Have commercial banks recently developed a sharply increased appetite for fixed-rate mortgages?
Some observers say they have. The reasons: The banks are starved for assets, fixed mortgages are in generous supply, and the spread between the fixed rates and the funding costs is attractive.
But a compilation by American Banker shows a somewhat different picture: A number of banks have significantly increased their concentrations of fixed-rate loans, but industrywide there has been little change.
First Fidelity Bancorp., Lawrenceville, N.J., for example, has been buying up thrifts in its service area. "It is the only bank we follow that has a program to originate and hold 30-year fixed-rate mortgages," said Dennis F. Shea, an analyst with Morgan Stanley & Co.
He pointed out that the bank has a large book of fixed-rate funding to control the risk attached to holding the fixed-rate assets.
Elsewhere, big changes in fixed-rate holdings were often merger-related. Amsouth Bank of Tennessee -- which has the nation's highest concentration of fixed-rate mortgages, about 29% of total assets -- acquired First Federal Bank, a Chattanooga-based thrift, early this year.
Balancing Act
At First Union Corp., Charlotte, N.C., two of its units are in third and fourth place. Jerry Schmitt, executive vice president for the funds management group, said the two units both made substantial acquisitions of thrifts during the past year.
"We don't look at our portfolio in terms of individual banks," he said. "We manage our balance sheet for the whole corporation. Our general direction is just the opposite, away from fixed-rate loans." He added that other First Union units were substantially larger.
Valley National Bank, Passaic, N.J., showed one of the largest proportional increases in fixed-rate loans, jumping from 3.88% as of March 31, 1992, to 13.89% at the end of this year's first quarter.
The bank has also been actively making acquisitions. But Peter Southway, first senior vice president, said: "Our entire portfolio is up substantially." He said the bank had no specific strategy to build its fixed-rate assets and was trying to balance existing ones with five-year certificates of deposit.
He said he thought they were a good match for fixed-rate mortgages.
