Illinois Thrift Disposing of Its Mortgages through Securitization to Boost Liquidity
Bronstien, Barbara F., American Banker
A Chicago-area savings bank, one of a growing number of midsize thrifts seeking banklike earnings streams, is jettisoning a large portion of its fixed-rate assets.
First Federal Bank for Savings, Des Plaines, Ill., last week securitized a large chunk of 15-year and 30-year mortgage loans to sell in the coming months.
The move is part of an effort to improve liquidity, by decreasing long term, fixed-rate loans, and diversify lending.
"It's always been my intent over time to make us more of a commercial bank," said president and chief executive Larry G. Gillie, who was a commercial banker for more than 20 years before joining $564 million-asset First Federal in 1987. "To be viable long term, we needed to be more diversified in the balance sheet."
The federally chartered stock savings bank, owned by FirstFed Bancshares, will sell $116 million in securities backed by 15-year and 30-year fixed-rate mortgages. First Federal will retain servicing on the loans.
The sale is expected to bring in more than $2.1 million in gains and fees, based on recent price estimates, the company said.
Management said it then can redeploy funds in variable-rate investments and diversify its loan products into areas such as commercial and construction lending. …