At about $9 billion in assets, Coast Federal Bank, Los Angeles, is a midsize mortgage player.
In many respects, its strategies are similar to those of large thrifts. For example, it has cut its cost of funds through an aggressive pursuit of checking accounts, according to Coast's chief operating officer Robert L. Hunt 2d. And it is strong in fee-producing businesses such as the sale of mutual funds and annuities.
But the thrift, ranked 18th nationwide by assets at the end of 1994 (and ninth in California), is steering clear of some other recent big thrift strategies, such as going after fixed-rate loans.
Mr. Hunt spoke to American Banker last week in San Diego at the annual meeting of the Western League of Savings Institutions.
Q.: Is most of your business linked to the 11th district cost-of-funds index?
HUNT: I'd say right now, 96% of our production is COFI-based products. The remaining 4% is fixed-rate.
Q.: Some of the large thrifts are aggressively going after the fixed- rate market. How about you?
HUNT: We don't think it's necessary. We're small enough where we don't have a gigantic production machine that we have to keep fed. Even two years ago, when the fixed rates were at very low levels, we originated all of the COFI product that we had wanted to.
Q.: Some people believe the thrifts that survive will be either small niche players or large thrifts that cut costs very low. Where does Coast fit in?
HUNT: We're probably operating in the middle of the two extremes. We're not a little niche provider in a local market and we're not a Great Western or Ahmanson - a very large system. We're right in the middle with about $9 billion.
There's no question that there's got to be efficiency in the services that we provide. That's absolutely a consumer demand. They're looking at pricing.
But we have a lot of general and administrative expenses (from the sale of fee-producing products.) For example, we were the largest thrift in the United States in selling annuities last year. There's a lot of G&A associated with that.
Q.: Have you pursued checking accounts to cut your cost of funds?
HUNT: The strategy should be and has been to acquire sources of funds equivalent to what is happening around us in the 11th district.
Because we are originating the COFI mortgage, you've got to mirror the district in mortgage composition, deposits, and borrowings. But it's through deposits that you generate fee-income relationships. So we are slightly more a retail-deposit company than the district.
We began offering checking accounts at Coast in 1981. Up until last year, we had 140,000 checking accounts. This year, in just one year, we will acquire 100,000 new checking accounts.
