As marketeers and mortgage bankers prepare to capitalize on the anti-regulatory environment of a second Trump presidency, rumors have circulated that depositories might angle for re-entry into mortgages.

Nondepository, independent mortgage banks accounted for nearly 69% of one-to-four-family home-purchase loans in 2023, Home Mortgage Disclosure Act (HMDA) data shows, reflecting the extent to which depositories have reduced their footprint in a sector of financial services they once dominated. In 2010, it was depositories who made more than 70% of home loans.

Some depositories have remained active in mortgage banking post-Great Financial Crisis, though, such as Chase, Wells Fargo, and Western Alliance, operating at arm’s length from the fray of origination, providing liquidity to nonbank counterparts through warehouse lines of credit or by purchasing whole loans in a correspondent capacity.

Then there’s Cornerstone Capital Bank, which, before Oct. 2022, was not a bank at all — just a decades-old, fan-favorite nonbank mortgage lender: Cornerstone Home Lending.

“Frankly, an unprecedented merger,” President and CEO of Cornerstone Capital Bank Scott Almy says, describing Cornerstone Home Lending’s acquisition of West Texas’s 110-year-old Roscoe State Bank. That three-year process, which began in 2019, resulted in Cornerstone Home Lending’s approval as a state savings bank in the third quarter of 2022.

With more than $380 million in regulatory capital and $1.5 billion in assets at its inception, Cornerstone became the highest-capitalized new bank in Texas history. Now, after two years of contraction in the mortgage industry, which most market watchers believe will continue into 2026 – the IMB-turned-building-and-loan stands to capture notable market share.

“We had a lot of people running our direction with the impeccable reputation that Cornerstone had in mortgage,” he continues. “The capital, the people we brought to the table, both from a board of directors perspective and also from a management perspective.”

“I was very excited about the opportunity to do something that had never been done before,” says Almy. “There wasn’t a template for how to get it done.” And yet, Almy was singularly well-positioned to get the deal done, given the numerous bank mergers he has marshaled over a three-decades-long career.

Almy helped grow LegacyTexas Bank’s market capitalization from roughly $300 million to $2 billion from 2012 to 2019, as its Chief Risk Officer, General Counsel, and Chief Operating Officer (COO). The Plano-headquartered subsidiary of LegacyTexas Financial Group, Inc., had traded publicly on the NASDAQ under ticker symbol, LTXB.

Then, in what remains the largest state bank merger in Texas history, Almy helped sell the now-defunct community bank and its 42 branches to Prosperity Bancshares, Inc., in 2019.

Almy was included in the executive team expected to transition to Prosperity — which swings a market capitalization of more than $8 billion and trades on the New York Stock Exchange (NYSE) under ticker symbol PB — until he received a more intriguing offer. Cornerstone Home Lending wanted to become a bank, and had targeted Almy as the leader to make it happen.

Ultimately, Almy said ‘yes,’ pledging himself to the countercyclical mission upon which he and the team at Cornerstone have embarked. Build where others level. Plant where others pick.

“We had just the opposite issue,” Almy explains. “We were gathering deposits very quickly, and we started having loan opportunities from very seasoned customers who would say, ‘My bank has basically closed the doors for now. We’d like to give you guys a shot.’ It wasn’t difficult for us to cherry pick some very solid commercial credits.”

Part-and-parcel of the unique merger Almy orchestrated, Cornerstone’s foray into traditional banking could not have been better timed. The merger positioned Cornerstone to take advantage of volatility that the banking and mortgage industries continue to weather two years later.

“It was a calamity in the industry, both for mortgage and banking, but that calamity worked in our favor because of mortgage and banking,” Almy believes, “and it had everything to do with putting together a mortgage company and a bank.”

Post-merger, Cornerstone operates in mortgage lending and servicing, commercial and retail banking, and institutional banking — a meta-modern institution leveraging big-bank leadership and community-bank relationships to diversify funding sources, slash costs, and do mortgages.

“It’s gone almost exactly as we had hoped,” Almy says, “our vision in bringing together a bank and a mortgage company, and the way that we did it was several-fold: reducing our overall cost of funds to provide stability and diversity through multiple economic cycles, serve more people more broadly, and expand opportunities for those that worked for Cornerstone.”

Before accepting the offer, however, the “extremely complex” task before Almy and Cornerstone prompted him to ask co-founder Marc Laird about his motivations for the endeavor.

Per Almy, Laird told him: “This company has provided more rewards to me and my family than I ever imagined was possible. I don’t want to meet my maker someday and have to answer the question as to, ‘Why didn’t you do more to help my people?’”

Having worked for public companies, private companies, advisory boards, outside investors, mortgage companies, and boards on every side, Almy had never heard that reasoning before.

“It meant something to me personally,” says Almy, who subscribes to Cornerstone’s Christian faith-based mission. “It was a competitive challenge for me to try to get something done under potentially adverse circumstances, and I’m proud to be here.”

With a merger like Cornerstone and Roscoe, Almy was not game-planning for 2025, but 2045. Instead of operating the bank on a quarter-to-quarter basis, he’s been “making long-term bets” about future opportunities “for at least the next quarter-century.”

In bringing together a nonbank mortgage lender and a traditional depository, mortgage banking had to remain the beating heart of the company’s relationship with its depositors, and the entity’s ability to operate with “size, scale, and significance” in the broadest market context.

“It’s in our DNA. We’re good at it. We’re efficient,” Almy says. “Through 2024, for example, our mortgage loan officers, on average, closed 7.03 units per month, which ranked number one overall amongst our 100-nearest competitors nationwide.”

As the bank’s name suggests, Cornerstone also benefits from one of the largest joint-venture programs with homebuilders nationwide. Estimates vary, but a shortage of roughly 5 to 7 million homes across the U.S. underscores the bank’s advantage in maintaining their production edge.

“Even in essentially the worst mortgage market in the last 50 years, we’re still capable of originating between $8 to $10 billion in loans,” Almy continues. “But, the twist to all of that is we have a mortgage operation of scale that, from a banking perspective, operates as a very large branch because we have this continuous flow of escrows running in.”

Pre-merger, Cornerstone had access to roughly $1.5 billion in funding sources. As of mid-2024, that had more than doubled to approximately $3.4 billion in funding sources, including deposits. Cornerstone has reduced its cost of funds (primarily warehouse lending expenses pre-merger) by 250 basis points in less than two years.

As is the case with larger banks, expanding access to cheaper capital has enabled Cornerstone to “create portfolio products that independent mortgage companies typically do not, and with our substantial capital base, we now for the first time can begin to offer those products,” Almy adds. “As we move our cost of funds down, we only have more opportunity to do these things.”

Of course, Cornerstone faces stiff competition to serve homebuilders. Stand-alone nonbank mortgage companies offer builders scaled origination services and access to cutting edge technologies. Community banks can, too, but not at scale — though they can offer deposits and commercial lending services, in addition to warehouse lending services.

Cornerstone’s partnership brings the best “of all worlds” to homebuilders, Almy says, “to offer deposit products, to help pull-through rates with their purchasers, to offer Treasury management products for the corporate side of home builders, and also to provide financing to the home builder directly, including land and lot development loans and other corporate facilities.” 

Don’t forget, either, many of the national banks have closed their warehouse lending facilities in recent years, a trend that Cornerstone’s leadership expects to continue.

“We now offer the ability to serve as a backup funding source,” Almy adds, “to the extent that warehouse lines go away. We’re prepared to support that business in almost a more holistic way than any other bank in the country could do.”

The third quarter of 2025 will mark the final year of Cornerstone’s initial three-year business plan, devised with the input and blessing of regulators, built for the future of mortgage and banking.

The Million Dollar Man In A $100 Suit

Sometimes people ask Almy why he went to West Texas to buy a bank. Why not Houston?

“It didn’t really matter where we bought a bank,” Almy says, “but I grew up substantially in West Texas in my youth, and I believe in those communities. We want to continue to serve in those communities.” He knows the legacy of big banks robbing rural communities of their local lender, however, and is adamant that Cornerstone is different. “We have no intention of doing that,” he insists.

“Banks are not bought, they’re sold,” Almy says, quoting an old banking proverb. Upon making Cornerstone’s pitch to Roscoe State Bank in early 2020, he promised to care for its customers, communities, and employees. He did not intend to release anybody in the merger. 

Moreover, Almy wanted Roscoe’s President and CEO John Jay to remain as a partner and member of the board of directors. When Jay asked Almy, “How can you assure me that you’re not going to terminate any of my team members?” he responded, “We’re becoming a bank. I need all the bankers I can get.”

When Almy started in the banking industry in 1994 as a staff attorney in a two-lawyer office for Guaranty Financial Group and Guaranty Bank, then a subsidiary of Temple-Inland, a corrugated packaging and building products company acquired by International Paper in 2012, roughly 16,000 banks were in operation across the U.S. 

Only about 4,500 remain. That number will continue to shrink, Almy all but promises, because most of those banks are in a negative-operating-leverage environment. 

“Same thing for mortgage companies,” he says, adding of Cornerstone’s countercyclical momentum, “we’re actually planning to expand our operating leverage over the next 12 to 18 months, and then certainly beyond that as well.”

Despite undertaking this endeavor “in the middle of a firestorm in the last two years,” Cornerstone has developed a growing, in-house servicing franchise, earned approval to operate an insurance agency within its mortgage division to meet homeowners insurance needs, and started a treasury management function to tap a niche within its current customer base.

Besides all that, Almy is intent on reducing Cornerstone’s cost of funds by another 150 or 200 basis points through another acquisition. Why? Because saving 250 basis points on Cornerstone’s cost of funds was only the start. It’s all part of the plan “cultivated with regulators.”

“By the time we reach that funding level, we will be a power to be reckoned with on multiple fronts nationwide in all of our businesses,” he says. Regulators want to see, he explains, that “structure supports your strategy,” which has been Cornerstone’s priority since 2019 — soundness over speed and room to grow in the long run — not a fat dividend tomorrow. 

“Our plan was to spend every bit of time during our application period to build a runway that we could land sizable jets on, but not start with sizable jets until we were ready to do so,” he says.  That construction period lasted 18 months, and involved recruiting talent with “significant growth trajectories and backgrounds” in mergers and acquisitions and large bank operations. 

Though Cornerstone holds roughly $2.5 billion in assets, Almy has had to convince both recruits and regulators that they’re not really a $2.5 billion bank — nothing close.

“We’re more like a $20 billion asset bank, and that is what the regulators were looking for,” he continues, “running the bank with discipline, with sophistication, to ensure that the deposit insurance fund would be protected in all cycles. We’ve spent an inordinate amount of time doing that.”

While “higher for longer” rates present headwinds for other mortgage lenders, Almy sees the challenging market as an opportunity, even in a “skinny margin environment,” because Cornerstone’s operation has achieved scale and efficiency over the past two-and-a-half years. Where others struggle to reduce the cost of funding or production expenses, they have.

“I expect to see more independent mortgage companies be sold, file for bankruptcy, or close their doors because this is a highly competitive market,” says Almy, eyes fixed on the future. It used to be that closing loans on time gave a lender an advantage. That’s table stakes, now.

While he expects borrowing costs to decline at some point in 2025, helping Cornerstone pick up additional non-interest expense and scale its mortgage operations, an overall restrictive rate environment will continue presenting difficulties to lenders lacking a robust balance sheet.

“If I’m one of our loan officers, I get excited about the fact that we’re actually talking about making investments, adding more products and services, more support, retaining more of the servicing at a time when others are having just the opposite conversations,” says Almy. “It’s an industry that will not go away, and we intend to stay a participant in that industry as long as we possibly can.”