Dime Savings Bank is among a handful of large thrifts that is expanding its mortgage business in a big way, even as it diversifies into other lines of business.

At an investor conference organized by Friedman, Billings, Ramsey & Co. in Washington last week, Dime Bancorp's chairman, Lawrence J. Toal, highlighted its mortgage activities.

Mortgage production rose 56% in the second quarter from the previous quarter, Mr. Toal told investors. Dime's acquisition of North American Mortgage Co., Santa Rosa, Calif., will give those numbers another big boost. The deal is expected to close this year.

Dime has also introduced a new piggy-back mortgage, Mr. Toal said. The product will let some customers be approved for home equity lines of credit at the same time they get their home loans.

The combined loan-to-value ratio of the two loans generally is 80% or more.

The New York thrift's aggressive mortgage strategy is being led by two industry veterans. Fred B. Koons, former chairman of Chase Manhattan Mortgage Corp., heads Dime Mortgage. His former second in command at Chase, Richard A. Mirro, who later became CEO at Fleet Mortgage, is now his deputy at Dime.

The two are directing Dime's expansion into correspondent lending, as well as into new geographic markets.

"Mortgage lending is a tough business, especially for portfolio lenders, because it's a commodity business," said analyst Thomas O'Donnell of Smith Barney. Some thrifts and banks are responding to lower profit margins on mortgage lending by becoming, in part, mortgage bankers, Mr. O'Donnell noted.

The strategy is to make the business pay through fees on servicing mortgages and by cross-selling other products to Dime's mortgage customers, Mr. O'Donnell said.

As New York's largest thrift, Dime is seen as an attractive takeover candidate. Rumors of a deal were rampant last year.

But Mr. O'Donnell said Dime's board appears to be committed to giving Mr. Toal, who became chairman just this year, some time to execute his strategies and see whether they pay.

Dime's decision to buy North American was clear evidence Dime is around for "the long haul," Mr. O'Donnell said. Indeed, he said, many investors who had bought Dime stock in hope of making a quick return on its takeover sold when the North American deal was announced.

Even if the thrift ultimately decides to sell itself, building revenues now will yield a higher takeover price, Mr. O'Donnell added.

Partly on the strength of takeover speculation-as well as on the strength of its goodwill lawsuit against the federal government and its business strategy-Mr. O'Donnell has raised his estimate of Dime's stock price during the next year from $21 to $24.

At midday Tuesday, its stock was trading at $20, down 12.5 cents.

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