Bank Buys RE Firm to Increase Originations

TowneBank acquires GSH Residential Real Estate
By PATRICK CROWLEY
5/31/2005

A Virginia-based bank that plans to double mortgage production over the next five years hopes to accomplish its goal through real estate agent referrals. So the company purchased a residential real estate company.

TowneBank is embarking on an aggressive path to double its mortgage originations to $1 billion in five years.

The company, headquartered in Portsmouth, Va., recently completed the purchase of GSH Residential Real Estate Corp., a 50-year real estate firm with a sales staff of more than 300.

TowneBank's growth strategy plays on the synergy of the two companies. Mortgage loan officers are being stationed in GSH's growing list of mortgage offices.

When customers come in to buy a house they can also get a mortgage, the company has indicated in securities filings and TowneBank CEO has told investors.

"The combination of TowneBank and GSH will result in a natural extension of our financial services for both organizations," TowneBank CEO G. Robert Aston Jr. said in a statement when the sale closed.

"The affiliation will create a synergy in the services provided by the bank and results in a natural extension of its financial and insurance services," the company said in a securities filing.

GSH has 10 offices in Virginia, including Virginia Beach, and is opening a new office to the south in Kitty Hawk, N.C. TowneBank is presently expanding in to the Norfolk area, one of the state's most populous regions.

Terms of the sale were not disclosed. TowneBank ended the third quarter with assets of $1.5 billion, according to its earnings statement.

At the company's annual shareholders meeting in late May, Aston told shareholders that one of the bank's goals is to double home mortgage originations from the 2004 total of $489 million, according to the Virginia-Pilot.

"With the addition of GSH the bank has expanded its services," the company said in the statement. "By placing mortgage loan officers in the GSH offices, the bank believes that it will be able to maintain or increase the mortgage loan closing volume."

Under a new program, financial planners working out of the bank branches will be able to offer mortgages, providing another growth avenue for the bank.

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