Hamilton Financial Services Corp., San Francisco, is engaged in talks with investment bankers towards selling the company, according to a well-placed source.
Hamilton has requested proposals from a number of investment banks, according to the source, but has not chosen a representative.
Up until now, Hamilton had been one of the few publicly traded mortgage banking companies not subject to persistent rumors of a sale.
Company officials could not be reached for comment.
At Friday's closing price of $5.50, Hamilton has a market capitalization of $34.1 million.
Two strong forces are making themselves felt in the mortgage banking merger and acquisition market, experts say.
Since Arbor National Mortgage was sold for less than expected and North American Mortgage was pulled from the market, euphoria over the private market value of mortgage banks has given way to disappointment.
Nevertheless, many mortgage banks are putting themselves up for sale, especially ones that like Hamilton are mostly wholesalers and based in California.
"It is a really difficult environment for small wholesalers," said a mortgage banker in northern California.
About 80% of the company's originations are through wholesale channels, according to analysts.
That type of origination is very interest rate-sensitive and has experienced a sharp drop in demand this year as refinancings slowed to a crawl.
Hamilton originated $302 million of home loans in the third quarter, less than half of the $622 million in the comparable period in 1993.
The company processes payments on some $3.2 billion of home loans, making it the 127th-largest servicer in the country, according to an American Banker survey at midyear.
Hamilton Financial also owns Hamilton, Carter, Smith, one of the country's largest servicing brokerage firms.
The brokerage had $4 million of revenues in 1993 and is on a pace to surpass that this year.
It is unclear whether Hamilton, Carter, Smith would be included in any sale.
Founded as a thrift in 1984, the company surrendered its charter, closed its branches, sold its commercial loans, and became a mortgage bank in 1992.
It operates in 19 states.
Shares of the company were unchanged Monday.
The Mortgage Bankers Association index took a fall last week to 107.90, down from 111.90.
The major contributor was the plummet in shares of North American Mortgage, which fell $7.625, to $18.375 after the company announced that it had not found a buyer.
[CHART OMITTED]
