A chance to increase originations and the need for geographic diversity drove New York's Dime Savings Bank to two mortgage banking acquisitions last week, senior executives at the thrift said.

With the purchase of National Mortgage Investments Co., Griffin, Ga., and an agreement to buy James Madison Mortgage Co., Fairfax, Va., Dime is gaining about $1 billion in origination capacity, in addition to the roughly $1.5 billion it expects to do this year.

That will help the thrift as it tries to convert its portfolio from mortgage-backed securities to whole loans, said Dime chairman James M. Large.

Almost two-thirds of the thrift's $14.5 billion mortgage portfolio is now made up of securities, which yield lower returns than whole loans. Returns are lower on securities because the lender has to pay a guarantee fee to securitize the loan. Whole loans yield servicing income as well.

The acquisitions will also allow the Dime to push out of its traditional New York market into the Washington and Atlanta areas.

Mr. Large said these markets are growing somewhat faster than the New York market - an immediate advantage. And, the geograpical diversity will protect the institution during economic downturns, he said, adding:

"It gives us diversity. It gives us the faster growing market. It means that if there is an economic downturn, all our eggs aren't in one basket."

Jenne K. Britell, Dime's executive vice president in charge of mortgage banking, said the acquisitions were a good fit in a couple of other ways.

The Washington and Atlanta markets are primarily single-family markets. For Dime, whose New York originations are heavy on condominium and co-op loans, a broader product mix is a big plus, Ms. Britell said.

It will allow Dime to offer more-diverse loan packages to secondary- market investors, and thus secure better terms, she said.

Both the markets into which Dime has now expanded also have a strong population of relocating corporate executives, drawn by the mix of government and industry in these areas.

Ms. Britell said Dime sees these customers as ideal for adjustable-rate products, whose rates hold steady for the first three to five years. That's usually as long as these up-and-coming executives stay in one assignment, which means they sell their houses before the ARM adjusts.

Ms. Britell said the thrift had considered establishing branches from scratch in these markets. But, she added, Dime decided that it would be more advantageous to purchase institutions with a strong local reputation.

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