and is capped at
. Up to 50% of the additional contingent consideration may be paid in common stock of the Company, at the Company's option. The Company intends to fund the closing payment from existing cash and the sale of non-agency RMBS holdings.
The Company believes that the acquisition provides attractive strategic and financial benefits to ZAIS Financial and its shareholders, including:
Michael Szymanski, Chief Executive Officer of ZAIS Financial, commented,
- Addition of an origination platform to ZAIS Financial's sourcing capabilities, allowing access to new credit investment opportunities while controlling the origination process.
- Enhancement and growth of the GMFS origination platform through better access to capital and an expanded product offering.
- Acquisition of a Fannie Mae and Freddie Mac seller/servicer and HUD/FHA approved mortgagee, opening the opportunity for ZAIS Financial to invest in MSRs through retention and secondary market transactions.
- Insight provided by GMFS's seasoned management team into new product offerings, control of the origination process, and opportunities for future growth and expansion.
- Expected accretive earnings impact of the transaction commencing in 2015.
"We are delighted to announce this acquisition as a transformational next step in our evolution as a mortgage operating company. GMFS already has a solid mortgage banking franchise with significant retail operations that have continued to outperform in the current loan origination environment. The acquisition provides us with the opportunity to advance two of our core strategic objectives: first, to directly source newly originated mortgage loans while controlling the origination process, and second, to diversify revenue streams to include origination activities and mortgage servicing rights investment income. At the same time, GMFS is well positioned to substantially benefit from our investment capital and resources."