Ariz. firm to acquire local loan originator

December 13, 2005|By HANAH CHO | HANAH CHO,SUN REPORTER

Bay Capital Corp., the Owings Mills mortgage company, has agreed to be acquired by Nationwide Financial Solutions Inc., a small financial products and services company in Tempe, Ariz.

Bay Capital Corp., a privately held company founded in 2000, has 380 employees and posted revenue last year of $25 million on a loan-origination volume of more than $700 million. No layoffs or organizational changes are expected at Bay Capital and operations will remain in Owings Mills, said Jeff Hardy, Nationwide's general manager.

Financial details of the transaction were not disclosed yesterday.

The acquisition of Bay Capital fits well for Nationwide because the publicly traded company wants to grow into a full-service financial products provider. Nationwide currently helps customers manage and eliminate debt by working with creditors to settle and negotiate payments.

The Bay acquisition marks the company's first step in "aggressively pursuing" a strategy to expand its financial products, Hardy said.

He would not comment on Nationwide's future acquisition plans but said the purchase of Bay Capital is in line with a trend toward consolidation in the financial services industry.

"You see it in credit-card services, collection services. ... If you want to increase market share and expand your business, you need to be a large organization," he said.

The volume of mortgage origination is expected to drop next year to $2.2 trillion, from $2.8 trillion this year, in part because of a cooling housing market and higher mortgage interest rates that many economists predict.

That could signal further consolidation in the industry, said Mike Fratantoni, a senior economist with the Mortgage Bankers Association of America.

"Profitability isn't there with as many players that are currently involved in the industry," he said.

Bay Capital does business in 44 states and the District of Columbia.

Nationwide has about 20 employees, Hardy said.

Stewart D. Sachs, president of Bay Capital, said in a statement that the Nationwide acquisition will help Bay secure the capital it needs to expand.

The transaction is expected to be completed by March.

Nationwide, which trades on the OTC Bulletin Board under the ticker symbol NWFS, reported a net loss of $1.8 million with revenue of more than $357,000 in the fiscal year that ended June 30.

The company attributed the loss in part to a fire at its headquarters in 2003. The stock closed at $3.90 yesterday, down 5 cents.

hanah.cho@baltsun.com

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