Fast-growing Knutson Mortgage Co. has completed its acquisition of 14 FBS Mortgage branches in the West and Midwest. The closing substantially increases the originations capacity of the Bloomington, Minn.-based lender.
As other lenders continue to exit the mortgage business, citing thin profit margins and the high cost of technology investment necessary to remain competitive, Knutson is taking the opposite course with an expansion drive.
The acquisition extends the company's reach to Colorado, Montana, South Dakota, Kansas, and Wyoming. The branches originated $520 million of loans in 1995, according to FBS.
"We're committed to building a retail network throughout the heartland of the United States," said Ray W. Simms, Knutson's president and chief operating officer, when the acquisition was announced. The branches were attractive to Knutson because they do not overlap its existing branch system. Of the states encompassed in the purchase, Wisconsin is the only one where both companies operated.
Knutson already had branches in Minnesota, Wisconsin, Illinois, Ohio, Missouri, Oklahoma, Texas, and New England.
BankAmerica Corp. bought $14 billion of servicing assets from FBS. The First Bank System unit's retail origination branches were divided between Knutson and Columbia (Md.) National Inc.
"If a company survived 1994, particularly a private company, that's pretty telling about the abilities of their management," said Gareth Plank, a stock analyst at UBS Securities. "I think they have a pretty savvy group of people there."
Another mortgage lender has chosen to take its home equity business public rather than joining the parade of companies looking to be acquired.
Imperial Credit Industries is issuing 4.6 million shares of common stock in Southern Pacific Funding Corp. and retaining 64.5% ownership of the Riverside, Calif.-based home equity lending unit.
Imperial, based in Lake Oswego, Ore., is primarily a wholesale lender. About 83% of its production is first mortgages.
Mr. Plank of UBS said the spinoff signifies Imperial Credit's commitment to the mortgage business.
"It creates better total valuation," Mr. Plank said. He added that bringing Southern Pacific public allows the market to decide whether the unit's home equity business is worthwhile. "If the market does not like it, maybe you as parent shouldn't be in that business," he said.
Natwest Securities Ltd., Montgomery Securities, and Prudential Securities Inc. are the underwriters for the stock offering.
